honesty of persons engaged in certain classes of business and prescribing summary remedies for ascertaining the financial condition of institutions which invite the confidence and are entrusted with the funds of the business community are also valid as remedial legislation.1

§ 1048. Number affected unimportant.—And it is no objection to such laws that they apply exclusively to corporations or to a particular class of corporations or even to a single corporation.2

So an act for the reorganization of a single company under an amended charter which requires every dissenting shareholder and bondholder to file his dissent in writing within a given time upon reasonable notice of the proposed change and requirement, and providing that if they neglect to do so within the prescribed time they shall be bound by the alteration and reorganization, is valid. On the same principle laws are upheld which provide for the organization of boards and commissions and clothe them with authority to visit banks and similar institutions on whose solvency the security and welfare of many people often depend, and to restrain and terminate their operations by injunction in case the facts indicate such to be the proper course, and requiring the officers and managers of such institutions

1 Chicago Life Ins. Co v. Needles, 113 U. S. 574, 580, 583.

1 Baltimore, etc., R. R. Co. v. Nesbit, 10 How. 395; Mississippi Ry. Co. v. McDonald, 12 Heisk, 54; Sinking Fund Cases, 99 U. S. 700, 724, 726. In the last case an act of congress required that the Union Pacific and Central Pacific Railroad Companies set aside a portion of their current earnings to meet an indebtedness on which the payment of interest had been guaranteed by the government. A majority of the United States supreme court held that the act was valid as a reasonable protection of the rights of bondholders and the government independent of an express reservation of the right of alteration and amendment in the charters of the companies. See infra, § 1071.

Gilfillan v. Union Canal Co., 109 U. S. 401. See Canada Southern Ry. Co. v. Gebhard, Id. 527.

to allow free access to their books, vaults, etc., for purpose of inspection and examination.1

§ 1049. Original of practice of making reservations in charters. A practice sprang up soon after the decision in the Dartmouth College Case of inserting in state constitutions, charters and general incorporation laws reservations of power of future revision and revocation of the contracts, which that case decided were created between the state and each corporation by a grant of a corporate franchise. This means of escaping the consequences of that decision or the principle it declared was indicated incidentally, and possibly intentionally, by Justice STORY in the course of an able concurring opinion. But even before that decision it had been intimated by the supreme judicial court of Massachusetts that such reservation would save the state its power of control. of control. Whether the idea conveyed by this language was understood and acted upon thereafter by legislatures and constitution makers is immaterial in this connection. At any rate a majority of the states have since either engrafted an express reservation of power to amend, alter or repeal upon all grants of corporate privileges, or adopted the uniform practice of making it a provision in all the charters and incorporation laws.

§ 1050. Effect of a reservation. The decision in the case above mentioned rested on two grounds: 1. The irrevocable nature of an executed grant; 2. The express contract to which the state becomes a party as evidenced in the charter.

1 Atty.-Gen. v. North American Ins. Co., 82 N. Y. 172; Chicago Life Ins. Co. v. Auditor, 101 Ill. 82; Ward v. Farwell, 97 Ill. 593; Com. v. Farmers and Mechanics' Bank, 21 Pick. 542; Nevitt v. Bank of Port Gibson, 6 Sm. & M. 528; Commercial Bank v. State, 4 Sm. & M. 439, 461.

2 4 Wheat. 712.

3 Wales v. Stetson, 2 Mass. 143.

Therefore a general and absolute reservation of power to repeal a charter leaves the state at liberty to resume the privilege granted at pleasure and imparts to the charter the nature of a written delegation of authority to an agent. In other words, it renders that which by reason of the constitutional provision would be a contract an express authorization, which may be recalled at pleasure.

§ 1051. Distinction between franchise and power connected with it. The relation of the parties with respect to the franchise and to the powers and authority granted in connection with it are different. The grant of a franchise of acting in a corporate capacity invests the corporation with no rights, and its exercise involves the state in no obligation which will prevent it from resuming it at will. The state has an abiding control over it which it may exercise at any time by resuming it or imposing new conditions upon its exercise.

