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In McCallen v. Mogul Producing & suit in their own name against such Ref. Co. (1923) Tex. Civ. App. third person on behalf of the associa257 S. W. 918, where the trustees of tion relating to its property. a business trust, in good faith and

V. [b] [New] Power of beneficiaries to for value received, transferred trust

maintain suit. realty to three of the seven trustees,

In Weeks v. Sibley (1920) 269 Fed. it was held that the sale was not

155, it was held that a beneficiary voidable at the suit of the holder of

of a business trust may maintain an a materialman's lien on the ground

equitable action against the trustee, that the sale was not authorized by

in whom for practical purposes the the required number of disinterested

absolute control of the trust property trustees; at least, in the absence of

is vested, to restrain the voluntary a vertified pleading setting up lack of

payment by him of a tax which it is authority in the trustees who did

alleged has been illegally assessed act.

by the Federal government. V. Power of officers or shareholders to And it has been held that the sharesell trust lands.

holders of an unincorporated associa(Supplementing annotation in tion organized as a business trust A.L.R. 629.)

may maintain a suit against the trusIn Flint v. Codman (1924) Mass. tees for the appointment of a re- 142 N. E. 256, it was held that ceiver upon allegations of insolvency, shareholders in a real estate trust, misappropriation, and loss of trust under which the controlling authority funds through nonaction, fraud, etc. was vested in such shareholders, had Bingham v. Graham (1920) Tex. a right to sell the trust real estate, Civ. App. —, 220 S. W. 105; Davis v. but that a majority of such share

Hudgins (1920) Tex. Civ. App. —, holders could not sell the trust prop

225 S. W. 73. And see Burnett v. erty to themselves where the minority Smith (1922) Tex. Civ. App. shareholders expressly dissented.

240 S. W. 1007. And this, without And see McCallen v. Mogul Pro

naming the trust itself as a party. ducing & Ref. Co. (1923) - Tex. Civ. Bingham v. Graham (Tex.) supra. App. —, 257 S. W. 918.

Nor is it necessary to name all of

the shareholders. Davis v. Hudgins v. [a] [New] Power of trustee to (Tex.) supra. maintain suit in Own name.

And in Woodward v. Smith (1923) In Simson v. Klipstein (1920) 262 Tex. Civ. App. 253 S. W. 847, Fed. 823, where the power of control it was held that individual shareof a manufacturing enterprise organ- holders in an unincorporated associaized in the form of a business trust tion organized as a business trust is given to the certificate holders in could maintain an ex parte proceedthe articles of association, but the ing against pretending trustees, who, trustees are given full general author- it was alleged, were insolvent and ity to buy, sell, mortgage, and ex- were wasting, destroying, dissipating, change property of every description, and converting the firm property to and to do all things necessary to the their own use, for the appointment conduct of the business, and it is of a receiver. The court said that specified that the trustees shall be the appointment of a receiver in such deemed the absolute owners of all a case rests in the discretion of the the property of the association, and court, and that the facts showed a third person, in dealing with the "that an imperative necessity exists trustees, has regarded and accepted for said writ.” them as accredited authoritative And that the beneficiaries of a agents of the certificate holders, with business trust may maintain a suit in full authority to deal with the as- equity for an accounting by the sociation property, it was held that trustees of their administration, see such trustees were the proper parties Dunbar v. Broomfield (1924) — Mass. plaintiff, and entitled to maintain a -, 142 N. E. 148.

31 A.L.R.—55.

a

However, in Phænix Oil Co. v. Mc- as a "joint-stock association," rather Larren (1922) Tex. Civ. App. than in the name of its trustee, was 244 S. W. 830, where a business trust not precluded from recovering bewas formed to operate for a definite cause it proved itself to be a business period under the absolute control and trust, although the defendant in its direction of the trustees, it was held unverified answer raised the issue, that though shareholder could, since under Tex. Rev. Stat. art. 1906, upon a showing of fraud or unfitness, no issue can be raised as to the right bring an equitable proceeding to have of the plaintiff to recover in the a trustee removed, he could not have capacity in which it sues, unless the the business wound up, except upon “a defendant's answer be verified by very clear showing of the necessity." affidavit.

