ready seen, the members who compose the corporation may, after it has been organized and its shares have been issued, by transferring their shares to others, introduce a totally new membership into the corporate body and retire therefrom themselves. * * * The rule had a very substantial value when the franchise to be a corporation was generally granted by the king in his council *** when such grants could not be obtained except in consideration of the rendition of important services to the king or to the state. But under our American constitutions, under which a body of co-adventurers may freely organize themselves into a corporation by complying with certain statutory forms and paying a moderate tax, the franchise of being a corporation is scarcely more valuable than the franchise, if there could be such a thing,-of being a partnership. It is a myth; and the rule under consideration would be the silliest casuistry except for its value as a rule of interpretation of railway and other corporate mortgages."

Judge Elliott in his Law of Private Corporations (1900), devotes one chapter (5) to "Franchises and privileges," giving an excellent condensed view of the subject.

It is submitted that the above statements of Judge Thompson and Mr. Morawetz in regard to the corporate franchise are very much overdrawn, if not entirely incorrect. It might be pertinent to inquire, why is it, if the right to be a corporation is of no value, that so many corporations are formed? Why is it that four-fifths of the wealth of the United States is held under corporate organization? Why is no great enterprise undertaken except under a corporate form of organization? The franchise of being a corporation is valuable; the fact that the state makes it easy to obtain this franchise does not take from its value, any more than the fact that every male over twenty-one can vote makes the right to vote of no value. The corporate form of organization is the most efficient form of business organization yet discovered by the business world, and is consequently considered the most valuable by business men. It furnishes the greatest possibility of concentration of means, the completest unity of management, and the least individual personal responsibility both financially and morally of any business machine yet invented, to say nothing of the possibility of fraud, speculation, and exploitation that lax corporation laws, both now and heretofore, have made possible if not actually invited.

But, after all, are our general incorporation laws a mere repeal of the common law a mere exemption from the common law prohibition of forming corporations without consent of the king or state? Or was a special charter itself a mere repeal of or exemption from such rule of the common law? The legal theory-the doctrine of the legislature, or the doctrine of the courts, is not so, and never has been so, and it is hoped never will be so. The common law prohibition is not repealed, or in fact modified in any essential particular, but is the same as it was in Blackstone's time or before. A franchise at common law was something more than a license-it could not be revoked by the king after granting it, except for a justifiable cause judicially determined. It was something more than a law, also; it was an estate or interest like an estate in land; a repeal of the law granting it did not take it away in any other way than the repeal of a law granting land, by the transcendent power of parliament, took away the estate in the land-that is, by a forfeiture or bill of attainder, or something of that kind. A franchise to be a corporation was of the same character-a grant of a privilege-might be many, or only one, but at least one, that is, the right to do the designated business under the corporate form of organization. But it was still more than this: it was a grant upon a condition, a kind of condition subsequent-the condition being the faithful performance of the business to be conducted under the corporate form of organization-in other words, that there be no "non-user, misuser or abuser" of the privilege. It was very much the same as the condition always annexed to the grant of a freehold estate in land-it was in the theory of the common law always held from the king upon the condition that the holder do not commit treason or felony; if he did, the land would then be forfeited upon conviction after indictment and trial in the king's bench. So, too, the corporate franchise

was held upon a like condition-non-user or misuser led to forfeiture upon judgment in scire facias or quo warranto proceedings in the king's bench. This theory of a franchise yet remains with us, and is in no way repealed. Under our United States constitution, and the decisions of the supreme court, the transcendent power of parliament to declare forfeitures of either land or franchises, is taken from our legislative bodies-of the states at least (Fletcher v. Peck, 6 Cranch 87, and Dartmouth College v. Woodward, 4 Wheat. 518). But the right to forfeit franchises for misuser or non-user, in the proper judicial proceedings, yet remains. It perhaps matters but little to the state whether A., B. and C., either separately, jointly, or in a partnership, refine sugar or petroleum. If they engage in this business they may do so when and where they please, stop when they please, or agree not to make any more-the latter contract, under some circumstances being simply unenforcible, but not a cause of forfeiture or punishment. But if A., B., C., D., etc., form a corporation for making or refining sugar or oil, the case is different; the business is not different-it is neither more nor less public, nor more nor less a franchise than it was before; the privilege is not in making sugar or oil, but bringing into existence and using in this business the valuable, efficient, impersonal and in many ways morally less responsible, agency or organization known as the corporation; this is the privilege, a privilege of "public concern," a franchise, always having as an inseparable incident, always granted upon the implied condition that it will not be misused or abused. For not making oil, or sugar, or even agreeing not to do so, the charter, the franchise of being a corporation for such purpose, can be taken away by the state. (See People v. North River Sugar Ref. Co., 121 N. Y. 582, 18 Am. Št. R. 843, supra, 100; State v. Standard Oil Co., 49 O. S. 137.) Herein lies the essential difference between a corporation and a partnership or joint stock company. (See Gleason v. McKay, 134 Mass. 419, infra, p. 167.

