should be given him to compel the attendance of witnesses to be examined under oath. And if he finds that the corporation is overcapitalized or is violating any of the laws of the State or of the United States, he should, after giving the company a thirty days' written notice to rectify the wrong, place the evidence in the hands of the attorneygeneral, who shall immediately commence an action to annul its charter. Corporations cannot be controlled, unless a special department is created, whose sole business shall be to see that the corporation laws are respected and observed. by or through the privilege. After the board of corporate examiners has ascertained the percentage of actual net profits earned by a corporation for each and every year of its existence, based upon the fair value of its tangible assets for each year, it shall allow a profit of six per cent for each and every year since its incorporation; and if the average of net profits earned does not exceed six per cent during its corporate life no tax shall be levied. Only upon the excess of six per cent of average net profits earned by a corporation should a tax be placed. Such tax upon profits above six per cent should be graded as follows: a. b. C. d. e. f. g. h. i. j. 1-10 of the first per cent, about six per cent 1-9 of the second per cent, about six per cent 1-8 of the third per cent, about six per cent 1-7 of the fourth per cent, about six per cent 1-6 of the fifth per cent, about six per cent 1-5 of the sixth per cent, about six per cent 1-4 of the seventh per cent, about six per cent 1-3 of the eighth per cent, about six per cent 1-2 of the ninth per cent, about six per cent 6-10 of the tenth per cent, about six per cent 7-10 of the eleventh per cent, about six per cent 8-10 of the twelfth per cent, about six per cent 9-10 of all per centum of profits above eighteen per cent of net profits. Fifth. The State should tax the net profits earned by every corporation organized under its laws. Such a tax would be governed by actual results and be measured exclusively by the prosperity of the corporation taxed. "In adopting such a rule of estimate no one could complain of its being unequal in its effects upon different corporations or unjust in its general operation," declares Mr. Justice Fullerton in Monroe Co. Savings Bank v. Rochester (37 N. Y. 367). A corporation, whether owning a franchise or not, should be permitted to earn a reasonable profit on its assets. If this permission k. were taken away, all incentive to doing business 1. would be killed, the affairs of corporations would m. be wound up, and the State would be compelled to face the condition of having ninety per cent of its It is reasonable to assume that corporations will factories closed — thousands of workingmen thrown make all the profits they dare. And if we place a out of employment, and its people made dependent progressive graded tax upon their profits, their inupon other States for the necessaries and the luxu-centive to overcharge and increase their profits ries of life. That the percentage of profits allowed beyond a fair amount, will be gone and their time, should be liberal, no one would question. While four per cent may be the average value of capital, we would suggest the allowance of six per cent of actual net profits on the fair market value of the tangible assets of the corporation, as this percentage would be large enough to stimulate business and not too large to work injustice as between corporations and individual dealers. We do not mean the allowance of six per cent of profits only from the date of the passage of this proposed act, but an allowance of six per cent profits on the actual tangible assets of the corporation for each and every year of its existence. Most corporations make no profits and declare no dividends for some years after their incorporation. And to tax them when they are beginning to make money, without taking into consideration the years when the stockholders' money was earning nothing, when the stockholders were devoting their best thought and labor without any or with small compensation, to make the privilege worth something, would be unfair, unjust and inequitable. A franchise or a corporate charter is worth practically nothing, unless brain and money are expended to establish it on a paying basis in the business world. The value of a franchise or a corporate charter, represents the privilege plus the brains and money used to develop it. And the brains and money expended should be taken into account, when a tax is levied on the profits earned thought and energy will be taken from their calculations as to how much they dare to make, to be bestowed in making better the quality of their productions, in extending their markets and in holding their place in the business world. Franchises, special privileges and tariff protection will not produce the valuable monopolies they are doing to-day, for then the monopoly will not be allowed to yield the large profits that are now enjoyed by the few, to the injury of the many. If a corporation has to pay as a tax 9-10 of each per centum of profit above eighteen per cent, it will not risk the losing of its trade for the sake of making 1-10 of a per cent, and the people will get the benefit of a cheaper price and a better article. Sixth. In determining the actual net profits of a corporation the board of examiners shall annually ascertain the fair market value of the