CHAPTER IX.

CORPORATIONS CREATED BY CONGRESS.

SECTION.

440. Corporations Created by Congress not Foreign. 441. Corporations Created in District of Columbia.

§ 440. Corporations Created by Congress not Foreign. Whether or not the Federal government, as a government of delegated powers, is authorized generally to grant charters of incorporation, there can be no doubt that Congress has the power to incorporate a company, whenever this is an appropriate measure for carrying out any of the authorized purposes of the Federal government, and the power has been repeatedly exercised.' Such corporations are not to be considered as foreign in any of the States, since the jurisdiction of the government of the United States extends throughout the territory of all the States. The recognition to which such companies are entitled, therefore, rests upon the power of Congress, and not upon the principle of comity.' But since the sovereignty of the United States, however limited, is distinct from that of the

1 Morawetz, Corp., § 9; Beach, Corp., § 3.

2

Eby v. Northern Pac. R. Co., 13 Phil. 144; Commonwealth v. Texas, etc. R. Co., 98 Pa. St. 90; Farmers' Bk. v. Dearing, 91 U. S. 29. Compare Lathrop v. Union Pac. Ry. Co., 7 D. C. 111; Market Nat. Bk. v. Pac. Nat. Bk., 64 How. Pr. 1.

States, such corporations cannot, in any proper sense, be considered domestic. Nor are they subject to the regulations prescribed by the State for the government of its own companies.

§ 441. Corporations Created in District of Columbia.-But in the District of Columbia, over which Congress is vested with a power of "exclusive legislation in all cases whatsoever," it has the same power to grant charters of incorporation that any other sovereign has. The exercise by such a corporation of its powers, and its recognition as a legal entity throughout the States of the Union, rests not upon the jurisdiction of Congress, but upon the doctrine of comity. Such corporations are controlled by the same principles and subject to the same regulations as other foreign companies.'

1 Williams v. Creswell, 51 Miss. 817; Hadley v. Freedman's S. & T. Co., 2 Coop. (Tenn.) Ch. 122; Daly v. National L. Ins. Co., 64 Ind. 1.

CHAPTER X.

CONSOLIDATION OF FOREIGN CORPORATIONS.

SECTION.

446. Requisites of Legal Consolidation.

447. Legislative Authority.

448. Same "Regulation of Commerce."

449. Consent of Stockholders.

450. Consent Presumed from Terms of Charter.

451.

Same-Amendment of Charter.

452. Method of Consolidating Foreign Companies.

453. Adoption of Foreign Company.

454. Acceptance of Foreign Charter not a Ground of Forfeiture. 455. Adoption a Question of Legislative Intent.

459. Status of Consolidated Company as Domestic Corporation. 460. Same.

461. Charter Contemplating Foreign Consolidation.

462. Power of State to Regulate and Control Consolidated Company. 463. Status of Consolidated Company as a Whole.

464. Same-Infringement of Corporate Name.

465. Same-Specific Performance of Foreign Contract.

466. Powers, Privileges and Exemptions of Component Companies. 467. Liabilities of Component Companies.

446. Requisites of Legal Consolidation.-The general principles controlling the consolidation of corporations, briefly stated, are: 1. That such a step must be authorized by the State; and 2. That it must be with the assent of the stockholders.1

But see post, § 453.

2

§ 447. Legislative Authority. Since a corporation has no original power, but is dependent upon legislative enactment not only for legal existence, but for all the capacity it possesses,' and can do no act that does not fall within the scope of that authority, a consolidation with another company which is not authorized by the legislature is illegal. and void. And when such authority is given, it must be followed strictly. A power to "consolidate or join stock with any other railway company, running in the same general direction," will not authorize a company to sell its road and franchises to a company whose road, though a parallel or competing line, does not run in the same general direction."

§ 448. Same "Regulation of Commerce.”—A State statute, authorizing such a consolidation, between companies engaged in commerce, is not invalid as infringing the constitutional provision, which confers upon Congress the power to "regulate commerce with foreign nations, and among the several States."" That reservation of power does not affect the authority of the States to legislate upon the subject, in the absence of any legislative action, on the subject, by Congress.5

§ 449.

Consent of Stockholders.-The consolidation must be with the unanimous consent of the stockholders of both companies. In all ordinary transactions, consistent with the purposes for which the company was authorized, the acts of a majority

1 Head v. Providence Ins. Co., 2 Cranch, 127.

2 Pearce v. Madison R. Co., 20 How. 441; Clearwater v. Meredith, 1 Wall. 25; State ex rel. v. Bailey, 16 Ind. 46; Taylor v. Earle, 8 Hun, 1. 3 East Line, etc. R. Co. v. State, 75 Tex. 434, 12 S. W. Rep. 690.

4 Const. U. S., art. 1, § 8, subd. 3.

Boardman v. Lake Shore, etc. R. Co., 84 N. Y. 157, 185.

of the stockholders are binding on the whole. But a consolidation with another company is a fundamental change in the original purpose of the corporation, a departure from the stockholder's contract as expressed in the charter, which cannot be accomplished without his consent.'

§ 450. -Where, however, as is sometimes the case, legislative authority to consolidate is contained in the charter, the stockholder will be presumed to have contemplated such a contingency in his contract of subscription and to have intended to be governed in that, as in other matters of corporate policy, by the majority of his associates. A further assent on his part is not essential."

Consent Presumed from Terms of Charter.

§ 451. Same-Amendment of Charter.-The Connecticut court has even held that, when in the charter, the State has expressly reserved the power of amendment, a ratifying act confirming an unauthorized consolidation must be regard as an amendment, and would make the stockholders' assent

1 Mowery v. Indiana, etc. R. Co., 4 Biss. 83; Tuttle v. Mich. Air Line R. Co., 35 Mich. 247; Clearwater v. Meredith, 1 Wall. 25; Black v. Delaware, etc. Canal Co., 24 N. J. Eq. 455; Mills v. Central R. Co., 41 N. J. Eq. 1; Taylor v. Earle, 8 Hun, 1., See also Stevens v. Rutland, etc. R. Co., 29 Vt. 545; Sparrow v. Evansville, etc. R. Co., 7 Ind. 369; McCray v. Junction R. Co., 9 Ind. 358; Kean v. Johnson, 9 N. J. Eq. 401. Contra: Lauman v. Lebanon Valley R. Co., 30 Pa. St. 42, where it was held that the stockholder's right to object to the consolidation as being a departure from his contract, would entitle him to refuse to accept stock in the consolidated company for his interest, and to insist upon being paid the value thereof, but that it would not affect the validity of the new organization; that the power of a majority of the stockholders to dissolve the corporation and abandon the purpose of their creation, includes the power to merge its existence into that of another company.

2 Bishop v. Brainerd, 28 Conn. 289. See also Nugent v. Supervisors, 19 Wall. 241; Bish v. Johnson, 21 Ind. 299.