than in New York. Simplicity has never marked the proceedings by which corporations can act in the State of New York. The policy of New Jersey and Delaware, on the other hand, is diametrically opposite and the path of corporation procedure has been made as smooth as possible.

Issuance of Stock for Property.-Stock may practically be issued for property, without so marking it, both in New York and New Jersey, but in New Jersey the judgment of the directors as to the value of the property is conclusive in the absence of actual fraud.

In New York, no corporation may issue either stock or bonds except for money, labor done, or for property, and no stock may be issued for less than its par value. The law is settled that to charge individually for the debts of the company, a holder of stock, issued for the purchase of property, it is not enough to prove that the property has been purchased at an over-valuation-such over-valuation may arise through a mere mistake or error of judgment on the part of the directors-it must be shown that the purchase was in bad faith and to evade the statute. The transaction cannot be impeached for error of judgment or mistaken views of the value of the property, because good faith and the exercise of an honest judgment is all that is required. A deliberate over-valuation, however, of the property thus purchased is a fraud upon the law and a violation of the condition upon which stockholders are exempt from liability. It is equally true that fraudulent intent, as such, need not exist. It is presumed from the act of knowingly issuing stock for property to an amount in excess of its value. The courts have held that two facts only need be proved; first, that the stock issued exceeds in amount the value of the property in exchange for which it was issued; and, second, that the directors, deliberately and with knowledge of the real value of the property, over-valued it and paid in stock for it an amount which they knew was in excess of its actual value. Of course, the value must be determined, in any action in which the question arises, upon such evidence as may be given, having respect to the circumstances and the nature of the property and scienter. Guilty action of the directors may be proved either directly or inferred from circum

stances.

The question, therefore, in each case whether the property was taken at a higher valuation for a fraudulent purpose, with the intention of evading the provisions of the statute, and whether the form the transaction takes is a mere sham and intended as a violation of the statute is in all cases a question of fact for the jury.

In New Jersey, it is expressly prescribed by statute that a company may purchase property and issue stock to the amount of the value thereof, in payment therefor, "and, in the absence of actual fraud in the transaction, the judgment of the directors as to the value of the property purchased shall be conclusive." The precise meaning of the words, "the judgment of the board of directors in the absence of fraud shall be conclusive," has not yet been passed upon by the courts, certainly not in a case where there has been a simple mistake or error of judgment and no actual fraud, and where the discrepancy has not been so great as to amount to a legal fraud ipso facto.

Delaware has copied the provision of the New Jersey statute, and its incorporation act contains similar words, but whether such act is constitutional is a grave question. We find in Section 137, provision that when any corporation shall issue stock for labor done or personal property or real estate or leases thereof, in the absence of fraud in the transaction, the judgment of the directors as to the value of such labor, property, real estate or leases shall be conclusive. But by reference to the constitution of the State of Delaware, at Section 3, Article 9, we find that it is provided that no corporation shall issue stock except for money paid, labor done or personal property or real estate or leases thereof actually acquired by such corporation, and neither labor nor property shall be received in payment of stock at a greater price than the actual value at the time the said labor was done or the property delivered or title acquired. Hence the constitution of the State provides that the actual value at the time shall control, and conflicts with the enactment of the statute that the discretion of the board of directors upon the purchase of property shall be conclusive. The claim would seem to be justified that this statutory provision is unconstitutional and nothing more than an attempt to amend the

constitution of the State by the Legislature, and that there is the danger of stocks being held to be "not fully paid up," when the transfer of property is made for a price higher than the actual value, even in the absence of fraud.

Delaware thus becomes a dangerous State in which to incorporate where stock is to be issued for property. This is one of the great drawbacks to incorporating in Delaware, and companies that are about to issue stock for property, when wisely advised, go to New Jersey or New York. If the entire stock is issued for cash, Delaware is better than New York or New Jersey, other things being equal. If the stock is issued for mining property, West Virginia has offered the greatest advantages.

