POUND, Ch. J.

The action is to recover the balance due on a promissory note or the same balance due for money lent. It involves the construction of a pooling or syndicate agreement which reads as follows: "The undersigned hereby form a syndicate for the purpose of dealing in the capital stock of the Broadway National Bank Trust Company of New York. The syndicate shall be dissolved and terminate sixty days from the date hereof, but it may be terminated in the discretion of the managers prior thereto. Walter E. Bedell, chairman, Myer Davidow and Louis Eisenberg are hereby appointed as managers and they shall have sole management in the conduct of the business and affairs of the syndicate with all usual and customary powers including the right to make or procure loans and to pledge any of said stock and/or the obligations of the participants hereunder; to pay all commissions and expenses of every nature, and for the account of the syndicate, to purchase, sell, sell short, repurchase, resell or hold shares of the capital stock of the Broadway National Bank Trust Company to such amount, at such prices and in such manner as they may deem advisable, and generally to act in all respects as in their opinion may be to the best interests of the syndicate. The maximum commitment of the participants herein shall at no time exceed the sum of five thousand ($5,000) dollars. The managers hereof, as such, shall in no wise be liable for an error of judgment or mistake of law or fact. Said managers may participate in this syndicate and as such, with respect to their participation, shall enjoy all the rights, benefits and privileges and be subject to all the liabilities, debts and obligations hereby respectively granted to and imposed upon any other of the participants. This shall be binding upon the respective participants, their successors, executors, administrators and assigns, but no partnership relation shall arise therefrom. The liability of a participant in this syndicate shall not be increased by default of any other participant, the maximum individual liability being limited to the sum of five thousand ($5,000) dollars. At the termination period hereinbefore mentioned, the managers shall distribute to the participants herein pro rata, in the respective proportions which their respective participations bear to the total participations herein, the shares or cash remaining in their hands and the participants shall share pro rata in the said shares, in the profits or losses of the syndicate after deducting the expenses incurred by the managers in conducting the transaction and the apportionment and distribution by said managers of the said shares, profits or losses shall be final and conclusive upon the participants. Dated, New York, July 10, 1929."

The signatures and seals of the subscribers then follow, together with the signed acceptance by the managers: "The undersigned hereby accept the office of Managers specified in the instrument herein upon the terms and conditions therein set forth. Dated, July 10th, 1929."

The note reads as follows:

"$25,000.00. September 17, 1929.

"Sixty days after date we promise to pay to the order of David A. Brown Twenty-five thousand 00/100 Dollars at Broadway National Bank and Trust Company. Value received.

"No. Due.

"BROADWAY NATIONAL BANK AND TRUST CO. SYNDICATE,

"WALTER E. BEDELL, Chairman."

The courts below have held that the instrument constitutes a trust agreement, creating what is commonly known as a business or Massachusetts trust; that the trustees are the owners as well as the managers of the money put into the pool; that the subscribers are mere beneficiaries and that the promissory note for borrowed money, signed by the chairman of the syndicate, created a legal liability against the managers only and not against the subscribers to the agreement.

The exemption of the members of a business trust from personal liability for its debts has been recognized in New York. ( Jones v. Gould, 209 N.Y. 419; Byrnes v. Chase Nat. Bank, 225 App. Div. 102; affd., 251 N.Y. 551.) The leading Massachusetts case ( Williams v. Inhabitants of Milton, 215 Mass. 1) is cited with approval in Crehan v. Megargel ( 234 N.Y. 67, 79) for the proposition that business trusts may be utilized as substitutes for corporations and that such trusts raise an "insurmountable barrier" (HISCOCK, Ch. J., in Crehan v. Megargel, supra, p. 79) between the subscribers and the creditors.

The business trust as a device whereby to gain substantially all the advantages of incorporation and to escape the disadvantages of legislative regulation has not gained favor in all jurisdictions. It is, however, sustained by the great weight of authority. (Warren, "Corporate Advantages without Incorporation," p. 383; Stevens, "Limited Liability in Business Trusts," 7 Cornell Law Quarterly, 116; Darling v. Buddy, 318 Mo. 784; 58 A.L.R. 493.) The true test of such a trust seems to be to determine whether the relation between the parties is that of principal and agent or trustee and beneficiary; whether the subscribers are separated from direct interest ownership and control of the property and affairs of the trust. A trustee is a principal, not an agent in the management of the trust property. ( Taylor v. Davis, 110 U.S. 330, 335.) The trustees should, therefore, be a self-perpetuating body, owning the property of the syndicate, with all powers of control over it. The shareholders should have no rights except to receive dividends and to share in the final distribution when the business is wound up. Full-paid and non-assessable shares may be issued and sold to those who care to invest therein. The shares thus become an attractive form of investment when investments are eagerly sought by the public. The trust becomes a quasi corporation, separate and distinct from its members.

