of business often finds convenience and expediency substituted for caution and safety. There is little doubt that a majority of corporate instruments are supported by principles of estoppei. rather than by definite authority. In recognition of this fact, informalities are rarely permitted to defeat justice. Thus, where mortgages of corporate property have been executed without duly called meetings or proper resolutions conferring authority upon the executing officers, such mortgages are, nevertheless. held valid, if made with the knowledge and consent of all of the stockholders13. $95. Corporate Mortgages. In the absence of a restraining statute or by-law, full power to mortgage all or any of the corporate property for corporate purposes is vested in the board of directors11. The power should be exercised by means of a regularly called meeting. A meeting at which all directors are present and in which all participate without objection, will be sufficient, however called 15. But less than all of the members cannot assemble, without due notice to the others, and bind the corporation by a mortgage thus irregularly authorized16. A favorite method of gaining time in which to meet urgent obligations, is by means of a trust mortgage upon all of the corporate property for the benefit of creditors. Such an instrument is, of course, made only as a last resort to stay impending disaster. If the corporation is solvent, preferences may be given without immediate danger of successful interference by a court of bankruptcy1. If, however, these preferences are unjust, best to secure their assent. The fact that a bond issue has the united approval of all members of the company is well calculated to afford investors additional confidence and encouragement. For the same reason it is well, upon approaching prospective investors, to place them in possession of such certified copies of records as will indicate to them, not only that the action authorizing the bonds was regular, but also that the issue has been painstakingly prepared by competent counsel. While these precautions do not necessarily insure the success of a floatation, their absence will be found to exert a po creditors may ignore or repudiate the mortgage, and proceed to enforce their claims. The temptation to do this is materially modified by the fact that the. mortgage will, if valid, remain in force for the benefit of those who choose to be bound by its terms. While dissenting creditors may levy upon the corporation's equity in the mortgaged property, the secondary lien thus gained is usually less desirable than the security afforded by the mortgage. The levy may be cut off altogether by foreclosure of the mortgage, and the proceeds of the foreclosure sale, if not exceeding the mortgage indebtedness, will be divided pro rata among the assenting creditors, leaving nothing for those who have repudiated the mortgage securityis. If the corporation is insolvent, a mortgage creating preferences is an act of bankruptcy19. Even in these cases, if the terms of the mortgage are reasonable, it is likely to go unassailed. Liquidation through foreclosure is frequently preferable to liquidation through bankruptcy. A mortgage to a trustee for the benefit of creditors, where the instrument does not place control of the property, power of sale, and right to make distribution, in the hands of the trustee (except as such rights and powers may be gained by judicial decree) does not amount to a common law assignment, and is valid, under the laws of Michigan, even though it protects some of the creditors to the exclusion of others20. But a so called mortgage which divests the corporation of its property without right of redemption, and places the same in the hands of a trustee with full power to continue, or to close out, the business, and to distribute its proceeds, giving preferences, amounts to a common law assignment, and is void as to creditors21. The doctrine that a debtor may give a mortgage upon property to be afterwards acquired is recognized in Michigan. Thus a trust mortgage covering all of the corporation property including "all improvements thereon and additions thereto of every name 18. Alliance Milling Co. v. Eaton, Guinan & Co., 86 Tex. 401, 24 L. R. A. 369, and notes. See also Tuttle v. Vanleer. 89 Tex. 174, 37 L. R. A. 337, and notes. 19. National Bankruptcy Act of 1898, Sec. 3. 20. Longley v. Hosiery Co., 128 Mich. 194; Austin v. First National Bank, 100 Mich. 613; Bank of Montreal v. Salt & Lumber Co., 90 Mich. 345-351; Warner v. Littlefield, 89 21. Conely v. Collins, 119 Mich. 519-521; Hill v. Mallory, 112 Mich. 387; Pettibone v. Byrne, 97 Mich. 85; Burnham v. Haskins, 79 Mich. 35; Kendall v. Bishop, 76 Mich. 634; Tuttle v. Vanleer, 89 Tex. 174, 37 L. R. A. 337. and nature whatsoever," covers all after acquired property, including new special franchises22. It has been held in this State, that a corporation may mortgage or sell its franchises, as its other property, and the purchaser at sale, or upon foreclosure, becomes vested with all of the rights so conveyed23, subject to the same obligations that were imposed upon them in the hands of the vendor corporation. A mortgage given to secure a valid debt, and recognized as valid by the corporation, cannot be impeached, even by a judgment creditor, on the ground that it does not conform to the terms of the resolutions authorizing it25. Where a mortgage is executed to a director to secure him for a bona fide indebtedness owed him by the corporation, and is in good faith foreclosed upon default, such director may bid in the corporate property at the foreclosure sale, provided he does so openly and fairly26. 22. Lewis V. Weidenfeld, 114 Mich. 580-591; Preston National Bank v. Purifier Co., 84 Mich. 364387; Fuller v. Rhodes, 78 Mich. 36; Eddy v. McCall, 71 Mich. 497; Robson v. Mich Central R. Co., 37 Mich. 70; American Cigar Co. v. Foster. 36 Mich. 367; Leland v. Collver, 34 Mich. 418. 