the legislature may reserve the power to repeal the charter of a corporation for nonuser or misuser, the determination of the question whether there has been such nonuser or misuser, so as to give rise to the right to repeal, is a judicial, and not a legislative function, and, therefore, that the legislature cannot repeal a charter under such a reservation of power without an investigation and judgment by a court, after due notice to the corporation. This view is the better supported by reason and authority.86 § 4315. Extent of reserved power to alter or amend-In general. Probably the best general statement of the extent of the reserved power of alteration and amendment, is that of Mr. Justice Swayne of the United States Supreme Court, wherein he said that, "the power of alteration and amendment is not without limit. The alterations must be reasonable; they must be in good faith, and be consistent with the scope and object of the act of incorporation. Sheer oppression and wrong cannot be inflicted under the guise of amendment or alteration. Beyond the sphere of the reserved powers, the vested rights of property of corporations, in such cases, are surrounded by the same sanctions and are as inviolable as in other § 4316. Constitutional restrictions. The reserved right of amendment, alteration or repeal, whether contained in a statute. or constitutional provision, must be exercised in subjection to the various other constitutional commands and restrictions.88 Thus the power is subject to the provisions against impairing the obligations of contracts, and the right to amend does not authorize the taking 86 State v. Noyes, 47 Me. 189; Chesapeake & O. Canal Co. v. Baltimore & O. R. Co., 4 Gill & J. (Md.) 122; Flint & F. Plank Road Co. v. Woodhull, 25 Mich. 99, 12 Am. Rep. 233. 87 Shields v. Ohio, 95 U. S. 319, 24 L. Ed. 357, quoted in St. Louis, I. M. & St. P. R. Co. v. Paul, 173 U. S. 404, 43 L. Ed. 746; Lawrence v. Rutland R. Co., 80 Vt. 370, 15 L. R. A. (N. S.) 350, 13 Ann. Cas. 475, 67 Atl. 1091. 88 See also § 4321 et seq., infra. 246 Ill. 170, 138 Am. St. Rep. 229, 152 Ill. App. 398; Boswell v. Security Mut. Life Ins. Co., 193 N. Y. 465, 19 L. R. A. (N. S.) 946, 86 N. E. 532. Nebraska Const. art XIb (13), § 1, providing that general laws affecting the charters of corporations may be altered or repealed, is in pari materia with sec. 16, art. I, of the same Constitution, which prohibits the legislature from passing any law impairing the obligations of contracts, and the two provisions must be read and construed together. Omaha Water Co. v. Omaha, 147 Fed. 1, 12 L. R. A. (N. S.) 736, 8 Ann. Cas. 614. of a corporation's property without just compensation.90 But the legislature may enact any legislation, by way of amendment which does not violate the rule that property acquired under the operation of the charter cannot be taken away and that contracts made in like manner may not be impaired.91 It has been held that a "bank guaranty law" authorizing banks to employ their property for the purpose of securing the contract of deposit made by an individual with another bank, or in reimbursing such depositor for loss sustained on his contract, is invalid as impairing the obligations of a stockholder who dissents therefrom with the bank and with the state.92 § 4317. Impairing or defeating objects of grants; grant of additional powers. A general reservation of the right to alter, amend or repeal gives the legislature the power to make any alteration or amendment in a charter which will not defeat or substantially impair the object of the grant or change its fundament 1 character.93 Such 90 The reservation of the right to alter or repeal corporation charters does not authorize the impairment of the contracts of corporations made with third persons. Chicago, M. & St. P. R. Co. v. State of Wisconsin, 238 U. S. 491, 59 L. Ed. 1423, L. R. A. 1916 A 1133; Omaha Water Co. v. Omaha, 147 Fed. 1, 12 L. R. A. (N. S.) 736, 8 Ann. Cas. 614; Lord v. Equitable Life Assur. Soc. of United States, 194 N. Y. 212, 22 L. R. A. (N. S.) 420, 87 N. E. 443. 91 Lewis v. Northern Pac. R. Co., 36 Mont. 207, 92 Pac. 469. See also New York Cent. & H. River R. Co. v. Williams, 199 N. Y. 108, 35 L. R. A. (N. S.) 549, 139 Am. St. Rep. 850, 92 N. E. 404. 