public importance requiring extraordinary capital or involving daring risks, by placing in the hands of favored individuals a charter of incorporation which confers upon them exclusive privileges and correspondingly shuts out all competition.

§ 218. The Same Subject. -Corporations have been multiplied of late years in this country to a remarkable extent; and that, too, notwithstanding the abuses which are admitted to attend the exercise of exclusive privileges by powerful combinations. The absence of great individual wealth in a community tends to draw men closely together for the accomplishment of needful measures of mutual improvement; and, in order that traffic might be opened as civilization went forward, new inducements to capitalists have been offered in various States or by our American Congress, with each new necessity, in the shape of liberal charters and acts of incorporation. The network of railways, canals, and turnpikes extending across this continent attests lasting advantages which result from this policy; while the later movements of railway kings towards the practical consolidation of their companies, with a rivalry far more crushing than that formerly of small and single corporations, and the reckless tyranny already beginning to manifest itself on the part of jobbers and speculators who hold the reins of corporate power, may well awaken alarm lest this private monopoly system, if not overmastered and kept in restraint, prove, notwithstanding, the ruin of legitimate toil and honest enterprise in a popular government like ours. For, thus, capital and labor become arrayed against one another; corporation money becomes employed for legislative corruption and bribery in order to obtain new privileges or prevent the impairment of old ones; the few grow rich and the many grow poor; till at length either the republic sinks into decay or the remedy involves political revolution and immense temporary disaster.

Banking and insurance business, which cannot safely be transacted without large capital, is in the United States almost entirely absorbed by corporations; and at present we

have a national banking system in full operation, not confined to a single institution, but comprising a large number of banks chartered formally under the local laws. Under any American system the banks are likely to be localized to a great extent for their own business convenience. Corporations for manufacturing and mining purposes are also very common in the United States. There have been occasional attempts to check the rapid increase of corporations; as in the New York Legislature of 1821, when a two thirds vote was made requisite for the passage of each act of incorporation;1 though nothing seems to be more effectual for suppressing the worst evils of the monopoly system than constitutional provisions, such as many States have already adopted, which interdict or restrain special grants of corporate powers, and permit under general laws in preference all persons to obtain a corporate organization who desire the facility. Legislation sometimes throws special safeguards about its charteret banks; and in many of the Western States we find constitutional restraints imposed upon the State ownership of stock and the loan of State credit in aid of a corporation; while it is quite common and highly prudent for the legislature in these days, when granting an act of incorporation, to limit the term of the grant, and reserve, moreover, the right on the part of the State to alter and amend whenever it shall be thought needful and proper. And, finally, there has been a disposition in some parts of the United States to change essentially the privileges of private

1 Warner v. Beers, 23 Wend. 103. See a constitutional provision of this character in the fundamental law of Michigan, so construed as to prohibit the legislature from passing a general incorporation law without the assent of two thirds of each house. Green v. Graves, 1 Dougl. 351. Constraints of one kind or another upon corporate legislation (some of them very curious) prevail quite generally at this day in the several State constitutions. See Hough's Constitutions, passim.

2 Morawetz Corp. §§ 6, 536; San Francisco v. Water Works, 48 Cal. 493; Wallace v. Loomis, 97 U. S. 146.

See constitution of Maine providing that when a bill is presented for an act of incorporation, it shall be continued until a succeeding legislature assembles, &c. McClinch v. Sturgis, 72 Me. 288. The charter of a private corporation organized under a general law is as inviolable as that of one organized under a special act. 27 Hun, 483.

corporations, in various instances, by enlarging the personal liabilities of the members or directors.1

§ 219. How Private Corporations are created; Charter, Legislative Act, etc. - How, then, is a private corporation to be created? We have borrowed from the Roman law, and from that policy of municipal corporations which the Roman conquerors long ago extended to Great Britain as well as to the continent of Europe, most of the legal principles relative to the powers and capacities of corporations. No corporation could exist, at the civil law, unless confirmed by sovereign power. The king of England, soon after the Norman Conquest, assumed the exclusive prerogative of granting exclusive privileges of this sort; and since the time of Bracton the rule has been settled that the king's assent should be given, either by act of Parliament (where the royal assent is a necessary ingredient) or by charter; and, as the prescriptive royal prerogatives suffer with every new encroachment of Parliament, recourse in that country must now be usually had to special legislation. And special legislation being procured with difficulty and expense, joint-stock companies are favored. In this country the subject is commonly controlled by the State legislatures; and the authority of this branch of each local government to create corporations with powers which are not repugnant to the constitution of the State, nor to the constitution and laws of the United States, is unquestionable. The federal government, too, though limited in

1 See Abbott's Digest, Corp. "Constitutions;" 2 Kent Com. 272, and notes; Ang. & Ames, § 64. It is submitted by the writer that changes in private corporate organization are desirable in the direction of enlarging the personal liability of the directors, simplifying and defining their powers, and rendering them better subjected to scrutiny and more closely dependent upon the general will of the general stockholders, if not of the public, than hitherto. The adroit and selfish schemes of a ring of managers in a corporation have often proved more

injurious, in our day, to the corporate welfare and the general interests of the public, than would the charter itself, administered as the legislature intended it should be, and for the common interest of the stockholders. 2 Dig. 47, lib. 22, 23; 1 Kyd, 61; Ang. & Ames, §§ 67, 68; supra, §

201.

