Court Opinion

ID: 7367630
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:53:14.199667+00
Date Added: 2024-06-11T16:20:40.132302
License: Public Domain

*395ON APPLICATION POR REHEARING.
PER CURIAM.-^-
(4) Counsel for appellant have evidently mistaken the opinion and holding of 'the court. It is not decided, and was not intended to be said in tbe opinion, that a sale of stock'in a corporation was void, 'because, when tbe stock was issued, it was issued in violation of tbe constitutional provision or statute, if tbe stock actually bad some value. This case is not like tbe case of Beitman v. Steiner Brothers, 98 Ala. 241, 13 South. 87, -but is like tbe case of Williams v. Evans, 87 Ala. 725, 6 South. 702, 6 L. R. A. 218, which was distinguished from tbe Beitman Case in tbe opinion in tbe latter case, where it was said: “This case is clear-' ly distinguishable in tbe matter under consideration from that of Williams v. Evans, 87 Ala. 725 [6 South. 702, 6 L. R. A. 218]. Tbe enforcement-of tbe contract there sued on necessitated and involved tbe doing of an illegal act. The' plaintiff bad subscribed for stock in a corporation which undertook to issue $5 of stock for every dollar of its actual capital. • Before tbe stock was issued, however, ‘plaintiff sold $1,000 (or 10 shares) of tbe original stock, and gave tbe defendant an order on tbe corporation to issue to' defendant 50 shares.'of said company’s stock, which was tbe amount called for by tbe $1,000 of original subscription,' and to transfer tbe same to tbe defendant on tbe books of tbe company.’ Tbe sale of this stock'to be issued, tbe illegal issuance being necessary to a consummation of tbe contract of sale, was held invalid; tbe decision being expressly put on this ground, and tbe court saying: ‘A contract which contemplates tbe violation of a statute; or a Constitution, as a mode of executing such contract, is illegal and void. It is based on an unlawful consideration, and, if executory, cannot be enforced.’ ” *396—Beitman v. Steiner Bros., 98 Ala. 241, 248, 13 South. 87, 89.
That is the exact case shown by this record. While the original stock of this corporation had been issued, there was no contract to sell this original stock. The contract sued on was to take out of this original corporation nearly, if not quite, all of its paid-in capital give it to the plaintiff, and then issue new stock, or scale the old, from $50,000 to $38,000, thus depriving the new issue of stock of nearly, if not quite, all of its real value; and then, and only then, was there to he a sale of stock by the plaintiff to the defendant. In other words, there was to be no sale of stock unless this contract, which involved a violation of the Constitution and statutes, was carried out.' The contract sued on clearly contemplated a violation of the Constitution and statutes in taking out of the capital stock practically all that had been paid in, which had any real value, and in issuing new stock in lieu, of the old, which would practically have no real value, though nominally of the amount of $38,000, instead of $50,000, as originally organized. In other words, stock was to be issued and sold nominally to the amount of $38,000, in lieu of the original $50,000, which had but little, if any, real value. The $12,000 to be taken out of the capital of the corporation, represented nearly all the value of the $50,-000 of the original stock. Taking this $12,000 out, would leave the remaining $38,000 without much, if any, real value. .
It was evidently just such preferences as this that the Constitution and the statutes were intended to prevent.