Court Opinion

ID: 7191572
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:57:40.78996+00
Date Added: 2024-06-11T16:16:12.131481
License: Public Domain

CiwentKiNu Opinion.
Marr, J.
In my opinion, by the terms of the charter of the defendant company, article eight, the stockholders had the right in preference to all other persons, during the prescribed delay, to take shares in the increased stock, in proportion to the shares of original stock owned by them respectively: and, as no new subscription or other special formality was required for t-ho taking of such new shares, the declaration by a stockholder to the representatives of the corporation within the prescribed delay of his intention to avail himself of this right and privilege would constitute a taking of the designated number of shares in the new stock, an acceptance by the stockholder of the benefit, the offer made by the corporation to each stockholder, as required by the charter, *762which would authorize the corporation to treat and deal with him as a stockholder, to tho extent of the new shares as well as the old shares, and would compel the stockholder to pay the par value.
In the several resolutions of the Board of Directors the word “ payment” does not occur; and the secretary had no power to bind the stockholders by using the expression “ tho time for the payment for the stock,” instead of the words “talcing additional shares,” as used in article eight of the charter; or those used by the board of directors, “ the time for the subscription to the stock.”
As I understand the testimony the stockholders who availed themselves of this right to take the additional shares did not, in fact, make any new subscription. They paid for the shares, and certificates were delivered to them. I do not find in the proceedings of tho Board of Directors any thing to fix the terms of payment for the new shares. I do find, however, that interest, at eight per cent was charged on payments subsequent to the fourth of October, 1873.
The fourth article of the charter provides, with respect to tho original stock, that “thirty-five per cent of each subscription shall be payable at the time of signing the articles; and the remainder shall be paid at the time and in the manner directed by the Board of Directors: Pro-meted, that not more than ten per cent of said subscription shall be called for at any one time, and not oftener than once within any thirty days.”
If it be conceded that when the increase of the capital was authorized the directors wore empowered to prescribe terms and times of payment for the new shares, different from, those fixed in the fourth article of the charter, the intention to do this, and the carrying that intention into effect, must be manifested by the official, unequivocal, positive action of the Board; and that when the Board of Directors failed to fix the time, it was not competent for the secretary to do so.
In the absence of official action by the Board, prescribing different terms, making a new law applicable to the new shares, they would fall under the dominion of the organic law, article four, and would be subject'to the restrictions which it imposes. I do not see how the mere increase of the capital could subject the stockholders, with respect to the new stock, to conditions not imposed by the charter or by-laws; or by some authoritative order of the Board of Directors; or could abrogate the law of the corporation limiting the power of the Board to calls of ten per cent, to bo made not oftener than once in any thirty days.
I think, also, that this fourth article controls the action of the Board with respect to the additional capital in another particular. It provides that if any subscriber shall fail to pay punctually his installments as they mature and fall due,'interest shall be charged at eight per cent; *763and if lie fails to pay within thirty days after the specified time of payment the Board of Directors may cause his shares to be sold, at auction or otherwise, after ten days notice by advertisement.
Mrs. Hart actually tendered, on the twenty-second November, in money, the whole amount of the par value of the additional shares to which she was entitled. This was, of course, a waiver by her of any right which she might have claimed under article four to pay in installments, but after having demanded the right to take the additional shares, the corporation had no right to deny her the privilege conferred upon her by-the charter, article eight, without, at least, putting her in default, by a tender of the certificates, and demand of payment. It seems to me the Board could have proceeded, legally, only by a sale, for her account and at her risk, of the new shares to which she was entitled, as provided in the fourth article of the charter.
The cases cited from High and 11 Annual are- applicable to cases of original subscriptions to stock. There can be no doubt that the taking of stock must be in such form as to bind both parties, the corporation to deliver the shares, the taker of the stock to pay the par value. I understand the eighth article of the charter to mean that, whenever the corporation shall exercise its right' to increase the capital, the corpora- . tion, by the terms of the charter, makes in its aggregate capacity an offer to each stockholder, to take, during a certain prescribed delay, such number of shares in the increased capital as shall correspond with the number of shares of the original' stock which he already owns: and that when a stockholder declares his intention to avail himself of this right, this is an acceptance by him of the offer'; which binds him and binds the corporation.
Whenever the corporation, pursuant to its organic law, increases its capital, without changing that law with respect to the increase, the new stock falls under the dominion of the organic law, and is not distinguishable, and is not distinct from the original stock.
The case of the Yicksburg, Shreveport, and Texas Railroad Company vs. the Parish of Ouachita, 11 An. 649, is not, in my opinion, applicable to this case. The police jury of Ouachita, by ordinance of twenty-seventh June, 1853, agreed to subscribe for a certain number of shares in the Y. S. and T. R. R. Co. and levied a tax to make the necessary payments. The railroad company sued the parish to compel the payment of the installments due on the number of shares mentioned in the ordinance.
It appeared in evidence that the president of the police jury notified the president of the railroad company that this ordinance had not been ratified by the vote of the majority of the voters whose property was to be taxed to meet the installments : that this ordinance had been *764suspended by a subsequent ordinance of the police jury: that the ordinance of twenty-seventh June, 1873, had not been passed by a majority of all the members elect of the police jury, as required by the act of 1847, page eighty-two, section 5; and that no subscription, or signing, by the police jury had been made, as required by the express provisions of the charter of the railroad company. Of course, as the court decided, “ the assurance of the tax-payers, evidenced by a vote, was a sine qua non. The inevitable conclusion was that there was no contract binding the parish to the validity of the subscription, by the terms of the statute.” ■
The difference between that case and this is too plain to require exposition. In that case there was no contract binding both parties: In this there was : In that case the subscription by signing, on lists in the hands of commissioner, or upon stock books of the company, was indispensable; while in this case, as we have endeavored to show, no new subscription was made or required.
I concur in the opinion of Mr. Justice Spencer, and in the decree as pronounced by hi'm.