corporators or their successors, nor change the purposes for which it was incorporated, nor divert its funds without their consent.1 The unconstitutionality of such a law does not rest solely upon the reason that it impairs the contract between the corporation and the state, and seeks to take away its funds without due process of law" or just compensation, and apply them to uses to which their owner never consented.2

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It is invalid for the additional reason that it violates the contracts by which the several members agreed to become one corporate body for a given purpose.

Where a state has authorized the formation of a corporation and prescribed the terms and conditions upon which the corporators may organize and enjoy the franchise, it cannot afterwards impose new duties and obligations.1

1 Chief Justice MARSHALL said: "Because the government has given it (the corporation) the power to take and to hold property in a particular form and for particular purposes, has the government a consequent right substantially to change that form or to vary the purpose to which the property is to be applied? This principle has never been asserted or recognized, and is supported by no authority." P. 637.

2 Sinking Fund Cases. 99 U. S. 737-8, 746, 761-6. But see Nevitt v. Bank of Port Gibson, 6 Sm. & S. M. 536.

3 Clearwater v. Meredith, 1 Wall. 39; Zabriskie v. Hackensack, etc., R. R. Co., 18 N. J. Eq. 178; Black v. Delaware, etc., Canal Co., 24 N. J. Eq. 455, 468; New Orleans, etc., R. R. Co. v. Harris, 27 Miss. 517, 536; Stone v. Mississippi, 101 U. S. 814, 817, per Chief Justice WAITE. In Lauman v. Lebanon Valley R. R. Co., 30 Pa. St. 46, an act of the legislature provided for the consolidation of an existing corporation with a new company. Passing upon its validity, Justice LOWRIE, delivering the opinion, said: "This is a violation of chartered contracts; not the supposed contract between the government and the corporators, but the one between the corporators themselves." But where an act providing for the election of the directors of turnpike companies in which the state was interested by the other stockholders with the approval of the commissioners of the sinking fund, being merely a waiver of the exercise of its rights by the state during its pleasure as a stockholder, and without consideration, the assumption of such right by a subsequent act does not impair the obligation of a contract. Cassell v. L. H. & P. T. P. R. Co. (Ky.), 9 S. W. 502.

The charter of a company authorized it to build a bridge with "suitable draws which shall be at least thirty feet wide." A state law passed afterwards requiring draws of a greater width and imposing other duties concerning its con

Acts of legislation altering the construction of the laws previously given by the courts as to the validity and obligation of contracts are within the constitutional prohibition.1

§ 1033. The alteration cannot be accomplished indirectly. -The state cannot by indirect means evade this prohibition, and such an attempt will not be allowed to succeed, notwithstanding, the ostensible purpose or intendment of the enactment. A law compelling a corporation to continue its business after the expiration of its charter would be an impairment of the contract between the shareholders, for the reason that the period of its continuance fixed in the charter is a limitation of duration in each contract of membership.3

§ 1034. Provision violated by partial impairment and deprivation of all remedy.—Statutes which impair contracts in part are equally violative of the constitutional provision with those which seek to nullify them entirely; and it is immaterial in such case to what extent the statute, if enforced, would impair the contract. But

struction and use, was held an impairment of the terms of the charter, and therefore unconstitutional. Com. v. New Bedford Bridge Co., 2 Gray, 339. See also Washington Bridge Co. v. State, 18 Conn. 53; Monongahela Nav. Co. v. Coon, 6 Pa. St. 379.

1 Ohio Life & Trust Co. v. Debolt, 16 Ohio, 432.

2 Tennessee v. Sneed, 96 U. S. 69; Antonio v. Greenboro, 107 U. S. 769; Edwards v. Kearsey, 96 U. S. 595; Planters' Bank v. Sharp, 6 How. 301, 332. It cannot be evaded by making the execution of a contract already made a punishable offence. Bailey v. Philadelphia, etc., R. R. Co., 4 Harr. (Del.) 389. See Sloan v. Pacific R. R. Co., 61 Mo. 24. Where a canal company had been authorized by its charter to select and acquire lands upon a particular route and to construct thereon a canal, it was held that an act afterwards passed authorizing a railroad company to occupy difficult passes along the same route in such a manner as to exclude the canal company from doing so was void. Chesapeake, etc., Canal Co. v. Baltimore, etc., R. R. Co., 4 G. & J. I.

3 Per CHANCELLOR ZABRISKIE, in Black v. Delaware, etc., Canal Co., 22 N. J. Eq. 403, 404-406, 415; Von Schmidt v. Huntington, 1 Cal. 55.

