remaining after payment of its debts on its dissolution or the termination of its active existence and operation. Plimpton v. Bigelow, 93 N. Y. 592; Jermain v. Lake Shore & Mich. So. Ry. Co, 91 N. Y. 483. It is created by the joint action of the corporation and the shareholder. It imports a contribution to the capital stock made by the shareholder and accepted by the corporation. When a corporation has agreed that a person shall be entitled to a certain number of shares for a consideration permitted by law and executed by the person, those shares come into existence and are owned by him.

The statement in the certificate of incorporation or charter of the corporation that the capital stock is a designated amount divided into a certain number of shares, each of a named value, creates neither shares nor capital stock. It expresses the power of the corporation to acquire a capital stock. It creates potential shares which, transferred into actual shares by the acquisition of members and their payments, produce the money or property which, put into a single corporate fund, is the actual capital or capital stock on which the corporate business is undertaken and in which are the shares. It also fixes the sum of the payment necessary to create a share.

The certificate of the corporation for the shares, or the stock certificate, is not necessary to the existence of the shares or their ownership. It is merely the written evidence of those facts. It expresses the contract between the shareholder and the corporation and his coshareholders. But it is the payment, or the obligation to pay for shares of stock, accepted by the corporation, that creates both the shares and their ownership. Burrall v. Bushwick R. R. Co., 75 N. Y. 211; Christensen v. Eno, 106 N. Y. 97, 12 N. E. 648, 60 Am. Rep. 429; Southworth v. Morgan, 205 N. Y. 293, 98 N. E. 490; Buffalo & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336; Dayton v. Borst, 31 N. Y. 435; Flour City National Bank v. Shire, 88 App. Div. 401, 84 N. Y. Supp. 810, affirmed 179 N. Y. 587, 72 N. E. 1141. In the last case cited, Judge Hiscock, then Justice Hiscock, writing for the court, said: "The company having thus acquired property under an agreement to give therefor to various people certain interests or shares in its capital stock, we think that such latter persons, immediately upon the acceptance of transfers by the corporation, became entitled to and vested with said interests or shares, and that no further steps were necessary to accomplish this latter result. It may be admitted at once that ordinarily the corporation would issue certificates for these shares of capital stock, but it is too well settled to permit of doubt that said certificates would be merely representative of and not the real interest in the property and assets of the corporation constituting its actual capital stock." 88 App. Div. at page 405, 84 N. Y. Supp. at page 813.

Each of the four corporations became, upon the transfer of its assets to the plaintiff, the owner of the shares of the capital stock of the plaintiff, which were the consideration for it. The transaction did not involve a transfer of those shares. The shares were not transferred to the vendor corporation by plaintiff; they were created by the trans

action. At no time were they owned by the plaintiff. At the instant of their creation they were owned by the vendor corporation, which might at any time thereafter transfer them, and any transfer of them by it would be subject to the tax imposed by said section 270.

The four corporations did not transfer the shares owned by them to the trust company. They caused the record title to them to be placed in the trust company temporarily and for an expressed and limited purpose. They remained the owners of the stock. Their ownership was subject to the right of the trust company to vote the shares at corporate elections, but the power to transfer the shares, subject to the right of the trust company to vote them, remained in the corporations. The trust company could not sell or agree to sell the shares. It had no assignable interest in them. It had evidence in the certificate that it as trustee held the legal title, but this was notice of the existence of the trust agreement which disclosed the ownership of the corporations.

The valid request of each of the four corporations to the trust company that it issue its certificate to each of the holders of shares of the stock of those corporations for shares of the stock of the plaintiff proportionate to his holding, and the compliance of the trust company, was a transfer of the shares by the corporations to their shareholders. Upon the completion of those acts the corporations ceased having the right to receive the dividends declared upon those shares and the shareholders acquired it. The ownership of the shares is in their stockholders severally, as certified by the trust company, by virtue of the assignment of it inherent in the request and the execution of the request by the trust company. The appellant does not assert or claim that the corporations own the shares. It, on the contrary concedes that their shareholders are the owners, but asserts that they were such through and from the time of the purchase by the plaintiff of the assets of the corporations, and therefore there was no transfer of the shares from the corporations to them-an assertion erroneous, as already stated.

