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Clearwater v. Meredith, 1 Wall. 25; McCray v. Junction R.R. Co., 9 Ind. 358; Botts v. Simpsonville, etc., Turnpike Co., 88 Ky. 54; Oldtown & Lincoln R.R. Co. v. Veazie, 39 Me. 580.

So far as the right of the State to object to such departure from the corporate purposes goes, that may be waived by the Legislature in passing an act authorizing consolidation upon unanimous vote of the members of both banks. The Legislature, however, has no power to waive for an individual shareholder his right to object that the corporation is transgressing the limits of its powers. When he invested his money in the co-operative bank he authorized the majority to act for him within the scope of its chartered powers. The transfer of his contractual right to another co-operative bank he did not authorize.

The discharge of one contracting party and the substitution of a new one are a serious impairment of the obligation of his contract. See Hamilton Mutual Insurance Company v. Hobart, 2 Gray, 543.

It being established that the consolidation is a vital departure from the purposes for which the constituent banks were organized, the important question is as to the effect of R. L., c. 109, § 3: "Every act of incorporation passed since the eleventh day of March in the year eighteen hundred and thirty-one shall be subject to amendment, alteration or repeal by the general court. All corporations which are organized under general laws shall be subject to such laws as may be hereafter passed affecting or altering their corporate rights or duties or dissolving them."

Did the existence of this act at the time of the creation of the constituent co-operative banks have the effect of making their members agree in advance to whatever changes of purpose the Legislature might authorize, no matter how radical?

The doctrine of certain cases is that by virtue of this reserved power the dissenting shareholder in a stock corporation may be bound by a change the effect of which would otherwise be to release him. See Durfee v. Old Colony, etc., R.R. Co., 5 Allen, 230; Buffalo and New York City R.R. Co. v. Dudley, 14 N. Y. 336. But I believe this view to be erroneous. Such power was reserved by the Legislature on account of the decision in the Dartmouth College case, that a charter is a contract within the meaning of the constitutional provision that no State shall pass a law impairing the obligation of a contract. This decision was supposed to deprive the States of that power of control over corporations which the public welfare demanded.

Accordingly, nearly all the States passed laws reserving the power of amending or repealing charters, but this power was never reserved for the purpose of enabling a corporation to alter in a

radical manner the contract between its shareholders or for the purpose of enabling the corporation to impair a contract between itself and its members. It was solely to avoid the effect of the decision that the charter itself was a contract between the State and the corporation. The Legislature under this power may impose new duties and new restraints upon corporations in the prosecution of enterprises already undertaken, whether they should be assented to or not. But the Legislature cannot impose upon the minority of a corporation the duty of embarking in a new enterprise or of substituting their contracts with one corporation for similar contracts with another. All the Legislature may do is to grant the power, and then it is for the corporation to accept it or not, as it pleases. The right, therefore, to bind dissenting stockholders derives no additional support from the fact that the power of amending the charter had been reserved by the Legislature, but depends essentially upon the question whether the change is of such a character that it may be deemed so far in furtherance of the original undertaking and incident to it as to be fairly within the power of the corporation to bind its individual members by its corporate assent, or whether it is such a departure from the original purpose that no member should be deemed to have authorized the corporation to assent to it for him. See Kenosha, etc., R.R. Co. v. Marsh, 17 Wis. 13; Dow v. Northern R.R., 67 N. H. 1; Mills v. Central R.R. Co., 41 N. J. Eq. 1; N. H. & Derby R.R. Co. v. Chapman, 38 Ct. 56, 71; Zabriskie v. Hackensack, etc., R.R. Co., 18 N. J. Eq. 178. In the last case the court said: "The object and purpose of these provisions are so plain and so plainly expressed in the words that it seems strange that any doubt could be raised concerning it. It was a reservation to the State for the benefit of the public, to be exercised by the State only. The State was making what had been decided to be a contract, and it reserved the power of change by altering, modifying or repealing the contract. Neither the words, nor the circumstances, nor apparent objects for which this provision was made, can, by any fair construction extend it to giving a power to one part of the corporators as against the other, which they did not have before."

I should advise that this latter view is the correct one, and that the reserved power gives the Legislature merely the right to amend the charters of corporations as between corporation and State, not as between the majority and minority within the corporation, without hesitation, except for the fact of two Massachusetts decisions. Durfee v. Old Colony, etc., R. R. Co., 5 Allen, 230; Hale v. Cheshire R.R., 161 Mass. 443. The reasoning of the Massa

