Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/556

 § 5226.] Till: LAW OF PRIVATE CORPORATIONS. [CHAP. IX. § 5225. On the other hand, the courts show inclination to recognize as valid the custom of corporations to discharge cor- porate indebtedness by issuing stock at its market value, that is to say, for whatever can be got for it. In the case of Hand- ley v. Stutz 1 the corporate stock was validly increased by reso- lution, and an even amount of stock was issued as an induce- ment to subscribers to purchase the bonds of the corporation, and the bonds and stock were sold together at a price fairly equivalent to their value. It was held that the recipients of the stock could not be compelled to pay in its par value for the benefit of creditors of the corporation. The question, said Justice Brown, giving the opinion of the court, is whether " an active corporation, or, as it is called in some cases, a 'going concern,' finding its original capital impaired by loss or misfor- tune, may not, for the purpose of recuperating itself and pro- viding new conditions for the successful prosecution of its busi- ness, issue new stock, put it upon the market and sell it for the best price that can be obtained. 2 .... " To say that a corporation may not, under the circum- stances above indicated, put its stock upon the market and sell it to the highest bidder, is practically to declare that a corpo- ration can never increase its capital by a sale of shares, if the original stock has fallen below par ; " 3 and the court further held in the same case, that even as to persons who had received some of the same shares gratuitously (i. e., not as a direct inducement to purchase bonds), it was only subsequent creditors, who might be presumed to have given credit to the company on the faith of the increased stock, that could enforce any claims against the holders of such stock. 4 The Federal Supreme Court held in another case, that a corporation might issue its stock below par to a creditor in A corporation cannot validly agree with a shareholder that shares issued to him for a nominal consideration shall be treated as full paid. Ex parte Damill, 1 De G. & J. 372; Dent's Case, L. R. 15 Eq. 407. Bailey v. Pittsburgh and Connells- ville Gas, etc., Co., 69 Pa. St. 334, Compare Gamble v. Water Co., 122 N. Y. 91. 536 1 139 U. S. 417. 2 139 U. S. 417, 429. 3 lb. p. 430. Fuller, C. J., and Lamar, J., dissented. Accord, Hospes ». Northwes'n Mfg. Co., 48 Minn. 174; First Nat. Bk. v. Mining Co., 42 Minn. 327. See Peter v. Un. M. Co., 56 Ohio St. 181; and §§ 702a, 7026.
 * Handley v. Stutz, 139 U. S. 417.