LEHIGH AVE. BY. CO.’S ABPEAL.
Opinion,
Mb. Justice Williams :The Lehigh Avenue Railway Company was incorporated by the act of December 18, 1873, with an authorized capital of one million dollars, divided into shares of fifty dollars each. The shares have been subscribed for, and the first payment of five dollars per share paid on them, making a total of one hundred thousand dollars actually paid. Upon this amount of money the business of the corporation was entered upon, and nothing further has been collected upon the subscription to the *414capital stock. In 1888, the company, being in need of more money, decided to issue its bonds secured by a mortgage on its property and franchises for two hundred and fifty thousand dollars. This bill was filed by the attorney general to restrain the issuing of the proposed bonds on the ground that § 7 of article XVI. of the constitution, and the act of May 7, 1887, forbade it. The company denies that the act of 1887, or the provision of the constitution which it is intended to carry into execution, is applicable, and alleges that it has the right to issue the bonds under its own charter, the act of incorporation. Two questions are thus raised : First. Is the railway company authorized by the act of incorporation to issue the bonds proposed? Second. If so authorized, do the act of 1887 and the constitutional provision take away the authority so conferred ?
The act of incorporation provides, in section third, that “the said company shall have the power and authority to borrow money in any sum or sums not exceeding in amount one half of the par value of the capital stock.” The tenth section provides that “ the said company shall pay annually into the treasury of the city of Philadelphia for the use of said city, whenever the dividends declared by said company shall exceed six per centum per annum on the par value of the capital stock thereof, a tax of six per centum on such excess.” The first question presented is, what is the meaning of the words “ par value of the capital stock,” as used in the act of incorporation? The company contends that the par value of its stock is one million dollars, the amount of its authorized capital. The attorney general maintains that the par value is one hundred thousand dollars, the amount of capital actually contributed, as shown by the company’s books, and that the right to issue bonds is limited to one half that amount by the act of incorporation.
The words, stock, and capital stock, maybe defined as meaning the fund or property belonging to a firm or corporation, and used to carry on its business. This is contributed by those who embark in the business. The articles of co-partnership, or the charter of the corporation, fix the maximum amount of stock that may be issued, and this may properly be.spoken of as the proposed or authorized capital of the company. When an organization is effected, subscriptions are made to the stock, by which the subscribers agree to take and pay for certain *415sums or shares each. The total amount of stock thus taken constitutes the subscribed capital of the company. Sqme of these subscriptions may not be paid and may be uncollectible, but when the amount subscribed, or called for upon subscriptions, has been collected, so far as collection is practicable, the amount so gathered into the treasury constitutes the actual capital on which the business is undertaken. The amount paid by each subscriber measures his relative interest in the whole. As between himself and the corporation, or his fellow-subscribers, or the public, his share of the whole stock is fixed by the proportion which his actual contribution bears to the entire amount contributed by all who are associated in the enterprise. If, after the payment of one instalment on his subscription, a subscriber sells and assigns his stock, his assignee stands squarely in the shoes of his assignor, and takes no greater interest than was actually vested in his assignor at the date of the assignment. The general railroad law of 1849 provides that he to whom shares of stock are assigned shall take them “ subject to all the liabilities, conditions, and penalties incident thereto, in the same maimer as the original subscriber would have been; provided, that no certificate shall be transferred so long as the holder thereof is indebted to said company, unless the board of directors shall consent thereto; and provided, that no such transfer of stock shall have the effect of discharging any liabilities or penalties theretofore incurred by the owner thereof.” In accordance with this provision, it was held, in the Pittsburgh & Connelsville R. Co. v. Clarke, 29 Pa. 146, that the liability of a subscriber to pay “ for the amount of stock subscribed is an indebtedness within the meaning of the act, although the instalments have not been called in at the time of the transfer. It is debitum in prsesenti, solvendum in futuro.” It is clear, therefore, that, as between the assignor and assignee of shares, the assignment passes only the actual interest of the assignor as measured by what he has paid, and that the assignee takes subject to all unpaid instalments, whether called at the time of his purchase or not.
