part of corporations to consolidate in the absence of any statute permitting consolidation will not be recognized by the courts.1 Where power is granted to corporations to consolidate it is usually done by means of a general statute. Such statutes exist in a comparatively small number of the Commonwealths, the legislatures of the remaining States evidently looking upon consolidation as a form of a trust and therefore to be restricted. Some of the statutes limit the right of consolidation to corporations of the same character or engaged in the same line of business.3 Where the right to consolidate existed at the time the corporation was created it can ordinarily be affected by vote of a majority of the stockholders against the dissent of the minority. However, in the absence of such authority conferred prior to the incorporation of a company, it has been held that consolidation cannot be affected against the dissent of the minority stockholders.5

When it comes to the matter of consolidation, creditors have no right to intervene for the purpose of preventing such a consolidation providing the same is undertaken under legislative authority. The remedy of creditors in such cases is to proceed in equity with a view to subjecting the property of the consolidated corporation to the payment of their claims. Sometimes, though not always, when a new corporation is formed by the consolidation of a domestic corporation with a foreign corporation, it is required to pay an organization tax, at least upon so much of the capital stock as is represented by the capitalization of that of the consolidated domestic corporation."

1 Greenville Warehouse Press Co. v. Company, 70 Miss. 669; 13 So. 879.

8 See In re Prospect Park & Coney Island Railway Co., 67 N. Y. 371.

Spero v. Company, 7 Ind. 369; Sprague v. Company, 90 Ill. 174.

Clearwater v. Meredith, 1 Wall. (U.S.) 25; K. & R. I. Ry. Co. v. Marsh, 17

Wis. 13; Mowrey v. Company, 4 Bissell, 78; Fed. Cas. No. 9891.

People v. Company, 92 N. Y. 105. See R. I. Ry. Co. v. Moffatt, 75 Ill. 524; N. D. Ry. Co. v. Company, 120 Mass. 397.

7 State v. Sherman, 22 O. St. 411; P. Co. v. Company, 113 U. S. 296; A. & R. A. L. Co. v. State, 63 Ga. 2183; contra, People v. Company, 129 N. Y. 474; 29 N. E. 951.

CHAPTER VI.

LEGISLATIVE CONTROL OVER FOREIGN CORPORATIONS.

§ 127. Extent of Legislative Power of the various Commonwealths over Foreign Corporations. A foreign corporation may be defined as one created under the laws of a State, Territory, government, or country other than that wherein it seeks to do business.1 With some few exceptions nearly all of the Commonwealths have enacted statutes prescribing the terms and conditions upon which foreign corporations may carry on business within their borders. Most of these statutes closely resemble each other in character, and generally look to the attainment of the same end. Thus, for example, in order to give courts of the foreign State jurisdiction over the foreign corporation and to secure proper protection for such of its citizens as may transact business with the latter, the statutes prescribe that foreign corporations shall designate an agent residing within the State upon whom service of process upon the corporation may be served, and also designate a place of business where it may be found. Such provisions are unquestionably valid.3

Again, most of the acts require that a certified or sworn copy of the charter of the foreign corporation shall be filed in certain designated offices, usually with the Secretary of State and in the local recording office of the county where its principal place of business is to be located. The object of such enactment is to furnish easily accessible evidence of the existence of the corporation, and to protect parties dealing with it from fraud and imposition.1 Still other States require the filing of reports enumerating the officers, giving information relative to the business to be transacted within the foreign State and as to the financial condition.

1 Daly v. Company, 64 Ind. 1.

8 St. Clair v. Cox, 106 U. S. 356; Lafayette Ins. Co. v. French, 18 How. (U. S.) 404.

4 Evans v. Lee, 11 Nev. 194; D F. Co. v. Augustine, 5 Wash. 67; 31 Pac. 327; Huffman v. Company, 13 Tex. Civ. Ap. 169; 36 S. W. 306.

of the corporation. The right to transact business in a foreign State is a matter of State comity, pure and simple. The recognition of a foreign corporation and enforcement of its contracts in States other than that of its creation rests only on comity, and any conditions governing the right to transact business outside of the domiciliary State of the corporation may be imposed upon them or they may be entirely excluded. But the conditions imposed must not be repugnant to the Constitution of the United States or to the public policy of the foreign State as evidenced by its statutory enactments and judicial decisions, nor can they be repugnant to rules of public law.3

In this connection it may be observed that foreign corporations cannot claim the protection of the prohibition of the United States Constitution against denying to citizens of any State the privileges and immunities of citizens of the several States. Nor can they claim the benefit of the clause against denying to any person equal protection of the law.5

8

A State may preclude all foreign corporations not engaged in interstate commerce or in the employ of the general government from transacting business within its limits, and the courts cannot inquire into its reasons for so doing. A State may discriminate between foreign and domestic corporations. In short, the power of States over foreign corporations with respect to imposing conditions for doing business are as broad as those exercised over domestic corporations. Wherever a corporation transacts its business it carries its charter with it, and that becomes the law of its existence in the foreign State, for the charter is the same abroad as it is at home. Whatever disabilities are placed upon. the corporation at home are ordinarily equally binding upon it abroad, and whatever proper legislative control it is subject to must in general be recognized and submitted to by those who deal with it elsewhere. The foregoing rule should be qualified

