Diamond v. Parkersburg-Aetna Corp.

Haymond, President:

In this suit in equity, involving a controversy over corporate control between management and certain stockholders, instituted in the Circuit Court of Wood County on April 1, 1960, the plaintiffs, Sol Diamond, Diamond Boning Corporation, Louis Idelstein, Harold Konner, Bennick, Inc., H & M Holding Corporation, Konner Auto Sales, Inc., Benjamin Yanowsky, George Weinstein, Jack Gorham, and Irving Sklow, who constitute a minority group of common stockholders of Parkersburg-Aetna Corporation and who own no preferred stock but claim to own 104,743 shares of common stock of a total of 749,444 shares of common stock of Parkersburg-Aetna Corporation issued and outstanding, sought injunctive relief to prevent the principal defendants, Parkersburg-Aetna Corporation, a West Virginia corporation, Bernard P. McDonough, individually and as president and member of its hoard of directors, and Harold N. Wilson, its secretary-treasurer, and other defendants as members of the board of directors and stockholders of that corporation, from proceeding further with the annual meeting of the stockholders scheduled for April 15, 1960, than to adjourn or recess such meeting until such time as the right of the plaintiffs should be accorded them to examine the books and records of the corporation; from electing directors of the corporation at such annual meeting; and from decreasing or diminishing the membership of the board of directors; and particularly from reducing the number of directors from eight to three; and to require the defendants to permit all the stockholders to vote for the election of all the directors to be voted for and elected at the annual meeting of the corporation.

Upon the verified bill of complaint and its exhibits and a notice to the principal defendants of the application of tlie plaintiffs for an injunction against tlie defendants, filed April 5, 1960, the circuit court granted the plaintiffs injunctive relief substantially as prayed for in their hill of complaint. In a written opinion filed April 6, 1960, the circuit court held that section 7 of the charter of Parkersburg-Aetna Corporation, which provided that the holders of its preferred stock as a class should have the right to elect one member of the board of directors and that the holders of the common stock as another class should have the right to elect the remaining members of the board, was vio-lative of Article XI, Section 4 of the Constitution of this State, as amended in 1958, and that the provisions of its charter and by-laws which authorized the board of directors to increase or diminish the number of directors were also unconstitutional and void for the reason that they operated to permit the election of directors in a manner other than that provided by the foregoing article and section of the Constitution.

At May Rules 1960 the principal defendants, herein sometimes referred to as the defendants, filed their written demurrer to the bill of complaint and their written motion to dissolve the injunction insofar as it prevented the board of directors from changing the number of its members which it had done by reducing the number from eight to three on February 16, 1960, and insofar as it required the defendants to permit all the stockholders to vote at the annual meeting of the corporation for the election of all directors to be elected at such meeting.

On June 3,1960, the principal defendants filed their joint and separate answer and its exhibits, in which they denied the unconstitutionality and asserted the constitutionality of section 7 of the charter of Parkers-burg-Aetna Corporation and denied the invalidity and asserted the validity of the provisions of the charter and by-laws which authorize the board of directors to increase or diminish the membership of the board and asserted the validity of the action of the board of directors in reducing its number from eight to three on February 16, 1960. By the cross-bill portion of their answer the principal defendants prayed for affirmative relief with respect to the validity of section 7 of the charter and the provisions of the by-laws permitting increase or reduction in the membership of the board, and for a mandatory injunction to require the plaintiffs to make certain corrections in a progress report prepared and sent to the stockholders of the corporation by the plaintiffs on May 23, 1960, which informed the stockholders of and enumerated the advantages which enured to them from the rulings of the circuit court upon the questions involved and the injunctive relief granted by its decree of April 7,1960, in the campaign by the plaintiffs to restore corporate control to all the stockholders of the Parkersburg-Aetna Corporation.