The agreement is one of joint adventure when the subscribers retain some degree of ownership and control over the property which they put into the pool.

A typical investment trust exists where the trustees invest and reinvest the fund paid in to them in payment for shares and pay the income to the certificate holders and at the termination of the trust divide the fund among them, thus giving them a status like that of shareholders in a corporation. ( Williams v. Inhabitants of Milton, supra.)

Although the test is plain, the difference is not always entirely clear between agreements where the subscribers are associated together by the terms of their agreement as principals owning their contributions to the pool or trust, and giving to their agents mere power to act for them, and agreements whereby the property becomes the property of the trustees and the subscribers have no rights except a right to have the property managed for their benefit. ( Williams v. Inhabitants of Milton, supra, p. 8; Bouchard v. First People's Trust, 253 Mass. 351.)

Whether the syndicate is the one or the other depends upon the way in which the trustees are to conduct the affairs committed to their charge. If they act as principals, owners of the sums subscribed, free from the control of the subscribers, a trust is created; but if the trustees are subject to the control of the subscribers as co-owners of a business for profit (Partnership Law, § 10; Cons. Laws, ch. 39), a partnership or joint undertaking exists as to third parties, although otherwise specified as to the subscribers among themselves.

Applying the test to this case, we have the formation of a syndicate, not in terms the creation of a trust, to deal in the capital stock of the Broadway National Bank and Trust Company of New York, to last for sixty days, unless sooner terminated by the managers. The stock thus acquired was to be transferred to a corporation to be formed. The managers were to have sole management in the conduct of the business and affairs of the syndicate, but there is no transfer of title to the managers. They were instructed, on account of the syndicate, to purchase, sell, sell short, repurchase, resell or hold shares in the capital stock of the bank, the maximum commitment of the subscribers being five thousand dollars. Does this agreement make the managers agents of a mutual pooling arrangement or does it make them trustees properly so called, who own the property of the association and are masters of it? We think the managers were agents of the subscribers and not owners of the amounts subscribed and paid in.

It is observed, first, that the agreement on its face provides for managers and not for trustees. This, of course, is not conclusive ( Byrnes v. Chase Nat. Bank, supra), but it is not without significance. The agreement seeks to limit liability to five thousand dollars each, but it provides that, at the termination of the period of its existence, the participants shall share pro rata in the profits or losses of the syndicate. What is this but a pooling agreement whereby a fund is intrusted to managers to use for the syndicate purposes as they shall deem to be for the best interests of the syndicate in buying and selling the shares of the bank? The participants put five thousand dollars each into a pool. They also seek to limit their liability among themselves to that amount and to provide that no partnership relation shall arise therefrom. Plaintiff is charged with knowledge of the terms of the agreement and he is bound thereby. ( Craighead v. Peterson, 72 N.Y. 279, 283; Jones v. Gould, supra, p. 425.)

A partnership is a joint undertaking wherein the partners agree to share in profits and losses. A business trust, like a corporation, has its own profits and losses. The subscribers as such, like stockholders, have none. Yet here the subscribers agree to share personally in the profits and losses of the syndicate. The managers act as agents of the subscribers, subject to an accounting to them.

The court should be solicitous to gather the object and purposes of the parties from the language of their contract rather than from formulas applied to other cases. Such formulas must not mislead us into the belief that the essential thing to be determined is the question of management. It should not be solicitous to give corporate advantages without incorporation ( Eliot v. Freeman, 220 U.S. 178), or to extend the Massachusetts business trust doctrine of exemption from liability beyond properly defined lines. We conclude that the subscribers created a pooling agreement or agency and did not create a quasi legal entity, apart from such subscribers, which became an "insurmountable barrier" between them and the creditors of the syndicate. A business trust is something separate and apart from the members who compose it. We find nothing of the kind here.

The law has not crystalized in all matters to be included in making the test of a business trust, but on the essentials we have abundance of authority to sustain our position.

The trial court has found that the lapse of the sixty-day period did not put an end to the business of the pool and also that Bedell was properly intrusted by his co-managers with the whole management and control, but this was only as against the syndicate managers, Davidow and Eisenberg. ( Jones v. Gould, supra.) We think that the evidence justifies these conclusions as against them.

Many of the other legal questions raised were not considered nor decided when the subscribers, other than the managers, were let out. These questions should be tried out and decided in relation to the individual rights and liabilities of the other defendants severally.

The judgments below should be reversed and a new trial granted, with costs to abide the event, and the order dismissing the first count of the complaint as to defendant Winston reversed with costs.

CRANE, LEHMAN, KELLOGG, O'BRIEN, HUBBS and CROUCH, JJ., concur.

Judgments reversed, etc.