ERTHE COLA ASuperiorandDistinct of Administration
DistinguishedfromPartnerships ContrastedwithCorporations
TwopaperssubmittedtotheTaxCommissionerof Massachusetts,under
Chapter 55oftheResolves of1911, areportfromhimon
"VOLUNTARYASSOCIATIONS" Dy. -< \... ,, ALFRED ESQ. __ .. _ __
... OFTilEBOSTONBAR . BOSTON LITTLE,BROWN&Co. 1912 ' .' ' q - ~
6 .' COP\'RIGIIT,1912 IhALFREDD.CHANDLER TheRiverdalePress,
Brookline,Mass.,U.S.A ' .. ' ' .--........ ...~ : l : . . ~
~\\''...":'t" .'' ,.. 'v.,.- - ./' '. I...,.' '' ?.... :' /\ '\
:\\~ ''-.:J:\1 ~ o.. ~ ~ I ' -\ \........_~ ....1 IAW\11'\:/ ~ ~
-Bychapter 55,Resolvesof1911,theTaxCommissioner
ofMassachusettswasdirectedtomakeaninvestigation of Voluntary
Associations organized or doingbusinessinthnt
Commonwealthunderawritteninstrumentordeclaration
oftrust,thebeneficialinterestunderwhichisdividedinto
transferablecertificatesofparticipationorshares,witha
viewtodeterminingthepresentlegalstatusof
suchVolun-taryAssociationsandwhetherornottheirprohibitionor
furthercontrolandregulationbythatCommonwealthis
advisableandinthepublicinterest.Theresolveisas follows:-CHAPTER55.
RESOLVETOPROVIDEFORANINVESTIGATIONOF1'0/.UNT,IRY
ASSOCIATIONSORG.ANIZimORDOINGBUSINESSIN_ TillS
COMMONWEALTHUNDERWRITTENINSTRU MENTSOR DECLARATIONS oF TRUST. 4
RESOLVED,Thatthetaxcommissionerisherebyauthorizednnd
directedtomakeaninvestigation ofvoluntaryassociationsorganizedor
doing business In this Commonwealth under awritten Instrument or
declaration
oftrust,thebeneficialinterestunderwhichisdividedIntotransferable
certificates of participation or shares,with aviewto determiningthe
pres-ent
legalstatusofsuchvoluntaryassociations,andwhetherornottheir
prohibitionor/urtlurcontrolandregulationbytheCommonwealthisndvlsable
and in the public Interest.The attorney-generalis hereby directedto
give the tax commissioner suchassistance
asthelattermaydesireInmaking
thisinvestigation,andsaidcommissionermayIfhedeemsitadvisable
holdpublic hearings,after due notice, and 11hallconsult withthe
board of
railroadcommissionersandtheboardofgasandelectriclightcommis-sionerswith
especialreferencetothe effectof such voluntaryassociations upon the
supervision and regulation of gas, electric light and street
railway companies Inthis Commonwealth.The tax commissioner shall
reportthe result of his Investigation to the general court on or
before the second Satur- day of January, r.lneteen hundred
nndtwelve,with such recommendations
ashemaydeemadvisable:nndheshallsubmit,withhisreport,drafts of nny
bill or bills necessary to carry Into effect any recommendation
which hemaymake.InconductingtheaboveInvestigation,thetaxcomcnls
slonermayemploysuchassistanceandIncursuchreasonableexpenses,
notexceedingtwenty-fivehundreddollars,asmaybeapprovedbythe governor
andcouncil;andsaidcommissioner shallhave powerto require the
attendance and testimony of witnesses and the productionof all
books and documents relating to any matter within the scope of
thesaidInvest! gatlon.Witnesses shall be summoned In the same
m11nner and be paid the samefeesas are witnessesInthe
municipalcourtofthecityofBoston. (ApprovedApril15,1911.)
-CITATIONS. An1es'Cases on Trusts. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..33 Bank
of Topeka v.Eaton.100 Fed. Rep. 8. . . . . . . . . . . . . . . . .
. . . . . . .31,33 Black's Constitutional
Law........................ . . . . . . . . . . . . . . . . . . .10
Broadway Nat. Bank v. Wood, 165 Mass. 312. . . . . . . . . . . . .
. . . . . . . . . . . . . .33 Brown v.Eastern Slate Co., 134 Mass.
590. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Cooley's Constitutional
Limitations.................................... 34 Coxv. Hickman, 9
C. 8. N. S. 47;811. of 1.. Cases 268. . . . . . . . . . .28,29, 30
Eliot v.Freemnn, 220U. S.l78. . . . . . . . . . . . . . . . . . . .
. . . . . .. . . . . . . . .13,26 Everett v.Drew, 129 !\ta!ls. ISO.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .28, 31 Farmers' Loan andTrust Co. v. etc., 27 Fed. Rep. 1.46. .
. . . . . .9 Federal Constitution, Art. IV, Sec. 2. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .9 Federal
Statutes, Annotated, \'Ol. 9, pp. 178-9............................
9 Georae on Pu:-tnershlp. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .30 Gilmore
onPnrtnership. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .30 Gleason v.McKay, B4 Mass. 419
...................... 17, 18, 19, 23, 28, 29, 34 Governor Fernald
of Maine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .1 Hamilton's (Alexander)Works. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .6, 23 Hewitt
v.Phelp11,lOSU.S.393. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .... .33 lluascy v.Arnold, 185!\lass. 202. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.32 Johnson v.Lewis,6Fed. Rep. 27................... . . .. . . . .
. .19, 28,29 l.ackett v.Rumbaugh, 45Fed.Rep. 2.\. . . . . . . . . .
. . . . . . . . . . . . . . . . . .19, 27 Law Quarterly
Review,Oct., 1905,p. 365........... . .. . . . . . . . . . . . . .
. .18 Mason v.Pomeroy,151Mass.164;71..H. A.771. . . . . . . . .
.19, 28,29, 33 Massachusetts Business Corporations, llnll . . . . .
. . . . . . .. . . . . . . . . . . . . .18 1\layo
v.Moritz,1511\lnss. 481. . . . . . . . . . . . . . . . . . . . . .
. . . . .19, 28, 29, 31,33 Miller v.Simpson, 107 Va. 476;18 L. R.
A.lN.S.) 963, note. . . . . . . . . . . .30 l\linotv.
Winthrop,l62l\1nss.ll3....................................34 Norton
v.Phelps, S-1Miss. 467. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .33 Odd Fellows llnll Association
v.McAIIIster,IS3Mns!l.liJ2. . . . . . . . . . . . . .33 O'Keetlev.
Somerville, 1901\lass.IIO................................17 Opinion
of the Justices, 1961\lass. 603. . . . . . . . . . . . . . . . . .
. . . .17, 18, 23,34 on Contracts. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Parsons on Con tracts. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .32 Parsons on
Partnership........................................ 15,27,33 Paul
v. Virginia, 8 Wall. 168. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .9 on Trusts. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .9, 32 v.Blatchford, 137 Mass. 510. . . . . . . . . .
