HUNT, Circuit Judge
(after stating the facts as above). [1-3] The question for decision is whether the Maui Agricultural Company is an organization excepted from the Income Tax Raw of 1913, which, besides applying to persons, applies, subject to certain enumerated exceptions, to:
“Every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, not including partnerships.”
It is clear, we think, that the company is not a legally created corporation. It was originally formed in 1903, solely by agreement of its members. The statute of Hawaii (section 1, act 51, Session Raws of Hawaii 1903) permitted any two or more corporations, organized under the laws of Hawaii, to enter into partnex-ship with each other for the transaction of any lawful business; but a partnership formed of corporations is not in itself a corporation. The right given to a corporation to become a member of a partnership pertains to the power of the corporation to gain membex-ship in a partnership, but does not make the aggregation of partners itself a corporation. There may yet be upon a corporation member the liability of a partner as to • third persons. Butler v. Am. Toy Co., 46 Conn. 136; Bates on Partnership, § 1; Rindley on Partnership, p. 86. The partnerships into which cox'porations may enter in Hawaii are general and special. Chapter 70, § 1, Session Raws 1886. In the association in question thex*e were no special partners, nor was there limited liability; nor, indeed, was any attempt made to form any but a general partnership^ Strong evidence of this is the fact that tlie company registered as a general partnership under, the law. Chapter 189, Revised Raws of Hawaii 1915.
[107]*107In so far as intent may serve to determine the character of the agreement made between the parties, the theory of a partnership is reasonable. Fechteler v. Palm Bros. & Co., 133 Fed. 462, 66 C. C. A. 336. The provisions of the agreement are arranged with titles, for example, “Objects of Copartnership,” “Term of Partnership,” “Dissolution of Partnership,” and the second recital of the “Indenture of Partnership” is that the parties “have mutually agreed each with the other to enter into partnership,” while the first object stated is that the parties associate themselves together as partners under the firm name and style of the Maui Agricultural Company, and throughout the whole agreement the references are to the parties as partners and to the association as a partnership. After specifying the respective, proportionate interest of the several partners, the agreement provides for sharing profits and losses as owners, and for the division in the same proportion of all surplus funds of the company when dissolution’ is had. Meehan v. Valentine, 145 U. S. 611, 12 Sup. Ct. 972, 36 L. Ed. 835.
But, notwithstanding the intent to form an ordinary partnership, must it be held that the legal effect of the language used by the parties has been to create a joint-stock company rather than a partnership? If it is such, then the lower court should be sustained, and taxation should be upon the income of such legally created joint-stock company. This is the pivotal point in the case, for in making distinction between joint-stock associations and partnerships Congress must have had in mind that there are substantial points of difference between such relationships. It is noticeable that the arrangement under examination lacks the dement of changeability of membership or transferability of shares, an element often used as a determining criterion as between ordinary partnerships and joint-stock companies. Bates on Partnership, § 72. Nor has the agreement reference of any kind to indicate any purpose that the interests of members should be transferable; on the contrary, there are evidences of intent that the contract was solely between the parties thereto and no others. Hedge’s Appeal, 63 Pa. 273. It is conceded that the provision for the management of the company by a board of managers is such as is frequently a characteristic of a joint-stock company, but this feature is not inconsistent with the right of partners to make their own arrangements for the management of the partnership affairs. If the right to form the ordinary partnership existed, it should follow that representatives of members of the partners could, for convenience, he selected to manage. McAlpine v. Millen, 104 Minn. 289, 116 N. W. 583; Fleming v. Lay, 109 Fed. 952, 48 C. C. A. 748. This would seem to he an inevitable result of the exercise of the right of a corporation to enter a partnership with another corporation.
We find, however, that in the present case the management of the concern is as much like that of an ordinary partnership as possible, considering the fact that the several members are corporations. The members of the board are not chosen at large by a majority vote of unit shares, but each member of the board is a special representative of the particular members of the partnership. To illustrate: It is provided in the by-laws (article IV) that the Haiku Company shall [108]*108appoint two managers, the'Paia Company three, and the five other companies one jointly. These managers are to represent the respective partners by whom they are appointed, and a vacancy in the board is to be filled by appointment by the particular partner which “such manager represents.” It is also provided in the by-laws (article VI) that a quorum at a meeting of the partnership is to consist of a majority of the partners, both in numbers and interest. The by-laws (article 16) also give to the stockholders of each of the corporate members, although not themselves partners, the same rights to inspect and examine the books and records of the partnership, and to investigate into the partnership affairs, as such stockholders have in the several . corporate members in which they hold stock.
