The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• A Table of British Regnal Years
• Select Essays In Anglo-american Legal History: Volume Iii History of Particular Topics, Continued
• Part V.: Commercial Law
• 47.: Thomas Edwar Scrutton, General Survey of the History of the Law Merchant 1
• 48.: Spencer Brodhurst, the Merchants of the Staple 1
• 49.: Francis Marion Burdick, Contributions of the Law Merchant to the Common Law 1
• 50.: Edward Jenks, the Early History of Negotiable Instruments 1
• 51.: William Cranch, Promissory Notes Before and After Lord Holt 1
• 52.: William Reynolds Vance, the Early History of Insurance Law 1
• 53.: Edward Wyndham Hulme, the Early History of the English Patent System 1
• 54.: Joseph Henry Beale, Jr., the History of the Carrier’s Liability 1
• 55.: Cecil Thomas Carr, Early Forms of Corporateness 1
• 56.: William Mitchell, Early Forms of Partnership 1
• 57.: Samuel Williston, the History of the Law of Business Corporations Before 1800 1
• 58.: Simeon Eben Baldwin, History of the Law of Private Corporations In the Colonies and States 1
• Part VI.: Contracts
• 59.: James Barr Ames, the History of Assumpsit 1
• 60.: James Barr Ames, the History of Parol Contracts Prior to Assumpsit 1
• 61.: John William Salmond, the History of Contract 1
• 62.: Crawford Dawes Hening, History of the Beneficiary’s Action In Assumpsit 1
• 63.: Oliver Weldell Holmes, Jr., the History of Agency 1
• Part VII: Torts
• 64.: James Barr Ames, the History of Trover 1
• 65.: Van Vechten Veeder, the History of the Law of Defamation 1
• 66.: John Henry Wigmore, Responsibility For Tortious Acts: Its History 1
• Part VIII: Property (in General)
• 67.: James Barr Ames, the Disseisin of Chattels 1
• 68.: Frederick William Maitland, the Mystery of Seisin 1
• 69.: Arthur George Sedwick and Frederick Scott Wait, the History of the Action of Ejectment In England and the United States 1
• 70.: Harold Dexter Hazeltine, the Gage of Land In MediÆval England 1
• 71.: Arthur Underhill, Changes In the English Law of Real Property During the Nineteenth Century 1
• Part IX.: Wills, Descent, Marriage
• 72.: Charles Gross, the MediÆval Law of Intestacy 1
• 73.: Oliver Weldell Holmes, Jr., Executors In Earlier English Law 1
• 74.: Robert Caillemer, the Executor In England and On the Continent 1
• 75.: Melville Madison Bigelow, the Rise of the English Will 1
• 76.: James Bryce, Marriage and Divorce Under Roman and English Law 1
• List of Authors Contributing

58.

HISTORY OF THE LAW OF PRIVATE CORPORATIONS IN THE COLONIES AND STATES1

By Simeon Eben Baldwin2

THE law of corporations was the law of their being for the four original New England colonies. Of whatever else they might be ignorant, every man, woman, and child must know something of that. It governed all the relations of life. This was true, whether the government to which they were subject was set up under a charter from the crown or those who held a royal patent,3 or—as in New Haven—was a theocratic republic, owing its authority to the consent of the inhabitants. The one rested on the law of private corporations de jure: the other on that of public corporations de facto.

On October 25, 1639, the first General Court of the plantation of New Haven was organized, and on October 26, an Indian was arrested under its authority on a charge of murder. Three days later he was tried and sentenced, and the day following his head was cut off “and pittched upon a pole in the markett-place.”4 We may be sure that this was not done by such men as Eaton and Davenport, nor the steps taken that put them in a position in which they might be called upon to take such action, without careful study, first, of the powers rightfully belonging to de facto public corporations.

For all the charter governments, the seventeenth century, as has been suggested in Chapter II., was one long school of study for their leaders into the rights of private corporations as founders of colonies, and then into those of the colonies as they grew into public corporations—or provinces hardly distinguishable from public corporations1 —and received, as such, new authority from the Crown. Occasions arose upon which they sought counsel as to points of this kind from the leaders of the English bar, and the opinions thus obtained were eagerly read and everywhere discussed, not only by those in authority, but by their constituents in every local community.2

That the colonists thought and studied on these problems for themselves is evidenced by a letter from the General Court of Massachusetts to the counsel whom they had retained to defend against quo warranto proceedings brought for a forfeiture of the colony charter in 1683. He had been authorized to engage professional assistance, and “we question not,” they wrote, “but the counsel which you retain will consult my Lord Coke his Fourth Part, about the Isle of Man, and of Guernsey, Jersey, and Gascoigne, while in the possession of the Kings of England: where it is concluded by the Judges, that these, being extra regnum, cannot be adjudged at the King’s Bench, nor can appeal lie from them, &c.”3

