Lanier Lumber Co. v. Rees

• Decision Date: 21 June 1894
• Citation: 103 Ala. 622,16 So. 637
• Parties: LANIER LUMBER CO. v. REES ET AL. [1]
• Court: Alabama Supreme Court

16 So. 637

103 Ala. 622

LANIER LUMBER CO. v. REES ET AL. ^[1]

Supreme Court of Alabama

June 21, 1894

Appeal from chancery court, Talladega county; S. K. McSpadden Chancellor.

Suit by the Lanier Lumber Company against Frank Rees and others. There was a decree for defendants, and plaintiff appeals. Affirmed.

Browne & Dryer and C. C. Whitson, for appellant.

Knox &amp Bowie and Cooke, Frazier & Swaney, for appellees.

McCLELLAN J.

Robert Morrison, owning 900 of the 1,000 shares of stock in, and being president of, the Morrison Lumber Company, subscribed in his own name, and had issued to him individually, 333 shares, of the aggregate face value of $33,300, of the capital stock of the Lanier Lumber Company, and paid therefor with property belonging to the Morrison Lumber Company. These shares, it is averred, he held as trustee for said Morrison Lumber Company, and all along recognized the beneficial ownership of said company; and before the filing of the present bill 320 of these shares of stock were transferred on the books of the Lanier Lumber Company, and assigned by Robert Morrison to Frank Rees in payment of a debt the Morrison Lumber Company owed him, and the certificates for the remaining shares, 113 in number, were delivered to the First National Bank of Chattanooga, and are now held by it (though no transfer of them has ever been made on the books of the lumber company) presumably as security for debts of either the Morrison Lumber Company or Robert Morrison, though the bill does not disclose for what purpose, or in what supposed right, these certificates are in the hands of the bank; and it is immaterial, in the view we take of the case. While all this stock was so held by, and all of it stood in the name of Robert Morrison, for the Morrison Lumber Company, that corporation became indebted to the Lanier Lumber Company in a large sum of money, and the present bill is filed by the latter company for the purpose of collecting its said debt. This is sought to be done by having said shares of stock declared and decreed to be the property of the Morrison Lumber Company, the transfer of a part thereof to be set aside and avoided as fraudulent, and, this being done, by a further decree declaring and enforcing by sale, etc., the lien which section 1674 of the Code gives to corporations on the interest of shareholders in its capital for the security and payment of debts due from the shareholders to the corporation.

There is no averment in the bill that the Morrison Lumber Company was authorized by its charter or otherwise to subscribe for and hold or own stock in other corporations, but, to the contrary, it is virtually admitted that it had no such statutory power. And it is too well settled to require discussion that without such authority one corporation cannot subscribe for, or invest its own capital in, the shares of other corporations, either directly, as by becoming in its own name an incorporator of a new corporation, or indirectly by subscriptions in the names of persons acting as agents, and holding as its trustees. And it is equally clear, upon principle and authority, that all such attempted subscriptions or contracts of subscription are not voidable, but utterly void. 1 Mor. Corp. §§ 431, 433; 4 Am. & Eng. Enc. Law, p. 249, note 2; Freestone Co. v. Harvey (Tenn.) 20 S.W. 427; Central Railroad Co. v. Pennsylvania R. Co., 31 N. J. Eq. 475; Commercial Fire Ins. Co. v. Board of Revenue (Ala.) 14 So. 490. It is therefore obvious-indeed, counsel for appellant do not controvert-that the contract...