TITLE VI.

OF THE RECHARTERING AND THE DISSOLUTION OF CORPORATIONS.

CHAPTER XXXI.

TWO-STATE CORPORATIONS.1

§ 771. Association of corporations | § 780. Consolidation of a corpora

chartered by two States.

772. Rechartering of a corporation

in a second State.

773. What amounts to а rechartering.

774. Nature of the rechartered

corporation.

775. Legal result of rechartering. 776. Consolidation of corporations by one State.

777. Effect on the constituent corporations.

778. Consolidation by the joint act of two States.

779. Nature of such consolidated

corporation.

tion which has been rechartered.

781. Which constituent corpora

tion is responsible for act of consolidated corporation. 782. Suits by and against a consolidated corporation.

783. Present difficulties in dealing with consolidated corporation.

784. Statutory provisions for consolidation.

785. Statutory provisions for holding corporations.

8771. Association of corporations chartered by two States.

It is not unusual for the stockholders of a corporation to associate themselves for the formation (either in the same State or more often in another State) of another corporation which is intended to have more or less close business relations with the first corporation. Neither the business relations in

1 Copyright, 1904, Trustees of the Columbia Law Review.

66

tended nor the identity of the stockholders has any effect upon the nature of the corporations; they are, notwithstanding, independent entities. So in a case where it was found that the two corporations in question, bearing the same name, expected to work together in unison, as practically one and the same body, dealing in the same markets and with the same customers and in the same class of goods," the court said: "The only unity is the ownership of the stock. But this is of no consequence, because there is nothing in the law to prevent adverse ownership in this respect hereafter, and the moment the stock of the two corporations shall pass into different hands, the corporations will become independent in fact, as well as in legal contemplation. Beyond all question they may now legally contract with each other. They may acquire rights and transact business inimical to each other, and they may sue each other and make defence thereto, just as different natural individuals may do." 2

But when a corporation created in one State becomes reincorporated in another, or where by the concurrent action of two States a consolidation is allowed of two corporations, one created by each State, we have a question of more difficulty. In the eye of the business man there is but a single corporation, chartered in both States; not merely two closely connected and co-operating corporations. The corporation thus formed differs from an ordinary corporation, if at all, only in the wider extent of its operations. But the lawyer cannot so easily dispose of the problem. The creation of a corporation being an act of sovereignty, the mutual independence of sovereigns prevents any sovereign from affecting in any degree the legal nature of an association within the territory of another; each can act within his own territory only; and no two can act jointly. It is therefore theoretically impossible for the same corporation to be created by two States. As the Supreme Court of Illinois said of a corporation chartered both in

2 Scholfield, J., in Drumond Tobacco Co. v. Randle, 114 Ill. 412, 428, 27 N. E. 536.

Illinois and in Missouri: "The legislatures of this State and of Missouri cannot act jointly, nor can any legislation of the last-named State have the least effect in creating a corporation in this State. Hence the corporate existence of appellants, considered as a corporation of this State, must spring from the legislation of the State which by its own vigor performs the act. The States of Illinois and Missouri have no power to unite in passing any legislative act. It is impossible, in the very nature of their organizations, that they can do so. They cannot so fuse themselves into a single sovereignty, and as such create a body politic which shall be a corporation of the two States without being a corporation of each State or of either State."

Chief Justice Cooley said of a similar corporation: 4

"It comes into existence there by an exercise of sovereign will; and, though it may be allowed to exercise corporate functions within another sovereignty, it is impossible to conceive of one joint act, performed simultaneously by two sovereign States, which shall bring a single corporation into being, except it be by compact or treaty.'

And in the leading case on the subject Mr. Chief Justice Taney said: "

"It is true that a corporation by the name and style of the plaintiffs appears to have been chartered by the States of Indiana and Ohio, clothed with the same capacities and powers, and intended to accomplish the same objects, and it is spoken of in the laws of the States as one corporate body, exercis

3 Quincy R. R. Bridge Co. v. Adams County, 88 Ill. 615, 619.

4 Chicago & N. W. R. R. v. Auditor General, 53 Mich. 91, 18 N. W. 586. 5 These passages were quoted with approval and followed in Nashua & L. R. R. Corp. v. Boston & L. R. R. Corp., 136 U. S. 356, 34 L. ed. 363. The suggestion of a possible compact between the States, creating a single corporation, appears to be adopted in Pennsylvania. Brocket v. Ohio & P. R. R., 14 Pa. 241, 244, per Gibson, C. J.; Cleveland & P. R. R. v. Spear, 56 Pa. 325, 332, per Agnew, J. The application made of the doctrine is that the charter must not be construed according to the local usage of either State.