The question met and decided for itself by the Colony of New Haven at its outset was answered in the same way by the charter governments with which she soon became confederated, and into one of which she was finally absorbed. They claimed and exercised from the first the power of life and death as respects all crimes committed within their territorial limits; but to do so, it was necessary to found it on the general grant to them of legislative authority. The view repeatedly urged upon the home government in opposition to this contention, that the charters contemplated only the making of such by-laws as a trading corporation might need for its better regulation,1 was certainly plausible, and their use as the foundation of capital sentences was disputed before the Queen in Council in an attack upon the Connecticut charter as late as 1705.2

The Englishman’s right to local self-government, wherever he was, was the question fundamentally at issue, and as to that, the general sentiment was the same throughout all the colonies. Ultimately it led to a gradual undermining of the authority of the provincial Governors and their Councils, which prepared the way for American independence.

Even after that event, however, and when the political sovereignty of the United States and of each of them had been fully acknowledged by Great Britain, the English courts continued to insist that the colonies had never occupied the position of public governments. Maryland, in the first half of the eighteenth century, had put out circulating bills, as currency, on the security of shipments of tobacco, the proceeds of which were invested in stock of the Bank of England held by trustees appointed for the purpose. The title of the State of Maryland to this stock came in question before the English Court of Chancery some years after the Treaty of Peace. If the doctrine of public law that a change in the political government of a people does not affect its proprietary rights or obligations was to apply, the equitable interest in the shares belonged to the State. It was held by Lord Loughborough that it did not apply. “The old government of Maryland,” he said, “a government of a singular species, existing by Letters Patent, in some degree similar to a corporation, possessing rights in England, must sue in England, and ought to be regulated by the law of England, under which it has its existence.”1 Under that law, in his opinion, the new State could not be regarded as its lawful successor in title.

Lord Eldon, in referring to this case some years later, summarized it as deciding “that the property in question, which was stock in a London corporation held by English trustees, as it belonged originally to a corporation existing by the King’s charter, was not to be transferred to the State of Maryland after the Treaty of Peace of 1783, as that State did not exist by the King’s authority; but constituted bona vacantia, and fell to the Crown.”2

In this known attitude of the English courts, early taken and always maintained, reflecting, as it did, the attitude of the English Crown, we find one of the divisive forces leading to the Revolution. Opposed to it from the first was an American doctrine of colonial and corporate rights, rooted in Massachusetts Bay, and emphasizing the political and public character of our local governments. The better to repress its growth, the mother country, about the year 1680,3 determined to make applicable here the system of appeals to the King in Council, which she had devised for the better regulation of what remained of her French possessions,—the Channel Islands. That, under their charters, their proceedings were thus subject to review, some of the American colonies at first denied, and it took nearly half a century for the Crown to establish it as unquestionable.4

This contest against a royal prerogative, the maintenance of which all now must admit to have been then indispensable to the preservation of proper relations between England and her colonies, was one of the chief causes of a bill brought into the House of Lords by the ministry in 1701, to bring back under the direct control of the throne, by means of royal Governors, all those of the American colonies not already subject to those so appointed.1

By this time it was becoming the custom for each colony to keep in commission an agent at London to watch proceedings at court or in Parliament, and represent its interests wherever they might be concerned. One of them, Sir Henry Ashurst, procured leave for Connecticut to be heard by counsel at the bar of the House against this bill, and it was defeated, largely by raising the cry that its enactment would afford a precedent alarming to all the chartered corporations in England.2

A few years later, in 1714, a similar measure was again introduced and again defeated. The main object of that was to get rid of the proprietary government in Carolina; but the Northern colonies, in carefully prepared “cases,” copies of which have recently been found among the MSS. in the Bodleian library, successfully opposed it, insisting, among other grounds, upon this: that while it was true that if a charter held as private property were revoked for reasons of State policy, due compensation could be made to those divested of their franchises; yet, as those of the New England Colonies were vested in the body of the people, no equivalent for their loss could be provided.3

Questions like these were too large for the American lawyers of those days to handle. They belonged rather to statesmen. Franklin was perhaps the first of our countrymen to deserve that name, and he discussed them with more force than could any of the bar. There were indeed few in America during the first half of the eighteenth century who could be called lawyers.4 Those who had come over in the original companies of planters had passed away. There were no facilities for legal education in this country, and no inducement to incur the expense of seeking one in the Inns of Court at London, for our colonial courts were held by men little versed in law, and often, like the Roman prætors, holding judicial office as an incident of civil office.

The few controversies that might still arise before our domestic tribunals upon the construction and effect of colonial charters or grants belonged rather to the domain of public law. There was slight occasion, except as a mere matter of speculative inquiry, to study the principles governing private corporations, until such bodies were constituted by our own legislatures. The law of municipal corporations, however, became somewhat earlier a subject of investigation.1 The practice of the proprietaries, Governors, or legislatures in every colony, almost from the beginning of the eighteenth century had established it as one of their prerogatives to confer upon the owners or inhabitants of any political division of territory within their jurisdiction the attribute of legal personality.2 This is the essence of every corporation and, to understand all that it implies, some knowledge of the scientific conceptions of jurisprudence is quite necessary.

