which originally existed in it, and materially varies the effect of the certificate of stock. It is said that when a corporation can lawfully buy property or get money on loan, any known assurance may be exacted and given which does not fall within the prohibition, express or implied, of some statute. But the prohibition to such action as this is found not, indeed, in a statute commonly so called, but in the constitutional provision which forbids the impairment of vested rights, save for public purposes and on due compensation. The right which a stockholder gets on the purchase of his share, and the issue to him of the certificate therefor, is such a vested right. It is contended that the power so to do is an incidental and implied power necessary to the use of the other powers of the corporation, and is a legitimate means of raising money before securing the agreed consideration therefor. We have already conceded that it is legitimate to borrow money and to secure the repayment of it with a compensation for the use of it. But that is when it is done in such way as to put the burden upon every share of stock alike, and to enable every share of stock to be relieved therefrom alike; in such way as to preserve the equality of right and privilege and value of the shares, and maintain intact the contract thereto with the stockholders. "We are, therefore, of the opinion that there was no power in the corporate body, nor in a majority of the stockholders, to provide by by-law for the creation of a preferred stock, so as to bind a minority of the stockholders not assenting thereto." In what has been stated a most important principle has been referred to, which, it is believed, is controlling upon the question at hand. This principle to which reference is here made is that the charter proceeds from the State, and that nothing can be legally done by the corporation acting through its stockholders not authorized either by statute or by the charter itself. Thus it is clear that in these States where the statutory right to issue preferred stock is not granted and the charter itself only provides for common stock, no preferred stock can be legally issued by the stockholders as against the State, except by amending the charter itself. This, too, even where the stockholders consent.1 This question is likely to be presented in a troublesome form where common stock has been pledged to creditors before the preferred stock was issued.2 From a careful examination of the authorities it may be said 1 Knoxville, etc. Co. v. City of Knoxville, 98 Tenn. 1; 37 S. W. 883. 2 See generally Lockhart v. Van Alstyne, 31 Mich. 76; McGregor v. Insurance that in order to constitute an issue of preferred stock valid as against all the world, there must be a statute authorizing it, or provision therefor inserted in the charter. To make the issue valid as against all but the State, the consent of all of the holders of common stock to the issuance of preferred stock is, doubtless, all that is necessary. It is hardly necessary to add, in addition to the foregoing, that the total amount of common stock added to the preferred stock so issued must not in any case exceed the total authorized capital stock of the corporation. The rights of holders of preferred stock depend upon the terms of the statute or of the charter or by-law authorizing it.2 Ordinarily the power to authorize the issuance of preferred stock vests. in the stockholders and not in the directors.3 Where a portion of the stock of the corporation is issued as preferred, no creditor of the corporation can object, provided the money paid for the stock reaches the treasury of the corporation, and the dividends on the stock are not to be paid except out of net profits. Unless the statute provides otherwise, preferred stockholders may be deprived of the right which they would otherwise have, to vote their stock in the same manner as common stockholders.5 This is commonly done either by charter provision or by a by-law adopted before any preferred stock is issued. Preferred stock cannot be lawfully issued with the provision that it shall bear interest absolutely. In order to make preferred stock a lien upon the corporate assets statutory authority is necessary.7 Co., 33 N. J. Eq. 181; Higgins v. Lansingh, 154 Ill. 301; 40 N. E. 362; Covington, etc. Co. v. Sargent, 1 Cinn. Sup. Ct. 354; Elevator Co. v. Memphis, etc. Co., 85 Tenn. 703; 5 S. W. 52; March