Corporation

Corporation

(Lat. corpus, a body)

A corporation is an association recognized by civil law and regarded in all ordinary transactions as an individual. It is an artificial person. Chief Justice Marshall of the Supreme Court of the United States of America, in the course of a formal judicial utterance, thus defined the term corporation: "A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression may be allowed, individuality; properties by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs, and to hold property without the perplexing intricacies, the hazardous and endless necessity of perpetual conveyances for the purpose of transmitting it from hand to hand. It is chiefly for the purpose of clothing bodies of men, in succession, with qualities and capacities, that corporations were invented, and are in use. By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being."

Chancellor Kent of New York, one of the most famous jurists of modern times, defines a corporation as "a franchise possessed by one or more individuals, who subsist, as a body politic, under a special denomination, and are vested, by the policy of the law, with the capacity of perpetual succession, and of acting in several respects, however numerous the associations may he, as a single individual. The object of the institution is to enable the members to act by one united will, and to continue their joint powers and property in the same body, undisturbed by the change of members, and without the necessity of perpetual conveyances, as the rights of members pass from one individual to another. All the individuals composing a corporation and their successors, are considered in law as but one person, capable, under an artificial form, of taking and conveying property, contracting debts and duties, and of enjoying a variety of civil and political rights. One of the peculiar properties of a corporation is the power of perpetual succession; for, in judgment of law, it is capable of indefinite duration. The rights and privileges of the corporation do not determine, or vary upon the death or change of any of the individual members. They continue as long as the corporation endures."

ANCIENT CORPORATIONS

Among the ancient Greeks a kind of association called etairia corresponded in its characteristics very closely with the modern corporation. Solon is said to have encouraged the formation of such bodies, and in his legislation permitted them to be instituted freely and to engage in any transactions not contrary to law. The Roman prototype of the corporation as it came into existence under the common law of England, and from England was transplanted into America, was the collegium. This kind of association, called also corpus, was required to consist of at least three persons (Dig., L, tit. xvi), and persons who had regularly and legally constituted a collegium were said corpus habere (to have a body), i. e. to have been, as we say, duly incorporated. The persons who formed a collegium were called collegœ or sodales. The word collegium derived from con, "with", and lego, "to select", had the literal meaning of an aggregation of persons united in any office or for any common purpose. In the later days of the Roman Republic corporation was used in documents relating to public law in the same sense as collegium. The word societas seems to have been used as a term corresponding to our word partnership. A collegium possessed the legal right of holding property in common. Its members had a common treasury and could sue and be sued by their syndicus or actor. According to the Roman law, that which was due to the collegium was not due to individuals composing it; that which was an indebtedness of the collegium was not the debt of individuals. The property of the collegium was liable to be seized and sold for its debts. The term universitas is used by the Roman law writers in the same sense as collegium. The application of universitas to an academic or literary institution is first found in a Decretal of one of the popes establishing a medieval university for the teaching of religion, literature, science, and the arts. A collegium or universitas was, under the Roman law, managed by its officers and agents under regulations established by the corporate body itself, and these regulations might be such as were agreed upon by the members, subject only to the limitation that they were not contrary to the public law.

A lawfully constituted collegium was termed legitimum. Associations attempting to act as a collegium, when not duly authorized, were called collegia illicita. It seems that no particular Roman law defined the mode in which collegia were regularly to be formed. They appear to have been formed by the voluntary association of individuals according to some general legal authority. Some of these ancient Roman corporations resembled the guilds of medieval times, such as the collegia fabrorum, collegia pistorum, etc.; others were of a religious nature such as the collegia pontificum, augurum. According to Ulpian a universitas, though reduced to a single member, was still considered a universitas; for the remaining member thereof possessed all the rights and privileges of the universitas, and used the name by which it was originally known. When a new member was taken into a collegium, he was said co-optari, and the members of an association into which he was introduced were said, with respect to him, recipere in collegium. The chief public corporation of ancient Rome was the municipium. Municipia possessed all of the characteristic powers of ordinary corporations together with the right of local government. It is stated by Plutarch that corporations were introduced into the Roman system of legislation by Numa. That sovereign, upon his accession to the throne, noted that great public disorder existed in the city of Rome by reason of the contentions between the rival factions of Sabines and Romans; and for the purpose of protecting the State against tumult, divided each of these factions into many smaller ones by creating collegia for each of the professions and for each of the manual occupations.