tangible assets of the corporation, not taking into consideration the franchise, the capital stock or its bonds. It shall deduct from the total earnings of the corporation the necessary and reasonable expense of its management, which shall include the cost for renewing the plant, together with the taxes paid on its property, business or profits, to all municipalities. And having arrived at these amounts it shall by ordinary business methods figure the percentage of profits earned in relation to its corporate assets. NOTE UPON AMENDMENT VIII Seventh. Every ten years the board of examiners shall ascertain the fixed average of profits earned by each corporation for that period, and if the average To ARTICLE III OF THE CONSTITUTION OF THE UNITED of profits does not exceed six per cent per annum, the State shall refund to the corporation such moneys received during such period as a tax on its profits above six per cent, or so much thereof as to make the average of profits untaxed equal six per cent; thus allowing to every corporation an average of six per cent profit on its tangible assets during the period of its existence. STATES OF MEXICO, PROHIBITING THE STATES The Constitution of the United States of Mexico confers the right of proposing bills for laws or “initiating laws" upon the president of the Union, Eighth. A detailed report of the examination of as well as upon the representatives and senators in the property, business, profits and losses of every general congress and the legislatures of the States, corporation shall be made each year and kept on file and requires that when such bills are presented by in the office of the superintendent. A summary the president of the Republic they shall thereupon statement of its assets and liabilities shall be pub-pass to a committee. On April 10, 1901, the secrelished in the State paper and in one newspaper pub-tary of finance accordingly transmitted to the house lished in the county where the principal place of of representatives, with the consent of the president business of such corporation is located. of the Republic, a bill for an amendment to article III of the federal Constitution. The bill, as transmitted to the house, was as follows: The State which gives to a group of citizens a charter of incorporation or a special privilege, an advantage which they did not possess as individuals, has the right to know that the privilege has not been used against public policy. If the corporations are conducting legitimate business, no injury will be done them by inspection. Ninth. A tax should be levied on all foreign corporations doing business in the State, upon the amount of business done in the State, in the manner provided by the laws of the State of New York. A rate of taxation should be adopted, to make the foreign corporation pay the same proportion of tax that is levied on the domestic corporation, so as not to drive the domestic corporation to wind up its affairs and incorporate in another State, and come back and do business in their old market. The following checks on such practice may be provided: (a). The State shall prohibit foreign corporations from doing business in the State until they have been duly licensed by the corporation department. (b). The State shall not permit an unlicensed foreign corporation to maintain any action in the State upon any contract made by it in the State. "Art. III. The States can not, in any case: * * * "VIII. Issue evidences of public indebtedness payable in foreign money or outside of the national territory; contract, directly or indirectly, loans with foreign Governments; or contract obligations in favor of companies [sociedades] or individuals of foreign nationality, when for this purpose documents payable to bearer or transferable by endorsement have to be issued." The house duly ordered that the bill be referred to the second committee on finance, the first com mittee on constitutional amendments and the second committee on public credit for consideration and report. Thereafter these committees presented a report, agreeing to the substance of the bill, but making some modification in the form of it, in order to avoid the amendment being misunderstood, since the bill, as transmitted to the house and referred to the committees, embraced all kinds of documents to bearer or to order, even those of a merely mercantile Finally. Will not this plan drive the small busi- character, and consequently, in the judgment of the ness corporation out of existence? It probably will. committees, would have prohibited the States from But as most of the small corporations were organ- entering into many contracts which the necessities ized solely for the purpose of relieving their memof the public administration daily require, which bers from partnership liability, the general public they considered was not the intention of the execuwill be better protected by compelling them to carry tive. When the secretary of finance was advised on business by means of a partnership with indi- of the modification proposed by the committees he vidual liabilities, than under the corporate cloak which now is so often used to mask dishonesty, fraud and corruption. This effect, however, may be obviated by causing this plan of taxation to apply only to corporations capitalized above a given sum. This would have at least one advantage — it would save the corporation department a large amount of labor. HARRY EARL