Birmingham Nat. Bank v. Roden

• Decision Date: 23 November 1892
• Parties: BIRMINGHAM NAT. BANK v. RODEN.
• Court: Alabama Supreme Court

11 So. 883

97 Ala. 404

BIRMINGHAM NAT. BANK v. RODEN.

Supreme Court of Alabama

November 23, 1892

Appeal from city court of Birmingham; H. A. SHARPE, Judge.

Suit by John B. Roden against the Birmingham National Bank to compel defendant to register plaintiff as a stockholder for 40 shares of its stock, and pay the value of same. From a decree ordering payment of the stock, defendant appeals. Affirmed.

On the final submission of the cause on the pleadings and proof, the chancellor decreed that the complainant was entitled to the relief prayed for, but, "it appearing to the satisfaction of the court that the defendant corporation has heretofore issued, and that there is now outstanding certificates for the full amount of its authorized capital stock, wherefore a specific performance may not be compelled of its obligation to issue certificates for stock to the complainant," therefore it was ordered and decreed "that the defendant do pay to the complainant the amount of the market value of forty shares of its capital stock with the dividends accrued thereon since the organization of said corporation, and interest on such dividends, less the amount remaining due from the complainant upon the notes held by the defendant from the subscription price of such stock for which amount so found to be due the complainant may have execution; and, when the same is so paid or collected, it shall be taken as full compensation for and in extinguishment of the complainant's interest in the defendant's capital stock and dividends thereon, and the said notes of defendant against the complainant for and on account of the subscription price of such stock shall likewise be canceled and extinguished."

Webb & Tillman and Mountjoy & Tomlinson, for appellant.

R. H. Pearson, for appellee.

COLEMAN J.

The object of the bill, as originally framed, was to compel the defendant bank to register the plaintiff as a stockholder for 40 shares of stock in the bank stock book. After answer and plea by the bank, which averred as a defense that all the shares authorized to be issued by its charter had been issued before the filing of complainant's bill, the bill was amended so as to pray, as alternative relief, that the bank be required to pay the value of the stock, and the dividends declared thereon, as compensation in lieu of the stock. The respondent demurred to the bill, upon the ground that plaintiff's remedy at law was full and adequate; and, by answer, as a defense, alleges that plaintiff's subscription contract for stock was illegal and void, in this: that the agreement between Roden, the subscriber for the stock, and John W. Reed, the promoter of the corporation, and afterwards its president, was to the effect that the subscription was not to be paid for in cash, as required by the statute, but only by the notes of Roden. As a further defense, the answer further averred that the bank had issued its full amount of shares, and that any further issue would be ultra vires.

It sometimes happens, says Mr. Pomeroy in his Equity Jurisprudence, that certificates are issued to the wrong person, without the consent or fault of the true owner. In such cases, says the author, it is well settled that although the law may give some remedy, as that of damages, equity has jurisdiction to decree that the corporation replace the stock upon its books, and issue new certificates to the original owner; or if it is unable to do this, by reason of its not having or being able to procure any shares, to pay the value of the stock. 3 Pom. Eq. Jur. § 1412. And in Cook on Stock & Stockholders (section 579) it is declared that "a bill in equity may be maintained by a bona fide purchaser of stock against the corporation to compel a transfer of the stock upon the corporate books," and in the same work, in section 74, it is said: "A subscriber for shares of stock, in case the contract of subscription was regularly entered, into may, if the corporation refuse to issue him a certificate, have his action in equity for specific performance, or he may recover of the corporation, in assumpsit, the value of the shares at the time of the demand." Cook, Stock & S. § 74. We have frequently decided that, although the proof may show that the specific relief prayed for in a bill for specific performance cannot be granted, the bill may be retained for compensation, if the party is entitled to relief, and the remedy at law is inadequate to afford complete justice. Powell v. Higley, 90 Ala. 103, 7 South. Rep. 440; Allen v. Young, 88 Ala. 338, 6 South. Rep. 747; Moses v. Scott, 84 Ala. 611, 4 South. Rep. 742; Cowan v. Sapp, 81 Ala. 525, 8 South. Rep. 212; Aday v. Echols, 18 Ala. 353. "When the impossibility of a specific performance is disclosed at the hearing, and the suit was brought by the plaintiff in ignorance of such fact, the court will award the remedy of damages." 3 Pom. Eq. Jur. § 1410. It is very clear that, when a corporation has lawfully issued the full amount of stock authorized by its charter, no court can compel a further issue. Cases sometimes arise in which a recovery in damages would fail to compensate fully one entitled to stock, and yet the court would be without power to order a further issue, on account of the fact that all the stock authorized by its charter had been issued. The rule adopted by the Massachusetts courts in such cases, it seems, is to require the corporation to issue the stock to the person entitled to it, but, in order to prevent an illegal overissue, it must purchase an equal amount of shares in the market; while in the other states compensation may be awarded in lieu of the stock. Cook, Stock & S. §§ 284, 390, 391, and note; Bank v. Field, 126 Mass. 345. While the authorities are numerous in support of the proposition that upon the refusal of a corporation to issue certificates of stock to a subscriber, who is entitled to receive them, or where the shares of the proper owner have been wrongfully detained or converted by the corporation, or by an individual holder, he may have his remedy by appropriate action in a court of law, it is well settled that, as against the corporation, he may, by bill in equity, enforce a specific performance by having the stock registered in his name, or compel the issue of certificates of stock to him, or, in the alternative, if the corporation is unable to perform its contract, have his remedy by compensation in damages. The principle which accords compensation as an alternative relief on bills filed for specific performance is well recognized in this state. We are of opinion that the power of a court of equity is the better adapted to administer complete relief and justice in such cases between the parties. The overruling of respondent's demurrer to the bill of complaint was in accord with these principles, and must be sustained.

We hold also that the plea of ultra vires, in which it is averred that the bank had issued all the stock authorized by its charter, presented no defense as against plaintiff's right to compensation prayed for as alternative relief. The court in the case at bar awarded compensation...