A franchise of this kind must come from the sovereign power of the State, either directly or by delegation. Such a delegation was fairly implied in favor of the creation of political agencies for local government like towns and cities. But if for these purposes, why not for any which were political and governmental?

This line of reasoning early led to the incorporation of religious societies for the support of churches in most of the colonies, and was followed by Massachusetts, in 1639, so far as to induce the incorporation of a military company, and then of Harvard College, in 1650.

But by this last step a new field was clearly invaded. A college had always been considered by English law as something belonging to the field of ecclesiastical order and superintendence, and to be set up only by special permission from the highest authority. To found such institutions had been claimed as a papal prerogative. After the Reformation certainly, it belonged solely to the Crown. A college could only be founded by license from the King.3 His title, in the form adopted by Henry VIII., was, inter alia, “Fidei Defensor, in terra Ecclesiæ Anglicanæ & Hiberniæ supremum caput;”1 and in an ecclesiastical commission issued as late as 1728 we find George II. styling himself, yet more offensively, “supremum ecclesiæ in terris caput.”2 It is probable that Massachusetts only ventured on the incorporation of Harvard because the execution of Charles I. had extinguished for the time, and, she hoped, for all time, the royal prerogative, and replaced it by the form of a free commonwealth. She paid dearly for this. In the next reign she was called to account for it and certain other excesses of authority, before the Lord Chancellor, on a writ of scire facias, and in 1684 a judgment was entered against her for the cancellation of her colonial charter.3

In 1701, when the plan for establishing a college in Connecticut was taking shape, this ill consequence of the foundation of Harvard was in all men’s minds, and explains the care to avoid giving any definite form of incorporation to the ten Trustees or “Undertakers,” in the Act of the Assembly which is commonly called the first charter of Yale.4

Similar caution dictated the general policy of all the colonial legislatures in matters of this description. Down to 1741, when Parliament intervened and absolutely forbade for the future any American grants of corporate privileges for business purposes,5 there had been but three such, and during the whole of the eighteenth century, including the period subsequent to the Declaration of Independence, the number granted probably did not exceed two hundred and fifty.

A list of these charters, from the first settlements down to 1799, inclusive, which is believed to be approximately correct, follows this chapter and may serve to show how slowly the American business corporation became a factor in our economic life I am aware of no published record of an action at law in which one of them appeared as a party in our courts before 1790.1 By the first decade of the next century such forms of litigation became common, and four such cases appear in one volume of the Connecticut Law Reports,2 which were heard in or before 1809.

Long before the days of the Revolution, many of the enterprises in which the colonists became engaged were so extensive that they could hardly have been undertaken without the aid of aggregated capital, contributed by many, but managed by a few. This was done in rare instances under an English charter, but commonly by means of voluntary associations in the nature of partnerships, acting under a company name. One of the earliest of those of the latter description was the Undertakers of the Iron Works, who were given special privileges by the General Court of Massachusetts soon after the establishment of the Colony. The first grant was in 1643, and a later one, which has sometimes, though I think erroneously, been termed a charter of incorporation, was obtained in 1645. They soon found it necessary to call their managing agent to account in a suit demanding a balance of £13,000 from him, and their affairs occupied much of the time of the General Court for ten or twelve years. They sued in the names of certain persons as their deputies and attorneys, and it was apparently conceded that those who were full partners in the enterprise were personally liable to the creditors of the concern.3

Similar privileges were afterwards given to other undertakers, engaged in the same kind of mining.4

In 1670 a committee of the General Court was authorized to treat with certain “adventurers” who had asked for special privileges as manufacturers of salt, as to granting them a charter, but nothing further was done in regard to it.5

One of these partnership companies was formed for banking purposes in Massachusetts, under the license or sanction of Governor Dudley in 1686.1

In the same year we find in the early records of Pennsylvania one instance of an attempt of a number of landholders to combine without any public license or authority for the joint management and disposition of their interests, under a common seal. The agreement for this purpose was executed at Frankfort-on-the-Main in 1686; probably in ignorance of the English law of incorporation. The name assumed was “The Frankfort Company,” and it appeared under this designation in a suit in the colonial courts in 1708,2 but never, I believe, received a charter.

