This is especially the case where business projects are involved and the furious passion for moneymaking is to be gratified. No aid to these is so generally effective as the corporate franchise. The wildest, as well as the most dishonest, scheme of speculation or fraud may be carried on by its means, without responsibility on the part of the manager, and with risk only for the public.

Before the adoption of the Constitution of 1851, the usual mode of creating corporations was by special law. The people, in their anxiety to promote improvements and aid business enterprises, stimulated, rather than checked, the abuses of legislation in this form; which was rendered much more mischievous by the ruling in the Dartmouth College case, which, holding that a charter is a contract, and, when once granted, could not be revoked by subsequent legislation without the consent of the grantee of the charter, made the abuses of such legislation irrevocable. The consequences of that decision could hardly have been fully contemplated at the time it was rendered. Parliament had possessed the power of changing franchises and privileges granted of this character, whenever the interests of the public called for it. There had been no question raised as to similar authority among the States before the adoption of the Constitution; nor afterwards, until this decision was rendered. But, under this rule, the evil of bad legislation and the mischief of ill-regulated corporate power became irremediable.

Whatever may now be thought as to the wisdom or justice of it, it is established as a settled constitutional rule, and will stand. It has been assailed with great ability, but without effect. The eminence of the great lawyer to whose matchless logic and eloquence its result is credited, and of the great jurist who decided it, has imparted to the case a sacredness and authority that makes it almost impiety to question it. In my judgment, the judicial history of the English-speaking race presents no equal work of trial and decision, of eloquence and learning, to this, and it will stand like other great creations of art and literature.

But, however sound the law of that decision may be, the judgment of our American community has been against its policy and justice, especially as to all corporations intended for profit, and the uses of general business. Soon after its rendition States began to provide, by general law, for the organiza

Our own Constitution provides that no special privileges or immunities shall be granted that the General Assembly may not alter, revoke or repeal; and our statutes provide that all corporations created before the adoption of the Constitution, that shall have acted under the provisions of the general laws since, shall thereby be deemed to have consented to have and exercise their franchise, subject to the Constitution and laws. Like legislation has been adopted in other States, and, practically, the country has thus, in the main, relieved itself of the restrictions upon its powers over corporations im posed by the rulings in the Dartmouth College case.

But this class of legislation aims at other kinds of corporations than that involved in the celebrated case referred to. The founders of the Dartmouth College gave their property for charitable uses forever, without reserving any benefit therein to themselves. Any change in the charter, which was substantially a declaration of trust, would have been a legislative alteration of the conditions of the trust without the donors' consent; and a repeal thereof, if it was attempted after a lapse of time, would render it difficult and perhaps impossible to distribute the property donated to those equitably entitled to it. But these difficulties do not apply to private corporations organized solely for the benefit of those who contribute its property and who become its constituent members. They are the real owners, are perpetually represented in its management, and their several interests are exactly defined by their stock. If they are not satisfied with the conditions the State may impose as to the use of the corporate franchise, they may surrender it, and, in their own right, take possession of their business and property for future management, as shall best serve their own interest. The like is also the case when the State revokes the charter. The property is always for the use of those who give it and reverts to them, whether it be a factory, store or farm. The State gives the franchise, not for its own benefit, or that of the general public, but for the sole use of the incorporators and at their solicitation. It receives no consideration therefor, and the incorporators give

Many corporations have been organized for the construction of works, such as railways, waterworks and others for public use; bonds and stocks have been issued and manipulated by the promoters and managers of the corporation, so that the one is sold at par or a discount, and the other held as a bonus in such sale, without other consideration. The company is thus represented by stock not representing a copper of capital, and its money received from the sale of bonds, which represent the whole investment, and often considerably exceed it. If the venture proves successful, the bonds are paid, or made good, and the profits realized by the holder of the stock, for which nothing is paid.

The mischief arising from these enterprises is obvious. The profits of the corporation are derived from charges or rates paid by the public for the uses such corporation furnish. The amount of stock issued and bonds outstanding with the amount of dividends, which, it must be conceded, honest stock is fairly entitled to, and the amount of interest which bonds, representing real loans, are entitled to claim, constitute the basis upon which fair rates are calculated.

And, on this pretense, the public are required, in such cases, to pay greatly more than fair rates for the services rendered, and if complaints are made of such charges, the dividends upon the pretended capital and the payment of interest upon bonds that may have been sold at a discount, become the excuse or justification. Indeed the situation becomes such that it is difficult to resist, by fair reasoning, the claim for sufficient rates to pay such interests and dividends. The bonds are held, finally, by innocent purchasers. The purchaser may well say to the State - You have authorized or enabled this corporation to issue its stock without the payment of any money for it, we have bought it and paid full consideration, and if there is any fraud for which any one should suffer, it should be the public, who have authorized the issue of stock and enabled it to be done without the investment of a copper by the original stockholders, and you should not destroy our dividends, which we are entitled to receive, by the unfair reduction of rates."