. . . . . . . . . . . . . . .20, 28, 29 Ricker v.American Load and
Trust Co., 140 1\lnss. 3-16. . . . . . . . . . . . . . . .26 Roby
v. Smith, 13llnd. 342;15 L. R. A. 792. . . . . . . . . . . . . . .
. . . . . . . . . . . . .9 Shirk v. City of Ln Fnyette, 52 Fed.
Rep. 857.. . . . . . . . . . . . . . . . . . . . . . . .9
Shumaker's Law of Partnership. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .30 Simmons,1\lr. J. Edward
(Bunker). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .20 Smith v.Anderson, L. R.15, Ch. D. 247. . . . . . . . .
. . . . . . . . . . . . .19,27,28 Spotswood v.Morris,12Idaho, 360;6
L.R.A.(N.S.) 665. . . . . . . . . . . . . .16 Story's :quity. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .33 Taftv.Wnrd, 106l\lnss. 51'8. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .20
Taylorv.Davis,110U.S.330.................................. 19,27,31
Trustees' Hand Book, l.ori.1g ....................... -. . . . . .
. . . . . . . . . . .32 Und!rhlll on Trusts. . . . .. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9, 33
Wald's Pollock onContracts. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .22, 26 Warner v.Beers, 23Wendell,
103.............................. 18, 22,23, 32 Welles-Stone
Mercantile Co. v.Grover, 7 N.D. 460; 41L.R. A.252.... 27, 28,
.29,32, 33 Woerner onAdministrution . . .. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .31 Wilson, The
lion.Woodrow. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .5, 6,20, 35 Trusts.Corporations. "VoluntaryAssociations."
----------FirstPaper,November20,1911. Thel-Ion.\Voodrow in cogent
address P.ntitled "TheLawyerandtheCommunity,"beforetheAmerican
BarAssociation,atChattanooga,Tenn.,August31,Hl10,
transmittedlaterinpamphletform,challengedtheprofes-sionindemandingthattheimperso11atfeatureofcorpora-tionsshouldberestrictedastheoneobstaclethathas
blockedprogresstowardeffectivecorporationreform.This
question,hesays:-"StandsIntheforelo\roundofnilmoderneconomicquestionssof:uus
theUnitedStutesIscP::!:erned.".,,"UbertyIsalwaysfltnonal,never
a(lgre!1ate;alwaysnthinglnherlnlo\InIndividualsH;kensinltly,nenr In
groupsor corpomtlons or communities.TheIndividualunitofsocietyIs
theIndividual."..."ThutIswhyIplendsoearnestlyforthelndl-vlduallzutlon
ofresponsibility withinthe corporation, forthe estubllshment ofthe
principleoflawthutnmanhasnomore ri(lhtto donas n member of
ncorporationthnnasnnIndividual."
?vir.WilsonwaspromptlyadvisedfromBostonthathis
callupontheprofessionhadbeenanticipatedinMassachu-settsbymunerousExpressTrustsdeclaredinthatstate,
andwhichexercisethe common-lawnaturalrighttoemploy
allthemereincidentsoracces.;ariesusedinthemanage-mentormobilityofproperty,suchastransferableshares,
iJundissues,promissorynotesetc.,butwhichdonotand
neednotarrogateanyessentialofacorporation,suchas merging
naturalpersonsinto animpersonal, artificial entity,
orsuingorbeingsuedundertheirdesignatedname,and which(withproper
provisionforreimbursement)placeupon
Trusteesapersonalresponsibilitythatcorporatelaws. . 6
arcespeciallydesignedtoevade,andwhichevasion,legal-izedbyStateLi.:gislatures,bothconfirmsthepopularity
andcausesthecondemnationofcorporations.
Mr.\Vilsonwasreferredto,amongothers,theexample
furnishedacenturyagobyAlexanderHamilton,whoem-ployedthistrustmethodinusclongbeforehisday-inorganizingthel\lcrchantsBankofNewYork;andhe
wasfurtherremindedthatsomecorporationpromoters
mightdiscouragethiseffectivepersonalbulwark;andthat States
like:L\laine New thathave coinedmoney
bymarketingcorporationcharterscreatedontheimper-sonalbasis,mightfrownuponthissound,independent,
common-lawtrustmethodofadministration.
l\'lr.\Vilsonpromptlyexpressedhissincereappreciation
oftheinformationthathadcalledhisattention"to amost
interestingmatter"whichhewished 41l11orccarefullyto lookinto
afterthedistractionsofthepresentcampaign arc over."
InguardingtheStateandthebusinessworldfromthe pitfalls ofimpersonal
corporate bodies, boththe Bar anclthe
Benchshouldencouragetheapplicationtoaffairsofthe
clastic,effective,andwell-groundedprinciples
ofcommon-lawExpressTrusts.Mr.\Vilson,inhisChattanooga
address,insistedthatalthough "Corporationsmustcontinue tobe usedas
aconvenienceInthetrans-action
ofbusiness,yettheymustceasetobeusedasacoverttowron!l doers." Andhe
added: -"It isthe duty oflawyers,of alllawyers,to assistthe makers
of law and the reformers ofabusesby out the best and most effective
way:to makeit."
ExpressTrusts,whichnowmeetwithaugmentedap-provalinMassachusetts,andthemeritsofwhichthe
countryatlargebeginstoappreciate,putthelegalestate 7 ' '
entirelyinone or more,whileothers have abeneficialinter-est in and
out of the same, but arc neither partners nor agents.
Thissimple,adequate,common-lawright,anypersonor
groupofpersonssu.\jurismayexercise,theTrustees
issuingcertificatesofLeneficialinterestdividedintoshares,
aswellasissuingbondsandotherobligations,asfreelyas they
openabankaccount,haveapassbook,anddraw and
circulatechecks,ormakewhatevercontractualrelations
arcallowedtopersonsas anaturalright. Express Trusts have been in
successfuloperationinGreat
BritainandAmericaforgenerations.Theyhavebeen
andarcappliedwiselyinbothhemispherestoproperty
valuedathundredsofmillionsofdollars.Toaffirmat this date that
considerations ofpublicpolicy donot counte-nance
Truststhatutilizeconventionalbusiness
necessariesistochallengesoundeconomics.Publicpolicy
isnotalwaysimmutable.Neitherlawyersnorlaymen
canignoreexperienceorthetruth.ItwasColeridgC:
whowrotethat"Amanwhosquareshisconscience
bythelawwasacommonparaphraseorsynonymeofa
wretchwithoutanyconscienceatall."Ifpublicpolicy
inthisinstanceistobemeasuredasit shouldbeby a standard of
stabilityrather than ofinstability,thestartling contrast presented
later betweenExpress Trusts
andMassa-chusettscorporationsoughttomodifysomenotionsof
publicpolicy.It isthe substantiality
ofthetrustbaseduponpersonalresponsibilityandefficiency,thathas
socommendedit overloose,evasivecorporationlawsfound
fromtheAtlantictothePacific. Well-drawnmodernExpress Trusts
avoidnolegalobliga-tion,muchlessdotheyevadeany.Ifpervertedthey
shouldofcourseberestrained.Theyavoidneedlessbusi-nessobstacles;theyrequirenoarbitraryfixedcapitaliza-tion;theycandispensewiththedeceptivefictionofapar
value,afictionthatthe:NewYorkStateBarAssociation
isreportedtohaveindorsed"asatoolofmanyrascals 8
andthehonestservantofnoman";theypromotesound administration;they
stimulatemercantileintercourse;and
theysecureahigherstandardofefficiencythroughactive
Trusteesthanisgenerallyattainedthroughtheusualper-functory,oftenirresponsible,dummy,corporatedirectors
whofailto direct,andwhowhencalledto accountinCourt
areadmonishedthatthehighcriterionofatrusteeship shouldbetheir canon
of conduct rather thanthat of ashifty directorate.
