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Access to the sea alone gave opportunity for commerce. The means of transportation afforded by the sea were open to all on easy terms and any general commercial monopoly was impossible. Early in the vast industrial development of modern times the advantages of some association of effort and capital became obvious. To secure these, combination was inevitable. This at first took the form of co-partnership. Two individuals by combination of effort and capital could of course do at less expense and with greater economy of plant and effort what they could do separately. They could also by such association limit or suppress local competition. For example, two competing bakers, having each a shop, an oven, a journeyman and an apprentice, by combination could save rent and fuel, reduce waste and perhaps dispense with all assistance. If the only bakers in the village, their co-partnership established a monopoly. Yet this did not constitute an offense at common law. They might, in conibination as copartners, even temporarily reduce prices to prevent or stifle competition.

Under these conditions co-partnership in time shared with individuals almost the entire field of industry and trade. Though as a rule in control of the larger enterprises, the copartnership did not drive to the wall the individual manufacturer and merchant. Individuals and combinations of other individuals by way of co-partnership engaged as competitors on terms not seriously unequal in similar branches of industry and trade.

The next step in the march of combination was the employment of the corporation as an instrument of industry and trade. The co-partnership had appeared to supplement individual effort and capital and thus make possible larger enterprises. The corporation followed to supplement both and thus provide for still larger and more stable undertakings. Between the first and second of these there is no sharp distinction. Between them and the industrial or trading corporation there is a definite line.


Individuals, whether acting alone or as co-partners, appear in the world of industry and trade as natural persons. Each stakes all that he is and has and all that he hopes to be and acquire. His business may employ only a fraction of his capital and but little of his personal effort, yet he embarks his all in the enterprise. The individual, his good name, his possessions, his prospective acquirements, stand sponsor for every action. These hostages to good conduct "are impediments to great enterprises." Few men will risk so much beyond the power of their personal ability of control. Then, too, the co-partnership depends on the continuance of a good understanding among its members. Its dissolution by the act or death of any member is always imminent. Individual en terprise and co-partnership combination in industry and trade have thus distinct and general limitations. They are affected by the mutability of human life and bounded by personal limitations.

The corporation is subject to no such restrictions. It is impersonal in character. It is without relations beyond the enterprise for which it is organized. It risks nothing but the capital which it employs. It may grow to any dimensions. Its field may be the world. If not immortal, its mortality is not to it an ever-present menace. No cloud projects a shadow beyond its insolvency. Failure brings to it nothing but death and oblivion. Those who own and breathe into it the breath of life stake nothing but the purchase price of their holdings of its stock. Protected and shielded by it from personal responsibility, and even from the public gaze, they quietly de. cermine its every act and absorb the profits that result. If disaster comes, they beat a well-ordered retreat, leaving the wreckage to the creditors. Such are the characteristics of the impersonal Colossus of unlimited powers and limited liabilities, that now threatens the very foundations of public or der.


The private corporation, it should always be remembered, is wholly a creature of law. As the public welfare is the first and last concern of law, it should provide for and protect private corporations only to the extent that such artificial combinations of private citizens subserve the public good. Their only justification must be found in the public need for the combination of the efforts and capital of many individuals to carry forward enterprises of public utility which are beyond the ability of natural persons whether acting alone or in partnership to undertake. The rigid observance of this limitation would have made impossible many of the grave corporate abuses from which society now suffers. It would have confined the sphere of private corporations to public or quasi. public enterprises of great magnitude, such as the telegraph, transportation, lighting, banking and possibly mining and a few other great industries. In lieu of this reasonable employ. ment of the private corporation in the field lying beyond ordinary private enterprises, we bave permitted and even encouraged it to invade all occupations there to enter upon unequal terms into a war of extermination against individuals. In almost every State any one, aided by a few dummies who can merely sign their names, may incorporate for any pur. pose which, as he chooses to state it, is not illegal. Indeed, in many States, no unpleasant questions are asked as to the purpose. The issue of charters of incorporation to all comers, usually for nominal fees, has become merely a clerical function. The desire of any adventurer to escape personal liability for his acts, of any number of persons engaged in any business whatever to combine and place at disadvantage their competitors, now controls the issue of charters of incorporation. Thus the public need, the only true test of corporate combination, has everywhere given way to private greed. Here lies the root of the noxious growth, which we know as the monopoly corporation. If corporate combination was strictly limited to public requirements for the conduct of enterprises


beyond the scope of ordinary individual initiative, the problem of the trust would be relatively a simple one.

The private corporation as the child of positive law has the characteristics with which that law has endowed it. If found to be other than an obedient servant of the people, if not a factor making for the common welfare, the law is at fault. An artificial distinction between it and the individual lies in the interpretation which has been given to that clause of the Constitution of the United States which provides that no State shall "pass any law impairing the obligation of contracts.” Had this clause been held simply to affect the contracts of natural persons and like engagements between them and private corporations or the State, and those between such corporations and the State, the monopoly corporation would not today in America dispute the field with public authority.

The famous leading case of Dartmouth College vs. Woodward 4 Wheat. (U. S. Rep.), 519, prepared the way for a construction of this clause of the Constitution under which the charter every private corporation becomes at once a contract between the State and its off. spring, whose obligation may not be impaired by subse. quent legislation. This rule, in view of the reckless prodigality with which charters are issued as already noted, operates greatly to the prejudice of natural persons. While such persons as citizens are the source of law, they are as individuals subject to its provisions and constant changes. The state would scorn to enter into any contract for stability with individuals subject to its authority. It abdicates for them none of its legislative powers. They must embark their all in the hope that by future legislation the State will not materially change the conditions which have induced their risk. They can have no other guaranty than that their property shall not be taken for public purposes without just compensation. Be. yond this they can only hope for reasonable stability.



The private corporation is exposed to few such risks. By the act of its creation, usually a mere clerical function of some public official, the State surrenders perhaps in perpetuity some portion of its legislative power. By every enactment providing for the issue of corporate charters the Legislature binds its successors to the extent that charter contracts are entered into under its terms. Thus to the immunity of the private corporation from interruption or dissolution by the death of its members, the contract clause of the Constitution as thus far interpreted adds exemption in large measure from legislative control. This tremendous advantage might be free from serious objection had the operations of the private corporation been confined to the field which lies beyond individual effort; but, because of its invasion of the domain of personal enterprise, it amounts to a discrimination by law in favor of an artificial body against the citizen. Except for the obstacle of this constitutional guaranty, the State would be at liberty to impose at any time such restrictions on the operations of private corporations as the public welfare may require.

It is true that some States have in recent years, by provision of their general incorporation laws, expressly reserved the power to modify or annul charters issued by them; but we have become so accustomed to regard the charter powers of private corporations as vested rights, that no considerable use has yet been made of the power to amend or annul so reserved by the State. Its possibilities will be left for the discussion of public authority to impose restrictions upon existing monopoly corporations.

This, however, is not the whole story. Private corporations often appeal to public authority for increased powers; and some of them require licenses to use public property and facilities. All grants of such powers and licenses are also held to be “contracts” between them and the State or municipality, which may not be impaired under the contract clause of the Constitution. To secure them the powerful private

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