On the other hand, the stockholders of the corporation meet the appeal for the advance of wages, on the part of the employe, or enforce reduction against them, with the same plea that the business is not paying sufficient to afford an adequate dividend to the stockholders, and to pay the interest upon its indebtedness; and thus this fictitious stock becomes the necessity for extorting from the public, on one hand, and oppressing the wage-carner, on the other. The projectors of this scheme, which legislative neglect renders practicable, are the only ones that profit by the situation, and society suffers

without remedy, unless it shall throw the loss upon the innocent purchasers of such stock who may have paid full consideration therefor. The fair rate which the public should be called upon to pay should be that, only, which may be necessary, after the payment of reasonable expenses, to afford a just and reasonable return to the investor, for the use of the capital actually invested in the work.

If the scheme fails, we have another aspect of its evils. With no capital, with its property mortgaged as an insufficient security for the payment of its bonds, and a general indebtedness, without any security, the deceived creditors find themselves bearing the sole burden of the loss. This is usually attended with great distress, such as commonly fol lows great failures. The laborer and his family are stinted or starved with the loss of his wages, the contractor broken up and bankrupted, and trusts of every description, for charities, schools, widows, helpless age and infancy alike are impaired or wrecked by bonds issued by these corporations with little or no security to uphold them. The broker's skill is found equal to the work of foisting them upon the inexperienced and simple. The secrecy and mystery of corporate management renders investigation fruitless and gives full scope to the bond broker's doubtful arts and plausible inducements. And thus we have disaster after disaster visited upon the suffering communities of the country, who re ceive and endure them much as they do the devastation of wind or fire, as visitations of God with which they are classed. The author of this waste with such of the plunder as he can save, may now address himself to such new venture as he may devise.

Stock liability is inadequate or wholly worthless as a security for the creditor. In some cases the stock is manipulated in the name of an irresponsible

dummy." In others, stockbooks disappear, and I have known cases of the pursuit of them, with the aid of secret agents, from one city to another in an eventful search, chiefly useful as disclosing the ways of concealment, and mode of escaping liability. And where the ownership can be traced it is often found that, by transfers of stock and novation of corporate indebtedness, the responsible stockholder has been released and in his place substituted an irresponsible one who has received the stock as a gift or pretended sale. Protection is found against the claim upon the bonds by inserting in them, as a part of their conditions, the release of statutory liability.

Indeed, I think the experience of the profession will bear me out in the statement that, as each new catastrophe comes to these forms of business venture, and these managers grow in experience and skill in their manipulations, less and less is got by creditors out of the statutory liability of stockholders. When

the end approaches, the managers of the scheme disappear; a wreck follows; the captain and his associates, at a safe distance, may look on without anxiety, but with, it is to be hoped, a decent sympathy for the distress and disaster in which the passengers and crew are involved.

solvent concern.

Take an example: A and B are partners in an inThey organize a corporation, fix its capital at a large sum, subscribe for the stock, giving clerks and employes a share each to make up a board of directors, and upon a stuffed invoice, partly fictitious and excessively overvalued, they transfer the firm business to the new corporation, in satisfaction of their stock subscription, the corporation assuming the indebtedness of the partnership.

The first step then begins. The obligations of the corporation are substituted for those of the partners, and in time their liability as such is discharged.

The second step then follows.

The stock taken by the partners is transferred to a clerk for a consideration that is never paid or expected to be paid, and then another change of indebtedness takes place and the partners are thus relieved of their statutory liability to their creditors.

Usually it takes some money and a little time to carry through these processes, and in one case coming under my observation, the partners, advancing the necessary funds for this purpose, after having secured their release from their debt as partners, and their liability as stockholders, took a mortgage upon the assets that were left to secure to them the repayment of the money they had been compelled to advance to support the corporation while their scheme was in process. Upon foreclosure, they take the proceeds of corporate property, and leave their creditors, the victims of their schemes, to bear the whole loss. In this case there was a semblance of an

adequate capital at the outset, and also of an adequate security to creditors in responsible stockholders, but the capital is a sham, and the escape from statutory liability easy and entirely practicable, under existing legislation.

In the case I have just described, the owners of the property acted as both buyer and seller, as trustees for the corporation and representatives of their own interests, and the corporation was made substantially the administrator of the business of a worthless partnership, for the real purpose and with the real result of relieving the partners from liability and throwing the loss upon the creditors.

The same result is achieved in the reorganization of bankrupt corporations, including especially railroad companies and other corporations for operating a public use. These enterprises begin with inadequate capital, with the utmost use of crèdit, resulting in contracting a large debt with an unfin

ished work. In the process of foreclosure it is sold for a small sum. Under the laws of this State, which have been from time to time amended, and especially under the act of April 24, 1890, a syndicate of persons are authorized to become the purchaser of both the property and franchise. Upon filing deed therefor with the secretary of State they

become a corporation with full capacity to maintain and operate such road. They are not required to pay a dollar in any subscription to capital stock, but are authorized to provide for the purchase price of the property, by the issue of capital stock, and bonds secured by mortgage, in whatever amount the incorporators may have agreed on, which stock and bonds so issued shall be valid, and taken as fully paid for, by the transfer to the corporation of such property. It imposes no limit upon the amount of bonds and stock with reference to the value of

the property purchased, or the amount of security which shall be afforded for the payment of such bonds.

We have thus provided by express legislation the legalized means of perpetrating the abuses and frauds to which I have referred. Many such properties are fit only for gambling uses, consisting of railroads that answer no public need, or are many years in advance of the public necessity.