CHAPTER XI. CORPORATIONS. DIVISION I. General Rules Applicable to all Corporations. SECTION I. Classification of Corporations. A corporation is an artificial person, created by law, having a continuity of existence, either definite or indefinite, and capacity to do authorized acts, and capable, however numerous the persons that compose it may be, of acting as a single individual. The leading points in this definition are (1) that a corporation is an artificial person; (2) that it is created by law, and not by contract; (3) that it has a continuity of existence. This does not necessarily mean that it has a perpetual existence. It may be created to continue for thirty or fifty or other number of years. All that is meant is that, while it lasts, its existence is continuous, and made so by a mode of succession of members established by law. (4) It has capacity to act as a single person. Nothing is so characteristic of a corporation as the fact that it is made by law an artificial person. It has a standing in court as a person. The word "person" in a statute will ordinarily include a corporation.1 Nothing of this kind can be attributed to other assemblages of natural persons. The members of a partnership cannot by contract make themselves a person. Should they adopt a conventional name they could not make contracts or do other acts in that name. They could not sue in that name, while corporations not only may, but in general must, sue and be sued by a name given to them by law. The ordinary consequences of personality follow. The agent of a corporation is not the agent of its members.2 The individual members do not own the property. They cannot transfer it to third persons. The corporation, as a legal person, manages, owns, and can alone transfer the property. Such an expression as a "living person" may also include a corporation.1 8 People v. Trinity Church, 22 N. Y. Mickles v. Rochester City Bank, 11 Paige, 44, 57. 2 Moffat v. Winslow, 7 Paige, 124. Wilde v. Jenkins, 4 Paige, 481; 118. La Farge v. Exchange Fire Ins. Co., 22 N. Y. 352; Boyd v. Croydon R'way Co., 4 Bing. N. C. 669. A stock corporation should be distinguished from an ordinary partnership and that form of the latter which is termed a "joint stock company." The leading differences between a stock corporation and a partnership are these: (1) the corporation is created by law; the partnership by contract. (2) The corporation is a "person "1 and can make contracts and sue and be sued by its corporate name; a partnership is not a "person," but a collection of individuals, and can only sue, etc., in the names of all its members who are known, and cannot legally act by an assumed name. (3) A judgment against the corporation only binds the corporate property; a judgment against the members of a partnership binds, not only the firm property, but their individual assets. The members are said to be liable in solido, or absolutely. A "joint stock company," not incorporated, is but a special form of partnership, having its capital divided into shares. The characteristic distinctions between it and a corporation are essentially the same as between an ordinary partnership and a corporation. 66 Corporations may be classified from different points of view. (1) When considered in reference to the number of members, they are aggregate or sole. A "sole" corporation consists of a single individual, having an artificial or legal personality distinguished from his natural character. A king in a monarchical country is an example. A corporation consisting of two or more members. is aggregate. (2) When a corporation is regarded from the point of view of its being an instrument of government, it is called public. Municipal" is the equivalent of "public." Cities, towns, and villages are public corporations; all other corporations are private. (3) A further division, depending on the nature of the purposes for which the corporation is organized, is into ecclesiastical and lay. This last mode of classification is of no practical value in the United States, since there are no ecclesiastical corporations here. All corporations, including churches, are lay. A distinction in lay corporations is drawn between civil and eleemosynary, the latter being established, not for profit, but for charitable purposes. The word "charitable" is more commonly used in modern law than "eleemosynary." These distinctions run into each other, so that a corporation may be sole and public, or aggregate and public. It may also be both public and charitable. Thus, a city, though in one aspect a public corporation, may, from another point of view, be a charitable one. The term "stock corporation" is much in use. This is de1 A private corporation is a "person under the Fourteenth Amendment to the United States Constitution. Pembina scriptive of a private corporation whose stock is divided into shares, such as a railroad or a bank. The phrase "quasi corporation" means an organization having some of the powers of a corporation, but yet not completely incorporated. It is for the most part of a public or semi-public nature. It is a question of local policy whether to give such an organization full corporate powers, or only to a qualified extent. Thus, towns in the State of Massachusetts are fully incorporated; in New York they are, for the most part, mere political divisions, and have very slender corporate powers. Other instances of quasi corporations are trustees of school districts and counties. Similar theories prevail in England, where there are instances both of aggregate and sole quasi corporations, such as church wardens, overseers of the poor, the Lord Chancellor, etc.2 The distinction between public and private corporations is important in this country for a special reason. This is owing to a clause in the United States Constitution that "no State shall pass any law impairing the obligation of contracts." A private corporation is deemed to originate in contract, while a public corporation is not, being rather an instrument of government. A charter of a private corporation, being a contract, cannot be changed without the consent of the corporation. The effect of this rule has been to a large degree nullified by the insertion of