Button v. Hoffman

This is an action of replevin in which the title of the plaintiff to the property was put in issue by the answer.

In bis instructions to the jury the learned judge of the circuit court said: “ I think the testimony is that the plaintiff had the title to the property.” The evidence of the plaintiff’s title was that the property belonged to a corporation known as “ The Hayden & Smith Manufacturing Company,” and that he purchased and became the sole owner of all of the capital stock of said corporation. As the plaintiff in his testimony expressed it, “ I bought all the stock. I own all the stock now. I became the absolute owner of the mill'. It belonged at that time to the company, and I am the company.” There was no other evidence of the condition of the corporation at the time. Is this sufficient evidence of the plaintiff’s title? We think not. The learned counsel of the respondent in his brief says: “The property had formerly belonged to the Hayden & Smith Manufacturing Company, but the respondent had purchased and become the owner of all the stock of the company, and thus became its sole owner.”

From the very nature of a private business corporation,» or, indeed, of any corporation, the stockholders are not the| private and joint owners of its property. The corporation is the real, though artificial, person substituted for the natural persons who procured its creation and have pecuniary interests in it, in which all its property is vested, and by which it is controlled, managed, and disposed of. It must purchase, hold, grant, sell, and convey the corporate property, and do business, sue and be sued, plead and be im-pleaded, for corporate purposes, by its corporate name. The* corporation must do its business in a certain way, and by its regular^ appointed officers and agents, whose acts are those of the corporation only as they are within the powers and purposes of the corporation. In an ordinary copartnership the members of it act as natural persons and as agents for each other, and with unlimited liability. But not so with a corporation; its members, as natural persons, are merged in the corporate identity. Ang. & A. on Corp. secs. 40, 46, 100, 591, 595. A share of the capital stock of a corporation is defined to be a right to partake, according to the amount subscribed, of the surplus profits obtained from the use and disposal of the capital stock of the company to those purposes for which the company is constituted. Id. sec. 557. The corporation is the trustee for the management of the property, and the stockholders are the mere cestui-que-trusts. Gray v. Portland Bank, 3 Mass. 365; Eidman v. Bowman, 4 Am. Corp. Cas. 350. The right of alienation or assignment of the property is in the corporation alone, and this right is not affected by making the stockholders individually liable for the corporate debts. Ang. & A. on Corp. sec. 191; Pope v. Brandon, 2 Stewart (Ala.), 401; Whitwell v. Warner, 20 Vt. 444. The property of the corporation is the mere instrument whereby the stock is made to produce the profits, which are the dividends to be decláred from time to time by corporate authority for the benefit of the stockholders, while the property itself, which produces them, continues to belong to the corporation. Bradley v. Holdsworth, 3 Mees. & W. 422; Waltham Bank v. Waltham, 10 Met. 334; Tippets v. Walker, 4 Mass. 595. The corporation holds its property only for the purposes for which it was permitted to acquire it, and even the corporation cannot divert it from, such use, and a shareholder has no legal right to it, or the profits arising therefrom, until a lawful division is made by the directors or other proper' officers of the corporation, or by judicial determination. Ang. & A. on Corp. secs. 160, 190, 557; Hyatt v. Allen, 4 Am. Corp. Cas. 624. A conveyance of all the capital stock to a purchaser gives to such purchaser only an equitable interest in the property to carry on business under the act of incorporation and in the corporate name, and the corporation is still the legal owner of the same. Wilde v. Jenkins, 4 Paige, 481. A legal distribution of the property after a dissolution of the corporation and settlement of its affairs, is the inception of any title of a stockholder to it, although he be the sole stockholder. Ang. & A. on Corp. sec. '179a.

These general principles sufficiently establish the doctriné that the owner of all the capital stock of a corporation does not therefore own its property, or 'any of it, aDd does not himself become the corporation, as a natural person, to own its property and do its business in his own name. Whil.

It is true that none of the above cases are precisely parallel with the present case in facts, but they are sufficiently analogous to be authority upon the principle that the plaintiff, as the sole stockholder of the corporation, is not the legal owner of its property. He may have an equitable interest in it, but in this action he must show a legal title to the property in himself in order to recover, and he has shown that such title is in another person. Timp v. Dockham, 82 Wis. 146; Sensenbrenner v. Mathews, 48 Wis. 250. In analogy to the above principle it was held in Murphy v. Hanrahan, 50 Wis. 485, that the sole heirs of an estate did not have such a legal title to a promissory note given to their father as would entitle them to sue the maker upon it, because tbe title to it was in the administrator, and they could obtain the title only by administration and distribution according to law. The heirs in that case certainly had as much equitable interest in that note as this plaintiff has in the property in controversy. The want of title to the property?- being fatal to the plaintiff’s recovery in the action between the present parties, other alleged errors will not be considered.

By the Court.— The judgment of the circuit court is reversed, and the cause remanded for a new trial.