Randle v. Winona Coal Co.

• Decision Date: 23 June 1921
• Docket Number: 6 Div. 465
• Citation: 89 So. 790,206 Ala. 254
• Parties: RANDLE v. WINONA COAL CO. et al.
• Court: Alabama Supreme Court

89 So. 790

206 Ala. 254

RANDLE v. WINONA COAL CO. et al.

6 Div. 465

Supreme Court of Alabama

June 23, 1921

Appeal from Circuit Court, Walker County; T.L. Sowell, Judge.

Bill by E.P. Randle against the Winona Coal Company and the officers and directors thereof to enjoin them from filing an amendment to its charter and for doing any corporate act under said amendment.From a decree sustaining demurrer to the billcomplainant appeals.Affirmed.

John H Bankhead, of Jasper, for appellant.

Arthur F. Fite, of Jasper, for appellees.

THOMAS J.

The bill sought to enjoin respondents from filing a certified copy of amendment to corporate charter of Winona Coal Company, and from doing corporate acts thereunder.

The alleged amendment purports to have been adopted after due notice by the holders of two-thirds in value of outstanding stock in said corporation, who will (1) authorize the issuance of stock, common or preferred, without nominal or par value; (2)"change the par value of the shares of stock from one hundred dollars per share to common stock without nominal or par value"; and (3) increase the capital stock of the corporation from 100 shares of common stock of the par value of $100 per share, to 11,000 shares of stock without nominal or par value, of which 10,000 shares would be common stock, and 1,000 shares preferred stock.

The original articles of incorporation recited as to its capitalization that--

"The amount of the total authorized capital stock of the said *** corporation is ten thousand dollars, of the par value of one hundred dollars per share; and that the amount of capital stock with which said proposed corporation will begin business is three thousand dollars.*** That the names and post office addresses of the incorporators, and the number of shares of stock subscribed for," were as stated and paid in as so subscribed by the complainants Dimmick and Aldridge.

The equity of the bill is grounded on the assumption that sections 2and3 of the "Non Par Act," by Mr. Acker, approved September 26, 1919(Gen.Acts, p. 698), are in violation of sections 234and237 of the Constitution of 1901.It is averred that--

"*** The said officers, complying with such certificate, will issue certificates of stock of said corporation without nominal or par value in lieu of and in exchange for existing certificates of the shares of stock of said corporation now outstanding, claiming authority so to do under section 3 of the act of the Legislature of Alabama approved September 26, 1919, entitled 'an act to prescribe the various classes of stock that may be issued by corporations, to declare the rights, powers and limitations of the holders of the same, and to prescribe the methods of authorizing the issue thereof, and to provide a remedy against any unauthorized or illegal issue thereof heretofore or hereafter made, and a statute of limitations barring that or any other remedy against the same;' *** that said officers and directors have contracted to sell and will issue preferred stock of said corporation without nominal or par value in pursuance of the authority conferred by sections 2and3 of said act of September 26, 1919(Acts 1919, p. 698), which said preferred stock will have the preferences and rights set forth in the *** purported amendment of said charter; *** that said new shares of stock, both common and preferred, will be sold at a price less than $100 per share, regardless of the fact that orator heretofore paid $100, the full par value of the shares of stock so owned by him, and regardless of the fact that the value of complainant's shares will be seriously diminished thereby; *** that the act of said corporation in exchanging such shares of stock without nominal or par value for shares of stock of said corporation now outstanding, and the proposed issue and sale of common stock without nominal or par value, is without authority of law. ***"

The duty of this court in passing upon the constitutionality of legislative acts has often been defined.Lovejoy v. City of Montgomery,180 Ala. 473, 61 So. 597;Fairhope S.T. Corp. v. Melville,193 Ala. 289, 306, 69 So. 466;McDavid v. Bank,193 Ala. 341, 350, 69 So. 452;State ex rel. Mobile v. Commissioners,180 Ala. 489, 61 So. 368;Ex parte Bozeman, 183 Ala. 91, 63 So. 201.It is elemental that one assailing a statute on the ground that it is unconstitutional assumes the burden of vindicating his position, and that the constitutional provisions designed for the security of the elementary rights of life, liberty, and property should be construed liberally in favor of the citizen.State ex rel. Meyer v. Greene,154 Ala. 249, 254, 46 So. 268, and authorities collected in Williams v. Schwarz,197 Ala. 40, 46, 47, 72 So. 330, Ann.Cas.1918D, 869;Denson v. Ala. F. & I. Co.,198 Ala. 383, 393, 73 So. 525.

