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not have before. It was to avoid the rule in the Dartmouth College Case, not that in Natusch v. Irving," that the change was made. The words limit the power to that object. .. The only construction to be given is, that the legislature may alter, not that the stockholders may as between each other." Again, in Kenosha, Rockford and Rock Island R. R. Co. v. Marsh, 17 Wisc. 13 (1863), the same principles were advocated and sustained. A railroad company had been chartered to build a railroad from Kenosha to Beloit in the state of Wisconsin. Subsequently the legislature authorized a change of the terminal point from Beloit to the Wisconsin-Illinois state line, and also authorized the company to consolidate with a railroad company incorporated in Illinois. These changes were adopted by the company. In an action on a stock subscription the defendant contended that these alterations in the original scope and purpose of the company's enterprise released him from liability, and the court upheld this contention, although the charter of the company was subject to the reserved power of the state. "This power," said the court, was never reserved upon any idea that the legislature could alter a contract between a corporation and its stock subscribers, nor for the purpose of enabling it to make such alteration. It was solely to avoid the effect of the decision that the charter itself was a contract between the state and the corporation, so as to enable the state to impose such salutary restraint upon these bodies as experience might prove to be necessary. In all cases where charters are changed, the right to bind stock subscribers who do not assent seems to me to derive no additional support from the fact that the power of amending the charter had been reserved, but to depend essentially upon the question whether the change is of such a character that it may be deemed so far in furtherance of the original undertaking, and incidental to it, as to be fairly within the power of the corporation to bind its individual members by its corporate assent, or whether it is such a departure from the original purpose that no member should

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"See supra, first part of paper.

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be deemed to have authorized the corporation to assent to it for him. . . . An amendment of this kind, merely authorizing the substitution of a new enterprise for the old, has precisely the same effect that it would have had if there had been no power reserved to amend the charter. The legisla ture does not profess to make it obligatory. They grant it as a power to be accepted if the company chooses to accept it, otherwise not. This is just what they might have done if the power of amendment had not been reserved. And it seems to me that the question whether an individual subscriber was bound or not by the corporate assent should be determined by the same principles in either case." And, finally, in Dow v. Northern R. R. Co., 36 Atl. Rep. (N. H.) 510 (1887), there is an elaborate opinion by Chief-Justice Doe as to the constitutionality of an act authorizing a railroad company to lease its entire road for ninety-nine years without there being a unanimous vote of the stockholders approving such a lease. The act was held to be invalid, and this for the reason that the disposition in this way of all of the assets and plant of the corporation was held to work a radical, fundamental change in the corporate enterprise, and therefore could be enjoined by a dissenting stockholder, even though the charter of the company was subject to the power on the part of the state to alter or repeal it, because this reserved power did not and could not give to the state the power to alter the contract of association of the corporators.

What is contended, then, in this paper is, briefly summarized, this: That the reserved power clauses were inserted in the constitutions and general statutes of the states only in order that the states might retain power over corporations in so far as the grant of franchises—that is, the contract between the state and the corporation-is concerned, being intended to give to the states control over the corporation in the nature of a supervisory police power, and to prevent a legislature from giving away irrevocable property rights in the nature of exemptions from public duties. That the reserved power was not introduced to enable the state, either directly or by way of permission given to some of the corporators as against the others, to

