The San Francisco call., 1898-04-06

Coast Jockey Club, following the dark and mysterious Eastern methods intro- duced by Ed Corrigan, has lately doubled its stock in an illegal manner.
 At a meeting during the early part of last month the directors declared div idend of 100 per cent. This seemed so unusual that several stockholders de- clined to accept their share of the al- legged dividends until they investigated the meaning of the unusual proceeding.
 When they probed into the matter they soon discovered that the method pursued to double the stock was a void and useless proceedings. The suspicious stockholders, therefore, declined to ac- cept the dividends, which were pay able in other shares of stock.
 A little figuring soon showed that the reason of the queer and illegal pro- ceedings was that some of the stock holders were in debt to an embarrass- ing extent. To recoup their heavy losses they pledged their stock at va- rious banks, after which they met and doubled the issue of stock, thereby de- preciating the pledge as we'll as pre- viously issued shares to the amount of exactly onA-half.
 But the new stock looked so good on its face that a number of bankers ad- vanced money on it. They did not know "the ways that are dark and the tricks that are vain," by which the sleight-of- hand manipulators from the far East had rendered that stock equal to only half of its apparent value. They will know when they read this, and there is likely to be a merry war between pledgors and pledges when they come face to face. It will be difficult to convince the bankers that men can lift themselves by their own boot straps and that property repre- sented by ten thousand shares is more valuable than the same property repre- sented by five thousand.
 Those who refused to accept the ad- ditional shares, which the manipulators called dividends, were acting on the ad vice of lawyers, who, after investigat- ing the methods by which the stock was increased, pronounced the proceed ings void and wholly worthless.
 It will be understood at glance that the reason for the proceedings of the principal stockholders was that they had met with severe reverses, which drove them to hypothecate their shares at such banks as would advance them money. Having made the raise suc- cessfully they were ingenious enough to proceed to the extreme of issuing one hundred per cent more. They did not operate under the laws of California, and there is suspicion that they pro- St yNI lou af T nois, where MT. Corrigan has had long and varied experience.
 The original issue consisted of 5000 shares, valued at S100 per share. of which 24S1 shares were at once paid for and issued, the balance being held in reserve. Doubling the stock by the methods attempted by the stockholders has left batch of depreciated stock on hand and has furnished a brilliant ex- ample of the stone wall against which the directors have run their heads.
 The law on the subject of issuing and increasing stock is very plain. It is provided by section II, article XII, of the State constitution, 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.
 Practically the same thing Is reiter- ated at the beginning of section 359 of the Civil Code, which defines the pow CTS of corporations.
 That part of the Girl Code relating to powers of directore of corporations at section 3O9 provides among other things:
 "The directors of corporations must not make dividends except from the surplus profits arising from the busi- ness thereof" (Meaning the business of the corporation) Nor must they divide. withdraw or pay to the stock holders or any of them any part of the capital stock, nor must they create debts beyond their subscribed cap- ital stock, nor must they divide, withdraw or pay to the stockholders any part of the capital stock except as hereinafter provided, nor reduce or in- crease the capital stock except as here in provided"
 The provision covered by the "here- matter provided" has reference to cor porations holding and selling real es- tate, water and water rights, when two-thirds vote of the stock is neces- sary And also that after the payment of all the debts of corporation upon it's dissolution, the capital stock may be divided among the stockholders
 The only decision that appears to be directly upon those propositions is the case of Kellerman vs Maier, 116 Cal, 416, decided April 6, 1897. In that case stock was issued in corporation called the Castica Oil Company to cer- tain stockholders upon the payment by them of 50 cents share. Subsequently the price of the stock to persons in- tendino to purchase was reduced to 25