In 1688, Wait Winthrop and other inhabitants of Massachusetts united with Sir Matthew Dudley and others in England, in a petition to the Crown for a charter of incorporation for a trading company with authority to open mines in New England. The colony instructed its agent at court to object to the grant, urging that any such charter tended to create a monopoly and enhance prices, and trenched upon the field of government. The Attorney-General was consulted by the Lords of Trade and Plantations in regard to the matter, and gave an opinion that there was no legal objection, but the petition was finally rejected in 1703.3

The Ohio Company was incorporated in England in 1749, by a royal charter, for the purpose of dealing in American lands and effecting settlements beyond the Alleghanies, its capital stock being divided into twenty shares.4 The other land companies whose names often appear in our colonial history were, it is believed, with one exception,5 all voluntary associations. Of these, perhaps the best known was the Indiana Company, but it consisted simply of a number of sufferers from Indian depredations, who accepted a grant of three million acres in what is now Indiana from the Six Nations in satisfaction of their claims. The conveyance was made to the King in trust for them according to their respective interests, and the suit brought in the Supreme Court of the United States in 1793 against the State of Virginia to enforce their title was instituted in the names of the equitable owners as individuals.1

Among the moneyed companies with a considerable capital, but unincorporated, which were engaged in active business during the colonial period, several of the most prominent were in Maryland. The Patapsco Iron Works Company, sometimes called the Baltimore Company, was an important concern there as early as 1731.2 Another was the Potomac Company, or Potomac Canal Company, formed for improving the navigation of the Potomac River in 1762,3 and finally incorporated in 1784;4 and a third also deserves mention, the partnership known in 1781 as the Principio Company.

5 Some of these associations received from the colonial authorities almost all the attributes of corporations, except what it was thought impossible to confer, that of artificial personality. Similar privileges were also bestowed on tenants in common of landed property. Thus in 1709, the General Assembly of Connecticut gave the major part of the proprietors of the Simsbury copper mines power to appoint annually a committee with the powers for their management now usual for a board of directors, and even erected a special court to determine any differences that might arise between the owners or those with whom they dealt.6

Adjoining proprietors of low lands or on a water-course were not infrequently given power to associate for improving their property in such manner as a majority might determine. Some of these drain companies were made quasicorporations, and could sue in the name of the treasurer. They were really public agencies, created on account of the interest of the State in regulating a use of land or water shared in by many under separate titles, and it was no part of their purpose to make money for their members. Indeed, their powers extended over those who might not desire to come into them, precisely as is the case with municipal corporations.1

It was one of the greatest of the voluntary joint-stock companies, the “Manufacturing Company” or Land-bank of Massachusetts, whose issue of circulating bills in 1740, against the protest of the royal Governor, to the amount of nearly £50,000, led to the Act of 1741, which has been already mentioned.2 This made unlawful the establishment of or transaction of business by any unincorporated jointstock company, having transferable shares, and consisting of over six persons. Any one violating the statute was subject to the penalties of præmunire, that is, of confiscation and imprisonment, and to payment of treble damages to any merchant suffering by his acts.3 This continued to be the law of the land for every American Colony until the Revolution.

The earliest moneyed corporation, formed for the profit of its members to come into existence on this continent, under a legislative charter, was the “New London Society United for Trade and Commerce in Connecticut,” incorporated perpetually in 1732. It was a rash act. The society was formed for trading with any of “his Majesties Dominions, and for encouraging the Fishery, &c., as well for the common good as their own private interest.”4 It proceeded to set up a land-bank and issue circulating notes, and with consequences so disastrous to the currency of the colony that after a single year the charter was declared forfeited and repealed, a special court of chancery being organized ad litem to wind up its affairs and do what justice it could to the unfortunate billholders.1 The General Assembly also resolved that “although a corporation may make a fraternity for the management of trades, arts, mysteries, endowed with authority to regulate themselves in the management thereof: yet (inasmuch as all companies of merchants are made at home by letters patent from the King, and we know not of one single instance of any government in the plantations doing such a thing), that it is, at least, very doubtful whether we have authority to make such a society; and hazardous, therefore, for this government to presume upon it.”2

This reference to fraternities was probably made in view of certain action taken by the General Court of Massachusetts in the previous century. That was a grant of license to the shoemakers of Boston to form a guild for the better regulation of their trade, and investing them with a monopoly of the market. It was made in 1648 and was to endure for three years only. There was no capital stock, no provision for a common seal, no specification of the name to be assumed, nor were any words used that were indicative of an intention to constitute a legal corporation. Similar privileges were granted at the same session to the coopers of Boston and Charlestown.3

Pennsylvania, in 1768, ventured to incorporate a fire insurance company;4 but not till the Continental Congress led the way was there to be found, after 1741, a commercial corporation of any magnitude under an American charter. In 1781 came the Bank of North America, with an authorized capital of $10,000,000, incorporated by the United States, and soon reincorporated by Pennsylvania.