alter the contract of association existing among the stockholders of the company, even though that contract might be formally expressed in the charter over which the power was reserved. That whatever, however, may have been the intention of the reserved power clauses, the state has not the constitutional power to reserve to itself a right to alter or repeal the contract of the corporators any more than it could reserve such a power over the contracts of partners, of unincorporated associations, or of private contracts in general. That, therefore, although it may be admitted that the state, without thereby releasing dissenting stockholders, can make immaterial changes, changes which are not radical or important, in regard to the charter contract even in so far as it represents the contract among the corporators, yet this power derives no additional force from the reserved power clauses, but exists independently of them; and whatever changes of this kind cannot be made where there is no reserved power of amendment or revocation of the charter cannot be made by the state where such a reserved power exists. That the state cannot gain power over a contract over which it otherwise would have none merely because such contract is, by an accident of history and legal procedure, formally embodied in an instrument over which, in a different aspect, the state can legally reserve rights of amendment or repeal; for, if it were otherwise, the states could acquire for themselves any otherwise forbidden powers, merely by having them, or the subjects which they are intended to concern, inserted in some form in the charters of incorporation thereafter granted. In short, that the stockholders are, as a group, subject in their corporate capacity to the reserved power of the state, but that their contract among themselves is as much under the protection of the Constitution forbidding the impairment of the obligation of contracts as is any other contract. Therefore the state may, under the reserved power, say to a corporation, "We enact certain amendments qualifying your original privileges;" but it cannot say, "We enact amendments changing the organization and nature of the enterprise of your company as originally determined upon by your mem

bers;" or to some of the stockholders, “We give to you the privilege, if you desire to use it, of changing the contract into which you have entered with your fellow corporators."

If these contentions be correct, almost the entire law on the subject of the control of the states over corporations must be rewritten. It is of importance that it should be so rewritten, for it is submitted that the law, as it now stands, is illogical and historically incorrect, and, further, that under it no investments in the stock of any corporations can safely be made, for the entire organization and purpose of a corporation may at any time be changed by legislative enactment notwithstanding the protests of minority stockholders. Even policy, therefore, does not dictate in this case the necessity of fallacious reasoning. There is no apparent reason why the states should have any more power to annul or alter corporators' contracts inter se than to revoke or amend any other contracts. If the people of the United States think differently, they may find means to accomplish their desire, but it is submitted that those means are to be found only in an amendment to the Federal Constitution limiting in this respect the impotence of the states to impair the obligation of contracts. It is not believed that any such amendment would be desirable, but that, on the contrary, it would be in the highest degree impolitic.

(To be concluded.)

Horace Stern.

SUMPSIT AS AFFECTING THE RIGHT OF
ACTION OF THE BENEFICIARY.

(Continued from Volume 52, page 779)

[Errata in first part of article: Page 773, line 15, after the word A and before the word assigns read "A makes E his executor and dies, and B having assets.”

Note 39, at bottom of page 778, read folio 8, placitum 18.]

In the December number of the AMERICAN LAW REGISTER the writer has presented a number of cases of debt and of account, in which a beneficiary not a party to the transaction was allowed to recover upon the obligation. In the present issue the writer proposes to conclude the discussion of the cases of debt, and also to discuss the cases of account, in respect to the right of action of the beneficiary.

In debt, if the quid pro quo was a chattel, the title to or the ownership of it was by the delivery absolutely vested in the debtor.

Where A loaned money to B and then brought debt for its recovery, the legal title to the money bailed was always in B, otherwise the very intention of the loan would be defeated-i.e., if B could not transfer title to the money he could have no benefit from the loan.' Where A promised

"The subject of a loan may be either a specific thing, as a horse or a given quantity of a thing which consists in number, weight, or measure, as money, sugar, or wine. In the former case it is of the essence of the transaction that the thing lent continue to belong to the lender: otherwise the transaction is not a loan.

"In the latter case, the thing lent may (and commonly does) cease to belong to the lender and become the property of the borrower, such a loan commonly being an absolute transfer of title in the thing lent from the lender to the borrower. The reason why such a transfer of title takes place is obvious. The object of borrowing is to have the use of the thing borrowed; but the use of things which consist in number, weight, or measure commonly consumes them; and this use, of course, the borrower cannot have unless he owns the things used. When such things are lent, therefore, it is presumed to be the intention of both parties, in the absence of evidence to the contrary, that the borrower shall acquire the title to them.

But why then call the transaction a loan? The answer is, that, in

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