TrusteesunderExpressTrustspaytaxesontheirreal
andpersonalproperty.Trusteeshavetoreportfullyto theirbeneficiaries,
or becalledto account inCourt by them.
Publicity,aswithpartnerships,issecuredtoallwhoarc
entitledtoit.Publiccuriositymereprying,orprurient
curiosityisnotgratified,andoughtnottobe.The
Trusteesarcprotected,astheyshouldbe,frompersonal
loss,byaprovisionforexonerationorreimbursementfrom the
estate,exceptincaseofwilfulldefaultor of fraud.The
customaryprovisioninthedeclarationoftrustrequiring
allpartieswhodealwiththeTrusteestolooktotheestate forultimate
security,ratherthantotheTrustees ortothe
beneficiariesconformswithacommon-lawprinciplelong
sanctioned.Suchaprovisionisastrongassuranceofthe
meritsoftheTrust;becauseifitsfoundationdoesnot
permitofasubstantialsuperstructure,asthebasisof
credit,theTrustisnotlikelytobedeclaredortoinduce
desirableTrusteestoacceptit.Corporations ontheother hand offer
apremium, as it were, fora weak foundationbased
uponanirresponsibleartificiality,andhencegotothewall
bythethousands. ExpressTrusts,underthecommonlaw,regulatedby
equitableprinciplesandpractice,furnishsomeofthe
highestmodelsforadministration.Corporationsunder
Statelawsinviteandareresponsibleforthegreatestbusi-nessscandalsinourhistory.Onewhopreferstodrink
fromapure spring onacommoncannotjustlybecharged 9.
withevadinganearbylicensedbarroom.Thelattermay
oftenbewiselyavoided. Asfortheequitablelawsthat regulatetrusts
andTrus-tees,theyare awell-formedsystemwhich.Mr.JusticcStory
pronouncedasevenmoresymmetricalintheUnitedStates thanthe
originalsysteminEngland.
l\'Ir.Perry,oneofAmerica'sleadingauthoritiesupon
trusts,attlrmsthat:-"Everykindofvaluableproperty,bothrentnndpersonul,thutcnnhe
assignedutlawmuy bethe subject-matter of atrust."Andfurther:-"The
personwhocreatesthetrustmaymouldItIntowhnteverformhe
pleases."(Perry on Trusts, I,67,287; Underhill on Trusts, p.57,
Anll'r.Ed.) TheFederalConstitutionprotects Trustee:;as"citizens"
throughoutcontinentalUnitedStates;butcorporations,
notbeing"citizens"asthatwordisusedintheConstitu
tion,donothavetheprivilegesandimmunitiesofCorporations cannot enter
another State except ontheterm:; whichthat Stateprescribes.But
Trustees underawill,or
underanexpressdeclarationoftrust,arcnaturalpersons
andarc"citizens"inthefullestsenseundertheConstitu-tion,and,asnaturalpersonspossessedofbothstateand
nationalcitizenship,arc"entitledtoalltheprivilegesand immunities
ofthecitizensintheseveralStates." Fed.Con.,Art.IV.Sec.2.
Farmers'I.oan&TrustCo.\',Chicago,etc.,27Fed.Rep.146,149.
Shirkv.Cityof/.aFayette,52Fed.Rep.857. Rohyv.Smith,131Ind. 342,
345-6;15L.R.A.792,71J4-5 9 Federal Statutes Annot.,pp. 178-9.
Mr.justiceFieldoftheSupremeCourtoftheU.S.,in
hisopinioninthefamouscaseofPaulv.Virginia,8Wal-lace,168,180,wrote:-"It
has been justly saidthat no provision Inthe Constitution hastended
sostronglytoconstitutethecitizensoftheUnitedStutesonepeopleas
this." 10 Thepurposeforwhichthisclausewasinsertedinthe Constitution
"was to preventthe States frommakinginvidiousdiscriminationagainst
non-residents,andtopromote the unificationofthe Americanpeople,by
breaking downState lines,in respecttothe enjoyment of social and
busi-nessprivileges andthe favorandprotection ofthe
laws."(Black'sConst. Law,p.292.)
Inmostcasesbusinessmendonotneedacorporate
charter,exceptforrailroads,fortherightofeminentdo-main,forbanks,forinsurance,andforcertainpublicser-vicefunctions.Inmostcasesthe
Stategivesnoadequate
equivalentforitscharter.Itisoftenauselessincum-brance;andit
oftenstimulatesmercantileiniquity.
Ourcorporationlawsthroughoutthiscountryhavebe-comesuchalegalizedmeansofel'ast"onbecauseofthe
impersonality,theartificialentitywhichtheysanction,
thattheyhaveelicitedcausticcriticismfromexecutives,
economists,educators,andbusinessmen. In conservativeMassachusetts
over fourthousand(4,154)
ofitsStatecorporatecharters,representingmanymillions
ofdollarsofauthorizedcapitalstock,weredissolvedbyits
Legislatureinthelastfiveyears,anaverageofovertwoa
day,omittingthoseotherwisedissolved.This showsthat
evenMassachusetts'conservativecorporationlawsarea delusivewill-o'
-the-wisptothousandsofimpressionable,
misdirectedpeople.ThisStateincorporatesabout1,200
or1,300companiesayear,makingforthepastfiveyears
fromabout6,000to6,500,andover4,000orabout64 per centwere
dissolvedinthattime.A verylargenum-ber ofMassachusetts corporations
appear to be mere fugitive
organizations,baseduponcredulity,andtobepluckedin
transit.ThisStatecannotinjustice
demandtheapplica-tionofsuchanadministrativesystemto
everyenterprise. It
cannotproperlyinsistuponauniform,undiscriminating, and
ofteninferior businessmethod,whetherfor industrialor 11 taxation
purposes,andthen as an excuse say that it isnot its
function''tojoininthefutileattempttosaYethefoolish fromthe
consequencesoftheirfolly."The State's
corpora-tionrecordinalargepart on this score isself-incriminating.