Up to this time, the only branch of corporation law which had been of real importance in the United States, except that concerning public (including municipal) corporations, was the law of religious societies. These had been freely incorporated both by the royal Governors and the colonial Assemblies, and soon acquired considerable possessions, some of them receiving public grants.1 In the Colonies where there was an established church, charters for any of a different character were obtained with difficulty. The Earl of Bellomont, when Governor of New York, wrote in 1698 to the Lords Commissioners of Trade and Plantations, of one procured by a Dutch Reformed Church from one of his predecessors (and as it was hinted by means of a present of plate) that such a grant was a very extraordinary proceeding “for it is setting up a petty jurisdiction to fly into the face of the government.”2

There were also two missionary societies chartered in England for operations in America, which were much before the public eye. One was “the President and Society for Propagating the Gospel in New England and Parts adjacent” incorporated in 1659 under the Commonwealth, and rechartered soon after the Restoration. This was in the hands of the dissenters.3 The other, the “Society for the Propagation of the Gospel in Foreign Parts,” was chartered in 1701, in the interest of the Church of England, by the procurement of an American clergyman, the Rev. Dr. Thomas Bray, Commissary of the Bishop of London for Maryland.4 This soon sent its missionaries over all the colonies. Grants of land were occasionally made to it, and it not infrequently stood behind the parish clergy, when they were setting up the claims of the church to property which had been devoted to pious uses.5

It has been already said that the large business enterprises of the earlier colonists had been managed through the form of voluntary association in a joint-stock company. Such organizations were good at common law, and when the Act of Parliament by which they were prohibited in the colonies after 1741 fell with the Revolution, the old practice was naturally resumed.

Alexander Hamilton organized in this manner the Bank of New York,1 which did a large business without a charter until 1791.

Land companies were formed in the same way. The Connecticut Gore Land Company, which bought in 1795 the Connecticut title to a long gore of territory west of the Delaware River, was one of this kind, and the conveyance was taken to five of the members, in behalf of all the shareholders.2

The table appended to this chapter shows that no considerable impulse towards the granting of business charters was felt in any of the United States until after the adoption of the national Constitution. This first put our foreign commerce and that between the States upon a solid footing. It first also gave to capital a sense of security, for the government which it replaced had been found from the first too weak even to protect itself.

The States, however, for many years after 1789 dealt such charters out with a sparing hand, and most of the large business enterprises were still carried on by voluntary associations. The cumbersome methods of combining capital which were endured originally from the cost of getting a royal charter were followed after the Revolution, largely by the force of tradition. At the opening of the two centuries of which this volume particularly treats, there had been but three joint-stock commercial companies under full charters existing in England,3 and the monopolies enjoyed by the “regulated” companies had fallen under the ban of the Parliament which came in with William and Mary. So late as 1717 the Attorney-General and Solicitor-General had advised the rejection of an application for the incorporation of a London marine insurance company, as being a dangerous experiment.1 It took the descendants of the English colonists in America a long time to emancipate themselves from their inherited prejudices against private corporations. It was the same sentiment that put so many restrictions against voting in proportion to stock interests into our earlier charters, and which looks to-day with disfavor and suspicion upon the modern “trust,” whether its business be fairly or unfairly conducted.

Of the charters granted prior to 1800 for moneyed corporations, two-thirds were of a quasi-public character, and such as carried or might properly have carried the right of eminent domain. Most of these were for the improvement of transportation facilities by roads, bridges, and canals, or by deepening rivers or harbors. Of the corporations whose business would bring them into daily contact with the people at large, irrespective of locality, there were less than eighty, the most considerable of which were twenty-eight banks and twenty-five insurance companies.

By this time, however, the number of public and municipal corporations, religious societies, academies, library companies, and public quasi-corporations, such as drain companies, had become very large, and probably approached two thousand. The principle of freedom of incorporation or organization under general laws had been applied to them in several of the States, although only extended thus far to a single class of private corporations, and by a single State.2

What now had been accomplished towards the formation of an American law of corporations by the close of the eighteenth century?

Law is the philosophy of society. It must reflect the political and economic views of the State for which it speaks, or it speaks in vain. It must answer the needs of the people who are subject to it, or they will throw it aside. Under the English and American system of government to keep Law and Society in adjustment to each other is mainly the office of the Judges. The people believe that their will is, on the whole, more faithfully interpreted and fulfilled by courts than by legislatures. The legislature hears the loudest talkers, and hurries to the relief of the last sufferer, without always stopping to consider how helping him will affect the rest of the community. The courts act more slowly. They do not act at all unless parties in interest have had a fair opportunity to be heard. They take that judicial notice of the lessons of history and the nature of things, which stands for the common knowledge and common sense of the people at large. They administer a science which rests on reason, and proclaims as one of its fundamental principles: Cessante ratione, cessat et ipsa lex.1

It was with these powers that the American judiciary first took up the work of bringing the English law of corporations into harmony with the social conditions of the colonies.

Our political conditions differed widely from those of the mother country: our social conditions more widely still.

There one class of corporations—the corporation sole—had been created for the benefit of an hereditary crown and an established church. We had got rid of one, and were, wherever the other still existed, steadily advancing towards its destruction.

