Court Opinion

ID: 7994850
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:35:36.336305+00
Date Added: 2024-06-11T16:35:30.465913
License: Public Domain

Ethridge, J.
(dissenting).
In my opinion the judgment of the court below should be affirmed for two reasons:
1. Because chapter 244, Laws of 1920 (section 4150b, Hemingway’s Supplement of 1921), set out in the majority opinion, should be construed as a condition precedent to the corporation’s beginning business 'as such; and
2. Because the record shows that the stock of the corporation had not been subscribed either in full or to the amount of twenty-five per cent, thereof, and that the subscription of the stock in the prior decisions of this court is a condition precedent to making a binding contract between the incorporators.
I think chapter 244, Laws of 1920, supra, is a mandatory provision requiring the actual payment of the twenty-five per cent of the authorized capital stock; that when the legislature authorizes the corporation to begin business upon certain conditions," it necessarily excludes its right to begin business under any .other conditions. The legislative purpose in enacting this chapter evidently was to have a given amount of actual capital before a corporation should begin business. To hold that a- number of people may apply for a charter and report an organization to the secretary of .state and begin business without one single subscription and without a single dollar of money is certainly an anomalous proposition. Persons dealing with a corporation have a right to assume that a statute has been complied with and that it has at *630least twenty-five per cent, of its capital stock not only subscribed but also paid in.
If it was not necessary to have the capital stock subscribed and paid in under the prior law, it would certainly be necessary to have it. subscribed and twenty-five per cent, paid in under the present law.
In 14 Corpus Juris, p. 153, section 154, it is provided:
“If a statute requires corporations formed thereunder to have a capital stock and shares, a valid corporation cannot be formed thereunder as a mere membership corporation without any capital stock; but there are statutes in all jurisdictions authorizing such corporations for specified purposes, and they have also been frequently created by special act. A corporation, even though it is a stock corporation, may not only have corporate existence, but may exercise its corporate powers, without issuing certificates of stock, and even without creating a capital stock, if this is not required by statute as a condition precedent to its creation or organization or to its right to transact its business, but ordinarily the statutes require as a necessary step in the creation or organization of a stock corporation that proper provision shall be made for its capital stock and shares, in which case the statute must be complied with; and frequently the statutes contain express provisions with respect to the subscription or payment of capital or capital stock, or of both, and require provisions with respect thereto to be inserted in the articles of association, certificate of incorporation, • or charter. It is not necessary, however, that a statute-creating or authorizing a corporation shall designate or limit the amount of capital stock, or prescribe the number or value of the shares, or contain other provisions in this respect. In the absence of such provisions the matter is left to the discretion of the corporation.”
In Perkins v. Sanders, 56 Miss. 733, the court, speaking-through Chief Justice George, at page 738,; said:
“In charters which are mere propositions for the organization of a corporation and which require certain *631acts to be performed precedent to the existence of the corporation, no corporation can exist, and of course no corporate act can he performed, till these conditions have been complied with. In all snch cases, where a certain amount is named in the charter as necessary to be subscribed as the capital stock of the company, such subscription is regarded as a condition precedent to the. existence of the corporation, unless otherwise provided in the charter. Persons, therefore, who subscribe for stock under such a charter have a right to assume that they will not be called upon to pay until the amount named in the charter shall be subscribed; and, accordingly, in that class of charters it has been held that subscribers for stock are not liable to assessments on their stock until the full amount of the subscription has been made,”- — citing Selma M. & M. R. Co. v. Anderson, 51 Miss. 829, in which case this court said, at page 834:
“It seems well settled that where the charter of a corporation provides for or authorizes a stipulated amount of capital stock, divided into shares of a specific number, or value, no assessment can be made against the subscribers until the whole amount has been subscribed, unless a contrary intention is manifested in the charter or in the subscription. The reason given is that the subscriber for each share knows.that the total expense of the enterprise may require the whole or a part of the stock subscribed; that, therefore, his share will bear its proportionate part of this expense, and he has, consequently-, a right to demand that nothing be exacted from him until he has the number of coshareholders contemplated in the charter. ’ ’
It seems to me that it is an unreasonable construction to say that a corporation can begin business when it has no subscribers who are bound to the enterprise. If the corporation is sued in this case, or in any case where the stipulated capital stock has not been subscribed and none of the subscribers are liable for the debts of the corporation, and it has no funds paid in, it would be in effect the *632state creating a shell to which a name was given hut with no substance and for the purpose of defrauding the public who might deal with it.
In my. opinion the statute indicates a requirement by the state and not a mere agreement among the shareholders.
If the case of Wells Company v. Gastonia Cotton Manufacturing Co., 198 U. S. 177, 25 Sup. Ct. 640, 49 L. Ed. 1003, were construed to mean what it is held to mean by the majority opinion in the case before us, it is in conflict with the two decisions above cited in 51 and 56 Mississippi Reports, and of course this is a question upon which the state decisions are, binding.
Statutes of the kind under consideration here ought to be given a construction, where it can reasonably be done, that will protect the public against fraud and compel corporations to comply with the law.