Opinion
No. 31049.
March 26, 1934. Suggestion of Error Overruled. June 5, 1934.
1. RELIGIOUS SOCIETIES.
Church which is unincorporated religious society is without power to contract.
2. RELIGIOUS SOCIETIES.
Agent who contracts for unincorporated religious society, becomes party to contract and liable thereon, unless contract otherwise provides, or nonexistence or incompetency of principal is known to other parties.
3. RELIGIOUS SOCIETIES.
Trustees for unincorporated religious society, who executed deed of trust and notes by setting forth their names as such, held personally liable for deficiency judgment on notes after fore closure.
4. RELIGIOUS SOCIETIES.
Religious society, having unlawfully acquired title to land, may continue in enjoyment thereof until right thereto is successfully questioned in direct proceeding by state (Code 1930, sections 4168, 4169).
APPEAL from Chancery Court of Hinds County.
L.F. Easterling and Calhoun, Rosenthal Capers, all all of Jackson, for appellants.
It is our contention that the decree should have fixed a lien on all the trust estate and provided that execution should issue against any property belonging to the estate, and not make it necessary for the complainants to have sold the property covered by the deed of trust and then come back into the court and by separate proceeding fix a lien on the rest of the estate and have a special sale therefor.
Section 4168, Miss. Code of 1930; Paine's Chapel of African Methodist Episcopal Church v. Aberdeen Realty Co., 120 Miss. 12, 81 So. 650; Gullett v. First Christian Church of Meridian, 154 Miss. 516, 122 So. 732; Evans v. M.C. Lilly Co., 95 Miss. 58, 48 So. 612; Alkahest Lyceum System v. Featherstone et al., 113 Miss. 226, 74 So. 151.
Under the decisions of the Mississippi courts there is no doubt as to the individual liability of the trustees in this case.
Section 2676, Miss. Code of 1930; Orgill Bros. v. Perry, 128 So. 755; Treas v. Price, 146 So. 630; I.W. Phillips Co. v. Hall et al., 128 So. 635.
The law is that an unincorporated church organization cannot be made liable on its contracts. Nor can an officer of such church organization be made liable in his official capacity; but a contract signed by an officer in his official capacity binds him individually and not the church.
Summerhill v. Wilkes, 63 Tex. Civ. App. 456, 133 S.W. 492, 493; C.S. Forsberg et al. v. Harry J. Zehm, 143 S.E. 284, 61 A.L.R. 232; Catlett v. Hawthorne et al., 161 S.E. 47.
A general rule in the law of trusts is that a trustee is a principal and not an agent for the cestui que trust. It follows from this rule that the trustee, and not the cestui que trust, is personally responsible for an indebtedness growing out of transactions in relation to the trust estate. The creditor's guaranty is the personal liability of the trustee.
Betts et al. v. W.M. Hackathorn, 159 Ark. 621, 252 S.E. 602, 31 A.L.R. 850; Riedell v. Stuart et al., 2 P.2d 929, 76 A.L.R. 1469; Printup, Trustee, v. Trammel, 25 Ga. 240; Wilkins v. The Wardens and Vestry of St. Mark's Protestant Episcopal Church, 52 Ga. 351; Lyons v. Planters Loan Savings Bank, 86 Ga. 485; Atlanta v. Grant, 57 Ga. 346; Kelsey v. Jackson, 123 Ga. 113.
Watkins Eager, of Jackson, for appellees.
The appellants acted in a representative capacity and are therefore not individually responsible.
New Georgia National Bank v. Lippmann (N.Y.), 164 N.E. 108; Baker v. James (Mass.), 181 N.E. 861; Orgill Bros. v. Perry, 128 So. 755, 157 Miss. 543; Hunt v. Adams (Fla.), 149 So. 24; Tripp County State Bank v. Farmers' Co-op. Union (S.D.), 210 N.W. 674; First National Bank v. Delancey (W. Va.), 153 S.E. 908; Johnson v. Welch (W. Va.), 24 S.E. 585; Consumers Twine Co. v. Tank Co. (Iowa), 194 N.W. 290; Wright v. Petroleum Cor. (Mich.), 201 N.W. 484; Chas. Nelson Co. v. Norton (Cal.), 288 P. 845; Roper v. Alamo Oil Ref. Co. (Texas), 284 S.W. 305; Lyons v. Planters' Loan Savings Bank, 86 Ga. 485; Kelsey v. Jackson, 123 Ga. 113; Wilkins v. St. Marks Episcopal Church, 52 Ga. 351; Printup, Trustee, v. Trammel, 25 Ga. 240; Evans v. Lilly, 95 Miss. 58, 48 So. 612; Alkahest Lyceum System v. Featherstone, 113 Miss. 226, 74 So. 151; Forsberg v. Zahm (Va.), 61 A.L.R. 232, 143 S.E. 284; Catlett v. Hawthorne (Va.), 161 S.E. 47; Betts v. Hackathorn, 159 Ark. 521, 31 A.L.R. 847; Little Rock Furn. Mfg. Co. v. Kavanaugh, 111 Ark. 575, 164 S.W. 289; Ridell v. Stuart (Okla.), 2 P.2d 929, 76 A.L.R. 1469; Price, State Auditor, v. Independent Oil Co., 150 So. 521.
