I concur in the judgment of reversal, but I do not approve that portion of the opinion which holds that the P.ark Gate Building Corporation was dissolved by reason of the fact that the ownership of all of the capital stock of the corporation came into the possession of a single person, and the other circumstances enumerated. Cook on Corporations (4th Ed.) §§ 6, 631, 663, 664, and 709.
Hool owned -a pre-existing debt to the Hool Realty Company of more than $60,000, and had diverted to the Building Corporation approximately $250,000 of the bankrupt’s funds. When the impending crash became apparent to Hool, he assigned to the Realty Company his certificate of all the capital stock in the Building Corporation. True, certain entries were made on the books of the bankrupt, presumably at the instance of Hool, the president; but equity will disregard the form of the transaction and view its substance. So doing, Hool simply delivered his certificate to the Realty Company as a pledge for the'payment of his personal indebtedness and the recovery of its funds *339which he had diverted to the Building Corporation.
The bankrupt Realty Company was prohibited from becoming the owner of stock in the Building Corporation by virtue of section 8 of the Illinois Corporation Act of 1919, but it was not prohibited from becoming the pledgee of the stock to secure the payment of pre-existing debts. The ordinary rules governing pledges apply to this ease. By the assignment of his certificate as pledg- or Hool did not loso, and still retains, the legal title to all the stock of the Park Gate Building Corporation. In re McIntyre, 181 Fed. 955, 101 C. C. A. 419; Smith v. Lee (C. C.) 77 Fed. 779; Gilmer v. Morris (C. C.) 35 Fed. 682. He retains the legal right to the restoration of the stock pledged on payment of the debt, until it is sold under foreclosure, by or for the pledgee. Wilson v. Little, 2 N. Y. 443, 51 Am. Dec. 307; 14 Corpus Juris, 731. There is certainly nothing in the law of Illinois that makes Hool incompetent to be the owner of all the capital stock of the Building Corporation, or prohibits the bankrupt from owning an equitable interest in Hooks stock to secure the payment of debts due it.
Under the General Corporation Act of 1872 (Laws 1871-1872, p. 296), which was in force until the act of 1919, corporations could not own stock in other corporations. Pullman Palace Car Co. v. Reed, 75 Ill. 125, 20 Am. Rep. 232; People v. Chicago Gas Trust Co., 130 Ill. 268, 22 N. E. 798, 8 L. R. A. 497, 17 Am. St. Rep. 319; McCoy v. World’s Fair Columbian Exposition, 186 Ill. 356, 57 N. E. 1043, 78 Am. St. Rep. 288; People v. Union Gas & Electric Co., 254 Ill. 395, 98 N. E. 768, Ann. Cas. 1916B, 201; Burrows v. Niblack, 84 Fed. 111, 28 C. C. A. 130 (7th Cir.) The Illinois law was in harmony with the general rule in most jurisdictions. Marbury v. Kentucky Union Land Co., 62 Fed. 335, 10 C. C. A. 393.
The Illinois Act of 1919 completely reversed the policy of the state, expressly granting corporations (section 6, par. 6) the power “to own, purchase or otherwise acquire, * * * stocks * * * of any corporation, domestic or foreign,” except (section 8) that of “a building corporation or an agency and loan corporation.” As to the corporations within the description of section 8, the former policy of prohibition continues. Under the old policy Chief Justice Taft was discussing the effect of this prohibition as one of the judges of the Circuit Court of Appeals of the Sixth Circuit, and said: “This does not prevent a corporation from receiving the stock of another in payment of, or in security for, a debt in due course of business (Howe v. Carpet Co., 16 Gray, 493), but it prevents a deliberate and permanent investment of a corporation’s assets in the stock of another.” Marbury v. Kentucky Land Co., supra.
In People ex rel. v. Chicago Gas Trust Co., supra, while discussing the same rule, the Illinois Supreme Court said: “It is true that a gas company might take the stock of another corporation in payment of a debt, * * * but the actual purchase of such stock is not directly and immediately appropriate to the execution of a specifically granted power to operate gas works and manufacture gas.”
It would be in harmony with these two holdings to find that, notwithstanding section 8, the Realty Company had the power to receive the legal title to Hool’s stock in payment of its debts, but it is unnecessary to so hold as the transaction was clearly a pledge. The policy of the state of Illinois with reference to denying to corporations the power to hold real estate, except for purely corporate purposes, was not so markedly changed as that with reference to one corporation owning the stock of another. The only material change was that which authorized (section 3) the “one building corporation.” This change is substantial and grants a franchise to each corporate entity organized under the new statute. Such a franchise possesses many elements of value not necessary to discuss here, but, suffice it to say, it contains many advantages over the mere private ownership of property.
In these circumstances, and in the light of these views, the purchaser of the stock from the trustee in bankruptcy in the course of administration of the bankruptcy estate, will receive good title to all the capital stock of the Building Corporation with the many elements of value which would not accompany a sale of the more physical assets of a defunct corporation. If the Park Gate Building Corporation was dissolved before Hool assigned the capital stock to the Realty Company, the franchise lapsed, and, in the view taken in the majority opinion, Hool conveyed nothing but the physical properties so far as the Realty Company was competent to take them. In Illinois a franchise is unassignable. People ex rel v. Union Gas & Electric Co., supra.