23. City of Kalamazoo v. Power Co., 124 Mich. 74-83; Michigan Telephone Co., v. St. Joseph, 121 Mich. 502-509; Detroit v. Mutual Gas Light Co., 43 Mich. 594-599; Joy v. Jackson & Mich. P. R. Co., 11 Mich. 155163; C. L. 1897, Sec 8572, 8573. In Joy v. Jackson & Mich. P. R. Co. (ante). Justice Christiancy said: "All the several rights and powers conferred by the charter may, I think, be treated as so many different franchises, some of which are essential to the existence of the corporation while others are not. Those which are essentially corporate franchises, without which the corporation could not exist, and which are, in their nature, incapable of being vested in, or enjoyed by, a natural person-such as the right or franchise of being a corporation, of having corporate succession, etc. -can not be made the subject of sale or transfer, without a positive provision of statute, giving the authority and pointing out some mode in which such transfer may be effected, as this would be allowing the corporation 'to transfer its corporate existence into another body'-to create a new corporation, which is an act of the sovereign power only to be performed by the legislature. The franchise, also, of taking private property for the use of a road, though not perhaps necessarily a corporate right, yet being an exercise of the right of eminent domain, and to be exercised only by the officers, and in the manner specified in the charter, may also require positive legislative authority for its transfer." 24. Township of Grosse Pointe v. Detroit, etc., Ry. 130 Mich. 363; Michigan Telephone Co. v. St. Joseph, 121 Mich. 502-509: Detroit v. Mutual Gas Light Co., 43 Mich, 394599. 25. Citizens State Bank v. McGraft Lumber Co., 122 Mich. 573; Beecher v. Marquette & Pacific R M. Co., 45 Mich. 103: Thomp. Corp. Sec. 6165. 26. Lucas V. Friant, 111 Mich. 426-436. $96. Bonds. Unless restricted by charter, a corporation may issue its negotiable bonds for the purpose of raising money for corporate objects. The price at which these bonds may be sold, and the uses to which they may be put if not sold, have given rise to some questions which have been settled in this State by judicial authority. A corporation may issue and sell its bonds at a discount for the purpose of paying debts, unless prevented by statute. If the selling price is such as to make the transaction usurious, the sale may be enjoined at the instance of any stockholder whose interests are in peril. To secure this injunctive relief a clear case of imminent and certain injury must be established. Usurious bonds are enforcible in the hands of bona fide purchasers28. Where the bonds of a corporation were issued upon an understanding that they were to be sold for cash only, no one but a stockholder, or the corporation, could object to the fact that the bonds were pledged as collateral to secure a loan for the company, instead of being sold as contemplated. If the corporation received value for the pledge, it would be estopped to deny the regularity of the transaction, and participating or assenting stockholders would be likewise estopped29. 27. Fletcher & Sons v. Circuit Judge, 136 Mich. 511; Gamble v. Queen's County Water Co., 123 N. Y. 91; 9 L. R. A. 527. In this case Justice Peckham made the following statement: "To warrant the interposition of the court in favor of the minority stockholders.......as against the contemplated action of the majority where such action is within the corporate powers, a case must be made out which plainly shows that such action is so far opposed to the true interest of the corporation itself as to lead to the clear inference that no one thus acting could have been influenced by any honest desire to secure such interests, but that he must have acted with an intent to subserve some outside purpose, regardless of the consequences to the company and in a manner inconsistent with its interests. Otherwise the court might be called upon to balance probabilities of profitable results to arise from the carrying out of the one or the other of different plans proposed by or on behalf of different shareholders in a corporation, and to decree the adoption of that line of policy which seemed to it to promise the best results, or at least to enjoin the opposite policy. This is no business for any court to follow." 28. Fletcher & Sons v. Circuit Judge, 136 Mich. 513. 29. Beecher v. Marquette & Pacific R. M. Co., 45 Mich. 103. CHAPTER XI. CHANGES IN THE CORPORATE ENTITY. § 97. How Changes May be Effected. $ 98. Amendment and Repeal by the State. § 99. $100. Amendment by the Stockholders. $101. Dissolution. §97. How Changes May be Effected. Changes in the corporate entity may be effected through amendment or repeal of the enabling statute, or through amendment of the articles of association, or by dissolution. $98. Amendment and Repeal by the State. Under its reserved right, the legislature has full power to repeal any statute of this state conferring rights, privileges, or franchises upon private corporations1. An amendment or a repeal can not divest the corporation of such property rights as might exist independently of the charter; but the corporation may be stripped of its corporate powers and franchises, and of the right to continued existence2. When a statute has been repealed, its force is at an end. The powers which it conferred cease to have legal authorization3. 1. Mich. Const. 1908, Art. XII, Sec. 1 and Beecher's notes. 2. For a case carrying the power of amendment to the verge of an impairment of vested rights see Attorney General v. Looker, 111 Mich. 498, affirmed in Looker v. Maynard, 179 U. S. 44, 45 L. ed. 79. In this case it was held that a general law authorizing cumulative voting, did not impair vested rights. See also Detroit v. Detroit & Howell R. Co., 34 Mich. 140. 3. "One obvious effect of the repeal of a statute is that it no longer exists. Its life is at an end. Whatever force the law may give to transactions into which the corpora tion entered and which were authorized by the charter while in force, it can originate no new transactions dependent on the power conferred by the charter. If the corporation be a bank, with power to lend money and to issue circulating notes. it can make no new loan nor issue any new notes designed to circulate as money." "If the essence of the grant of the charter be to operate a railroad, and to use the streets of the city for that purpose, it can no longer so use the streets of the city, and no longer exercise the franchise of running a railroad in the city. In short, whatever nower is dependent solely upon the grant |