Does the corporation stand on better ground than its members ? It claims the right to issue bonds because pf its stock. We must inquire, therefore, first, what is the amount of its stock ? And, next, what is the par value of a share of that *416stock? We think the first of these questions is, in the light of the facts in this case, answered by repeated decisions of this court. Whether it be for the purpose of adjusting and paying dividends to stockholders, or of regulating the amount of taxes due to municipalities having the right and power to tax, the amount of stock actually paid is the capital stock of the company: Citizens Pass. Ry. Co. v. Philadelphia, 49 Pa. 251. Neither the cost of the road, nor the authorized capital can be made the basis of dividends or of taxation, but these must rest on the amount of capital stock actually paid in: Second & Third St. Pass. Ry. Co. v. Philadelphia, 51 Pa. 465; Philadelphia v. Philadelphia & Gray’s Ferry Pass. Ry. Co., 52 Pa. 177; Philadelphia v. Ridge Avenue Ry. Co., 102 Pa. 190. The company appellant proposes to exercise a power and incur a liability upon the basis of its capital stock, and for this purpose, as for purposes of taxation or, payment of dividends, its rights must be measured not by nominal or authorized capital, but by the actual amount of capital paid in. The issuing of certificates of stock to the subscribers does not add to the common stock in the treasury or business of the corporation, nor does it increase the interest of the individual stockholder. He takes his certificate when issued, subject to all the unpaid instalments of the subscription and the terms and conditions on which the subscription was made. Its value to him as between him and the corporation, is what he has paid upon it; no more, no less. That value may be increased or diminished in a commercial sense by the success of the business, the ability of the management, or other similar consideration, and such increase or decrease makes the market value greater or less than the amount he has paid upon it, as the case may be; but as between himself and the corporation or his fellow stockholders, the consideration of market value has no place. He must pay his subscription as calls are made, whether the venture prospers or fails. If the value of the stock is measured bjr what has been paid upon it, is the “ par value ” measured in the same manner when the right of the corporation to do a given act is to be settled?
The par value of the stock of this corporation for purposes of taxation or payment of dividends is, as we have already seen, the amount actually paid upon it, or one hundred thousand *417dollars. This is well settled by the cases we have cited, which hold that for the purposes enumerated the par value has no necessary relation to either the authorized or the market values, but is fixed by the amount actually paid, and is the equivalent or par of the value of the shares as shown by the stock account. The issuing of certificates ■ does not affect our question. If issued, they cannot increase the money in the treasury, or confer any independent right on the stockholder. They simply afford evidence of the extent of his interest in a more convenient form than the books of the company furnish, but leave him subject to all the liabilities resting on him before they came into his hands. We see no good reason for distinguishing this case from the cases cited above, but regard it as substantially ruled by them. The Lehigh Avenue Railway Company has received just one hundred thousand dollars from the subscribers to its stock. So far as the paper-books advise us, this is all it has ever asked for in the more than fifteen years of its corporate life, and all it expects to receive. The other nine hundred thousand dollars of authorized capital are uncalled and unpaid. The par value of all its shares taken together is one hundred thousand dollars, because that is the sum paid upon them, the value they represent. The par value of each share is fixed in like manner. Its value is the equal, or par, of the corporate capital it represents, which is the amount paid upon it by the subscriber, or applied to it out of the earnings of the corporation.
It is argued that nominal value and par value are synonymous terms in the commercial vocabulary, and that the par value of the stock of this company is one million dollars, because that is the amount of its nominal or authorized capital. If this is so, the par value has not been affected by the payment of calls upon the subscriptions heretofore, and will not be hereafter, though the entire amount subscribed be actually paid to the treasurer. Whether the amount paid in is ten per cent, or fifty, or one hundred per cent of the authorized capital, the par value must, according to this doctrine, remain the same. This overlooks the meaning of the word value, and the basis on which the idea of value rests. The par value of a treasury note or bank bill is the sum named on its face, because the holder can demand and is entitled to receive that sum for it *418from the government, or the bank by which it was issued. The same thing is true of notes, bonds, and negotiable instruments of all sorts. The maker cannot deny that he is indebted as he is represented in his note or bond, nor refuse to pay the exact sum he has promised to pay. In these cases the nominal and the par value are, prima facie, the same. The par value of a treasury note for one dollar is one dollar, because that sum in coin can be had for it. When it cannot be so exchanged it is said to be below par, because it is not redeemed at a price which is the par, or equal, of the promise on its face. But a certificate of stock in a railroad company is not a negotiable instrument, in either a legal or commercial sense. It stands in the hands of the subscriber for so much and no more than the amount actually paid upon it. In the hands of his transferee it stands for no more, hut is held under the express provisions of the general railroad law, subject to the balance due upon the subscription, and all liens, penalties, etc., to which it was subject in the hands of the subscriber. Neither the seller nor the buyer can secure any greater interest as a holder of the stock than the sum actually paid entitles him to. Future calls must be paid as they are demanded, and the possession of the certificates is no defence against them.
How, then, is the equivalent, the par, in value of the stock in the hands of the holder to be ascertained at any given time ? Very clearly by the books of the company, which show for what value it stands, what value it represents at that time. If but five dollars have been paid on a share, such share is subject to be called on for the remaining forty-five, if, as in this case, the nominal value of the share is fifty dollars, and the par value of such share is a sum which is equal to, or the par of, the value it represents, the five dollars actually paid into the treasury. It is clear that the certificate stands for no more than this to the holder, for he remains liable to be called on for the remaining forty-five. It stands for no more to the corporation, because it may compel payment of the sum standing due on the subscription, notwithstanding the certificate. When another call has been made and collected, the capital of the corporation will have been doubled. It will have two dollars to employ in its business where it now has one, and the par value of each share will have advanced to ten dollars, the exact *419equal or par of what the share represents. When the whole amount subscribed shall have been paid, the capital of the company will be one million dollars. Its stock will represent its actual capital, and each share will have a par value equal to its nominal value. The authorized or nominal value of the stock has remained the same from the beginning, viz., one million dollars. The equivalent or par value of the stock has advanced as the calls have been paid, so as always to be the exact equivalent of the value received from the subscriptions made to it. The market value has risen or fallen according to the estimate placed by the commercial world on the value of the business in which the corporation is engaged, the ability of its management, and the prosperity of its affairs.
