87 Ala. 725 | Ala. | 1888
Upon first consideration, we were of opinion that the contract sued on in this case was not illegal, or invalid, as in violation of public policy. But, after further deliberation, we have come to the opposite conclusion.
It is too plain for argument that, under the evidence, if the plaintiff can recover at all, it must be under the third count, which claims the price agreed to be paid for the sale of fifty shares of stock in the Decatur Land Company. The bill of exceptions sets out all the evidence, and this evidence, in our opinion, shows a contract in violation of section 6, Article XIV, of the Constitution (1875), which provides, that “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 plaintiff’s own testimony shows that he had subscribed originally for $2,500 of stock in said company — say twenty-five shares — with the understanding, that the company was to issue to him “five dollars of stock for one dollar of subscription,” which would be $12,500 — a fictitious increase of five to one. The plaintiff sold $1000 (or ten shares) of the original stock, and “gave the defendant an order on the Decatur Land Company, to issue to defendant fifty shares of said land company stock, which was the amount called for by the $1000 of the original subscription, and to transfer the same to defendant on the books of the company.” This stock was not then issued, but was to be issued on the day of the transaction.
The contract necessarily implied by this transaction is one which seems to us to be in violation of the section of the Constitution above quoted; and this is the consideration of the defendant’s promise. It is a sale, not so much of the stock itself, as a transfer of a subscription to ten shares of the stock, based on an illegal agreement of the land company to issue fifty shares of such stock (a fictitious increase of forty shares), with an order on the company instructing it
One of the purposes of this clause of the Constitution was to protect the public, as well as stockholders, against spurious and worthless stock by the process of luatering — in other words, from fraudulently issuing and putting on the market fictitious corporate stock, which is based on nothing valuable as a consideration for its issue. — Fitzpatrick v. Dispatch Pub. Co., 83 Ala. 604; Memphis & Little Rock R. R. Co. v. Dow, 120 U. S. 287; Peoria & Springfield R. R. Co. v. Thompson, 103 Ill. 187. It is greatly to the interest of the public that the policy of this provision should be enforced. We repeat that the present contract is in violation of this provision of the Constitution, and is void.
The court erred in the charges given.
Other questions need not be considered, as the defendant is entitled to the general affirmative charge in his favor, if requested.
Reversed and remanded.