Case Name: Thomas C. Perkins et als. vs. Arthur D. Coffin et als.
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1911-05-29
Citations: 84 Conn. 275
Docket Number: 
Parties: Thomas C. Perkins et als. vs. Arthur D. Coffin et als.
Judges: Hall, C. J., Prentice, Thayer, Roraback and Wheeler, Js.
Reporter: Connecticut Reports
Volume: 84
Pages: 275–318

Head Matter:
Thomas C. Perkins et als. vs. Arthur D. Coffin et als.
First Judicial District, Hartford,
March Term, 1911.
Hall, C. J., Prentice, Thayer, Roraback and Wheeler, Js.
Averments as to the powers of a private corporation where its charter is embodied in the pleading, and as to the effect of amendments thereto, also set out, are averments of conclusions of law which will be disregarded save as they are well founded.
In determining whether or not there was error in the sustaining of a demurrer, the question is as to its sufficiency, and not as to the sufficiency of the reasons assigned by the trial court.
An amendment to the charter of a private corporation offered for acceptance as an entirety must be accepted as offered.
Where an amendment embodying a variety of powers is offered for acceptance by a majority of the stockholders, and certain of these powers entirely separable from and independent of the others are such as the majority may lawfully accept on behalf of the corporation, acceptance of the amendment by the majority will be effectual as to those matters, although ineffectual as to other matters.
The charter of the Connecticut River Company, originally granted in 1824, contained no reservation to the State of a right to alter, amend or repeal. In 1856, at the request of the corporation embodied in a vote passed at a stockholders' meeting, the legislature passed a resolution amending it. No formal vote of the stockholders accepting the amendment was ever adopted, but the corporation has ever since exercised the powers contained therein in a manner to become known to every stockholder. Held that an acceptance of the amendment would be implied, and that, therefore, ■ under § 3315 of the General Statutes, the charter had become an open one.
Alterations in the charter of a corporation which make a material or fundamental change therein will not become operative unless accepted or assented to by all the stockholders. Those which make auxiliary or incidental changes only will become operative upon acceptance by a majority.
The right of the majority to rule in respect to charter changes of the latter class, as in all matters relating to the corporate business and policy within the authority of the charter, is implied in the contract into which the stockholders enter.
There is no exact formula for ascertaining what changes are fundamental and what incidental. Each case must be determined upon its own peculiar facts.
The original charter had in view the large public purpose of improving the navigation of the Connecticut River by means of artificial constructions which would enable transportation to avoid Enfield Falls, and secure safe passage by the use of canals with locks. Its purpose was to achieve this result through the agency of private capital and enterprise. To enlist the aid of these agencies, inducements were held out in the form of rights and privileges embodied in the charter. Among these rights and privileges were those of owning boats for river commerce, of building wharves and piers along the river banks, of collecting tolls, of purchasing and holding mills, mill sites and manufactories adjacent to the falls, and of holding, selling or leasing them at will. An amendment made in 1881 expressed as one of its purposes the preservation and maintenance of the company’s “water power.” Held:—
1. That the rights and privileges conferred upon the corporators as the reward of their undertaking were as much within the main design of the charter and as much a.part of its plan and purpose as any other features of it.
2. That these rights and privileges, in view of the charter provisions and purposes and of the conditions involved in the situation, included the right to utilize or sell for use by others the energy latent in the fall of the water subjected to the corporation’s control and diversion.
3. That a charter amendment which authorized the corporation to utilize this energy to the same end as formerly, but by a method which involved its conversion into electricity and transmission to the point of use by means of an electrical generation and transmission system, was not one which created a fundamental clfange in the corporate powers, and therefore might be accepted by the consent of a majority of the stockholders.
The fact that the exercise of the new power would involve large and costly constructions, the employment of large capital not already possessed by the company, the expenditure of large sums, and the creation of heavy financial burdens, obligations and hazards which might result in the destruction of the present value of the stock, while being one of the highest moment as bearing upon the question of corporate policy, is not one which is significant in determining whether or not its addition accomplishes a fundamental change in the character and purposes of the corporation. It is the element of quality rather than of magnitude which is decisive upon that question.
The fact that an increase of stockholders’ liability, pursuant to § 3911 of the General Statutes, would attend entering upon the business of generating and selling electricity, would not make the change a fundamental one.
