State ex rel. Perkins v. Montgomery Light Co.

HEAD, J. This is a proceeding in the nature of quo warranto, to vacate the charter of the respondent corporation, under sections 3167 et seq. of the Code of 1886. It has its basis mainly in subdivision 5 of section 3167, which authorizes judgment of forfeiture when a corporation “ exercises a franchise or privilege not conferred on it bylaw.” The statute prescribes two methods of procedure to enforce these forfeitures. One is that the j udge of the circuit, wherein the corporation is- located, whenever he has reason to believe any of the specified acts or omissions can be proved, and it is necessary for tlie public good, must direct the solicitor to bring the action. When so done the proceeding is alone in the behalf of the State for the public good. The other is, that the action may be brought on the information of any person giving security for the costs, to be approved by the clerk of the court; in which case the informant must be joined as plaintiff with the State. If the informant dies pending suit, another, giving security for costs, may be substituted in his place ; but if no person is so substituted the action abates. The present proceeding is of the latter class, except that the requirement — 600 — that the informant be joined as plaintiff with the State seems to have been overlooked and was not conformed to, the action being instituted in the ' name of the State alone, “on the relation of B. F. Perkins.” > The respondent corporation was chartered by special act of the General Assembly, in the year 1853, by the name of The Montgomery Gas Light Company, with the city of Montgomery, Alabama, as its place of business, and was empowered to furnish that city and its inhabitants gas for illuminating purposes, which was the sole object and end of the incorporation. The business of the company was legitimately carried on, within corporate powers, until the year 1889, when the grievances complained of in the information began. On December 12th, 1888, the General Assembly of Alabama passed an act, “To authorize corporations organized under the general incorporation laws of the State, or which have been chartered by an act of the General Assembly prior to the enactment of the general incorporation laws of this State of 1867, to alter and amend their charter;” and, in this act, it is provided that not less than three-fourths in number of the stockholders of any such corporation, holding not less than two-thirds in value of the stock thereof, may, in specified cases, file in the office of the judge of probate of the county in which the corporation has its principal place of business, a verified declaration, in writing, signed by them, setting forth, 1st. When said corporation was organized, its name, what changes, if any, are desired to be made in such name, and the amount of its capital stock which has been subscribed for and taken. 2d. The names of the stockholders signing the same-, and the amount of stock held by each. 3d. The purposes of the corporation and the nature of its business, as the same is set forth in the original declaration, and the alterations or amendments thereof desired. 4th. The amount of the capital stock as shown by said original declaration, and the amount to which it is proposed to decrease such capital stock, if a decrease is proposed. There is a proviso limiting, to some extent, the powers to be derived by such alterations, not material to the present case. — Acts, 1888-89, p. 20. Proceeding strictly under and in accordance with this act, assuming its validity, the respondent, in 1889, in the probate court of Montgomery county, changed its name' from “The — 601 — Montgomery Gas Light Company” to “The Montgomery Light Company”; acquired the authority to manufacture electricity and furnished the same to the city and its inhabitants for purposes of illumination; had its capital stock increased to about $200,000, “from amount fixed by its first named charter,” and acquired authority to execute bonds to the amount of $250,000, and to mortgage all its property to secure the payment thereof ; since which, the company has exercised the franchise of producing and furnishing electricity, as aforesaid, having established the necessary plant and appliances for that purpose. It has increased its capital stock to $200,000, and issued certificates for the same; has issued its bonds in the sum of $250,000, and its mortgage on all its property to secure them. The relief the informant seeks is based alone upon the proposition that the act above noticed is violative of section 5, Art. XIV of the constitution, that “No corporation shall engage in any business other than that expressly authorized by its charter;” and in connection therewith section 3, Art. XIV, which forbids the General Assembly to alter or amend the charter of any corporation existing at the adoption of the constitution, or to pass any general or special law for the benefit of such corporation, except upon the condition that such corporation shall therafte? hold its charter subject to the provisions of the constitution ; and especially as violative of those provisions of the Federal and State constitutions which forbid the State to pass any law impairing the obligation of contracts. In argument of appellant’s counsel the attack is made solely from the last named position, but we will notice the others as well. We observe first, that section 5 of Art. XIV can exert no influence upon this controversy, for, if we go to the verge of holding that, under that section, necessarily implied corporate power can not exist, and that every corporate act must find its authorization in express terms in the charter, the acts now complained of are expressly authorized in respondent’s charter, if the alterations and amendments above noticed can be otherwise upheld as valid. Next, we find, in section 3 of Art. XIV, express recognition of the right of the General Assembly to alter or amend the charter of an existing corporation, or to pass — 602 — any general or special law for its benefit, upon condition only that such, corporation shall thereafter hold its charter subject to the provisions of the constitution. We take it that it would not be contended that the enactment, under these provisions, must express the condition above mentioned. A valid acceptance by