Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/600

 § 572.] THE LAW OF PRIVATE CORPORATIONS. [PHAP. IX. the shares, takes away a right which originally existed in it, and materially varies the effect of the certificate of stock. 1 "It is said that when a corporation can lawfully buy prop- erty or get money on loan, any known assurance may be ex- acted and given, which does not fall within the prohibition, express or implied, of some statute (Curtis v. Leavitt, 15 N. Y. 66-67) ; and that is sought to be applied here. But the prohi- bition 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 pur- poses and on due compensation. The right which a stock- holder 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 and 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 burthen 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 stockholder. " Citations are made to us for the converse of this, but they do not come up — sometimes in their facts, sometimes in their declarations — to the necessity of the proposition. Either it is where the capital is not limited and it is new shares that may be issued with a preference, and where there is express power 1 In the absence of authority in its articles of association, a company cannot authorize the directors to issue the unallotted shares as pre- ferred stock, against the wishes of a minority; and a shareholder may enjoin such issue. Hutton v. Scar- borough Cliff Hotel Co. (Limited), 4 De G., J. & S. 672; Melhado v. Hamilton, 28 L. T. N. S. 578. Com- pare Harrison v. Mexican R'y Co., L. R. 19 Eq. 358. Authority to issue an increased amount of preferred 580 stock does not authorize the issue of partly preferred and partly common stock. Covington, etc., Bridge Co. ». Sargent, 1 Cin. Sup. Ct. (Ohio) 354. That a corporation has ac- cepted an amendment to its charter, authorizing it to issue preferred shares, besides its common stock, does not release a dissenting sub- scriber to the common stock from his subscription. Everhart v. Phil- adelphia and W. C. R. R. Co., 28 Pa. St. 339. quaere f 1