The change would not be converted into a fundamental one for the reason that the prosecution of the newly-authorized business would expose the corporation to taxation upon so much of its property as should be acquired for its conduct, whereas it had been altogether exempt from taxation.
Present limitations upon the liability of the stockholders and tax exemptions do not possess the character of contractual rights of such a nature that the State may not, in the exercise of its reserved power, change them for the protection of the rights of the public or of creditors.
Whatever alteration of a charter may be imposed upon a corporation in the exercise of the reserved power may be offered for acceptance by the majority of the stock.
Where the officers of a corporation make unauthorized expenditures in procuring from the State the proffer of additional charter rights and privileges, the grant is not thereby rendered nugatory and its acceptance by the stockholders will not be enjoined for that reason, since it is as competent for the corporation to directly or indirectly ratify the expenditures as it is for it to accept.
The propriety of future expenditures to secure further legislation in aid of projects purported to be authorized by an accepted charter amendment, if they are proper in themselves, is concurrent with the lawfulness of the corporate purpose in aid of which the legislation is sought.
Argued March 7th
decided May 29th, 1911.
Suit by minority stockholders to restrain the defendants from calling and holding a meeting of the stockholders of the Connecticut River Company for the purpose of passing upon the question of accepting an amendment of its charter granted by the General Assembly of this State, and from other corporate action, brought to and tried by the Superior Court in Hartford County, Bennett, J.; the court sustained a demurrer to the complaint, and rendered judgment for the defendants, from which the plaintiffs appealed.
No error.
Lewis Sperry and Lucius F. Robinson, for the appellants (plaintiffs).
John R. Buck and John H. Buck, for the appellees (defendants).

Opinion:
Prentice, J.
The plaintiffs, stockholders in the defendant corporation, The Connecticut River Company, seek a restraining order against it, and against its president and secretary and treasurer. It appears by the allegations of the complaint, demurred to, that the charter of the corporation, at the time the action was brought, was the resultant of an original grant made in 1824 (1 Private Laws, p. 73), and of amendments thereto, including one made in 1856 (4 Private Laws, p. 1377) and one made in 1881 (9 Special Laws, p. 68). These resolves of the General Assembly are set out in full in an exhibit annéxed to the complaint. Thus the purposes and objects of the corporation, and the powers and privileges enjoyed by it through grant from the State, as they originally were and have since become, are fully disclosed. They are to be determined by legal construction, to which any allegation thereupon must yield. Auffmordt v. Stevens, 46 Conn. 411, 413.
The plaintiffs charge that the defendants threaten and intend to call and hold a stockholders' meeting for the acceptance of an amendment to this charter, which amendment was passed by the General Assembly in 1909, and by its terms was offered to the corporation for acceptance by a majority vote of the stockholders; that the defendant Coffin, president, personally and as trustee, is able to control the action at such meeting of a majority of the stock; and that he threatens and intends to so control it that the vote of such stock shall be cast in favor of the acceptance of said amendment against the vote and protest of the plaintiffs and others, minority stockholders.
It is further alleged in this connection that this amendment, embodied in the complaint, would, if accepted, change the fundamental character and purposes of the corporation, and thus impair the obligation of the contract existing between the plaintiffs and their co-stockholders, change the contractual relation between the plaintiffs and the corporation, its stockholders and creditors, and impair the rights, privileges and immunities which the plaintiffs enjoy under and by virtue of those relations, all in violation of the provisions of paragraph 1, § 10 of Article First of the Federal Constitution. It is also alleged that the acceptance of the amendment would operate to deprive the plaintiffs of their property without due process of law, and to deny to them the equal protection of the laws, in violation of the Fifth and Fourteenth Amendments of that Constitution.
It is further charged that it is the intention of the defendant president, in the event of the acceptance of the amendment, to have the corporation proceed to build a large and expensive dam across the Connecticut River at Windsor Locks, and to build and operate a large electric power plant and electric transmission system requiring expenditures of very large sums of money, and that the defendant individuals, as officers and agents of the corporation, and the corporation, threaten and intend, in continuance of a policy already inaugurated, to expend large sums of the money of the corporation in the development of an electric power plant, and in attempts to secure further legislation by the General Assembly of this State and by the Congress of the United States to enable it to exercise the powers of an electric power company. In this connection it is also averred that the building, construction and operation of an electric power plant and electric transmission system, and the generation and sale of electricity by the corporation, would "radically change the fundamental character of its corporate business and purposes."
