Page images

wills, speaks, and acts as one person. It may make contracts; may sue and be sued in the courts; and may acquire, possess, and dispose of property. The word “ certain ” in the definition is important. It implies that the powers of a corporation are limited. A natural person may do anything not contrary to law; but a corporation may do only the things that the law permits it to do. In particular it may engage in no other business than that for which it was created, as specified in its articles of incorporation.

3. “Being created by the law, it may continue for any length of time which the law prescribes.” This means that a corporation has what is called perpetual succession. The persons who compose it may change, but the corporation remains the same legal entity until it is terminated by the expiration of its term of existence, or until it is dissolved according to law. A partnership is dissolved if one of the partners di or sells his interest in the firm, because it does not enjoy the right of perpetual succession; but if all the original stockholders or members of a corporation abandon the enterprise, sell their stock, or die, the new stockholders or members acquire their rights and privileges, and the law does not recognize that any change has taken place in the identity of the corporation.

20. Charters of Corporations. -- Incorporation is a voluntary act. The state will not force corporate existence upon a group of people. A private corporation is thus invariably formed at the request of its stockholders, or members, and its formation confers upon them powers and privileges which they previously did not possess. These powers and privileges are definitely stated in the charter of the corporation. The charter also serves as a constitution for the corporation, designating what officers it shall have, how they shall be chosen, how long they shall serve, and what their powers and duties shall be.

Until the last quarter of the nineteenth century it was customary throughout the United States for corporations

1 The longest term for which a corporation may be formed in California is fifty years. The term may be renewed, however.

to receive their charters as special acts from state legislatures. At present they commonly incorporate under general laws according to some such procedure as that described above. In California private corporations must always be formed according to this process. The charter of a corporation thus formed consists of its articles of incorporation and the general laws governing corporations. The general laws may of course be amended by the legislature, and the articles of incorporation may be amended by the corporation ; but all amendments to the articles must be adopted according to state law, must be in harmony with the law, and must be approved by the secretary of state. Charters of municipal corporations will be considered in succeeding pages.

21. Private and Public Corporations. — “Corporations are either public or private. Public corporations are formed or organized for the government of a portion of the state; all other corporations are private.

Private corporations may be formed for any lawful pose. They exist for business undertakings of every description; for the support of churches, schools, colleges, and hospitals; for pleasure; for sport; and for the furtherance of other enterprises almost without number. If the property of a private corporation is represented by shares of stock, the persons who compose it are called stockholders; if the property is not divided into shares the persons who compose it are called members. Private corporations are managed by their officers, who are chosen by their stockholders or members, and not by the voters of any definitely bounded district. They have no power to tax the property of any district, but derive their income from


lawful pur

1 Civil Code of California, $ 284.

voluntary contributions, from assessments levied on their stockholders or members, or from the profits of the business in which they may be engaged.

Public corporations are formed or organized for the government of a portion of the state.” Every public corporation is thus located within a definite district, and is composed of all the citizens who live in the district. Its affairs are managed by public officers and employees representing the people as a whole, and it derives its income mainly from taxing the property within its borders.

A public corporation may do only the things that the law definitely states that it may do. The trustees of a school district, for example, may not spend the money of the district to build a road or a bridge, to give relief to the poor, to fight contagious diseases, or for any purpose whatever, except the one purpose of educating the children within the district. An irrigation district may tax itself for the purpose of developing and distributing water, but for no other purpose. How, then, can it be said that a school district, or an irrigation district, is “formed or organized for the government of a portion of the state”? Government is the doing of public work. Any instrument that has a part in the doing of public work is participating in government. A school district, or an irrigation district, does not completely govern the people within its limits; but it does for them an important piece of public work, has an important part in their government, and for this reason the supreme court of California calls it a public corporation."

It would not be an accurate use of language to speak of a state as a public corporation. A state has all the powers and privileges that

1 See Supreme Court decisions: 93 Cal. 414; 92 Cal. 296; 51 Cal. 406; 129

Cal. 567.

could be granted to any corporation; but it is superior to any corporation. It creates corporations, grants to them all the powers and privileges that they possess, supervises and controls their actions, and has the power to dissolve them. The state, on the other hand, is not controlled by any outside authority; no outside authority has any legal power to dissolve it; its powers and privileges are nowhere definitely written down, for they are practically without limit. It possesses a modified sovereign power, and sovereign power transcends corporate power.

Likewise the United States possesses all possible corporate power, but is superior to any corporation, public or private, for it also possesses sovereign power.

22. Two Kinds of Public Corporations. — Public corporations are divided into two subclasses: municipal corporations and quasi corporations.3

I. A municipal corporation is an incorporated town or city. A community incorporates by obtaining a charter according to a process described in Chapter VIII. A municipal charter is a special law for a particular city, or a particular class of cities, which contains a statement of the powers that may be exercised, and the privileges that may be enjoyed, and an outline of the form of government.

Every thickly settled community has wants and interests that a rural community does not have. But all thickly settled communities do not have the same wants and interests. For these reasons rural communities and cities cannot be governed by the same plan, nor can all cities be

1 The powers of a state are restricted in numerous ways by the provisions of the national Constitution, but they are without limit in the sense that no definite bounds can be set to them. See the tenth amendment to the national Constitution.

2 Cooley, Principles of Constitutional Law, p. 34.

3 This term must not be confused with the term quasi public corporations, a name given to the great private corporations which serve the public on a large scale, such as railroads, telephone and telegraph companies, etc.

4 There is no difference in meaning between the words town and city as used in California.

governed alike. The constitution and laws of California, therefore, provide that each city may have a charter which is suited to its own peculiar needs. When we come to study the government of cities more in detail, we shall consider the different kinds of charters. ($ 75.)

When a community incorporates, it acquires an individuality which sets it apart from the balance of the state as a separate political entity. To be sure it is a part of the state and in many respects acts as the agent of the state, but in the management of its local affairs it is regarded as a distinct political organism. The fact that the state confers upon it the power to manage its local affairs according to the terms of its charter, rather than according to general state law, makes of it a true corporation.

2. A quasi corporation is not a true corporation. It is not incorporated and has no charter, but is governed according to the general laws of the state. Thus all the counties of the state, except the incorporated city and county of San Francisco, and such others as have adopted county charters, are governed according to the same plan. This is true also of school districts, — except those whose government is modified by city charters, — of irrigation districts, sanitary districts, and of every other kind of district belonging to Class II. A quasi corporation has no

1 A constitutional amendment adopted in 1911 provides that any county may elect a board of fifteen freeholders for the purpose of drawing up a charter for the county; and that this charter shall become the fundamental law of the county when adopted by the voters and ratified by the legislature. But such a charter would not be a true charter because it would not be a grant of power. It would provide for the election of a board of supervisors, and for the election, or appointment, of other county officers; it would state their terms of office, and determine, or provide a method of determining, their compensation. But all powers to be exercised by the county or any of its officers must be according to general law. The possession of such a charter would not make a county a true corporation.

2 Los Angeles and San Bernardino counties at present (1913).

« PreviousContinue »