Connally v. W. H. Lyons & Co.

1. Parties — Trustees — Beneficiaries. — A trust estate was administered by a trustee, being a mercantile business. Creditors brought suit for goods sold the trustee. Held, that the beneficiaries were not necessary parties in the suit for the debt incurred in the management of the trust. 2. Trust.—There was no right of control reserved in the instrument creating the trust; no beneficiary had the right to control or withdraw his several interest until the time specified for the closing up of the business. This did not create a partnership. 3. Personal Liability of Trustee for Debts He Incurs.—Although the plaintiffs knew that the defendant was conducting the mercantile business of which he had control as trustee for the benefit of persons mentioned in the conveyance creating the fund, and charged the goods to the trust, the trustee was nevertheless personally liable for the price of the goods. This rule is not only in accordance with the authorities, but is a salutary rule in the interest of common justice.

This suit was originally brought by W. H. Lyons & Co., merchants, of New York, against Nathan Connally, to hold him personally liable for certain goods, wares, and merchandise sold by them to the firm of Connally & Co., of Sulphur Springs, at his instance and request. Defendant answered by general demurrer, and specially excepted to the petition that there was no allegation that the Connallys were insolvent and unable and unwilling to pay. Defendant excepted, also, that the petition disclosed a want of proper parties, and that the account was barred by limitation. The demurrers and exceptions were overruled, and trial was had before the court, October 31, 1889, and judgment was rendered in favor of the plaintiffs. The judge filed his conclusions of fact and law, and the case has been appealed without a statement of facts. As far as pertinent to the appeal the facts found are as follows: “1. I find that on the 26th day of February, 1875, M. A. T. Connally executed an instrument in writing, of which the following extracts evidence its nature and purpose, to-wit: ‘In consideration of the fact that my success in said business is principally owing to the efforts and assistants of my father C. P. Connally, as well as to those of my brothers Drury A. Connally and Nathan Connally, who have not been sufficiently remunerated by me for their unremitting diligence, industry, and attention to my said business; commencing as I did on little capital, with their assistance that capital has increased till it now amounts by estimation correctly taken, including my storehouse on the west side of the public square of said town, to the sum of $13,455.83; in and for the further consideration of the natural love and affection I have for and bear to my said father and all my brothers, to-wit, Drury A. Connally, Uathan Connally, Commodore P. Connally, Jr., David M. • Connally, Lafayette T. Connally, James H. Connally, and Edgar Connally, I hereby sell, transfer, and convey in absolute sale, except the one-ninth of the amount of the same, which I reserve for myself and subject to my control, all my right, title, and interest in and to the goods, wares, and merchandise which I now have on hand, as well as moneys, notes, claims, and accounts due me and growing out of and with my said mercantile business carried on in Sulphur Springs, together with the lot of land and storehouse erected thereon, and which I am now occupying in my said business (reference is here made to record book for full description), all of which amounts to the sum of $13,455.83, and said property as aforesaid and described as aforesaid I now, in consideration as aforesaid, turn over and deliver to my said father, the said C. P. Connally, in good faith, being wholly out of debt at this time. I do so, however, in trust, except as hereinafter set out, as follows: Said sum of $13,455.83 is now by me divided into nine equal shares, each share amounting to the sum of $1495.09; the whole amount is still to be kept together and undivided, except as hereinafter provided, and my said father O. P. Connally is hereby appointed trustee of said fund, and is to continue said sum and its increase in amount, if any there be, in active and constant operation in the business heretofore by me pursued, to-wit, merchandising, and in his own name, or in such name and style as he may prefer, and is to keep correct accounts of all gains and losses, so that at the end of each year he can by his balance sheet correctly show how said business stands. The one-ninth part of the amount here by me transferred or assigned to my said father is transferred to him in absolute and unconditional sale, together with its increase. One-ninth part thereof with its increase, in case the said sum should by his management be increased, is reserved for myself, and he is to turn over the same to me whenever I or my assignee or legal representative shall demand of him so to do. The other seven-ninths and its increase shall go to the support and maintenance