6 Railroad Co. v. Wheeler, 1 Black, 286, 297, 17 L. ed. 130.

ing the same powers and fulfilling the same duties in both. States. Yet it has no legal existence in either State, except by the law of the State. And neither State could confer on it a corporate existence in the other, nor add to or diminish the powers to be there exercised. It may, indeed, be composed of and represent, under the corporate name, the same natural persons. But the legal entity or person, which exists by force of law, can have no existence beyond the limits of the State or sovereignty which brings it into life, and indues it with its faculties and powers. The President and Directors of the Ohio and Mississippi Railroad Company is, therefore, a distinct and separate corporate body in Indiana from the corporate body of the same name in Ohio, and they cannot be joined in a suit as one and the same plaintiff, nor maintain a suit in that character against a citizen of Ohio or Indiana in a Circuit Court of the United States."

§ 772. Rechartering a corporation in a second State.

The simplest form of action by a second State is the act of conferring a domestic charter on a foreign corporation which does business within the State. The charter from the first State is of course not vacated by the second charter; and it follows that the same association of members or stockholders may be a corporation of two different States, and domiciled in each. But it is clear that the result is two corporations, not one. These corporations may have the same name, powers, and liabilities, be composed of the same stockholders, and governed by the same officers; but they cannot be a single legal person.

"Identity of the name, powers, and purposes does not create an identity of origin or existence, any more than any other statutes, alike in language, passed by different leg

7 Nashua & L. R. R. Corp. v. Boston & L. R. R. Corp., 136 U. S. 356, 34 L. ed. 363.

8 Guinault v. R. R., 41 La. Ann. 571; Bernhardt v. Brown, 119 N. C. 506, 26 S. E. 162.

Martin v. B. & O. R. R., 151 U. S. 673, 38 L. ed. 311.

islative bodies, can properly be said to owe their existence to both. To each statute and to the corporation created by it, there can be but one legislative paternity.” 10

8773. What amounts to a rechartering.

It is not always easy to determine whether legislation of the second State has or has not conferred a new charter upon the corporation. A mere license to a foreign corporation to act within a State does not reincorporate it, so as to make it a corporation of the enabling State. This express license is after all only permission to do what the common law already allows it to do; or if it goes further, as for instance if it gives permission to exercise a franchise, it is no more than may be granted to an alien individual, and is therefore not tantamount to making the corporation a domestic one.11 Thus an enabling act to permit a foreign corporation to hold real estate does not make it a domestic corporation.12 And where a railroad company is allowed by the legislature to extend its line

10 Field, J., in Nashua & L. Corp. v. Boston & L. Corp., 136 U. S. 356, 34 L. ed. 363. See to the same effect Stout v. S. C. & P. R. R., 3 McCr. 1, 8 Fed. 794; Central Tr. Co. v. St. Louis, A. & T. Ry., 41 Fed. 551; Granger's L. & H. Ins. Co. v. Kamper, 72 Ala. 325; Kahl v. Memphis & C. R. R., 95 Ala. 337; State v. No. Cent. Ry., 18 Md. 213; County of Allegheny v. Cleveland & P. R. R., 51 Pa. 228, 88 A. D. 579; Railroad v. Barnhill, 91 Tenn. 395; Rece v. Newport News & M. V. Co., 32 W. Va. 164. Expressions may be found in a few cases which seem to have a contrary tendency. Copeland v. M. & C. R. R., 3 Woods, 651, 658, Fed. Cas. No. 3209; Bishop v. Brainerd, 28 Conn. 288, 299; Bridge Co. v. Mayer, 31 Oh. S. 317, 325. But on examination these expressions will appear to have been uttered obiter.

11 Martin v. Baltimore & O. R. R., 151 U. S. 673, 38 L. ed. 311; Louisville &c. Ry. v. Louisville Tr. Co., 174 U. S. 552, 43 L. ed. 1081; State Treasurer v. Auditor General, 46 Mich. 224, 234; Daniel v. Gold Hill Mining Co., 28 Wash. 411, 68 Pac. 884; Quesenberry v. Peoples' B. & L. Assoc., 44 W. Va. 512, 30 S. E. 73; Savage v. Peoples' B. & L. Assoc., 45 W. Va. 275, 31 S. E. 991.

12 Blackstone Mfg. Co. v. Blackstone, 13 Gray (Mass.), 488; State v. Delaware, L. & W. R. R., 30 N. J. L. 473; In re Prime's Estate, 64 Hun, 50, 18 N. Y. Supp. 603; Lauder v. Burke, 65 Oh. S. 532, 63 N. E. 69; Quesenberry v. Peoples' B. & L. Assoc., 44 W. Va. 512, 30 S. E. 73.