The English corporation held its franchise as a special favor. It was of the nature of a monopoly; perhaps a reward for party service; perhaps gained by a purchase for which some minister or court favorite received the price.

The American corporation could only come into existence legitimately for the public good. Such franchises, under the principles of our government, could only be dealt out with an equal hand.

These considerations early led our courts to certain definite conclusions as to the nature of corporate rights, which differed essentially from those of English law.

Before the Revolution the people had accustomed themselves to the assertion that their charters had made them certain irrevocable grants, one of which was that they were to possess all the rights and privileges of Englishmen. From this standpoint, it was a logical conclusion that they could not be taxed without their own consent. To do so was to alter the colonial charters, and in the language of Franklin, they could not be altered, “but by consent of both parties, the King and the colonies.”1 An executed grant is inviolable because it is a contract. The party who made it has lost certain rights; the party who received and accepted it has acquired them; and each must stand by his bargain.

The same effect was attributed under the proprietary charters, both to them and to such charters as the proprietaries might themselves grant by their delegated authority.2 President Clap in 1763 had set up, and successfully, a similar claim as to the charter of Yale College, when the General Assembly were threatening to amend it without the consent of the corporation.3

Here then was one fait accompli. It became such by the Revolution, if not before it. The Declaration of Independence proclaimed this doctrine of the inviolability of grants of franchises, when it gave as a reason for renouncing all allegiance to George III. that he had assented to Acts of Parliament “for taking away our charters . . . and altering fundamentally the powers of our governments.”

A different theory was asserted and acted upon by Pennsylvania in 1785, when she repealed the charter which she had granted to the Bank of North America, notwithstanding the masterly argument of James Wilson in support of its vested rights.4 Two years later, however, the injustice was redressed by a new charter, and as soon as the question whether a charter was a contract came before a judicial body it was unhesitatingly (in the Dartmouth College Case) decided to be such, and therefore to be inviolable.1

Another doctrine may be said to have become established by popular acquiescence before the opening of the nineteenth century. It is that a corporation can acquire a legal existence under the laws of several States, by accepting a charter from each; and so in each be a corporation, although holding its meetings in but one of them.

The first of these organizations was the Bank of North America, chartered first by the Congress of the United States in 1781, and then in 1782 by Pennsylvania2 and New York, and in 1786 by Delaware. This is still in existence under the form of a national banking association. Another was “The Corporation for the Relief of the Widows and Children of Clergymen in the Communion of the Church of England in America,” which received charters from New York, New Jersey, and Pennsylvania (1785). Each authorized the annual meetings to be held in any of these States, according to such rotation as it might appoint.3 This organization was found to be unwieldy, and in 1797, by concurrent legislation on the part of these three States, provision was made for dividing it into three new corporations. The method devised, as set forth in the new Pennsylvania charter,4 was a grant from each State to its citizens, who were members of the “aggregate” or in modern parlance “consolidated” corporation, to draw off and form a separate one, on such terms as they might agree on with their fellow-members from New York and New Jersey for the division of the corporate funds. When such a division should be agreed on, the seal of the old corporation was to be broken, and the Pennsylvania citizens were to become “The Corporation for the Relief of the Widows and Children in the Communion of the Protestant Episcopal Church in the Commonwealth of Pennsylvania,” with a new seal of their own.

The courts of the nineteenth century have often had occasion to define the nature and incidents of such consolidated corporations; but they were an inheritance from the century before, and in that the legal conception of a dual personality in bodies of this nature had become familiar.

In respect to the powers of legislation granted by the colonial charters, the popular construction, as has been seen, had always favored extreme liberality. This was in accordance with the general English doctrine that as a corporation was a person, it had all the rights of a person, in the absence of a particular exception or prohibition. This lay at the root of much of the opposition to the ratification of the Constitution of the United States. As Patrick Henry put it, in addressing the Virginia Convention, the Congress which it created could do everything that it was not forbidden to do.1 But as soon as the courts set themselves to constructing an American theory of corporate personality, the judicial position became antagonistic to what had been the common opinion before the Revolution. All our circumstances were changed. It had been our interest to make the most and claim the most of whatever franchises we had obtained from the Crown or the agents of the Crown. Americans had been only recipients of corporate privileges. Now they began to be givers, also. They had been but too glad to repeat the doctrine of the English Judges that corporations possessed power to do anything which they had not been expressly or by fair implication forbidden to do.2 Their own Judges now began to assert that corporations could do nothing which they were not expressly or by fair implication authorized to do.3

