repealed by the Legislature, and all corporations doing business in this state, may, as to such business, be regulated, limited or restrained by law."

It is contended by the respondent that, under section 338 of the Revised Statutes, as amended by the Session Laws of 1903, twothirds of the stockholders of the outstanding capital stock were authorized to amend the articles of incorporation against the consent of the minority, so as to make nonassessable full-paid capital stock assessable, and to empower the board of directors to levy an assessment on such stock, and that the Legislature, under the reserved power of the Constitution, was authorized to make such legislation and thereby to affect existing corporations, and hence such legislation was not violative of the federal Constitution, placing an inhibition on the impairment of contracts and the taking of property without due process of law. On the other hand, it is contended by appellant: (1) That neither section 338, as contained in the Revised Statutes, nor as amended by the Laws of 1903, gave any number of stockholders less than the whole the right to make such an amendment; and (2) if it were intended by the Legislature to confer such a power, the right so to do was not within the reservation of the Constitution, for that it was violative of the federal Constitution, prohibiting states from impairing the obligations of contracts and the taking of property without due process of law. The meaning of the phrase in the proviso of section 338 as amended, "that the personal or individual liability" of the holder of fullpaid capital stock for assessment or for the indebtedness or obligations of the corporation shall not be changed without the consent of all the stockholders, is not as clear as it might be. It is argued by respondent that the meaning thereof is that two-thirds of the stockholders might so amend the articles as to create what is called a mere stock liability for assessments or for the indebtedness or obligations of the corporation against a dissenting minority, but that no amendment of the articles could be made, so as to create any kind of liability other than one for a sale or forfeiture of stock, without the consent of all the stockholders. On the other hand, it is argued with much plausibility that full-paid capital stock of a private corporation is the individual and personal property of the stockholder to the same extent as is his chattel, and when specific property of his is made liable for a certain thing or things to that extent he is made personally and individually liable, and hence, in order to change the articles, under the laws of 1903, whereby such a liability is created, a consent of all the stockholders is essential. For the purpose of a consideration and a decision of the other question involved, we will assume, without deciding the point, that the meaning of "personal or individual liability," as used in the statute, does not include a

mere stock liability, and that it was the intention of the Legislature, among other things, to confer the power upon two-thirds of the stockholders of a corporation to amend the articles of incorporation so as to make full-paid nonassessable capital stock assessable against a dissenting minority, and therefore the action taken by two-thirds of the stockholders was within the power conferred by the amendment of 1903. This, then, brings us to the troublesome and greatly controverted question as to whether the Legislature had the authority to confer such a power upon any number of stockholders less than the whole, and as to its effect upon corporations existing when the act was passed.

It is a well recognized principle of law that "the charter of a corporation having a capital stock is a contract between three parties and forms the basis of three distinct contracts. The charter is a contract between the state and the corporation; second, it is a contract between the corporation and the stockholders; third, it is a contract between the stockholders and the state." 2 Cook on Corp. (5th Ed.) § 492; 1 Clark & Mar. Priv. Corp. § 271f. It is also the general rule that, in granting charters or authorizing the creation of corporations under general laws, the state may expressly reserve the power of alteration, amendment, or repeal, and such reservation becomes a part of the contract between the state and the corporation, and is binding. not only upon the corporation, but also upon every individual stockholder. 3 Clark & Mar. Priv. Corp. § 631f. In the case of Dartmouth College v. Woodward, 4 Wheat. (U. S.) 518, 4 L. Ed. 629, it was held that the charter from a state to a private corporation created a contract within the meaning of the federal Constitution, forbidding any state to pass any law impairing the obligation of contracts, and hence the federal Constitution prevented a change by legislative enactment of a charter so issued. All of the text-writers and all the cases upon the subject agree that, to avoid the application of the rule laid down in that case, many of the states, either by a constitutional or statutory provision, provided a limitation upon corporate power by reserving the right to alter, amend, or repeal the charters granted to any corporation. or the laws under which it was created. While the language used in the Constitutions or statutes of the various states defining the reserved power is somewhat different, yet all the authorities agree that the purpose thereof was to avoid the application of the rule announced in the Dartmouth College Case. In all these Constitutions and statutes, so far as we have been able to see, the reservation is as comprehensive and sweeping as is contained in our Constitution; all of them containing the words "alter, amend or repeal," or "alter, repeal or suspend," or "alter or repeal," or words of like kind without limitation or condition. Our Constitution is: "All laws relating to corporations may be al

tered, amended or repealed by the Legislature, and all corporations doing business in this state may, as such business, be regulated, limited or restrained by law." In this respect our Constitution is no broader than that of other states. The important question is: Does the legislative enactment here in question fall within this reserved power?