MONTGOMERY. BUFFALO. N. Y.. Nov.. 1001. concurred in it, and by agreement with him, and in bill was amended as follows: case: III. * * * can The States not in any "VIII. Issue evidences of public indebtedness, payable in foreign money or outside of the national territory; contract directly or indirectly loans, with foreign Governments, or contract obligations in favor of foreign com panies [sociedades] or individuals, when evidences [of public indebtedness] or bonds to bearer or transferable by endorsement have to be issued." The words" for this purpose documents payable" in the bill, as referred to the committees, were stricken out, and in place thereof were inserted in the bill, as amended, the words "evidences (of pub- ¦ lic indebtedness) or bonds," thus eliminating from the prohibition of the bill all documents to bearer or order of a merely mercantile character, and confining its terms to evidences of the public debt and bonds. Article 127 of the Federal Constitution, concerning amendments to the Constitution, provides: amendment, it should be noted that by its terms it applies only to the States. Under Mexican law it is, however, a limitation upon the powers of the municipalities, as well. The amendment contains three principal prohibitions upon the powers of the States and municipalities. I. To issue evidences of public indebtedness, payable (a) in foreign money, or (b) outside of the national territory; II. To contract directly or indirectly loans with foreign governments, and III. To contract obligations in favor of foreign companies (sociedades) or individuals, when evidences of public indebtedness or bonds to bearer or transferable by endorsement have to be issued. "The present Constitution may be amended or modified. In order for amendments to become a part of the Constitution, it is necessary that the congress of the Union, by a vote of two-thirds of the members present, should agree upon the additions or amendments, and that such additions or amendments should be approved by a majority of the legislatures of the States. The congress of the Union will make | Mexican, or (b) payable in the United States or the count of the votes of the legislatures and the declaration of the additions or amendments having been approved." First. The first principal prohibition deals with (1) the medium of payment, and (2) the place of payment of evidences of public debt; and it would seem clear that the States could not issue evidences of public indebtedness (such, for example, as bonds), payable (a) in gold, or in any other money, except In the house of representatives, on December 2, 1901, the second committee on correction of style presented the following minute: "The congress of the United States of Mexico, in exercise of the power conferred upon it by article 127 of the Federal Constitution, and after the approval of a majority of the legislatures of the States, declares article 111 of said Constitution amended as follows: "Article III. The States can not in any England, or in any other country, except Mexico; or outside of Mexico, either. The word "evidences Second. The second principal prohibition would seem, by its terms, to make it unconstitutional for the States in any manner to contract loans with (that is, to borrow money from) foreign govern ments. "VIII. Issue evidences of public indebtedness, payable in foreign money or outside of the National Territory; contract directly or indirectly loans with foreign Governments, or contract obligations in favor of foreign Companies [Sociedades] or individuals, when evidences [of Public Indebtedness] or bonds to bearer, or transferable by endorsement, have to be issued."*uals, when evidences (of public indebtedness) or Put to debate and none ensuing, the minute was approved by economic vote. The amendment in this form to article III of the Constitution was thereupon ordered to be transmitted to the president for promulgation by him. In endeavoring to arrive at a proper understanding of the purpose and effect of the foregoing In Spanish as follows: "Artículo 111. Los Estados no pueden en ningún caso: *** "VIII. Emitir títulos de Deuda Pública, pagaderos en moneda extranjera 6 fuera del Territorio Nacional; contratar directa 6 indirectamente préstamos con Gobiernos extranjeros, 6 contraer obligaciones en favor de Sociedades 6 particulares extranjeros, cuando hayan de expedirse títulos ó bonos al portador, 6 transmisibles por endoso." Third. By the terms of the third principal prohibition the States cannot contract obligations in favor of foreign companies (sociedades) or individ bonds to bearer or transferable by endorsement have partnership, with special partners (simply); (2) a shall not be contracted in favor of foreign individugeneral partnership; (3) a joint-stock company orals, partnerships, companies, corporations, or govcorporation; (4) a general partnership, with special ernments. In other words, if a State or city make partners (by shares), and (5) co-operative com- any payment by means of negotiable bonds or panies. Every commercial company, in Mexican other forms of public indebtedness, such payments law, constitutes a person distinct from its individual must be made in Mexican money, in Mexico, to members. The word "companies," therefore, in the Mexicans. Henceforth, neither a State nor a municithird principal prohibition of the amendment would pality can issue or guarantee a gold bond or coupon; seem to be of general application, and