Appellants thoroughly understood the nature of appellees' principal. They had actual, as well as constructive, notice that the principal for which the appellees acted was an unincorporated religious association which could not be bound.
Gillett v. First Christian Church of Meridian, 120 So. 732, 154 Miss. 516; Paine's Chapel v. Aberdeen Realty Co., 81 So. 650, 120 Miss. 12; Enochs v. City of Jackson, 109 So. 864, 144 Miss. 360; Kilpatrick v. Greaves, 51 Miss. 432; Sorrel v. Alexander Bros., 144 So. 560; Chicago, Great Eastern Ry. Co. v. Farmers Ship. Assn. (C.C.A. 1932), 59 F.2d 657; Updike Grain Cor. v. Chicago N.W.R.R. Co. (C.C.A.), 35 F.2d 486; Updike Grain Cor. v. St. Louis S.F.R.R. Co. (C.C.A.), 62 F.2d 94; Methodist Episcopal Church v. Watlers (D.C. Mo.), 50 F.2d 416; Dunn v. Elliott (Ala.), 141 So. 700; People v. Powers (N.Y.), 35 A.L.R. 502; Knights of the Ku Klux v. Independent Klan of Am. D.C., Inc., 11 F.2d 881; Blount v. Sixteenth St. Baptist Church (Ala.), 90 So. 602; Parker v. State (Ala.), 41 So. 724; Frohliger v. Richardson (Cal.), 218 P. 487; Pilcher v. Martin (Fla.), 136 So. 386; Hunt v. Adams, 149 So. 24; Brice v. Bull (Fla.), 143 So. 409; 2 C.J. 810; Lorenze v. Wilbert, 165 La. 247, 115 So. 475; McCarty v. Love, 145 Miss. 330, 110 So. 795; Phillips v. Hall (Fla.), 128 So. 635.
Capitol Street Methodist Church was without authority to have acquired the particular property because in excess of that authorized to be owned by it. The contract was illegal. The appellants had knowledge, actual and constructive, of the legal limitation on the right of the Capitol Street Methodist Church to acquire additional property.
Paine's Chapel v. Realty Co., 120 Miss. 12; Enochs v. City of Jackson, 144 Miss. 364; Aldrich v. Rice, 138 So. 570, 161 Miss. 879; Elkin Grain Co. v. White, 98 So. 531, 134 Miss. 203; Dixie Rubber Co. v. Gates, 110 So. 870, 145 Miss. 342; Woodson v. Hopkins, 85 Miss. 171; Green v. Brown, 153 Miss. 893.
Argued orally by Simon Rosenthal, for appellants, and Tom Watkins, for appellees.
The appellants exhibited an original bill against the appellees by which they seek to foreclose a deed of trust executed to them by the appellees to secure several promissory notes also executed to them by the appellees, and for a personal judgment against the appellees for any balance that might remain due them on the notes after the sale of the property described in the deed of trust, and the application of the proceeds thereof to the payment of the notes. The court below granted the prayer for the foreclosure of the deed of trust, but declined to grant the personal judgment prayed for against the appellees. The assignment of error challenges only the ruling of the court below on the appellants' request for this personal judgment.
The case was tried on an agreed statement of facts which is, in substance, as follows: The West Capitol Street Methodist Church is an unincorporated religious society, and owns and occupies, in the city of Jackson, all of the real property it is permitted so to do by section 4169, Code 1930. Desiring to build a new church situated in another part of the city of Jackson, it decided to sell the property now owned by it, purchase another lot, and build a new church thereon. Pursuant to this intention it adopted a resolution authorizing the appellees to accept a deed from the appellants to a lot owned by them in consideration of ten dollars, cash in hand paid, and other valuable consideration, to be held in trust by the appellees for the use and benefit of the church, which deed was duly executed by the appellants.