Starting with this assumption there was less to fear from free grants of corporate franchises. They could be used for the proper purposes of the corporation, but for those only. Hence the principle of free incorporation under general laws early found its way into American legislation, while even now it is in England subject to great restrictions. Hence also special charters have been far more freely granted with us, and corporation law has become a much more important and extensive branch of jurisprudence.1 Hence also the corporations of one State were for a long time encouraged to engage freely in business in any of the others, and are still admitted for this purpose on easy terms.2 Up to 1839, on the other hand, no case was to be found in the English reports of a suit brought by a foreign corporation on an English contract.3

The first general incorporation law, since the days of Queen Elizabeth, was enacted by New York in 1784. Delaware followed in the same line in 1787,4 and Pennsylvania in 1791.5 The system thus early inaugurated and since so extensively pursued, of free incorporation, offered to all on equal terms, removed the foundations of the common-law doctrine that to charter a corporation indicated special confidence in those named as corporators, and so implied a trust in the artificial person thus created which justified a liberal construction of its rights and powers. In its application to municipal corporations not only was this view early abandoned by our courts, but they have gone to what might be regarded as the other extreme and hold that no powers are implied in their favor which are not either such that their possession is necessary for the proper exercise of those expressly granted, or indispensable to the fulfilment of the public purposes to be attained.6

PART VI.

CONTRACTS

• 59. The History of Assumpsit.James Barr Ames.
• 60. The History of Parol Contracts prior to Assumpsit.James Barr Ames.
• 61. The History of Contract.John William Salmond.
• 62. The History of the Beneficiary Third Person’s Action in Assumpsit.Crawford Dawes Hening.
• 63. The History of Agency.Oliver Wendell Holmes, Jr.

Other References on the Subject of this Part are as Follows:

History of the Common Law Theory of Contract, by C. Morse (Canada Law Journal, 1903, XXXIX, 379-395).

The Doctrine of Consideration, in English Law, by E. Jenks (London, 1892), cc. III, IV.

The Foundations of Legal Liability, by T. A. Street (Northport, 1906), vol. II, cc. I-IV, vol. III, cc. X-XVI.

[1 ]This Essay was first published in “Two Centuries’ Growth of American Law,” Yale University Bicentennial Publications, on the occasion of its Bicentennial, 1901, (New York: Scribner’s Sons), pp. 261-281, being part of c. X.

[2 ]Chief Justice of the Supreme Court of Errors of Connecticut, and Professor of Constitutional and Private International Law in Yale University. A. B. 1861, A. M. 1864, Yale University, LL. D. 1891, Harvard University.

Other Publications: Modern Political Institutions, 1898; American Railroad Law, 1904; The American Judiciary, 1905; and numerous articles in legal journals and transactions of societies.

[3 ]See Chapter II., pp. 11, 17-19, 21, 24.

[4 ]New Haven Col. Rec., I. 24.

[1 ]See Report of the American Historical Association for 1895, 619, 626, and Pennsylvania Statutes at Large, V. 645, 735.

[2 ]Such was the opinion of Ward, Somers, and Treby, given at the request of Connecticut in 1690, as to the effect of her involuntary submission to Sir Edmund Andros, upon her charter rights. Trumbull’s Hist. of Conn., I. 407. See also that from Sir John Holt (afterwards Chief Justice) and seven others in New Jersey Archives, 1st series, I. 272.

[3 ]Palfrey, Hist. of New England, III. 389.

[1 ]See Palfrey’s Hist. of New England, I. 307.

[2 ]Hinman, Letters from the English Kings, etc., 325, 328.

[1 ]Barclay v. Russell, 5 Vesey’s Reports, 424, 434.

[2 ]Dolder v. Bank of England, 10 Vesey’s Reports, 352, 354.

[3 ]Pitkin, Hist. of the United States, I. 23.

[4 ]See the memorial to the Lords Commissioners of Trade and Plantations, drawn for Connecticut in 1700, and other documents of following years, in Hinman’s Letters, 286, 292, 296, 316, 328; Report of the American Historical Association for 1894, 314; Pennsylvania Statutes at Large (ed. 1899), III. 32. Cf. Chapter II. p. 18.

[1 ]Pitkin’s Hist. of the United States, I. 125.

[2 ]Trumbull, Hist. of Connecticut, I. 431.

[3 ]Report of the American Historical Association for 1892, 25, 27.

[4 ]See Chapter II. pp. 13-17.

[1 ]See Chapter IX. p. 259.

[2 ]Baldwin, Modern Political Institutions, 184; Report of the American Historical Association for 1895, 304.

[3 ]Jacobs’ Law Dictionary, in verbo; Adams & Lambert’s Case, 4 Reports, 107.

[1 ]Cowel’s Interpreter (ed. 1727), Chronological Table.

[2 ]Documents relating to Col. Hist. of New York, V. 849.

[3 ]Palfrey, Hist. of New England, III. 390, 394; New Haven Colony Hist. Soc. Papers, III. 413.

[4 ]New Haven Colony Hist. Soc. Papers, III. 406, 410.