1 Washington County Mut. Ins. Co. v. Dawes, 6 Gray, Mass. 376.

2 Paul v. Virginia, 8 Wall. (U. S.) 161. 8 Lafayette Ins. Co. v. French, 18 How. 407; S. P. Ry. Co. v. Denton, 146 U. S. 201; Am., etc. Christian Union v. Yount, 101 U. S. 356. 4 Paul v. Virginia, 8 Wall. (U. S.) 168. 5 P. C. S. M. & C. Co. v. Pennsylvania, 125 U. S. 181.

by the statement that a foreign corporation can do no act in a foreign State which cannot be done through the intervention of a mere agent and which is not in contemplation of law the direct act of the corporation itself.1

Comity between States authorizes a corporation to exercise its charter powers within any State, but it does not permit the exercise of a power where the policy of that State distinctly marked by legislative enactments or constitutional provisions forbids it.2 It has been well said that "no rule of comity will allow one State to charter corporations to operate in another State unless there is willingness on the part of the foreign State that it should be so. To hold otherwise would be to say that the right of one. State by comity is superior to the sovereign will of the other. This involves the surrender of sovereignty to a rule of comity and to a matter of international etiquette, which no sovereign State should for a moment think of." 8

A great deal of litigation has arisen through the question. whether or not foreign corporations may exercise the same powers in a foreign State that their charter authorizes them to exercise in the domestic State. It has been held that foreign corporations cannot exercise outside of the domicile State powers which their own charters do not permit them to exercise within the State of their origin, nor can they exercise powers in a foreign. State not permitted to corporations organized under the laws thereof. They cannot, however, do any acts which are contrary to the public policy of the foreign State.5 Nor can they transact business for which domestic corporations cannot be formed on account of statutory prohibition thereof."

In some jurisdictions what are termed "retaliatory statutes" have been enacted. The purpose of these statutes is to put corporations coming from other States upon the same plane as domestic corporations of that State are placed when they seek in turn to transact business in the States referred to.7 Sometimes the laws of the foreign State expressly provide that foreign

1 Duke v. Taylor, 37 Fla. 641; Demarest v. Flack, 128 N. Y. 205; 28 N. E. 645; Colwell v. Company, 100 U. S. 55.

2 McDonough v. Murdoch, 15 How. (U. S.) 413.

8 Empire Mills v. Company (Tex. Ap.), 15 S. W. 506.

Diamond Match Co. v. Powers, 51

Mich. 145; Clarke v. R. R. Co., 50 Fed. 338; State v. Water Co., 61 Kan. 563; People v. Howard, 50 Mich. 239.

6 L. G. R. T. Co. v. Commissioners, 6 Kan. 245.

Empire Mills v. Company (Tex. Ap.), 15 S. W. 200.

7 Talbot v. Company, 74 Mo. 544.

corporations shall have no rights or privileges other than those possessed by domestic corporations of the same character. A fair interpretation of such statutes would seem to be that such foreign corporations shall have equal powers with domestic corporations of a character similar to their own.1

In a recent case an interesting question arose as to the legal effect of inserting powers in a charter to be exercised only outside of the State, such powers being forbidden by the laws of the State in which the corporation was organized.2 In this case the Federal Court of the State of Washington spoke as follows:

"It has become a habit of business men in this country to organize corporations in one State to operate in another, and presumably there is some advantage to be gained thereby, otherwise the practice would not be continued. But no sound reason has been advanced, and none occurs to my mind, for giving additional encouragement to the practice by judicially expanding the powers of such corporations so as to include additional rights and powers to be exercised abroad but not at home. Corporations organized under legislative statutes are not endowed with the rights of natural persons to do as they please except when restrained by prohibitive laws. On the contrary, the rule is that they have only such powers and rights as the statutes confer, and the enumeration of their powers implies the exclusion of all others except such subordinate and incidental rights and powers as are essential to their existence and the exercise of the rights and powers conferred in express terms, and the corporation can make no contracts and do no acts other than permitted by the State which created it except such as are authorized by its charter."

The general rule is that foreign courts will not interfere in the internal management of foreign corporations; that is, except in the presence of extraordinary circumstances. In this connection a distinction obtains where the act complained of affects the party solely in his capacity as stockholder, for there he must seek redress of his grievance in the courts of the domiciliary State of the corporation. But where the act affects his individual

1 See sec. 15, Art. XII. California Constitution; sec. 11, Art. XV. Montana Constitutions; I. & M. B. Co. v. Stone, 174 Mo. 1; 73 S. W. 453; MacGinniss v. Company (Mont.), 75 Pac. 89; Lowe v. Company, 52 Cal. 60.

2 Seattle Gas & Electric Co. v. Citizens' Light & Power Co., 123 Fed. 588; 125 Fed. 1001.

8 Sidway v. Company, 104 Fed. 481; Kimball v. Company, 157 Mass. 7; 31 N. E. 697.