Victor Refining Co. v. City National Bank of Commerce ( 1925 )

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 interpleaded 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 sued 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 that 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 therefore 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 be protected from personal liability on account thereof."

The Court has today determined in the case of Thompson v. Schmitt, ante, p. 53, 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 bound 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.

Affirmed.