Baldwin v. Miller & Lux

SHAW, J.

Upon further consideration of this case upon rehearing before the court in Bank, we adhere to the opinion of Justice McFarland, formerly rendered in Department. In addition to what is there said, we add some remarks concerning the points urged upon the rehearing:—

1. The proposition that a corporation cannot, except in the manner provided by law, divide its capital stock among its stockholders, has no application to this case. The property formerly belonging to the firm of Miller & Lux, which was, by the successors in interest of that firm, conveyed to the newly formed corporation, also named “Miller

&

Lux,” was, in no proper sense, within the meaning of the law and the public policy forbidding such division, the capital stock of that corporation. In order to determine the character of the estate which the corporation Miller & Lux held in that property it is necessary to consider together, as parts of one transaction, the deeds of conveyance of the respective parties to the corporation; the written agreement of the same parties, providing for the formation of that corporation with a prescribed form of articles of incorporation, and for the execution of said deeds conveying to it the said property, and the articles of incorporation under which that corporation was

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formed. These instruments clearly show that the corporation did not take an absolute unqualified estate in the property so conveyed to it, but, on the contrary, that it took the legal title in trust for the purposes declared in the agreement and in its articles, and that the grantors in the deeds were the beneficiaries of the trust. The main purpose of the trust was the conversion of the property conveyed to it into money and the division of it, in that form, among the beneficiaries, who were also its stockholders, according to their interests. The other powers given to the corporation were merely incidental and subsidiary to the main purpose. It is of no consequence that the agreement does not use the words “trust,” or “trustee,” nor expressly declare that the corporation is to take and hold the property as trustee in trust. It does declare with much detail the purposes for which it shall take the property and the disposition thereof to be made by it; and these elaborate provisions show clearly and conclusively that the corporation took no interest, beneficial to itself, in the property, but only the title, custody, and control of it, for the benefit of others. The thing created by the entire transaction was, in fact, a trust, and the corporation was in fact constituted a trustee of the property, and it matters not that the agreement does not call it by that name.