v. Eastern R. R. Co., 43 N. H. 515; Bates v. Androscoggin, etc. R. R. Co., 49 Me. 491; Pronty . Mich., etc. R. R. Co., 1 Hun, 655; Kent v. Quicksilver Min. Co., 12 Hun, 53; Jones v. Terre Haute, etc. Co., 57 N. Y. 196; Hoyt v. Quicksilver Mining Co., 78 N. Y. 159; s. c. 9 Week. Digest, 187, aff'g 17 Hun, 169; Curry v. Scott, 54 Pa. St. 270; Sturges v. E. Un. Ry. Co., 7 De Gex, M. & G. 158; Matthews v. Gt. Northern R. R. Co., 28 L. J. Ch. 375; Green's Brice Ultra Vires, 145; Hutton v. Scarborough Hotel Co., 2 Drew & Sim. 514; Hook v. Gt. Western Ry. Co., 3 L. R. Ch. 262; Henry v. Gt. Northern Ry. Co., 4 K. & J. 1; 27 L. J. Ch. 1; Corry v. Londonderry, etc. Co., 29 Beav. 272; 3 L. J. Ch. 290; Coates v. Nottingham Water Works Co., 30 Beav. 86. 1 Higgins . Lansingh, 154 Ill. 301; 40 N. E. 362. 2 Scott v. B. & O. R. R. Co., 93 Md. 75; 49 Atl. 327. 3 See Coit v. Freed, 15 Utah, 426; 49 Pac. 533. 4 First Nat. Bank of Peoria v. Peoria Watch Co., 191 Ill. 128; 60 N. E. 859. 5 Lockhart v. Van Alstyne, 31 Mich. 76; Mackintosh v. Company, 32 Fed. 350; Miller v. Ratterman, 47 O. St. 141. 6 Winscott v. Investment Co., 63 Mo. Ap. 367. 7 Continental Trust Co. v. Toledo, etc. Ry. Co., 72 Fed. 92. § 27. Power to change the Corporate Purposes. In the early days the right of amendment, when the same related to altering the original purposes of corporations, was jealously guarded and limited both by statute and by judicial construction. In later years there has been evinced greater liberality in this regard, as evidenced by granting to corporations unlimited power of amendment. The only real difficulty in this connection arises when an attempt is made to so completely change the original purposes for which a corporation was formed as in effect to create a new corporation. Under the Pennsylvania Incorporation Act governing amendments, it was held that this could not be done.2 The present attitude of the courts on this subject is well shown by a recent New Jersey decision, that of Meredith v. New Jersey Zinc & Iron Company. In this case the right of amendment, even when producing fundamental changes in the corporate purposes, was sustained. It appears clear that under the liberal power of amendment existing to-day in the majority of the States, any changes may be made, no matter how fundamental, by the consent of all the stockholders. And where the matter is simply one between the corporation and the State, the right to make such an amendment cannot, in the States referred to, be questioned when adopted by the requisite number of stockholders. § 28. Power to change Number of Directors. - Only in those States where the number of directors is required to be fixed in the articles, is it necessary to have statutory authority to change the same. In other States the matter of amendment may be regulated by the by-laws. However, in the larger number of the Commonwealths, the power to amend the articles with reference to changing the number of directors is required to be based upon express statutory authority so to do." 1 See Part III., Table 8, page 578. 2 In re Pennsylvania Bottling Co., 19 Pennsylvania County Court Reports, 593. See also State v. Taylor, 53 Iowa, 759; 6 N. W. 39. 3 Meredith v. Company, 59 N. J. Eq. 257; 44 Atl. 55. See also sec. 112, post. 4 See also Grand River College v. Robertson, 67 Mo. App. 329; Mercantile Statement Co. v. Kneal, 51 Minn. 263; 53 N. W. 632; Bowie v. Grand Lodge, 99 Cal. 392; 34 Pac. 103; Day v. Company, 75 Ia. 694; 38 N. W. 113; Stickle v. Liberty Cycle Mfg. Co. (N. J. Eq.), 32 Atl. 708; Banet v. Company, 13 Ill. 504; Ross v. Company, 77 Ill. 134; Pac. Ry. Co. v. Renshaw, 18 Mo. 210; Ashton v. Burbank, 2 Dill. (U. S.) 435; Del. Ry. Co. v. Thorp, 1 Hurst (Del.), 149; M. B. Ry. Co. v. Sullivan, 37 Ga. 240; Com. v. Cullen, 13 Pa. St. 133. 5 See Part III. Table 16, page 586; also see Matter of Griffing Iron Co., 63 N. J. Law, 168; 41 Atl. 9311; 63 N. J. Law, 357; 46 Atl. 1097. § 29. The Power to change the Corporate Domicile and Principal Place of Business. As will hereafter be seen, it is essential to corporate existence that the corporation should have a home.1 It is the naming of the domiciliary office in the articles which fixes. the residence of the corporation for jurisdictional purposes, and fixes the usual place for holding stockholders' and directors' meetings. If it is desired to change the domicile, or if the location of the corporation's principal place of business is to be transferred from one place to another, an amendment to the articles must be had under legislative sanction. It should, however, be noted in this connection, that the corporation's domicile and its principal place of business are not necessarily one and the same thing.3 Again, if, as is the case in some States, the name of the agent upon whom process upon the corporation may be served, is required to be set forth in the articles, in order to lawfully substitute a new agent, an amendment to the articles is necessary, made pursuant to statutory authority given in the premises.