98 Ala. 515 | Ala. | 1893
Moses Bros, owned forty shares of the capital stock of the Montgomery Beal Estate Association, a corporation, which they pledged as Security for a loan of money obtained by them from the Merchants & Planter's National Bank. At the time of the loan and pledge of the stock Moses Brothers were creditors of the Montgomery Beal Estate Association, and after obtaining the loan and making the pledge, the association became indebted to them for an additional amount. Moses Bros, became financially embarrassed, and made a general assignment of all their effects to Janney & Cheney for the benefit of all their creditors. The assignees sued in a court of law upon the debts due Moses Bros, and which passed to them by virtue of the assignment, and obtained judgment against the Montgomery Beal Estate Association. Execution upon this judgment was levied upon the property of the Montgomery Beal Estate Association, and the trustees were proceeding to enforce ‘the collection of their judgment by a sale of the property, when The Merchants & Planters National Bank, appellees, filed the present bill in chancery, the purpose of which was to enjoin the execution sale of the property and require the trustees to redeem the stock pledged by Moses Bros, before enforcing their judgment, against the Montgomery Beal Estate Association, by a sale of its property. The Lili also prays for a decree for the sale of the stock pledged, and the application of the proceeds to the satisfaction of complainant’s debt.
It is averred in the bill, that the property levied upon by execution is the entire property of the Building Association and that its value, is not more than sufficient to pay the ■judgments and other indebtedness of the Association, so that its sale under execution will render valueless the stock pledged as a security for complainant’s debt. Complainants might properly call upon the respondents to redeem the pledge, and in the event of their failure to do so, pray for a sale of the legal pledge and the application of the-proceeds to their debt, and no doubt it would be the duty of the as
The bill does not pretend that Moses Brqs. were guilty of any fraud in the transaction, or made any misrepresentations, or were guilty of concealment, or held out any improper inducements, as to the stock, or made any express promises, as to their future action, or false affirmation as to existing facts. The rights of the parties then are those, and none other, which arise from the contract of pledging the stock. What did Moses Bros. pledge? What is stock, and what rights and privileges compose its constituents ? Many writers have undertaken to define stock. We need not repeat them. All agree that capital stock is a security for the creditors of a corporation. That stock entitles its holder, to share in the management of the corporate business, to. share in its profits during its existence, and in the surplus assets, after paying all its indebtedness. The claims of creditors have priority of stockholders. They must be first satisfied even to the exhaustion of the capital stock and all the assets of the corporation, to the utter destruction of the value of the stock if necessary, before the holder of stock can lay any claim to share in the profits or in the distribution of the property of the corporation. In the application of this principle, there is no discrimination against creditors who are also stockholders. Moses Bros, as creditors of the Montgomery Beal Estate Association, were entitled to have the assets of the corporation applied to the payment of their debt although it rendered valueless every stockholder’s interest in the corporate property, including their own stock. Certainly the pledgee of the stock acquired no greater right, than the pledgor held and owned as a stockholder. Tlieir rights as creditors remained unimpaired, and these rights, passed to their assignees. It is no impairment of the value of the stock to apply the assets of the corporation to the payment of its just debts, in preference to applying it for the benefit of a stockholder, or his assignee.
If the complainant desires the assistance of a court of equity to decree a sale of the stock, the bill might be retained for this purpose.
Beversed and remanded.