The question whether the national banks should be authorized to extend their business over these new fields is not perhaps a matter of much moment. The case is important because of its bearing upon the question of the scope and extent of the powers that may be conferred by Congress upon a corporation created by it for the execution of any of the powers given to it by the Constitution. Does it extend the doctrine of M'Culloch v. Maryland and Osborn v. Bank of the United States? Is it true, as was insisted by Justice Ostrander in the court below, that the decision involves the conclusion that if Congress has lawfully created a corporation in aid of the fiscal operations of the government, it may confer upon it the powers of a trading company or a transportation company, or to go further and to speak more generally, is there anything in this decision that indicates that Congress having created a corporation with such powers as in its judgment make it an appropriate means of executing the powers committed to the federal government, it may incidentally confer upon it powers not essential to its efficiency for those purposes and having no relation to those purposes? Before considering the arguments that have been urged in favor of the extension of the field of the activities of federal corporations, it may be well to note that for more than a century Congress, except in legislating for the territories and the District of Columbia, has rarely exercised its incidental power to create corporations other than the national banks and the Pacific Railroad companies. Charters were granted to some interstate bridge companies and ferry companies, some canal companies and a few associations of a benevolent or social character of general concern; but the movement now is toward the incorporation by general law of railroad and transportation companies, of large commercial corporations engaged in interstate commerce and even of companies engaged in manufacturing goods intended to be carried in interstate commerce. There is a chapter in the first edition of "Thompson on Corporations," 1895, entitled "National Corporations" containing an historical sketch in less than three pages. The chapter was written by Russell H. Curtis of the Chicago bar and the article appeared first in 21 AMERICAN LAW REVIEW, 258 (1887). He says that in 1791 Congress incorporated the earliest bank of the United States, the charter of which expired by limitation in 1811. In 1815 a bill to incorporate a national bank was passed by Congress, but was vetoed by President Madison. In 1816 Congress granted a charter for twenty years to the second bank of the United States, but before the charter expired President Jackson, on September 24, 1833, found a Secretary of the Treasury who would consent to obey his order to withdraw the funds of the United States from the bank. In 1863 Congress passed a statute authorizing the formation of national banks 13 and the existing National Bank Act was approved June 3, 1864. In 1862 Congress chartered the Union Pacific Railroad and Telegraph Company,14 and by the same act granted franchises to certain state railroad companies with provision for their future consolidation, which was effected in part in 1880, and it was held by the Supreme Court in 1883 15 that a suit relating to the validity of the consolidation was a suit arising under the laws of the United States. In 1866 Congress chartered the Atlantic and Pacific Railroad Company to build a line from Missouri to the Pacific coast,16 and in 1871 a charter was granted to the Texas and Pacific Railroad Company.17 The Supreme Court in 188418 held that these and similar companies were strictly suits arising under the laws of the United States, and this is now the settled law.19 Justice Bradley, in 1887, speaking of these statutes granting franchises to the Pacific Railroad companies, said: "It cannot at the present day be doubted that Congress, under the power to regulate commerce among the several States, as well as to provide for postal accommodations and military exigencies, had authority to pass these laws." 20 In 1865 Congress incorporated the Freedman's Savings and Trust Company and in 1866 the National Asylum for Disabled Volunteer Soldiers, but both of these were made corporations of the District of Columbia; but the Forty-ninth Congress went further and incorporated the National Trade Union of the District of Columbia, with authority to establish branches in all the states. 14 Ibid., 489. 13 12 STAT. AT L. 665. 15 Ames v. Kansas, 111 U. S. 449 (1883). 17 16 STAT. AT L. 573. 18 Pacific Railroad Removal Cases, 115 U. S. 1 (1884). 20 California v. Pacific R. R. Co., 127 U. S. 1, 39 (1887). In 1871 Congress granted a charter to the Centennial Board of Finance for the national exposition of 1876. In 1889, for the purpose of regulating commerce with foreign countries and among the states, Congress incorporated the Maritime Canal Company of Nicaragua as a private stock company for profit with authority to construct a canal in foreign territory, and in 1890 the North River Bridge Company was incorporated by Congress with power to build a bridge over the Hudson River between New York and New Jersey, to exercise the right of eminent domain and to sue and be sued in the United States Circuit Court.21 The Supreme Court likened the creation of this corporation to the creation of "a bank for the purpose of carrying on the fiscal operations of the United States, or a railroad corporation for the purpose of promoting commerce among the States." 