Among the allegations thus referred to are several which embody conclusions of law only. The admissions of the demurrer do not, therefore, run to them, and they may be dismissed save as the facts presented support them. Coughlin v. Knights of Columbus, 79 Conn. 218, 222, 64 Atl. 223. Such an allegation is that which sets out that the acceptance of the amendment would change the fundamental character and purposes of the corporation. It is a question of law whether or not the amendment, if engrafted upon the charter, would accomplish- what the law regards as a fundamental change in the character and purposes of the cor poration. 2 Cook on Corporations (6th Ed.) § 499; 1 Thompson on Corporations (1st Ed.) §85; New Haven & Derby R. Co. v. Chapman, 38 Conn. 56, 71; Memphis Branch R. Co. v. Sullivan, 57 Ga. 240; Witter v. Mississippi, O. & R. R. R. Co., 20 Ark. 463. As we have before us in the complaint both the existing charter and the proposed amendment, that question is open to our determination, and that determination will supersede any allegation of the complaint. The allegation that the threatened construction and operation would change the fundamental character of the corporate business and purposes, is one of a similar character. Those which charge that the legal result of the threatened acceptance of the amendment would be an invasion of the plaintiffs' rights as guaranteed by the Federal Constitution, are also included in this category of reviewable conclusions of law.
The relief which is asked is two-fold: (1) A temporary and permanent injunction against the defendants restraining them from calling, holding or conducting a meeting of the stockholders of the corporation for the purpose of passing upon the acceptance of the amendment; and (2) a permanent injunction restraining the two defendant officers and their successors in office from "expending any money of the corporation, or obligating the corporation in any way for the purpose of developing an electric power plant and electric transmission system," and against the corporation restraining it from "establishing, building or constructing any electric power plant and from generating, selling or delivering electricity; from the expenditure of any money to secure any legislation either from the General Assembly or from the Congress of the United States for the purpose of aiding in developing an electric power plant, or for the generation, sale or delivery of electricity."
It thus appears that there are two classes of subject-matter of complaint, and two classes of prayers for relief, which are so distinct that considerations which might with propriety be addressed to one might not be pertinent to the other.
The demurrer contains a considerable number of grounds of demurrer. Some of them deal with incidental matters appearing in the complaint, and not yet referred to, or with aspects of the case which are essentially incidental. Others go to the question which underlies the case or its most prominent phase, to wit: as to the power of a majority of stock to effectively accept an alteration or amendment of a charter in opposition to the will of a minority. The court sustained the demurrer upon certain grounds, and refrained from passing upon others which were regarded as not essential to the result reached. We have no occasion to follow the court below in its line of reasoning, or to pass upon the soundness of its special conclusions as disclosed in its memorandum of decision. We have only to inquire whether the demurrer was one which ought to have been sustained, and therefore, whether the court erred in its action in sustaining it, quite regardless of its reasons for so doing. Lewisohn v. Stoddard, 78 Conn. 575, 589, 63 Atl. 621.
The record discloses that a temporary injunction, as prayed for, was issued ex parte when the action was begun, and that the court at the time of final judgment, acting pursuant to the provisions of § 1009 of the General Statutes, and having found that the continuance of such order would work great and irreparable injury, dissolved it. It also appears from a stipulation by counsel that since the judgment below was rendered a stockholders' meeting' has been called and held to act upon the acceptance of the amendment, that a majority of the stock voted thereat in favor of such acceptance, that the plaintiffs voted in the negative, and that a certificate of the action of the meeting was thereupon filed in the office of the secretary of State. The question presented by the record as to the legal correctness of the court's action, in so far as it concerned the holding of a stockholders' meeting to act upon the acceptance of the amendment, was thus deprived of all present practical consequence, and may be dismissed with no further consideration than the observation that its propriety necessarily results from our conclusions upon the other branch of the case.
