Case ID: sw_191/html/0557-01.html
Source: Caselaw Access Project
Author: {"author": "VANTIS, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BEACH et al. v. McKAY, State Secretary.
    (No. 2850.)
    (Supreme Court of Texas.
    Jan. 31, 1917.)
    1.Mandamus <&wkey;88 — Performance of Official Acts — Discretionary Act.
    Const, art. 12, § 6, provides that no corporation shall issue stocks or bonds except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void. Vernon’s Sayles’ Ann. Civ. St. 1914, art. 1126, provides that, when stockholders of a company furnish evidence to the secretary of state that the full amount of authorized capital stock has in good faith been subscribed, and 50 per cent, thereof paid in cash, or its equivalent in other property, or labor done, etc., it shall be the duty of such officer on payment of office fees and franchise tax to receive, file, and record the charter, and give a certificate showing the record. Article 1127 provides that the term “satisfactory evidence,” as used in article 1126, shall be an affidavit of those who executed the charter stating the name, residence, and address of each subscriber, the amount subscribed and paid by each, the cash value of any property received, giving its description, -location, etc., and from whom and the price for which it was received, the amount, character, and value of labor done, and from whom and at what price it was received. Article 1128 provides that, if the secretary of state is not satisfied, he may require other and more satisfactory evidence before he shall be required to receive, file, and record the .charter. Held that, as article 1128 gives the secretary of state discretion to refuse a charter when the stockholders of a proposed company have failed to furnish satisfactory evidence that the provisions of article 1126 have been complied with, his act in issuing the charter not being purely ministerial or imperatively required of him by law, he cannot be required by mandamus to issue a charter in a case where he has not received evidence satisfactory to him that the provisions of article 1126 have been complied with.
    [Ed. Note. — For other cases, see Mandamus, Dec. Dig. <&wkey;88.]
    2. CORPORATIONS ■©=»21 — ISSUE OF CHARTER— Statute.
    In view of Vernon’s Sayles’ Ann. Civ. St. 1914, arts. 1126, 1128, the secretary of state was within his rights in refusing to issue a charter to a company where it involved the acceptance of a patent at the value of $64,050, where the evidence was not satisfactory that it had in fact such a real value, and it was shown that a three-fourths interest in the patent had been acquired for $10,000 in cash.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 66-68; Dee. Dig. <&wkey;>21.]
    3. Mandamus <&wkey;88 — Issuance of Charter-Questions of Fact.
    Whether stock had'been subscribed in good faith, and 50 per cent, thereof had been paid in cash, or its equivalent, as required by Vernon’s Sayles’ Ann. Civ. St. 1914, art. 1126, are questions of fact to be determined by the secretary of state by the exercise of the discretion lodged with him by article 1128.
    [Ed. Note. — For other cases, see Mandamus, Dec. Dig. <&wkey;>88.]
    Petition ior mandamus on relation of Frank W. Beach and others against John G. McKay, Secretary of State.
    Writ refused.
    Gilbert H. Irish, of 'Dallas, for relators. B. F. Looney, Atty. Gen., and C. W. Taylor and C. M. Cureton, Asst. Attys. Gen., for respondent.
   VANTIS, J.

The relators, Frank W. Beach and numerous others, filed their petition in this court asking that a writ of mandamus be issued against the secretary of state, John G. McKay, the respondent herein, to require him, as secretary of state, to issue a charter for the Moody Calculator Company. The relators had previously presented to' the secretary of state their application for such a charter in proper form, showing the purpose of the proposed corporation to be the manufacture and sale of Moody calculators, and the purchase and sale of goods, wares, and merchandise used in connection therewith. The respondent refused to issue and file the charter, one of the grounds for his refusal being, as shown by his answer herein, that the value of the letters patent, which in the application for charter had been valued at $64,050, was so uncertain and speculative that he was unable to determine its actual value. The application for charter alleged that the proposed corporation would have an authorized capital stock of $150,000, and that one-half of this amount had been paid in cash or its equivalent, the said patent being treated as worth $64,050, and as having in that sum been paid, by its assignment to the proposed corporation. Section 6 of article 12 of the state Constitution,' relating to the issuance of stocks and bonds, is as follows:

“No corporation shall issue stock or bonds except for money paid, labor done or property actually received, and all fictitious increase of stock or indebtedness shall be void.”