to include, neither can issue a bond the principal or interest of among others, corporations and partnerships. By which is made payable in the United States or Eng"bonds to bearer or transferable by endorsement' land; neither can borrow money from foreign govare probably intended negotiable instruments ernments; and, if bonds to bearer or transferable by whereby in the hands of bona fide holders for value endorsement have to be issued, neither the State nor equities are cut off. the municipality can contract any obligation whatsoever with a foreign person, the word "person" including individuals, partnerships, companies and corporations. It would seem from the foregoing amendment, as thus understood, that the States and municipalities could not, after the promulgation of the amendment, for example, guarantee payment of bonds issued by a corporation organized and existing under the laws of the United States in whatever medium and place they might be payable, provided such bonds should be to bearer or transferable by endorsement; for to make such a guaranty would be to "contract obligations in favor of foreign companies (sociedades) or individuals." There would seem, on the other hand, to be in the amendment no limitation upon the power of the States or municipalities to guarantee payment of bonds issued by a corporation organized and existing under the laws of Mexico, whether they should be made payable to bearer or transferalbe by endorsement, or not, provided such. bonds should be payable in Mexican money and in Mexico. It is true the first principle prohibition, in terms, expressly applies only to the issuance by the States of evidences of public indebtedness; but a fair and reasonable construction of the whole amendment would no doubt lead a court to extend the meaning of the word issue so as to include the word guarantee. If a State be prohibited from issuing bonds, which it undertakes to pay abroad in gold, it would seem that they are likewise prohibited from guaranteeing bonds, which they undertake to pay abroad in gold. It is also true that the first principal prohibition, in terms, relates to "evidences of public indebtedness,” and it may be suggested that by this is meant only such evidences of indebtedness as are issued in the name of the people or State. But such an objection would probably be held to be unsound; because, if the State is compelled, by virtue of its guaranty of the bonds of a private corporation to make payment of them on default of the maker, its obligation to pay them would be none the less a public obligation, and the payment a payment by the people. If a State guarantee a bond it is clearly an evidence of an obligation on the part of the public to pay the bond according to the tenor of its guaranty. It is clearly the intention of the amendment that, when the States issue its own or guarantee another's bonds, which are payable to bearer or transferable by indorsement, such bonds shall be payable in Mexican money, in Mexico, and that such obligations Hence, for example, neither a State nor a city could be a party to a contract by which a trust company organized and existing under the laws of the United States should be appointed (1) to receive for deposit and issue bonds to bearer or transferable by endorsement, and (2) to receive funds of the city or State to be applied in payment for public works; and this, whether such bonds should be issued by the State, the city, or a private Mexican corporation, and be made payable in Mexican money in Mexico; for by joining in such a contract the State and the city would "contract obligations in favor of foreign companies," to wit, in favor of a foreign trust company. Nor would it be material that the bonds should not be issued directly by the State or city. It is sufficient, in my judgment, to bring the contract within the prohibition of the amendment for the State or city to assume the mortgage made in favor of the foreign trust company, and guarantee the bonds issued by the private Mexican corporation. Nor, for the same reason, could the foreign trust company, under such circumstances, be empowered to re-enter, take possession of and operate such public works in the case of default by the city or State. If a private Mexican corporation should desire a municipality or State in Mexico to assume such private domestic corporation's mortgage payable in gold coin, and guarantee its bonds issued thereunder, also payable in gold coin, to bearer or transferable by endorsement, the assumption by the municipality or State of such a mortgage and the guaranty of such bonds — where the mortgage is issued in favor of a trust company organized and existing under the laws of the United States, and such trust company is appointed to receive for deposit and from time to time issue the bonds, and also to receive the funds of the municipality or State and from time to time apply the same in payment for public work-would seem to be (1) the contracting by the municipality or State of an obligation in favor of a foreign company where bonds to bearer or transferable by endorsement have been issued, and (2) an issue by the municipality or State of evidences of public indebtedness payable in foreign money-in violation of the first and third principal prohibitions of the amendment. The fair intention of the amendment is that, if bonds to bearer or transferable by endorsement have to be issued, neither the State nor the