Hereitiscondensed,thelistcoveringaboutninety-four
pagesoftheStatelaws:-MASSACHUSETTSCORPORATIONSDlSSOLVEl>
INTHELASTFIVEYEARS. Actsof 1907,ch. 290,pp.226-250 1909,ch.
347,pp.296-324 1910,ch. 609,pp.662-{)84 1911,ch. 363,pp. 331-351 0
0 0 00 Number dl&&olved 1,164 1,185 932 873 4,154
Contrasttheaboveexcessivecorporatemortalitywith
theremarkablevitalityofExpressTrustsasfumishedby
thelistsofrealestatetrustsinBoston,publishedbyBur-roughs&
DeBlois,*thefirstofwhichappearedin1899,and
containedseventeensuchtrusts,everyoneofwhicharc
foundtoday,withmanymore,onthemonthlylistwhich
thatfirmpublishes,andwhichlistnowrepresentsinvest-mentsof about
onehundredandtenmilliondollars.
\Vcdonotknowthewholenumberofrealestateandof
industrialcommon-lawtrusts,aswellaspartnerships,that
makeuscoftransferableshares,andarcnowoperatingin
Massachusettsandelsewhere.ButExpressTrustsunder testamentary and
otherwritteninstruments
affectinginter-estslargeandsmall,aswellaspartnerships,numbermany
thousands., SomeStatesopenlydependupontheliberalityoftheir
corporatecharterstopaytheirexpensesandtocancel their debts.Such
acourse iscondemnatory.Soundfinance repudiatesit. RealEstate
TrustStocks,30Kilb>Street,Boston. 12
GovernorFernaldofMaine,inhisaddresstotheLegis-latureofthatStatein1909,whilesuggestingreforminits
corporatelaws,stigmatizedhisStatethus:-"While it is true that the
State is receiving large revenue from this source, it isulsotrue
that,in aconsiderable measure,itistheprice of prostitution.I
hopeyoutakestepstoremodelthem,alongevidentlinesofreform, thus
restoringtoMaineher self-respect."
Severerthanthiscanbeproducedfromrecog-nizedauthoritiesinthiscountry,astothe
dishonorofcor-poratelegislation,andastotheiniquitiesofimpersonal
andnon-moralcorporate-bodyactsthatwouldexposeindi-vidualtrusteesunderExpressTruststopersonalliability.
\VhilcrelativeJythe goodwroughtby corporations hasbeen
verygreat,yetabsolutelythevolumeofmischieftheyarc
responsiblefor,andcontinuetoinvite,hasbeenandis enormous.
Nowadaystherighttoorganizeacorporationisalmost
asfreeastherighttoexecuteadeedofrealestate;it has
beencarriedtotheutmostirresponsibility;andonemay
orderandmayreceive,throughthemediumofcharter
purveyors,anumberofcorporatechartersrepresenting
millionsofcapital,fromanychosenState,almostwith the celeritythat
onemayorderandreceiveasmanyboxes
ofcigars.Ordinaryconveyancing,orconstructivelegal
drafting,areutterlyoutmatchedinsuchaperformance.
Theproperinitialdeliberationandafterresponsibility
andattentionthatarerespectivelyaconditionprecedent
totheforroatbnandconditionssubsequenttothe
accep-tanceandperformanceofameritoriousExpressTrust,
profferawholesomecorrectivetotherashmultiplication
ofthemanyanemic,moribundcorporationsthatMassa-chusettsimprovidentlycreates,[eelsboundtonursefora
while,andisthencompelledtoburybythethousands.
OurnextStateCommissionmightwellbeoneonCorpo-ration Eugenics. 13
Longbeforeitwasgiven,thedecisionoftheSupreme
CourtoftheUnitedStateslastwinterinEliotv.Freemau,
220U.S.Rep.,p.178,holdingthatExpressTrustsin
vogueinMassachusettsandelsewherearcasfreeaspart-nershipsfromtheapplicationoftheFederaltaxondoing
businessunderacorporatecharter,hadbeenanticipated
andacteduponaccordinglyin.Massachusetts.Thatdcci-
sionhasawidersignificancethanmayucrealizedinthe
transcontinentalscopeofitssalutaryapplication .
Afewstrong,permanentExpressTrustsarcworthmore tothis State
andtotheUnitedStatesthanthe entire4,000
charteredMassachusettscorporationscastbythewhole-saleintooblivioninthelastfiveyearsuytheirownpro-
gem tor . The Massachusetts passed aresolve(Resolves
'of1911,Chap.55)toprovidethattheTaxCommissioner
shallmakean"investigationofVoluntaryAssociations organizedor
doingbusinessinthisCommonwealthundera
writteninstrumentordeclarationoftrust,thebeneficial
interestunderwhichisdividedintotransferable certificates of
.participationorshares,withaviewtodeterminingthe
presentlegalstatusofsuchVoluntaryAssociations,and
whetherornottheirprohibitionor
furthercontrolandregu-lationbytheCommonwealthisadvisableandinthepublic
interests."TheTaxCommissionerwastoreportonthb
onorbeforeJanuary13,1912.* If
suchaninquiryisaimedatoneortwoexceptional
organizationsaffectingcertainpublicservice utilities,the public
shouldbefrankly informedthereof.Butifits object
istoputeverypersonalExpressTrust,andeverypartner-ship,thatmakesuseoftransferableshares,onalevelwith
impersonalcorporations,andtoprohibit,oreventosub-- ---
isdatedjanuary17,191:.!,andfounrlinHouse DocumentNo.1040. 14
jecteverysuchExpressTrust,andeverysuchpartnership, to an
inquisitorial State control,though they are notcreated bythe
State,andarcnotallclothed withapublicinterest,
thenitspurposeassumesascopethatrequiresextreme cautiononthepart
oftheLegislature. Putinsyllogisticformtheprohibitionaimofthis
inquiryinvolvesthefollowingfallacy:-Some"voluntaryassociations"havebeenholdingcom-
pames. Someholdingcompanies are saidto have cloneharm.
Thereforepublicpolicydemandsthathereafterall
"voluntaryassociations"shallbeprohibited.
Theirrationalityoftheabovewillbemoreapparent
ifthesyllogismisparaphrasedthus: -SomelawyershavebeenPresidents of
theUnited States. SomePresidents aresaidtohave doneharm.
Thereforepublic policy demands that hereafter alllawyers shallbe
prohibited.
Thisinquiryisdirectedtoso-called"VoluntaryAsso-ciations."Cananyonesatisfactorilydefine,orexplainthe
originof,orjustifythe
retentionofthatindefiniteexpres-sion,"VoluntaryAssociation"?Isitsantithesis,an"In-voluntaryAssociation,"everused,eithercolloquiallyor
technically?Thedifferencebetweencreationbysovereign
powerandcreationbyprivatecontractisnotasufficient
basisfortheterm.Thecreationinbothcasesrestsupon
volition.Thesovereigndocsnotforcecitizenstocreate;
organizationisoptionalunderthegeneralcorporation
laws.Theterm,howeverold,hasnofixedapplication .