The resolution further provided that the appellees "be further authorized to secure the unpaid purchase money on said property, and execute deed of trust in words and figures as follows: `Whereas, we, the undersigned trustees (setting forth the name of the appellees), of the Capitol Street Methodist Church, and their successors in office, are justly indebted unto (setting forth the names of appellants), in the sum of twenty-five thousand dollars, evidenced by our certain promissory notes of even date herewith (describing notes).'" The deed of trust then proceeds in the usual form and concludes as follows:
"The trustees of the Capitol Street Methodist Church hereby covenant that they have full authority for and on behalf of said church to execute and deliver this trust deed in manner and form as executed and delivered, and further covenant that the same is valid and binding in manner and form as executed, and vests in the trustee for the benefit of the beneficiary the fee simple title, free and discharged from all encumbrances, to the property hereinbefore described.
"Witness our signatures, this the ____ day of July, A.D. 1928.
"Trustees of Capitol Street Methodist Church "by (setting out names of the appellees)."
The deed and deed of trust referred to in this resolution were executed in accordance therewith. The notes described in the deed of trust were signed "Trustees of the Capitol Street Methodist Church by (setting forth the name of each of the appellees)."
The trustees were also authorized to sell the other property then owned by the church, and they endeavored, without success, to so do.
The appellees are mere passive trustees of the property purchased by them from the appellants, and are vested with the legal title thereto solely for the use and benefit of the church.
If the law trusts here governs, the appellees are, of course, personally liable on these notes. A.L.I. Restatement, Trusts (Tent. Draft, No. 4), section 254; but we will not decide that question, and will assume, for the purpose of the argument, that the law of agency here controls.
The West Capitol Street Methodist Church being an unincorporated religious society, is without the power to contract, and, therefore, the appellees were here acting for a nonexistent or incompetent principal. An agent contracting for such a principal becomes a party to the contract and liable to the contractee thereon unless the contract otherwise provides, or (probably) the nonexistence or incompetency of the principal is known to the contractee. Restatement, Agency, secs. 326 and 329; Mechem on Agencies (2 Ed.), sec. 1389 et seq.; Evans v. Lilly, 95 Miss. 58, 48 So. 612, 21 Ann. Cas. 1087; Alkahest Lyceum System v. Featherstone, 113 Miss. 226, 74 So. 151; Victor v. Adams, 140 Miss. 643, 106 So. 433; Johnson v. Howard (Miss.), 141 So. 573; Treas v. Price (Miss.), 146 So. 630.
It will not be necessary for us to decide whether an agent contracting for such a principal becomes a party to the contract and liable thereon in the event the disability of the principal is known to the contractee, for two reasons: (1) The agreed statement of facts does not disclose that the appellants knew that the church was not a legal entity. In none of the cases hereinbefore cited was the knowledge or want thereof of the contractee of the nonexistence or incompetency of the principal referred to. But see Merchants' Planters' Packet Co. v. Streuby, 91 Miss. 211, 44 So. 791, 124 Am. St. Rep. 651. And (2) the appellees expressly covenanted "that they have full authority for and on behalf of said church to execute and deliver this trust deed in manner and form as executed and delivered." This warranty, of course, included the notes embodied in the deed of trust.
As hereinbefore pointed out, the evidence is silent as to the appellants' knowledge vel non of the nonexistence of the church as a legal entity, and there is no presumption that they did so know, for the church could have become such an entity under section 4168, Code 1930, without any publicity, by proper entries on its own records.
But the appellees say that the purchase of the land for the benefit and use of the church violates section 4169, Code 1930, which fact the appellants knew when they executed the deed and received the notes and deed of trust, and, therefore, cannot invoke the aid of the courts in the collection of the notes. Whether they here violated the statute is of no concern of the appellees. They have acquired title to the land and can continue to use and enjoy it unless and until the right so to do is successfully questioned in a direct proceeding by the state. Quitman County v. Stritze, 70 Miss. 320, 13 So. 36; Taylor v. Alliance Trust Co., 71 Miss. 694, 15 So. 121; Middleton v. Georgetown Mercantile Co., 117 Miss. 134, 77 So. 956; State v. Sisters of Mercy, 150 Miss. 559, 115 So. 323; cf. Southern Realty Co. v. Tchula Co-op. Stores, 114 Miss. 309, 75 So. 121.
The court below should have awarded the appellants an ordinary personal deficiency judgment against the appellees.
Reversed and remanded.