110 Ala. 214 | Ala. | 1895
The questions of prime importance, in this record, are, first, the sufficiency of the third plea, as tested by the demurrers which are interposed to it, and which were overruled ; and, second, if the demurrers were properly overruled, what judgment should have been rendered, upon the plaintiff declining to plead,over’ — there being other pleas in bar, upon which issues were joined?
The plea, in the form of its conclusion, is one in bar of the further maintenance of the action, at common law; and, in other repeats, it is a plea puis darrein' continuance. The gravamen of the complaint is, that in the organization of the Electro-Libration Company, under the general laws of the State, the board of corporators, and the subscribers to the capital stock, fraudulently overvalued the property agreed to be transferred to the company in payment of the stock subscriptions ; and further, that the organization of the company was never completed by the issuance of the certificate of incorporation required by the statute to be issued by the judge of probate. The complaint shows that the organization was in accordance with law, in all other respects. The incorporation took place in 1887, in the office of the probate judge of Jefferson county, Ala.; and in February, 1893,- after this suit was brought, but before plea pleaded, the General Assembly of Alabama enacted the following statute :
“An act to.amend the charter of the Electro-Libration Company, which is a body corporate chartered under the general statutes of the State of Alabama, and to reduce its capital stock.
“Section 1. Beit enacted by the General Assembly of Alaban,a, That the charter of the Electro-Libration Company, which is a body corporate under the general laws of Alabama, having been incorporated by declaration filed in the probate office of Jefferson county, Alabama, be, and the same is, hereby amended, by the reduction of its authorized capital stock from one million dollars to five hundred thousand dollars, and that five thousand shares of the capital stock of said corporation which is
“Section 2. Be it further enacted, That the charter of said corporation heretofore granted by M. T. Porter as probate judge of .Jefferson county, under the general statutes of incorporation of this State as so amended as above set forth be, and the same is, hereby ratified and confirmed.”
The plea set out this act, prefacing it with the following matter : ‘ ‘The said defendants for further plea say that they deny that the subscription for the capital stock of the said Électro-Libration Company was fictitious, and they deny that the issue of said stock upon said subscription was fictitious, but that, on the contrary, they aver that it was issued for property actually received, which was conveyed according to the terms of the said subscription, and that said subscription of said stock was made in good faith and without any fraudulent intent to violate the law, or the constitution of the State of Alabama in that respect, but made in the honest belief that said patent and patent rights and inventions were of a largo intrinsic value, which belief had been proved to be true by the subsequent investigation and developments thereof. And they farther say that since the beginning of this suit, and since the last continuance in this case,” &e. averring the passage of said act and setting it out. Without stating the several grounds, we will notice the questions raised by, and the views insisted upon in support of, the demurrers to the plea.
It is not denied that the legislature, unrestrained by constitutional limitation, may validate an invalid charter of a corporation, or by express confirmation, or by plain recognition of it as an existing de jure body corporate. We quote from the brief of plaintiff’s counsel on this subject. They say: “But the defense set up in the third plea proceeds upon the idea that the legislature is omnipotent in the matters of creating corporations, and that a recognition by it of an organization as a corporation, by amending its charter or'otherwise, makes it one from thenceforth, or at least forestalls all further inquiry into the matter. That this is true in the. absence of some constitutional lim
Section 1 of Article XIY of the constitution reads as follows : “Corporations may be formed under general laws, but shall not be created by special act, except for municipal, manufacturing, mining, imigration, industrial, and educational purposes, or for constructing canals, or improving navigable rivers and harbors of this State, and in cases where, in the judgment of the General Assembly, the objects of the corporation cannot be attained under general laws. All general laws and special acts passed pursuant to this section may be altered, amended, or repealed.” It may be, as contended, that a special legislative act recognizing or confirming a charter derived solely under the general incorporation law, having no power or existence other than by virtue of that law, would demonstrate, in itself, that it was a charter which could be obtained under the general law, excluding possibility of exercise of the legislative judgment contemplated in the above quoted constitutional provision ; but we are not under the necessity of decid--ng that question, since the provision itself excludes from