Without much reflection it might seem that almost any kind of legislation relating to corporations would fall within the reservation of such Constitutions. But, again, all the authorities agree that the power reserved by the various Constitutions or statutes has its limitation, and that thereunder certain acts may be done by the Legislature without violating the federal Constitution, forbidding the impairment of contracts or taking property without due process of law, while certain other things may not be done. It becomes important, therefore, to inquire what power is reserved by these constitutional provisions, and upon this question we find much diversity of opinion in the cases. While it is settled that the power is not unlimited, yet it is very difficult to say what its limitations

It has well been stated by Clark & Marshall, in their work on Private Corporations (volume 3, § 631f): "The difficulty has been in construing such a reservation and determining what amendments are properly within it, and on this question there has been some difference of opinion. There is no use trying to reconcile all the decisions on this point, for they are irreconcilable." Reference, however, to the text-writers and the cases will aid us in determining whether the legislative enactment in question does or does not fall within the power.

In discussing this question the authors just named, at section 631b, say: "And it is equally clear that, if the state has not reserved the power to alter, amend, or repeal the charter of the corporation, or if, although there is such a reservation, it is to be construed, as is held by most courts, as intended merely for the protection of the public, and not for the purpose of enabling the Legislature to change the contract between the corporation and its stockholders, the Legislature has no power to authorize a majority of the stockholders to bind the minority by accepting such an amendment; for this would be to impair the obligation of the contract between the corporation and the dissenting stockholders, by forcing them into a different contract, and therefore would be within the constitutional prohibition against laws impairing the obligation of contracts. At section 631f it is further observed by them: "The true view is that the power to alter, amend, or repeal charters is reserved by the state solely for the purpose of avoiding the effect of the decision in the Dartmouth College Case, that the charter of a corporation is a contract between the state and the corporation within the constitutional prohibi

tion against laws impairing the obligation of contracts, and of enabling the state to impose such restraints upon corporations as the Legislature may deem advisable for protection of the public, and not for the purpose of avoiding the effect of the doctrine in Natusch v. Irving. Such power is not reserved in any sense for the benefit of the corporation, or of the majority of the stockholders, upon any idea that the Legislature can alter the contract between the corporation and its stockholders, nor for the purpose of enabling it to do so.” And at section 275a they say that, under the reserved power, the Legisla ture may make "any alteration or amendment in the charter which will not defeat or substantially impair the object of the grant, or rights of property which have vested under it, and which the Legislature may deem necessary to secure either that object or any other public or private rights. The power, it has been said, may be exercised in all cases and to any extent to carry out the original purposes of the incorporation, 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."

At section 501 of Cook on Corporations (5th Ed.) it is said: "The extent of the power of the Legislature to amend a charter where it has reserved that power, is not yet fully settled, and is full of difficulties. There is a strong tendency in the decisions, and a tendency which is deserving of the highest commendation, to limit the power of the Legislature to amend the charter under this reserved power. It should be restricted to those amendments only in which the state has a public interest. Any attempt to use this power of amendment for the purpose of authorizing a majority of the stockholders to force upon the minority a material change in the enterprise is contrary to law and against the spirit of justice. Under such reserved power the Legislature has only that right to amend the charter which it would have had in case the Dartmouth College Case had decided that the federal Constitution did not apply to corporate charters.

The power to make a new contract for the stockholders is not thereby given to the Legislature. The Legislature may repeal the charter, but cannot force any stockholder into a contract against his will.

** The best view taken of this reserved power of the state is that under it a fundamental amendment of the charter does not authorize a majority of the stockholders to accept the amendment and proceed, but that unanimous consent of the stockholders is necessary."

