Court Opinion

ID: 3975058
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:33:03.76738+00
Date Added: 2024-06-11T13:49:42.321662
License: Public Domain

I respectfully dissent from the conclusion announced in the majority opinion that the note is valid in the hands of an innocent purchaser for value. We held in Prudential Life Insurance Co. v. Smyer, 183 S.W. 825, that article 12, § 6, of the state Constitution by necessary implication inhibited the execution of a note in payment for stock, and rendered the note void, even in the hands of an innocent purchaser. To the same effect is Crawford v. Davis, 188 S.W. 436, also by this court, Strudevant v. Falvey, 176 S.W. 908, and Republic Trust Co. v. Taylor,184 S.W. 772. It is admitted that article 12, § 6, of the Constitution, supra, does not expressly declare that a note given for stock in a corporation is void, nor does it expressly declare that the stock so issued is void, yet the Legislature, by the enactment of article 1147 (Vernon's Sayles' Civil Statutes), has construed that constitutional provision as a declaration that the stock is void, and by that statute has made it the duty of the Attorney General to file suit to cancel the stock or any renewal thereof. The terms "money," "labor," and "property" reasonably include every supposable consideration for which a corporation could issue stock, except a promise, either written or verbal, to pay for it in the future, and my position is that the legal maxim, "Expressio unius est exclusio alterius," applies, and that, when the Constitution specifically names three of the only four possible considerations for which stock may be issued, the fourth is necessarily excluded. In other words, the constitutional provision by necessary implication makes a note given for stock as well as the stock itself void ab initio. If the constitutional provision was "corporations may issue stock or bonds for money, labor or property," such language would not unavoidably imply that an issue of stock in exchange for notes would make either the stock or the notes void between the parties to the *Page 801 
transaction; but when the language is "no corporation shall issue," it is mandatory, and cannot be held to be directory (6 R.C.L. p. 55, § 50); and when it further declares that stock shall not issue "except for money paid, labor done or property actually received," I think the necessary implication is that the stock and the promise to pay for it as well are both void. The constitutional provision is negative in its terms, and the use of negative words in a statute or Constitution is conclusive of an intent to impose a limitation. Cooley's Constitutional Limitation (6th Ed.) p. 94; People ex rel. Mooney v. Hutchinson,172 Ill. 486, 50 N.E. 499, 40 L.R.A. 770.
"Whenever a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative, viz. that the thing shall not be done otherwise." 19 Cyc. 26, 27.
The limitation here is that any consideration for stock except "money paid, labor done, or property actually received," is absolutely void. The purpose of the constitutional provision in question is expressed by Judge Brown in O'Bear-Nester Glass Co. v. Antiexplo Co., 101 Tex. 434,108 S.W. 968, 16 L.R.A. (N.S.) 520, 130 Am. St. Rep. 865:
"The purpose of the convention in enacting that provision of the Constitution was to secure creditors as well as stockholders of corporations against the practice which was too common of corporations issuing fictitious stock and stock upon an insufficient consideration, whereby the actual capital was much less than the amount represented by the shares issued and sold by the corporation. The terms in which this section of the Constitution is expressed indicate the purpose that the assets of the corporation should be something substantial, and of such a character that they could be subjected to the payment of claims against the corporation as well as to secure the shareholders in their rights in the capital stock."
Evidently the writer of that opinion did not consider a promissory note as "something substantial." Notwithstanding the fact that Deutschmann, in the case of San Antonio Irrigation Co. v. Deutschmann, 102 Tex. 201,105 S.W. 486, 114 S.W. 1174, had, as an attorney, rendered valuable services for the original company under an agreement whereby he should thereafter have one-third of the stock in said company, to be paid for at such time as he could arrange, Judge Brown, after quoting the section of the Constitution, said:
"The contract which Deutschmann sets up, by which he was not to pay for the stock any money at the time of its issue, is plainly and unquestionably in violation of the Constitution of the state, and, being in violation of the Constitution, that agreement, in so far as it provided that Deutschmann should have all the time he might find necessary in which to pay for his stock, was void."
It is true that Duetschmann's promise to pay was verbal, but, of course, the rule is the same when the promise to pay in the future is evidenced by a promissory note. As sustaining the position last above announced. Judge Brown cites the case of Williams v. Evans, 87 Ala. 726,6 So. 703, 6 L.R.A. 218, in which it is said:
"It is too plain for argument that, under the evidence, if the plaintiff can recover at all, it must be under the third count, which claims the price agreed to be paid for the sale of 50 shares of stock in the Decatur Land Company. The bill of exceptions sets out all the evidence, and this evidence, in our opinion, shows a contract in violation of section 6, art. 14, of the Constitution (1875), which provides that `no corporation shall issue stock, or bonds, except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void.' "
It will be observed, as is remarked by Judge Brown, after citing the case, that this provision of the Constitution of Alabama is not quite as emphatic as our own. As shown, that was a case where the seller of stock had agreed to issue certificates in excess of the amount paid, and the holding was that the agreement or promise to pay was void. The language of the opinion is in part as follows:
"The contract necessarily implied by this transaction is one which seems to us to be in violation of the section of the Constitution above quoted; and this is the consideration of the defendant's promise. * * * A contract which contemplates the 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."
Enabling statutes on the principle of "Expressio unius est exclusio alterius" impliedly prohibit any other than the statutory mode of doing the acts which they authorize. Sutherland, Statutory Construction, § 454; Parks v. West, 102 Tex. 11, 111 S.W. 726. What is expressed is exlusive when it is in derogation of existing law. Sutherland, Statutory Construction, § 325. Before the adoption of the Constitution of 1876, the law did not prohibit the sale of corporate stock upon credit, and the provision in question was designed to remedy that evil.
"In accordance with the maxim, `Expressio unius est exclusio alterius,' where a statute enumerates the things upon which it is to operate, or forbids certain things, it is to be construed as excluding from its effect all those not expressly mentioned, and where it directs the performance of certain things in a particular manner, it forbids by implication every other manner of performance." 36 Cyc. 1122.
The opinion in the Deutschmann Case and the authorities cited therein by Judge Brown do not hold that the stock alone was void, but that the entire contract was void, and this necessarily includes the note. It is admitted and universally held that the language of the Constitution necessarily implies that the stock is void. Then why not the note also? The one is the consideration for the other; together they evidence the illegal transaction; without both there is no contract at all. They came into existence at the same time, and if we are to infer that by the language of the Constitution one is condemned, there is no good reason why the same inference should not damn the other. Believing that the provision under *Page 802 
consideration necessarily implies that, not only the stock, but the written promise to pay for it, are both void, I think the trial court properly refused the special instruction, and that its judgment should be affirmed.