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{1) ."fhere stock: is -.ransf erred to a cruate© to hold i t for
>fit o:1 the transferor, leg&l t i t l e passes to the trust©©, but equitebla
t i t l e remains in the transferors Boreas the atile of stock to • corporation
in whioh th« seller owns stock transfers both legal and equitable t i t l e tot
the purchasing
."here stock is transferred to st trustee for th® benefit of u
transferor, t.ha. transferor is entitled to a l l the laeoma t her ©from and the
entire arooee's wi' any sale thf&reofj whereas the sal© of stock so a
tion in which the aell^r owns stock deprives the seller ef My rigjjli
income from the stock sold or the oro^e&ds or any resixl© thereof in the
absence of express oontraot to the contrary. In the l a t t e r case the seller
of th© stock can thereafter shrre in such income or oroc«Msds of eel© only
if the directors of the pnrcshaslr^ corporation choose to dsclsra
and cmly in tne ?>roportion whioh his maaber of shares in tfef purchasing
oorporetios bears to th© total Oirtn%aiiit1n riWFU of sal3 oo
(3/ ;.f a porsca traxxefers aclnnal "bank stiock to a trustee xlor
own benefit, he reaiains liftble for any assfttarctent thereont whereas a boim
Tide, unoon^iitlonml sale of bank stock to a bnti flda oorporation prevents
the sellar fro-a 'beirij;; 1 labls for any stocskholders liablHty 1>1iffd thereafter.
(4) -here stook ie transferred tc a trustee for the transferor*s
benefit, M transferor can retain the right to VfH the cmao or to inM
fl l
struet the tru^te© how to fa)it it} al^NMHi fen ttSMfeiifcioMll sale if stock
to a corporation deprivas the seller of any ri^hA to vot® the stock or to
the nanner in which i t c»n be -voted, unless the seller i? in a
to control the •Hat^MHWl ftf the
(8) stock la tronsferred to a fcrustea for the tran«feror's Isen^fit th© transferor ra—!•• nnhj act to tax®.t ion on tuta) stoekj
whereas the bone fide, umoondiairmal sala of stotvK; to • cjorr,»oy»tion relieves
the seller of ®.ny furthar li&bility for taxes subsequently levied on such
(6) -ihere stoek is urfcagfatff i to « trustee for the tru.nsf®rorf a
benefit, it L Mt subject to llM •islM of the crediter i
•wtiere&s stock sold uaoomiifeinnElly to a corporation b@eom«s subject to the
claims of fill creditors of she corporation.

iceles of his «fc«ok I s the K



of ,jgd«fi, to the. '-iooles tovaatHKBl Caaaaay, of' whiefe. h® i s

a. minority stockholder owning l#ss tfa&it I pip oent of" th# t o t a l ©tcwsk,
r e s u l t e d la a ?amt©rial ohar.,:!,# not only In feh*? l'\.,s>3 M Sfi LtMiWt situs.

but Ui MM pra«ti©&! s i t u a t i o n M M i l *
Formerly fiovertiar ;'5©el«« wts a atntWMliif In th« F i r s t
IMP I I l i ftti t* «?t^eidir?l !f*.r*


at atoo'-r^ol?* •!•» sMiotim^t of t*\»


fcM iAd t o pay taxe<g on siish tlatll M i ©s

he Mfcl the absolute r i g h t to s e l l , t>l«*i|;@ or 4
th# t i i a i i t o aiMNi ha alaaaaAf aaapaaa aa ao longer fm-m any taeh r i g h t *
. •;''orts@rly aa * » a a t i t i « d N taa aaaifa bwaaa fiwai s?wh «took
e n t i r e proc«*«i8 of any sal a tw*3>«*»o''j n<v,r th^ -'e^l^s
i i aa%tt&ai to aaa ino(»m aai araaaadi af iala^ aa4 fi
oan o'btiiiii sione of i t unless the corpor®.ti©n ohooa#i ao pay
or aalBt • -lisvributioB of aaaa%a«

