a watering of stock, would be condemned by law."* A stock dividend is exceptional in its character, and the objections to them as bearing upon the value of the stock, address themselves more to the managers than to the court. "After a stock dividend, a corporation has just as much property as it had before. It is just as solvent, and just as capable of meeting all demands upon it. After such a dividend, the aggregate of the stockholders own no more interest in the corporation than before. The whole number of shares before the stock dividend represented the whole property of the corporation, and after the dividend they represent that and no more. A stock dividend does not distribute property, but simply dilutes the shares, as they existed before." In the case just referred to, the stock dividend of the Western. Union Company was sustained on the ground that there was no statute in New York which prohibited it. Such dividends do not affect the title of the property or transfer any legal consideration of property from the receiver to the corporation. They are merely changes of the entries in the books of the company. What effect and meaning have these provisions in the light of these principles of corporate law? There is no difference in their force, whether they are embraced in either the Constitution or statute, or in both. If they form part of the statutes, under which the corporations are organized, and which confer their charter powers, there can be no question as to their restraining effect. As a constitutional provision alone, the first clause is self-enacting and prohibitory. It restrains the legislative power and the effect of its prohibition cannot be evaded by indirect any more than by direct action.§ * Williams vs. W. U. Tel. Co., 93 N. Y. 189. ? Ewing vs. Oroville Min. Co., 56 Cal. 649. The general laws where this constitutional prohibition is in force must be in conformity to it and can grant no powers which will conflict with its provisions. of The language used is clear and positive-"no corporation shall issue stocks or bonds except for money paid, labor done, or property actually received." It applies to every corporation, if general, and the words "no corporation shall” are a direct prohibition upon any exercise of power except in conformity to its requirements. It is restricted to no special issue of stock, but applies to any and all issues, whether original or an increase. It provides what the consideration any contract for an issue of stock or bonds must be, and limits it to one of the three classes enumerated, viz.: "Money paid," "labor done," and "property actually received." Every party, therefore, to a contract with a corporation for an issue of stock must see to it that the consideration for his shares, with which he parts falls within one of these classes, in order that the corporation may exercise the power to issue its stock. Is this not a limitation of the charter powers of corporations, and is it not expressed in such prohibitive language that "every rule of interpretation must say that the legislature intended to interpose its power to prevent the act, and as one of the means of its prevention that the courts shall "hold any issue of stock contrary to its provisions," void? Its proper construction must go further and be that the considerations named are the only legal considerations for a valid issue of stock, and that every other is excluded. It must be borne in mind that this provision does not affect the amount of stock which a corporation may issue. This is governed by the charter and also by the statutory provisions limiting the amount of capital stock which may be held. If the statutory provisions in regard to an increase of capital stock are fully complied with, a corporation may have a right to an increased limit, but this right will be of no avail unless the corporate power to issue it also exists. It is this power to issue which these provisions regulate. That the stock may be legal and valid, the manner and mode of exercise of the power to issue must be in strict compliance with their provisions. We have seen that an issue of stock by a corporation in excess of its charter limits has been held void, and that no liabilities or rights accrue to the holders of this excessive issue. Being void by reason of the want of authority to have it, no acts of the holders could make it valid and binding, or estop them from questioning its validity. In such case the stock would be invalid and void, because of its being an over-issue, while under the provisions now being considered the invalidity would arise from a disregard of the conditions annexed by law to an issue of stock duly authorized. Thus far the discussion has been in regard to the meaning of the first part of the clause as to all issues of stock, but the force of the prohibition is further strengthened in its bearing upon an increase of the capital stock by its concluding words, "and all fictitious increase of stock or indebtedness shall be void." The first part of the clause, by its terms, defines the considerations for which alone a valid issue of stock can be made, and its effect upon the meaning of the word “fictitious," must now be considered. If no issue of stock is valid, except when made in conformity to the requirements of the first part of the clause, and for one of the considerations therein named, then the term "fictitious increase" must apply to any increase of capital stock whose issue fails to conform to its provisions. To limit its meaning merely to such issues of additional stock as are made gratuitously without any real property value to represent it, would be to defeat the intention and force of the language used. Unless this is its meaning, these provisions have no force or effect. Are stock dividends then within the prohibition of these provisions? It has been seen that a corporation has only those direct and implied powers which are granted by its charter and the statutes under which it is organized; that the exercise of powers not included in these is ultra vires and illegal, and when prohibited and expressly declared illegal and void the acts performed under it are void; that the title to all the property of a corporation is in the corporation. and not in its stockholders individually or collectively; that the stockholders have no individual interest in the property until a division is made by the proper agents; that they cannot compel the declaration of a dividend, except where the profits are withheld in violation of the charter; that the provisions under discussion define and limit the consideration for a valid issue of stock to the three named; that the power to issue valid stock depends upon a strict compliance with their terms; that all other issues are embraced in the term "fictitious," and hence void. It will not be contended that stock dividends can be sustained upon either of the first two considerations. No money is paid for the stock received, to the corporation, and certainly no labor has been performed by the receivers. They must rest, therefore, if at all, upon the remaining one, "property actually received." These dividends are based upon the accumulated profits and surplus funds, which the interest of the incorporation make it desirable to retain for corporate use, as part of its capital stock. No division is made of these funds to the shareholders, but the corporation merely transfers from the debit of the surplus account to the credit of the capital stock the necessary amount, and then distributes, as a dividend, the shares which have been. thus paid up. The contract in this case, is, as has been seen, one between the corporation on one side, and the receiver on the other. What property does the corporation "actually receive" as the consideration for these shares? corpora Certainly the receiver has parted with none, for he has, as a stockholder, no title to the property, applied to the payment. of these shares. That is, and has always been, in the tion itself, and certainly it would be absurd to say that a change in the credits on the books of the corporation was in any legal sense a transfer of title. It receives nothing more than it had before, and as the shareholder cannot force a dividend of the funds thus applied, and has "no incohate or legal title" until a division is made, he certainly transfers no property or title by the reception of his share of such a dividend. Such a dividend does not "distribute" property, but simply "dilutes" shares. As between the receiver and corporation, the transaction simply amounts to the relinquishment of his right to a share in this fund, when, if ever, it may be divided. It is not a right capable of enforcement, and, although the effect of the relinquishment may be that the corporation does still retain the fund, still it cannot be said to be "property actually received," within the meaning of these provisions. Where the legislative body has expressed its will in restraining statutes or laws, the ruling of courts, in the absence of such laws, can have no weight. If, then, stock dividends cannot be supported by any one of the required considerations, the prohibition applies, and no power exists in a corporation to issue the stock called for by them. Such an increase would come within the latter part of the clause that "all fictitious increase of stock, etc., shall be void." This construction is the only one which will give full meaning and force to these provisions, and fully meet the evils aimed at. It may be contended that when a shareholder has accepted the shares under such dividends, he has in effect received a dividend of this fund and is estopped from questioning the validity of the transaction. In other words, granting all that |