and education, or as much thereof as may in my father’s estimation be necessary for that purpose, of my brothers, whose names I have already herein given. Any of my grown brothers, and when they shall become grown, who will remain with my said father, the said trustee herein, and assist him for reasonable wages, such as he may contract to give them, are to be boarded out of said fund, but not otherwise. “ ‘When and after each of my seven brothers shall become of 25 years of age, my said trustee shall advance and pay over to him his pro rata of the amount then on hand, and said trustee may advance and pay over said pro rata share to any one when he thinks safe and prudent to do so even before he arrives at the age of 25 years, and especially so if he seem inclined to attend energetically to any species of business and prosper in said business; but no amount under this condition is to be advanced before the age of 25 years for uncertain or prodigal purposes. I mean by his pro rata above set forth, the one-seventh interest of the brothers’ interest or part at the time the advancement shall be made, and without regard to the amount now transferred. The advancement when so made must be taken by said brother in full payment of his portion, without recourse on the main fund for further advancement. A final settlement shall not be demanded nor had, nor shall any of the beneficiaries of the trust herein created force by law or equity a final settlement by trustee, till my youngest brother Edward shall arrive at the age of 25 years; or, in case of his death, till the period of time when he would be 25 years of age if alive. My father, the said trustee, shall not under any circumstances be required to give bond to faithfully carry out the trust herein created. I trust only to his integrity to do so; and I further provide that said trustee, my father, the said C. P. Connally, shall, for his services in faithfully carrying out this trust, and for his services in managing said mercantile business, have and receive $1000 per annum of and out of said fund here conveyed in trust as above set forth. Witness my hand,’ etc. “ 2. That C. P. Connally accepted such trust, and continued to execute the same till his death. “3. That on the 24th day of March, 1882, after the death of C. P. Connally, all the parties at interest being before the court, the District Court of Hopkins County, Texas, assumed jurisdiction, and appointed Hath an Connally, the defendant herein, and one of the beneficiaries in said trust, as trustee, with full power to execute the said trust according to the terms of the trust deed; and I find that he accepted said appointment and qualified thereunder and continued to operate and run such mercantile business under the style of Connally & Co. till on January 20, 1886, when the said business was attached by creditors.” Then follow the fourth, fifth, and sixth findings, which relate to three several statements made by the defendant to Dun & Co. and plaintiffs’ commission merchant in Hew York, showing large excess of assets over liabilities. “7. That on January 20, 1886, the concern of Connally & Co. was attached by creditors, and was indebted at that time, including the debt herein sued for, in the sum of $31,121.39, and had assets, as evidenced by the sheriff’s invoice attached to the returns to the writs of attachment, of $20,000; and I also find that on January 18,1886, a few days prior to the attachment, the defendant withdrew the deposits of Connally & Co. from the bank in Sulphur Springs, amounting to the sum of $4286, cash. “8. That during the months of July, August, and September, 1885, the plaintiffs W. H. Lyons & Co. sold and delivered to Connally & Co. merchandise to the amount of $6082.14, on credit, and that none of the same has ever been paid. “9. Finding that the goods were shipped on faith of representations as to credit. “10. That the plaintiffs, when the debt herein sued on was created, knew the capacity in which defendant Nathan Connally operated and conducted the business styled Connally & Co.; and I further find that the defendant Nathan Connally, in creating such indebtedness for Connally & Co., did not contract against his personal liability for the debt incurred. “11. Finding that at the time of the purchase of the goods from plaintiffs the defendant had in possession assets of Connally far in excess of the amount of plaintiffs’ debt.” The judge concluded, as a question of law, that Nathan Connally is individually liable to plaintiffs for the amount of their said debt, with interest. That the fact that defendant as trustee created the debt, and did not at the same time contract against personal liability for the same, made him individually liable. Plaintiffs’ original petition'was filed April 2, 1886, and sought judgment against the defendant Nathan Connally as trustee of the trust estate of Connally & Co. On August 1, 1887, plaintiffs filed their first amended original petition, and sought judgment against defendant individually. [This statement accompanied the opinion.]