Davis v. Montgomery Furnace & Chemical Co.

• Decision Date: 10 December 1890
• Citation: 8 So. 496,101 Ala. 127
• Court: Alabama Supreme Court
• Parties: DAVIS v. MONTGOMERY FURNACE & CHEMICAL CO.

8 So. 496

101 Ala. 127

DAVIS v. MONTGOMERY FURNACE & CHEMICAL CO.

Supreme Court of Alabama

December 10, 1890

Appeal from city court of Montgomery; T. M. ARRINGTON, Judge.

Const Ala. art. 14, § 6, provides that no corporation shall issue stock or bonds except for money, labor done, or money or property actually received. Code Ala. 1886, § 1662, provides that all subscriptions to the stock of a corporation must be payable in money, or property at its reasonable value, or in labor performed for the corporation.

Tompkins & Troy, for appellants.

Jones & Falkner, for appellee.

COLEMAN J.

Appellants having recovered a judgment against the defendant corporation, upon the return of execution indorsed "No property found" sued out writ of garnishment against W. F. Joseph. The answer of garnishee, denying indebtedness, was contested, and upon the evidence to sustain the contest the court directed the jury to find the issue in favor of the garnishee. This charge of the court is assigned as error. The recovery of the judgment, the issue of execution as above stated, and the corporate character of the defendant in execution is admitted. The evidence consists of the testimony of Woolfolk, secretary and treasurer of the defendant corporation, and Exhibits 1, 2, 3. Exhibit No. 3 is a contract or agreement signed by the "Mortgomery Land and Improvement Company," and the "Standard Charcoal Iron & Chemical Company," and was made in promotion of the general purpose for which the defendant corporation was intended. The testimony of Woolfolk, in connection with Exhibits 1 and 2, show that the terms and stipulations contained in the agreement evidenced by Exhibit 3 substantially were accepted and ratified by the defendant corporation. A corporation, after its organization, has the power to accept and ratify the agreement and covenants of its promoters, made to effect and carry out the purposes of its organization, and, when accepted and ratified, the covenants are mutually binding. Wood v. Whelen, 93 Ill. 155; Reichwald v. Hotel Co., 106 Ill. 439; 4 Amer. & Eng. Enc. Law, 202; Canal Co. Vallette, 21 How. 419; Moore & H. Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 6 South. Rep. 41; Cook, Stocks, § 707, and note to text.

It is contended that the obligation or subscription of Joseph was in violation of article 14, § 6, of the constitution, and Code, § 1662; and under these provisions of the law, as construed in Williams v. Evans, 87 Ala. 726, 6 South. Rep. 702; Tutwiler v. Coal, etc., Co., 89 Ala. 399, 7 South. Rep. 398,-the subscription is null and void. The word "bonds," as used in the constitution, is omitted from section 1662 of the Code, but the same principles of law apply in either case. If the Montgomery Furnace & Chemical Company was organized with a capital stock of $4,000, each share of the par value of $100, whether of this amount the Montgomery Land & Improvement Company subscribed and received 100 shares or 300 shares, and the Standard Charcoal Iron & Chemical Company subscribed for and received 3,900 shares or 3,691, and 9 shares were subscribed for by other parties in cash, is immaterial upon the question now considered. The evidence shows that all the capital stock of the defendant corporation was subscribed for and paid up in full; that of the Montogomery Land & Improvement Company by a conveyance of property consisting of 30 acres of land, and that of the Standard Charcoal Iron & Chemical Company by the issue of a license to operate under the H. M. Pierce patents to the extent of 60,000 cords of wood per annum; and in consideration of these payments the certificates of stock were issued to them respectively. There is no evidence in the record to show or tending to show either the value of the 30 acres of land or of the Pierce patents, conveyed in payment of the stock; and, in the absence of all proof as to the value of the consideration, the court cannot say the issue of the stock was fictitious, or in violation of the constitution or section 1662. The stock having been paid for in full, and lawfully issued to the subscribers, they had the right to sell or donate the same, and such sale or gift did not impose any liability upon the grantee or donee. Railroad v. Dow, 120 U.S. 299, 7 S.Ct. 482. "Where stock has been issued to a patentee for the use of his patent he may donate and return a part of this stock back to the corporation, to be sold at a reduced price for the benefit of the corporation, and the transaction will be upheld whether the stock was placed in the hands of a trustee or not." Cook, Stocks,§§ 42, 43, and note; Otter v. Petroleum Co., 50 Barb. 247. To carry out the purposes for which the Montgomery Furnace & Chemical Company was organized it was necessary to raise a large amount of money, and to effect this it was agreed "to negotiate by subscription, at par, one hundred and seventy-five thousand dollars of first-mortgage bonds," "all of which subscriptions for bonds were to be paid for when called, provided said calls do not exceed ten per cent. per month." The Standard...