[5 ]By the extension to the colonies of the “Bubble Act” of 1720. Hildreth, Hist. of the United States, II. 380; Transactions of the Colonial Society of Massachusetts, III. 27.

[1 ]Bank of North America v. Vardon, 2 Dallas’ Reports, 78.

[2 ]3 Day.

[3 ]Mass. Col. Records, 1642-9, 61, 81, 103, 125, 185; III. 58, 351, 370; IV. 188. Bolles, American Industrial History, 190.

[4 ]Mass. Col. Records, IV. 311.

[5 ]Mass. Col. Records, 1661-1674, IV. pt. ii. 505.

[1 ]It has been stated that this was actually incorporated, but I find no evidence of that: Proceedings of the American Antiquarian Society for 1884, 266; Trumbull, First Essays in Banking, 12.

[2 ]Heather v. The Frankfort Company, Pa. Colonial Cases, 147.

[3 ]Palfrey, Hist. of New England, IV. 395, n.

[4 ]Life of George Mason, I. 58.

[5 ]The Society of Free Traders of Pennsylvania.

[1 ]Life of George Mason, I. 284, II. 341; Calendar of Virginia State Papers, Vol. VI.

[2 ]Life of Charles Carroll of Carrollton, I. 23, 60; Bishop, Hist. of American Manufactures, I. 586.

[3 ]Life of Carroll, 94.

[4 ]Pickell’s Hist. of the Potomac Company, 44, 64.

[5 ]See Laws of Maryland (ed. 1811), I. 419.

[6 ]Colonial Records of Connecticut, 1706-1716, 105. Cf. Ibid. 315; Col. Rec., I. 222.

[1 ]Of this kind were the following in Pennsylvania, which are sometimes referred to as incorporated:—

[2 ]Transactions of the Col. Soc. of Massachusetts, III. 2, 22, 34.

[3 ]Ibid., 26.

[4 ]Colonial Records of Connecticut, VII. 390.

[1 ]Colonial Records of Connecticut, VII. 421, 450.

[2 ]Colonial Records of Connecticut, VII. 421.

[3 ]Massachusetts Colonial Records, 1644-1657, 132, 133.

[4 ]This was probably not in existence in 1776. See statement of Mr. Ingersoll of Philadelphia, arguendo, in Bank of Augusta v. Earle, 13 Peters’ Reports, 575.

[1 ]See Documents relating to Colonial History of New York, IV. 271.

[2 ]Documents relating to Colonial History of New York, IV. 427, 463.

[3 ]Douglass’ Summary, II. 121; Documents relating to the Colonial History of New York, IV. 455.

[4 ]Perry, History of the American Episcopal Church, I. 142.

[5 ]See Douglass’ Summary, II. 106, 124, 127.

[1 ]Hamilton’s Works, I. 414 et seq.

[2 ]Report of the American Historical Association for 1898, 148.

[3 ]They were the East India Co., the Royal African Co., and the Hudson’s Bay Co. Anderson, History of Commerce, II. 598.

[1 ]Chalmers’ Opinions of Lawyers, 599, 608.

[2 ]North Carolina, in the case of canal companies.

[1 ]I venture to think that Sir H. S. Maine has laid too much stress on Legal Fiction as the instrument by which this judicial power is applied. See his Ancient Law, chapter ii.

[1 ]These words were used by him in 1769. Franklin’s Works (ed. of 1834), I. 220. He had asserted the same doctrine at the bar of the House of Commons in 1766. Ibid., 214.

[2 ]Ibid., I. v. Report of the Committee of Grievances of the Assembly of Pennsylvania, in 1757.

[3 ]Trumbull, History of Connecticut, II. 331.

[4 ]Wilson’s Works (ed. of 1896), I. 549.

[1 ]Dartmouth College v. Woodward, 4 Wheaton’s Reports, 518.

[2 ]This Pennsylvania charter, repealed in 1785, was restored in 1787.

[3 ]Dallas, Laws of Pennsylvania, II. 135, 240.

[4 ]Dallas, Laws of Pennsylvania, IV. 136.

[1 ]Elliot’s Debates, III. 461.

[2 ]Pollock on Contracts, Appendix D.

[3 ]Head v. Providence Insurance Co., 2 Cranch’s Reports, 127; Baldwin, Modern Political Institutions, 206.

[1 ]Commonwealth v. Arrison, 15 Sergeant & Rawle’s Reports, 131.

[2 ]Bushel v. Commonwealth Ins. Co., 15 Sergeant & Rawle’s Reports, 176.

[3 ]Ingersoll, arguendo, in Bank of Augusta v. Earle, 13 Peters’ Reports, 573.

[4 ]Laws of Delaware (ed. of 1797), II. 879.

[5 ]Baldwin, Modern Political Institutions, 174, 194.

[6 ]Merrill v. Monticello, 138 United States Reports, 673, 681; Crofut v. Danbury, 65 Connecticut Reports, 294, 300.