clauses in the charter, or in some law applicable to the case, that the legislature may at any time alter or repeal the incorporating act. Such a law is held to be a part of the contract created by the charter, and leaves the legislature free to make amendments so far as the constitutional inhibition is concerned. Corporations may also be considered from the point of view of being either "domestic" or "foreign." This is not a distinction as to the nature of the corporation, but simply turns upon its status, or legal condition. If it act or sue or be sued in the State or country where it is created, it is regarded as a domestic corporation. On the other hand, if legal inquiries concerning its conduct come up in a different State or country, it is in such aspects termed "foreign." In the absence of restrictions, a corporation chartered in a State may make contracts and do other acts elsewhere, provided that they are embraced within the terms of its charter. It may, however, be restricted by foreign law. 1 Lorrillard v. Town of Monroe, 11 N. Y. 392. 2 The English authorities are collected in Brice on Ultra Vires (Lond. ed. 1874), pp. 17, 18; (2d ed.) pp. 26-28. * Dartmouth College v. Woodward, 4 Wheat. 518. 4 Bank of Augusta v. Earle, 13 Pet. 519, 588; La Fayette Ins. Co. v. French, 18 How. U. S. 404. This distinction becomes important as between the States of the Union. There is nothing in the United States Constitution to prevent a State from excluding a foreign corporation created by another State from doing business within its borders. Thus, it may prohibit foreign insurance companies from insuring property within its limits. That article of the Constitution which provides that the citizens of each State shall be entitled to "all privileges and immunities of citizens in the several States," is not infringed, since that refers to individual citizenship, and not to a mere creation of local law, such as a corporation is. Its recognition, as well as the enforcement of its contracts in another State, is purely a matter of comity or courtesy.2 Accordingly, if a State has the power to exclude a foreign corporation from doing business therein, it may impose conditions upon its permission, such as the payment of a tax considered as a license fee.3 A State, however, cannot, in giving its assent to the transaction of the corporate business therein, lawfully impose as a condition the surrender by the foreign corporation of a privilege secured to it by the Constitution and laws of the United States. An example is, a stipulation exacted that the corporation will not remove a suit against it in a State court into a Federal court, which, by the laws of the United States it would have the right to do. A State statute cannot make an agreement by the corporation to such an effect valid, since the statute itself would be unconstitutional and void.5 A State might as well pass a statute to deprive an individual citizen of another State of his right to remove such suits.6 This Notwithstanding what has just been said as to a corporation not being a citizen for certain purposes, the question still remains whether it is not a "citizen" within that clause of the Constitution which confers judicial power upon the Federal courts. clause allows a citizen of one State to be sued by a citizen of another State in the Federal court. The result of prolonged judicial discussion upon this point is, that while a corporation is not strictly a citizen, yet its members will be conclusively presumed for the purposes of this section to be citizens of the State creating the corporation. It was on this ground that the court was able to reach the conclusion in the case of Barron v. Burnside, already cited, that the stipulation of the corporation not to sue in the Federal courts was void. SECTION II. The Creation of Corporations. - Corporations may be created in a number of ways, - by prescription, by charter granted by the king, or by act of Parliament, or, in this country, by the legislature. A corporation is said to be created by prescription when it has assumed to act as a corporate body without legal question for a prescribed number of years. The consent of the State is presumed after, say, twenty years. There is a legal fiction resorted to that there has been a charter but that it has been lost.1 This theory may be resorted to when a charter or act of incorporation has in form been granted, but it has been so defectively drawn that it does not actually incorporate the parties named, though they have acted under its provisions. Formerly, a large part of the corporations in England were created by the king. While the king could create an artificial person, he could not confer upon it the full powers which could be given by the legislature. For example, he could not give the authority, now so frequently needed by railroad companies and the like, to take land from owners by compulsory measures for their use. Such a power can only be derived from the legislature. For this and other reasons, most of the corporations now created in England are created by Act of Parliament. Such charters as the king granted in this country before the Revolution still remain in force. The king may exercise his power by delegation to another as well as by a direct act of creation. The only direct mode of creating a corporation in this country is by an act of the State legislature or of Congress. The power of Congress was at one time much disputed, but without success. Though there are no express words in the Constitution on the subject, the power may be exercised under the general principle that wherever a power is granted, there is bestowed by implication a power to make use of all such means as are necessary and requisite to carry into effect the power granted.3 Congress has under this doctrine created great railroad corporations as well as chartered national banks and other instrumentalities of government. The main power to create corporations is vested in the State 1 See on the general subject, Queen v. Durham, 10 Mod. 146; Jenkins v. Harvey, 2 C. M. & R. 393; Angell & Ames on Corporations, §§ 69-71. 2 Dartmouth College v. Woodward, 4 Wheat. 518. 8 McCulloch v. State of Maryland, 4 Wheat. 316, 421. |