8

over the Southern Pacific Railroad in California, his rights are measured largely by the laws of Kentucky; at least seven different views exist as to the extent of the duty to receive and transport freight safely from state to state, without considering any qualifying charter provisions; if a foreign corporation does business in a state without complying with the laws as to filing its articles or designating an agent upon whom service of summons may be made, the contract is valid as to both parties in some states, void as to both parties in others, unenforceable by the corporation, but enforceable by the other party in still other states; if one becomes an officer or director in foreign corporations, his rights, duties and liabilities will be as various. as the laws of the states where such corporations are formed, though they are engaged in the same business; if one is a shareholder in a Missouri corporation, he may be called on to pay up his stock in full, though it may be contrary to his contract and to his principles, practices and the law elsewhere.10 He is likely to find his shares taxed to him and to the corporation also in some form or other where it is incorporated." He will find, too, if he takes shares in some state-created corporations that the directors can do nearly everything they are forbidden to do by the law of the state where he lives. If he

12

This is because these corporations are incorporated in the state indicated.

7 See article by E. P. Prentice, Origin of Right to Engage in Interstate Commerce, Harv. L. R., Nov., 1903, p. 32.

See 2 Wilgus, Corp. Cas. 1510, note 1512; Marshall, Corp., p. 1186 et seq.; Cook, Corp., 5th ed., 22 696-700, p. 1677.

9

Cook, Corp., 28 704-712; 2 Wilgus, Corp. Cas., 1727 et seq.; note 96 Am. St. R., 972, 989.

10 Van Cleve vs. Berkey, 143 Mo. 109, 42 L. R. A., 593, 2 Wilgus, Corp. Cas. 1953.

11 Farrington vs. Tennessee, 95 U. S. 679, 2 Wilgus, Corp. Cas., 1370; Tappan vs. Merchants Bank, 86 U. S., 490, 2 Wilgus, Corp. Cas., 1399; Corporation Tax Laws, pt. ii, Rept. Mass. Com. on Corp. Laws, 1903.

12 For example, the New Jersey law, 8, par. 7, enables three incorporators (who may be mere dummies of the future directors) to create any power, with very few exceptions, and confer it upon the directors. Under this law the U. S. Steel Corp. was organized with the maximum power

holds stock in a California corporation, he can inspect the books even for an improper purpose,13 while in others he cannot do so without the consent of directors.14 In some states the original holder of shares is relieved from liability on the shares by the transfer thereof; in others he continues liable for debts incurred while a shareholder; in others, not only for these, but for future debts contracted within a year afterwards or upon default of the transferee.15 If he is a creditor of a foreign. corporation, he may find the directors, contrary to the law of his own state, have preferred themselves as creditors to his exclusion,16 or the shareholders have paid for their shares in grossly overvalued property without liability unless actual fraud is shown. All the foregoing, or nearly all-all questions relating to the organization, amendment, internal control, rights, duties and liabilities of members and officers, the issue, payment and transfer of shares, duration, dissolution and winding up-affecting dealers, members and officers throughout the country, are determined by the law of the state where the corporation is formed and may differ materially from what such dealers, members and officers suppose is the law, judging from that of their own state.18 All are susceptible of uniformity given to directors and the minimum left to shareholders. See Wilgus, U. S. Steel Corp., pp. 53-7, 70-3.

17

13 Johnson vs. Langdon, 135 Cal. 626, 67 Pac. 1050, 87 Am. St. R. 156. 14 The U. S. Steel Corp. charter, art. vii, provides that " the board of directors from time to time shall determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the corporation, or any of them, shall be open to the inspection of the stockholders."-Wilgus, U. S. Steel Corp., p. 53, 136.

15 See the provisions of the statutes of the various states collected in the Report of the Massachusetts Committee on Corp. Laws, 1903, pp. 194-9, showing ten different classes of provisions on this subject.

16 As in Alabama, see Corey vs. Wadsworth, 118 Ala. 488, 2 Wilgus, Corp. Cas. 1836, note 1841.

17 See cases collected and classified in State Trust Co. vs. Turner, 111 Ia. 664, 82 N. W. Rep. 1029, 53 L. R. A. 136, 2 Wilgus Corp. Cas. 1943. Compare also Shields vs. Hobart, 172 Mo. 491, 95 Am. St. R. 529, 72 S. W. 669, and Hall vs. Henderson, 134 Ala 455, 63 L. R. A. 673.

18 Marshall, Corp. 2 435, 436; Cook, Corp. 2 696-700; 2 Wilgus, Corp. Cas. 1480 et seq.; North State Copper & Gold Min. Co. vs. Field, 64

under one general law, which with a little care could embody the desirable points of each. How much confusion and uncertainty would thereby be avoided and with how much less effort and anxiety could business be done?