On June 30, 1960, the plaintiffs filed their written demurrer and their special replication to the answer of the defendants; and on July 13, 1960, moved the court to dismiss the bill of complaint, without prejudice, and to dissolve the injunction granted by the decree of April 7, 1960, with the reservation that the plaintiffs did not abandon their position with respect to the legal propositions and contentions involved and without waiving any benefit accruing to them by reason of the written opinion of the court of April 6,1960, and that the court enter an order to require the 1960 annual meeting of the stockholders to be held as soon as possible.

On July 25, 1960, the defendants filed their motion for the injunctive relief prayed for in the answer filed by them on June 3, 1960. On August 17, 1960, the court granted the motion of the principal defendants to amend their answer to show that the total number of shares of preferred stock of the corporation then outstanding was 4431 and that the defendant Bernard P. McDonough then owned 1849 shares of such preferred stock; and the principal defendants filed their reply to the special replication of the plaintiffs.

The circuit court filed its written opinion on August 23, 1960, and by final decree entered September 7, 1960, denied the motion of the plaintiffs to require the 1960 annual meeting of the stockholders of Park-ersburg-Aetna Corporation to be held as requested in such motion, dissolved the injunction granted by the decree of April 7,1960, dismissed the bill of complaint of the plaintiffs, denied the injunctive relief prayed for by the defendants in their answer and, treating the portion of the answer of the defendants seeking affirmative relief as an application for relief by declaratory judgment, held that the provisions of the charter of the defendant Parkersburg-Aetna Corporation which granted preferred stockholders as a class the exclusive right to elect one director and denied them the right to vote for all directors and which granted common stockholders as a class the exclusive right to elect all directors other than the one to be elected by the preferred stockholders and which denied them the right to vote for all directors, were unconstitutional and void under the provisions of Article XI, Section 4 of the Constitution and the 1958 Amendment to that article and section.

Prom the foregoing final decree this Court granted this appeal and supersedeas upon the application of the defendants Parkersburg-Aetna Corporation, Bernard P. McDonough and Harold N. Wilson.

The vital and controlling question for determination on this appeal is whether the 1958 Amendment to Article XI, Section 4 of the Constitution of this State effected a change in the provisions of that article and section so as to enable the Legislature to empower every corporation other than banking institutions to grant preferred stockholders, as a class, the exclusive right to elect one director and to grant to common stockholders, as a class, the exclusive right to elect all other directors as provided by section 7 of the charter of the defendant Parkersburg-Aetna Corporation and whether that charter provision is constitutional and valid. If the decision of that question is in the affirmative it is necessary also to determine the additional questions (1) whether the provisions of the 1958 Amendment and of the enabling statute, based on that amendment, and being Sections 22 and 66, Article 1, Chapter 20, Acts of the Legislature, 1959, Eegular Session, which reenacted the identical provisions of Sections 22 and 66, Article 1, Chapter 31, Code, 1931, apply to charters of such corporations in existence at the time the amendment was ratified or must be given only prospective operation and effect; and (2) whether the action of the board of directors of any such corporation, under provisions of its bylaws, in increasing or diminishing the number of the members of its board of directors is valid.

The material facts disclosed by the pleadings are not conflicting and the questions presented for decision are questions of law.

The historical background of Article XI, Section 4 of the present Constitution of 1872 in its original form and of the various statutes relating to the voting rights of corporate stockholders which culminated in the enactment of Sections 22 and 66, Article 1, Chapter 31, Code, 1931, is set forth in the majority opinion and in the dissenting opinion in State ex rel. Dewey Portland Cement Company v. O’Brien, 142 W. Va. 451, 96 S. E. 2d 171, in which this Court held that Sections 22 and 66, Article 1, Chapter 31, Code, 1931, to the extent that they undertook to authorize the issuance of shares of stock which limited or denied the right of their owners to vote in the election of directors or managers of an incorporated company were invalid as violative of the provisions of Article XI, Section 4 of the Constitution of this State. The practical result of that decision was to invalidate the charter provisions of a large number of domestic corporations which had for many years attempted to authorize the issuance, and had issued, shares of stock with limited or no voting rights in their owners, and whose power to do so, under the provisions of their charters, had not been questioned or challenged until the institution of the Dewey Portland Cement Company case. The impact of the decision in that case upon the vast number of corporations created and organized under the laws of this State and the widely recognized desire to authorize the issuance of various classes of stock with limited or no voting rights in their owners in the election of the directors or managers of such corporations caused the Legislature to submit and the people to ratify the 1958 Amendment to the original Article XI, Section 4 of the Constitution. To accomplish that result was the sole and manifest purpose of the Legislature in submitting and of the people of this State in ratifying that amendment to the Constitution.