Nor do we think that the exercise of this legislative power can be said to suspend the operation of the quo ■warranto statute for the benefit of this particular corporation or these defendants, within the meaning of the constitution. Section 23, Article IV-,’of the cons titution ordains, that “no special or local law shall be enacted for the benefit of individuals or corporations, in cases which are or can be provided for by a general law, or where the relief sought can be given by any court of this State ; nor shall the operation of any general law be suspended by the General Assembly for the benefit of any individual, corporation or association.” In connection with this, Section 1 of Article XIV, supra, may be read. Section 24 of Article IV, provides. “That the provisions of this constitution, as to special or local laws, shall not apply to public or educational institutions of or in this State, nor to industrial, mining, immigration or manufacturing corporations or interests, or corporations for constructing canals, or improving navigable rivers or harbors of this State.” The charge of the complaint is, substantially, that these defendants — individuals—are exercising franchises of a manufacturing corporation, under color of a voidable corporate organization had under the general laws of the State, regulating the organization of manufacturing, mining, immigration and industrial business corporations — voidable for a specified irregularity, and for fraud in reference to subscriptions to stock. From this standpoint, then, defendants were not, of right, a corporation, and it is so averred. Therefore, it can not be contended, and is not, as we understand, that these constitutional provisions restraining the passage of special or local laws for the benefit of
Again, it is insisted that the second section of the ratifying act is upon a subject of .legislation distinct from that contained in the first section ; and not being comprehended within the title, the first section only is valid, and the second inoperative, under Art. IV, section 2 of the constitution. Whether or no, this is technically true, we need not consider ; for the express confirmation declared in the second section, cannot possess greater validating potency than the express recognition of the corporation.,'as ’ a lawful corporation, contained in the-title and first section of the act. The one implies no other or further notice or knowledge, on the part of the legislature, of the vices or imperfections of the
As affecting the inquiry whether the legislature intended the confirmation or not, it is a question which well suggests itself to the mind, whether a ratifying or confirmatory act like the present, will cure the vice of a secret fraud infecting the charter, of which neither the act, nor the charter under legislative review, gives a suggestion or clue. The authorities cited in the foregoing extract from the brief of counsel, and others, seem to hold that such a ratification has the like effect of a direct creation, by original, special charter, of the persons composing the irregular body,into a body corporate, excluding the vitiating effect of all deficiencies, known or unknown, ascertainable or otherwise.—R. R. Co. v. Cook, 29 Ill. 240; Goodrich v. Reynolds, 31 Ill. 498; Bridge Co. v. U. S., 105 U. S., 480; Clinton Bridge Case, 10 Wall 462; Cook on Stocks and Stockholders, § 636, and many cases collected in note ; 1 Thompson on Corp., § 512, and other authorities cited by counsel. Chief Justice Ruffin, however, in alluding to the subject, in Att’y. Gen’l. v. Petersburg R. R. Co., 6 Ired. L. 456, stated the rule in this language : "But on the other hand, if the sovereign — with us, the law making power — with a distinct knowledge of the breach of duty by the legislature, or so clearly to be inferred from its own archives that the contrary can not be, thinks proper by an act to remit the penalty, or continue the corporate existence, or to deal with the corporation as lawfully and rightfully existing, notwithstanding such known default, such conduct must be taken, as in other cases of breaches of conditions, to be intended as a declaration, that the forfeiture is not insisted on, and, therefore, as a waiver of the previous defaults.”
But, however this may be, whether the rule admits of the qualification implied in this language or not, we think we may pretermit decision of the question, in this cause.- It must be assumed that the legislature was cognizant of all the terms of the charter it had under
The title and first section of the act distinctly mark, by minute description, the charter here involved, as the subject of legislative action ; and its recognition as a lawful corporate body, including expressly, we may say, the integrity and validity of its reduced capital stock, are so emphatic, that it is impossible to reach another conclusion than that the act was, in legal effect, for the purpose of this controversy, a re-enactment of the charter, curative of all vitiating elements alleged against it in the complaint.