We agree fully with the learned judge of the court below, that the case as presented on bill and answer raises no question under the act of 1887, or that provision of the constitution which it was intended to enforce. The only question is whether the act of incorporation on which the company rests its right to make the mortgage and issue the bonds, and which is thus brought to our attention, does confer the authority which it is proposed to exercise. We think it does not. The company may issue its bonds under the act of incorporation for an amount equal to one half of the par value of its stock, or fifty thousand dollars, and no more, as the par or equivalent value of the stock is shown by the books of the corporation to be at this time. It appears by the bill and answer that the stock is not paid up; that no profits have been applied to it; and that nothing has beén paid upon it except five dollars per share. This is all the corporation has, and for that reason it is all that its stock can represent. Its aggregate value is equal to the aggregate of the sums received, or one hundred thousand dollars, and the value of each share is equal to the sum it stands for to the company and the stockholder, which is five dollars. This is the value, or common stock, of which the certificates are the equal, equivalent, or par.
The industry of the learned gentleman, who represents the appellant, has enabled him to place before us extracts from a large number of acts of assembly, in which the words, par value, occur, for the purpose of showing that they have received a legislative construction in accordance with the views *420presented by him in his argument. But these extracts do not show a uniform use of the words, as will be seen by an examination of some of them. The act of January 81, 1878, P. L. 110, provides that “ no certificate of stock shall be issued by said association until the full amount of the par value of the same shall be paid in cash.” Here the nominal and par values are confused, and the draughtsman evidently regarded them as one and the same. But there could be no par value in the stock in advance of organization and payment of something upon it, for there was nothing whatever in the hands or treasury of the corporation to be represented by it. The object of the provision was to require payment in full before certificates should issue, so that when issued the par value should be equal to the nominal value. The provision from the act of March 20, 1873, P. L. 320, is in these words: “ That none of said bonds shall be sold for less than the par value thereof.” This is a correct use of the words. The bonds of a corporation have, prima facie, an actual value exactly equal to their face or nominal value. The solvency of the obligor is to be presumed, and on that basis, like other negotiable instruments, its value is equal to, the par of, its face value, so that its par and nominal value are the same. It may go above or fall below its par in value by reason of extrinsic circumstances, but if none such occur its par value is its nominal value. Another example from the act of April 4, 1873, P. L. 519, is as follows: “ Section 4. If calls are not paid the directors may forfeit and sell the stock, but not for less than par.” Here the words are correctly used. Suppose that a stockholder has paid five dollars per share on shares with a nominal value of one hundred dollars each, and that for non-payment of the second call the directors proceed to forfeit and sell his shares. What now is the minimum price which the shares must bring? If the words, par value, are equivalent to face or nominal value, and the nominal value of the share is one hundred dollars, then it is clear that the directors must sell five dollars’ worth of stock for one hundred dollars, or not sell at all. But if the words, par value, are understood in their proper legal sense, then this provision merely forbids the sacrifice of the shares of the delinquent for less than their actual cash equivalent, which is the s.um paid upon them as shown by the books of the corporation. *421must be remembered that we are speaking of the par value of stock that is conceded to be unpaid. The shares that are bought and sold in large blocks in the stock markets are, we presume, paid up shares. They certainly should be. In that case, nominal and par values are the same. It may fairly be presumed, that they would not be listed or dealt in in the market until they had been paid for in full, so that he who sold could confer an indefeasible title on the buyer. But there is no room for presumption in the ease in hand. We have the fact on the record, that but one tenth of the nominal value has been paid. The corporation is the party. It has one hundred thousand dollars in its treasury, and no more; yet it asks us to hold that the par value of its stock is one million dollars, and permit it to exercise an important power on that basis. This we decline to do. The par value of its shares is measured by the money it has received upon them, and not by the broken promises of those who subscribed for them.
The decree of the court below is affirmed at the costs of the appellant.
Mr Justice Mitchell dissented.common wealth’s appeal.
Opinion,
Me. Justice Williams :This was an appeal by the commonwealth from the decree of the court below in the case of the Commonwealth v. The Le-high Avenue Railway Company. For reasons given in an opinion delivered at the present term, dismissing the appeal of the Lehigh Avenue Railroad Company from the same decree, This appeal is dismissed and the decree affirmed at the costs of the appellant.