The franchise to conduct any business as a corporation, or through a corporate organization, is now, and has always been since the time of the Romans, "a matter or privilege of public concern," given by the state only on condition that it be not abused. Kent says: Solon permitted private companies to institute themselves at pleasure, provided they did nothing contrary to the public law. But the Romans were not so indulgent as the Greeks. They were very jealous of such combinations of individuals, and they restrained those that were not especially authorized, and every corporation was illicit that was not ordained by a decree of the senate or emperor. Collegia licita, in the Roman law were, like our incorporated companies, societies of men united for some useful business or purpose with power to act like a single individual, and if they abused their right, or assembled for any other purpose than that expressed in their charter, they were deemed illicita, and many laws from the time of the Twelve Tables down to the times of the emperors were passed against all illicit or unauthorized companies. In the age of Augustus, certain corporations had become nurseries of faction and disorder; and that emperor interposed, as Julius Cæsar had done before him, and dissolved all but the ancient and legal corporations.

*

And the Emperor Trajan, in refusing to incorporate a fire company, said, 'that societies of that sort had greatly disturbed the peace of the cities; and whatever name he gave them, or for whatever purpose they might be instituted, they would not fail to be mischievous,"" citing Taylor's Elements of Civil Law, 567-570; Suetonius, Ad. Aug. 32, and J. Cæsar 42, vol. 2, pp. 268-9.

Does not this experience of the old Romans, the experience of England in the early part of the last century, with John Law's schemes and the South Sea Bubble, and the experience of our own day attest the wisdom of the common law rule that the "right to be a corporation is a franchise of public concern, held upon the implied condition that it will not be abused, under penalty of forfeiture," and that it is well to hold fast to such rule? It, of course, has been the policy of corporations and corporation counsel to minimize the franchise as much as possible, under nearly every circumstance, except where they have had to fight for their existence; and the above expressions of the leading text writers of the day have helped (perhaps unwittingly) to make ob

scure this wholesome doctrine, both in the minds of the people and of many judges as well. The legislatures, too, of several states have substantially abdicated the power of the state to retain control over the creatures of its bounty by authorizing the formation of joint-stock companies with nearly all the powers of corporations, without the liability to render an account at the hands of the state in quo warranto proceedings. The older writers-Blackstone, Kyd, Kent, Angell & Ames and Grant-all hold fast to these old and tried doctrines, and are, therefore, better guides in these matters than later writers.

ARTICLE V.

CORPORATIONS AS DISTINGUISHED FROM OTHER INSTI

TUTIONS.

Sec. 30. (1) From partnerships.

GLEASON v. McKAY.1

1883. IN THE SUPREME JUDICIAL COURT OF MASSACHUSETTS. 134 Mass. 419-426.

[In 1866 McKay was the owner of certain letters-patent for improvements in machinery used in the manufacture of shoes; from the proceeds of the business he had built a machine shop for the manufacture of these machines. He was the legal owner, but others were equitably interested in various amounts. He executed an instrument of trust, declaring himself to hold the business in trust for all who were, or might become, interested therein, upon condition that those so interested who accepted the declaration of trust and had a certain certificate evidencing their interest, should constitute and be an association, to be known as the McKay Machine Association, but no member shall have any right or authority to make any contract or bargain, or transact any business whatever for the association, without special authority; it was to continue thirty years; death of members was not to dissolve or have any effect on the association, except that those who succeeded to ownership of shares should succeed to the rights of the decedent; that the association should be the equitable owner of the business, which was to be divided into 50,000 shares, to be distributed among the members in proportion to their interests, which were to be evidenced by certificates indicating the number of shares, the same to be transferable, by assignment in writing and surrender to the trustee, who was to issue a new certificate, keeping record of the same; the general management was to be in an executive committee of three or five, to be chosen by the whole body of shareholders; and this committee was to divide proceeds from time to time in proportion to the respective interests; provision was also made whereby the business might be transferred to a corporation, when a majority should so determine, and thereafter no member was to have or claim any right to the property or business, and the declaration of trust was to cease; provision was also made for choosing a new trustee in case of death or resignation of McKay. McKay was taxed, as trustee of said 1 Statement of facts condensed, and compiled partly from Hoadley v. County Commissioners of Essex, 105 Mass. 519; arguments omitted.

association, upon its real estate, machinery, tools and all personal property. The commonwealth, in addition to the foregoing taxes, sought to collect a tax upon the aggregate value of the shares of the association. This was resisted.]