Itisnotanalogoustoavoluntarysettlementor
convey-ancewhichdependsuponameritoriousornaturalrather
thanavaluableconsideration,uponbloodoraffectionor 15 liberalitythan
upon acompensatory or materialadvantage .
Thedefinitionofa"VoluntaryAssociation"asgiven inthe
CenturyDictionary is:.
"Asocietywhichisunincorporated,butIInota/)artntrJhip,Inthatthe
membersarenota(tentsforoneanother."
Theword"Voluntary"addsnothingdefinitetothe word "Association."The
word"Association" isunderstood to mean abody of persons united
without a
charter."Asso-ciations"aresometimespartnerships,andoftentimesnot
partnerships."Thetruetestofpartnershipistheinten-tionoftheparties."(ParsonsonPart.
54.)Associa-tionstoproducesomethinganddividetheproductarcnot
partnerships.(Id. 61):Astoworkagoldmineand
dividethegold;tomakeanddividebricks;tofishand
dividethefishcaught;tomanufacture anddividelumber. (Id.
61note,and445,446.)Clubsandassociations
forsocialorcharitablepurposesarcnotpartnerships. (Id. 60.)
Colloquially a"Voluntary Association"may be any group
ofpersons,whetherincorporatedornot,fromtheUnited
StatesSteelCompanytoaboys'baseballclub,ora
women'ssewingcircle,unitedoftheirownvolition;and
oneandallwillhavearighttoissue"transferablecertifi-cates
ofparticipationorshares,"withouttherebyaffecting their legalstatus.
The"Ladies'Soldiers'andSailors'Monument
Association"(161N.Y.353),orafarmers'association
toconstructandoperateatelephoneline(122N.Y.S.
610),orthe"\VashingtonTentNo.1,IndependentOrder
ofRechabites,"associatedfortemperance,sympathy,and
decentfuneralobsequies(81N.Y.507),noneofwhich
wereheldtobepartnerships,mightanyorallhavebeen
organizedtousctransferableshares,asweltastheNew
EnglandGasandCokeCo.andtheNewEnglandInvest-mentandSecurityCo.(198Mass.413,425,430),the
16 lattertworepresentingmanymillionsofdollarsofcapital,
andalloftheabovemaybe,astheyare,referredtoas "Voluntary
Associations."* \Vehavecorporations,joint-stockcompanies(common
lawandstatutoryt),partnerships,"trusts"(meaningcom-binationsofcorporations,amodernperversionorrestric-tionofthetermtrust);andnowthatinapposite,sweep-ing,indefinitedesignation"VoluntaryAssociation"has
becomethesubjectofalegislativeinquiryinMassachu-setts,whichif
itresultsonlyinhelpingtodrivethatex-pressioninto
disuse,willbebeneficial.
Toattemptthroughlegislationtosynonymizeorto
putonaparity"VoluntaryAssociations,"Partnerships,
andExpressTrustscreatedbyprivatecontract,and
maintainthatallthreearclikecorporationscreatedby
theState,andtoberegulatedlikecorporations,merely
becausethecommon-lawrightofissuingsharesisexercised by anyoneor
allofthem,istoinvitecontention.Andto
maintainthatbecausesomequestionable"VoluntaryAsso-ciations"haveoversteppedthemark,that,therefore,all
ExpressTrusts,andPartnerships,and"good""Voluntary
Associations,"shall,withoutdistinguishingbetweenpub-licutilitiesandprivateenterprises,be"prohibited"or
"controlledandregulated"bytheState,isfallaciousand prcj udicial.
Theconfusionandtheconstitutionalconflictsucha
coursemightinciterecallstheswiftdispositionthe. writer
madewiththeState thirtyyearsago,in1881,
*Thedefinitiongivenof"VoluntaryAssociation"bytheTaxCommissionerin
hisReportHouseDocumentNo.1646,p.2is as follows:-"The term voluntary
associationas !lenerallyusedslllnlftesan associationorpenona with
acombined capital, repreentedbytransferable aharea,
forthepurposeorcarrylna on acommon project for llaln."
Butthisattempttonarrowthetermbysorestrictingitsscopeisarbitrary.It
seek!\to accentuate thefeaturesoftransferableshares
amiofgain.Butthereare
innumerablesocallcd"VoluntaryAssociations"withouttransferableshares,a.nd
verymanywithsuchsharescarried
onwithouttradingwiththirdpersonsforgain.
tScetheleadingcaseofSpotsu'Ood\',Morris,12Idaho,360;6 1..R.A.(N.S.)
665(1900). 17
oftheActof1878,Chap.275,totax'\:ompanies,co-partnerships
andotherassociations,inwhichthebeneficial interest
isheldinshareswhicharcassignable,"etc.,which
Act,notlongafter,receiveditsjudicialquietusasun-constitutionalbythedecisioninGleasonv.1llcKay,134
Mass.,419(1883),reaffirmedandgivenanewapplication in0'
Keeffev.Somenillc,190Mass.,110(1906),anddis-cussedintheOpinionofthejusticesinHl6Mass.,603
(1908). Thesuppositionthattransferablesharesarcapeculiar
prerogative orspecialprivilegeor attributeofcorporations, andthat
whoeverusesthemistobedisciplinedas copying
anessentialofacorporateStatecharter,uras
ofanimportantcharacteristicofcorporations,isamis-take.Transferablesharesarcnotanessential,notc\en
anattribute,notaninseparableormarkof
anycorporation,butamereincidentor::tlTl'ssaryofsonw corporatiOns.
Thecorporationsthatrepresentthelargestaggregateof
capital,andwhosetotalbusinessnowexceedsthat
oftheNationitself,issuenoshares;thesearcmunicipal
corporations.So,too,transferabilityofsharesisnot
essentialtocharteredcolleges,academics,hospi tats,and
othercorporateinstitutions,foundedbypublicendow-mentorprivatebeneficence.Norarcsuchsharesneces-saryinmanyscientificandliterarysocietiesformutual
benefitorcharity,inthefundsofwhichthemembers
haveabeneficialinterest.Ontheotherhandsucharight
oftransfermaybeincorporatedintopartnershiparticles
orintotestamentaryorotherexpresstrusts,andbecome
afundamentalconditionofthem,withoutaiteringtheir legalcharacter,
ortrespassinguponany corporateattribute.
LegislaturesandevenCourtshaveoccasionallyfostered
theabovemisconception;andCourtshavehadtocorrect
themselvesthereon.Mistakenideasastotransferable 18
shares,aswellast::>othermereincidentsofcorporations,
wereanalyzedandexposedoverseventyyearsagoin New York inthe leading
case of Wanzerv.Beers, 23 Wendell
Reports,pp.103,116,12-li,145to151,174to176(1840).
TransferabilityofsharesisrecognizedinMassachusetts
asanaturalrightatcommonlaw.Gleasonv.1\fc Kay,
134Mass.,419,425(1883).Opinionofthejustices,196 Mass.603,627(1908).