Of pertinent constitutional provisions is the general authority of the Legislature to enact laws for the formation and government of domestic corporations, derived from section 229, as follows:

"The Legislature shall pass no special act conferring corporate powers, but it shall pass general laws under which corporations may be organized and corporate powers obtained, subject, nevertheless, to repeal at the will of the Legislature; and shall pass general laws under which charters may be altered or amended.The Legislature shall, by general law, provide for the payment to the state of Alabama of a franchise tax by corporations organized under the laws of this state, which shall be in proportion to the amount of capital stock; but strictly benevolent, educational or religious corporations shall not be required to pay such a tax.The charter of any corporation shall be subject to amendment, alteration or repeal under general laws."

This power is subject to the inhibitions of the Constitution, of which are section 234:

"No corporation shall issue stocks or bonds except for money, labor done, or property actually received; and all fictitious increase of stock or indebtedness shall be void.The stock and bonded indebtedness of corporations shall not be increased except in pursuance of general laws, nor without the consent of the persons holding the larger amount in value of stock, first obtained at a meeting to be held after thirty days' notice, given in pursuance of law."

The further provisions are that "no corporation shall issue preferred stock without the consent of the owners of two-thirds of the stock of said corporation"(section 237); and that--

"The Legislature shall have the power to alter, amend or revoke any charter of incorporation now existing and revocable at the ratification of this Constitution, or any that may be hereafter created, whenever, in its opinion, such charter may be injurious to the citizens of this state, in such manner, however, that no injustice shall be done to the stockholders."Section 238.

The fact that within the last few years 21 states of the American Union--Alabama, Acts 1919, p. 698;California, Laws 1917, c 215, 701;Colorado, Sess.Laws 1919, pp. 347, 350, § 3;Delaware, Laws 1917, c. 113, § 4a;Gen. Corp.Law 1920, p. 15, § 4a;Idaho, Laws 1921, S.B.193, p. 413;Illinois, Laws 1919, H.B.664, p. 312;Kansas, Laws 1921, H.B.261, p. 234;Maine, Laws 1917, c. 144; Maryland, Business Corp. Law (1920), as amended bychapter 545;Massachusetts, Laws 1920, c. 349, p. 361;New Hampshire, Laws 1919, c. 92;New Jersey, Laws 1920, c. 168;New York, Stock Corp. Law(Consol.Laws, c. 59) §§ 19-24;North Carolina, Laws 1921, c. 116;Ohio, Laws 1919, S.B.210, p. 1287, as amended by Laws, 1920, subs. 1, S.B.67, p. 273;Pennsylvania, Laws 1919, c. 363(Pa. St.1920, §§ 5656-5667);Rhode Island, Laws 1920, c.1925;Utah, Laws 1921, c. 22;Virginia, Laws 1919, c. 48;West Virginia, Laws, 1st ExtraSess.1920, c. 3;Wisconsin, Laws 1919, c. 681, p. 1230--have enacted laws providing for the organization of corporations with "non-par" capital stock, having no par or face value or for the amendment of existing charters to authorize the issue of such capital stock, is an unimportant consideration in a decision of the question of the constitutionality of the Alabama statute containing the provision that--

"Sec. 3.Any corporation heretofore or hereafter organized under the laws of the state of Alabama, other than building and loan associations, insurance companies, banks and trust companies, may if so provided in its certificate of incorporation or any amendment thereof or joint agreement of merger or consolidation duly adopted as provided by the laws of Alabama, issue shares of stock, either common or preferred, without any nominal or par value.Every share of such stock without nominal or par value shall be equal to every other share of such stock, except that the certificate of incorporation or any amendment thereof or joint agreement of merger or consolidation may provide that such stock shall be divided into different classes with such preferences, designations and voting powers or restrictions or qualifications thereof as shall be stated therein, but all common stock issued shall be subordinate to the preferences given to preferred stock, if any.Unless otherwise provided in the certificate of incorporation or any amendment thereof or joint agreement of merger or consolidation, stockholders shall be entitled to one vote for each share of such stock owned by them and may vote either in person or by proxy.Stock without any nominal or par value may be issued by the board of directors of the corporation from time to time for such consideration as may be fixed form time to time by the board of directors thereof, pursuant to authority conferred in the certificate of incorporation or any amendment thereof or joint agreement of merger or consolidation, or if

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