The appellant urges, with ability and earnestness, that if the four corporations did in the first instance own the shares, the transfer of them to the shareholders was a division among the true owners of their own property, and therefore not a taxable transfer. Without deciding whether or not the conclusion correctly expresses the law, it suffices in this case to point out that the premise given for its support is fallacious. While conditions may exist under which equity will consider the shareholders as the proprietors and the ultimate beneficiaries of the corporate interests, the fact is that a corporation is an individual being incapacitated through statutory powers to acquire the title to, own, and dispose of real and personal property, enter into contracts, engage in business, sue and be sued and taxed. It is the owner of all the corporate property, real and personal, and within the powers conferred upon it by the charter can deal with it as absolutely as a private individual can with his own. The whole title to it is in the corporation, and the shareholders are neither ten

ants in common nor in any legal sense the owners of it. Hyatt v. Allen, 56 N. Y. 553, 15 Am. Rep. 449; Gibbons v. Mahon, 136 U. S. 549, 10 Sup. Ct. 1057, 34 L. Ed. 525; Lowry v. Farmers' Loan & Trust Co., 172 N. Y. 137, 64 N. E. 796; Humphreys v. McKissock, 140 U. S. 304, 11 Sup. Ct. 779, 35 L. Ed. 473; Buffalo L. T. & S. D. Co. v. Medina Gas & El. L. Co., 162 N. Y. 67, 56 N. E. 505. A shareholder cannot acquire title to any of the property of the corporation through the operation of the law as an administrator acquires the title to the personal property of his intestate. A corporate act alone can effect that result. When the act, as did the act in the present case, transfers to the shareholders shares of the capital stock of another corporation, it is taxable under said section 270.

The judgment should be affirmed without costs.4

CULLEN, C. J., WERNER, CUDDEBACK, and MILLER, JJ., concur. GRAY and HISCOCK, JJ., dissent.

Section 2.-Right to Vote-The Voting Trust.

CAMDEN AND ATLANTIC R. R. CO. v. ELKINS.

1883. 37 N. J. Eq. 273.5

THE opinion of the court was delivered by Depue, J.

The complainant's bill is purely an injunction bill. It prayed an injunction to restrain the directors from making any change in the by-laws, and forbidding the postponement of the election for di

The appellants urge the retention of the appeal on the ground that the complainant is not a bona fide holder of stock of the corporation. They insist that he became the purchaser of the stock he holds with the money of rival companies, and that he holds it in the interest of those companies, and contemplates the use of it for

4 In HOOD RUBBER Co. v. COMMONWEALTH (1921) 238 Mass. 369, 131 N. E. 168, Rugg, C. J., said, at p. 371: "The words 'capital', 'capital stock', 'shares of capital stock' and 'stock' may be used as synonyms or with different meanings dependent upon the context in which they occur and the subject-matter to which they are applied * *. We are of opinion that in the statute here involved the words 'capital stock' * * * mean a genuine addition to the property permanently dedicated to the business enterprise for the prosecution of which the corporation was organized." See, also, State v. Morristown Fire Assn. (1851) 23 N. J. L. 95; Goodnow v. American Writing Paper Co. (1907) 72 N. J. Eq. 645, at p. 695, 66 Atl. 607.

As to corporate capital in connection with corporations issuing shares without par value, see Articles, Problems of Non-Par Stock, by A. A. Berle, Jr., (Jan., 1925), 25 Col. Law Rev. at pp. 46-52; Capitalization of Corporations Issuing Shares Without Par Value, by William D. Mitchell (June, 1925), 11 Am. Bar Assn. Journal, 377-380; Peters v. U. S. Mtg. Co. (Del., 1921), 114 Atl. 598.-Eds.

5 A portion of the opinion omitted.-Eds.

the purpose of controlling the business of the corporation for the advantage of those other companies. They insist that therefore he has no standing in a court of equity to seek its aid in accomplishing his purposes.

The complainant appears, on the company's books, to be the owner of thirteen hundred and fifty shares of its capital stock, being more than a majority of its entire capital stock, and the stock he holds was regularly issued by the company and was regularly transferred to the complainant on the company's books. The statute makes the stock of a corporation personal property, and transferable on the books of the corporation. It vests in the stockholders the right to elect directors, who shall manage the business of the corporation. for them. It secures to each stockholder the right to one vote, at every election of directors, for each share of the capital stock of the company held by him, and makes the books of the corporation plenary and conclusive evidence of the ownership of stock and of the right to vote in virtue of such ownership. The right to hold election for the directors of a corporation, and to vote at such elections, is a right that is inherent in the ownership of stock; and a stockholder who appears by the books to be such cannot be deprived of these rights upon the allegation that he proposes to use his legal rights for purposes which others may think to be detrimental to the interests of the corporation. Pender v. Lushington, L. R. 6 Ch. Div. 70. If the complainant, in virtue of his ownership of a majority of the stock, elected a board of directors of his own selection, and they should endeavor to misuse the franchise of the corporation, or improperly manage its affairs in the interest of other companies, to the prejudice of its stockholders as a class, the remedy is by proceedings by the attorney-general as the representative of the public, or by other stockholders whose rights may be injured by the unlawful acts of the directors. The directors who are in office, and who are the mere ministerial agents of the corporation, cannot dispute the right of stockholders to obtain a new election of directors, and prolong their own authority, on the ground that the proposed election is a step toward the illegal and improper control of the property or the business of the corporation. When that event occurs, or is impending, the proper means to redress or avert the wrong is in other parties and by other proceedings.

