Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/125

 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 135. § 135. In America, on the other band, the weight of author- ity clearly indicates that there is nothing in itself illegal or ultra vires in the purchase of its own shares by a corporation ; and that whether the purchase is valid depends on the condi- tion of the corporate affairs, the purpose for which the pur- chase was made (or the shares received by the corporation), and on the relation to the corporation of the persons questioning the validity of the transaction. 1 Thus a solvent corporation may receive fully paid-up shares of its own stock in payment of or as security for a debt owing the corporation. 2 But an insol- vent corporation can neither purchase, nor receive in payment of debts owing it, shares of its own stock : especially when the power to purchase shares in other corporations. Same cases. Coppin v. Greenless & Co., 38 Ohio St. 275, follows the English rule, and holds that an executory contract between a corporation and a shareholder for the purchase of its own stock by the former cannot be enforced, and will not sustain an action for damages against the corporation. For the power of a corporation to purchase shares in the stock of another cor- poration, see § 130, note. 1 Vail o. Hamilton, 85 N. Y. 453, 457; Dupee v. Boston Water-power Co., 114 Mass. 37, 43; Clapp v. Peter- son, 104 111. 26; Chicago, Pekin, etc., R. R. Co. v. Marseilles, 84 111. 145; S. C, 84 111. 643; Fraser v. Ritchie, 8 111. App. 554; Republic Life Ins. Co. v. Singert, 135 111. 150; Blalock v. M'f'g Co., 110 N. C. 99; Hartridge v. Rockwell, R. M. Charton (Ga.), 260; Iowa Lumber Co. v. Foster, 49 Iowa, 25; Verplanck v. Mercantile Ins. Co., 1 Edw. Ch. (N. Y.) 84. 04; City Bank v. Bruce, 17 X. Y. 507; Dock v. Cordage Co., 167 Pa. St. 370; Coleman v. Columbia Oil Co., 51 Pa. St. 74; compare Morgan v. Lewis, 46 O. St. 1; Bank v. Wicker- sham, 99 Cal. 655; Chapman v. Iron- clad Co., 62 N. J. L. 497. Unissued stock of a corporation was by an agreement of all the shareholders (who were also directors), there be- ing no creditors, paid for with the funds of the corporation and issued to one of their number in trust for them all. Held, the issue could not be impeached. Jones v. Morrison, 31 Minn. 140. Agreement held valid, whereby corporation in selling its shares, agreed, upon a given no- tice, to repurchase at a given price; rights of creditors not being in- volved. Vent v. Dul u th, etc., Co., 64 Minn. 307. Statutes regarding the purchase by a corporation of its stock are collected, with authorities, by Mr. E. C. Moore, Jr., in 8 Southern Law Rev. N. S. 369. 2 Taylor ». Miami Exporting Co., 6 Ohio, 177; State Bank v. Fox, 3 Blatchf. 431 ; City Bank v. Bruce, 17 N. Y. 507; Ex parte Holmes, 5 Cow. 426; Barto v. Nix, 15 Wash. 563. See Cooper v. Frederick, 9 Ala. 738; Barton r. Port Jackson, etc., Plank Road Co., 17 Barb. 307. Compare First National Bk. v. Nat. Exchange Bk., 92 U. S. 122. So it is said a corporation may receive its shares in exchange for property owned by it. Clapp o. Peterson, 104 111. 26. 105