129 Pa. 405 | Pa. | 1889
LEHIGH AVE. BY. CO.’S ABPEAL.
Opinion,
The Lehigh Avenue Railway Company was incorporated by the act of December 18, 1873, with an authorized capital of one million dollars, divided into shares of fifty dollars each. The shares have been subscribed for, and the first payment of five dollars per share paid on them, making a total of one hundred thousand dollars actually paid. Upon this amount of money the business of the corporation was entered upon, and nothing further has been collected upon the subscription to the
The act of incorporation provides, in section third, that “the said company shall have the power and authority to borrow money in any sum or sums not exceeding in amount one half of the par value of the capital stock.” The tenth section provides that “ the said company shall pay annually into the treasury of the city of Philadelphia for the use of said city, whenever the dividends declared by said company shall exceed six per centum per annum on the par value of the capital stock thereof, a tax of six per centum on such excess.” The first question presented is, what is the meaning of the words “ par value of the capital stock,” as used in the act of incorporation? The company contends that the par value of its stock is one million dollars, the amount of its authorized capital. The attorney general maintains that the par value is one hundred thousand dollars, the amount of capital actually contributed, as shown by the company’s books, and that the right to issue bonds is limited to one half that amount by the act of incorporation.
The words, stock, and capital stock, maybe defined as meaning the fund or property belonging to a firm or corporation, and used to carry on its business. This is contributed by those who embark in the business. The articles of co-partnership, or the charter of the corporation, fix the maximum amount of stock that may be issued, and this may properly be.spoken of as the proposed or authorized capital of the company. When an organization is effected, subscriptions are made to the stock, by which the subscribers agree to take and pay for certain
Does the corporation stand on better ground than its members ? It claims the right to issue bonds because pf its stock. We must inquire, therefore, first, what is the amount of its stock ? And, next, what is the par value of a share of that
The par value of the stock of this corporation for purposes of taxation or payment of dividends is, as we have already seen, the amount actually paid upon it, or one hundred thousand
It is argued that nominal value and par value are synonymous terms in the commercial vocabulary, and that the par value of the stock of this company is one million dollars, because that is the amount of its nominal or authorized capital. If this is so, the par value has not been affected by the payment of calls upon the subscriptions heretofore, and will not be hereafter, though the entire amount subscribed be actually paid to the treasurer. Whether the amount paid in is ten per cent, or fifty, or one hundred per cent of the authorized capital, the par value must, according to this doctrine, remain the same. This overlooks the meaning of the word value, and the basis on which the idea of value rests. The par value of a treasury note or bank bill is the sum named on its face, because the holder can demand and is entitled to receive that sum for it
How, then, is the equivalent, the par, in value of the stock in the hands of the holder to be ascertained at any given time ? Very clearly by the books of the company, which show for what value it stands, what value it represents at that time. If but five dollars have been paid on a share, such share is subject to be called on for the remaining forty-five, if, as in this case, the nominal value of the share is fifty dollars, and the par value of such share is a sum which is equal to, or the par of, the value it represents, the five dollars actually paid into the treasury. It is clear that the certificate stands for no more than this to the holder, for he remains liable to be called on for the remaining forty-five. It stands for no more to the corporation, because it may compel payment of the sum standing due on the subscription, notwithstanding the certificate. When another call has been made and collected, the capital of the corporation will have been doubled. It will have two dollars to employ in its business where it now has one, and the par value of each share will have advanced to ten dollars, the exact
We agree fully with the learned judge of the court below, that the case as presented on bill and answer raises no question under the act of 1887, or that provision of the constitution which it was intended to enforce. The only question is whether the act of incorporation on which the company rests its right to make the mortgage and issue the bonds, and which is thus brought to our attention, does confer the authority which it is proposed to exercise. We think it does not. The company may issue its bonds under the act of incorporation for an amount equal to one half of the par value of its stock, or fifty thousand dollars, and no more, as the par or equivalent value of the stock is shown by the books of the corporation to be at this time. It appears by the bill and answer that the stock is not paid up; that no profits have been applied to it; and that nothing has beén paid upon it except five dollars per share. This is all the corporation has, and for that reason it is all that its stock can represent. Its aggregate value is equal to the aggregate of the sums received, or one hundred thousand dollars, and the value of each share is equal to the sum it stands for to the company and the stockholder, which is five dollars. This is the value, or common stock, of which the certificates are the equal, equivalent, or par.
The industry of the learned gentleman, who represents the appellant, has enabled him to place before us extracts from a large number of acts of assembly, in which the words, par value, occur, for the purpose of showing that they have received a legislative construction in accordance with the views
The decree of the court below is affirmed at the costs of the appellant.
common wealth’s appeal.
Opinion,
This was an appeal by the commonwealth from the decree of the court below in the case of the Commonwealth v. The Le-high Avenue Railway Company. For reasons given in an opinion delivered at the present term, dismissing the appeal of the Lehigh Avenue Railroad Company from the same decree, This appeal is dismissed and the decree affirmed at the costs of the appellant.