And in Fischer-Schein Syndicate v. Lee (1924) 295 Fed. 485, it was held

V. [d] [New] Defense of suits against

business trusts. that all the shareholders are necessary and indispensable parties to a

In McMillan v. Greenamyer (1920) suit to wind up a business trust and

50 Cal. App. 601, 195 Pac. 734, redistribute the assets.

affirmed on subsequent appeal in

(1921) 53 Cal. App. 13, 199 Pac. 841, V. [c] [New] Right to bring suit in it was held that where two of three firm name.

trustees of a business trust organized In Hull v. Newhall (1923) 244 Mass. under the so-called Massachusetts 207, 138 N. E. 249, where the trustees plan confess judgment on an alleged of a business trust leased trust prop- trust obligation, a third trustee, erty in their individual names with representing himself and the other out mentioning the trust, it was held shareholders, is entitled to maintain that the association could not main- a defense on its behalf, on showing tain an action for rent under the that the other trustees are acting in lease, and that the sole legal right collusion with the plaintiff in an atto maintain an action therefor was tempt to enforce an illegal demand in the trustees named as lessors, so against the association. On the first that the fact that the trustees were appeal it was also held that the third such was immaterial and did not re- trustee, whose answer had been quire proof as an essential to their ignored, had a right to appeal from a right to recover.

judgment entered on the confession; But in Texas, by virtue of Rev. and on the second appeal it was furStat. 1911, title. 102, chap. 2, art. ther held that a showing of collusion 6149, which provides that any unin- to wreck the trust, and lack of concorporated joint-stock company sideration for the claim sued upon, association may sue or be sued in constituted a good defense thereto. its company or distinguishing name without making the individual share

VI. Liability of trustees for negligence. holders or members parties, it has

(Supplementing annotation in 7 been held that an unincorporated as

A.L.R. 629.) sociation organized under a declara- In Sleeper v. Park (1919) 232 tion of trust, and styling itself a Mass. 292, 122 N. E. 315, where the common-law trust, may maintain a declaration of trust in effect created suit in its own name without naming a partnership, and the trustees were its trustees, to enjoin a threatened authorized to rent buildings erected breach of a contract with it and a on the trust lands, it was held that trespass against its property. Gra- they were liable for personal injuries ham v. Omar Gasoline Co. (1923) sustained by a prospective tenant Tex. Civ. App. - , 253 S. W. 896. while examining trust property, due

And in Cranfill v. Swann Petroleum to the negligence of the association Co. (1923) Tex. Civ. App. — 254 acting through the managing trustees. S. W. 582, it was held that an un- And in Connellee v. Nees (1923) incorporated association suing on a

Tex. Civ. App.

-, 254 S. W. 625, firm obligation in its own name and it was held that the individual mem

or

bers of an unincorporated associa- they cannot contract for freedom tion were liable for personal injuries from liability for negligent injury of sustained by an employee, whether the a servant resulting from breach of the association be regarded as a partner- master's duty, it being maintained that ship or as operating as a trust. The public policy does not recognize any court said that, even if the trust be particular necessity for favoring perregarded as a commercial creature sons electing to do business under operating under a trust agreement, the so-called “Massachusetts trust" the law would not permit its members plan above an individual who engages to escape liability by operating under in the same business. Fisheries Co. the mere fiction of a trust agree- v. McCoy (1918) Tex. Civ. App. ment.

202 S. W. 343. However, the court And it has been held that the man- pointed out that this does not mean aging trustee shareholders of an that the trustees and shareholders of unincorporated association organized a business trust cannot, by contract, as a business trust are the actual limit their liability for torts, where masters, and not merely masters in the relation of master and servant or a representative capacity, of the serv- carrier and passenger does not exist. ants employed by the trust, so that

G. J. C.

SALEM TRUST COMPANY, Piff. in Certiorari,

V.
MANUFACTURERS' FINANCE COMPANY et al.

United States Supreme Court - February 18, 1924.