[4-8] In a joint-stock company the members have no right to decide what new members shall be admitted to the firm; on the other hand, the right of delectus personarum is an inherent quality of the ordinary partnership. Oak Ridge Coal Co. v. Rogers, 108 Pa. 147; Ashley v. Dowling, 203 Mass. 249, 89 N. E. 433. The provision for existence of the association for 45 years, “unless sooner terminated by the mutual consent of the parties hereto,” does not show a plan for changeability in the membership. ’ Karrick v. Hannaman, 168 U. S. 328, 18 Sup. Ct. 135, 42 L. Ed. 484. Dissolution would probably be effected 'through a transfer of any partner’s interest, and there would be a liability for the breach, to be compensated in damages. Lindley on Partnership, *230, *231. A joint-stock company often consists of a large number of persons, between whom there is no special relationship of confidence; the retirement or death of a member works no dissolution; while a partnership, although it may consist of several persons; generally is made up of a few, who are drawn to each other by feelings of mutual confidence, and no member is at liberty to retire and substitute another as a partner. In a joint-stock company the business is generally managed by directors or other designated officers of the association, and a shareholder as such is without power to contract for the company; whereas, in a partnership any member may bind the partnership.
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HUNT, Circuit Judge
(after stating the facts as above). [1-3] The question for decision is whether the Maui Agricultural Company is an organization excepted from the Income Tax Raw of 1913, which, besides applying to persons, applies, subject to certain enumerated exceptions, to:
“Every corporation, joint-stock company or association, and every insurance company, organized in the United States, no matter how created or organized, not including partnerships.”
It is clear, we think, that the company is not a legally created corporation. It was originally formed in 1903, solely by agreement of its members. The statute of Hawaii (section 1, act 51, Session Raws of Hawaii 1903) permitted any two or more corporations, organized under the laws of Hawaii, to enter into partnex-ship with each other for the transaction of any lawful business; but a partnership formed of corporations is not in itself a corporation. The right given to a corporation to become a member of a partnership pertains to the power of the corporation to gain membex-ship in a partnership, but does not make the aggregation of partners itself a corporation. There may yet be upon a corporation member the liability of a partner as to • third persons. Butler v. Am. Toy Co., 46 Conn. 136; Bates on Partnership, § 1; Rindley on Partnership, p. 86. The partnerships into which cox'porations may enter in Hawaii are general and special. Chapter 70, § 1, Session Raws 1886. In the association in question thex*e were no special partners, nor was there limited liability; nor, indeed, was any attempt made to form any but a general partnership^ Strong evidence of this is the fact that tlie company registered as a general partnership under, the law. Chapter 189, Revised Raws of Hawaii 1915.
[107]*107In so far as intent may serve to determine the character of the agreement made between the parties, the theory of a partnership is reasonable. Fechteler v. Palm Bros. & Co., 133 Fed. 462, 66 C. C. A. 336. The provisions of the agreement are arranged with titles, for example, “Objects of Copartnership,” “Term of Partnership,” “Dissolution of Partnership,” and the second recital of the “Indenture of Partnership” is that the parties “have mutually agreed each with the other to enter into partnership,” while the first object stated is that the parties associate themselves together as partners under the firm name and style of the Maui Agricultural Company, and throughout the whole agreement the references are to the parties as partners and to the association as a partnership. After specifying the respective, proportionate interest of the several partners, the agreement provides for sharing profits and losses as owners, and for the division in the same proportion of all surplus funds of the company when dissolution’ is had. Meehan v. Valentine, 145 U. S. 611, 12 Sup. Ct. 972, 36 L. Ed. 835.
But, notwithstanding the intent to form an ordinary partnership, must it be held that the legal effect of the language used by the parties has been to create a joint-stock company rather than a partnership? If it is such, then the lower court should be sustained, and taxation should be upon the income of such legally created joint-stock company. This is the pivotal point in the case, for in making distinction between joint-stock associations and partnerships Congress must have had in mind that there are substantial points of difference between such relationships. It is noticeable that the arrangement under examination lacks the dement of changeability of membership or transferability of shares, an element often used as a determining criterion as between ordinary partnerships and joint-stock companies. Bates on Partnership, § 72. Nor has the agreement reference of any kind to indicate any purpose that the interests of members should be transferable; on the contrary, there are evidences of intent that the contract was solely between the parties thereto and no others. Hedge’s Appeal, 63 Pa. 273. It is conceded that the provision for the management of the company by a board of managers is such as is frequently a characteristic of a joint-stock company, but this feature is not inconsistent with the right of partners to make their own arrangements for the management of the partnership affairs. If the right to form the ordinary partnership existed, it should follow that representatives of members of the partners could, for convenience, he selected to manage. McAlpine v. Millen, 104 Minn. 289, 116 N. W. 583; Fleming v. Lay, 109 Fed. 952, 48 C. C. A. 748. This would seem to he an inevitable result of the exercise of the right of a corporation to enter a partnership with another corporation.