The corporation, too, is often unduly hampered and greatly inconvenienced by conflicting state regulations. Its property and shares are taxed in as many ways as there are states in which it does business. Here the state officer values its property, there the local authorities do; here it is taxed on its paid up stock, there on its authorized stock; there again on its stock and bonded debt, and elsewhere on its gross receipts; in still other places on its net earnings, and elsewhere it pays specific taxes; here it pays the same as domestic corporations, there more.19 Its franchises and intangible property are not infrequently subject to double, triple or quadruple taxation, and under the decision in the Horn Silver Mining case 20 it is within the power of each state in which a foreign corporation does business to tax it, under the form of a license fee, upon the whole of its capital stock, and not merely on that part used in the state. In Ohio, Indiana and elsewhere express horses and wagons are worth many times as much for taxation as the same things would be if owned by the farmers. In one state in which corporations do business they must designate a certain officer upon whom summons may be served; in another, appoint the secretary of state for this purpose; in another, agree not to remove a suit to the federal court; in another, pay a license fee, if not engaged in interstate commerce, for the privilege of doing business in the state, much higher than domestic corpoMd. 151, 2 Wilgus, Corp. Cas. 1519; Guilford vs. W. U. Tel. Co., 59 Minn. 332, 50 Am. St. R. 407, 2 Wilgus, Corp. Cas. 1521.

21

19 See Corporation Tax Laws of the States, Mass. Rept. Com. on Corp. Laws, 1903, pp. 206, 242-261, 295; 9 Indus. Com. R. 1006 et seq.; 19 Ib. 1058 et seq.; 2 Wilgus, Corp. Cas. 1370-1404.

20 People vs. Horn Silver Min. Co., 105 N. Y. 76, 143 U. S. 305; 2 Thompson, Corp. 2900; 6 Ib. ¿? 8101, 8102.

21 Adams Express Co. vs. Ohio, 165 U. S. 194, 166 U. S. 185, 2 Wilgus, Corp. Cas. 1381.

22

rations do; in another, file their articles of agreement and become domestic corporations before they can even sue in the state. By doing this, however, their power to consolidate with another company, or to hold stock therein, or to hold their own shares, may be the opposite on these points in the two states.23 So, too, the rights and liabilities of the shareholders in the two states may be seriously affected. Stockholders not originally liable when the corporation was formed may find themselves individually liable in other states for the wages of employees, or even for the double or proportional statutory liability.24

Also as to reports and police supervision, these will be as various as the states, or nearly so; one state requires no report, and another requires even business secrets to be divulged; some make the officers liable for all the debts if false statements are knowingly made, others make them liable to a fine and imprisonment.25

If they violate anti-trust acts in some states, it is called a tortious conspiracy; in others, a misdemeanor. In some states the officers are required annually to make affidavit that their corporation is not a member of any illegal combination; in some states the agent's acts are prima facie proof of corporate guilt. Penalties for officers vary from thirty days' to ten years' imprisonment; individual fines, from $50 to $5000; corporate fines, from $50 to 20 per cent. of the capital, and penalty of forfeiture or ouster from the state. In some states the prosecuting attorney gets part of the fine; in others, the

22 Clark & Marshall, Corp., vol. 3, 844-9; 6 Thompson, Corp. ?? 7928-70.

23

Noyes' Incorporate Relations, 2 99-107; 1 Thompson, Corp. ?? 319-23; 2 Clark & M., Corp. pp. 1094, 1100; Marshall, Corp. pp. 491 et seq.; Taylor, Corp., 5th ed., 403-9; 1 Wilgus, Corp. Cas. 988; note 89 Am. St. R. 604.

24 Pinney vs. Nelson, 183 U. S. 144; Staten Island R. R. vs. Hinchliffe, 170 N. Y. 473; Cook, Corp., 5th ed., ? 213.

25

Compare the laws of New Jersey and Pennsylvania as to reports required from corporations for purposes of taxation; Wilgus, U. S. Steel Corp. 69; Cook, Corp., 3d ed., ch. lvi.

informer and the state or county the balance. In some of the states contracts are void; in others not. In some states a buyer of goods from such a combination need not pay for them, and one damaged may recover the price he pays for the goods; while others allow him treble damages.26

And so on.

There is no need of further enumeration of details with which you are probably familiar and have often puzzled over for some anxious client and then given an opinion that you were very uncertain of yourself. There is scarcely any matter here that could not be uniform, and be better if uniform so far as affecting interstate commerce is concerned. But in these matters the policy of the states never will be in harmony. Situation, local pride, political bias, party politics, peculiar industries or financial interests produce and increase these differences. Upon the score of utility alone, I believe a national law would be desirable.

II. NECESSITY.

The utility of uniformity in corporation laws, however desirable that may be, is not the main nor, to my mind, a sufficiently important reason for a national incorporation law. There are reasons of a much more fundamental kind, the necessity of such a law properly to regulate our interstate commerce "in order to promote the general welfare" of us all. Nearly everybody admits there is a trust problem, but there are divergent views as to what the problem is. With the trusts themselves the problem is, mainly, how to be let alone; with the hysterical, how to destroy them at once; with the more sober-minded, what is good or bad in them and how to devise means to preserve the former and remove the latter. Some say there is nothing amiss. These are usually, though not always, the anointed beneficiaries of some trust whose cup runneth over. There is, upon the other hand, "the tale of woe' of thousands of sufferers throughout our land, coming from the depths of experience, that tells a very different story. Ever

26 See charts, tabulating state anti-trust acts, 2 Indus. Com. R.