It is manifest that the burden of the plaintiffs' complaint as to the second branch of the case is, not that the defendants threaten and purpose to perform the recited acts of business conduct, in any event, but only that they threaten and purpose to pursue that course of conduct under the pretended authority of the proposed amendment after its acceptance by a majority vote of the shareowners. The plaintiffs are seeking to test the legality of the latter course of action, and it is that alone which they are attempting to restrain. We understand counsel to concur in this construction of the complaint and its prayers.
It is beyond question that the alleged threatened acts are within the scope of the terms of the amendment. The question before us thus becomes resolved into one as to whether or not the acceptance of the amendment by a majority vote of the outstanding stock, and in opposition to a minority dissent, would suffice to en-graft upon the charter powers ample for the performance by the corporation of the acts enumerated and sought to be restrained. It has been discussed by counsel as the broader one, as to whether or not the amendment is one which could be made a part of the charter in its entirety, and as conferring all the powers comprehended by its terms, against the will of a dissenting minority of stockholders. That is not the inquiry whose answer would necessarily be determinative of the court's action, unless it be that no effect at all could be given to the amendment or to any part of it by a majority acceptance, if full effect as to each and every provision could not be so secured.
The condition last named does not exist with respect to this amendment. It purports to grant a wide variety of powers. These relate to various subjects, and seek the attainment of various objects. There are powers appropriate to the improvement of navigation, to the increase of water-power to be applied to water-wheels, to the provision of water-power for the generation of steam to be applied to the operation of machinery, to the production of such power to be utilized through its conversion into electrical energy for the propulsion of machinery, and to the conversion of electrical energy, first obtained, into light or into heat. It is provided that these various agencies of power, light and heat, when produced, may be utilized directly for the use of the defendant corporation, or be leased or sold to others for use. There are provisions as to the delivery of these agencies to purchasers or lessees, and as to territory, and a wide variety of regulations and recitals of powers in incidental details. This hasty resumé indicates that the powers attempted to be conferred are clearly separable both as to subject, object, and otherwise, and that the various provisions are by no means mutually connected or dependent upon each other. There are powers applicable to several different and quite distinct subjects, and certain of these classes of powers are separable in respect to the extent to which and the conditions under which they may be exercised. Counsel for the plaintiffs well say that the amendment could not be dissected, and accepted in part. It could only be accepted as offered by the State. But it does not follow from this that, if it be accepted in form in its entirety, no portion of its provisions could be held operative if any separable and independent portion could not be. Neither does it follow that if the engrafting upon the charter of some separable portion of the amendment by the assent of a majority only of the stock is forbidden by law, that no part of it could be effectively so engrafted by majority action in the only permissible way, to wit: by the acceptance of the whole. As to separable and independent matters, not mutually connected and dependent upon each other, the amendment might well become effective as to a portion or portions of the attempted grant of powers by majority action, although such action was inadequate to give effectiveness to other portions. State v. Wheeler, 25 Conn. 290, 299; Wilcox v. Consolidated Gas Co., 212 U. S. 19, 53, 29 Sup. Ct. Rep. 192; Employers Liability Cases, 207 U. S. 463, 501, 28 Sup. Ct. Rep. 141. The question for our determination is, therefore, the narrower one first stated.
In this connection it is well to recall what it is that, as alleged, the defendants threaten and purpose to do under the assumed authority of the amendment, if accepted by a majority vote, and what the court is asked to enjoin. It is, taking up the matters enumerated in the complaint in the order of their recital, the building of a large and expensive dam across the Connecticut River, the building and operation of a large electric power plant and electric transmission system requiring the expenditure of very large sums of money, and necessitating a large indebtedness and large bond issue, and the expenditure of large sums in the development of an electric power plant, and in attempts to secure additional legislation to enable the company to exercise the powers of an electric power company. The acts which it is sought to enjoin are the expenditure of money and the creation of financial obligations by the company for the purpose of developing an electric power plant and electric transmission system, the construction of an electric power plant, the generation, sale or delivery by the company of electricity, and the expenditure of money to secure legislation for the purpose of aiding in the development of an electric power plant, or for the generation, sale or delivery of electricity.