chusetts court in the former case is based upon the assumption that the reservation by the State of the power to alter, amend or repeal the charter of a corporation is intended not merely for the protection of the public, but also to enable the Legislature to authorize a corporation to engage in new enterprises solely for its own benefit and whether any interests of the public are concerned or not. If the reasoning is sound, then the Legislature might authorize a majority of the stockholders of a manufacturing company to engage in banking, insurance or railroading against the dissent of the minority. Under this doctrine the money invested by a stockholder in a corporation, and his contract with it, are at the mercy of the Legislature and a majority of the stockholders. I quote from the language of the court, Bigelow, C.J., page 243 et seq.: "When, therefore, it is expressly provided between the Legislature on the one hand and the corporation on the other, as a part of the original contract of incorporation, that the former may change or modify or abrogate it or any portion of it, it cannot be said that any contract is broken or infringed when the power thus reserved is exercised with the consent of the artificial body of whose original creation and existence such reservation formed an essential part. The stockholder cannot say that he became a member of the corporation on the faith of an agreement made by the Legislature with the corporation, that the original act of incorporation should undergo no change except with his assent. Such a position might be asserted with more plausibility if there was an absence of a clause in the original act of incorporation providing for an alteration in its terms. In such a case it might perhaps be maintained that there was a strong implication that the charter should remain inviolate, and that the holders of shares invested their property in the corporation relying upon a contract entered into between it and the Legislature that the provisions of the act creating it should remain unchanged. But it is difficult to see how such a construction can be put on a contract which contains an express stipulation that it shall be subject to amendment and alteration. If it be asked by whom such amendment or alteration is to be made, the answer is obvious: by the parties to the contract, the Legislature on the one hand and the corporation on the other; the former expressing its intention by means of a legislative act, and the latter assenting thereto by a vote of the majority of the stockholders, according to the provisions of its charter. It is nothing more than the ordinary case of a stipulation that one of the parties to a contract may vary its terms with the assent of the other contracting party. In such case, all persons claiming derivative rights or interests under the original contract, with notice of its terms,


would be bound by the amendment or alteration to which the parties should agree. It is a mistake, therefore, to say that the contract of a stockholder with a corporation established under our statutes binds the latter to undertake no new enterprise and engage in no business or operation other than that contemplated by the original charter. This interpretation puts aside the express provision authorizing an amendment or alteration of the act of incorporation, and gives it no effect against a stockholder without his assent, although he bought his stock or subscribed for his shares subject to the legal effect of such a stipulation. The infirmity of the argument in behalf of the plaintiff is that it admits that an amendment may be legal and valid as to the corporation, if they assent to it by a vote of the majority, while at the same time it sets it aside as against the stockholder who refuses to sanction it, on the ground that as to him it is illegal and void. But we cannot see how the amendment can be said to be legal and illegal uno et eodem flatu. If it is valid as to the corporation, for the reason that they have accepted and approved it according to the provisions of their charter, it would seem that it must also be binding on the stockholder, who has agreed that his rights and interests in the corporation shall be regulated and controlled by a vote of a majority, acting in conformity to the original constitution of the corporation, and within the scope of its corporate powers. The real contract into which the stockholder enters with the corporation is that he agrees to become a member of an artificial body which is created and has its existence by virtue of a contract with the Legislature, which may be amended or changed with the consent of the company, ascertained and declared in the mode pointed out by law. Having, by virtue of the relation which subsists between himself and the corporation as a holder of shares, assented to the terms of the original act of incorporation, he cannot be heard to say that he will not be bound by a vote of the majority of the stockholders accepting an amendment or alterations of the charter made in pursuance of an express authority reserved to the Legislature, and which by such acceptance has become binding on the corporation."

This reasoning is unsound because it leaves out of sight the contract made by the shareholders of a corporation with each other, which is the basis of incorporation, and considers the charter only as a contract with the State. The decision, however, is not necessarily inconsistent with the true view. The new enterprise which a dissenting stockholder sought to enjoin was an extension of the railroad from Fall River to Newport by building as far as the State line and taking a lease of the Rhode Island railroad. This

was fairly within the purposes of the Old Colony charter and gave no cause of complaint to a stockholder. It was a slight enlargement of the corporate purposes, not a deviation from them. The State waived the right which it possesses over public service corporations to object to the enlargement of the corporate purpose. The court, indeed, observed this distinction between that case and one like the present, saying, at page 246: "It was urged, as a grave objection against the doctrine above stated, that it puts the minority of the stockholders of a corporation entirely within the control of the Legislature and a majority of the stockholders, and that there would be no limit or restraint placed on the exercise of the power, so that corporations might be diverted to purposes and objects wholly foreign to those for which they were originally established, and stockholders might be made to participate against their will in undertakings which they never contemplated and which they deemed inexpedient or ruinous. . . . No such question arises in the present case, inasmuch as the additional acts, the validity of which is called into controversy by the plaintiff, do not empower the defendants to engage in any undertaking essentially different in kind from that which was embraced in the original acts by which their corporate existence under their present name was authorized and established."

And again, on page 241, the court calls attention to another distinction which exists between that case and the present: "Nor are we called on to determine the effect which such a legislative act would have upon a previously existing executory contract entered into with the corporation; as, for instance, an agreement to subscribe for stock and to become a member of a corporate body, created or to be established for certain distinct and designated objects. No such question arises in the present case. The plaintiff had no executory agreement with the defendants at the time the act in question was passed by the Legislature, or when it was approved and accepted by a legal vote of the corporation."

In Hale v. Cheshire Railroad, 161 Mass. 443, it was held that a minority stockholder in the Cheshire railroad which, without his objection, had consolidated with the Fitchburg railroad by authority of the Legislature was bound by the terms of the consolidation and could not have an accounting of his share of the assets of the Cheshire railroad as upon a dissolution. The court said: "Dissenting stockholders are bound by the vote of the majority, acting in good faith and within legislative sanction. It was within the constitutional power of the Legislature to authorize the consolidation. If the plaintiffs had any ground for complaint as to the terms of the plan of consolidation, they should have tried to pre

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