Citizens' Loan & Savings Co. v. Arwood

BRICKEN, J, [1] This case calls for a construction of section 3479 of the Code of 1907, the material parts of which on this inquiry are as follows: “Any corporation * * * may issue preferred stock by a vote of two-tliirds in value of the capital stock at a meeting called for that purpose, * * * the proceedings of the meeting must be reduced to writing, * * * and filed and recorded in 'the office of the secretary of state, and thereafter preferred stock in no case exceeding two-thirds of the capital stock paid for in cash or property may he isstied,” etc. (Italics supplied.) The plain purpose and effect of the statute is to permit the issue of preferred stock only in the ratio of two shares of preferred stock to three of common stock paid for in cash or property, and any issue in excess of this ratio is unauthorized. Continental Varnish & Paint Co. v. Secretary of State, 128 Mich. 621, 87 N. W. 901; Heide v. Capital Securities Co., 76 South. 313. 1 The words “capital stock,” as used in the phrase “in no case exceeding two-thirds of the capital stock paid for in cash,” etc., obviously refers to “com.mon stock,” and not to preferred stock. The view here expressed makes it unnecessary to pass upon the motion made by. appellee to affirm the cause because the question has become moot by reason of the bankruptcy of the appellant. [2] The case was tried in the court below without a jury, and the trial court found that the stock purchased by appellee was part of an overissue; that is to say, the preferred' stock purchased by appellee was issued in a greater proportion of the common stock paid for in cash or property than was authorized by the statute, and permitted a recovery for money' had and received, doubtless on the theory that there had been no consideration passing from appellant to appellee for the money paid. We are of the opinion that the trial court was correct, and its judgment is affirmed. Affirmed. Footnotes [1] 200 Ala. 397.