The 1958 Amendment is expressed in this language: “The Legislature shall provide by law that every corporation, other than a banking institution, shall have power to issue one or more classes and series within classes of stock, with or without par value, with full, limited or no voting powers, and with preferences and special rights and qualifications, and that in all elections for directors or managers of incorporated companies, every stockholder holding stock having the right to vote for directors, shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock, shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner. ’ ’

Comparison of the language of the amendment with that of the original constitutional provisions shows that the amendment contains the additional provisions that “every corporation, other than a banking insti-ution, shall have power to issue one or more classes and series within classes of stock, with or without par value, with, full, limited or no voting powers, and with preferences and special rights and qualifications,” and that in all elections for directors or managers of incorporated companies, every stockholder “holding stock having the right to vote for directors,” shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate such shares. Except the additional quoted provisions, the amendment contains the same language as that of the original provision of the Constitution.

The first part of the amendment relates to the power of “every corporation,” other than a banking institution, to issue one or more classes and series within classes of stock, with or without par value, with full, limited or no voting powers, and with preferences and special rights and qualifications. The second part of the amendment relates to the manner in which a stockholder “holding stock having the right to vote for directors,” shall exercise that right. The circuit court in considering the provisions of both parts of the amendment found that they were in irreconcilable conflict and that by reason of such conflict the amendment did not operate to change the meaning and effect of, or supersede, the original consitutional provision which invalidated the restriction or the denial of the right of any stockholder of such corporation to vote for the election of all its directors and managers. According to the circuit court the provisions of the amendment approved and affirmed the decisions of this Court in State ex rel. Dewey Portland Cement Company v. O’Brien, 142 W. Va. 451, 96 S. E. 2d 171, and State ex rel. Syphers v. McCune, 143 W. Va. 315, 101 S. E. 2d 834, “in more ways than it overruled them.” The meaning and effect of the amendment, as determined by the circuit court, would operate to nullify and defeat the very purpose sought to be accomplished by its ratification by the people. With this conclusion this Court does not agree. It is clear that it was the intention of the framers of the amendment and of the people who ratified it that it should change, amend and supersede, at least to the extent of its new and added provisions, the original constitutional provision, and that the new and added provisions should be given their intended meaning and effect. This it is the solemn duty of this Court to do. Berry v. Fox, 114 W. Va. 513, 172 S. E. 896. In that case this Court held in point 3 of the syllabus that a constitutional amendment, as the last word from the people on a subject under consideration, should be given controlling effect where there is irreconcilable conflict between it and other constitutional provisions.

The provisions of Sections 22 and 66, Article 1, Chapter 20, Acts of the Legislature, 1959, Eegular Session, based on the 1958 Amendment, are identical with the provisions of Sections 22 and 66, Article 1, Chapter 31, Code, 1931, and to the extent here pertinent are:

Section 22 — “Every corporation, other than a banking institution, shall have power to issue one or more classes of stock or one or more series of stock within any class thereof, any or all of which classes may be of stock with par value or stock without par value, with such voting powers, full or limited, or without voting powers and in such series and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the charter, or in any amendment thereto, or in the resolution or resolutions providing for the issue of such stock adopted by the board of directors pursuant to authority expressly vested in it by the provisions of the charter or of any amendment thereto.”