Morawetz, in his work on Corporations, at section 1097, says: "It was not intended by any reservation in a charter or a general faw to withdraw the Legislature of a state from its properly legislative duties, and make

it the arbiter over private rights. It is not the purpose of a provision of this nature to give the Legislature of a state fatherly control over the affairs of private corporations. The right is reserved for the benefit of the public and can be exercised only for public purposes." And at section 1098, he says: "The nature of a corporation is, therefore, an important consideration in determining the extent of the reserved right of the state to alter or amend its charter. In some corporations the public is interested, and in others it is not; and the right of interfering in their management varies accordingly. The Legislature of a state is authorized to alter the charter of a corporation, or interfere in its management, without the consent of the shareholders, only so far as the welfare and convenience of the public may require."

In 1 Beach on Private Corporations, § 40, it is said that under the reserved right "an amendment must not defeat or substantially impair the object of the grant, or any rights of property vested under it, nor deprive the incorporators of control of the corporate property, nor divest or impair the rights of the shareholders as between themselves, nor alter the relation between the corporation and subscribers to its stock, nor work injustice to the incorporators or to the corporate creditors."

In 4 Thompson's Commentaries on the Law of Corporations, § 5417, it is said: "It may be added that there is a view to the effect that, even where the right to repeal or alter a charter has been reserved to the Legislature, the right cannot be so exercised as to interfere with contract rights subsisting between the corporation and its stockholders. The theory is that, while the Legislature may alter and amend charters, yet it cannot compel dissenting stockholders to accept such alterations and amendments; in other words, it cannot force them into a new contract into which they did not agree to enter."

Black, in his work on Constitutional Law, at page 535, says: "This power may be reserved in the particular charter itself; but it is equally effective if the state Constitution or a statute, in force when the charter is granted, reserves to the Legislature the right to revoke or modify it. In the latter case, the reservation becomes a part of the contract. But the exercise of this power must be reasonable, and must have relation to the original nature and scope of the charter. It cannot be employed as a means of forcing the corporation into enterprises not contemplated by the charter, nor to deprive the corporators of their property, nor to abridge the lawful rights of the stockholders."

Spelling, in his work on Private Corporations, at section 1028, says: "But the effect of such reservations is not as far-reaching and important as might be supposed without due reflection. The contract between the

state and the corporation with respect to the grant of the franchise of being a corporation is of little significance in comparison with the innumerable collateral agreements depending upon the exercise of the franchise and into which the express and implied terms of the charter become incorporated. No reservation of amendment and

alteration, however broad and sweeping, will authorize a disturbance of vested rights or take away or divest corporate funds without compensation or due process of law."

In Looker v. Maynard, 179 U. S. 46. 21 Sup. Ct. 21, 45 L. Ed. 79, in speaking of the effect of the reservation, the court says the power may be exercised by the Legislature when it will "not defeat or substantially impair the object of the grant, or any right vested under the grant, and which the Legislature may deem necessary to carry into effect the purpose of the grant, or to protect the rights of the public or of the incorporation, its stockholders or creditors, or to promote the due administration of its affairs."

In 1 Rose's Notes on United States Reports, p. 942, it is said: "In many of the cases, the purpose of the legislation attempted under the reserve power is the taking away of something-whether a franchise, power, privilege or immunity-which the corporation has hitherto enjoyed. * Un

der the reserve power the state * may take away or it may modify that which it has granted. But that is all. Property acquired during the exercise of these powers it may not divest, contracts already executed it may not annul, acts lawful when committed it may not afterwards punish. taxes thus remitted it may not afterwards exact, and the legislation thus attempted must be prospective and not retrospective in its operation. This principle has been very clearly stated by several of the most eminent of the members of the Supreme Court of the United States"-citing numerous authorities from that court.

