McKenzie v. Guaranteed Bond & Mortgage Co.

• Decision Date: 23 February 1929
• Docket Number: 6427.
• Citation: 147 S.E. 102,168 Ga. 145
• Parties: McKENZIE v. GUARANTEED BOND & MORTGAGE CO. et al.
• Court: Georgia Supreme Court

147 S.E. 102

168 Ga. 145

McKENZIE v. GUARANTEED BOND & MORTGAGE CO. et al.

No. 6427.

Supreme Court of Georgia

February 23, 1929

Syllabus by the Court.

Amendments of a charter of a corporation, which are vital, radical, and fundamental in their nature, cannot be adopted without the unanimous consent of its stockholders.

The amendment applied for in this case was vital, radical, and fundamental, and no such right was granted in the original charter of the corporation.

"The power and authority to apply for amendments to this charter by a vote of the majority of the stock outstanding at the time," as conferred in the original charter under consideration, does not authorize the grant of power to increase the capital stock to the amount, nor upon the terms set forth in the application.

The petitioner as a minority stockholder had the right to object to any vital, radical, or fundamental change in the nature or scope of the activities of the corporation.

The prayer for a receiver not having been argued or insisted upon in the trial court, it must be treated as abandoned.

The court erred in refusing an interlocutory injunction.

Error from Superior Court, Cobb County; John S. Wood, Judge.

Petition by E. F. McKenzie against the Guaranteed Bond & Mortgage Company and others. Judgment for defendants, and plaintiff brings error. Reversed.

Hines J., dissenting.

Geo. M Wilson and Pearce Matthews, both of Atlanta, for plaintiff in error.

Morris, Hawkins & Wallace, of Marietta, for defendants in error.

RUSSELL C.J.

It is conceded by counsel for both parties that the only point at issue is whether the language in the original charter granted to the corporation, with reference to applying "for amendments to this charter by a vote of the majority of the stock outstanding at the time," authorized the amendment increasing the capital stock of the company, as set forth in the statement of facts. It is conceded that "the general rule of law is that such a vital, radical, and fundamental amendment as is here involved must receive the unanimous consent of the stockholders, provided there is no provision in the charter of the corporation to the contrary." It is insisted, however, by the defendants, that the provision of the charter in this case, allowing amendment to the charter by a majority vote of the stockholders, takes this case out of the general rule. Counsel for the plaintiff insists that the power of amendment upon the majority vote of the stockholders cannot be held to authorize amendments which are vital, radical, or fundamental in nature. Therefore the real question at issue may be said to be whether, under a reserved power to amend, if contained in the charter, as insisted by the defendants, the Guaranteed Bond & Mortgage Company is authorized to apply for, obtain, or accept an amendment which is fundamental in character without obtaining the unanimous consent of its stockholders. In other words, does the power granted the corporation in its original charter to " apply for amendments" to its charter, "by a vote of a majority of the stockholders outstanding at the time," include the power to make a vital, radical, or fundamental amendment to the charter by the vote of only a majority of the stockholders?

It may be conceded that the charter of a corporation is a contract of a dual character: First, a contract between the state, which grants the charter, and the corporation; second, a contract between the corporation and its members. And while the state, in its reserved power to do so, can alter and amend the charter, and the corporation itself cannot object to the alteration, even the state has no power to make any material or essential alteration in the contract between the members themselves and the corporation. Snook v. Georgia Improvement Co., 83 Ga. 61, 65, 9 S.E. 1104, and cit. It is also true that the charter limits and fixes the powers of a corporation, and, in addition to the rights and privileges granted by the charter, the corporation has the powers which are common to all corporations. These common powers are set forth in Civil Code 1910, § 2216. The method of incorporation by the superior court is set forth in that Code, §§ 2822, 2823. As to the common or general powers of a corporation, it is provided in paragraph 5 of section 2823 that corporations thus created may exercise all corporate powers necessary to the purpose of their organization. Among the matters required to be specified in the petition required to be filed by those seeking a charter is the amount of capital stock to be employed, as well as the particular business which it is proposed to carry on.

It is to be noted that in paragraph 6 of section 2823 it is declared that the powers therein conferred shall extend to the amendment of all charters contemplated in the section. So, while it does not appear in the prior decisions of this court, holding that a vital, radical, or fundamental amendment to a charter could not be legally obtained without the unanimous consent of the stockholders, that the charters then dealt with contained a provision for amendments, we do not think that that point is important, for the reason that the language employed in the application for the charter in this case is not substantially or in any respect different from the language employed in paragraph 6 of section 2823; and yet the decisions of this court in Atlanta Steel Co. v. Mynahan, 138 Ga. 668, 75 S.E. 980, Macon Gas Co. v. Richter, 143 Ga. 397, 85 S.E. 112, National Bank v. Amoss, 144 Ga. 425, 431, 87 S.E. 406, Ann.Cas. 1918A, 74, and Johnson v. Tribune-Herald Co., 155 Ga. 204, 116 S.E. 810, applied the general rule that amendments to a charter, vital, radical, or fundamental in their nature, should not be permitted, except upon the unanimous consent of the stockholders.

In the Richter Case, it was held that "Increasing the amount of the common capital stock in a corporation in excess of the amount authorized by the charter is a vital and fundamental change of the original contract, and requires the unanimous consent of all the stockholders." In delivering the opinion of the court, Mr. Justice Hill said: "It is insisted by the plaintiffs in error that the unanimous consent of the stockholders of the gas company is not required in order to increase the capital stock beyond that named in the charter; in other words, that such consent is not necessary in order to obtain an...