Section 66 — “In all elections of directors of corporations each stockholder shall have the right to cast one vote for each share of stock owned by him and entitled to a vote, and he may cast the same in person or by proxy, for as many persons as there are directors to be elected, or be may cumulate sucb votes and give one candidate as many votes as tbe number of directors to be elected multiplied by tbe number of bis shares of stock shall equal; or be may distribute them on tbe same principle among as many candidates and in sucb manner as be shall desire, and tbe directors shall not be elected in any other manner; and on any other question to be determined by a vote of shares at any meeting of stockholders each stockholder shall be entitled to one vote for each share of stock owned by him and entitled to a vote, and he may exercise this right in person or by proxy.”

Though there is no irreconcilable conflict in or between the different provisions of the amendment, its provisions are not entirely clear and unambiguous and for that reason they are subject to interpretation by the court according to the well recognized rules of construction applicable to all types of written instruments.

In State v. Harden, 62 W. Va. 313, 58 S. E. 715, 60 S. E. 394, in considering the meaning and the effect of two separate constitutional provisions, this Court held in point 3 of the syllabus that “In ascertaining the intention of the people in adopting a constitution all parts of the constitution must be considered, every article, section, clause, phrase and word allowed some effect, and all parts, clauses, phrases and words harmonized, if possible. No part or word in it can be ignored, disregarded, treated as meaningless or denied purpose and effect, unless there be irreconcilable contradiction and repugnancy.” In the opinion in that case this Court said: “A Constitution, for the most part, may be construed as a great compact or agreement, entered into by all the people of the State, for and on behalf of themselves and those who shall come after them, until such time as it is abolished, changed or modified. An elementary rule of construction, applicable to every kind of written instruments, is that all parts of the instrument under consideration shall be considered, and every portion, paragraph, clause and word given effect, if it be susceptible of such construction, and, whether it be so susceptible or not, all of its parts must be considered, and no court is warranted in expunging or declaring meaningless or ineffective any word, phrase or clause, except in the case of irreconcilable conflict and repugnance.” The opinion also contains this pertinent language: “Courts are bound, in construing a constitution, statute or other instrument, to presume that the authors of the instrument had some purpose in inserting every clause found in it, and every word of the clause, and intended it to have some effect.”

In Flesher v. Board of Review, West Virginia Department of Veterans’ Affairs, 138 W. Va. 765, 77 S. E. 2d 890, this Court said that “An elementary rule of construction is that, if possible, effect should be given to every part and to every word of a constitutional provision and that, unless there is some clear reason to the contrary, no part of the fundamental law should be regarded as superfluous.” See also State v. Kyle, 8 W. Va. 711; List v. City of Wheeling, 7 W. Va. 501; Marbury v. Madison, 1 Cranch (U. S.) 137, 2 L. Ed. 60; Myers v. United States, 272 U. S. 52, 47 S. Ct. 21, 71 L. Ed. 160; State ex rel. Walker v. Bus, 135 Mo. 325, 36 S. W. 636, 33 L.R.A. 616; Lamar Water and Electric Light Company v. City of Lamar, 128 Mo. 188, 26 S. W. 1025, 31 S. W. 756, 32 L.R.A. 157. The opinion in the Flesher case also contains this quotation from 11 Am. Jur., Constitutional Law, Section 61: “ The fundamental principle of constitutional construction is to give effect to the intent of the framers of the organic law and of the people adopting it. A constitutional clause must be construed reasonably to carry out the intention of the framers, which gives rise to the corollary that it should not be construed so as to defeat the obvious intent if another construction equally in accordance with the words and sense may be adopted which will enforce and carry out the intent. The intent must be gathered from both the letter and spirit of the document.”

In State ex rel. Trent v. Sims, 138 W. Va. 244, 77 S. E. 2d 122, the opinion contains this quotation from Bronson v. Syverson, 88 Wash. 264, 152 P. 1039, L.R.A. 1916B 993, Anno. Cas. 1917D, 833: “It is a cardinal rule of construction that the langauge of a State Constitution, more than that of any other of the written laws, is to he taken in its general and ordinary sense.”, and this quotation from Volume 1, Carrington Cooley’s Constitutional Limitations, 8th edition, 124: “The object of construction, as applied to a written constitution, is to give effect to the intent of the people in adopting it” See also May v. Topping, 65 W. Va. 656, 64 S. E. 848; Chesapeake and Ohio Railway Company v. Miller, 19 W. Va. 408, affirmed 114 U. S. 176, 5 S. Ct. 813, 29 L. Ed. 121; Gibbons v. Ogden, 9 Wheat. 1, 6 L. Ed. 23.

