Morris v. Stevens

Citations

• 178 Pa. 563
• 36 A. 151
• 1897 Pa. LEXIS 985

Syllabus

<p>Corporations — Issue of new stock.</p> <p>Where the capital stock of a corporation is increased by the issue of new shares, each holder of the original stock has a right to subscribe for and demand from the corporation such a proportion of the new stock as the number of shares already owned by him bears to the whole number of shares before the increase.</p> <p>Corporations — Equity—Injunction—Defacto directors.</p> <p>A de facto board of directors of a corporation decided to issue additional shares of stock, and authorized the issue of some of the new stock to one of their number, without giving the stockholders generally an opportunity to subscribe for it. The director paid for it, and the money was used fot the benefit of the corporation. A certificate for it was issued to the director, and through the possession of the certificate, he secured control of a majority of the stock. He then sold a portion of the new issue to one who had no knowledge of the illegality of the board of directors which authorized the issue of the stock. Subsequently a stockholders’ meeting was called, but before it met an injunction issued restraining the holding of an election which was the principal object of the meeting. The meeting was held, but owing to the injunction none but the de facto directors- attended. At the meeting, the action of the de facto board was ratified. Subsequently the de facto board was ousted by quo warranto proceedings. Held, (1) that the assignee of a portion of this stock is entitled to hold the same; (2) that it would be inequitable to cancel the new stock in the hands of the director after the corporation had received the benefit of the payment, but it was proper to continue a preliminary injunction restraining him from voting it, or selling it, or disposing of it.</p>