In Re Newark Library Ass'n, 64 N. J. Law, 217, 43 Atl. 435, it was held that the power reserved to alter, suspend, and repeal relates to those matters which concern the public, and not to the mode of controlling the affairs of the stockholders inter sese. Thereunder it was held the Legislature may alter or repeal the charter and extinguish the corporate existence of the association, but that the Legislature was without power to take away from the shareholders the property which they had acquired during its existence, or to affect or change the rights of the stockholders as among themselves. To the same effect is Pronick v. Spirits Distributing Co., 58 N. J. Eq. 97, 42 Atl. 586; and in the case of Intiso v. Loan Ass'n, 68 N. J. Law, 588, 53 Atl. 206, it was held that the power of alteration, amendment, or repeal, which the state reserved in its grant of permissive incorporation, "has no effect upon contract relations arising from membership,"

and that it was not competent for the Legislature to impair the obligation of such a contract. In the case of Zabriskie v. Hackensack & N. Y. R. R. Co., 18 N. J. Eq. 178, 90 Am. Dec. 617, approvingly quoted by all the text-writers, the court, in speaking of the reserve power, says: "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."

In the case of Snook v. Ga. Improvement Co., 83 Ga. 61, 9 S. E. 1104, it was said by the court: "It is also held that the charter of a corporation is a contract of a dual character: First, a contract between the state which grants the charter and the corporation; and, secondly, a contract between the corporation and its members. And while the state, if it reserves the power to do so, can alter and amend the charter, and the corporation itself cannot object to the alteration or amendment, yet the state has no pow. er to make any material or essential alteration in the contract between the members themselves and the corporation."

From the texts and the cases it will be seen that under the reservation the state is not only unauthorized to alter or amend charters of existing corporations in such a way as will change the fundamental character of the corporation, impair the object of the grant, or rights vested thereunder, but it is also unauthorized to alter or amend them in such a way as will impair the contractual relations or rights of the stockholders among themselves, or between the corporation and its stockholders; and it will also be seen that under the reserved power the Legislature has only the right to amend the charter, or laws with respect thereto, which it would have had in the event it had been decided in the Dartmouth College Case that the federal Constitution did not apply to corporate charters. The Dartmouth College Case did not call in question nor involve any right or relation of the corporators among themselves. It involved only the relation of the corporation and the state. Without the reservation it was held that even such relation cannot be changed without doing violence to the federal Constitution. Because of the reserved power the state may now amend or alter the charter, so far as affecting the contract with itself, and so long as it does not change the fundamental character of the corporation or impair any

vested rights acquired thereunder. But, as stated by the authorities, the right is reserved for the benefit of the state and of the public and for public purposes. The power can only be exercised to the extent that the state is interested. It can alter or modify any right, privilege, or immunity granted by it. It cannot, however, reach out and impair the obligations of contracts existing between the corporation and its members, or among the corporators themselves, any more than it can impair the obligations of contracts existing between other individuals. Undoubtedly it may repeal the charter, or all laws under which it was granted, and may take away altogether the franchise and privileges granted under it. The exercise of such powers pertain directly to its contract, and was expressly reserved to the state, and with reference to which every stockholder subscribed for or purchased his stock. So, under the reserved power, the Legislature may make such reasonable amendments or alterations as it may deem necessary to carry into effect the purposes of the grant, or to protect the rights of the public, or of the incorporation and its stockholders, or to promote the due administration of its affairs. when such amendments or alterations will not defeat or substantially impair the object of the grant or any vested rights. Independent of the reservation there are many things which the state may do in the exercise of its police powers towards regulating and restricting corporate powers and functions.

When reasonably exercised, such legislative enactments do not fall within the prohibition of the federal Constitution.

Bearing in mind that the corporate charter is a dual contract-one between the state and the corporation and its stockholders, the other between the corporation and its stockholders-and that under the reserved power the state may alter or amend the former, but not the latter, the question is: Under which do the legislative enactment of 1903 and the action taken by the majority of the stockholders fall? We are of the opinion that they do not pertain to any right, privilege, or immunity which the state had granted to the corporation or to its stockholders, and that the action by such stockholders in no wise affected or was related to the contract existing between the state and the corporation. It merely pertains to and affects the contract existing among the stockholders themselves. Neither the enactment nor the stockholders' amendment of the articles purport to be for the benefit of the creditors or for the benefit of the public. Thereunder no right or privilege in favor of creditors or the public is created, and thereunder no creditor could assert any right or claim that could not have been asserted by him prior to the enactment. In the original articles of incorporation each stockholder agreed, one with the other, that his fullpaid capital stock should be nonassessable.

