§ 1 Mortgages.-There is no prescribed statutory procedure for the creation of mortgages by corporations organized under this act. No consent of stockholders is required as in New York. While the power to create mortgages is undoubtedly vested in the directors (Section 12) it is the usual practice, in the absence of express authority to the directors in the certificate of incorporation, to obtain the sanction of the stockholders at a duly convened meeting. No statutory limitation as to amount of mortgage indebtedness.-The question is frequently asked whether there is any limitation under the laws of New Jersey on the amount of bonds or other indebtedness which a corporation may create. As to ordinary business corporations the statutes are silent, although railroad companies are limited in the amount of such indebtedness. This question is doubtless suggested by the provisions of the laws of some of the other States limiting the amount of bonded indebtedness to the amount of the paid-up capital stock. The general rule is stated in Barry v. Merchants' Exchange Co., 1 Sanford Ch. Rep. (N. Y.), 280, 310, where it was said "It is in vain to look in our laws for any express restriction of corporations, to the amount of their capital in the use of their credit. The history of those institutions in this country shows that no such restriction exists. The Legislature has sometimes interposed its authority by expressly limiting the use of the corporate credit, thus showing that unless so restricted it was unlimited." V. To appoint agents.-The power to appoint officers and agents is ordinarily in the directors, but it may be delegated. It is not necessary that the appointment of an agent should be made under the corporate seal. (Mendham v. Losey, 2 N. J. Law, 327.) The manner of appointing agents is usually prescribed by the by-laws. A trading or manufacturing corporation, until its charter is annulled by a proper proceeding at law, has the same authority as an individual trader or manufacturer to sell or consign its goods, to select its selling agents, and to impose conditions as to whom they shall sell, and the terms upon which they shall sell. (Stockton v. American Tobacco Company, 55 N. J. Eq., 352.) See further as to officers and agents and de facto officers, see notes to § 13. VI. By-laws.-As to where the power to make and alter by-laws lies, see Sec. 11, post. By-laws are binding upon and confer rights upon members of the corporation and not upon third persons without notice. (State v. Overton, 24 N. J. Law, 440.) Where a by-law is adopted as a part of the original organization of the company, and the subscriptions of stock are made and money paid thereon upon the strength of it, it becomes a fundamental contract between the stockholders, and cannot afterwards be altered, even though a general power be reversed in the by-laws to make alterations therein. Rights under such a by-law are vested in the stockholders and pass to each new holder of stock by transfer. (Loewenthal v. Rubber Reclaiming § 2 Co., 52 N. J. Eq., 440.) For early cases declaratory of general principles relating to by-laws see Taylor v. Griswold, 14 N. J. Law, 222; Paxson v. Sweet, 13 N. J. Law, 196; State v. Overton, 24 N. J. Law, 440. VII. To wind up and dissolve. This subject will be treated more fully in discussing Sections 31 and 69. Generally speaking, aside from the inherent power of the State to forfeit a charter for misuser or nonuser, the statutes alone provide the means by which a private corporation may be dissolved, and any other method may be enjoined. (Hunt v. American Grocery Co., 81 Fed. Rep., 532.) In Hoboken Building Association v. Martin (13 N. J. Eq., 427) it was contended that a failure to elect officers according to the requirements of the constitution worked a dissolution. But the Chancellor held that it did not. This matter is now settled by statute. (Sec. 41, post.) The charter of a company is not extinguished by a transfer of all its real and personal property. (Zinc Co. v. Franklinite Co., 13 N. J. Eq., 323; Sewell v. East Cape May Beach Co., 25 Atl. Rep., 929.) The ways by which a corporation may be wound up and dissolved, as provided in the statutes, are: 2. 1. By limitation in the certificate of incorporation. The corporate 2. By surrender of the corporate franchises. (Sec. 32.) 3. Voluntary dissolution by the directors and stockholders, or by 4. By the Legislature. (Sec. 4.) 5. By decree of the Court of Chancery in insolvency proceedings. 6. The Court of Chancery or Supreme Court may declare charter 7. By proclamation of the Governor for failure to pay taxes Powers additional. In addition to the powers enumerated in the first section of this act and the powers specified in its charter or in the act or certificate under which it was incorporated, every corporation, its officers, directors and stockholders, shall possess and exercise all the powers and privileges contained in this act, so far as the same are necessary or convenient to the attainment of the objects set forth in such charter or certificate of incorporation; and shall be governed by the provisions and be subject to the restrictions and liabilities in this act contained, so far as the same are appropriate to and not inconsistent with such charter or the act under which such corporation was formed; and no corporation shall possess or exercise any other corporate powers, except such § 2 incidental powers as shall be necessary to the exercise of the powers so given. P. L. 1846, p. 16, Act of 1875, §§ 2, 3, 9. This section is an important provision of the Corporation Law, involving the question as to what corporate powers are granted by the Statutes of New Jersey. In 1846 the act entitled "An Act Concerning Corporations," approved February 14, 1846 (P. L. 1846, p. 16), was passed, giving all corporations substantially the same general powers as are contained in paragraphs 1 to 5 of this act. In the same year "An Act to authorize the establishment and pre"scribe the duties of manufacturing companies," approved February 25, 1846 (P. L. 1846, p. 64), was passed. This was the first General Enabling Act of New Jersey. During the next three years recourse was had to the Legislature by way of special charters for specific powers and objects, until it became apparent from the multiplicity of special charters that an extension of the General Enabling Act (P. L. 1846, p. 64) was necessary so as to include corporations other than manufacturing. Accordingly in 1849 the General Enabling Act was broadened to include companies for manufacturing and other purposes by the passage of an act entitled "An Act to authorize the establishment, and "to prescribe the duties of companies for manufacturing and other pur"poses," approved