With the resumption of the franchise the powers conferred in connection with it terminate, to the same extent as instructions to an agent become functus officio on a termination of the agency. But to continue the illustration: an agent while exercising his authority during his agency may have been instrumental in causing contracts to be made and property rights to become vested. Through the exercise of his authority third parties may have incurred obligations among themselves affecting property connected with the agency and involving his powers as an agent as well as his relation to the principal. These contracts are vested rights which the principal has not the power to alter by revoking the authority. Nor can he compel the agent to

1 See People v. O'Brien, 111 N. Y. 1. Northern Pac. R. Co. v. Carland, 5 Mont. 146; 3 P. 134 holding also that equity will interpose by injunction to prevent the destruction of a franchise in the same manner and for the same reasons as in the case of other property.

continue in his employ on new terms offered by himself.

So the state may under a reservation of power to repeal divest a corporation of its character and capacity as such, but it cannot by the exercise of such power cancel or alter any contractual relations which have arisen or divest any rights which have become vested during the enjoyment of the franchise. And the corporation with respect to these stands upon an equal footing with others and may claim the same constitutional protection. But the legislature may before any rights have vested under a charter alter it at pleasure; as where at the same session at which a charter was granted to a railroad company, an act was passed limiting the period within which it should complete the road. And as an individual having employed an agent or given permission to another to do one thing cannot under that authority or permission require him to do an entirely different thing, so although the state having granted a franchise and prescribed the terms upon and the purpose for which it may be exercised cannot compel the grantee to retain and continue to exercise it for other purposes or upon entirely different terms.

§ 1052. Constitutional protection of franchises in the hands of transferee.-But the protection of the federal constitu

1 Hill v. Glasgow R. Co., 41 F. 610. Const. Cal., art. 12, § 7, provides that no act shall be passed extending the charter of any corporation or remitting the forfeiture of a franchise. During the pendency of an action to forfeit the charter of a street-car company operating under a city ordinance, Acts Cal. 1891, cc. 18, 19, were passed, one amending Civil Code, § 497, so as to invest municipal corporations with power to authorize street railways to use electricity as a motive power; the other ratifying existing ordinances granting such power. Held, that the acts did not extend the company's franchise or charter, and, as there had been no decree of forfeiture, there was none to remit, and therefore the acts were not repugnant to the constitution. People v. Los Angeles Electric

Ry. Co. (Cal.), 27 P. 673.

2 Cinn. H. & I. R. Co. v. Clifford, 113 Ind. 460; 15 N. E. 524.

tion has recently been held to extend not only to the ordinary property, but to the franchises of a corporation other than that of being a corporation, where the same has become vested under statutory authority in the hands of a transferee. Under the existing system of legislation in New York this application of the special provisions there in force was doubtless correct. The decision was affected somewhat by a provision of the general railroad act,2 to the effect that, upon the dissolution of such corporations, no remedy given against them for any liability which shall have been previously incurred shall be taken away or impaired. But without some such provision it would be impossible to

1 In the case of People v. O'Brien, 111 N. Y. 1, it appeared that the Broadway Surface Company had been incorporated under an act of the New York legislature (Laws of 1884, chap. 252), and endowed with capacity to acquire and hold such rights and property, real and personal, as was necessary to enable it to transact the business for which it was created by purchase from the city authorities of New York city, and to mortgage its franchise as security for loans made to it. After the organization of the company it obtained by resolution of the common council authority to lay its tracks and run its cars over Broadway in the city upon certain terms and conditions prescribed in the resolution but with no limitation as to time or power of revocation reserved. After fully complying with the specified conditions the company mortgaged its property and franchises for contemplated loans, and authorized its bonds secured by said mortgage to be sold, and they were purchased by investors. It also made traffic contracts with other roads. Afterwards (Laws of 1886, chap. 268), the corporation was dissolved by statute, the power of repeal having been reserved in the act authorizing its incorporation. It was held that while the annulling act was constitutional and valid, its effect was only to take the life of the corporation; that the corporation took through its grant from the city an indefeasible title in the land necessary to establish it to construct and maintain a street railway in Broadway and to run cars thereon, which constituted property; that all its street rights or franchises as well as its mortgages and valid contracts including the traffic contracts survived its dissolution; that upon its dissolution its trustees then in office become vested with its property under the provisions of the Revised Statutes as trustees for its creditors and stockholders, and that the act providing in case of such dissolution for the taking away from the company of its street franchises and for the winding up of its affairs by suit brought by the attorney-general and the appointment of a receiver therein were unconstitutional and void. The tracks of such a company and the franchise of maintaining and operating its road in a public street were considered by the court to be inseparable.

2 Sec. 48, chap. 140, Laws of 1850. Infra, § 1061.