23 Haw. 387 | Haw. | 1916
Lead Opinion
OPINION OP THE COURT BY
The Territory, in a suit for an injunction to restrain the Honolulu Rapid Transit & Land Company from carrying out an alleged plan to increase its capital stock, averred that it is provided by the charter and franchise of the company that it shall not be lawful to increase the capital stock of the company in excess of the sum of $200,000 unless the proposed increase shall, when taken with the original capital stock ($200,000) represent only the actual cost of the property of the railway (company) and not over 25% of such cost in addition thereto; that the amount of its capital stock now outstanding is of the par value of $1,207,500, and that it exceeds the actual cost of the property of the railway and 25% of such cost in addition thereto. By an amendment to the bill, however, it was averred that neither the actual cost nor the actual value of the property exceeds the sum of $966,000. The sum of $966,000 plus 25% amounts to $1,207,500, the present outstanding capital of the company. The bill further averred that the company plans and intends to and will, unless restrained, further increase its capital stock to the sum of $1,600,000, which would far exceed the actual cost of its property and 25% of said cost in addition thereto. The company, in its answer, denied that the amount of its present capital stock exceeds the actual cost of its property and 25% in addition thereto, and averred that the actual cost of its property exceeds the sum of $2,171,841.51. It was also averred in the answer that though neither the directors nor the stockholders of the company have taken any action looking to
We have found some difficulty in ascertaining which, if
The Honolulu Rapid Transit & Land Company was incorporated under a charter which authorized it to construct a street railway in such streets, roads and places in Honolulu as are designated in Act 69 of the Session Laws of 1898, of the Republic of Hawaii (R. L. 1915, Chap. 54) and to operate the same under and in accordance with the authority of said act. The capital stock of the company was designated to be $200,000 with the right to increase the same from time to time upon notice to the minister of interior (superintendent of public works) by the issue of new shares not to exceed in all $2,000,000, provided that whenever such increase is made for the purpose of constructing new lines or branches of its railway, and of equipping the same, or for covering extensions already made, the notice of the increase shall be accompanied by a sworn certificate of the company showing the estimated or actual cost of such proposed extension or of such extension already
“The following charges shall be lawful upon the income of said railway:
“1. The expense of operating, repairs, renewals, extensions, interest, and every other cost and charge properly or necessarily connected with the maintenance and operation of said railway;
“2. Dividends may be paid to the stockholders not to exceed eight per cent, on the par value of the stock issued;
“3. A sinking fund may be created for the redemption of any bond which may be issued or other record debt and the capital upon the expiration of the franchise; provided, however, that the amount placed to the credit of such sinking fund annually shall not exceed in amount such a sum, with interest computed at five per cent, per annum, compounded, as will, principal and interest combined, at maturity, equal the par value of the bonds, record and capital debt aforesaid;
“4. The excess of income shall be divided equally between the Territory of Hawaii and the stockholders of said corporation;
“5. A quarterly account or trial balance of the corporation shall be rendered by the corporation to the superintendent of public works from the beginning of the actual construction of the railway.”
It is now contended by the complainant that notwithstanding its admission at the hearing that the actual cost of the property of the company was $1,603,056.68, that was not the actual cost to the company, and that the actual cost mentioned in section 37 of the franchise act (R. L. 1915, Sec. 804), which will be dealt with presently, means actual cost to the company. It is argued that the “extensions,” for the expense of which the income of the railway may be used under paragraph 1 of section 17, under the rule of construction noscitur a sociis, must be held to be limited to such extensions of the lines of the railway as are
The remaining points urged on behalf of the complainant, and which we will discuss, involve the meaning and effect of section 37 (R. L. 1915, Sec. 804) of the franchise act. It reads as follows:
“It shall not be lawful to increase the capital stock of said corporation at any time in excess of said two hundred thousand dollars, unless the proposed increase shall, when taken with the said original capital stock, represent only the actual cost of the property of the railway, and not over twenty-five per cent, of such cost in addition thereto; such cost may include all expense, of laying tracks and equipping the road for public use, and may also include all subsequent extensions, but no such increase shall be authorized for extensions until they shall be determined upon and authorized by a vote of the corporation.”