March 2, 1849 (P. L. 1849, p. 300). The "Act Concerning Corporations," approved February 14, 1846 (P. L. 1846, p. 16), which prescribed the powers of corporations in general, remained practically unchanged down to the Revision of 1875. Meanwhile the General Enabling Act of 1849 (P. L. 1849, p. 300) was supplemented by various acts of the Legislature from time to time. In 1875 the Constitution of New Jersey, as then amended, provided that the " Legislature shall pass no special act conferring corporate "powers, but shall pass general laws under which corporations may be "organized and corporate powers of every nature obtained." In obedience to the provision of the Constitution the Corporation Act of 1875 was passed and in that act the fundamental powers of corporations as defined under "An Act Concerning Corporations," approved February 14, 1846 (P. L. 1846, p. 16), were substantially reiterated. The Revision of 1896 consolidated Sections 2 and 3 of the Act of 1875 into Section 2 of the Act of 1896. Before proceeding to analyze this section it should be borne in mind that the act is applicable to domestic corporations generally, including (1) corporations under special charters granted by the Legislature, or under the General Corporation Act prior to 1875; (2) corporations created under general acts of the Legislature applicable to different classes of corporations, such as banking, insurance, etc., as well as (3) to corporations "in organized under the Act of 1875. Therefore, when the statute reads " At common law a corporation created by charter could do any act that an individual could do, whether expressly empowered by its charter to do such act or not. For an abuse of its powers it was amenable to the sovereign alone. (Riche v. Ashbury Co., L. R., 9 Exch., 224, 262.) A corporation created by statute, however, is precisely what the organic act makes it. For every function it claims to exercise and for every power it assumes to possess it must find authority in legislative grant. (Watson v. Acquackanonck Water Co., 36 N. J. Law, 195; Stockton v. Central R. R. Co., 50 N. J. Eq., 52.) When we seek to ascertain the powers of a corporation under this act we find that there are two sources from which its express powers are derived. These are: (1) The "Act Concerning Corporations." (2) The certificate of incorporation. I. The "Act Concerning Corporations." It should be borne in mind that this act has a twofold scope. It contains (a) A code of general rules of law applicable to all corporations. may be formed. (See Section 6.) In its first aspect it declares the fundamental powers which shall be possessed by every corporation. These are set forth in Section 1. These are, with some slight modifications, declaratory of the common law attributes of corporate existence, as stated by Coke and Blackstone. These are basic and inherent powers, pertaining to a corporation as such without regard to the object of its creation. In the next place, it confers certain additional general powers and privileges on all corporations, however organized, but only "so far as the same are necessary or convenient "to the objects set forth in such charter or certificate of incorporation." (Ellerman v. Chicago Junction Rys., &c., Co., 49 N. J. Eq., 217.) It confers also certain express powers on condition that they are inserted in the certificate of incorporation. Such, for instance, as the power to issue preferred stock (Sec. 18); to transact business outside of New Jersey (Sec. 7). In the third place it prescribes that every corporation "shall be gov"erned by the provisions and be subject to the restrictions and liabilities "in this act contained, so far as the same are appropriate to and not "inconsistent with such charter or the act under which such corporation "was formed." This clause is applicable to corporations organized otherwise than § 2 $2 2 under this act. As to corporations organized under this act, it is provided that the certificate of incorporation must be consistent with the act (Sec. 8), and Section 5 provides "this act and all amendments thereof "shall be a part of the charter of every corporation heretofore or here"after formed hereunder, except as far as the same are inapplicable and "inappropriate to the objects of such corporation." In its second aspect the act enumerates the kinds of corporations that may be organized under it, prescribes the procedure for their organization, confers upon them certain powers and privileges, and imposes certain regulations as to their conduct and management. II. The certificate of incorporation.-The second source from which a corporation derives its express powers is its Certificate of Incorporation, and in the discussion which follows reference is had only to corporations formed under the "Act Concerning Corporations." "The general act gives to all corporations general corporate powers and all "others necessary to their exercise. "If these were not sufficient to effect the objects of the corporation "recourse was formerly had to the Legislature for a specific grant of power. The Constitution providing that 'the Legislature shall pass no "special act conferring corporate powers, but shall pass general laws "under which corporations may be organized and corporate powers of "every nature obtained,' and the general corporation act being as it now "stands passed in obedience to the mandate of the Constitution, the cer"tificate required by that act becomes the charter of the company, and "the equivalent of the former special act of the Legislature." (Ellerman v. Chicago Junction Ry., &c., Co., 49 N. J. Eq., 217, 240, 241.) As though to carry this idea to its logical conclusion, by an amendment to Section 8 passed in 1898 (Chap. 172) corporations are now authorized to insert in their certificate of incorporation provisions "creating "and defining the powers of the corporation." This is perhaps an innovation in general enabling acts, and if the word "create" is to be given its usual and ordinary meaning it is as though the Legislature has endowed the corporators with a lawmaking power, enabling them to give the corporation such powers as they see fit, provided only that such powers are not inconsistent with the act itself. In other words, unless a power is expressly or impliedly forbidden by the statute it may be created under this section. These words may also be taken in a second and additional meaning, that outside of the express powers granted by Section 1, and the powers directly incidental to these powers, all others are lying dormant and not available to any other corporation under the act, until called into being and made applicable to the charter by being specified among the objects and purposes and powers of the corporation. |