Story Case

Edward Dixon purchased an acre of suburban property in Chicago from the Western Stone Company, a corporation. Dixon submitted his deed to the Real Estate Title and Trust Company, asking for a mortgage loan upon the property. The Real Estate Title and Trust Company refused to make a loan, claiming that the title was defective, because the Western Stone Company had never conveyed the property.

The deed read as follows:

"We, Roy Bonsib, Richard Robinson, and Abel Davison, the three directors and officers of the Western Stone Company, convey to Edward Dixon, etc.

(Signed)

Roy Bonsib, Richard Robinson, Abel Davison,

Directors Western Stone Company."

Dixon contended that only the directors could convey, that this was distinctly their power and that he owned a good title. Is this correct?

Ruling Court Case. Button Vs. Hoffman, Volume 61 Wisconsin Reports, Page 20; Volume 50 American Reports, Page 131

Balza W. Button brought a replevin suit to recover certain property from the possession of Fred J. Hoffman. Hoffman, the defendant, claimed that Button ought not to recover the property because he was not the owner of it. Button proved that it had belonged to a corporation, the Hayden & Smith Manufacturing Company, of which he had bought all the stock. His contention was: "I became the absolute owner of the mill. It belonged at that time to the company, and I am the company."

This conclusion was denied by the Court, in an opinion delivered by Mr. Justice Orton. The interest of the stockholders is not a joint title to the property, but a contingent interest in whatever property shall remain to be divided up after the corporation is dissolved and all debts paid, and a right, in the meantime, to receive dividends, when declared by the directors, and to vote in the stockholders' meetings. At no time do they hold the title to the property of the corporation, and the corporation, alone, can dispose of that title or enforce it in an action. This situation does not change merely because all the stock becomes united in one owner, but the corporation continues its individual existence. Since the Hayden & Smith Manufacturing Company had never been dissolved, it was still the owner of the property here in dispute and Button was not entitled to recover it. The company could act only through its directors, and Button's rights consisted merely of the stockholder's privileges of voting and holding the directors to account for the faithful performance of their duties, and the right to profits and a share in the final distribution. His suit was not allowed, because (1) a stockholder has no title to the property of a corporation, and (2) the owner of all the stock is in no different position in this respect than the owner of any smaller number of shares. Judgment was given for the defendant, Hoffman.

Ruling Law. Story Case Answer

A stockholder in a corporation has no title to any of the corporate property. Title to all corporate property, whether real or personal, is vested in the corporation and not in the members. This is based upon the conception of a corporation, which we have mentioned before - that the corporation is an artificial person, separate and distinct from those persons who compose it. This conception is so far maintained, that a person, even though he is the sole stockholder in a corporation, is not regarded as having any title to the corporate property. In the Court Case of Button vs. Hoffman, it was shown that Button was sole owner of the stock in the corporation, yet the Court held that title to the corporate property was still in the corporation. In the Story Case, the conveyance should have been made in the name of the Western Stone Company, as principal. As the directors were not the owners, they had no right to convey.