Phelan v. All Persons

California Supreme Court Sep 26, 1927 No. Docket No. S.F. 11565.Published

Before: Langdon

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Holding. The court held that a stockholder does not possess legal title to corporate property and that a prior judgment was void because the order for publication of summons was not filed until after the publication was completed.

Issues

Does ownership of corporate stock confer legal title to the corporation's property?
Is the requirement to file an order for publication of summons under the McEnerney Act jurisdictional?
Does a judgment recital of regular publication cure a jurisdictional defect appearing on the face of the judgment-roll?

Disposition. affirmed

Quotations verified verbatim against the opinion

“It is elementary that the ownership of shares of stock in a corporation gives no legal title to the property of the corporation to the stockholder.”

“It is apparent, therefore, that the requirement as to the filing of the order for publication is mandatory and jurisdictional.”

“Inasmuch as the judgment-roll in the prior action to quiet title to the property involved here shows the actual date of filing the order for publication of summons therein, as of a date subsequent to the publication of summons, the recital in the judgment therein that summons was regularly published does not cure the defect.”

LANGDON, J.

This action was commenced by plaintiffs to quiet title to certain parcels of real property in the city and county of San Francisco, alleging that they were tenants in common of the same. The city and county of San Francisco filed a formal answer thereto, but no proof was made by them at that trial. Francis J. Sullivan filed an answer asserting that “he has a right, title and interest in the real property referred to in the complaint.” He also alleged that he was president of the plaintiff corporation, Alice Phelan Sullivan Corporation, and also a stockholder thereof; “that said corporation is a family corporation composed of ten thousand shares. That James D. Phelan owns a very few shares, to wit: one share, but absolutely controls the Board of Directors, who are also stockholders ; that all the business of the corporation, as well as the officers thereof, except affiant, are subject to his will and act in conjunction with him, and that for this reason it would be of no avail to make a demand on the directors to file an answer herein. Such a request would have been useless and would have been refused; therefore, affiant has verified and filed • this answer on behalf of all the stockholders of the Alice Phelan Sullivan Corporation and of the

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corporation itself.” It is also alleged that defendant Sullivan is the sole owner of the lot on the southwest corner of Folsom and Ninth Streets, having purchased the same from the plaintiffs, but no proof was adduced at the trial of his ownership of this lot.

From a judgment in favor of plaintiffs, defendant Sullivan appealed, and one of his contentions upon appeal is that the finding that he had no interest in said property or any part thereof at the time of the commencement of the action is contrary to the admitted fact that he was a stockholder of the Alice Phelan Sullivan Corporation at the commencement of the action, one of the tenants in common of the property. It is elementary that the ownership of shares of stock in a corporation gives no legal title to the property of the corporation to the stockholder.

(Kohl

Lilienthal,

81 Cal. 378, 385 [6 L. R. A. 520, 20 Pac. 401, 22 Pac. 689].)

Phelan v. All Persons

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LANGDON, J.

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