Nebraska State Railway Commission v. Alfalfa Butter Company
| Decision Date | 29 June 1920 |
| Docket Number | 21048 |
| Parties | NEBRASKA STATE RAILWAY COMMISSION, APPELLANT, v. ALFALFA BUTTER COMPANY ET AL., APPELLEES |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Douglas county: LEE S. ESTELLE JUDGE. Affirmed.
AFFIRMED.
Clarence A. Davis, Attorney General, and Hugh LaMaster, for appellant.
Brome & Ramsey and Joseph P. Uvick, contra.
Suit in equity, brought by the Nebraska State Railway Commission, to require, for the alleged benefit of stockholders, an accounting of corporate funds, and to enjoin the defendant company, its officers and agents, from the further sale of defendant's corporate stock. The trial court sustained a demurrer to the petition, and, plaintiff having elected to stand upon the petition, the case was dismissed. Plaintiff appeals.
Plaintiff claims its authority for this action under the provisions of the so-called "Blue Sky Law" (Rev. St. 1913, secs. 796-811), and the primary question to be determined is whether or not the defendant company is a corporation within the purview of that act.
The petition discloses that this company was incorporated in October, 1915, and had been in existence for more than one year at the time of the commencement of this proceeding. It is contended that the defendant corporation, having been in existence for one year, was exempted from the operation of the act under that provision of section 798, Rev. St. 1913, which reads as follows: "This article shall not include within its purview sales of stock in Nebraska corporations already in existence, and in Nebraska corporations hereafter created, but which have been in existence one year or more at the time of such sale, and in corporations of other states which have been in existence five years or more at the time of such sale, the majority of stockholders, directors and officers of which were at the time of commencing business, and are at the date of the approval of this article, citizens of the state of Nebraska, nor individual sales of securities owned by the seller prior to the taking effect of this article and purchased by such seller prior to March 1, 1913, when no commission or other compensation of any character whatsoever is to move in the transaction, and no publicity is used in accompanying the sale."
The question is whether or not the words, "when no commission or other compensation of any character whatsoever is to move in the transaction, and no publicity is used in accompanying the sale," refer only to those individual sales of securities by the owner, or whether they refer back to Nebraska corporations already in existence, to Nebraska corporations to be created, and to foreign corporations of five years' existence where a majority of the officers and stockholders are citizens of this state.
The intention of the legislature is the law, and such intention is to be gathered from the meaning of the language used, in the light of the necessity for or reason of the enactment and the objects sought to be attained, and, in determining the meaning of the language, its ordinary and its grammatical construction is to be followed, unless an intent appears to the contrary, or unless, by following such construction, the intended effect of the provisions would apparently be impaired.
The evident purpose of this enactment was to stop the sale of stock in companies organized for fraudulent stock exploitation. The frauds thus perpetrated seem to have been considered by the legislature to especially arise in the organization and sale of stock in new companies and promotion schemes, having no proper plan or bona fide intent of applying the proceeds from the sale of such stock to the carrying on of any actual business, but for the purpose only of exploiting the public. A statute of this kind is to be given a prospective effect only, rather than a retroactive operation, unless another intent is expressed. It is reasonable to assume that, as to the great number of Nebraska corporations, then existing and actually doing business in this state, no regulation was considered necessary. In such corporations the stock had, for the most part, been sold prior to the time of this enactment, and the great body of such corporations would not, therefore, come within the purpose of the act. For this reason, and for the reason that outstanding stock in such corporations was not intended to be affected, the general exemption of Nebraska corporations, then existing, may have been provided.
As to corporations to be thereafter created in this state, the legislature evidently considered it necessary to prohibit the sale of stock unless the organization and plan of the enterprise to be carried on and the sale of stock should be under the supervision of and be approved by some agency of the state. Such supervision by the railway commission was limited to one year only, no doubt because it was thought such corporations could come into existence only under the supervision and permission and direction of the railway commission, and that, if properly organized upon a legitimate plan of business, and with proper assets and valuation representing the stock, the danger of stock speculation would have been avoided. By this supervisory power, the railway commission could, by criminal or other proceedings, prevent the sale of stock in that class of companies which were organized for the purpose of exploitation in the sale of stock and not for legitimate business.
If, as plaintiff contends, the proviso in question applies to Nebraska companies created after the enactment, we can see no reasonable purpose of fixing the one-year limitation, for, if a corporation is to continue under the operation of the law in all practical manner the same after the year has elapsed as before, why did not the legislature leave out the...
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