CLASSIFICATION

Under the English law corporations are distinguished in the first place as being either aggregate or sole. A corporation aggregate consists of several persons united in a society and maintained by a perpetual succession of members. A corporation sole consists of one person only, and the successors of that person in some particular station or office. The King of England is a corporation sole; so is a bishop; and in the Church of England every parson and vicar is, in view of the law, a corporation sole. The laws of the United States have rarely recognized any sole corporation, but "the Catholic Bishop of Chicago", now Archbishop, was, many years ago, created a corporation sole by a special act of the legislature of the State of Illinois. In Maryland the Archbishop of Baltimore holds all Church property as a corporation sole. Similarly in the several Catholic dioceses of California, the bishop or archbishop is a corporation sole, and since 1897 such is the case in Massachusetts for the Archdiocese of Boston (H. J. Desmond, The Church and the Law, Chicago. 1898, 72, 73). Under certain circumstances the Third Plenary Council of Baltimore (Acta et Decreta, no. 267) urged each bishop and archbishop of the United States to have himself constituted a corporation sole (see PROPERTY, ECCLESIASTICAL).

A further division of corporations, either sole or aggregate, recognized by the law of England, is that of ecclesiastical corporations and lay corporations. Ecclesiastical corporations are those whose members are persons devoted to spiritual affairs, such as bishops, archdeacons, parsons, and vicars. Prior to the reign of Edward VI, deans and chapters, priors and convents, abbots and monks were ecclesiastical corporations aggregate. Lay corporations are of two kinds, civil and eleemosynary. Civil are such as exist for the safeguarding and administration of temporal affairs. As Blackstone says, the king is made a corporation to prevent in general the possibility of an interregnum and to preserve the possessions of the Crown entire; for immediately upon the demise of one king his successor is considered in law as having full possession of the regal dignity and privileges. Examples of other lay corporations are those which are created to govern towns or districts such as the corporation known as the City of London; others have been created for the conduct of manufacturing and commercial enterprises, for the diffusion of learning, and for scientific research. The Universities of Oxford and Cambridge are examples of corporations created for the advancement of learning. Eleemosynary corporations are defined by Blackstone to be such as are constituted for the perpetual distribution of free alms or bounty of the founder thereof to such persons as such founder may have designated. Of this kind are all hospitals for the maintenance of the poor, sick, and impotent.

CREATION

Under the common law of England corporations depended for their existence upon a charter (Lat. charta, a paper) granted by the king. Corporations which had existed so long a time that "the memory of man ran not to the contrary" were said to exist by prescription; but that considerate doctrine was based upon the theory that the corporation had at one time received a charter, which, in course of time and by reason of the vicissitudes of human affairs, had been lost. When the religious revolution of the sixteenth century occurred, most of the religious houses of England were corporations by prescription, because they were so ancient that their original charters, if there were any, had disappeared. The rights of a corporation by prescription, however, are quite as valid at common law as are the rights of those which can exhibit a charter. Instances of corporations interesting to American people are those created by letters patent from the King of England to the London Company, under which the original settlements of the New England coast were made; and the charter to the Virginia Company, under which the shores of Virginia were first colonized by Englishmen.

NAME

Under the Roman law as well as under the English common law a corporation must, necessarily, have a name, and by that name alone it must appear in court and must conduct all of its transactions. Such a name is said by Blackstone to be for a corporation, "the very being of its constitution". The name of incorporation is said by Sir Edward Coke to be its proper name or name of baptism.