Itistobehopedthathereinl'vlassachusettsnorevival
oftheabove-mentionedmistakewillmisleadeitherits
Executive,Legislative,orjudicialDepartmentstobelieve
thatsuchanerrorcanbejustifiedeitheruponeconomic or
uponlegalgrounds.Our freecommon-lawrights inthat
respectrestontoobroadandsoundafootingtobecur-tailedbyanassumptionsonarrowandmistaken.The
acquisitionofaformalcharterofincorporationonly
recognizes,butdocsnotbest01.v,theserights.(Sec"The
PersonalityoftheCorporation andtheState,"in21Law
QuarterlyReview,p.365;atp.370,Oct.,1905.)Asfo:-listingshares
onStockExchanges,thoseExchangeshave
theirownrigidrulesofacceptanceorrejectionwhichform apublic
safeguard. ThereturnstotheStaterequiredofcorporationsare
notbecauseacorporationissuestransferableshares,but
becausetheStateistokeepinformationathandofits owncorporate
creations,or,asMr.Hall expressesit:-"The present law,passedin
1903,adoptsthe modern viewthat the State owesnodutytoinvestorsto
lookafter the solvencyofcorporations,and thatItssoleobligationIsto
seethatcreditorsandstockholdersshallbeat all times Informed as to
the organization and management of the corpora-tionstowhichittivts
franchises."(Mags,Business Corp.Hall,p.3,2dEd.)
ThepresentLegislativeinquiryunderResolve55,Acts
of1911,atthehandsoftheTaxCommissionerofthe
State,appearstobebasedonthemistakenideas(1)
thatthereisacorporateusurpationinallso-called"Volun-taryAssociations"whosebeneficiali
n t r s t ~ arc"divided 19
intotransferablecertificatesofparticipationorshan.'s";
and(2)thatbecausetheStatefeelsbcmndtofurnishin-formationastoitsimpersonalgcmra.llytransitory-corporationstowhichitghes
andtoregulate thosethatarcclothedwithapublic thereforeit
mustfurnishsimilarinformationastoprimtcpersonsto
whomitgh.esnofrcmc/zisesandwhichtheydonotnct>d,
andmustregulateprivateinterestsevenwhc:1notclothed withapublic
character. Ifsuchregulativeorinquisitoriallawsarctobevalid
theyshouldbeuniform(Gleasonv.}.fc Kay,134i\lass.,
419,425-6),applyingtoallwithoutdiscrimination,and
shouldincludealsoallpartnerships,forsuchmayissue
transferablesharesrepresentingmillionsofdollars.But
Constitutionaiprovisionsthatprohibitunreasonableintcr-fcnnccwithprivaterightscannotbeignored.
TheproperappellationforDeclarationsofTrustthat
recognizecommon-lawrightsinmattersofadministration,
andthatrestorethepersonalequationwhichStatecor-porationsevade,is"ExpressTrusts,"thelawsinregard
towhicharcwellestablished.NosuchDeclarationof Trustshouldemploythat
all-inclusive,unfitterm"Volun-taryAssociation."
TrusteesunderExpressTrustsare1zotagents,butprin-cipals,having the
fulltitle and control; and the beneficiaries
thereunderarcneitherpartnersnoragents.T.llisis elementary.If
someauthoritiesarcwantedthereonthe followingarctothepoint:
v./Uoril,151Mass.481,484. AfaJonv.151Mass.164;7L.R.A.771.
Johruonv.uwis,6Fed.Rep.27,28. v.Davis,110U.S.330,334-5;L.
Ed.163,165. I.acitll v.Rumbaugh,45Fed.Rep.23,29.
Smith\',Andtrson,L.R.15,Ch.D.,247,2756,284-5. The abo\'eruling
casesarc readily distinguishedfromthe
familiarclassthatascribeapartnershipcharactertoccr-' 20
tain"joint-stock companies,""associations,"andadmitted
tobe"co-partnerships,"ofwhichTaft-v.lf'arcl,106Mass.
518,andPhillipsv. Blatchford,137Mass.,p.510,are types.
Thelatei\'lr.J.EdwardSimmons,Presidentofthe
NewYorkChamberof.Commerce,andfortwenty-two
yearsPresidentoftheFourthNationalBankinNew
York,inhisaddressonOct.5,1905,beforetheMaryland
Bankers'Association,on"HonestyistheBestPolicy,"
forciblyemphasizedthebasicprincipleinvolvedherein. According to
theNewYork Daily Tribune of Ort. 7,1905, he "laid his finger on the
real trouble when he declared that the most
demoral-IzingforceInbusinesstodayistheJivtslitureof/Jtrsonallwnorandpersonal
responsibilit,allowedbymodernmethods.Theextensionoftheprinciple
ofincorporationhasenabledleadersinbusinesstosetuptwostandards of
morality,to maintain aJekyllandHyde duality, and to do as members
ofanim/Jtrsonolandnon-moralcorporatebodyactswhichtheywould shrink
fromas individuals.""What Iswanted,If weareto preserve ' ~ (
:!tandardsofhonestyinbusinessdealings,isadherencetotheold
notionof;.:rsonalresponsibilityandpersonalintegrity." "Men(saidM ~
. Simmons),whoposeasthe salt oftheearthandwho condemn,without
:eserve,thosewho steal.$50,or forgeacheckfor$100, or
acceptabribe,willthemselves make millions by lying,by fraudand by
bribery.In private ll!.ethey are stainless,but in the interests of
corpora-tions, ofthe 'trusts,'ofthegas company, ofthe railroad
company, of the
insurancecompany,theywillhaverecoursetoeveryvillainydamnedIn the
decaloaue."
TheHon.\Voodrow\Vilson,inhisaddressatChatta-nooga,echoedthedistinguishedNewYorkbanker,Mr.
Simmons;anditbehoovesMassachusetts,n0wadvancing
torestorethatpers01ialityinadministrationwhich isthe basis of
liberty and of soundfinance,not to embarrass
thatmovementwhichfindsanefficientbulwarkin
ExpressTrustsbuttoconsiderlegislationthatwillim-plantmorevitalityattheinceptionofitsimpersonal
corporatecreations,andthusprotecttheseartificial
entitiesfromprematureoblivion. ExpressTrusts.Corporations.
"VoluntaryAssociations." SecondPaper,December li,1911.