This provision might have been omitted or inserted as the corporators saw fit to agree among themselves. Neither the state nor the public were concerned, whether they agreed upon one or the other. No franchise or privilege granted by the state to the defendant or its members was dependent upon, this provision. The same grant, franchise. and privileges would have been granted had the provision been omitted. Had it been omitted, no other or greater liability would have been created in favor of creditors or the public than was created by its insertion, Such a stipulation did not, then, in any wise pertain to the contract between the state and the corporation. It was manifestly intended to concern and fix the reciprocal rights of the stockholders among themselves, and to place a limit upon the amount of money or capital that each was required to put into the enterprise and contribute to the corporation. The whole consideration for the agreement that no further contribution of capital to the corporation should be exacted was the mutual promise of the stockholders, the one to the other. Neither the state nor the public had anything to do with it, nor was either in any wise concerned therewith. The corporators had the undoubted right, as among themselves, to stipulate and agree as to the extent of their contributions. Each corporator had the right to determine for himself the amount of money or capital he would contribute to the enter prise and risk in the business. No subscriber or purchaser of stock could legally be made to contribute to the corporation more than he agreed to contribute. Each had the legal right to have such contribution measured by the terms of his agreement and by the laws in force at the time of its execution. To permit the Legislature to confer authority upon any number of stockholders less than the whole to bind a dissenting minority to another and a different agreement in such respect is to force them into a contract which they never made and which they are not willing to make. To do so is to confer the power on the majority to determine the amount of contributions that each stockholder is required to make. If in the face of the contract as here made by the corporators the majority may legally authorize the board of directors to levy one assessment, they may authorize it to levy an unlimited number of assessments, restricted only as such actions may be questioned by bad faith. that respect a stockholder is placed in a worse position than that arising from a mere partnership, from which he may withdraw at any time and demand a distribution of assets. But here, if the action of the majority shall be upheld, a dissenting minority may be required to contribute additional capital to the corporation indefinitely, or, on their failure so to do, suffer an involuntary alienation of their full-paid capital stock, which is their private property, and for

feit all right to participate in the distribution of the assets. The exercise of such a power is something which affects the very core of the contractual relations of the stockholders among themselves; and a legislative enactment which confers such a power is, in our judgment, an impairment of the obligation of a contract which is protected by the federal Constitution.

We are, however, cited to cases where it has been held that it was competent for the Legislature, under the reserved power, to impose on the corporators a statutory individual liability for the future debts and obligations of the corporation, when, under the charter as originally granted, no such liability was imposed, and that such legislation does not impair the obligations of contracts, within the meaning of the federal Constitution; and hence it is argued that, if such a change or alteration of the charter by legis lative enactment is not forbidden, such legislation as was here attempted and such action as was here taken by the majority are likewise not forbidden. We are not disposed at this time. nor is it necessary, to question the correctness of such rulings. In principle, however, we perceive a marked distinction between the exercise of such power and the one here in question. Undoubtedly, if it were competent for the Legislature to create such an individual statutory liability, it would be competent for it to create a mere stock liability for the future debts and obligations of the corporation. But the exercise of such a power pertains directly to the very franchise and immunity granted by the state, and directly relates to and affects the contract existing between the state and the corporation and its stockholders. Among others, one of the principal objects of persons forming private business corporations is to obtain and have granted to them an immunity from personal or individual liability for the debts and obligations resulting from the conduct of the business carried on by the corporation, and to avoid the personal and individual liabilities usually growing out of the relation of a mere partnership. Such an immunity is generally granted to members of most private business corporations and of some quasi public corporations. As the authorities say, this limited liability is a part of the corporate privilege conferred by the state, and the right to repeal the franchise itself includes the right to repeal any part of, or altogether, the franchise or privilege of limited or nonpersonal liability. The immunity of such liability to the corporators existed in the first instance only because the state had granted it to them, and what it has granted it may, under its reserved power, take away or modify.

But the Legislature has not undertaken to repeal, modify, or alter any immunity or liability of any kind theretofore granted by it to the members of the defendant corporation. No new or different liability in such