83 Ala. 604 | Ala. | 1887
— The Dispatch Publishing Company is an incorporated newspaper enterprise, with a paid-up capital stock of ten thousand dollars. This stock is divided into one hundred shares of one hundred dollars each, of which
Fitzpatrick, the stockholder who was opposed to the increase, filed this bill, and obtained an interlocutory injunction, restraining the corporation from carrying the resolution into effect. On motion of the corporation the'injunction was dissolved, and the present appeal is prosecuted to obtain a reversal of the decretal order of dissolution.
The ground relied on as giving equity to the bill is, that if the resolution be carried into effect, it will be violative alike of the State constitution, Art. 14, § 6, and the statute enacted upon the subject, Code of 1876, § 2035. The language of the constitution is: “No corporation shall issue stock or bonds except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void.” The legislature, by act approved January 20th, 1876 — Sess. Acts, 261 — prescribed the manner in which private corporations may increase their capital stock or bonded indebtedness, but added a proviso, “That neither stock nor bonds shall be issued by any private corporation, except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void.” — Code of 1876, §§ 2031 to 2035, inclusive. The proviso copied above is but a reiteration of the language of the constitution.
We have indulged in these reflections, with no intention of taking issue with the averment of the bill, that the capital of the Dispatch Publishing Company. has increased to double the value of the amount first paid in. We have no reason for suspecting anything improper in the proposed increase of stock. We are declaring a rule, however, which must govern alike this and all other propositions to issue additional stock, upon mere increased value of corporate property. The constitution, in terms, inhibits the issue of fictitious stock; that is, stock which has no valuable thing, or corporate assets, to rest on, and of which it is the representative. If it represents nothing, and has nothing to stand on, it is fictitious, it is fraudulent, it is unconstitutional.
Conceding, for the present, that if this corporation held accumulated, undistributed, tangible assets in excess of its capital stock, that excess or surplus would furnish a basis for the issue of additional stock, commensurate with the value of such excess, the case made by the report of the chairman of the stockholders’ meeting falls very far short of what should be required, before an increased issue of capital stock
In the absence of constitutional restraint, it must be admitted that corporations may declare stock dividends, or, what must rest on the same principle, may issue increased stock, based on increased capital, or increased value of accumulated property, in excess of capital stock requirements. B.ut, as said by Cook, Stock and Stockholders, § 51: “It seems to be generally conceded that, if the capital stock and the actual property of the corporation is not permanently increased to the extent of the par value of the stock distributed as a dividend, then that the issue of stock by such dividend is irregular, and, under certain circumstances, fraudulent.” The italics above are our own, and the italicised phrase is so marked, because in our opinion the sense and meaning of the author would be precisely and with more accuracy expressed, if these words were omitted.
Farther than what is said above we need not go in this case. We have not decided, nor need we declare what would be our ruling, if it were shown that the Dispatch Publishing Company had an accumulated money surplus, or visible, tangible property in excess of its authorized stock, and proposed to make that the basis of additional stock to be issued. Upon that question we decide nothing. We simply declare that the report of the chairman to the stockholders’ meeting did not authorize the issue of additional stock, based on the alleged increase in the value of the corporate property.
The decree of the chancellor is reversed, and a decree here rendered, reinstating the injunction.