Corporations – Charter – Change of Voting Right by Amendment
Defendant, incorporated in 1938 with an authorized capital stock of 500 shares, amended its articles of incorporation in 1940 to increase the common stock to 2,000 shares, and to authorize the issue of preferred stock. By the amendment, the voting power was vested exclusively in the common stock, with the exception that the holders of preferred stock would acquire temporary voting power upon default of four semi-annual dividends. Default in payment of dividends occurred and the preferred stockholders exercised the right to vote from 1943 on. In 1953, a second amendment was proposed and passed by a majority in interest vote of the common stockholders and a unanimous vote of the preferred stockholders. By this second amendment voting power was given equally, share for share, to the holders of both common stock and preferred stock. The plaintiffs, holders of common stock, brought suit in equity to have the 1953 amendment declared invalid, contending that it abrogated substantial property and contractual rights. The common pleas court held that the exclusive right of common stockholders to vote was not a property or contractual right. On appeal, held, affirmed. The amendment is one which concerns the internal management of the corporation rather than “vested rights.” Metzger v. George Washington Memorial Park, 380 Pa. 350, UO A. (2d) 423 (1955).