Article 1126, Vernon’s Sayles’ Civil Statutes, is as follows:

“Whenever the stockholders of any such company shall furnish satisfactory evidence to the secretary of state that the full amount of the authorized capital stock has in good faith been subscribed, and fifty per cent, thereof paid in cash, or its equivalent in other property or labor done, the product of which shall be to the company of the actual value at which it was taken, or property actually received, it shall be the duty of said officer, on payment of office fees and franchise tax due, to receive, file and record the charter of such company in his office, and to give his certificate showing the record thereof.” . .

Article 1127, Vernon’s Sayles’ Civil Statutes provides that the term “satisfactory evidence;” as used in article 1126, above mentioned, shall consist of the affidavit of those who executed the charter, stating the name, residence, and post office address of each subscriber to the capital stock; the amount subscribed by each; the amount paid by each; the cash value of any property received, giving its description, location, and from whom and the price at which it was received; and the amount, character, and value of labor done, from whom and price at which it was received. Article 1128 of said statute is as follows:

“If the secretary of state is not satisfied, he may, at the expense of the incorporators, require other and more satisfactory evidence before ’ he shall be required to receive; file and record said charter.”

It is clear that article 1128, above, lodges a discretion in the secretary of state to refuse to file and record a charter applied for when the stockholders of the proposed company have failed to furnish satisfactory evidence to him that the full amount of the authorized capital stock has been in good faith subscribed an$ 50 per cent, thereof paid in cash, or its equivalent. We are properly denied -the power to require by mandamus the secretary of state to issue a charter in a case where he has not received evidence satisfactory to him that the full amount of the authorized capital stock has in good faith been subscribed and 50 per cent, thereof paid in cash, or in its equivalent, as provided in article 1126.

By the affidavit of Frank W. Beach, one of the relators, it is shown that the amount of money which had been paid for the acquisition of a three-fourths interest in such patent was $10,000 in cash. The affidavits of several of the relators placed the value of said patent “in excess of $75,000.”

We think the secretary of state was within his rights in refusing to accept such a patent at a value of $64,050 when the evidence was not satisfactory to him that it had in fact such real value.

The question whether the stock had been subscribed in good faith, and whether 50 per cent, thereof had been paid in cash, or its equivalent, are questions of fact to be determined.by the secretary of state by the exercise of a discretion lodged with him by law. We have not the power to require him to exercise his discretion in a particular way on suefi questions of fact. If the act sought to require the secretary of state to perform were purely ministerial, we could compel its performance by mandamus; but before we are permitted to grant the writ of mandamus it must appear that the act sought to have him perform is imperatively required of him by law, and not a matter within his discretion. Mortgage Co. v. Hardy, 93 Tex. 295, 55 S. W. 169; Trinity Life & Annuity Society v. Love, 102 Tex. 278, 115 S. W. 26, 116 S. W. 1139; Durrett v. Robinson, 103 Tex. 502, 131 S. W. 400.

It is insisted by the Attorney General, in behalf of the secretary of state, that patent rights are never property which can be “actually received,” as provided by the Constitution. Such a question is not presented by the facts of this case as a question necessary to its decision, since the patent in this case is the only one before us. It appears that the secretary of state is unable from the evidence furnished to ascertain the value of the particular patent offered as property in this,case, and it is clear to us that his action in refusing to receive and file the charter is within the exercise of a discretion lodged with him by law, and we cannot revise his action in this particular, which is all that is necessarily presented to us for decision in this particular case. We are not called upon to decide, and do not decide, whether all patent rights are excluded by the terms of the Constitution, as not being “property actually received” within the meaning of the Constitution.

The writ of mandamus is refused. 
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