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The private corporation has become completely distinguished from the public corporation.
Thus, up to the middle of the nineteenth century, the law of corporations furnished but meager jural material for the regulation of our varied forms of group activity. As a matter of fact there were relatively very few private corporations, and until well into the last century practically all of the cases dealt with public corporations. After Tudor times, however, the English state, although still retaining a close grasp on the corporate franchise, did not display its earlier jealousy of association. Standing armies had made single groups of artisans or untrained burghers comparatively innocuous. Hence we find developing contemporaneously with the private corporation all sorts of unincorporated associations ranging from the closely knit church organizations, Catholic and Non-Conformist, to the loose underwriting groups of the Lloyd's type; — from the great friendly societies to the select social clubs, each securing adequate legal protection behind its hedge of trustees. That absolutely unique of English legal institutions, the adaptable trust cleverly shaped by centuries of the subtlety of the English Bar, secured practically all the advantages of corporate organization without any of its drawbacks. The citadel of corporate association, made impregnable to a frontal attack by the imposing maxims of Crown lawyers, was furnished with an easy approach from behind. Nevertheless the personality of these groups as such was not recognized by the courts, and hence we have the complete separation of legal from natural personality in the law of group activity.
But coming into the nineteenth century, the state again faced the problem of dealing with combinations of men which threatened to shake its very foundations. The discontent of the great proletarian masses under the new industrial régime made the struggles of small groups of burghers and journeymen seem but teapot tempests. Little consideration was given to the interests of the group; the legislature only thought to secure the state. At first it sought
3 MAITLAND, COLLECTED PAPERS, 321 (Trust and Corporation); Introduction to GIERKE, POLITICAL THEORIES OF THE MIDDLE AGE.
6 Williston, History of Law of Business Corporations, 3 SELECT Essays ANGLOAMERICAN LEGAL HISTORY 195; Carr, Early Forms of Corporateness, 3 SELECT ESSAYS 161; 2 HOLDSWORTH, History Of English LAW, 362; 1 POLLOCK & MAIT. LAND, HISTORY OF ENGLISH LAW, 2 ed., 486; 3 MAITLAND, COLLECTED PAPERS, 271
to solve the problem through repression, by making associations for certain purposes illegal. This expedient by the very nature of the case was soon found to be a social impossibility and more conciliatory methods were gradually adopted. It is not our intention to go into the history and development of the combination laws here.? But it will suffice to say that the present English solution is to permit the utmost liberty of association under the maximum of feasible government supervision. What is feasible is frequently for a number of reasons very limited. Today the English law confers corporate personality upon registration on any group complying with a few formalities, and requires registration where the group consists of more than twenty persons and is organized for profit.'
The French and German laws as to association have had a similar history except that the German law was more profoundly affected than the French by the concession theory of Innocent IV.10 In mediæval times, the continental states reserved to themselves the prerogative of licensing associations for reasons similar to those obtaining in England. All associations without a license were illicit. But in France when we reach the mercantile period, the Government has become firmly established by Richelieu. The law is no longer so jealous of associations in general, and groups organized for mutual gain without a license are not considered illegal, but they are, so to speak, extra-legal and hence not recognized as possessing legal personality. It was natural to attribute the juristic personality of the licensed associations to the license. Thus, by the time of the Code Napoléon in 1804, we have a complete separation of the concept of personality from the right of association. The Code took much the same attitude towards associations as that adopted in England. But, as in England, the French law throughout the nineteenth century was marked by a growth of liberality towards associations in general, and a constant broadening of juristic personality. This culminated in the French Law of Associations of
7 Reference for that may be made to Professor Dicey's article in 17 Harv. L. REV. 511. See also Geldart, “Status of Trade Unions in England,” 25 HARV. L. REV. 579.
8 Companies Act of 1862, Consolidation Act of 1908, 5 HALSBURY, LAWS OF ENGLAND, 88 58, 59; Quasi-Corporations, 5 HALSBURY, LAWS OF ENGLAND, § 1352; Trades Unions Act of 1913, 27 HALSBURY, LAWS OF ENGLAND, $$ 1164 et seq., 1168.
• Ibid., 5 HALSBURY, LAWS OF ENGLAND, 88 55, 56. 10 See infra, p. 684.
11 Of course this was correct in a sense, but the more proximate cause was the fact of legal recognition.
1901, in which liberty of association is secured, and juristic personality is conferred on all associations legally constituted. The German Code, likewise, allows full freedom of association, and confers juristic personality on any group complying with a few formalities.13 Today, we may say that the Continental Law makes no distinction between the individual and the group as to personality. It is obtained by each on registration.
The so-called concession theory, that the personality of a corporation is a pure fiction created by the state, and not merely a natural fact given legal recognition, is being discarded throughout the world, first in fact, now in theory. The general corporation laws and the de facto doctrine in this country, the English Companies' and Trades Unions' Acts, the French Associations Law of 1901, and the German Code indicate what has happened in fact. Sir Frederick Pollock tells us the English Common Law never adopted the theory.14 In the face of our doctrines as to de facto corporations, and corporations incorporated in two states, we can hardly claim that our courts ever did more than lip service to it. It is significant that the English Interpretation Act of 1899, section 19, provides that the word “person” shall be taken to include any body of persons, corporate or unincorporate, unless the contrary intent appear. Similar statutes are not uncommon in this country.
