to cancel his contract of subscription, and the illegal amendment will operate as a release.' He may, however, be estopped from objecting to an amendment by his express or implied acquiescence therein; and although as a general rule the consent of the shareholders is not to be presumed but must be proven, yet if circumstances arise under which it is his duty to express his dissent, his silence will operate as a bar to any subsequent objection.* 44. Amendment of articles of association.-- The general acts of incorporation of the several States provide the method by which articles of association drawn thereunder may be amended by the incorporators themselves. Until such pro 1 Champion v. Memphis &c. R. Co., 35 Miss. 692; Clearwater v. Meredith, 1 Wall. 25; Nugent v. Supervisors, 19 Wall. 241; “Liability of Subscribers as affected by Amendments to Charters of Corporations," by W. H. Whittaker, (1882) 16 Am. L. Rev. 101. Cf. Dawes v. Ship, (1868) L. R. 3 H. L. 343. 2 Bedford R. Co. v. Bowser, (1864) 48 Pa. St. 29; Gifford v. New Jersey R. Co., (1854) 10 N. J. Eq. 171; Memphis &c. R. Co. v. Sullivan, 57 Ga. 240; Houston v. Jefferson College, 63 Pa. St. 428; Danbury &c. R. Co. v. Wilson, 22 Conn. 435; Vermont &c. R. Co. v. Vermont Central R. Co., 34 Vt. 2; Hayworth v. Junction R. Co., (1859) 13 Ind. 348; Mills v. Central R. Co., (1886) 41 N. J. Eq. 1, holding, however, that a stockholder merely expressing an opinion favorable to a lease authorized by the amendment, while refusing to vote for it, and afterwards voting against it, is not estopped by acquiescence from assailing its validity; Zabriskie v. Hackensack &c. R. Co., 18 N. J. Eq. 178; Ex parte Booker, 18 Ark. 338; Upton v. Jackson, 1 Flipp. C. C. 413; Goodin v. Evans, 18 Ohio St. 150. N. H. 515; Proprietors &c. Union 4 Commonwealth v. Cullen, (1850) 13 Pa. St. 133; Martin v. Pensacola & G. R. Co., (1869) 8 Fla. 370; Owen v. Purdy, (1861) 12 Ohio St. 73. Contra, Hamilton Mutual Ins. Co. v. Hobart, (1854) 2 Gray, 543. E. g., Wis. Rev. Stat. §§ 1772, 1774; Conn. Act of June, 1880, § 8, whereby amended articles are required to be subscribed by stockholders holding at least two-thirds of the stock, to be certified, published and recorded as provided for in the original articles. Iowa Code, § 1065, provides "that any of the provisions of the articles of incorporation may be changed at any annual meeting of the stockholders, or special meeting called for that purpose; but said changes shall not be valid unless recorded and published as the original articles are required to be; and said changes in the articles need only be signed and acknowledged by the officers of said corporation." By N. Y. Laws of 1870, ch. 135, § 11, "the directors of any corporation organized under any March v. Easton R. Co., (1862) 43 general act for the formation of com visions of the enabling act have been fully complied with, a proposed amendment remains inoperative. For where a company is formed under a general act of incorporation, the artipanies in whose original certificate of shares of which its capital stock of incorporation any informality consists, (N. Y. Laws of 1866, ch. 73, may exist, by reason of an omission $$ 1 and 2); changing the corporate of any matter required to be therein name, (N. Y. Laws of 1870, ch. 322); stated, are hereby authorized to and changing or extending the busimake and file an amended certificate ness of the company. And in that or certificates of incorporation to State, "whenever any company conform to the general act under shall desire to call a meeting of the which the said corporation may be stockholders, for the purpose of organized; and upon the making and availing itself of the privileges and filing of such amended certificate, provisions of this act, or for increas the said corporation shall, for all ing or diminishing the amount of its purposes, be deemed and taken to be capital stock, or for extending or a corporation from the time of filing changing its business, it shall be the such original certificate. Nothing in duty of the trustees to publish a nothis act contained shall in any man- tice, signed by at least a majority of ner affect any suit or proceeding, at them, in a newspaper in the county, the time of filing such amended cer- if any shall be published therein, at tificate, pending against said corpo- least three successive weeks, and to ration, or impair any rights already deposit a written or printed copy accrued." See In re New York, L. thereof in the postoffice, addressed & W. R'y Co., 25 Hun, 556. By to each stockholder at his usual N. Y. Laws of 1881, ch. 22, all certifi- place of residence, at least three cates of incorporation filed in the weeks previous to the day fixed upon office of the Secretary of State are to for holding such meeting, specifying be recorded, and the same fees paid the object of the meeting, the time therefor as for recording deeds. Fur- and place when and where such ther provisions are made in New meeting