3 M'Culloch v. State of Maryland, 4 Wheat. 421; Vincennes University v. Indiana, 14 How. 268; Stowe v. Flagge, 72 Ill. 401.

The power to charter corporations belongs to each legislature, unless ex

its powers, is sovereign within its sphere of action; and, as an appropriate means of exercising any of the powers given by the Constitution to the government of the Union, it may lawfully create a corporation. It is sometimes said that corporations exist by prescription; but this is nothing more than a presumption that any existing corporation was duly incorporated; and the case must be rare in this country where a legislative act or charter could not be shown in positive proof.2

A corporation is the body or institution itself; while incorporation is the act by which that institution is created. A charter is properly a sovereign grant; but in this country the word is used as synonymous rather with the legislative act of incorporation. And a State legislature may pass a general law which authorizes any persons to meet together and form corporations of a certain kind; or it may grant a special act of incorporation to certain individuals and their successors only. It is the policy of some States, indeed, to discourage special acts of incorporation altogether; and constitutional prohibitions may be found to that effect, which nevertheless permit the passage of general laws authorizing

pressly taken away by the constitution; and is incidental to the general power of making laws for the welfare of the State. Bank of Chenango v. Brown, 26 N. Y. 467; Morawetz Corp. § 4. A State legislature cannot incorporate an association for purposes prohibited by the Constitution of the United States; as, e.g., to promote rebellion. 71 N. C. 111; 6 Rich. 243. The old common-law doctrine of the power of delegating the right to grant a private charter has little or no practical application to the constituted governments, State and national, in this country. See Morawetz, §§ 7, 8, where the doctrine is stated with its limitations.

1 M'Cullough บ. Maryland, 4 Wheat. 316. This is a leading case in point, affirming the right of Congress to charter a national bank;

contrary to the constitutional interpretation which a political school in this nation had previously insisted upon. This doctrine has been reasserted and extended in recent years; as, for example, in sustaining our present national banking acts, and the acts incorporating the Pacific railroad companies. The power of granting corporate franchises is not given expressly to Congress by our federal constitution; but is incident to powers expressly granted. See Morawetz, § 5; Thompson v. Pacific R., 7 Wall. 566; Farmers', &c. Bank v. Dearing, 91 U. S. 27; 153 U. S. 525.

22 Kent Com. 277; Dillingham v. Snow, 3 Mass. 276; Pawlet v. Clark, 9 Cranch, 292.

& Ang. & Ames, § 5; Bouvier Dict. "Corporations," &c.

the formation of an indefinite number of corporations, in order that corporate privileges may be as free to the public as the right to trade singly or in partnerships.1 Our State legislatures, in the absence of express constitutional restrictions, exercise large powers in the premises; for they may prescribe the functions and duties of private corporations, control their action, and impose restraints upon them; subject to the qualifications that the obligations of the contract implied in the charter cannot afterwards be impaired, nor the essential franchise taken without due compensation.2

§ 220. The Same Subject; Acceptance of a Charter by the Incorporators; Conditions Precedent, etc.—A charter is inoperative until it is accepted by the persons intended to be incorporated; and the grant may be withdrawn meantime; but after it has once been sufficiently accepted, the legal duties and liabilities attach, according to the terms of the charter, and cannot be disavowed at the pleasure either of the State or the individuals concerned. No precise form of acceptance is necessary; for while any man may refuse a grant, yet he may be bound by collateral acts which imply an acceptance on his part; and hence we find that where the persons named in a charter have acted under it, held meetings, adopted bylaws, and elected officers in conformity with its terms, they are considered to have accepted it, although acceptance should usually be by a majority vote of the persons incorporated.3 A charter must be accepted on the terms offered; not conditionally, nor partially, nor for a less time than stated therein. A substantial compliance with all the forms prescribed by a general statute authorizing incorporation is a prerequisite, and a sufficient one, to corporate existence. The same prin

1 Brightly Fed. Dig. 182; Falconer v. Campbell, 2 McLean, 195. See supra, § 218, n.

2 Thorpe v. Rutland, &c. R. R. Co., 27 Vt. 140; Madison, &c. R. R. Co. v. Whiteneck, 8 Ind. 217; Gorman v. Pacific R. R. Co., 26 Mo. 441.

81 T. R. 575; 1 Kyd, 63; Ang. & Ames, §§ 81-83; Bangor R. R. Co. v.

Smith, 47 Me. 34; Abb. Dig. Corp. "Acceptance;" Russell v. McLellan, 14 Pick. 63; Zabriskie v. Cleveland R. R. Co., 23 How. 381; Morawetz, §§ 12-16, and cases cited.

4 Green v. Seymour, 3 Sandf. Ch. 285; Harris v. McGregor, 29 Cal. 124. See Eastern Plank Road Co. v. Vaughan, 14 N. Y. 546.