iaaa la UMI l a t t e r avaaa«

af raaaiTia^ a l l af aaaa Utaaaa or proceeds af aita af aaaii f^aaki aa
would reeelT-s laaa than I pmr aaad iiliereof aai ttMl other t%aaMMl4art of
kaa ":JSO!#S Ivtaaaaaai Oaayaay aaald rsoeiir© mcr« feh^s t l i>«>r aaaa*

is wo 11 settled that the ownership by a parson of ttook
a corporation which Is a ateokhelder in another corporation
does not sake such person ft stockholder In the Moond corporation*
This Is to obvious to p - rsens familiar with corporation law that
the question bat seldotri been raised In court} but a hasty search hat revealed at least two case* In which this question hat been tquarely passed
upon by the courts*
In the ease of Hoepet v. Basic Co*, 69 X« J» Lq« 679, 61 Atl.
979, the plaintiff filed a bill to have the Basic Company placed in receivership,

the bill vat filed under a statute providing that "any

creditor or stockholder" could request the appointment of a receiver*
The defendant sought to have the bill dismissed on the ground that the
plaintiff was not a creditor or stockholder. fhe evidence showed that
plaintiff was a stockholder of the Union Predglng Company which owned
ttoek in the Basic Company and that the plaintiff held in his own name
only one directors* qualifying share of stock in the Basic Cenpany, whleh
admittedly belonged to the Union Dredging Coapeny.

On the basis of these

facts, the court held that the plaintiff was not a stockholder of the
Basic Cotjpany and therefore, the court dismissed the bill*
This ease Is especially notable because it wae a suit brought
in the Court of Chaneery of the State of Mew Jersey* which doet not
hesitate to disregard corporate fictions or look through the fora to the
substance of a transaction whenever the ends of justice or equity required
suoh action*

The ease vas appealed to the Court of terror* and Appeals of «ew
Jersey* the highest e^rarfc of the State, whieh affirmed the ieoisioi* of
the Chancery Court by a per curias opinion (6& Atl. 1113) as follow*!
agree with the Viee Chancellor that the proofs
show that Mr* Eoopes was met a stockholder within the
meaning of the statute, and therefore could not main*
tain this suit. It Is not necessary to express any
opinion upon other matters discussed by the Vice Chancellor.**
In the ease of Sabre *•» United Traction and Bleetrie Co* et
£25 led* 601, the court held that stockholders in holding companies are
not stockholders or entitled to the rights of stockholders in other corporations, & part of who®® stock Is owned by the holding company and that,
therefore, a sale or lease of all the property of a corporation controlled
by the holding eoin^any through its ownership of stock does act require the
unanimous consent of the stockholders of the holding companyj but it Is
sufficient If there is tusenimous oonsent of the stockholders of the co»»
-p*ny whose property is leased or sold*

In so holding the court said*

"It is impossible, however* to aooept the contention
that the nonassent of a shareholder of the Traction Company should be given the uaiae effect &• the noaasseiit of
a shareholder la each of the lessor street railway eoa»
pamies* Neither as a setter of fora nor as a natter of
substan©® ean the cowplaiaant be regarded as a *harehold«
9T, or entitled to elai» the rights of a shareholder in
any one of the lessor casualties. He is aerely a share*
holder in a corporate ©w»#r of all the stock of the street
railway corporations, each of which it still a disti&et
corporation i&ese individual existence ©annot be ignored."
In the course of its opinion, in the case of Brook v. £oor, 216
H. T, S87, 111 M. E. 229, 2S4, the Court of Appeal* of Mew Tork saldi

"One who by purchase or otherwise beectaes the owner
of all the capital stock of a private e@ir]?@**tl©n does not


thereby become the legal owner of its property, but title to
the latter is vested in the corporate entity. Button v.
floffaan, 61 lit. SG, 80 I, *« $67, SO Aa. Rep. 131.
"*Xn no legal sense can the business (or in an
equal sense the property) of a corporation be said to be that
of its individual stockholders. It is true that they have an
interest in the business carried on, and an influence In eon*
trolling its conduct, but they hav« created a legal entity,
• • * and that entity Is alone responsible to persons dealing
with it for the conduct of «uch business.* People v. Aa* Bell
telephone Co., 117 K. Y. 841, 2§S, 12 »* B. 10S7, loe«.B