(264 U. S. 182, 68 L. ed. — , Adv. Ops. p. 270, 44 Sup. Ct. Rep. 266.) Assignment - effect of priority of notice.

1. Mere priority of notice does not give priority of right, as between successive assignees of a chose in action.

[See note on this question beginning on page 876.] Courts jurisdiction diverse citi- not an indispensable party to the conzenship.

troversy between plaintiff and defend2. District courts of the United ant, who are citizens of different States have jurisdiction of controver- states. sies in which all the parties on one [See 27 R. C. L. 26.] side are of citizenship diverse to those

Parties necessary custodian of on the other side.

fund. [See 27 R. C. L. 15; 3 R. C. L. Supp. 1500.]

5. A mere custodian of a fund Removal of causes

claimed by different persons is not an what determines

indispensable party to a suit between jurisdiction.

them to settle the claim, so that join3. The right to remove a cause from

ing him as a party to the suit will dea state to a Federal court depends up

feat the jurisdiction of a district court on the case disclosed by the pleadings

of the United States, which would othwhen the petition therefor was filed.

erwise exist on the ground of diverse [See 23 R. C. L. 683.]

citizenship. Courts

jurisdiction effect of presence of unnecessary parties.

Courts - question of general law – 4. Jurisdiction of the district court

effect of state decision. of the United States on the ground of

6. A question of priority between diverse citizenship of the parties is assignees of a debt when the later has not affected by the fact that one of the given prior notice to the debtor is one defendants is a citizen of the same of general law, upon which the destate as plaintiff, if that defendant is cisions of the courts of the state where

the transaction arose are not binding Estoppel to assert claim to chose in on the Federal courts.

action. [See 27 R. C. L. 52; 3 R. C. L. Supp. 8. Estoppel may prevent a first as1502; 4 R. C. L. Supp. 1721.]

signee in a chose in action from asAssignment effect of payment to

serting his right against a second assecond assignee.

signee of it. 7. A debtor who pays or becomes Assignment - equal equities - - priorbound to pay a later assignee of the ity. debt is not liable to an earlier as- 9. As between equal equities, the signee, who failed to give him notice first in time is best in right. of the assignment.

[See 2 R. C. L. 627, 628; 1 R. C. L. [See 2 R. C. L. 623, 632; 1 R. C. L. Supp. 596.] Supp. 594.).

CERTIORARI to the United States Circuit Court of Appeals for the First Circuit to review a judgment affirming a judgment of the District Court for the District of Massachusetts in favor of defendant in an action brought to establish title to a certain fund under an alleged assignment. Reversed.

The facts are stated in the opinion of the court.

Messrs. Alexander Whiteside, Ar- Ex parte Nebraska, 209 U. S. 436, 52 L. thur Drinkwater, and Raymond P. ed. 876, 28 Sup. Ct. Rep. 581; NilesBaldwin, for plaintiff in certiorari: Bement-Pond Co. v. Iron Moulders

The first. assignee has the prior Union, 254 U. S. 77, 80, 65 L. ed. 145, claim to the proceeds of the assigned 147, 41 Sup. Ct. Rep. 39; New York accounts.

