CHAPTER V.

GENERAL POWERS AND DISABILITIES.

§ 34. Corporate capacity. After you have made certain of its existence, the next question is whether the corporation may lawfully do a particular act contemplated or actually done. And herein lies the fundamental difference, in the prevailing modern theory, between an artificial and a natural person. To the latter, everything not forbidden is permitted. The powers of the former are limited by the grant, and anything not given explicitly or implicitly is withheld. A corporation is created for the certain purposes specified in its charter or articles of association; its lawful transactions are those fairly in furtherance of such purposes; the powers it may exercise in these transactions are only those the law has conferred upon it; and these powers must be exercised in the appointed way. Where, then, do you find the rule by which the powers of the artificial person and those of the natural person are distinguished? The starting point is in the common law doctrine, which knew nothing of the modern limitations and which ascribed to a corporation general capacity, limited only by the necessities of incorporeality. Then come modifications of the common law doctrine, whether in judicial decision or enacted law, whereby some of the earlier disabilities are removed and new limitations are introduced,-notably that which confines corporate action within the scope of the charter.

§ 35. Common law powers and disabilities. The old cases enumerated the attributes of a corporation as follows: To have a common name, a common seal and perpetual succession; to contract, sue and be sued; to hold and dispose of property; and to make by-laws for the government of the members and the regulation of corporate affairs. To the modern lawyer, the importance of the early view lies in the disability consequent upon the incorporeal nature of the artificial person. A corporation could not take an estate in joint-tenancy, because there was no survivorship;1 it could not be an executor because this required the taking of an oath; it could not execute a power or act as trustee or agent, if the duty to be performed could only be accomplished by delegation of the authority conferred; 2 it could not amend its charter, or make any organic change in its structure, or terminate its existence by a voluntary winding up, because these things were incompatible with its nature. The prevailing rule is that these disabilities remain, unless removed by statute or special charter.

§ 36. Modifications of the common law doctrine. Subject to the limitations of incorporeality, it is probably true that at common law, a corporation could exercise all the powers of a natural person and engage in any transaction

1 Grant Corp., 109; 5 Thompson Corp., 5793.

2 George Town College v. Brown, 34 Md. 453; Frostburg Building Asso. v. Lowdermilk, 50 Md. 179. In the latter case it was said: "It is impossible in the nature of things that a corporation can execute such a power, except through its attorney or agent, and in that event the authority would be derivative, not original." See further, Chilton v. Brooks, 71 Md. 449; Reed v. Baltimore T. Co., 72 Md. 534. For the subject generally and the conflicting views, see 5 Thompson Corp., 5833-5835; Vidal v. Girard's Exrs., 43 U. S. 125; Barnum v. Baltimore, 62 Md. 293.

not expressly forbidden to it. But now the accepted rule makes the charter, read in the light of any relevant statute, the measure of corporate powers. "A corporation is a creature of the law and derives all its powers from the act of incorporation. It is exactly what that act has made it and is incapable of exerting any other faculties than those conferred by that act or in any other manner than it authorizes."2

Subject, then, to this cardinal limitation, what other modifications of the common law doctrine have been introduced by legislation and judicial decision? It is obvious that a concise treatment must deal with the subject in broad outlines. Within constitutional limits, a special charter may modify common law disabilities to any extent; a general incorporation law may and usually does define the powers and limitations of the associations formable under it; and

1 Compare the opinion of Blackburn, J. in Riche v. The Ashbury Company, L. R. 9 Exch. 224 with the overruling decision of the House of Lords, L. R. 7 H. L. 653. The distinction herein between the corporation and the statutory company is historically sound, but does not exist in American law.

2 Baltimore v. Railroad Co., 21 Md. 50. But there is a difference, in consequences, between want of power and the irregular exercise of a granted power. See post, §79.

3 E. g. Code (1911) Art. 23, sec. 7: "Every corporation which is subject to the provisions of this article shall have the following general powers, except where the special provisions relating to any particular classes of corporations are inconsistent herewith:

(1) To have perpetual succession by its corporate name. (2) To sue and be sued, complain and defend in all courts. (3) To make and use a common seal and alter the same at pleas

ure.

(4) To transact its business, carry on its operations within or without this State, and to exercise in any other State, territory, district or possession of the United States, or in any foreign country,

special provisions may be made for particular kinds of associations. The following illustrations will give a view of the subject which is incomplete but not, it is hoped, inaccurate. It will appear: first, that sometimes the denial of a power is merely a decision that a particular transaction is foreign to the scope of the charter; second, that there are restrictions imposed upon public-service corporations which are not applicable to purely private bodies; third, that some statutory provisions deal with merely administrative powers

so far as the laws thereof permit, the powers granted by this article. (5) To make contracts, incur liabilities, and borrow money; and to issue bonds and secure the same by mortgage or deed of trust of its property, franchises and income; provided such issue is authorized at any meeting duly warned, as provided for in secs. 15 and 16 of this Article, by the affirmative vote of a majority of all its members or a majority of all its stock (or if two or more classes of stock have been issued, of a majority of each class) outstanding and entitled to vote.

(6) Subject to the provisions of Art. 38 of the Declaration of Rights, to acquire by purchase or in any other manner, and to take, receive, hold, use and employ, sell, mortgage, lease, dispose of and otherwise deal with any property, real or personal, including the shares, bonds and securities of other corporations, situated in or out of this State, which may be appropriate to enable it to carry on the operations or fulfil the purposes named in the certificate of incorporation.

(7) To have such officers and agents as the business of the corporation may require.

(8) To make by-laws not inconsistent with law for regulating the government of the corporation and for the administration of its affairs.

(9) Generally to exercise the powers set forth in the certificate of incorporation and those herein enumerated and also to do every other act or thing not inconsistent with law which may be appropriate to promote and attain the objects and purposes for which the corporation was formed."