Mr. Justice Gray,
after stating the case, delivered the opinion of the court.
The single question in this case is whether a power, reserved by the constitution of a State to its legislature, to alter, amend or repeal future acts of .incorporation, authorizes the legislature, in order (as declared in the title of the statute of Michigan now in question) “ to secure the minority of stockholders, in corporations organized under general laws, the power of electing a representative membership in boards of directors,” to permit each stockholder to cumulate his votes upon any one or more candidates for directors.
By the decision in the leading case of
Dartmouth College
v.
Woodward,
4 Wheat. 518, it was established that a charter from the State to a private corporation created a contract, within the meaning of the clause in the Constitution of the United States forbidding any State to pass any law impairing
the obligation of contracts; and consequently that a statute of the State of New Hampshire, increasing the number of the trustees of Dartmouth College as fixed by its charter, and providing for the appointment of a majority of the trustees by the executive government of New Hampshire, instead of by the board of trustees as the charter provided, was unconstitutional and void.
Mr. .Justice Story, in his concurring opinion in that case, after declaring that in his judgment it was “ perfectly clear that any act of a legislature which takes away any powers or franchises vested by its charter in a private corporation, or its corporate officers, or which restrains or.controls the legitimate exercise of them, or transfers them to other persons, without its assent, is a violation of the obligations of that charter,” took occasion to add: “ If the legislature mean to claim such an authority, it must be reserved in the grant.” 4 Wheat. 712.
After that decision, many a State of the'Union, in order to secure to its legislature the exercise of a fuller parliamentary or legislative power over corporations than would otherwise exist, inserted, either in its statutes or in its constitution, a provision that charters thenceforth granted should be subject to alteration, amendment or repeal at the pleasure of the legisla-ture. See
Greenwood
v.
Freight Co.,
105 U. S. 13, 20, 21. The effect of such a provision, whether contained in an original act of incorporation, or in a constitution or general law subject to which a charter is accepted, is, at the least, to reserve to the legislature the power to make .any alteration or amendment of a charter subject to it, which will not defeat or substantially impair the object of the grant, or any right vested under the grant, and which the legislature may deem necessary to carry into effect the purpose of the grant, or to protect the rights of the public or of the corporation, its stockholders or creditors, or to promote .the due administration of its affairs.
Sherman
v.
Smith,
1 Black, 587;
Miller
v.
State,
15 Wall. 478;
Holyoke Co.
v.
Lyman,
15 Wall. 500;
Sinking Fund Cases,
99 U. S. 700, 720, 721;
Close
v.
Glenwood Cemetery,
107 U. S. 466;
Spring Valley Water Works
v.
Schottler,
110 U. S. 347;
New York & New England Railroad
v.
Bristol,
151 U. S. 556.
As illustrations of the right of the legislature, exercising such a reserved power, to alter for the future the liability of stockholders to creditors of the corporation, or the mode of computing the votes of stockholders for directors, it will be sufficient to state two of the cases just cited.
The case of
Sherman
v. Smith, 1 Black, 587, was as follows: The general banking act of New York of 1838, c. 260, provided, in § 15, that any number of persons might associate to establish a bank, upon the terms and conditions, and subject to the liabilities prescribed in this act; in § 23, that no shareholder of any association formed under this act should be-individually liable for its debts, unless the articles oí association signed by him should declare that the shareholder should be liable-; and, in § 32, that the legislature might at any time alter or repeal this act. The articles of association of a corporation organized under this act in
1844
expressly provided that the shareholders should not be individually liable for its debts. By provisions of the constitution of New York of 1846, art. 8, see. 2, and of the general statute of 1849, c. 226, the shareholders of all banks were made liable for debts contracted by the bank after January 1, 1850. This court unanimously held that these provisions were not unconstitutional as impairing the obligation of a contract.
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Mr. Justice Gray,
after stating the case, delivered the opinion of the court.
The single question in this case is whether a power, reserved by the constitution of a State to its legislature, to alter, amend or repeal future acts of .incorporation, authorizes the legislature, in order (as declared in the title of the statute of Michigan now in question) “ to secure the minority of stockholders, in corporations organized under general laws, the power of electing a representative membership in boards of directors,” to permit each stockholder to cumulate his votes upon any one or more candidates for directors.
By the decision in the leading case of
Dartmouth College
v.
Woodward,
4 Wheat. 518, it was established that a charter from the State to a private corporation created a contract, within the meaning of the clause in the Constitution of the United States forbidding any State to pass any law impairing
the obligation of contracts; and consequently that a statute of the State of New Hampshire, increasing the number of the trustees of Dartmouth College as fixed by its charter, and providing for the appointment of a majority of the trustees by the executive government of New Hampshire, instead of by the board of trustees as the charter provided, was unconstitutional and void.