Constr. Co. v. Simon, 53 Fed. 1; ShatGreey v. Dockendorff, 231 U. S. 513, tuck v. North British & M. Ins. Co. 7 58 L. ed. 339, 34 Sup. ct. Rep. 166; C. C. A. 386, 19 U. S. App. 215, 58 Fed. Putnam v. Story, 132 Mass. 205; Thay- 609; American Nat. Bank v. National er v. Daniels, 113 Mass. 129; Fortu- Ben. & Casualty Co. 70 Fed. 420; First nato v. Patten, 147 N. Y. 277, 41 N. E. Nat. Bank v. Bridgeport Trust Co. 117 572; Re Hawley Down-Draft Furnace Fed. 969; Harvey v. Harvey, 290 Fed. Co. 151 C. C. A. 198, 238 Fed. 122; Re 653. National Discount Co. 272 Fed. 570; The English rule that, as between Herman v. Connecticut Mut. L. Ins. Co. two successive bona fide assignees of 218 Mass. 181, 105 N. E. 450, Ann. Cas. the same chose in action, the second 1916A, 822; Rabinowitz v. People's will prevail if he was the first to give Nat. Bank, 235 Mass. 102, 126 N. E. notice to the debtor, is the rule of the 289; Black, Judicial Precedents, $ 149. Federal courts; and as the question is

Messrs. Robert G. Dodge and Lau- one of general jurisprudence, the fact rence Curtis, 2d, for defendants in cer- that the courts of Massachusetts do tiorari:

not follow the English rule is imThe fact that the International material. Trust Company, which, like the plain- Dearle v. Hall, 3 Russ. Ch. 1, 38 Eng. tiff, is a Massachusetts corporation, Reprint, 475, 27 Revised Rep. 1, 10 was made a party defendant, did not Eng. Rul. Cas. 478; Judson v. Corcoprevent the removal of the case.

ran, 17 How. 612, 15 L. ed. 231; Spain Re Nichols, 166 Fed. 603; Minard v. v. Hamilton (Spain v. Brent) 1 Wall. Watts, 186 Fed. 245; Fletcher v. 604, 17 L. ed. 619; Laclede Bank v. Sharpe, 108 Ind. 276, 9 N. E. 142; Paul Schuler, 120 U. S. 511, 516, 30 L. ed. v. Draper, 158 Mo. 197, 81 Am. St. Rep. 704, 706, 7 Sup. Ct. Rep. 644; Farmers' 296, 59 S. W.77; Perry, Trusts, 6th ed. & M. Bank v. Farwell, 7 C. C. A. 391, $ 122.

19 U. S. App. 456, 58 Fed. 633; MethThe citizenship of a merely nominal V. Staten Island Light Heat & party is immaterial upon the question P. Co. 13 C. C. A. 362, 35 U. S. App. of removability on the ground of di- 67, 66 Fed. 113; The Elmbank, 72 Fed. verse citizenship.

610; Third Nat. Bank v. Atlantic City, Walden v. Skinner, 101 U. S. 577, 25 126 Fed. 413; Re Hawley Down-Draft L. ed. 963; Barney v. Latham, 103 U. S. Furnace Co. 233 Fed. 451; Re Leter205, 26 L. ed. 514; Bacon v. Rives, 106 man, B. & Co. 171 C. C. A. 327, 260 U. S. 99, 27 L. ed. 69, 1 Sup. Ct. Rep. 3; Fed. 543; Fortunato v. Patten, 147 N.

ven

(264 U. 8. 182, 68 L. ed. —, Adv. Op8. p. 270, 44 Sup. Ct. Rep. 266.) Y. 277, 41 N. E. 572; Graham Paper the amount of $40,000, and on Co. v. Pembroke, 124 Cal. 117, 44 L.R.A. September 20 made another assign632, 71 Am. St. Rep. 26, 56 Pac. 627;

ment to the Finance Company of the Lambert v. Morgan, 110 Md. 1, 132 Am. same indebtedness to the amount of St. Rep. 412, 72 Atl. 407, 17 Ann. Cas.

