196 N.E. 667 | Ohio | 1935
The petition, including the attached exhibits, is quite lengthy. Briefly stated, it pleads that on April 2, 1929, the firm of Otis Company, as syndicate managers of a syndicate, sent letters to certain of their clientele informing them that they, as managers, were forming a syndicate to deal in shares of companies engaged in the steel industry, the syndicate to become effective as soon as a certain aggregate amount of subscriptions should be received and accepted by the syndicate. Each participant, in his proper proportion, was to share in the profits or proceeds of the syndicate and was obligated to pay for its expenses, commitments and losses. Each was obligated to contribute proportionately to the extent deemed requisite by the managers and in the manner prescribed by them. Calls were to be made by the managers upon the participants ratably in such amounts as the managers deemed desirable. The subscription agreements provided that the managers were to "have sole direction of all Syndicate matters, with full discretion and unrestricted powers." The managers were empowered, in their discretion, to buy and sell shares of stock, etc. They were given the power of exercising all the rights, privileges and powers pertinent to their ownership of shares. They were *12 authorized to borrow money on account of the syndicate and pledge as collateral therefor the participants' holdings in the syndicate. By the terms of the original agreement the syndicate was to expire on April 2, 1930, but the managers were authorized to extend the syndicate from time to time so that it would expire not later than a year thereafter; but the managers, in their discretion, could terminate the syndicate at any time.
The requisite amount having been subscribed by various participants, the syndicate became effective under its terms, the defendant subscribing to a participation in the sum of $25,000, which was accepted by the syndicate managers. Thereafter, and prior to April 2, 1930, large investments were made by the syndicate managers in steel and iron stocks, with funds obtained by calls from the syndicate participants. The managers made seven calls, the sixth and seventh of which were ignored by the defendant, and the percentages therein not being paid by him his prorated shares were held by the managers as security for the non-payment of his delinquent calls. These two delinquent calls amounted to the sum of $3,750. After demand and notice for the amount due on his delinquencies had been given the defendant, and after his non-payment thereof, his proportion of the securities invested in were on August 31, 1932, sold at public auction, no acceptable offer having been made therefor on the stock exchange on the previous day. The syndicate managers caused public notice of the same to be published for two weeks prior to the sale, and the securities held by the syndicate applicable to defendant's participation therein were sold to the best bidder for the sum of $1,923. This suit is for the recovery of $1,859.20, with interest from the day of sale, this being the balance claimed to be due on the defendant's delinquent calls, less certain credits given the defendant, among which was the sum produced by the auction *13 sale. The facts relating to the subscription contracts, the authority of the syndicate managers, and the extension of the life of the syndicate appear in two exhibits which form the contractual relations between the subscribing participants and the syndicate managers.
In support of his demurrer the defendant in error contends that the syndicate terminated on October 2, 1932, and whatever powers the syndicate had ceased at that time; that this suit being brought in January, 1933, three months after the syndicate's alleged termination, its powers, including that of bringing suit, had ceased. The original agreement of April 2, 1929, did provide that the syndicate should expire on April 2, 1930, but empowered the managers to extend the syndicate until April 2, 1931. On February 24, 1931, the foregoing agreement was amended, with the consent of the participants, authorizing the board of managers to extend the syndicate until October 2, 1932. While this limitation of time expiration denied authority to the managers to further act in the purchase and sale of steel securities — the main purpose of the participation agreement — it did not, nor was it intended to, control the time of liquidation of the syndicate or terminate its managers' powers to distribute the stocks in their hands to the participants or to collect the indebtedness then due from the defendant on his delinquent calls. The stocks were bought in 1930. The calls for delinquent subscriptions were made in June and September of 1931, the defendant's proportion of the participating shares being sold on August 31, 1932, prior to the expiration of the agreement in the following October. Had the purchase and sale of the stocks been to the defendant's advantage, obviously he would not advance the contention that the syndicate managers' powers of distribution had ceased, or that he would himself have no authority to bring suit against *14
the plaintiffs in error. The claim that this was a partnership arrangement cannot be upheld. Participation in the profits of a business is not decisive of that question. In order to constitute a partnership, the evidence must show that the person taking the profit shared in it as a principal in a joint business in which each had express or implied authority to bind the other. Harvey v. Childs and Potter,
The syndicate managers were given wide and extensive powers over all syndicate dealings. No participant had a right to interfere so long as the syndicate managers carried out the agreement. The managers were authorized to make calls in such amount as they deemed desirable. They had full discretion and unrestricted powers over all syndicate matters. Undoubtedly they had the power to collect delinquent calls. At the expiration of the syndicate the managers were authorized to sell stocks remaining unsold in their hands or, in their discretion, to distribute them to the participating subscribers in proportion to their respective *15 liabilities at the time of such distribution. While not named as "trustees" in the syndicate agreement, they became trustees in fact for all the various participants and were subject to account to each of them if the syndicate managers were guilty of violating their agreement.
This brings us to the question whether or not the plaintiffs, as syndicate managers, had the legal capacity to sue for the uncollected delinquencies. Section 11244, General Code, provides that a trustee of an express trust, a person with whom or in whose name a contract is made for the benefit of another, may bring an action without joining with him the person for whose benefit it is prosecuted. Counsel for defendant in error advance the argument that at most the plaintiffs in error are merely the agents of the syndicate and not trustees. If that be true, if the syndicate managers were mere agents, they would have the right to sue, since the contract was entered into in their name. Davis v. Harness,
Judgment reversed.
WEYGANDT, C.J., STEPHENSON, WILLIAMS, MATTHIAS, DAY and ZIMMERMAN, JJ., concur.