An analysis of these subjects of complaint and prayer shows that the things which it is asserted that the defendants have it in contemplation to do upon the acceptance of the amendment by a majority of the stock, and which it is desired to restrain, consist of those acts, and of those only, which are involved in the construction and development of an electric power plant and electric transmission system, and in connection therewith the generation, sale and delivery of electricity. Here is the description of a single, complete and independent business with its associated distinctive features. It is a business which is not only distinctive in character from others within the purview of the terms of the amendment, but those provisions of the amendment which are appropriate to this business may readily be disassociated from those which touch upon other matters. It possesses all the requisites of separability, and may, therefore, be treated by itself and uncomplicated by considerations which might be addressed to other unconnected features of the amendment.
Language is used characterizing the proposed plant as a large and expensive one, and the projected enterprise as one requiring the expenditure of large sums, and involving large financial obligations and hazards. We may with profit reserve these incidental allegations, and others of a similar character contained in the complaint, for later consideration when the nature of the issue before us shall have been more fully developed.
The language of the amendment forbids any claim that it could become operative without corporate action. See § 9. Its contents as effectually forbid a claim that its provisions might have been imposed upon the corporation in the exercise of the State's reserved power of alteration, amendment or repeal, did such power exist. Our question, therefore, is not one which involves an inquiry as to the extent of the reserved power, but as to the power of the majority stock in the matter of an acceptance of a proffered charter amendment. While the ultimate answer to be given to this question might not be different according as the charter was an open or close one, it will serve to facilitate our discussion, if its character in that regard be first established.
The charter, when originally granted, was unquestionably a close one. No reservation of a power of alteration, amendment or repeal was contained in it. Dartmouth College v. Woodward, 4 Wheat. (U. S.) 518. The amendment of 1856 was made at the request of the corporation embodied in a vote passed at an annual meeting, and the corporation has availed itself of its provisions, and in such a manner as necessarily to have become known to every stockholder, from the time of its passage down to the present. The consequence of this action has been the opening of the charter. General Statutes, § 3315. True there has been no formal stockholders' vote accepting the amendment, and, of course, no copy of such vote has ever been filed with the secretary of State. But it is a too literal construction of the statute which would permit the corporation as against the State to say that there had been no acceptance, or that the corporation, by refraining from a particular manner of acceptance which the statute directed, had succeeded in retaining the right which it would have lost had it secured in the prescribed way the results which it has enjoyed for more than half a century. Acceptance will be implied from the exercise of the powers granted. Gibbs v. Consolidated Gas Co., 130 U. S. 396, 9 Sup. Ct. Rep. 553.
With respect to alterations of charters which the sovereign may not at its will impose upon the corporation, the well-settled rule is that those which work a material or fundamental change will not become operative unless accepted or assented to by all of the stockholders; while those which make auxiliary or incidental changes only may become engrafted upon the charter by the acceptance of a majority. The right of the majority to rule in all matters relating to the corporate business and policy within the authority of the charter, and in respect to any changes in that charter which the law regards as auxiliary or incidental to its existing plan, purpose and character, is one which is implied in the contract into which the stockholders enter, and in such rule against a dissenting minority there is no violation of that contract, or impairment of its obligations. New Haven & Derby R. Co. v. Chapman, 38 Conn. 56, 71; Joy v. Jackson & M. P. R. Co., 11 Mich. 155, 171; 1 Clark & Marshall on Corporations, p. 171, § 57e.
The test to determine the limit of the power of the majority stock in the defendant corporation being furnished, the question remains as to what changes are to be regarded as fundamental and material and what auxiliary or incidental. By common consent no exact formula for the determination of the line of demarcation between the two classes of changes under all conditions can be furnished. Statements explanatory of the distinction intended have, however, frequently been made. The following are among the most helpful of them. "An amendment may be said to be auxiliary and incidental when it merely grants new powers or authorizes new methods and new plans for the purpose of carrying out the original plan and effecting the real object of that plan." 2 Cook on Corporations (6th Ed.) § 499. "Amendments, which do not change the nature, purpose, or character of a corporation or its enterprise, but which are designed to enable the corporation to conduct its authorized business with greater facility, more beneficially, or more wisely, are auxiliary to the original object." Mower v. Stables, 32 Minn. 284, 286, 20 N. W. 225. "Where there is an exercise of the power in good faith, which does not change the essential character of the business, but authorizes its extension upon a modified plan, both reason and authority support the corporation in the exercise of the right." Wright v. Minnesota Mutual Life Ins. Co., 193 U. S. 657, 664, 24 Sup. Ct. Rep. 549. "However, it may be stated as a general rule that alterations or amendments which materially change the nature and purposes of the corporation, or the undertaking or business venture, for the prosecution of which it was created, are regarded as fundamental and material." 1 Thompson on Corporations (2d Ed.) § 374. "The majority may bind the minority by accepting an alteration or amendment which does not radically or fundamentally change the character or objects of the corporation, but is merely in furtherance of the objects for which the corporation was created." 3 Clark & Marshall on Corporations, p. 1904.
