OPINION.
Opper, Judge:We are again confronted with the problem of applying Commissioner v. Court Holding Co.2 to a corporate taxpayer and of the potential transferee liability of two different sets of the corporation’s stockholders. As in Steubenville Bridge Co., 11 T. C. 789, an unsuccessful effort to purchase the principal asset of the taxpayer, the Development Co., was followed by the acquisition from the old stockholders of all of its capital stock. That neither petitioner Development Co., as the taxpayer, nor the old stockholders, as transferees, are liable here follows directly from the holding in the Steubenville Bridge case, as to which in that respect the present facts are comparable. See also Armored Tank Corporation, 11 T. C. 644.
Such distinction as exists here from what occurred in those cases has to do with the developments subsequent to the sale of stock by the old stockholders. The property in question ultimately came to rest in petitioner Texas Bank, which, because of its occupancy of a part of the building as its banking headquarters, was interested in a continuation of that occupancy not as tenant, but as owner. The transaction is complicated, first, by provisions of the Texas banking law, and the necessity that the Texas Bank limit its investment in its banking quarters to a sum substantially less than the requisite purchase price, with the consequence that an intermediate corporation was inserted, the only function of which in the ultimate result was to be the dummy obligor on a mortgage procured from another bank in order to eliminate the unlawful excess of the Texas Bank’s investment; and, second, by the conduct of negotiations through a committee of individuals from the Texas Bank’s board of directors.
We have found as facts, since every evidential and logical process necessitates such ultimate findings, that the individuals in question were at all times acting as agents and fiduciaries for the Texas Bank; that they attempted to acquire the property and eventually acquired the stock solely in that capacity and, when acquired, that they held it for and on behalf of the Texas Bank. The committee could not have secured the property for their own account, even had they attempted to do so. “* * * the modern current of authority appears to be to the effect that if an agent be employed to negotiate the purchase of land for his principal, and violates the principal’s confidence, by purchasing the land with his own money, and taking a deed therefor to himself, he becomes a constructive trustee for the principal’s benefit, upon payment of the purchase price. This is the rule adopted by the American Law Institute. ‘The agency may be established by a written contract or a verbal contract, or no contract whatever, the assumption of confidence involving a purely gratuitous service, for which the agent is to receive no compensation in any form’ * * 4 Pomeroy, Equity Jurisprudence, 5th Ed., 141; see Shannon v. Marmaduke, 14 Tex. 217; Rio Securities v. Wassell (Dist. Ct., S. Dist. Tex.), 64 Fed. Supp. 881.
We have found further that the Investment Co., the intermediate corporation, which momentarily secured the record title to the .bank building and executed the note and deed of trust in a transitory phase of the whole operation, was no more than a nominee of the owner’s then sole stockholder, and received and held the property on behalf of the Texas Bank and without consideration to or from itself. The Investment Co. being “a mere agent or conduit created with this limited function, any gain or loss from the * * * dispositions of the property would be attributable not to it, but to its principal, the controlling stockholders. * * * North Jersey Title Insurance Co. v. Commissioner (C. C. A., 3d Cir.), 84 Fed. (2d) 898.” Hollywood, Inc., 10 T. C. 175, 182. Property can be conveyed to a stockholder through its nominee or fiduciary without converting a liquidation into something else. Acampo Winery & Distilleries, Inc., 7 T. C. 629.
Stripping away the appearances and attempting then to grasp the essential nature of what actually occurred, we think the only realistic summarization of the entire transaction is that the principal tenant of a business building decides to attempt to acquire it as its headquarters, and, being unsuccessful in buying the property itself from the corporate owner, secures all the stock- by purchase from the individual holders, and, as sole stockholder, then dissolves the corporation, and through the intervention of a temporary conduit or agency, acquires the property as a liquidating dividend. So stated, it seems clear that there was no sale of the property by the corporation at any time, no capital gain to it, General Utilities & Operating Co. v. Helvering, 296 U. S. 200; J. T. S. Brown's Son Co., 10 T. C. 840 (acquiesced in, Internal Revenue Bulletin, Nov. 15, 1948, p. 1), and hence that there could be no transferee liability on either the old stockholders or the new.
We see nothing in Interstate Transit Lines v. Commissioner, 319 U. S. 590, or Moline Properties, Inc. v. Commissioner, 319 U. S. 436, to preclude this view of what occurred and of the resulting liabilities of the parties. The Investment Co.’s holding of the property is being disregarded, not because or in spite of its corporate form or of the issuance of its stock in the names of the Texas Bank’s nominees, but because of its transitory and fiduciary character as the mere nominal holder of legal title to the Texas Bank’s property. When the Development Co. was dissolved and its property distributed in liquidation through the Investment Co. to its sole stockholder, there was, in our view, a transaction resulting in no gain or loss to the liquidating company, J. T. S. Brown's Son Co., supra, as surely as if the transfer had been direct. Hollywood, Inc., supra; Acampo Winery & Distilleries, Inc., supra.
In a sense these cases present the reverse of the situation in such proceedings as Fairfield Steamship Corporation, 5 T. C. 566; affd. (C. C. A., 2d Cir.), 157 Fed. (2d) 321; certiorari denied, 329 U. S. 774; and Rose Kaufmann, 11 T. C. 483. There, in lieu of a formal sale by the corporation, there was a dissolution, a transfer to the stockholders, and a sale in form by them to the ultimate vendee. The dissolution was an integral part of the formal arrangements, but there was nowhere any contention that the gain arose because of the transfer from the corporation to the stockholders. Here, whatever sale there was consisted of a transfer of stock from the old shareholders to the new. Dissolution would not have been necessary; the new stockholder could own and operate the property effectively through its control of the intervening corporation. But it is only by reason of the dissolution and the transfer of the property to the new shareholder that there is any basis here for the contention that what occurred was the sale of the property rather than of the shares. Incidentally, we do not have here the question whether Texas Bank, as a taxpayer, secured any gain when it exchanged its stock for the building in liquidation. Cf. Commissioner v. Ashland Oil & Refining Co. (C. C. A., 6th Cir.), 99 Fed. (2d) 588; certiorari denied, 306 U. S. 661. In the instances first cited, the property transferred was the same, whether sold by the corporation directly or through the conduit of its shareholders. Here, there is a fundamental variance between what would have been transferred had the property itself been sold, as was first discussed, and what was dealt with when the stockholders merely sold their shares, demonstrated, in the facts before us, by the increase in the purchase price resulting when the vendee was compelled to add to the price of the shares the net liabilities of the corporation.
The short of the matter seems to us to be that the taxpayer corporation did not sell its property when the stockholders sold their shares, Steubenville Bridge Co., supra; Armored Tank Corporation, supra; and that it did not become chargeable with any gain on the disposition of the property when it was distributed in liquidation to its sole stockholder. J. T. S. Brown’s Son Co., supra. We are accordingly satisfied that no liability exists either on the original taxpayer or on either set of stockholders as transferees.
Reviewed by the Court.
Decision will be entered for the petitioners.
Leech, J., dissents.324 U. S. 331.