Appeal unanimously dismissed.

6 Memphis &c. C. R. Co. v. Woods (1889) 88 Ala. 630. 7 So. 108, 7 L R A. 605, 16 Am. St. 81, contra. But see Oelberman v. N. Y. & N. R. Co. (1894) 76 Hun 613, 77 Hun (N. Y.) 332, 29 N. Y. S. 545, 59 N. Y. St. 881, 60 N. Y. St. 876 (railroad company purchasing stock in another company has the same voting rights as any other shareholder); Rogers v. Nashville & St. L. R. Co. (1898) 91 Fed. 299. Cf. Dunbar, v. American Telephone & Telegraph Co. (1906) 224 Ill. 9, 79 N. E. 423, 115 Am. St. 132.

In Bjorngaard v. Goodhue County Bank (1892) 49 Minn. 483, 52 N. W. 43, held, "Stockholders in a corporation are not disqualified to vote upon a mater coming before a stockholders' meeting by the fact that they may have a personal interest in the matter, as upon a proposition to ratify a purchase of property from themselves which they as directors had assumed to

COMMONWEALTH EX REL. EBERHARDT v. DALZELL.

1893. 152 Pa. St. 217, 25 Atl. 535.7

PETITION for alternative writ of quo warranto, to determine whether J. H. Dalzell, C. L. Magee, Joshua Rhodes, George B. Hill and Fred Gwinner were entitled to act as directors of the Pittsburgh, Allegheny & Manchester Traction Company.

From the petition it appeared that at a meeting of the stockholders of the said company held on May 16, 1892, the five respondents were declared elected to the position of directors. One of the candidates for the office of director was the relator, William Eberhardt, who, by proxies under seal, claimed the right to vote stock, held by Watson and Wood as trustees, and so registered in the stock book of the corporation. The votes were rejected. If they had been received relator would have had more votes than defendants. Further facts appear by the opinion of the Supreme Court.

The case was heard upon petition setting out these facts and demurrer to answer. The answer denied the right to vote the stock in question. The court overruled the demurrer, and entered judgment for defendants, in an opinion by Ewing, P. J., 1 Dist. R. 657. OPINION BY MR. JUSTICE MITCHELL.

The right of voting stock at corporate elections is an incident of ownership, to be exercised, of course, in the mode and under the restrictions prescribed by the charter and by-laws; but nevertheless a part of the stockholder's property, inherent in him by virtue of his make." See, also, Blinn v. Riggs (1903) 110 Ill. App. 37, (affirmed 208 Ill. 473, 70 N. E. 704, 100 Am. St. 234).

In Lord v. Equitable Life Assur. Society (1909) 194 N. Y. 212, at page 228, 87 N. E. 443, at p. 448, 22 L. R. A. (N. S.) 420, Vann, J., said: "The right to vote for directors, therefore, is the right to protect property from loss and make it effective in earning dividends. In other words, it is the right which gives the property value and is part of the property itself, for it can not be separated therefrom. Unless the stockholder can protect his investment in this way he can not protect it at all, and his property might be wasted by feeble administration and he could not prevent it. He might see the value of all he possessed fading away, yet he would have no power, direct or indirect, to save himself, or the company from financial downfall. With the right to vote, as we may assume, his property is safe and valuable. Without that right, as we may further assume, his property is not safe and may become of no value. To absolutely deprive him of the right to vote, therefore, is to deprive him of an essential attribute of his property."

According to the old common-law rule each shareholder was entitled only to one vote without regard to the number of shares he owned. Taylor v. Griswold (1834) 2 Gr. (14 N. J. L.) 222, at page 237. In re Horbury Bridge &c. Co. (1879) L. R. 11 Ch. Div. 109. This rule has been generally abrogated by statute.

The duty of a stockholder is to vote honestly. In Palmbaum v. Magulsky (1914) 217 Mass. 306, 104 N. E. 746, Crosby, J., said: "It is the duty of a stockholder of a corporation, in attending at meetings of the stockholders, to act fairly and in good faith."

7 A portion of opinion omitted.-Eds.