Little light will be thrown upon the practical scope of these principles by an analysis of the results which have been reached in attempts to apply them to concrete cases. The cases in which this has been undertaken are very numerous, and they exhibit such a wide difference in results reached that one may draw from some of them inferences by way of analogy which would tend to support almost any position. In fact it will be found that different conclusions have been arrived at upon substantially similar conditions. This confusion in the cases has been the subject of frequent comment, so that it has been often said that each case must be left for determination upon its own peculiar facts. 2 Cook on Corporations (6th Ed.) § 499; Wright v. Minnesota Mutual Life Ins. Co., 193 U. S. 657, 663, 24 Sup. Ct. Rep. 549. The case before us can, therefore, be satisfactorily answered only by an application of the conceded test to the conditions presented by the record.
An examination of the original charter discloses that it, unlike many such enactments, had in view a large public purpose to be accomplished through its operation. That purpose, from the point of view of the State, was doubtless its main and underlying one. It was the improvement, through the agency of private capital and enterprise, of boat navigation of the Connecticut River at and near the Enfield Falls. In order to thus secure this beneficial public result it was necessary not only to grant to the corporation the powers required for the accomplishment of the improvements, but also to bestow upon the corporation such privileges and franchises as would induce the enlistment of private capital in the enterprise. These privileges and franchises and the means of their enjoyment must be regarded as within the main design of the charter, and as much a part of its plan and purpose and of the general enterprise as any other features of it. The powers conferred, as bearing peculiarly upon the public end in view, included the erection of dams, the building of locks, the construction of a canal on either bank of the river, and the improvement of the channel of the river from Hartford to Springfield in Massachusetts. The privileges conferred embraced the right to build wharves and piers along the river banks, the right to procure and possess any boats, steam or other, which might be thought necessary to increase the commerce- of the river, and the right to collect prescribed tolls from boats and rafts passing up or down the stream.
This enumeration indicates somewhat the wide scope and diversified character of the grants of power and privilege which were included in the plan of this charter in order to secure the accomplishment of thé public purpose contemplated by it. But that is not all. The grant of the power to collect tolls, which is expressed in § 10, is followed by another of far reaching possibilities in § 11, where it is provided that the corporation "may also purchase and hold such mill or mill seat or manufactories upon or adjacent to Enfield falls as they may judge expedient, and the same may lease or alien, by lease or deed, . in such way and manner as said corporation shall direct." 1 Private Laws, p. 76.
We may not say which one of these privileges presented the most alluring prospect to investors eighty-seven years ago. Perhaps it was the right to the tolls, as the plaintiffs urge, and perhaps it was not. Who shall say from this barren record that there was not some forecast in the mind of those who became associated in the enterprise, of the possibilities bung within the broad provisions of § 11 under the conditions to be created by the contemplated improvements, such as we know have been elsewhere realized under quite similar conditions? Unfortunately we do not have before us either an adequate picture of what those conditions would be, or the story of what the succeeding years have brought to pass in the neighborhood of Enfield Falls, to aid us in arriving at a conclusion as to what may have entered into the minds of these persons. We may not use our personal knowledge upon this subject, although it be a matter of large notoriety, and can only take the language of the several grants at its face value. So taking it, and reading it in the light of what it was proposed to do upon the river, it is plain to see that there lay in these provisions of § 11 large possibilities of industrial enterprise, and of enterprise of extensive proportions, which might have appealed to an investor. The corporation was privileged to purchase and hold mills, mill sites and manufactories, without limitation as to location or extent save that they be adjacent to the Falls. It might hold, sell, or lease them at will. This power carried with it by the plainest implication the power to utilize for the operation of these mills and factories, so owned, sold or leased, the latent energies in the fall of the waters of the river, subjected to the control of the corporation as the charter contemplated, or in the waters of the canals to be dug, and to sell that power to lessees or owners. The intimate association between the power there present and to be put in a condition convenient for use, and the mills which might be there erected, is too apparent to permit any other conclusion. The amendment of 1881 recognizes this in its provisions for the preservation and maintenance of the company's "waterpower."