4 Green v. Biddle, 8 Wheat. 84; Von Hoffman v. City of Quincy, 4 Wall. 551, 554; Farrington v. Tennessee, 95 U. S. 683.

a statute cannot be said to impair the obligation of a contract because it lessens the value of privileges acquired under a previous act.1 The state may regulate practice in the courts and alter methods of procedure, but cannot deprive a party of all remedy by taking away existing remedies without substituting others.2 A different question is presented to which the same answer applies when such statute provides for complete discharge of the debtor from contracts with citizens of other states. Such result can only be accomplished under bankrupt laws enacted by congress.3

§ 1035. Grants and contracts of membership both affected by unconstitutional legislation. There is a nominal distinction between the contract to which the state and the corporate body as a whole become parties by an act of incorporation or amendment to the same, and that to which the members of the corporation have made themselves parties in the articles of association; but it would be difficult to consider the interests of the members in the one separately from their interest in the other, since each contract of membership embraces by implication every provision of the charter. Consequently a statute which would impair the contract between the state and the corporation would generally be repugnant to the constitution with respect to the contract between the corporators.

However, laws may be passed which impair the con

1 Lehigh W. Co. v. Easton, 121 U. S. 388; 7 S. Ct. 916.

2 Denny v. Bennett, 128 U. S. 489. An act limiting the amount of recovery against common carriers for negligence may be repealed though the act provide that "upon the acceptance thereof by any carrier or corporation the same shall become a part of its act of incorporation." Penn. R. Co. v. Bowers, 124 Pa. St. 183; 16 A. 836.

* Ogden v. Saunders, 12 Wheat. 213; Sturgie v. Crowninshield, 4 Wheat. 122; Gilman v. Lockwood, 4 Wall. 409; Denny v. Bennett, 128 U. S. 489, 497, per Justice MILLER.

tract between the shareholders, while nominally leaving the franchise unaffected. For instance, a law altering the business management of a foreign corporation would be unconstitutional as affecting the company's franchise which has no extra territorial validity. The same invalidity attaches to laws altering the voting powers of shareholders of corporations under existing laws, giving additional powers to a majority regardless of the will of a dissenting minority, or imposing a liability to contribute capital in excess of the amount fixed in their subscriptions.

§ 1036. Character of membership in corporations formed under general laws considered. Where the formation of corporations takes place under general laws which may be treated very much as laws authorizing the formation of special partnerships, the contractual relation between the state and the corporation, if indeed any may be considered to exist, is of little or no practical importance apart from the contracts between the members who have organized under such laws. If a law affecting

1 State v. Greer, 78 Mo. 188, overruling s. c. 9 Mo. App. 219, 224. Where a corporation has been dissolved on scire facias by a court having jurisdiction, the validity of such dissolution cannot be afterwards called in question. Danville Seminary v. Mott (Ill.), 28 N. E. 54. Under N. Y. Code Civ. Proc., sec. 2423, the court, upon petition for dissolution, "must make an order requiring all persons interested in the corporation to show cause before it . . . why the corporation should not be dissolved." In re Christian Jensen Co., 15 N. Y. S. 144. A statute providing that a foreign railroad company may extend its road into the state upon condition that it “ shall be liable to be sued by summons in the same manner as corporations created by the laws of this state," does not make it a domestic corporation so as to justify service of summons in the manner provided for service on domestic corporations. It must be served as a foreign corporation. Quade v. New York, N. H. & H. R. Co., 14 N. Y. S. 875.

2 Lauman v. Lebanon Valley, R. R. Co., 30 Pa. St. 46; Zabriskie v. Hackensack, etc., R. R. Co., 18 N. J. Eq. 178; Black v. Delaware, etc., Canal Co., 24 N. J. Eq. 467; New Orleans, etc., R. R. Co. v. Harris, 27 Miss. 517, 536; Clearwater v. Meredith, 1 Wall. 39; Mowrey v. Indianapolis, etc., R. R. Co., 4 Bliss; and see supra, secs. 645, 646.

partnerships should be held unconstitutional it would not be because of its affecting any contract between existing partnerships and the state, but because it impaired the mutual obligations which the partners had assumed on becoming associated as such in business.

But there is no better reason why a state could by altering, amending, or repealing general incorporation laws put to an end to existing corporations before the termination of the period fixed in their articles, and thus extinguish the contracts of membership contrary to their terms, than that it should have the power to import new terms into articles of copartnership already entered into, or shorten or extend the period during which the firm was to continue in business.1

§ 1037. Changes beneficial to the corporation. The legis lature may release a corporation from obligations imposed for the public benefit, without in any wise impairing corporate rights or releasing its members from their contracts of membership.

Such change is not a diversion of funds from the original purpose to which they were dedicated within the constitutional prohibition, as an alteration of the terms of the contract of membership prejudicial to the stockholder would be.2

A corporation may also be authorized to issue preferred stock where the funds realized from the sale of its shares have been exhausted and the completion of the enterprise is threatened with failure for lack of capital to prosecute it to completion.3

1 Joy v. Jackson, etc., Plank R. Co., 11 Mich. 155; Eastern R. R. Co. v. Boston, etc., R. R. Co., 111 Mass. 125.

2 Taggart v. Western Md. R. R. Co., 24 Md. 563. A railroad corporation may be released from the terms of its charter requiring it to connect with another line. Wilson v. Wills Valley R. R. Co., 33 Ga. 470.

3 Covington v. Covington, etc., Bridge Co., 10 Bush Ky. 69. See also Baker v. Clarke Ins. Co., 110 Mass. 88.