the corporation of the benefits conferred by the enactment would imply acceptance upon the condition named in the constitution. Then, suppose all the stockholders of the respondent corporation had joined in the petition to the probate court for the enumerated powers, in pursuance of the act of 1888, could it be seriously questioned that the amendments of its charter and the enlargements of its powers were constitutionally accomplished, so far as the provision of the constitution under consideration is concerned? Certainly not; and if not, then we demonstrate that the act of 1888 is not per se violative of the constitutional provision in question. It is, in that regard, a valid enactment open to every existing corporation, in a lawful way, to avail itself of its provisions ; and the only show of argument appellant can now make is, that it does not affirmatively appear, on the face of the probate court proceeding, that all the stockholders applied for or consented to the grant of the enlarged powers. What may have been done by the stockholder, by positive act, at the time, he may do by subsequent express ratification or silent acquiescence, and, in. respect of acts which may be made lawful and efficacious by ratification, either express or by acquiescence, of another, it is the legal right of such other so to ratify, which right no outsider can deprive him of. Then, in the present case, suppose it be true, in point of fact, that every shareholder in the respondent company was, from the first, fully informed of the enlarged powers, was entirely satisfied with them, believed them to be beneficial to him, and day after day, through all these years, has acquiesced in, and confirmed the same, is there any so bold to say there has not been a lawful, constitutional acceptance by the corporation of the provisions of the act of 1888, on the condition named in the constitution? And it is too clear for controversy, that, with the light this kind of proceeding, put on foot by a mere informer, is capable of shedding, we must presume such a ratification ; for if we do not, and grant the prayer of the in — 603 — formant, we take the risk of infringing the legal right of the minority shareholders to adopt by ratification, express or silent, that which was done by the majority in their behalf. Indeed, it may well be inquired if a shareholder himself, having full knowledge of the facts, after four years acquiescence in what has been done for him, standing by to affirm, if the new venture proves successful, and disaffirm if unsuccessful, would be permitted now to come before the courts, even in a direct .proceeding, to prohibit the usurpation of power by the company or to vacate its ultra vires acts done in the exercise of the new venture. The authorities upon this question are abundant, and would seem to leave the course of such a complaining stockholder not free from difficulty. — 3 Herm. Estoppel, § 1135, p. 1323; Cook on Stockholders, § 731; Taylor v. S. & N. R. R. Co., 4 Woods 575; Kelley v. R. R. Co., 24 Amer. & Eng. Ry. Cases 27; Cozart v. Ga. R. R. & B. Co., 54 Ga. 383; Alexander v. Searcy, 8 S. E. Rep. 630; Beach on Priv. Corp., 431; 2 Mor. on Corp., § 631; M. & C. R. R. Co. v. Grayson, 88 Ala. 572. What we have said applies with greater force, if possible, to that feature of appellant’s contention resting upon the “contract” clauses of the Federal and State constitutions. As we said, in considering the other constitutional objections, it is a mistake to say that the act in question is unconstitutional and void per se, because its terms appear to be such as, if enforced, might impair the obligation of the contract between the State and respondent’s shareholders, for the reason, as we have said, that it is competent for the shareholders to waive the protection of the constitution, and by their assent to, or acceptance of, the provisions of the act, render it valid, though otherwise it would be invalid; and it is always open to inquiry in a case like this, involving, so far as contractual obligations are concerned, merely the private rights of individuals, whether there has been such assent or acceptance. — Cooley Con. Lim., marg. p. 181; M. & O. R. R. Co. v. State, 29 Ala. 573 (586); 3 Amer. & Eng. Encyc. of Law, 744, note 1. And the assent of a corporation may be inferred from such acts or omissions as would raise a similar presumption in the case of natural persons. — 3 Amer. & Eng. Encyc. of Law, supra, and cases cited in note. These contract clauses are intended alone for the protection of the private rights — 604 — of contracting parties. No principle or element of public State policjqis intended to be conserved by them. A person, the terms of whose contract would be materially changed by the enforcement of a given legislative enactment, may conceive the change beneficial to him and waive the . unconstitutionality of the act; and in such case, it would become no one, not even the State itself, to interfere and allege it. The courts will not suffer such interference. There is, in essence, no contravention of the constitution, except upon complaint of the injured party. If he accepts it, it is a valid enactment. As we have already said, as the question now comes before us, we can not do otherwise than presume that the shareholders have acquiesced in what was done by the majority, because they have the right to ratify it, and they are not complaining. We must not interfere with that right. This law of quo warranto as applicable to abuse of corporate power and usurpation of corporate franchise was never designed to enforce or protect the private contractual rights of persons, involving no public detriment. Such persons are supposed to be able to take care of themselves. Here is a case of a person coming into court, and bringing the State with him, if we will, and invoking the unconstitutionality of an act which has received the solemn approval of the legislative and executive departments of the State, and been put in operation by that branch of the judicial department appointed to enforce it, upon no other plea than that the private contracts of other persons, with which he has no concern whatever, may have been impaired by the act. To give sanction to the proceeding would be to pervert the law, under which it is attempted to be maintained, to ends never intended. Affirmed.