ECCLESIASTICAL CORPORATIONS

Ecclesiastical corporations as such, are not recognized by the laws of the United States or of the several States constituting the Union. Under the American system of law, corporations are either public or private, public corporations being those that are erected for the purposes of local government, such as municipal corporations for the government of cities. The term private corporations includes all others, religious, literary, charitable, manufacturing, insurance, banking, and railroad corporations. In the various States of the Union corporations were formerly created by charter granted by the legislature. In the greater number of the States at the present time private corporations are created by the voluntary act of individuals who associate themselves together and make a public declaration of their intention to become a body corporate and take such action in conformity with general rules laid down by legislation. Charters of incorporation granted by the legislatures of the States to private corporations are considered as executed contracts within the protection of Article 1, Section 10, of the Constitution of the United States, by which it is declared that "no State shall pass any law impairing the obligation of contracts". This was decided by the Supreme Court of the United States in the case entitled "The Trustees of Dartmouth College vs. Woodward" (Wheaton's Reports, Vol. 4, p. 518). In many States the right to amend, modify, or repeal a charter was usually reserved in the charter itself. Such a provision is now incorporated into the constitutions of many of the States.

POWER OF CORPORATIONS

The principal characteristic of a corporation at common law was that it was vested with the privilege of perpetuity, that is, it was said to have perpetual succession. At the present time in the greater number of American States the general legislation providing for the creation, of corporations expressly designates a fixed term during which a corporation may exist. The second of the original powers of corporations which is still maintained, is to sue or to be sued, implead, or to be impleaded, grant or receive, by its corporate name and to do all other acts as natural persons may. The third privilege was to purchase lands and to hold them for the benefit of the members of the corporation and their successors. This right was largely modified by the statutes of mortmain (q. v.) in England and has been strictly regulated and greatly limited by American legislation. The fourth original power possessed by corporations was that of having a common seal. As was said by the ancient law writers of England, a corporation, being an invisible body, cannot manifest its intentions by any personal act or by speech, and therefore can act and speak only by its common seal. In modern times many corporations are expressly authorized by legislation to act without using a seal, and the decisions of the courts have generally held, at least in modern times, that a corporation was bound by implication in many cases where its acts had not been attested by the corporate seal. The fifth privilege of a corporation, which has existed from time immemorial and still exists, is that of making by-laws or providing statutes for the regulation of its own affairs; and these are binding upon the corporation and its members unless contrary to the law of the land. This right was allowed by the Law of the Twelve Tables at Rome.

PRIVILEGES AND DISABILITIES

A corporation must always appear by attorney or agent (the actor or syndicus of the Roman law) for it cannot appear in person; being, as Sir Edward Coke says, invisible and existing only in contemplation of the law. Under the strict construction of its legal quality the courts of England originally held that a corporation could not be held liable for any action based upon tortious conduct; that is, a corporation could not be held liable for personal injuries inflicted by the wrongful act or culpable neglect of its agents. It is now held however, both in England and America, that a corporation is liable in damages for any wrong committed by its servants or agents when acting within the scope of the duties which properly devolve upon them. The doctrine designated by the term ultra vires is that which governs the courts in limiting the liability of a corporation to acts which are expressly authorized by its charter, or acts which are defined by its original articles of institution to be within the scope of its corporate operations. This doctrine is sound because it would be contrary to public policy to hold that a corporation had the right to do any act or to undertake any course of transactions which was not within the scope of the powers which it originally declared itself as possessing. However, the application of this doctrine is so restricted by the courts as not to allow corporate officers to use the doctrine as a cloak for deeds not equitable in their nature. It is construed strictly by the courts as a shield and is not allowed to operate as a sword.