In State v. General Daniel Morgan Post No. 548, 144 W. Va. 137, 107 S. E. 2d 353, in considering rules of statutory construction which, of course, apply as well to constitutional provisions, this Court said that “a cardinal rule of statutory construction is that significance and effect must, if possible, be given to every section, clause, word or part of the statute.” See also Building and Loan Association v. Sohn, 54 W. Va. 101, 46 S. E. 222; Bank of Bramwell v. County Court of Mercer County, 36 W. Va. 341, 15 S. E. 78.

Applying the foregoing well recognized rules of constitutional and statutory construction and giving effect to the added provisions of the 1958 Amendment to the Constitution of this State that ‘ ‘ every corporation, other than a banking institution, shall have power to issue one or more classes and series within classes of stock, with or without par value, with full, limited or no voting powers, and with preferences and special rights and qualifications” and the phrase relating to a stockholder “holding stock having the right to vote for directors”, it is clear that these and the other provisions of the amendment are intended to mean that every corporation, other than a banking institution, shall have the power to issue one or more classes and series within classes of stock, with or without par value, with full, limited or no voting powers, and with preferences and special rights and qualifications; that a stockholder holding stock which gives him full voting powers shall have the right to vote for the number of shares of stock owned by him for as many persons as there are directors or managers to be elected, or to cu-mulate his shares; that a stockholder holding stock which gives him the limited right to vote for more than one director or manager but for less than the total number of directors or managers to be elected shall have the right to vote for that number of directors or managers to be elected, or to cumulate his shares; that a stockholder holding stock which gives him no voting powers can not vote for any directors or managers to be elected and can not cumulate his shares; and that a stockholder holding stock which gives him the right to vote for only one director or manager can vote for only one of the directors or managers to be elected and can not cumulate his shares for the reason that his vote for one director or manager can not be cumulated. This interpretation of the provisions of the amendment does not deprive any stockholder holding stock having the right to vote for more than one director or manager from cumulating his shares but simply means that a stockholder holding stock which does not give him any voting power or which gives him the right to vote for only one director or manager can not cumulate his shares because unless his stock gives him the right to vote for more than one director or manager his shares in the nature of things can not be cumulated. So to interpret the amendment does not deprive any stockholder of any of his voting rights for the reason that he has only such voting rights as the kind or class of stock purchased by and issued to him gives him under the charter provisions of the corporation, and he accepts the stock with knowledge of and subject to such terms and limitations. No person is required to purchase stock of any kind in any corporations and when he does so voluntarily he accepts the stock subject to the limitation imposed relating to the powers conferred with respect to the election of directors or managers of the corporation.

Under the 1958 Amendment to the Constitution of this State and Sections 22 and 66, Article 1, Chapter 20, Acts of the Legislature, 1959, Regular Session, which are based on that amendment and are in harmony with it and for that reason are constitutional and valid, the provisions of section 7 of the charter of the defendant Parkersburg-Aetna Corporation, that the holders of its preferred stock shall have the right, as a class, to elect at least one member of its board of directors and that the holders of its common stock and of its other stock with the same voting rights as the common stock shall have the right, as another class, to elect the remaining members of such board, are constitutional and valid and apply and are operative from and after the ratification of the amendment and the effective date of the statute. This holding is not contrary to the decision of this Court in State ex rel. Syphers v. McCune, 143 W. Va. 315, 101 S. E. 2d 834, concerning the right of a stockholder of a corporation to cumulate his shares in voting for directors or managers of the corporation. That case was decided under Article XI, Section 4 of the Constitution and before the ratification of the 1958 Amendment and determined the effect of the terms of the original constitutional provision relating to cumulative voting. For that reason the Syphers case is distinguishable from and does not control the decision in the case at bar on the question whether stockholders holding shares of stock with limited or no voting powers under the provisions of the 1958 Amendment may cumulate such shares in the election of directors or managers of the corporation.