92 Kansas Laws 1909, c. 61 violates Federal Const. art. I, § 10. Larabee v. Dolley, 175 Fed, 365. 93 United States. Chicago, M. & St. P. R. Co. v. State of Wisconsin, 238 U. S. 491, 59 L. Ed. 1423, L. R. A. 1916 A 1133; Berea College v. Kentucky, 211 U. S. 45, 53 L. Ed. 81; Fair Haven & W. R. Co. v. New Haven, 203 U. S. 379, 51 L. Ed. 237; Shields v. Ohio, 95 U. S. 319, 24 L. Ed. Arkansas. Arkansas Stave Co. v. State, 94 Ark. 27, 27 L. R. A. (N. S.) 255, 140 Am. St. Rep. 103, 125 S. W. 1001; Leep v. St. Louis, I. M. & S. Ry. Co., 58 Ark. 407, 23 L. R. A. 264, 41 Am. St. Rep. 109, 25 S. W. 75. Connecticut. Town of Southington v. Southington Water Co., 80 Conn. 646, 13 Ann. Cas. 411, 69 Atl. 1023. Georgia. Macon & B. R. Co. v. Gibson, 85 Ga. 1, 21 Am. St. Rep. 135, 11 S. E. 442. Kentucky. Orr v. Bracken County, 81 Ky. 593. Massachusetts. Com. v. Boston & N. St. R. Co., 212 Mass. 82, 98 N. E. 1075; Inland Fisheries v. Holyoke Water Power Co., 104 Mass. 446, 6 Am. Rep. 247, aff'd 15 Wall. (U. S.) 500, 21 L. Ed. 133. New Hampshire. Dow v. Northern New Jersey. Zabriskie v. Hacken- New York. New York Cent. & H. reasonable amendments or alterations may be made as the legislature deems necessary to carry out the original purposes of the corporation, to promote the due administration of its affairs, to protect the rights of the corporation, its stockholders, and the public, and to secure the due administration of justice in regard to the rights of the creditors of the corporation and the proper disposition of its assets.95 But the legislature is not authorized to make a fundamental change in a charter, so as to force minority members to engage in a business entirely different from that into which they entered.96 "The legislature,” said Chancellor Zabriskie in a leading New Jersey case, "can repeal or suspend the charter; it can alter or modify it; it can take away the charter; but it cannot impose a new one, and oblige the stockholders to accept it. It can alter or modify the old one; but power to alter or modify anything can never be held to imply a power to substitute a thing entirely different. It is not the meaning of the words in their usually received sense. Power to alter a mansion-house would never be construed to mean a power to tear down all but the back kitchen and front piazza, and build one three times as large in its place. In anything altered, something must be preserved to keep up its identity; and a matter of the same kind wholly or chiefly new substituted for another is not an alteration: it is a change." It was further said in substance, in the same case, that the power to alter or modify an act of incorporation contemplates an alteration of something contained in or granted by the act; that any of the franchises granted may be altered, as the right to take land by condemnation, the right to take tolls or fare, or the amount to River Co. v. Williams, 199 N. Y. 108, Pennsylvania. In re Liberty Bell Lodge, No. 42, 231 Pa. 112, 80 Atl. 532. Utah. Garey v. St. Joe Min. Co., 32 Utah 497, 12 L. R. A. (N. S.) 554, 91 Pac. 369. 94 Garey v. St. Joe Min. Co., 32 Utah 497, 12 L. R. A. (N. S.) 554, 91 Pac. 369. 95 United States. New York & N. E. R. Co. v. Town of Bristol, 151 U. V. S. 556, 38 L. Ed. 269, aff'g 62 Conn. Illinois. Park v. Modern Woodmen of America, 181 Ill. 214, 54 N. E. 932. Maine. Read v. Frankfort Bank, 23 Me. 318. New York. Hyatt v. McMahon, 25 Barb. 457. South Carolina. Charlotte, C. & A. R. Co. v. Gibbes, 27 S. C. 385, 4 S. E. 49. 96 Bernstein v. Kaplan, 150 Ala. 222, 43 So. 581. be taken, etc.; but that the legislature has no right to impose upon the corporation any other duty, or anything involving any other duty, than that attending the business or enterprise for which the corroration was created.97 Additional powers which are merely auxiliary to the object for which the corporation was originally created, may be conferred upon the corporation,98 and the fact that an amendment of a charter gives a corporation greater or less power than other corporations is not a violation of constitutional rights.99 § 4318. Changes as fundamental and material and as incidental or auxiliary. There is no exact formula for determining the line of demarcation between changes regarded as fundamental and material and changes