ThepublichearingsghenunderResolve,Ch.55,Acts of
1911,haveemphasizedsomecommonerrors:-FIRST:ThatCorporationsarcsupposedtobtstounumerousprlvl
h:ges.Whereasforthemostparttheymerelyrtcognistandadoptcertain
natural common-law riQhtsthat are notcorporattprerognthes or
SECOND:ThatCorporationspresentthehighestmodelforcapital.Whereasofthethreestandardsofadministrationofferedby(1)
Corporations,(2)Partnerships, and (3)Express Trusts, that of
Corporations is the lowest, while that of Express Trusts Isthe
hiQhcst. THIRD:ThatExpressTrustsarePartnerships.Whereasthelawof
Partnerships is abntnch of the law of Principal and Agent,while
Trustees under an Express Trust are the absolute Principals,but
accounting to the beneficiaries,whohaveno powerseither as
Principals or AgentsInactual administration.This distinction is
clear and Indisputable. FOURTH:That prohibitive, or repressive,or
regulative legislation aato common-law modes of admlnlatratlon can
be partial or unequal.Whereas Inequality In that respect creates
aConstitutional conflict '. \, . . ' ' 22 FIRST. ThatCorporations
are supposed to bestownumerousprivileges.Whereas forthemost part
theymerelyrecogni:uandadoptcertainnatural common lawr i ~ t s that
arenotcorporateprerogativesorprivileges.
Corporations,asarule,bestownothingsavetheartificial
entitythatmergesnaturalpersonsintoanartificialbeing,
withtherighttosueandtobesuedinacorporatename;
andastheStatecreatesthesefictitiousbeings,itfeels
boundtoregulatetheminsomedegree.
\Vhatevcrelsemostcorporationspossessbeyondtheir
artificialentityandrightofsuitintheirrespectivenames,
arcmere"consequences orincidents ofincorporationrather
thanprimaryconstituents"(\Vald'sPollockonCon.,
p.126),suchasissuingtransferableshares,orlimitinglia-bility,orusingaseal,ormakingby-laws,orpurchasing
landsandchattels,thesebeingmerelyarecognitionand
adoptionofnaturalcommon-lawrightsthatanyperson orpersonssui
}urismayexercisewithoutacharter.(See Warnerv.
Beers,23wendell,pp.103,116,130,145to151,
174to176.\Vald'sPollockonCon.,p.296.)
"Thereareseveralveryusefulandbeneficialaccessorypowersorattri-butes,veryoftenaccompanyingcorporateprivileges,especiallyIn
moneyedcorporations,which,inthe existing state of our
law,asmodified by statutes, are more prominent in the public eye,
and perhaps sometimes
intheviewofourcourtsandlegislatures,thanthosewhichareessential
tothebeing of acorporation.Suchaddedpowers,howevervaluable,are
merelyaccessory.Theydonotinthemselvesaloneconfirmacorporate
character,andmaybeenjoyedbyunincorporatedindividuals.Suchapoweris
thetransferabilityof shares.Such,too,isthelimitedresponsibility..
So,too,theconvenienceof
holdingrealestateforthecommonpurposes,exempt fr&nl
the/ega/inconvenienceof
jointtenancyortenancyincommon.Again:Thereisthe COntinuanceof
thejointpropertyforthebenefitandpreservationofthecommonfund,
indissolublebythedeathorlegaldisabilityofanypartner.Everyoneofthese
attributesorpowers,thoughcommonlyfallingwithinournotionsofa
moneyedcorporation.,isquiteunessentialtothelegalityof
acorporation,maybe foundUJherethereisnopretenseof
abodycorporate;norwilltheymakeoneifall
werecombined,withoutthepresenceoftheessentialqualityoflegalindividuality,"
etc., perSenatorVerplanck, in.,farnerv.Beers,23Wend. 103,145-6,
et.seq. 23 Thecourtinthatcase(pp.149-155)referstoseveral
trusts,andunincorporatedassociations,havingtheright
toemploysuchaccessaries,oneofthemoreprominent
beingthatoftheMerchants'Bank,inthecityofNew
York,withlimitedliability,aswellastran4crablcshares,
thearticlesofassociationforwhichweredrawnbvAlex-
anderHamilton.(Hamilton's\Vorks,CongressionalEel., VI I. "The
mostpeculiar andthestrictly essentialcharacteristicofacorpo-rate
body, which makes It to be such, and not some otherin
lt>galcon-templation,isthe ofthelndhlduals the
bodyintoo11edistinct,artificialindividualtxiste11u.NowthisIs11otfoundIn
the associationsunderthe act."(!d.23Wend. p.155.)
"ByourcommonltiWasitwouldexistnow,independentlyofstatu-toryrestrictions,associations
beformedandtrustscreated, havingeveryoneof
theaboteenumeratedchartlcteristics,whichhave beenInsisted
onasessentialtoacorporation,e.-rceptthatpersorwlityformingitsstricta1Jd
necessaryesstntialle11aldefinition."(/d.23Wend.pp.152-3.Secalso174-u.:
IntheopinionoftheJusticesoftheSuprem(Judicial
Courtofi\lassachusettsgiventotheStateLegislature,
in1908,onthetaxationoftransfersofstock,isthefol-lowing:-"NoneofthesestatutesImpliesthatanexcisetaxmaybelaidUJlona
company,association,orpartnership Inasimplebusiness,like
husbandry,merelybecausethemembersthemselvesthat
theirownershipshallberepresentedbytransferableurtificatesofshares.
Suchanarrangementbetweentwoormoreassociatesisasimpl.460:411..It./\,2!2,
undcusescited. Brown\',/:'asttrnSlatt Co.,134 1\luss. 51JO.
Norton\',l'htlfls,Miss.467,S.G.Ames'GasesonTru!lts,420 (2dEd.), und
casl'Ncited. "UubllltyofTru11tEstatesforGontructsMadeforTheir.
Benefit."15Am.l.awHtt.449-462. "Undisclosed Prlncipul." By James
Barr Ames, Inl'alt J.aw Journal, l\luy,1909,pp.450,451. Banltof
1optltav.Eaton,100Fed.Rep. 8(C.C.-:\Iuss.-1900).
PursonsonPartnership, 447,nnd cl\ses(4th 1-:d.).
UnderhillonTrust!!&Trustees,347,348(lJth Ed.). ' . ' ''" ' ' '
34 FOURTH.
Thatprohibitiveorrepressiveorregulativelegislationastocommon-law
modes of administration can be partial or unequal.Whereas
inequality inthat respect creates aConstitutional conftict.
Prohibitive,repressive,orregulatinglawsshouldbeuni-form;andifanyattemptismadetoselectTrusteeswho
issuetransferablecertificatesunderExpressTrustsandto omit Trustees
who do not issue such certificates, or to select
partnerswhoissuetr;tnsferablcsharesandtoomitpart-nerswho
U'Jnotissuesuchshares,orto select Trustees and
toomitpartners,theConstitutionalpointofinequality
islikelytoarise,asinGleasonv.:McKay,134Mass.419,
425-6,whichcasesetasideasunconstitutionaltheAct
of1878,Chap.275,totax"companies,copartnerships,and
otherassociations,inwhichthebeneficialinterestisheld
inshares,whicharcassignable,"etc.;forasChief Justice
Fieldsaid,in1llinotv.lVinthrop,162Mass.113,122,
andquotedwithapprovalbyChiefJusticeKnowltonand
othersintheopinionoftheJusticesin196:\lass.603,
628:-"AsthetaxconsideredinGleasonv.McA'aywasnotuponabusinessor
employment,and11stherewasnofrancl1111e-.: conferredbythe
LeJtislature,thedistinctionbttwttnpartnerships;;oi1'h!rans/trabltshartsandthose
withoutrtndtrtdthttaxunequaland11nreasonablt,bt
:austitwasadiscrimination foundeduponanimmaterialfact." ' "Every
one has arightto demandthathe be by generalrules,
andaspecialstntutewhich,withouthisconsent,singleshiscnseoutns
onetoberegulatedbyadiflerentlawfromthatwhichlsappliedInall similar
cases,wouldnotbell'tUtimate andwouldbesuchan arbitrary mandate as
is not withinthe province of free ,,,
"Equalityofrights,privileges,andcapacitiesunquestionablyshouldbe
the aim ofthe law.".."The State, it isto be presumed, has no
fnvor11 to bestow, and designs to Inflict no arbitrary deprivation
of rights."(Cooley's Const. Limitations, pp. 559, 562,563,7th Ed.)