As previously indicated, the effect of the ratification of the 1958 Amendment and of the enactment of Sections 22 and 66, Article 1, Chapter 20, Acts of the Legislature, 1959, Regular Session, was to validate the provisions of the existing charters of corporations created and organized under the laws of this State which authorized the issuance of classes of stock with full, limited or no voting powers, and to give such charter provisions operative effect from and after the ratification of the amendment and the effective date of the statute. Those constitutional and statutory provisions, however, do not operate retrospectively and, of course, do not render such charter provisions valid or their operation effective before the ratification of the amendment or the enactment of the statute; and until that time such charter provisions were of no force or effect.

By the terms of the amendment the legislation which it directs the Legislature to enact applies to “every corporation” and includes corporations then in existence and corporations subsequently created and organized. To give the words “every corporation” any other meaning or effect would disregard and nullify those words of the amendment and would give recognition to two classes of corporations which would operate under and be subject to two sets of laws, a situation which this Court refused to recognize and sanction in Germer v. Triple-State Natural Gas and Oil Company, 60 W. Va. 143, 54 S. E. 509. In that case this Court held in point 3 of the syllabus that the provisions of a statute apply alike to all corporations subject to the statutes of this State whether incorporated prior or subsequent to the passage of such statute. To the same effect are the cases of Cross v. West Virginia Central and Pittsburg Railway Company, 35 W. Va. 174, 12 S. E. 1071, and Lamb v. Strother, 118 W. Va. 257, 189 S. E. 865. In the Lamb case this Court held in point 1 of the syllabus that statutes prescribing the method of enforcing the constitutional double liability of stockholders in banks may be applied to enforce such liability against stockholders who purchased their stock prior to the enactment of such statutes without impairing the obligation of their contracts for the purchase of such stock. Moreover by Section 8, Article 1, Chapter 31, Code, 1931, the right of the Legslature to alter any charter or certificate which may be granted and to alter or repeal any law applicable to such corporation is expressly reserved. Under substantially the same earlier statutes this Court has held that such provisions of the statute constituted a part of the charter of the corporation as fully as if the right of amendment were contained in the charter. State v. St. Mary’s Franco-American Petroleum Company, 58 W. Va. 108, 51 S. E. 865, 112 Am. St. Rep. 951, 1 L.R.A., N.S., 558, 6 Anno. Cas. 38; Cross v. West Virginia Central and Pittsburg Railway Company, 35 W. Va. 174, 12 S. E. 1071.