We find, however, that in the present case the management of the concern is as much like that of an ordinary partnership as possible, considering the fact that the several members are corporations. The members of the board are not chosen at large by a majority vote of unit shares, but each member of the board is a special representative of the particular members of the partnership. To illustrate: It is provided in the by-laws (article IV) that the Haiku Company shall [108]*108appoint two managers, the'Paia Company three, and the five other companies one jointly. These managers are to represent the respective partners by whom they are appointed, and a vacancy in the board is to be filled by appointment by the particular partner which “such manager represents.” It is also provided in the by-laws (article VI) that a quorum at a meeting of the partnership is to consist of a majority of the partners, both in numbers and interest. The by-laws (article 16) also give to the stockholders of each of the corporate members, although not themselves partners, the same rights to inspect and examine the books and records of the partnership, and to investigate into the partnership affairs, as such stockholders have in the several . corporate members in which they hold stock.
[4-8] In a joint-stock company the members have no right to decide what new members shall be admitted to the firm; on the other hand, the right of delectus personarum is an inherent quality of the ordinary partnership. Oak Ridge Coal Co. v. Rogers, 108 Pa. 147; Ashley v. Dowling, 203 Mass. 249, 89 N. E. 433. The provision for existence of the association for 45 years, “unless sooner terminated by the mutual consent of the parties hereto,” does not show a plan for changeability in the membership. ’ Karrick v. Hannaman, 168 U. S. 328, 18 Sup. Ct. 135, 42 L. Ed. 484. Dissolution would probably be effected 'through a transfer of any partner’s interest, and there would be a liability for the breach, to be compensated in damages. Lindley on Partnership, *230, *231. A joint-stock company often consists of a large number of persons, between whom there is no special relationship of confidence; the retirement or death of a member works no dissolution; while a partnership, although it may consist of several persons; generally is made up of a few, who are drawn to each other by feelings of mutual confidence, and no member is at liberty to retire and substitute another as a partner. In a joint-stock company the business is generally managed by directors or other designated officers of the association, and a shareholder as such is without power to contract for the company; whereas, in a partnership any member may bind the partnership. Where a corporation is a partner, the doctrine of mutual agency may make business administration more intricate, but does not affect the legal'question. Mallory v. Hanaur Oil Works, 86 Tenn. 598, 8 S. W. 396; News-Register Co. v. Rockingham Publishing Co., 118 Va. 140, 86 S. E. 874.
Stress is laid upon the provisions of the partnership agreement, 'wherein what is termed the “capital stock” is divided into 35 shares of interests. It is to be remembered, however, that the company had no nominal or fixed capital stock apart from the capital assets it owned— that is to say, there was no capital stock of a corporation or joint-stock company, divided, as is usually done in corporations or joint-stock companies, into nominal transferable shares of specified par value. When the agreement and by-laws are looked upon as a whole, the capital stock referred to is the capital or capital assets, and reference to1 the shares or interests is a method used to express the entire proportional indivisible interests of the seven named members of the partnership. These respective interests of the -partners were different, as is shown by article II of the by-laws; and as already [109]*109indicated in another by-law (article IV), the managers are required to represent the partners in accordance with their respective interests. State v. Cheraw & Chester R. Co., 16 S. C. 524; Goodnow v. Am. Writing Paper Co., 73 N. J. Eq. 692, 69 Atl. 1014.
[9] In conclusion, while the case is not free from doubt, we think that its determination should be had in conformity with the intent of the several members of the association, and that by so resolving it we are accepting the latest expression of the Supreme Court, as announced in Gould v. Gould, 245 U. S. 151, 38 Sup. Ct. 53, 62 L. Ed. —, where it was said:
“In the interpretation of statutes levying taxes it is the established rule not to extend their provisions by implication beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen.”
[10] The judgment of the District Court must he reversed, and the cause remanded, with instructions to enter judgment for plaintiffs for the amount claimed, with interest and costs. Erskine v. Van Arsdale, 15 Wall. 75, 21 L. Ed. 63; Herold v. Shanley, 146 Fed. 20, 76 C. C. A. 478.