* § 30. Power to acquire and enforce a Lien upon Stock to secure the Payment of Debts Due the Corporation. In a large number of the States statutes exist expressly granting to corporations the right to enforce a lien upon the stock of its members for the purpose of securing the payment of debts due from such members to the corporation.5 The courts are not by any means in entire agreement as to whether statutory authority to enforce such a lien is essential to its validity. Some courts, of excellent repute, maintain the affirmative, and others take the opposite view. It seems fairly certain that at common law such a right did not exist.7 The true view appears to be that while at common law a corporation had no lien on the shares of its capital stock for the debts due it from the stockholders, nevertheless such a lien may be acquired either when given by statute or when such right is 5 See Part III. Table 9, page 579. 6 Costello v. Company, 69 N. H. 405, 43 Atl. 640; Young v. Vough, 23 N. J. Eq. 325; Moore v. Bank, 52 Mo. 377; In re Klaus, 67 Wis. 401; 29 N. W 582; Farmers', etc. Bank, r. Wasson, 48 Ia. 336; Cont. T. R. Co. v. Toledo, etc. Ry. Co., 72 Fed. 92. 7 Brinkerhoff, etc. Co. v. Company, 118 Mo. 447; 24 S. W. 129. preserved by inserting provisions therefor in the Articles of Incorporation, or by the passage of a valid by-law, or by inserting a provision therefor in the stock certificates.1 - § 31. Power to levy Assessments against the Stockholders with the Right to forfeit their Stock for Non-payment thereof. - With some few exceptions the right to forfeit stock for non-payment of valid assessments levied against it is preserved by statute in most of the States and Territories.2 Even in the absence of such statute the right to forfeit stock for non-payment of valid assessments when given to the corporation by its by-laws will probably be enforced by the courts. In any event the common law remedy would exist, giving the corporation the right to recover judgment against the delinquent stockholders for the amount of such assessments.3 In all cases the right to forfeit stock is considered to be merely a cumulative remedy. The right to levy assessments upon stockholders does not exist after payment by such stockholders. for their stock in full, unless the power to do so is conferred either by statute, by the articles of incorporation, or by the unanimous consent of all the stockholders.5 But even in the absence of express power to declare a forfeiture of stock for non-payment, a corporation may sue for amount of subscription to the capital stock, and on failure to collect the amount subscribed may secure payment by sale of stock subscribed." On the general subject of assessments the following may be said: provisions for the forfeiture of capital stock for the non-payment of assessments must be just and reasonable in order to be valid.7 The terms of the statute in any event must be strictly complied with. The power to levy assessments rests in the directors by virtue of their office and not in the stockholders.9 Even where 1 Union Bank v. Laird, 2 Wheaton (U. S.), 390; St. Louis Per. Ins. Co. v. Goodfellow, 9 Mo. 149; Van Sands v. Bank, 26 Conn. 144; Sargent v. Insurance Co., 25 Mass. 90. See also Atchison Bank v. Durfee, 118 Mo. 431; 24 S. W. 133; V. G. B. Co. v. Bloede, 84 Md. 129; 34 Atl. 1127; Bishop v. Globe Co., 135 Mass. 132. 2 See Part III. Table 17, page 587. 3 San Joaquin v. Beecher, 101 Cal. 70; 35 Pac. 349. 4 M. F. & N. Co. v. Hall, 121 Mass. 272; Raymond v. Caton, 24 Ill. 123; Lesseps v. Architects' Co., 4 La. Ann. 316. 5 Enterprise Ditch Co. v. Moffitt, 58 Neb. 642; 79 N. W. 560; Duluth Club v. 6 Chase v. Company, 5 Lea (Tenn.), 415. 7 Crissey v. Cooke, 67 Kan. 20; 72 Pac. 541. 8 P. G. T. R. Co. v. Graham, 11 Metcalf, 1. Chouteau Ins. Co. v. Floyd, 74 Mo. 286. |