In Germer v. Triple-State Natural Gas and Oil Company, 60 W. Va. 143, 54 S. E. 509, in discussing the amendment to the charter of a corporation by a statute enacted after the formation of the corporation this Court said: “When the Triple-State stock was subscribed for by the stockholders they did so charged with a full knowledge of the statutory provisions then existing under which the legislature might, at any time, alter, amend or repeal the provisions of the law which were made a part of the charter. The powers reserved to the legislature are plain and distinct and any amendment or alteration made subsequent to the formation of the corporaton and made within the scope of the reserved powers were written into the charter as certainly as the restrictions and rights and powers of the stockholders and the corporation itself existing at the time of the incorporation. It is contended by appellants that section 83 added to chapter 54, and the amendment to section 3 of chapter 52 being enacted subsequent to the organization of the Triple-State Company said corporation and the stockholders thereof are not subject to the provisions thereof; in other words, corporations, existing prior to the enactment of chapter 35, Acts of 1901, are not affected by it, or subject to its provisions. If this proposition were correct we should have two classes of corporations operating and subject to two sets of laws. This question seems to be well settled in the case of Cross v. Railway Company, 35 W. Va. 174.” The opinion in the Germer case also contains these statements: “The broad reservation to the legislature to ‘Amend, alter or repeal’ tlie provisions of the statute under which corporations operate are as though written into every charter issued thereunder, and every subscriber to the stock of any such corporation is charged with full knowledge of the provisions of the law then existing, under which the legislature might, at any time, amend, alter or repeal the provisions of the law which were so made a part of the charter, and such subscriber must be held to have given his consent that such change might at any time be made by the legislature. This being true, it cannot be claimed, with good reason, that by such action the legislature would be impairing the obligation of any contract the subscriber entered into when he became a stockholder. — 4 Thomp. on Corp., section 5408. In Allen v. Ajax Mining Company, 77 Pac. Rep. 47, decided in Montana in 1904, a case very similar to the one before us, Holloway, J., in delivering the opinion of the court, says: ‘It is to be understood, too, that this reservation possesses equal vigor, whether contained in the charter of the particular corporation itself, or in the Constitution or general laws of the state under which the corporation is organized. While there may be some slight conflict in the authorities, the great weight of authority clearly and unequivocally sustains such statutes. Market Street Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225; Looker v. Maynard, 179 U. S. 46, 21 Sup. Ct. 21, 45 L. Ed. 79, and cases cited: Northern Central Railroad Co. v. Maryland, 187 U. S. 258, 23 Sup. Ct. 62, 47 L. Ed. 167; Venner Co. v. Steel Corporation, (C.C.) 116 Fed. 1012. The theory upon which these statutes are upheld is that whatever rules or regulations for the management, operation or control of a corporation which the legislature might have incorporated in the law under which the corporation was organized may afterwards properly be engrafted on its charter by virtue of this reserved power existent at the time of the formation of the corporation. Sinking Fund Cases, 99 U. S. 700, 25 L. Ed. 496; Spring Valley Water W. v. Schottler, 110 U. S. 347, 4 Sup. Ct. 48, 28 L. Ed. 173; Market Street Ry. Co. v. Hellman, above; McGowan v. McDonald, 111 Cal. 57,43 Pac. 418, 52 Am. St. Rep. 149; Williams v. Nall, (Ky.) 55 S. W. 706. A review of the authorities citing numerous instances of the enforcement of such statutes is found in 4 Thompson on Corporations, Par. 5411.’ ”

In Charlotte Harbor and Northern Railway Company v. Welles, 260 U. S. 8, 43 S. Ct. 3, 67 L. Ed. 100, the court said: ‘ ‘ The general and established proposition is that, what the Legislature could have authorized, it can ratify if it can authorize at the time of ratification.”

The action of the board of directors in reducing the number of members of the board from eight to three, on February 16, 1960, pursuant to the section of the bylaws of the defendant corporation which provides that “The number of directors shall be eight, (nine), but the number may, from time to time, be diminished to not less than three, or may be increased by amendment of these by-laws adopted in the manner hereinafter prescribed for amendments of these by-laws, or as provided in Section 6.03 of these by-laws.”, which the circuit court, in denying the prayer of the answer of the principal defendants, considered invalid, was fully authorized by Section 16, Article 1, Chapter 31, Code, 1931. That section, to the extent here pertinent, provides that “The number of directors which shall constitute the whole board shall be such as from time to time shall be fixed by, or in the manner provided in, the by-laws, but in no case shall the number be less than three.” These provisions of the by-laws, under which the directors of the defendant company acted in reducing the number of the members of the board to the prescribed statutory minimum of three members, are in full compliance with the provisions of the statute. The provisions of the by-laws do not violate any provision of the 1958 Amendment to Article XI, Section 4 of the Constitution or of Sections 22 and 66, Article 1, Chapter 20, Acts of the Legislature, 1959, Regular Session, and are in all respects valid and effective; and the action of the directors pursuant to those provisions in reducing the number of directors from eight to three was likewise valid.

The final decree of the Circuit Court of Wood County is reversed and set aside and this case is remanded to that court for further proceedings in conformity with the principles enunciated in this opinion.

Reversed and remanded with directions.