Court Opinion

ID: 7993096
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:33:33.751226+00
Date Added: 2024-06-11T16:35:26.824984
License: Public Domain

Holden, J.,
delivered the opinion of the court.
This is an appeal from a decree of the chancery court overruling the demurrer to the complainant’s bill, and presents for our consideration one proposition of law which is, to state it in the simplest language: Can an organized state bank with an authorized capital .stock of thirty-five thousand dollars reduce its capital stock by charter amendment to twenty-five thousand dollars, by a majority vote of the stockholders, it having-adopted a by-law.by the stockholders at the time its charter was accepted providing expressly that any and all amendments to the charter might be made whenever a majority of the stockholders may so declare to have the charter amended in any particular? The contention of appellant is that no such amendment to a charter reducing the amount of the capital stock can be validly made except by unanimous vote of all the stockholders of the corporation; and that the right to amend is limited and circumscribed, and can be exercised only by the legislature, when the public interest demands it and not for the benefit of private gain, and upon the express condition that no injustice shall be done the shareholders.
The charter of the appellee bank and amendment' thereto provided that the capital stock of the bank should be thirty-five thousand dollars. At the-time the charter was accepted and the bank organized, the following by-law was duly and regularly adopted by the stockholders under authority of section 901, Code 1906 (section 4073, Hemingway’s Code):
*852“An increase in the capital stock of the bank may be made whenever a majority of the stockholders may so declare, and any and all amendments to the charter may be made whenever a majority of the stockholders may so declare, and thereupon permission to the state may be applied for, to increase the capital stock, or to have the charter amended in any particular.”
Section 899, Code 1906 (section 4071, Hemingway’s Code), in force now and at the time the charter was granted, provides as follows:
“Renewals and Amendments. — Every corporation created under the provisions of this chapter, and every corporation heretofore created, whether by special act of the legislature or under the general law, ‘except railroads other than street railroads and insurance companies,’ desiring a renewal or amendment of its charter, shall make publication as above, if the original charter were required to be published, setting forth at length in such publication, the nature and extent of the amendment or amendments desired, and the Governor, with the advice of the attorney-general, may grant the same. But in case of renewal merely it shall be sufficient for the Governor to give a certificate thát the original charter is renewed, under the great seal of the state.”
See, also, Acts 1914, page 123, section 32.
Section 88 of our Constitution reads: “The legislature shall pass general laws, under which local and private interests shall be provided for and protected, and under which cities and towns may be chartered, and their charters amended, and under which- corporations may be created, organized, and their acts of incorporation altered; and all such laws shall be subject to repeal or amendment.”
After the resolution was passed and adopted by a majority of the stockholders of the bank, which resolution is here quoted:
“Resolved by the stockholders of the Bank of Commerce, of Grenada, Miss., that the present capital *853stock be reduced from thirty-five thousand dollars to twenty-five thousand dollars; that application be made to the state of Mississippi, so as to authorize this decrease in capital after compliance with the laws of said state; and, further, that when said capital is reduced that the certificates of stock now outstanding be called in and new certificates be issued in lien of said old certificates in proportion to the amount of stock now held by each stockholder' — the new certificates to be issued upon the said reduced capital — which said resolntipn after being discussed was unanimously adopted by all of the stockholders”- — the amendment to the charter authorizing the reduction of the capital stock to twenty-five thousand dollars was duly published as required by section 899, Code 1906 (section 4071, Hemingway’s Code), and was granted by the Governor with the advice of the attorney-general — all of which was regular and in accordance with the statute.
We are unable to see any merit in the contention of the appellant that the amendment to the charter of appellee was not in all respects legal and valid. The question is presented as to whether this change in the amount of the Capital stock from thirty-five thousand dollars to twenty-five thousand dollars is a radical or fundamental change in the purpose and character of the original charter necessitating a unanimous vote of the stockholders to make such change, or whether such change in the capital stock was merely auxiliary or incidental to the original purpose or plans of the corporation and might be made by a majority of the stockholders. But we consider it unnecessary to pass upon this question, although we think the better rule is that such a reasonable change in the amount of the capital stock is riot a fundamental or radical change, but is auxiliary and incidental to the main purpose of the corporation. However, under either view it appears certain to us that under the Constitution and statutes of our state the amendment to the charter here in question was contemplated *854and permissible, and was authorized by a resolution passed by a majority of the stockholders of the bank under the statute (section 899, Code 1906; section 4071, Hemingway’s Code), which permits such amendments, and more especially was it proper since, under section 901, Code 1906, a by-law was duly passed and in force authorizing* any and all amendments to the charter by a majority of stockholders at the time the appellant, who seems to be the only objecting stockholder, became or was a stockholder in the bank (Commonwealth v. Vandegrift, 232 Pa. 53, 81 Atl. 153, 36 L. R. A. [N. S.] 45 Ann. Cas. 1912C, 1269).