municipality can contract any obligation whatsoever in favor of a foreign person; and in no event can the municipality or State bind itself, either as issuer or as guarantor of any bonds payable in any other medium than Mexican money, or in any other place than the United States of Mexico. This so-called Limantour amendment to the federal Constitution only awaits promulgation by the president of the republic to give it the full force and effect of a constitutional limitation upon the powers of the States and municipalities. It has been agreed to by a vote of two-thirds of the members present at a session of the federal congress, and has been approved by a majority of the legislatures of the States. The congress of the Union has counted the votes of the legislatures, and has declared the amendment to have been approved. As the bill for the amendment was transmitted to the house of representatives by the secretary of finance with the consent of the president of the republic, it is probable that he will duly promulgate it. Any amendment to the amendment, or any repeal of it, could only be effected by a similar agreement of congress and approval by the States. Just what effect the amendment will have upon the marketability of Mexican State and municipal bonds will best be appreciated when the endeavor to market such securities is made. LUCIUS Q. C. LAMAR. MEXICO, December 14, 1901. The Irish magistrate of the penal days was, indeed, a curious character. He hardly knew as much law as Coke or Blackstone, but in conceit and egotism he easily out rivalled them. In the penal days the country magistrate was usually one of the farming class, who by frugality had amassed a small competence. His residence was generally one of those old, heavy-looking buildings which are to be found in country places, and which look rather the worse for wear. From an architectural standpoint our honor's residence would have no recommendation whatever, being after no particular order, but a combination of the whole. The rooms were small but many, the staircases almost perpendicular and the corridors narrow and winding. The furniture generally consisted of quaint, dark oak, highbacked chairs, chests of drawers, elaborately ornamented bedsteads fashioned after the tastes of by-gone days, and the style of the drear and musty past. His household generally consisted of himself and wife and broken-down servant, who answered the door calls, growled at the poor and bent the cringing knee to the "quality." The magistrate resembled a Turkish Cadi, where the president is at once court and jury. His knowledge of law was about equal to that of Marks, the lawyer in Uncle Tom's Cabin. Any yawning or gaping in his presence was considered gross contempt of court, and the guilty one was instantly reprimanded. His library consisted of one book, the Holy Scriptures, which was displayed on a table in the center of our hero's court-room. In deciding cases which came under his jurisdiction the rich man got the law and the poor man the justice. His administration of the law showed that one thing was absolutely necessary- the appointment of a commission of inquiry by the government to determine the qualifications and capabilities of these country squires. Their investigation would be a right droll one, for not only would they find men quite ignorant of the law dealing it our every day, but men, who, if their heads exchanged places with, I won't say where, the newly substituted heads would contain as much brains as the former ones. Any voluntary suggestion as to procedure volunteered by members of the constabulary was always considered by his honor as a reflection on his qualifications, and the accommodating individual generally received a sharp rebuke for his pains. But when our hero administered the oath to an illiterate peasant, how he would swell with importance! The lord chief justice of the Queen's Bench did not possess one-half of his dignity. How he would peer through his goldbowed spectacles (which, by the way, he didn't need) and look through the innermost soul of the half-frightened peasants. He would explain to them that perjury means penal servitude here and eternal damnation hereafter. 66 In those days the unfortunate followers of the Stuarts organized themselves into various secret societies, which were known by the names of Whiteboys," 'Ribbonmen," "Molly Maguires," and the followers of William of Orange formed thmeselves into a secret society called the "Hearts of Oak." Information leading to the prosecution of Whiteboys, Ribbonmen, etc., was always hailed by his worship with great glee, because a conviction, whether just or unjust, of an unfortunate peasant, he considered would place him in high favor with the officers of Dublin Castle. The following instance will show the reader the mental calibre of the Irish magistrate of the penal days. This one, if for nothing but its ingenuity, deserves to be recorded. A worthy magistrate having occasion to write the word "usage," contrived to spell it without using a single letter of the original word; his improved orthography was "yowzitch." When some remarks were made on similar feats he averred that nobody could spell with pens made from the quills of Irish geese. Happily for Ireland, the magistrate above described is no more; but in America the country squire still exists and expounds his lame law upon the suffering public. JOSEPH M. SULLIVAN. OF THE SUFFOLK (MASS.) Bar. |