Mr. .Justice Story, in his concurring opinion in that case, after declaring that in his judgment it was “ perfectly clear that any act of a legislature which takes away any powers or franchises vested by its charter in a private corporation, or its corporate officers, or which restrains or.controls the legitimate exercise of them, or transfers them to other persons, without its assent, is a violation of the obligations of that charter,” took occasion to add: “ If the legislature mean to claim such an authority, it must be reserved in the grant.” 4 Wheat. 712.
After that decision, many a State of the'Union, in order to secure to its legislature the exercise of a fuller parliamentary or legislative power over corporations than would otherwise exist, inserted, either in its statutes or in its constitution, a provision that charters thenceforth granted should be subject to alteration, amendment or repeal at the pleasure of the legisla-ture. See
Greenwood
v.
Freight Co.,
105 U. S. 13, 20, 21. The effect of such a provision, whether contained in an original act of incorporation, or in a constitution or general law subject to which a charter is accepted, is, at the least, to reserve to the legislature the power to make .any alteration or amendment of a charter subject to it, which will not defeat or substantially impair the object of the grant, or any right vested under the grant, and which the legislature may deem necessary to carry into effect the purpose of the grant, or to protect the rights of the public or of the corporation, its stockholders or creditors, or to promote .the due administration of its affairs.
Sherman
v.
Smith,
1 Black, 587;
Miller
v.
State,
15 Wall. 478;
Holyoke Co.
v.
Lyman,
15 Wall. 500;
Sinking Fund Cases,
99 U. S. 700, 720, 721;
Close
v.
Glenwood Cemetery,
107 U. S. 466;
Spring Valley Water Works
v.
Schottler,
110 U. S. 347;
New York & New England Railroad
v.
Bristol,
151 U. S. 556.
As illustrations of the right of the legislature, exercising such a reserved power, to alter for the future the liability of stockholders to creditors of the corporation, or the mode of computing the votes of stockholders for directors, it will be sufficient to state two of the cases just cited.
The case of
Sherman
v. Smith, 1 Black, 587, was as follows: The general banking act of New York of 1838, c. 260, provided, in § 15, that any number of persons might associate to establish a bank, upon the terms and conditions, and subject to the liabilities prescribed in this act; in § 23, that no shareholder of any association formed under this act should be-individually liable for its debts, unless the articles oí association signed by him should declare that the shareholder should be liable-; and, in § 32, that the legislature might at any time alter or repeal this act. The articles of association of a corporation organized under this act in
1844
expressly provided that the shareholders should not be individually liable for its debts. By provisions of the constitution of New York of 1846, art. 8, see. 2, and of the general statute of 1849, c. 226, the shareholders of all banks were made liable for debts contracted by the bank after January 1, 1850. This court unanimously held that these provisions were not unconstitutional as impairing the obligation of a contract.
The case of
Miller
v.
State,
15 Wall. 478, was this: By the Revised Statutes of New York of 1828, c. 18, tit. 3, it was enacted that “ the charter of every corporation that shall hereafter be granted-by the legislature shall be subject to alteration, suspension and repeal, in the discretion of the legislature.” The constitution of New York of 1846, art. 8, sec. 1, ordained as follows: “ Corporations may be formed under general laws but shall not be created by special act,” except in certain cases. “ All general laws and special acts passed pursuant to this section may be altered from time to time, or repealed.” 2 Charters and Constitutions, 1363. In 1850 the legislature passed a general railroad act authorizing the formation of railroad corporations with thirteen directors, and providing that the subscribers to the articles of association and all who should become stockholders in the company should become a corporation, and
“
be subject to
the provisions contained in ” the aforesaid title of the Revised Statutes. Stat. 1850, c. 140, § 1. In the same year, a railroad corporation was organized under that act for the construction of a railroad from the city of Rochester to the town of Portage ; and in 1851, by a statute amending the charter of the city of Rochester, that city was authorized to become a stockholder in the corporation, and to appoint four of the thirteen directors. Stat. 1851, c. 389, § 24. In 1867, the legislature passed another statute, authorizing the city to appoint seven of the thirteen directors. Stat. 1867, c. 59. This court upheld the validity of the latter statute, upon the ground that the reservation in the constitution of 1846, and in the statutes of 1828 and 1850, of the power to alter or repeal the charter, clearly authorized the legislature to augment or diminish the number, or to change the apportionment, of the directors as the ends of justice or the best interests of all concerned might require. 15 Wall. 492, 498. The full extent and effect of the decision are clearly brought out by the opinion of two justices who dissented for the
very
reason that the agreement with respect to the number of directors which the city should elect was not a part of the charter of the company, but was an agreement between third parties, outside of and collateral to the charter, and which the legislature could not reserve the power to alter or repeal. 15 Wall. 499. That case cannot be distinguished in principle from the case at bar.
Remembering that the
Dartmouth College
case, (which was the cause of the general introduction into the legislation of the several States of a provision reserving the power to alter, amend or repeal acts of incorporation,) concerned the right of a legislature to make a change in the number and mode of appointment of the trustees or managers of a corporation, we cannot assent to the theory that an express reservation of the general power does not secure to the legislature the right to exercise it in this respect.
Judgment affirmed.