In order, however, to deal with the problems of jurisdiction over foreign corporations or groups, we must examine the relations of the group and its members to the community outside of the group. The corporate group affords the most profitable field for observation, but our conclusions will be applicable to all group activity, It is apparent that the individual member of any group devotes but a part of his time to the activities of that group, most members a relatively small part of their time. Outside of this time, their activity cannot be said to be in any sense the group activity, and our coming in touch with them does not put us in touch with the group. The stockholders of a corporation may perhaps attend the annual meeting - it is more likely that they will send proxies - but that
12 CAPITANT, DU DROIT CIVILE, 160 et seq.
13 GERMAN CIVIL CODE, $$ 21, 22; SCHUSTER, PRINCIPLES OF GERMAN CIVIL LAW, 37 seq.
14 “Has the Common Law Received the Fiction Theory of Corporations?”, 27 L. QUART. REV. 219.
concludes their relations with the group. At the meeting, however, they do elect directors who take a more immediate part in the group's operations, formulating its policies and in a very general way supervising its management. But even the directors devote a relatively small part of their time to the corporation's business, perhaps attending a meeting once a month. The immediate management is in the hands of a group of officers who devote all their economic activity to managing its affairs. They, with all the employees of the corporation, are the most evident part of the group, the most important, and frequently the most permanent. When one comes in contact with an officer or an employee of the corporation engaged in the corporate business within the scope of his employment, he comes in contact with the group, and the activity of such an officer is group activity. We have been accustomed to separating the corporation from its agents very sharply as a matter of law, — treating the relation between the corporation and agent as that between individual and individual, when, as a matter of fact, the agent is a part of that natural group which is given legal personality as a corporation. Indeed the legal recognition of the personality of a group unit, or the lack of such recognition, is not material. If we take the case of a great banking firm, instead of a corporation, we find that employers and employees are both members of one group, working for the mutual advantage to accrue from the successful operations of the firm. The internal distribution of profits cannot affect the external fact apparent to the world. To make the employer the single proprietor of a great banking house does not seem to change the result any. The only difference is that now one controls, and one takes the lion's share of the profits. The internal structure of the group or the relations of its members inter se have little significance for the purposes of jurisdiction. But it is of the utmost importance that courts become cognizant of a fundamental fact of group organization, viz., that the humblest miner in the employ of the United States Steel Company is as truly a member of that group as its president or any shareholder; that the least of the clerks employed by the firm of J. P. Morgan & Company is as certainly a member of the group associated for mutual profit under that name as J. P. Morgan himself. The civil law, not having as broad a conception of agency as our law, has been compelled to adopt the organic theory, at least in dealing with the gov
erning boards of corporations. 15 It is questionable whether the problems of Conflict of Laws have not now forced us into a position in which we must take a more realistic view of the relations of individuals in and to their groups.
It was thought at Common Law that a corporation could not be sued unless service of summons was made upon its head officer.16 Such service was conceived to be impossible in the case of a foreign corporation, because it was said that the officer dropped his official capacity as soon as he left the state of incorporation.17 Indeed, this was the ground for setting aside an attachment of a foreign corporation's property in New York.18 Seemingly the only difficulty felt by the courts was that of service, since none of the cases seem to doubt that once that difficulty was removed the courts had power to render a personal judgment.19 These doctrines, however, were apparently breaking down and the weight of authority taking a more liberal view,20 when the dictum of Chief Justice Taney appeared in Bank of Augusta v. Earle 21 in 1839. He tells us:
“A corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. It exists only in contemplation of law, and by force of the law; and where that law ceases to operate, and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation, and cannot migrate to another sovereignty.”
The source of the doctrines of the early cases and of Chief Justice Taney's theory is of course very clear. Throughout the early part of the nineteenth century the law of private corporations took its complexion entirely from the law of municipal corporations. For 15 Maitland, Introduction to GIERKE, POLITICAL THEORIES OF THE MIDDLE AGE, 40.
i Kyd, CORPORATIONS, 272. 17 McQueen v. Middletown Mfg. Co., 16 Johns. (N. Y.) 5, 7 (1819); see also Peckham v. North Parish, 16 Pick. (Mass.) 274, 286 (1834).
18 McQueen v. Middletown Mfg. Co., 16 Johns. (N. Y.) 5, 7 (1819).
19 Bushel v. Insurance Co., 15 Serg. & R. (Pa.), 173, 176 (1827); ANGELL & AMES, CORPORATIONS (1831), ch. 10, $ 12.
20 In Libbey v. Hodgdon, 9 N. H. 394 (1838); March v. Eastern R. Co., 40 N. H. 548, 577 (1860); Day v. Essex County Bank, 13 Vt. 97 (1841), personal judgments were given against foreign corporations doing business within the territory without the consent of the corporation to the jurisdiction of the courts.
Pet. (U. S.) 519, 558.