But it is suggested that the question under discussion may be affected by section 6, Art. XIV of the constitution, which reads as follows: “bio 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 stock and bonded indebtedness of corporations shall not be increased, except in pursuance of general laws, nor without the consent of the persons holding the larger amount in value of stock, first obtained at a meeting to be held after thirty days’ notice is given in pursuance of law. ’ ’
It must be kept in mind that the question for decision here is, whether the legislature may, by enactment, correct and waive the vice of a fraudulently organized corporation — fraudulent, in that the corporators knowingly issued the amount of the authorized capital stock for property worth greatly less than the par value of the stock? There was no issue of stock beyond the amount of the authorized capital. It was issued, according to the idea, for propi rty of large value, actually received by tlie corporation. In view of the fraudulent overvaluation of the property received, the legislature intervened and took action, by reducing the amount of the
The provision is evidently of far reaching importance, and it would be unsafe to undertake to define, abstractly,, its scope and effect. Each case invoking the provision, should be cautiously decided as it arises, upon the questions actually presented. We may illustrate its importance by inquiring, what is meant by “money, labor done, or money or property actually received?” Can no stock or bonds issue by any corporation, until it has actually received full payment for the stock or the full consideration of the bonds? Must the money or projiertj' have been received, or the labor actually performed, before the subscriber can become a stockholder? If so, are stock or bonds issued without such prepayment, intended to be declared void by the provision in question, and, if so, what is their nature in respect of their validity, when put upon the market and passed into the hands of bona fide purchasers? Does the general principle that a contract or obligation, even of a commercial character, which is denounced void as against public policy, by the written law,'is void even in the hands of buna fide holders, apply, under this constitutional provi.-ion, so as to render utterly invalid,, in all hands, stock issued by a corporation, within the-
These questions, we do not think arise in the present controversy. We state them to call attention to their importance, and to emphasize the care which should be observed in expounding this provision of the constitution .
As we have already shown, the other provisions of the constitution which have been discussed, do not alter or affect the sovereign power of the State, through its legislature, to create manufacturing corporations like this, either by original charter, or by confirmation or ratification of organizations irregularly or even fraudulently accomplished. ' The State and the corporation, so far as the grant of the franchise is concerned, are the sole par
Alter demurrer overruled to this plea, the plaintiffs declined to plead over to it; but did join issue on other
As we have said, the plea, in its conclusion, purports, to be in bar of the further maintenance of the suit. In its body, it purports tobe a plea since the last continué anee. In our system of pleading forms are not essential; and we do not regard, in that particular, the English', common law rules which counsel nowinvoke. We loolo to the substance of the plea, and thereby determine its legal effect. In the present instance, the matter pleaded arose after the institution of the suit and before plea pleaded. It. is, therefore, a plea puis darrein continuance strictly. Section 2848 of the Code provides what judgment shall be rendered as to co^ts, when the defendant succeeds on a plea of this character. Its provision is that when the party filing a plea “since the last continuance,” succeeds thereon, but fails on the plea to the merits previously filed, he mu-t be taxed with the costs which accrued previous to the filing of the last plea. This statute, obviously, dispenses with all necessity for offering in the plea to nay such costs. It prescribes a mandatory rule of action for the court, thé observance of) which the defendant, filing the plea, by no act nor) omission on his part, can prevent. . He files the plea’ with the knowledge that, by the statute, the court must: tax him, on its success, with the specified costs. Iie: thereby assents to such taxation, and, impliedly offers, to submit to the same. The question now made, arises out of our statutó suffering pleas of this character to bev filed, with other pleas to the-whole action; which was-' not allowed at common law. Discarding technical differences, which were, perhaps, indulged bv the common; law, more with respect to form than substance, the plea (save as to the proportion of costs taxable against the) defendant) is, with us, at last, in its essence and effect,n an answer to the whole complaint. It may be true, and, doubtless is, that the defendant, if he has other pleas in
"We think, therefore, that the judgment of the circuit court was right, except in that it awarded all the costs against the plaintiff. We have but to correct that error here; and it will be done by adjudging all the costs which accrued prior to the 4th day of May 1893, including the costs of the other pleas and demurrers thereto, against the defendants ; and the judgment as thus corrected, will be affirmed. The costs of the appeal will be divided between the parties.
Corrected and affirmed.