shall be held, and the York for amendment of the original amount to which it shall be proagreement between the incorpora- posed to increase or diminish the tors with respect to the duration of capital, and the business to which corporate existence, (N. Y. Laws of the company would be extended or 1857, ch. 29, § 2, as amended by changed; and a vote of at least twoN. Y. Laws of 1867, ch. 12, § 1; N. Y. thirds of all the shares of stock shall Laws of 1867, ch. 937, § 1), and with be necessary to an increase or dimrespect to changing the place of busi- inution of the amount of its capness, (N. Y. Laws of 1864, ch. 517, ital stock, or the extension or change § 1), increasing or reducing the num- of its business as aforesaid, or to enber of trustees, (N. Y. Laws of 1860, able a company to avail itself of the ch. 269, § 2, amended Laws of 1867, provisions of this act." N. Y. Laws ch. 248, § 2, as amended by Laws of of 1848, ch. 40, § 21. 1878, ch. 316, § 1), increasing or reducing the capital stock, (N. Y. Laws of 1848, ch. 40, § 20; Laws of 1878, ch. 264, § 1); increasing the number 1 Wood v. Union Gospel Church Assoc., (1886) 63 Wis. 9; Day v. MillOwners' Mutual Fire Ins. Co., (1888) 75 Iowa, 694. cles of association are as immutable as a charter granted by especial legislative act; and a majority of the incorporators cannot change the objects for which the association was formed, against the will of a dissenting minority. An injunction will issue to restrain them from so doing. But an application to parliament for authority to effect an alteration of that character will not be enjoined by the English courts; 3 for parliament is a constitutional tribunal for settling in such cases the rights of the parties upon the footing of the contract, and its decision would be conclusive of the rights and authority of the corporation as well as of the dissenting shareholders. Whereas in one of the United States, upon a similar legislative decision, the question would still present itself upon the original contract. A memorandum of association may contain other provisions than those required by the statute under which it is drawn, and it has been contended that with respect to these additional matters it is not equally fixed and Ashbury Ry. &c. Co. v. Riche, L. R. 7 H. L. 653; "Immutability of Memorandums of Association," 78 L. T. 314. 2 In Natusch v. Irving, cit. by Gow on Partnership, 398, 405, 406, Lord Eldon held that a majority of stockholders of a life and fire insurance company could not change the objects for which they were associated under their articles of agreement, to marine insurance, and granted an injunction to restrain the company from carrying on the latter business. 3 Ware v. Grand Junction W. W. Co., 2 Russ. & M. 470. See however Canliff v. Manchester & B. Canal Co., 2 Russ. & M. 480 and note, where an injunction was granted restraining the canal company from affixing its seal to a petition to parliament for authority to convert a portion of the canal into a railway. Legislative Control over the Fundamental Contract of an Incorporated Company," 6 Am. L. Mag. 89, 93. The power of the British parliament is seldom exercised in derogation of private rights of property, or to vary the obligations of a contract; when the rights of contracting parties, however, are submitted to the action of parliament, the decision of the legislature is binding upon courts of justice. But the constitution of the United States restrains the power of the State legislatures, and no legislative act which impairs the obligation of a contract can be recognized as valid in any court of this country. (Vide supra, §§ 17 and 18.) When the objects for which a company was incorporated or a joint-stock company associated are changed by legislative enactment, the validity of the act will depend upon the question whether any material alteration of the original contract which formed the basis of the association, is attempted by the statute. "Legislative Control over the Fundamental Contract of an Incorporated Company," 6 Am. L. Mag. 89, 90. 2 immutable, but may be varied, rescinded or modified after registration as well as before. But it has been decided that these additional provisions are equally immutable, and that there is no power in a majority of the members to change or modify the articles of association, as originally filed, in any particular which may be said to form a part of the original contract between the shareholders. The ground of these decisions seems to be the ordinary law of contract; and it would appear to follow that there is prima facie nothing to prevent the whole body of shareholders from modifying the terms of their original contract in any way they choose, provided they do not attempt to alter the memorandum in those points which are required by statute to be stated therein." In re New Buxton Lime Co., Duke's Case, (1876) 1 Ch. Div. 620; Guinness v. Land Corporation of Ireland, 22 Ch. Div. 349; Winstone's Case, 12 Ch. Div. 251, where as dicta Mr. Justice Fry said: The argument has assumed that everything which is in a memorandum is immutable. I am not convinced that this is the case where the memorandum embodies particulars not required by the statute." 