This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The rights of stockholders in the corporation of which they are members, are contract rights, the obligation of which cannot be impaired by subsequent legislation. Thus the right of stockholders to vote in proportion to the number of shares held cannot be altered.1 But under a constitution reserving the power to alter, amend or repeal future acts of incorporation, cumulative voting may be provided for by statute.2 So an amendment cannot authorize a pre-existing mutual insurance company to transform itself into a joint-stock company against the will of one pre-existing member.3 So a member of a beneficial association who has when he becomes a member, a right to change the beneficiary of his insurance certificate cannot thereafter be deprived of such right.4 So the rights of a withdrawing shareholder of a building association cannot be impaired by subsequent legislation.5 On the other hand, a change in the method of enforcing existing rights is valid. Thus a provision in effect allowing dividends to be paid in property instead of in money is valid.6 The liability of a stockholder to the creditors of a corporation is generally held to be so far contractual in its nature that it cannot be modified by legislation subsequent to the debts involved,7 either increasing such liability, as where an assessment on stock, fully paid up, is authorized,8 or diminishing it, as where a subsequent statute repeals a prior statute which imposed a personal liability on the stockholders in an amount in addition to that paid in on their stock equal to the par value thereof.9 So a statute making valid certain defectively attempted incorporations, does not affect a prior right of action against the incorporators personally for the debts of such organization.10
6 Nashville, etc., Turnpike Co. v. Davidson Co., 106 Tenn. 258; 61 S. W. 68.
7 Houston, etc., Ry. v. Texas, 170 U. S. 243. (After an important part of the road has been completed.)
8 Pingree v. Ry., 118 Mich. 314; 53 L. R. A. 274; 76 N. W. 635; (citing New Orleans Gaslight Co. v. Louisiana Light & H. P. & Mfg. Co., 115 U. S. 650; Georgia R. & Bkg. Co. v. Smith, 128 U. S. 174; Reagan v. Farmers' Loan & T. Co., 154 U. S. 362; Chicago B. & Q. R. Co. v. Iowa, 94 U. S. 155; Ruggles v. Illinois, 108 U. S. 526;) Stone v. Yazoo, etc., Ry. Co., 62 Miss. 607; 52 Am. Rep. 193.
9 Pearsall v. Ry., 161 U. S. 646.
10 pearsall v. Ry., 161 U. S. 646; (reversing 73 Fed. 933).
11 Norton v. Taxing District, 129 U. S. 479; Wilkes County v. Call, 123 N. C. 308; 44 L. R. A. 252; 31 S. E. 481; (citing Galveston, etc., Ry. v. Texas, 170 U. S. 226; Citizens', etc., Association v. Perry County, 156 U. S. 692; Norton v. Brownville, 129 U. S. 479; and citing as overruled. Concord v. Portsmouth Saw Bank. 92 U. S. 625; Fairfield v. Gallatin County, 100 U. S. 47).
12 C. H. Venner Co. v. Steel Cor. poration, 116 Fed. 1012.
1 Tucker v. Russell, 82 Fed. 263.
2 Looker v. Maynard, 179 U. S. 46; Gregg v. Smelting Co., 164 Mo. 616; 65 S. W. 312.
3 Schwarzwaelder v. German Mutual Fire Ins. Co., 59 N. J. Eq. 589; 44 Atl. 769.
4 Peterson v. Gibson, 191 111. 365; 85 Am. St. Eep. 263; 54 L. R. A. 836; 61 N. E. 127; (citing Baldwin v. Begley, 185 111. 180; 56 N. E. 1065; Association v. Kentner. 188 111. 431; 58 N. E. 966).
5 Intiso v. Loan Association, 68 N. J. L. 588; 53 Atl. 206.
6 Merchant v. Land Association, 56 Minn. 327: 57 N. W. 931.
7 Hawthorne v. Calef, 2 Wall. (U. S.) 10; Webster v. Bowers, 104 Fed. 627; Evans v. Nellis, 101 Fed. 920; Central, etc., Association v. Ins. Co., 70 Ala. 120; Woodworth v. Bowles, 61 Kan. 569; 60 Pac. 331; Providence Savings Institution v. Jackson, etc.. Bathing Rink. 52 Mo. 552.
8 Enterprise Ditch Co. v. Moffit, 58 Neb. 642; 76 Am. St. Rep. 122; 45 L. R. A. 647; 79 N. W. 560.
9 Barton National Bank v. Atkins, 72 Vt. 33; 47 Atl. 176.
10 Christian v. Bowman, 49 Minn. 99; 51 N. W. 663.