22 The Wheeling Bridge Case,23 related to the paramount control of Congress over a bridge erected by a state corporation, and in Stockton v. Baltimore & New York Railway Co. the authority to construct the bridge had been given by Congress to corporations of New York and New Jersey. The American Red Cross Society, incorporated in the District of Columbia in 1881 and 1893, was finally reincorporated by act of Congress under government supervision in 1905. The Panama Canal was built by the government. The United States Shipping Board is a commission and its Emergency Fleet Corporations are organized under the laws of the District of Columbia.24 The Federal Reserve Banks are made up of national banks.25 Hitherto Congress has confined the exercise of its power to create corporations pretty strictly to the organization and regulation of national banks and of transcontinental railroads. It has not attempted to require the federal incorporation of existing railroad companies chartered by the states, even though their business within the state of their origin is insignificant, nor has it attempted to insist upon federal incorporation of companies organized for commercial business coextensive with the whole country, still less to incorporate manufacturing companies even though they exercise 21 26 STAT. AT L. 268. 22 Luxton v. North River Bridge Co., 153 U. S. 525, 529 (1894). nation-wide competition or competition or threaten to exercise nation-wide monopoly. The growing sense of national unity and the experience of national efficiency acquired in the war will tend to bring pressure upon Congress to avail itself more freely of its power to create corporations, and the question naturally arises whether corporations engaged in business throughout the whole country should not be created and controlled by national authority and whether this should not apply not only to interstate railroads but also to trading companies and even to companies engaged in the manufacture of goods intended to be sold in interstate and foreign commerce. --- In his book on "Social Reform and the Constitution," published in 1911, Professor Frank J. Goodnow, of Johns Hopkins, has a chapter on "Federal Incorporation" prepared under his direction by Mr. Sidney D. Moore Hudson. After examining the opinions of Chief Justice Marshall in M'Culloch v. Maryland and Osborn v. Bank of the United States, as well as the argument of Secretary Hamilton,26 he considers first, the constitutionality of the erection of federal corporations having power to engage in interstate commerce, trade as well as transportation, and secondly, whether such corporations may be granted the power to manufacture goods to be sold or transported in interstate commerce. He finds that no question has been made with regard to corporations engaged in transportation by land or water, and as to corporations formed for the purpose of engaging in interstate trade, he says it must be shown that the corporations are such as to have, in fact, a relation to the regulation of interstate commerce sufficiently close to indicate that such regulation may reasonably be regarded as the purposes of Congress in the erection of the corporation. And the suggestion is that if a railroad or a bridge company may be organized as an instrumentality of interstate commerce why may not companies be erected in order to provide a more efficient organization for carrying it on. He goes further and includes the manufacture of goods in the purposes for which federal corporations may be organized by act of Congress, provided it is found in the judgment of Congress that the manufacture of goods to be transported or sold in interstate commerce is essential to rendering 26 4 Wheat. (U. S.) 316 (1819), 9 Wheat. (U. S.) 738 (1824); 3 HAMILTON'S WORKS, Federal Ed. 448. the corporation completely efficient for the purposes for which the government has created it. He accepts the distinction made in Kidd v. Pearson between manufacture and commerce,27 but submits "That this principle does not render unconstitutional the conferring of the power to manufacture upon federal corporations engaged in interstate or foreign commerce." He refers to the Danbury Hatters' case 28 as affirming the rights under certain conditions of direct federal control over manufacture. The need of federal incorporation was urged by President Taft in his special message to Congress on January 7, 1910, pages 17-20, and H. L. Wilgus, writing on the question, "Should there be a federal incorporation law?" insisted that "the jurisdiction which can create corporations should be confined exclusively to that one which will have responsibility for their actions in every place." Some five years ago Victor Morawetz wrote in this REVIEW a comprehensive article entitled "The Power of Congress to Enact Incorporation Laws and to Regulate Corporations." 29 He referred to the bank cases and the bridge cases and quoted Hamilton's opinion on the charter of the first bank of the United States to the effect that the creation of a corporation was but a mean having a natural relation to any of the acknowledged objects or lawful ends of the government; it is not an independent, substantive thing, but a quality, capacity or mean to an end. A mercantile company is formed for the purpose of carrying on a particular branch of business, and to add incorporation to this would only be to add artificial capacity for prosecuting the business with more safety and convenience.30 Mr. Morawetz discussed the question how far national corporations would be peculiarly subject to national legislation and how they would be affected by state laws, and also the questions of taxation by the states and national control and regulation of state corporations, and suggested that any attempt on the part of Congress to control or regulate state corporations by means of the imposition of prohibitory excise taxes should not be encouraged. The federal incorporation of railway companies was the subject of an article in the HARVARD LAW REVIEW by Charles W. Bunn, of Minnesota, in April, 1917. He refers to Railroad Co. v. Mary 27 128 U. S. 1 (1888). 28 Loewe v. Lawlor, 208 U. S. 274 (1908). |