Case ID: sw_274/html/0561-01.html
Source: Caselaw Access Project
Author: {"author": "GREENWOOD, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

VICTOR REFINING CO. et al. v. CITY NAT. BANK OF COMMERCE et al.
    (No. 4273.)
    (Supreme Court of Texas.
    June 24, 1925.)
    1. Joint-stock companies and business trusts <S^> 15'( I) — Articles of association of partnership, in form of voluntary unincorporated joint-stock company, held not to exempt shareholders from personal liability for payment of claims of creditors of association.
    Provisions of articles of association of partnership, in form of voluntary unincorporated joint-stock company, held insufficient to exempt shareholders from personal liability for payment of claims of creditors of association.
    2. Joint-stock companies and business trusts 5(2) — -Compliance with statute governing limited partnerships, held essential to secure exemption from personal liability of shareholders in voluntary unincorporated association to creditors of association.
    Compliance with statute governing limited partnerships held essential to secure exemption from personal liability of shareholders in voluntary unincorporated association to creditors of association.
    Error to Court of Civil Appeals of Seventh Supreme Judicial District.
    Consolidated, suits by the City National Bank of Commerce and others against the Victor Refining Company and other defendants, who interpleaded additional parties defendant. The Court of Civil Appeals affirmed (263 S. W. 622) the judgment of the district court, save as to one plaintiff, and interplead-ed defendants bring error.
    Affirmed.
    Taylor & Taylor and J. L. Lackey, all of Wichita Falls, for plaintiffs in error.
    John B. King, Leslie Humphrey, and Bul-lington, Boone & Humphrey, all of Wichita Falls, for defendants in error.
    Bonner, Bonner & Sanford, of Wichita Falls, for certain appellees.
   GREENWOOD, J.

Several suits were brought in the district court of Wichita county by the City National Bank of Commerce and others against the Victor Refining Company, alleged to be a joint-stock association, and a number of individuals, alleged to be partners in the association. The suits were to enforce obligations incurred by the refining company in the transaction of its business. The original individual defendants in-terpleaded other individuals, seeking contributions from them to any judgment recovered by the plaintiffs; the association having become insolvent.

The several suits were consolidated, and the trial resulted in judgment for the respective plaintiffs against the original defendants for large sums, with judgment in favor of the original individual' defendants for contributions from the interpleaded individual defendants. No question is raised as to the status of the Victor Refining Company as a voluntary, unincorporated, joint-stock association, engaged in an industrial enterprise.

Some of the interpleaded defendants appealed from the judgment of the district court, which was affirmed, save as to the recovery awarded one of the plaintiffs. 263 S. W. 622. The appealing interpleaded defendants thereupon suecj. out a writ of error, and complain that there was error in the action of the district court in refusing to allow them to prove notice to the plaintiffs of a clause in the declaration of trust under which the refining company was formed, to the effect that no personal liability should be' incurred by the stockholders on obligations of the company. The articles of association, under which the company was organized, empower the trustees to control the company’s business and to contract debts, and further undertake to provide:

■“The trustees shall have no power to bind the shareholders or members personally, and in every written contract they shall enter into relating to the business of this company, its property or any part thereof, reference shall be made to said declaration of trust; and the person, firm, or corporation so contracting with them shall look only to the funds and property, legal and equitable, of the company, under said-contract, for the payment of any debt, damage, judgment, or decree, or of any money th(it may become due and payable in any way by reason thereof. And neither any of the trustees nor the shareholders, present or future, shall be personally liable therefor or for any debt incurred or engagement or contract made by the board of trustees, or any officer, agent, or servant acting under them on behalf of the company. Furthermore, the funds and property of the company of every character shall stand primarily charged with the burden of paying any claim or money demand established or existing on account of the operations and business of the company, whether founded on contract or tort, to the end that the members of the company may've protected from personal liability on account thereof.”

The court has to-day determined, in the case of Thompson v. Schmitt, 114 Tex. —, 274 S. W. 554, that exemption from personal liability on the part of shareholders in a voluntary, unincorporated association in this state to creditors of the association can be secured only by compliance with our statutes governing limited partnerships, and that the legal effect of articles of association of a partnership, in the form of a voluntary, unincorporated, joint-stock company, containing an attempted exemption provision like the above, was to render the shareholders responsible for the payment of the company’s debts.

“As between the members, each is hound to pay his proportion of the debts; but, as to the creditors, one member is bound for all the debts.” Hodgson v. Baldwin, 65 Ill. 538.

On the authority of Thompson v. Schmitt, supra, the judgment of the Court of Civil Appeals is affirmed. 
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