' 35 Thestampedetoorganizeundercorporationlaws,and
thustryinmanycasestoobtainsomethingfornothing,
byevadingpersonalresponsibility,hasbeenperwrtcdinto
anationaldisgrace,astheHon.\VoodrowWibonsoforce-ablypresentedtothelegalprofessioninhisaddnssat
Chattanoogain1910. It isthedutyofthatprofessionandoftheLegislature,
ifanylcgh;lationisreallynecessaryuponthissrorc,rather
toconfirmthecommon-lawnaturalrightofallpersons sul
}uristomanageaffairs,whetherasindividuals,oras
partners,orasassignees,ortrusteesunderExpressTrusts,
asthe):now,jo,thantoencouraget l ~
uscofe\asivceor-poratccharters.Intlwgreatmajorityofcasesadminis-trationthroughExpressTrustsissuperiortothatofany
othermet hod. Mortalityini\lassachustt
tsforhumanbeingshasaver-agedduringthepastliYcyrnrsaboutsixteen(
W)percent forevery1,000persons.i\lortalityforcorporatebciugs
withl\Iassachusetts'imprimaturhasawragcdforthe
sameperiodaboutsixty-four((H)percent. ExpressTrustsarcconstitution
allyfarmorehealthy.
Corporateimpersonalityinadministrationinvitesboth
fraudanddisaster.TntstjJcrsoualityisthestrongest
safeguardagainstthem. . . '. ' .' '.. .. .. .' . ' ' ''' ' "
"EYPRESSTRUSTSUNDERTHECOMMONLA\V." '.....'..... .. 1 '
ByAlfredo:Chandler,Esq., ....... SUPPLEMENT. June15,1912. .() - ---
-...-- -TheLegislatureof.Massachusettsduringitssession of101
2hasactedupontheReportoftheStateTaxCom-missioner,made under Chapter
ilf'i,oftheResolvesof1911,
requiringhimtoitn-estigatcandreportupon"Voluntary
Associations,''withaviewtotheirprohibitionorfurthtr
cuntrolandregulation,andtwonewlawshaveresulted,
neitherofwhichprohibitExpressTntstsor"Voluntary \ ..' '
."ssoctattons. Onelaw(Chap.;)!H),Actsof1 0 1 ~
authorizescorpora-tionstoheformedinMassachusettstoacquire,manage
andsellrealestate,foratermnottoexceedfiftyyears. Theotherlaw(Chap.1
t:-3,oftheResolvesofln12)pro-virksforaCommissiontoinvestigatetheHoldingsof
''VoluntaryAssociations"andCertainCorporationsand
'theConsolidationofCompaniescontrolledbythem,such
Investigationbeingspecificallydirectedtocertainpublic
utilityCompanies. TheCommissionistobecomposedoftheAttorney
General,theBoardofRailroadCommissioners,theBoard
ofGasand.ElectricLightCommission,twomembersof
theSenate,andf'\illrmembersoftheHouseofRepresen-tatives,anditistoreporttothenextGeneralCourtnot
laterthanJanuary5th,HH:J.
OtherwiseExpressTrustswhetherfortheadministra-tionofrealestateorforindustrialorcommercialusesare
notaffected. - ~ ~~ ..,,I ,,I '', /i .'' c. , '! '. .' - . '.' '.
.-.~''f "- .' t' C/1;):e CONTINUEDDISSOLUTIONOF
MASSACHUSETTSCORPORATIONS.
Onpages10andItof"ExpressTrustsundertheCommonLaw"
theexcessivemortalityinconservativeMassachusettsofitsStatecor-poratechartersispresented,showingthatin!i\'eyearspriorto
Massachusettscorporationstothenumberof4,154wereclissohed,or about
64per cent.ofthewholenumber createdinthatperiod.
TheMassachusettsLegislatureof1!11:.?hascontinuedthiselimina-tionbydissolving929moreofthatState'scorporatecreations,acopv
oftheActbeinghereprintedinfullasinmressi\eprouf ofthe illusiun ancl
instabjl ityofimpersonalcorporatebodiese\eninaconsenativeState.
Whatthedeathrate ofcorporationsisinother Statesisnotknown.
buttheBostonNewsBureauforDec.1.t Ott.anirmedtl1:1t :-..
InCaliforniaabout4000corporations\\
i!ldissolveonNo\'.:m.bLcauscofthdr
failuretopaytherequirldlictnsetax:andinMissouriabout4000morL'arelinbleto
dbsolution lx'Causc oftheir h1ilureto lilttill'
annual::.tatL'Illl'lltIWJuirldbythe State law.
ThecorporateformofOWill'rshipmuchltssprL'\'alentthere(\\'estandSouth):
andi11consequence,dept.ndl'llCL'uponcorpora t icJIJOiisgL'IIL'nl
I,andtolerationof theirmethodsiskssinLAWSOFMASSACHUSETTS, "A;o.;ACT
toDissolveCertainCorporations. lJeitcnactctJ,etc.,ns
Section1.Suo:hofthe porationsasarcnot.alread} dissolvedarc
herebydissolvt.d,suhjtcttothepro\isinnsofsec
tionsfirty-twoamifirt>-thn-cr,fchapterfour
hunclrrdunc..lthirty-sevenofthlactsofthenineteenhumlr{'tiandthree:-
A.E.EllisBuildingCo. A.II.RiceLumberCompanr A.j,
Legt:BakcrCompany,The A.L.Whittemore Company A.LowensteinrmdSons
A.!\1.Abels,Inc. A.l\1.ThomasCompanr A.S.Aile>Coml.:my
Abbott-Detroit ..Jm;tonCompan}' Abraml"rcnchCompany
AckotistPlaytrPianoCompanr AcmeWrtWashCompan)' ArlamsTmstCompanr
Ada1nsonPublishingCompany Adco,Inc..The AeroplaneCompany ofAmerica
Cotnpany AlbcrlnCcr..aCompanr Alden andTnrbox,Inc:orporatcrl
AlhambraCompany Alhm.(;uihl(ne. Alln-RamlallCompany Alon;:The
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