$10,000. Later, about the last-men439; Enchos-Havis Lumber Co. v. Newcomb, 79 Miss. 462, 30 So. 608;

tioned date, the Finance Company Jenkinson v. New York Finance Co. 79

notified the debtor of its assignment. N. J. Eq. 247, 82 Atl. 36; Jack v. Na- Up to that time it had made no intional Bank, 17 Okla. 430, 89 Pac. 219; quiry, of the debtor as to its inCoffman v. Liggett, 107 Va, 418, 59 S. debtedness to the Nelson Company, E. 392; Pom. Eq. Jur. 4th ed. § 695, and neither it nor the debtor had note J; Phillips's Estate, 66 L.R.A. 761

any knowledge of the prior assignand note, 205 Pa. 515, 97 Am. St. Rep.

ment to the petitioner. September. 746, 55 Atl. 213; 5 C. J. 953; 19 Yale

26, 1919, the United States district L. J. 258; Foster v. Cockerell, 3 Clark, & F. 456, 6 Eng. Reprint, 508, 9 Bligh,

court, in a suit in equity, appointed N. R. 333, 5 Eng. Reprint, 1315; Meux

a receiver of the Nelson Company. v. Bell, i Hare, 73, 66 Eng. Reprint,

About that time each assignee 955, 11 L. J. Ch. N. S. 77, 6 Jur. 123; learned of the assignment to the Story, Eq. Jur. § 1384; Scott, Cases on other. October 6, 1919, petitioner Trusts, 623; Swift v. Tyson, 16 Pet. 1, and respondent Finance Company 10 L. ed. 865; Oates v. First Nat. Bank,

agreed that the Nelson Company, 100 U. S. 239, 25 L. ed. 580; Brooklyn

acting by its receiver, should finish City & N. R. Co. v. National Bank, 102

the work being done for the debtor, U. S. 14, 26 L. ed. 61; Presidio County v. Noel-Young Bond & Stock Co. 212

and that the net proceeds, which U. S. 58, 53 L. ed. 402, 29 Sup. Ct. Rep.

amounted to $7,963.36, a sum less 237; Russell v. Grigsby, 94 C. C. A. 61, than the amount of the claim of 168 Fed. 577; New York L. Ins. Co. either assignee, should be deposited v. Dunlevy, 130 C. C. A. 473, 214 Fed. with the respondent International 1; Re Jarmulowsky, L.R.A.1918E, 634, Trust Company, a Massachusetts 161 C. C. A. 327, 249 Fed. 319; Re Gro

corporation, in a special account in cers' Baking Co. 266 Fed. 900; Russell

the name of the Finance Company, v. Southard, 12 How. 139, 13 L. ed. 927; MacKelvie v. Mutual Ben. L. Ins. Co.

as trustee for the one or the other of 287 Fed. 660; Ætna L. Ins. Co. v.

such assignees, thereafter to be Moore, 231 U. S. 543, 559, 58 L. ed. 356, agreed by them, or found by some 366, 34 Sup. Ct. Rep. 186; Myrick v. court of competent jurisdiction, to Michigan C. R. Co. 107 U. S. 102, 27 be entitled thereto. They failed to L. ed. 325, 1 Sup. Ct. Rep. 425; Harper agree, and petitioner brought a bill v. Hochstim, 20 A.L.R. 1232, 278 Fed.

in equity in the state court against 102; Johnson v. Charles D. Norton Co.

the respondents to establish its right 86 C. C. A. 361, 159 Fed. 361.

to the amount so on deposit, and to Mr. Justice Butler delivered the have the same paid to it. For the opinion of the court:

removal of the suit to the district On May 16, 1919, the Nelson court of the United States, the FiBlower & Furnace Company, a nance Company filed its petition Massachusetts corporation, assigned stating that the International Trust to the petitioner, for a valuable con- Company is not a necessary party to sideration, indebtedness to the the suit, but is a mere nominal paramount of $45,000, due or to become ty, being only a stakeholder, and due to the Nelson Company from the without any interest whatever in the Murray & Tregurtha Corporation, result, and that the controversy in under a contract whereby the Nelson the suit is entirely between citizens Company was to construct certain

of different states, Salem Trust engines for the latter. July 15, Company, a Massachusetts corpora1919, the Nelson Company, for a tion, and the Manufacturers' Fivalid consideration, assigned to the nance Company, a Delaware correspondent Manufacturers' Finance poration. Other proper steps were Company, the same indebtedness to taken, and the case was removed

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