The Highland weekly news. [volume] (Hillsborough [Hillsboro], Highland County, Ohio) 1853-1886, 1858-10-28
RAILROAD DECIs.
ION.

cinnati Railroad Company, in January,
1853, issued and transferred to VIM.
Sturges fifteen thousand shares Of stock
for S521 ,667, being less by 1928, 1888
than the rate Cs5O per share) fixed by
the charter. Sturges subsequently trans
forred six hundred shares to Stetson for
his promissory note of $4,000, which
was not taken up. Surges sued on the
note, and the case was taken before the
Circuit Court on demurrer.
The following is brief synopsis Of
the decision:
The question before the Court was
raised on the 9Th plea, which states that
the Board of Directors had not the
power to dispose Of the shares Of stock
Of the Company at less than $50 per
share.
That Sturges entered into a scheme
with the Board of Directors by which
they should execute to him a bond for
I875O,O00, within four years, to be con-
vertible into $4,000 shares, at $50 each,
and the bond should be sold to plaintiff
for 1921 ,677, payable on call, which was
less by S228, 1873 than the par value Of
the shares
That Sturgos induced the defendant
to purchase six hundred shares, for
which he gave his promissory note, on
which this action is founded.
The Court held that stock can be ere.
ated only by contract. There must be
an agreement to take stock, and moth
ing short of this can create it. The
term 'stock" in the charter, before it is
taken by subscription, means nothing
more than power in the Directors tc
receive subscriptions for stock.
There was no sale Of stock to the
plaintiff which had been previously is
sued, but an attempt to create the stock
and sell it at the same time as one tran
saction.
The power given in the charter t.
sell the property of the company doe.
not apply to the disposition of capita
stock.
A subscription procured Of ffteer
thousand shares, amounting to the sun
Of seven hundred and fifty thousan,
dollars, to be paid for at one-third les
than the par value of the stock, was
fraud upon the law and a fraud upol
the other stockholders who had paid il
full for their shares.
tt is essential to the success Of an,
enterprise, that the contributors shOul
, be placed upon an equal footing in re
gard to the money paid.
Therefore, the subscription Of th
plaintiff as made is void.
IT, on a full knowledge Of the facts
the defendant (Stetson) had taken tn
stock by the payment Of his note, h
would hold it subject to the right o
the stockholders prior to the subscrir
8 ton Of the plaintiff to have it reduce
C to the charter value Of the shares
{ This would take from him nearly one
j. third of his shares
The defendant having done nothin
to preclude him from the defense 81
4 up in his plea, which stands admitte
by the demurrer, and which is in tn
. judgment of the Court, a sufficient al
swer 10 the action,
The demurrer is ovorrulod.
The principle settled by this decisio
4 is very important one to all railroa
and other joint stock companies, vi
e that such companies kaUe no legal poo
:, 10 issue slOcg al less han he par cal
|, per share faed Jy'theF charters. Jud,
j, MCLEAN clearly illustrates the justi
Il Of this principle in the following bri
IS extract from his decision:
N "a certificate Of stock was issued
the plaintiff, for fifteen thousand shar,
amounting to the sum Of S75OOO0,
u which only S521 ,677 were paid, viii
Sc was less for the shares than the pr
- fixed by the charter, by 228,333.
IS This sum, distributed among the sha
holders at the time Of the transactit
y; will show the loss they sustained A
~ if this be a correct construction Of {
powers Of the Directors, they may cC
N tinue to reduce the price Of stock,
he every subsequent subscription down
3f. Eve or ten dollars a share, distributi
be the loss upon prior stockholders. q
~ last subscriber, at whatever rate, wo,
70 stand on an equality, as to further d
y idonds and In all other respects, "
ot the previous subscribers for stock, "
sJ had paid ia full for their shores q
.st injustice Of such a scheme requires
its demonstration. IL is in conflict "
10 the charter"
.e- Immediately after the decision in
ne above case, another decision was rend
TO ed in the same Court, IN the case
1I Samuel Fosdick vs.. VIM Bturges, wh
ui turned upon the same question deoi
he in the former case. Sturges sold \
ta. dick coo shares Of the illegal stock,
600, and tho stock was regul'