The attorney general, in his brief, says, “Under no rule of statutory construction can this provision be construed as meaning that the company may issue stock that has not been paid for. We contend that this limitation does not give the company the right to issue stock to its shareholders without consideration.” The phraseology of the section in question that the capital stock of the company shall not be increased “unless the proposed increase shall, when taken with the said original capital stock, represent only the actual cost of the property of the railway, and not over twenty-five per cent, of such cost in addition thereto” implies that such 25% additional shall not represent value. It was evidently intended to allow a bonus which, taken in connection with the provisions of section 17, would amount to an allowance of ten per cent, of dividends upon stock which has been issued upon capital cost before the government would be entitled to share in an excess of profits. The reason for this provision and the liberal provisions of section 17 is to be found in the conditions which existed when the'
Next, it is contended that the words “actual cost” used in section 37 of the franchise act mean actual cost to the company or its stockholders, and should be held not to include cost of property paid for out of moneys borrowed upon bond issues or the investment upon capital account of any surplus income in excess of eight per cent, in any one year which might have been payable to the Territory under the provisions of section 17. And it is argued that even though it should be held that all the net income of the company may be put into extensions, still so much of such income as would otherwise have been payable to the Territory if not so invested ought not to be allowed to be capitalized since to that extent the expense of extensions cannot be said to have been at the cost of the company or its
The doubt as to the meaning of the provisions of section 37 of the franchise act arises primarily out of the fact that under section 17 the Territory is entitled to share in the
The claims advanced by the company which go to the extent of almost nullifying paragraph 4 of section 17 of the act as a possible source of revenue to the Territory might be difficult to sustain as against the rule of strict construction against the grantee of a franchise were it not for the contemporaneous construction given to the act by the executive officers. Taking the provisions of the statute as we find them and applying the two rules of construction referred to, balancing one against the other, we think, upon the whole, that the contention of the appellant that the term “actual cost” used in section 37 means cost to the company should be sustained so far as the investment of income is concerned, but not as to borrowed money. Under the view we take of the matter the company was entitled
On behalf of the appellant it is contended that under general corporation law shares of stock may not be issued except upon payment of the par value thereof, or, when issued by way of a stock dividend to shareholders, only in case property equivalent in value to the full par value thereof has been ¿ccumulated and added to the capital assets of the corporation; also that under the law applicable to public utility companies as established in “rate” cases the
As to the matter of the cost of the company’s property we find that, after leaving out of consideration certain disputed items as to which there may perhaps be some doubt, there should be added to the sum of $1,603,056.68, admitted by the complainant to have been actually and properly expended, the items of $255,549.94, purchase of Hawaiian Tramways Company, and $79,024.43, Pearl Harbor Traction, making a total of $1,937,631.05. And we hold that the actual cost of the property of the company was not less than that sum, except that there should be deducted the amount of excess profits, if any, invested in property which would otherwise have been payable to the Territory under section 17 of the act as hereinabove stated. This conclusion does not change the ultimate result arrived at by the circuit judge in dismissing the bill. The decree appealed from will therefore be affirmed.
There were other and subordinate questions discussed in the briefs and argument which we deem it unnecessary to comment upon.
Concurrence Opinion
CONCURRING OPINION OP
I concur in the conclusion that the decree of the lower court should be affirmed. I also concur in so much of the reasoning contained in the opinion of the chief justice as is
When complainant stipulated in the court below that of the items aggregating $2,171,976.11, submitted by the company as capital expenditures representing the original cost of the property, items to the extent of $1,603,056.68 were correctly stated, I am of the opinion that upon the issue raised by the pleadings the complainant was virtually out of court.
The contention of the attorney general in his brief and oral argument that the company has not the right to issue stock to its shareholders without consideration raises a point which is wholly without the case made by the pleadings and one that was not considered or passed upon by the lower court. The rights of creditors are not involved in this proceeding (Handley v. Stutz, 139 U. S. 417; Christenson v. Eno, 106 N. Y. 97, 60 Am. Rep. 429). The sole issue made by the pleadings is as to the right of the company to increase its capital stock, and this was the only question passed on by the circuit judge. At this time to permit complainant to interject into the case an entirely new issue as to what disposition the company may lawfully make of its shares, even if it has the right to increase its capital stock and issue them, is, as I view it, wholly inappropriate, not warranted by the pleadings, and should not be permitted. This court should not decide a moot question where it is apparent that the object of the parties is not the vindication of a right, but a desire to obtain an interpretation of a statue. Sennette v. Police Judge, 129 La. 728, 56 So. 653.
In my opinion, under the stipulation entered into by the parties as to the cost of the property of the company, and under all the evidence in the case, the decree of the lower court should be affirmed.
Concurrence Opinion
CONCURRING OPINION OF
I concur in the conclusion that the decree denying the injunction sought be affirmed on the ground that the proven facts show that the defendant corporation’s property exceeds in cost the amount to which it proposes to increase its capital stock in the aggregate. Many questions entirely without the issues made by the pleadings have been discussed in the briefs and oral arguments and to some extent in the principal opinion. The issues made by the pleadings raise only one question, i. e., whether under the facts the defendant has the power under the franchise act and its articles of incorporation under which it operates, and
To my mind the provisions of sections 17 and 37 of the franchise act, which sections are quoted in the principal opinion, are plain and free from ambiguity and call for no construction by extrinsic aid or otherwise. The phrase in said section 37 “increase its capital stock” means just what those words import in their usual and ordinary signification and said section does not authorize the defendant to water its stock or to issue stock dividends except in the manner authorized by section 3299 R. L. The words “right” and “power” mean different things. It is only a question of' power that is involved here. The right of the defendant to issue some of the stock heretofore issued by it and to issue further stock, and the disposition of such stock as well as the amount of excess income heretofore earned by the defendant, to which the Territory is entitled, are matters to be settled in some other suit or suits and are not involved in the issues now before this court.