which are auxiliary or incidental.1 But statements explanatory of the distinction have frequently been made. Thus it has been said that "amendments, which do not change the nature, purpose, or character of a corporation or its enterprise, but which are designed to enable the corporation to conduct its authorized business with greater facility, more beneficially, or more wisely, are auxiliary to the criginal object." And "where there is an exercise of the power in good faith, which does not change the essential character of the business, but authorizes its extension upon a modified plan, both reason and authority support the corporation in the exercise. of the right."4 Little light will be thrown upon the practical scope of these principles by an analysis of the results which have been reached in at 97 Zabriskie v. Hackensack & N. Y. R. Co., 18 N. J. Eq. 178, 90 Am. Dec. 617. 98 Maine. South Bay Meadow Dam Co. v. Gray, 30 Me. 547. Maryland. Phinney v. Sheppard & Enoch Pratt Hospital, 88 Md. 633, 42 Atl. 58; Sprigg v. Western Tel. Co., 46 Md. 67; Taggart v. Western Maryland R. Co., 24 Md. 563, 89 Am. Dec. 760. Massachusetts. Agricultural Branch R. Co. v. Winchester, 13 Allen 29. New Jersey. Gifford v. New Jersey R. & Transp. Co., 10 N. J. Eq. 171. New York. Union Hotel Co. v. Hersee, 79 N. Y. 454, 35 Am. Rep. 536; Buffalo & N. Y. City R. Co. v. Dudley, 14 N. Y. 336. tempts to apply them to concrete cases. The cases in which such attempts have been made are very numerous, and they exhibit such a wide difference in results reached that one may draw from some of them inferences by way of analogy which would tend to support almost any position. In fact it will be found that different conclusions have been arrived at upon substantially similar conditions. This confusion in the cases has been the subject of frequent comment, so that it has often been said that each case must be left for determination upon its own particular facts.5 It is a question of law whether or not an amendment, if engrafted upon a charter, would accomplish what the law regards as a fundamental change in the character and purposes of a corporation. A change in fundamentals is an amendment, whether it is called such or not and whether made by the legislature directly or by the corporation itself by legislative authorization.7 A material and fundamental change in the charter by an amendment to that charter is an unconstitutional violation of the contract rights of any shareholder who does not consent to such an amendment.8 But the legislature under its reserved power may amend any charter in any respect that is not fundamental when the object of the corporation and property acquired by it are considered. The statement of Chancellor Zabriskie, previously referred to,10 is probably as clear in illustrating the difference between fundamental and auxiliary amendments as any that may be formulated. In addition it may be mentioned that a change in the name of a corporation is not a radical departure from the original charter,11 but a change in the capital stock, in principle, is an amendment of the fundamentals of a corporation.12 And when 5 Perkins v. Coffin, 84 Conn. 275, Ann. Cas. 1912 C 1188, 79 Atl. 1070. 6 Perkins v. Coffin, 84 Conn. 275, Ann. Cas. 1912 C 1188, 79 Atl. 1070. 7 State v. Northern Pac. R. Co., 157 Wis. 73, 147 N. W. 219. 8 Larabee v. Dolley, 175 Fed. 365. See § 4345 et seq., infra. 9 Lord v. Equitable Life Assur. Soc. of United States, 194 N. Y. 212, 22 L. R. A. (N. S.) 423, 87 N. E. 443. The property of a shareholder may be used by the corporation in any legitimate manner to further the business for which the corporation was created, and the state may, under its reserved power of amendment, from time to time change the manner of such use and the means employed to further the purpose for which the corporation was created. Larabee v. Dolley, 175 Fed. 365. 10 See § 4317, supra. 11 Thomas & Barton Co. v. Thomas, 165 Fed. 29; Casanas V. Audubon Hotel Co., 124 La. 786, 50 So. 714. 12 State v. Northern Pac. R. Co., 157 Wis. 73, 147 N. W. 219. A change in the amount of the capital stock of a corporation, like a change in the objects thereof, is fundamental and cannot be made without clear legislative authority. Marion Trust Co. v. Bennett, 169 Ind. |