Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/563

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 530. contract by the mismanagement of the corporate affairs, 1 even though the mismanagement amount to such non-user or mis- user of the corporate franchises as would be a ground for the state to forfeit them. 2 Thus, an illegal election of directors will not release a subscriber; 3 nor a release of other share- holders by the directors ; for if the release was made in pur- suance of competent authority it was valid, and, if not, it was simply void. 4 Similarly, a plea to an action to collect a sub- scription to the stock of a railroad company, that the company has sold or leased its road, is bad on demurrer ; for, if the cor- poration had authority to sell or lease, a subscriber would not be discharged ; and if it had not, the transaction was void and would not affect his rights. 5 § 530. When a radical change is effected, or is sought to be effected, in a corporate enterprise, through a legisla- tive amendment to the constitution, applied for and tue a corpc£ accepted by the corporation, 6 whether or not a dis- r ^s e e |J ter " senting shareholder is released from his subscrip- legislative, . . .... . , action. tion contract is a question involving many considera- tions, and in regard to it there is some conflict of authority. If the change is immaterial, or is an alteration or amendment 1 Chetlain v. Republic Life Ins. Co., 86 111. 220; Southern Life Ins. Co. v. Lanier, 5 Fla. 110. See Mer- rill v. Reaver, 59 Iowa, 404; Oler v. Baltimore, etc., R. R., 41 Md. 583; Oldham v. Mt. Sterling Imp. Co., 103 Ky. 529. 2 Hanover Junction, etc., R. R. Co. v. Haldeman, 82 Pa. St. 36; Connec- ticut, etc., Rivers R. R. Co. v. Bailey, 24 Vt. 465; Mississippi, etc., R. R. Co. v. Cross, 20 Ark. 443; Hammett v. Little Rock, etc., R. R. Co., 20 Ark. 204; Hannibal, etc., Plankroad Co. v. Menefee, 25 Mo. 547; U. S. V. Co. v. Schlegel, 143 N. T. 537; Same v. Foehrenbach, 148 N. Y. 58. See Cunningham p. Edgefield, etc., R. R. Co., 2 Head (Tenn.), 23; Mechanics' Bhlg. Ass'n o. Stevens, 5 Duer(N.Y.), 676. 8 Eakright v. Logansport, etc., R. R. Co., 13 Ind. 404. See Western Plankroad Co. v. Stockton, 7 Ind. 500. Compare § 540. 4 Hall v. Selma, etc., R. R. Co., 6 Ala. 741; Macon, etc., R. R. Co. v. Vason, 57 Ga. 314; Bristol Iron Co. v. Selliez, 175 Pa. St. 18. Contra, Rutz v. Esler, etc., Mfg. Co., 3 111. App. 83 (a more than questionable case). 5 Hays v. Ottawa, etc., R. R. Co., 61 111. 422; Ottawa, etc., R. R. Co. v. Black, 79 111. 262. Compare Nauga- tuck Water Co. v. Nichols, 58 Conn. 403. But see South Georgia, etc., R. R. Co. v. Ayres, 56 Ga. 230. 6 In order to be valid, a vote ac- cepting an act altering the charter, should be passed at a meeting of the corporation duly convened, after notice to all the members. Com- monwealth v. Cullen, 13 Pa. St. 133. Directors cannot bind shareholders 543