Page:Harvard Law Review Volume 32.djvu/463

427 NOTES 427 point of law constitute the relation of principal and agent between them, or render the shareholders liable to indemnify the company against the debts which it incurs." Where all the stock of a corporation is owned by one human being, the question arises whether there is any objection to such concentration of stock ownership. The usual situation is that creditors look solely to the assets of the corporation for payment, and, in such case, it is imma- terial to them how many persons will be entitled to what assets remain after the creditors are satisfied. Therefore legislatures have been slow to prohibit concentration of stock ownership in one person. Where all the stock of a corporation is owned by a second corporation, and such ownership is intra vires of the second corporation, the situation is the same as where all the stock is owned by one human being. And there is no more justification for saying that a corporation is the agent of its sole stockholder, than for saying that a corporation is the agent of its many stockholders. It has already been noted that of course a corporation may become the agent for its stockholder or stockholders by reason of any facts sufiicient to create that relation under the general rules of law appli- cable to agents. Tested by these rules, there were no subsidiary facts in the principal case justifying a finding that the coal company was the agent of the railway company. There was, however, an admission in the pleadings which should be noticed. The railway company, and its receiver, in their answers ad- mitted that the railway company was "the real lessor" of the coal properties. The bondholders might well urge that, if the railway com- pany was the "real" maker of the lease, then, by like reasoning, it must have been the " real " maker of the bonds. What is reality? There was a legal unit named the coal company; the legal title to the coal proper- ties was vested in it, and no conveyance of those properties, by lease or otherwise, could have been made except by the action of that legal unit. The coal company was controlled by another legal unit, called the rail- way company, and the action of the coal company was taken because the railway company desired it to be taken, — corporations usually act as those who control them desire them to act. (i) The lease was made by the coal company. (2) The bonds were made by the cOal company. (3) The coal company was controlled by the railway company, through ownership of all its stock. All three of these facts were realities. On these facts the question arises whether the fact that the coal company was so controlled by the railway company makes the railway company liable on the bonds made by the coal company. And we have seen that it is of the essence of the corporate franchise that control of a corpora- tion, through stock ownership, does not expose the stockholder or stock- holders to liability for the acts of the corporation. The admission that the railway company was " the real lessor " lacked legal certainty and, in any event, was the admission of a legal conclusion. In dealing with cases similar to the principal case, judges have char- acterized the controlled corporation by a variety of words or phrases, — "paper company," "alter ego," "alias," "device," "dummy," "nomi- nee," "tool," "instrmnentality," "adjunct." But the use, even the