Doubtless the early notion as to the method by which this latent power would be made useful was by the direct application of the water in its fall to the old time water-wheel. But the company was not, for that reason, limited in the furtherance of its purposes and objects to that peculiar method of accomplishing the same desired result by the same ultimate potential agency, at the risk of making a fundamental change in its enterprise, plan or essential character. Different, if not more advantageous and beneficial, methods for the utilization of water-power have resulted from later invention and discovery. Among them is that of harnessing the latent energy in the falling water to machinery so as to energize it by a process which involves its conversion into electricity. In this there is only a change of method and the use of a different medium. The same thing is applied to accomplish the same end. Certainly a corporation endowed with the power of achieving a given result by the action of a given agency, may be permitted to change the method of employing that agency in the achievement of that result so as to keep pace with the advance of science and invention, and thus accomplish its purpose most advantageously, without affecting a fundamental change in its essential character, purpose or objects, or in its general plan or enterprise. To say othei'wise, and thus bind the corporation to past methods without the unanimous consent of stockholders, would be to prepare the way for what might easily be made its doom.
It is common knowledge that the appropriation of water-power from the running stream involves constructions to control in some manner the water flow, and that the utilization of such power through the medium of electricity involves a plant for the generation of the electricity and a transmission system to carry it, when generated, to the point of use. Should this corporation, therefore, make such constructions, build such a plant and install such a transmission system for the purpose of generating electrical energy from the latent water-power at its command and of transmitting it for useful application, and either itself use such energy for its own power purposes, or sell or deliver it to others for such use, and enter upon such course of action as a distinctive feature of its business enterprise, it would not be making a fundamental or material change in the character, purposes or objects for which it was created, and, therefore, one which could not, under the principles stated, be authorized except by the assent of all the stockholders.
The alleged fact that the projected constructions and plant are to be large and costly, and the enterprise one which will require the expenditure of large sums, the employment of large capital not now possessed by the company, will entail the creation of heavy financial obligations, burdens and hazards, and may result in the destruction of the present value of the stock, are considerations of the highest moment as bearing upon the question of corporate policy, and as addressed to the stockholders in determining that policy. In such matters, however, the judgment of the majority, whether wise or unwise, must govern. But as touching the question of the acceptance of proffered corporate authority, the test to be applied, as we have seen, is one which looks to the quality and character of the new in relation to the old, and not to the element of magnitude whether in connection with extent of business, capital required, or financial risks incurred.
We have no occasion in this connection to inquire whether or not acts in the prosecution of the business of generating, selling and delivering electricity in some manner, for some purpose or to some point or points within the terms of the amendment might not conceivably be attempted, which, if permitted, would result in a fundamental change in the corporation. The complaint contains no allegations calling for any such inquiry. What it complains of and seeks to have enjoined is the adoption of the general line of business stated, as such. It is wholly barren of suggestion that any act is intended which would not be appropriate to the natural and normal conduct of that business as a substantial feature of the corporate enterprise, or that it is proposed that the corporation carry on that business in some way, for some purpose or within some territory, so that conditions would thereby be created calling for special consideration. What the plaintiffs complain of does not relate in any respect to the manner of carrying on the business, but to the carrying on of it at all. That complaint is not well founded, and we have no occasion to inquire whether or not the company might not conceivably undertake to do something in the line of the generation and transmission of electricity for power purposes which the law would regard as obnoxious to the test to be applied.