MORTON, C. J. The principal question in this case is whether the statute of 1878, chapter 275, as applied to the defendant, is constitutional. The first section of the statute provides that "chapter 283 of the acts of the year 1865, and the acts in amendment thereof, are hereby extended to apply, so far as applicable to companies, copartnership and other associations having a location or place of business within this commonwealth, in which the beneficial interest is held in shares which are assignable without consent of the other associates specifically authorizing such transfer. And the tax provided for in said chapter 283 shall be paid by such company, copartnership or association upon the aggregate value of the shares of said capital stock, in the manner provided in said chapter for taxes upon corporations.

The power of taxation, using the word in its generic sense as including all rates and impositions laid or levied upon the people, is conferred upon the legislature by the constitution, and is to be held and exercised subject to the limitations imposed by the constitution. Oliver v. Washington Mills, 11 Allen 268. The legislature is given the power "to impose and levy proportional and reasonable assessments, rates and taxes upon all the inhabitants of, and persons resident, and estates lying within the said commonwealth," and also power "to impose and levy reasonable duties and excises upon any produce, goods, wares, merchandise and commodities whatsoever, brought into, produced, manufactured or being within the same." Const. of Mass., chap. 1, art. 4.

It is clear that the statute in question was not intended to lay a tax upon property within the first of these clauses. It does not purport to do this. It merely extends to certain copartnerships and associations the provisions of the St. of 1865, c. 283, which chapter has been held to levy an excise upon corporate franchises, and not to lay a tax on property, and which chapter can be sustained as constitutional only upon the ground that it levies an excise. Murray v. Berkshire Ins. Co., 104 Mass. 586. Commonwealth v. Hamilton Manfg. Co., 12 Allen 298. Regarded as a tax on property, the tax we are considering would be invalid because not proportional; it would be an imposition upon certain property at a rate different from that to which other property in the commonwealth is subject. But, as we have said, it does not purport to be a tax on property. In levying an imposition under this statute, no inquiry is made as to what property liable to taxation any copartnership, or other association which comes within its terms, has. Such property remains liable to taxation under the general laws. This imposition is based upon the aggregate value of the shares of said capital stock." Such shares, if they can be said to be property, are not the property of the copartnership or association which is taxed, but of the individual partners or shareholders. It is very clear that this was intended as an excise upon some

franchises or privileges sought to be held by the copartnerships or associations in supposed analogy to the franchises of corporations. And the question is whether this imposition can be upheld as such excise within the second clause of the constitution, cited above. In this clause, there are two limitations upon the power of the legislature in imposing excises. They must be reasonable, and they must be excises upon some produce, goods, wares, merchandise or commodities, brought into, produced, manufactured or being within the commonwealth.

It will not be seriously contended that the privileges or rights which are taxed by this statute can be properly described as either produce, goods, wares or merchandise. Do they fairly come within the term "commodities," in the sense in which it is used in the constitution? Ever since the adoption of the constitution, the legislature in its practice, and this court in its adjudications, have given a very broad and extensive meaning to this term. It has been repeatedly held that corporate franchises enjoyed by grant from the government are commodities, and subject to an excise. So with corporate franchises granted by a foreign government, which by comity are permitted to be exercised within this commonwealth. So where the legislature has thought, upon considerations of public policy, that certain occupations or callings, of a public or quasi public character, should be carried on under governmental regulation it has been usual to impose a reasonable fee for a license. Portland Bank v. Apthorp, 12 Mass. 252; Commonwealth v. People's Five Cents Saving Bank, 5 Allen 428; Commonwealth v. Hamilton Manuf. Co., ubi supra; Commonwealth v. Cary Improvement Co., 98 Mass. 19; Connecticut Ins. Co. v. Commonwealth, 133 Mass. 161.

This imposition is clearly not in the nature of a license fee, but is an excise upon a franchise or privilege. The right to levy excises upon franchises has never been extended further than to corporate franchises specially granted by the government, or enjoyed and exercised by its permission.

The defendant in this case is not a corporation. It is merely a partnership, with all the incidents and responsibilities of a partnership. The firm property is taxable at its business domicile. Hoadley v. County Commissioners, 105 Mass. 519. It enjoys no franchises conferred upon it by the legislature. It does not ask for or enjoy any corporate or special privileges. It has constituted its partnership under its common law rights and such legal agreements as it chooses to make. The peculiar feature that the interest of each member may be transferred without the special assent of the other members, is created by agreement of the partners under their natural rights at common law. We do not see how this peculiar feature can be called a commodity, subject to a special excise, any more than the agreement of copartnership itself, or any clause or part of it, or any other agreement, right or mode of transacting any business, can be called a commodity, and so liable to taxation at the will of the legislature.

If this tax can be upheld, it seems to us that the necessary result