VISITATION

The necessity of supervision over corporate acts being generally acknowledged, it was held at common law that every corporation had, necessarily, a visitor. As Blackstone well says, "Corporations, being composed of individuals, subject to human frailties, are liable as well as private persons, to deviate from the end of their institution. And for that reason the law has provided proper persons to visit, inquire into and correct all irregularities that arise in such corporations, either sole or aggregate, and whether ecclesiastical, civil or eleemosynary". Prior to the religious revolution of the sixteenth century the pope was the visitor of the archbishops and metropolitans. In respect to all lay corporations, the founder, his heirs, or assigns are the visitors under the English system. In the various States of the American Union visitors of corporations are practically unknown; the supervision of private corporations being vested in courts of equity. In England the king is considered as the visitor for all civil corporations, and this jurisdiction is exercised through the Court of King's Bench.

DISSOLUTION

Any member of a corporation may be disfranchised, that is, he may lose his membership in the corporation by acting in such manner as to forfeit his rights under a provision of the by-laws; or he may resign from the corporation by his own voluntary act. A resignation by parole, if entered upon the records and accepted by the corporation, is sufficient. The corporation itself may be dissolved and in such case, at common law, debts due from a corporation were wholly extinguished ipso facto by such dissolution; and in this respect the common law concurred with the maxim of the civil law which declared that the members of a corporation in respect to its property rights and credits had no individual rights therein: "si quid universitati debetur; singulis non debetur; nec, quod debet universitas, singuli debent" (Pandects, III, 4, 7).

The method of dissolution under the common law was;

• (1) by an act of Parliament;
• (2) in the case of a corporation aggregate, by the death of all its members;
• (3) by surrender of its franchise into the hands of the king through voluntary action of the corporation;
• (4) by the forfeiture of its corporate rights through negligence or through non-user or abuse of its franchise.

The franchises, as the English law termed the privileges which corporations enjoyed, were considered a trust lodged in the corporation for the general benefit of society, and to allow such privileges to be abused or to discontinue the exercise of such franchise was held to be a fault punishable according to its degree and, in extreme cases, punishable by extinction of corporate existence. The regular course adopted for the punishment of corporations or their dissolution is to proceed by what is termed a writ of quo warranto, which means that a representative of the State presents to some competent tribunal a petition reciting abuses, wrongs, or culpable non-action of a corporate body, prays for its dissolution, and demands that a writ issue from the court requiring the corporation to show "by what warrant" it presumes to exist and to act as a corporation. Upon a proper showing by petition, the court issues its writ quo warranto; that is, the court issues a document requiring the corporation to present to such court the facts which the corporation deems sufficient to warrant its continued existence. Upon a trial of the issues involved, if it be found that the corporation is amenable to public discipline, it may be amerced or its extinction may be decreed. Proceedings by quo warranto still have a place in the law of England and also in the laws of the various American States, although such proceedings have been greatly modified by statute. Students of history will recall the great public agitation caused during the reign of King Charles II by the institution of proceedings in quo warranto against the city of London. Judgment, however, was rendered by a competent tribunal against the city of London, and it is probable that, according to a strict construction of the law, the proceedings were justified. After the English revolution which seated William and Mary upon the throne, the judgment against the city of London was reversed by an Act of Parliament. In all civilized countries bodies politic, similar in nature and quality to English and American corporations, exist. As these have many special characteristics imparted to them by the legislation of the various countries in which they exist, no attempt to describe them is made in this article.

BALDWIN, Modern Political Institutions (Boston, 1898), 141 sqq.; BLACKSTONE, Commentaries upon the Laws of England, ed. SHARSWOOD, (Philadelphia, 1875), I, xviii; KENT, Commentaries upon American Law (Boston, 1854), I, 526, and note, II, 268 sq.; MOMMSEN, History of Rome (New York, 1896), II, 65, V, 374; MACKENZIE, Roman Law (London, 1898), 160-163; SOHM, Institutes of Roman Law (Oxford, 1892), 106; Decision of U. S. Supreme Court, Dartmouth College v. Woodward in IV Wheatons Reports (New York, 1819), 518, 636; MINOR, Institutes (Charlottesville, Virginia, 1882), I, 541; ELLIOTT, Corporations (Indianapolis, Indiana, 1900), i; SMITH, Dict. of Greek and Roman Antiq. (London, 1875).

JOHN W. WILLIS.