Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/598

 § 572.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. necessary to raise further capital and to issue preferred shares, the legislature may authorize the issue on a vote of the holders of common shares, and a dissenting shareholder cannot prevent the issue of preferred shares nor the payment of dividends thereon. 1 Nevertheless, unless the right to alter and repeal is reserved to the legislature, it would seem that no constitutional legislation could authorize the issue of preferred shares when such an issue would impair the rights of any shareholder in the corporate funds. § 572. A leading case on the power of a corporation to issue preferred shares is Kent v. Quicksilver Mining Co.; 2 a case in which a number of appeals, taken in actions brought to determine the validity of certain preferred shares, were heard together before the New York Court of Appeals. The following somewhat extended citation is from the opinion of that court delivered by Judge Folger : " We know nothing in the constitution or the law that inhibits a corporation from beginning its corporate action by classifying the shares in its capital stock with peculiar privileges to one share over another, and thus offering its stock to the public for subscription there- to. No rights are got until a subscription is made. Each subscriber would know for what class of stock he put down his name, and what right he got when he thus became a stock- holder. There need be no deception or mistake ; there would be no trenching upon rights previously acquired ; no contract, express or implied, would be broken or impaired. " This corporation did otherwise. A by-law was duly made, which declared the whole value of its property and the whole amount of its capital stock, and divided the whole of it into shares equal in amount, and directed the issuing of certificates of stock therefor. It is not to be said that this by-law author- ized anything but shares equal in value and in right ; or that the taker of one did not own as large an interest in the corpo- held authority to issue preferred shares, Gordon v. Richmond, etc., R. R. Co., 78 Va. 501. etc., Bridge Co., 10 Bush (Ky.), 69. This on the principle that such amendments to the charter may be 578 made by the legislature as are neces- sary to enable the original enterprise to be carried out. lb. See also Rut- land, etc., R. R. Co. v. Thrall, 35 Vt. 536. 2 78 N. Y. 159.
 * City of Covington v. Covington,