The plaintiffs in their complaint aver in aid of their contention and prayers that the entrance of the defendant upon the business which we have been discussing would bring it under the operation of § 3911 of the General Statutes, with the result that the liability of each stockholder would be increased, in that he would become personally liable to the creditors of the company to the extent of twenty-five per cent of his holdings. This again is a matter for consideration as bearing upon the business policy of the company, and thus presents a question for majority decision. But it has no significance in determining whether or not the proposed new enterprise involves a change of corporate plan and purpose, or is one in furtherance of the existing plan and purpose by the employment of new methods. The test to be applied in determining whether a fundamental change would result does not have regard for matters like this. It is also worthy of note that whatever limitation of liability the defendant corporation's stockholders may now enjoy, that limitation does not enter into the contract between the State and the corporation, the State and them, or the corporation and them, so that the State may not in the exercise of its reserved power change it for the protection of the rights of the public or of creditors. Looker v. Maynard, 179 U. S. 46, 52, 21 Sup. Ct. Rep. 21; Sherman v. Smith, 1 Black (66 U. S.) 587; Commissioners v. Holyoke Water Power Co., 104 Mass. 446, 451; In re Lee & Co.'s Bank, 21 N. Y. 9, 22. Any existing limitation. is, therefore, one of the incidents of the corporate being which exists only at the pleasure of the State, and does not partake of a distinctive feature which may not be altered without causing a fundamental change in the objects and purposes of the being, and without the assent of all the stockholders. Whatever alteration of a charter may be imposed upon a corporation in the exercise of the reserved power may be offered to it for acceptance by the majority. 2 Morawetz on Corporations (2d Ed.) § 1111.
The National Banking Act furnishes a striking illustration in point. That Act (U. S. Rev. Stat. Comp. 1901, | 5154), long in force, authorizes two thirds of the stockholders of a State bank to effectually incorporate it as a national bank, and by virtue of such incorporation to subject the stockholders to liability for the debts of the bank to an amount equal to the par value of their several holdings in addition to their investment. § 5151. Certain States have adopted legislation in aid of dissenting stockholders, but we are not aware of the constitutionality of the national act having been successfully challenged, or for that matter challenged at all, save in one case where it was upheld. Keyser v. Hitz, 13 Mackey (D. C.) 473. See also State v. Phoenix Bank, 34 Conn. 205, 237; Casey v. Galli, 94 U. S. 673.
The complaint also presents, as a reason why the desired restraining orders should issue, the fact that by the terms of the amendment (15 Special Laws, p. 777, §9) the prosecution of the proposed business would expose the company to taxation upon so much of its property as should be acquired for its conduct, whereas it is now altogether exempt from taxation. The burden of taxation is one usually incident to property acquisition and holding. The amendment undertakes nothing more than to attach that incident to the acquisitions of this company made for the new enterprise. It does not profess to diminish the exemption now enjoyed. The argument which would deprive the majority of the privilege of entering upon the proposed business because to do so would carry with it the burden of taxation, would ordinarily result in depriving the majority of its control in respect of all matters of corporate acquisition or expansion. Even had the amendment gone further than it did in the line of submitting to taxation the property of the company, that fact would have furnished no obstacle to the acceptance of the amendment as proposed, for reasons substantially similar to those outlined concerning the extension of personal liability. See as to the reserved power in the matter of taxation, Union Passenger Ry. Co. v. Philadelphia, 101 U. S. 528; Tomlinson v. Jessup, 15 Wall. (U. S.) 454; Deposit Bank v. Daviess Co., 102 Ky. 174, 39 S. W. 1030, approved 173 U. S. 662, 19 Sup. Ct. Rep. 875.
The allegations of past unauthorized and unlawful expenditures of the moneys of the corporation by the defendant officers in securing the grant of the amendment and Federal legislation in aid of it, and otherwise in furthering by anticipation the project in view, have no other pertinence to the prayers than to give color to the allegations of threatened future expenditure in the same line, unless it be contended that such past expenditure would invalidate the entire proceeding, and prevent any legal result from the acceptance of the amendment. Such a contention would have no foundation. The majority having power to accept, would have co-extensive power to adopt and ratify the antecedent expenditure either by the act of acceptance or otherwise by subsequent action.
As far as expenditures to secure additional legislation in aid of the projected enterprise are threatened to be made in the future upon the acceptance of the amend ment by a majority, the propriety of them, in so far as they are reasonable and lawful in themselves, is concurrent with the propriety of the purpose in aid of which the legislation is sought. The general prayer to restrain them must, therefore, be denied.
There is no error.
In this opinion Hall, C. J., Thayer and Roraback, Js., concurred.