In other words, under Constitution, section 88, the right is given to the legislature- to create corporations and amend or change charters of corporations, and where the charter of the corporation itself provides that it may be amended, as it does here by reading into it section 899, Code 1906, and the corporation so provides ,by its by-laws,’ and where the majority of the- stockholders pass a resolution for the amendment, properly petition for the same under the law, and the amendment is granted as authorized by the statute, such amendment is legal and valid. 7 R. C. L. section 174.
“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 (6 Ed.), section m499.
“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. Staples, 32 Minn. 284, 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 modi*855fied plan, both reason and authority support the corporation in the exercise of the right.” Wright v. Minn. Mut. L. Ins. Co., 193 U. S. 657, 664, 24 Sup. Ct. 549, 551 (48 L. Ed. 832).
Under the authority of our Constitution, section 88, the legislature has provided a simple way of obtaining a corporate charter and amendments thereto; and when it appears necessary or beneficial to the interests of the corporation that its capital stock be increased or decreased, the method provided by the legislature for so doing is plain and constitutional; and when the requirements of the statute have been met by a. majority of the stockholders of the corporation .and the amendment .has been granted by the officials named by the legislature for that purpose, the amendment is valid. This method of obtaining charters .and amendments to them was wisely substituted by the legislature for the old, tedious, and expensive method of' securing corporate charters directly from the legislature, and we see no constitutional objection to it.
• If the contention of appellant were held to be sound, we would have the absurd situation in this case of one stockholder preventing the corporation from changing the amount of its capital stock, by either decreasing it or increasing it, which change might be absolutely necessary to the b.est interests of the bank or even necessary to its very existence, since, under our banking law of 1914, it may be that the affairs of the bank were in such a condition that- the state bank examiner should demand that the capital stock be decreased and the ten thousand dollars be written off the books of the bank so as to put the institution on a sound banking basis as required by the banking laws of our state. Then to say, as contended by appellant, in view of our statutes with reference to charters of corporations and the amendments thereto, -and the banking laws of our-state, that one single minority stockholder can prevent *856the change in the capital stock when all of the other stockholders desire the change, and it was necessary to the existence of the institution that the change be made, would be to give the dangerous power to one stockholder to force the bank into liquidation, resulting in loss to the other stockholders, contrary to the policy of our banking law, and against the best interests of all concerned. But minority stockholders have no power under the laws of this state to prevent a reasonable change in the amount of the capital stock, as in this case, regardless of whether such' change be radical or fundamental or whether it be merely auxiliary and incidental to the original purposes of the corporation.
“When a corporation is authorized by its charter to increase its capital stock, the power to increase becomes, so to speak, a part of the contract of subscription, and its exercise will be binding upon the stockholder, whether or not he assents thereto. The common-law rule that any material alteration in the charter of the corporation, without the consent of a stockholder, relieves him from liability on his stock subscription, does not apply to such a case.” Thompson on Corporations, vol. 2, section 2088; Port Edwards R. Co. v. Arpin, 80 Wis. 214, 49 N. W. 828.
As we have said above, the appellee corporation here was authorized by its charter, and' the statutes written into it, to make amendments to its charter, and thus increase or decrease its capital stock. When we say that the charter of the appellee bank authorized its amendment, we mean that the charter, with our statutes (section 899 and 901, Code 1906), together with the bylaw passed at the time the charter was accepted, referred to above, authorized such amendments of the charter, and when the appellant subscribed for the stock, he then and there became bound under the charter and its amendments to be governed by the will of a majority of the stockholders of the corporation whether he agrees *857or objects to tbe amendment increasing or decreasing the amount of the capital stock.
In answer to the last contention of the appellant, which question does not really arise here, that no amendment of the charter can be made if it shall do an injustice to the shareholders, we say in this case that it certainly appears that no injustice has been done to the appellant by amending the charter of the appellee bank reducing the amount of the capital stock from thirty-five thousand dollars to twenty-five thousand dollars, as the appellant is offered new stock under the ■ amended charter which is of the same actual value, though a less number of shares, as , the stock held by him in the bank before its capital stock was reduced by the amendment.
Appellant cites and relies upon the case of Scoville v. Thayer, 105 U. S. 143, 26 L. Ed. 968, as an authority to sustain his position, but the ease is not in point for the reason that in the case cited by counsel the facts are different and the law of the state of Kansas was quite unlike the law of Mississippi. Under the laws of Kansas a corporation was prohibited from increasing its capital stock to an amount exceeding double its original capital stock authorized in its charter. In that case the corporation attempted to increase its capital stock from one hundred thousand dollars to four hundred thousand'dollars, which was violative of the law of that state and was void, but it was held in that case that an increase from one hundred thousand dollars to two hundred thousand dollars was valid. The difference in the Kansas case and the case before us is very obvious.
The judgment of the lower court is affirmed, and ease remanded, with leave to answer within sixty days after the mandate reaches the lower court.

Affirmed.