2 Ashbury v. Watson, 28 Ch. Div. 56; s. c. 51 L. T. Rep. N. S. 766, distinguishing In re New Buxton Lime Co., Duke's Case, (1876) 1 Ch. Div. 620; Melhado v. Hamilton, 28 L. T. 578; s. c. 29 L. T. 364; Harrison v. Mexican Ry. Co., 32 L. T. Rep. N. S. 82; S. C. 19 Eq. 358; Hutton v. Scarborough C. H. Co., 12 L. T. Rep. N. S. 228, 289; s. c. 2 Dr. & Sm. 514; s. c. 4 D. J. & S. 672; Ashbury Ry. &c. Co. v. Riche, L. R. 7 H. L. 653. 3" The Immutability of Memorandums of Association," (1885) 78 L. T. 314, 315. The incorporators of a company organized under a general enabling act, can not acquire greater powers than those conferred upon similar companies organized thereunder, by inserting provisions to that effect in the articles of associa tion. Albright v. Lafayette &c. Assoc., 102 Pa. St. 411, 423, where the court said: "I think the law to be clear, that in corporations formed under the general laws, it is no objection that the articles of association contain provisions not authorized by the act. If unauthorized provisions are added, all acts done in pursuance of such will be void; but until the corporation is proceeded against for an abuse of its franchises, its rights as a corporation will not be affected by such unauthorized powers. Such, too, has been expressly stated in New York, in Eastern Plank Road Co. v. Vaughan, 14 N. Y. 546. The case of Rhoads v. Hoernerstown Building and Loan Assoc., 1 Norris, 180, does not seem to me to cover this case. Whatever else appears in that case, the controlling idea was, that the court that granted the charter then, could not and did not intend to charter it under the Act of 1859, because it had no authority under the petition to do so, and further, because the provisions of the charter were such as also to rebut any such intention." And in New Orleans National Banking Assoc. v. Weltz, 4 Woods C. C. 43, it was held that, a $45. Of forfeiture. It is conceded that a corporation may forfeit its charter or franchises for wilful misuser or nonuser thereof. For it is a tacit condition, annexed to the creation of every corporation, that it shall be subject to dissolution by forfeiture of its franchise for wilful misuser or non-user in regard to matters which go to the essence of the contract between it and the State; and a proceeding upon an information in the nature of quo warranto, filed by the attorney-general on behalf of the State, is the proper mode of trying the issue. The power of the courts in this respect is exclusive. The forfeiture of corporate charters is a penalty to be imposed by the judiciary alone. Under no circumstances can the legislature presume to declare a forfeiture. Such an usurpation of judicial powers would be hostile to one of the fundamental principles of the American system by which the legislative, executive and judicial departments of government are required to be forever separate, and would be a denial of due process of law. For "in these cases there are necessarily adverse corporation organized under the Louisiana general law, can not, by its private charter and by-laws, create a privilege on property actually and necessarily within commerce. 1 People v. Kingston &c. Road Co., 23 Wend. 193; s. c. 35 Am. Dec. 551, and note; State v. Commercial Bank, 13 Sm. & M. 539; s. c. 53 Am. Dec. 106; Chesapeake & O. Canal Co. v. Baltimore & O. R. Co., 4 Gill & J. 122; People v. President &c. Manhattan Co., 9 Wend. 351; Penobscot &c. Co. v. Lamson, 16 Me. 224; Commonwealth v. Commercial Bank of Pa., 28 Pa. St. 383. 2 Darnell v. State, (1887) 48 Ark. 821; State v. Real Estate Bank, (1843) 5 Ark. 595; Chicago Life Ins. Co. v. Needles, 113 U. S. 574, per Harlan, J.; State v. Minnesota Central Ry. Co., (1887) 36 Minn. 246; Terrett v. Taylor, 9 Cranch, 51; People v. President &c. of the Manhattan Co., (1832) 9 Wend. 361. A Baltimore & O. R. Co., 4 Gill & J. 122. A sentence of ouster or dissolution is "strictly a judicial act for some imputed delinquency ascertained by proceedings at law instituted for that purpose." Regents of the University of Maryland v. Williams, 9 Gill & J. 365; s. c. 31 Am. Dec. 72, 99. In State v. Noyes, 47 Me. 189; s. c. 43 Am. Dec. 119, the charter conferred certain powers upon the corporation, free from legislative interference, unless the company should in some way abuse the privileges granted, and it was held that whether there had been an abuse was a question for the courts and not for the legislature. 4 Allen v. Buchanan, (1873) 9 Phila. 283; State v. Real Estate Bank, 5 Ark. 595; s. c. 41 Am. Dec. 109. Cf. Regents of the University of Maryland v. Williams, 9 Gill & J. 365; s. c. 31 Am. Dec. 72. 5 Regents of the University of * Chesapeake & O. Canal Co. v. Maryland v. Williams, 9 Gill & J. . |