ANNUAL REPORTS.-New York still requires that both domestic and foreign corporations file annually a report of their financial condition, setting forth the maximum of debts and the minimum of assets. The penalty for failure to file such report is that the directors become liable personally for the debts contracted during their term of office. By a recent decision of the Court of Appeals, directors so defaulting are liable for bonds secured by mortgage, which are not incurred, but are merely outstanding during their term of office. It has also been lately held that the discharge of a corporation from its debts under the bankrupt act does not discharge the liabilities of the directors for failure to file such report. As a means of furnishing practical information of the solvency of a corporation, this provision is absolutely useless; and severe as the penalty is, less than ten per cent. of the corporations doing business in New York State file the reports required. It is very probable that New York will, at the present session of the legislature, abolish the necessity of filing the annual report.

In New Jersey, an annual statement is required, but no reference to the assets or liabilities of the corporation is necessary, and the penalty for failing to file it is merely to disqualify the directors then in office for election or reappointment to any office in the company at the time appointed for the next election and for one year thereafter. In Delaware a statement is required as to the total amount of capital issued and outstanding, but this is merely as a basis upon which to determine the taxes. West Virginia does not require any similar annual report.

GENERAL POLICY OF THE STATES.-The general policy of New York has heretofore seemed to be to place upon corporations all the burdens they can possibly bear. A new step has been taken in enacting a scheme of special franchise taxation (Chapter 254, Laws of 1900), the effect of which will be to largely increase the annual corporate taxes of transportation corporations and corporations of a semi-public nature. Exactly what the effect of such law will be, it is too soon to say, as it has not yet been given a sufficient practical test. Its mere enactment, however, shows the hostile State spirit and is an indication of other attacks yet to come. The constant policy of New Jersey and Delaware is to make smooth the path of corporation existence and to produce State revenue more by inviting fresh companies into the State, rather than imposing additional expense upon those already there. Perhaps the action of the New York authorities is dictated by the fact that so many corporations having their domicile without its borders, conduct practically all other business within them and receive the benefit of New York's prosperity and the protection of its laws without adequate return. Perhaps it is dictated by the fact that, owing to the economic supremacy of New York, corporations must do business within its borders, no matter where incorporated.

Another most important consideration is the attitude which the State takes through its public officials toward giving any legitimate information concerning corporations, their formation, and the proceedings incident to corporate life, so that the investing public may be educated at the expense of the State and informed of all changes in corporation law, without hiding or making secret the forms by which they may obtain their existence and perform their corporate functions.

The policy of New Jersey and Delaware is to publish and fully distribute all information an intending corporation can desire, even so far as to distribute the forms necessary to fulfil the requirements of the statute, and to maintain a paternal supervision over the corporate interests, relieve the individual stockholders and directors from all personal liability and the corporation itself from forfeiture wherever possible. The New Jersey law is the most carefully drawn and causes fewer questions to

arise than the law of any other State. Next comes New York. The law of Delaware should have been the most logical, practical, and certain of all, being preceded, as it was, by the practical experience of New York, New Jersey and West Virginia; but in the haste of the Delaware legislators to enrich the State treasury by offering low rates to intending incorporators, they have prepared a series of pitfalls which to the experienced observer promises much litigation and loss in the future.

New York, however, promises at the present session of the Legislature to enact many laws affecting corporations designed to make incorporation within its borders not only more cheap but more attractive, and to lay heavier burdens upon foreign corporations doing business with the State.

CHAS. F. BOSTWICK AND CHAS. W. Coleman.

SUMNER'S EGOTISM.

Charles Sumner had no more sense of humor than a hippopotamus, but there was something excessively humorous about his colossal selfconsciousness, of which it is no paradox to say he was apparently unconscious.

His egotism was inordinately vast, though innocent in its simplicity. It was far from conceit and led to no disparagement of his associates. Indeed, I doubt if he ever instituted comparisons.

Probably Grant, whom he hated and abused, came the nearest to sizing him up when he said: "The reason Sumner doesn't believe in the Bible is because he didn't write it himself!"

He had large intellectual powers, but not so large as he imagined. He had no influence on legislation. He was unable to endure opposition. If he could not have his own will he would do nothing. But this is not intended as an analysis of his work or his character. I started out to say that soon after I entered the Senate we were riding up the avenue in a street-car, and by way of conversation he asked me about my predecessor, Senator Pomeroy, who had met with an accident politically. He spoke of his early fidelity to the cause of freedom and the unusual degree to which he held the confidence of his associates until the impeachment of Andrew Johnson.

"Indeed," he continued with great gravity, "had he died before that time Kansas would have owed him a monument, and I should myself have pronounced his eulogy!"-Ingalls in Saturday Post.