on many different and unrelated businesses, or to do anything within or without the State with not only the common law limitation of liability but with an added limitation of liability through the formation and control of nominally capitalized corporations and the holding or ownership of their stock without terminating their separate existence, need be made only in deference to the wide acceptance of the fallacy of State creation of corporations. The complete perversion in these States of the law of incorporation to fraudulent purposes has created the corporation problem in the United States. The vices which these States have caused are not the consequence of incorporation. They consist in the unlawful restraint of trade which results from the assertion and exercise by these States of the power to grant charters not reconcilable with the natural or common law principles of corporations. These charters are a fraud upon the law of incorporation, and, if it be necessary, in order to prevent this fraud, to declare and define the common law of incorporation in statutory form, Congress could and should so declare it in the exercise of its power to regulate commerce and to carry out the other powers vested by the Constitution in the national government. The restraint of trade which follows the so-called grant of charter powers not only always may be but always is a restraint of interstate commerce when the corporation purports to receive any power from the State which it would not have under the common law of incorporation upon compliance with reasonable police regulation of the State and the requirements for exercising a public calling within the State. If it is possible through the grant of corporate charters by the States for the States or corporations to control interstate commerce, it is within the power of Congress to regulate these so-called grants through the exercise of the constitutional power to regulate commerce. The so-called franchises which facilitate restraint of trade are more important as elements and instruments of interstate commerce than boats or railway cars. The declaration by Congress of the national common law of incorporation is not only a necessary and proper means to regulate commerce, but it is an effective and the only effective means. CHAPTER III POWERS RESERVED TO THE STATES AND MUNICIPAL CORPORATIONS § 62. THE Power of the STATE OVER THE CITY IS BOTH INTRA-STATE AND EXTRA-MUNICIPAL.-It is clear that at the time of the adoption of the Tenth Amendment, the powers reserved to the States and to the people were not reserved to the State governments. The latter could get power only by grant of the people, and that grant differs in its nature from the grant of the national government in two ways. The grant to the nation was so ample as to necessitate implication for the attainment of the purposes of the grant; the purpose of the grant was to give powers adequate to national existence.' The grant of powers to the national government was made once for all; it was irrevocable and created the condition of nationality." The grants to the States have never been of more than a small part of that inherent power reserved to the people, and they have been strictly limited by their very nature. Of the power granted to the nation the people of each State devested the State for their own purposes in order that it might be exercised by a paramount government; of the power granted to the States, the people granted only that part necessary for the convenient administration of that part of their domestic affairs which could not be carried on inde 1 Baldwin, Two Centuries of Legal Growth, p. 28. pendently by each municipality. Nor did the people grant to the State any power over the people as a whole or any privilege. What was not granted remained in the abode of original political power, the people, to be exercised by them in their local communities subject only to the powers they had granted to the State government, which, moreover, the people might modify or revoke, subject to their own action, and subject to the powers of the nation, the Constitution, and the general law of the land. Consideration of the nature of the municipal corporation in the United States will give us a clearer idea of the position of corporations in the law of the land. $63. MUNICIPAL CORPORATIONS AS SUCH ARE SELFSUFFICIENT. The conception of the corporation does not vary, but is fixed by inherent nature. The municipality is a political and a territorial corporation, both being determined by the race instinct for free association under the settled laws and customs of society. "There is undoubtedly a just ground for distinguishing between municipal corporations on the one hand and other public corporations on the other. The municipal corporation is, as its name implies, an incorporation, or body politic, created by the act of law as an instrument of government over a particular community, and over the people located there. A municipal corporation is, in the first instance, charged with the exercise of all the powers and the performance of all the duties which are strictly local or municipal in their nature and which are of peculiar interest to the local community. They are incorporated for the purpose of giving to such a community the peculiar facilities for carrying on or conducting its local affairs, which a private corporation acquires over the voluntary union or combination of individuals. As thus defined, the municipal corporation is to be distinguished from other public corporations, like counties on the one hand and school districts on the other. The municipal corporation is to be distinguished from counties and other subdivisions of the State, in that the county is not a legal personage in whose hands is intrusted a share of the administration of the government, but simply a territorial subdivision of a State government and subject to the essential control of such State government, in the administration of all its affairs. "Municipal corporations proper are called into existence either at the direct solicitation or by the free consent of the persons composing them, for the promotion of their own local and private advantage and convenience. On the other hand, counties are at most local organizations which, for the purpose of civil administration, are invested with a few functions characteristic of a corporate existence. They are local subdivisions of the State, created by the sovereign power of the State, of its own sovereign will, without the particular solicitation, consent, or concurrent action of the people who inhabit them. The former (municipal) organization is asked for, or at least assented to, by the people it embraces; the latter organizations (counties) are superimposed by a sovereign and paramount authority. The main distinction, and the only reliable one, between public corporations, like counties and municipal corporations proper, is in the absence in the one case of an incorporation and its presence in the other. Indeed, counties are not properly denominated corporations. They are at the most only quasi-corporations with considerable emphasis on the prefix."1 § 64. POWER GRANTED TO THE STATE DOES NOT EXTEND TO THE CREATION OF THE MUNICIPAL CORPORATION. 1 Tiedeman on Municipal Corporations, sec. 3. |