PART V. 1. LEGAL EFFECT OF ACTS DONE WITHOUT THE STATE INCORPORATING THE CORPORATION. The two questions, § 379. Legal effect of the act within the limits of the home state, §§ 380382. Legal effect of the act in the foreign state, § 383. Penal provisions, when enforced out side the state enacting them. Statutory liability, § 393. Jurisdiction over assets of foreign corporations, § 394. Service on foreign corporations, §§ Comity among states, § 384. Statutes regulating service, § 397. Effect of non-compliance with these § 379. THIS topic relates to the territorial extent of corporate powers, and involves a consideration of two distinct The two questions. When an act is done by or on behalf of questions. a corporation outside of the state incorporating it, what is the legal effect of that act (1) in the state incorporating the corporation; (2) in the state where act was done? of the act Legal effect within the limits of the home state. § 380. Within the limits of the state incorporating the corporation, the legal effect of an act done without the limits of that state depends primarily on a construction of the provisions in the corporate constitution regarding the corporate powers. The question will be, do they authorize the given act to be done beyond the limits of the state? "It may safely be assumed that a corporation can make no contract, and do no acts, either within or without the state which creates it, except such as are authorized by its charter; and these acts must also be done by such officers or agents, and in such manner, as the charter author izes." 1 If the corporate powers authorize the act to be done outside the state, it will be valid as to all persons within the jurisdiction of the state. If they do not authorize the act to be so done, the rules applicable to ultra vires acts generally will apply; though the fact that the act was done outside of the state will not prejudice any person, acting on the faith of the act, who had no reason to know that it was done outside the state.s § 381. It may be stated as a proposition of general truth and applicability, that with respect to the jurisdiction of the state incorporating the corporation, acts done on behalf of the corporation, if done outside the state, are valid, in the absence of special restriction; for a grant of franchises without restriction is equivalent to a specific authority to exercise them wherever the corporation may find it convenient or profitable to do so. Accordingly, directors may act as a board outside the state limits." 1 Taney, C. J., in Bank of Augusta | ently within the scope of the corv. Earle, 13 Pet. 588. "Its residence porate powers, §§ 284-286. in one state creates no insuperable objection to its power of contracting in another." Ib. See Ewing v. Toledo S'v'gs Bk., 43 O. St. 31; State v. So. Pac. R. R. Co., 52 La. Ann. 1822; Angell and Ames on Corp., § 104. 4 Bank of Augusta v. Earle, 13 Pet. 519, 588; Hutchins v. New England Coal M'g Co., 4 Allen, 580; Blair v. Perpetual Ins. Co., 10 Mo. 559; New York Floating Derrick Co. v. New Jersey Oil Co., 3 Duer (N. Y.), 648; The two cases of Middle Bridge | Tombigbee R. R. Co. v. Kneeland, 4 Co. v. Marks, 26 Me. 326, and Miller How. 16; Wood Hydraulic Hose M'g v. Ewer, 27 Me. 509, seem to imply that it is incompetent for a legislature to authorize a corporation to act outside the boundaries of the state. But this seems incomprehen- 5 Merrick v. Van Santvoord, 34 N. sible. Merrick v. Van Santvoord, Y. 208; Day v. Ogdensburgh, etc., R. 34 N. Y. 208, holds that the charter R. Co., 107 N. Y. 129; Kerchner v. of a corporation may confer powers Gettys, 18 S. C. 521; Atchison, T. & without territorial limitation, which, S. F. R. R. Co. v. Fletcher, 35 Kan. accordingly, may be exercised be- 236. yond the jurisdiction of the sovereign granting the charter. Co. v. King, 45 Ga. 34; Dodge v. 6 Galveston Railroad v. Cowdrey, 11 Wall. 459; Bellows v. Todd, 39 2 Hutchins v. New England Coal Iowa, 209; Thompson v. Natchez M'g Co., 4 Allen, 580. 3 Galveston Railroad v. Cowdrey, 11 Wall. 459. This on principles regulating the effect of acts appar Water Co., 68 Miss. 423; Missouri § 382. The rule is otherwise in regard to the acts of the body corporate itself. These, when done beyond the limits of the state, are ordinarily held invalid.' It is submitted, however, that the reason of this does not lie in the imaginative notion that a corporation "must dwell in the place of its creation, and cannot migrate to another sovereignty;" but rather in the hardship and fraud it might entail on shareholders to permit corporate meetings to be held outside the state. Accordingly, there seems to be no reason for holding invalid acts done at corporate meetings assembled without the state, if all the shareholders acquiesce in the holding of such meetings. Nev. 293; Ohio & M. R. R. Co. v. | 297. Compare Camp v. Byrne, 41 McPherson, 35 Mo. 13; Wright v. Bundy, 11 Ind. 398; McCall v. Byram Mfg. Co., 6 Conn. 428; Wood Hydraulic Hose Mfg. Co. v. King, 45 Ga. 34; Smith v. Alvord, 63 Barb. 415; Reichwald v. Commercial Hotel Co., 106 Ill. 439, 450; Singer v. Salt Lake Copper M. Co., 17 Utah, 143. See Franco-Texan Land Co. v. Laigle, 59 Tex. 339; Saltmarsh v. Spaulding, 147 Mass. 224; Smith v. Silver Valley Mfg. Co., 64 Md. 86. But see Hilles v. Parrish, 14 N. J. Eq. 380; Ormsby Franco-Texan Land Co. v. Laigle, v. Vt. C. Mfg. Co., 56 N. Y. 623. A statute forbidding directors to hold meetings outside the state may be availed of by creditors of the corporation: it is not for the benefit of shareholders only. Sta. Nat. Bk. v. Union Nat. Bk., 168 Ill. 519. Mo. 525. Authority in charter to transact business at points without the state does not authorize acts by | the corporation directly, such as corporate meetings. An election of directors by a corporate meeting held outside the state is void. A shareholder is not bound by a by-law passed by directors elected without the state, although his own shares were voted, by proxy, at the meeting which elected the said directors. 59 Tex. 339; acc. Hodgson v. Duluth, etc., R. Co., 46 Minn. 454. 2 Bank of Augusta v. Earle, 13 Pet. 519, 588, per Taney, C. J. It is held that a corporation dwells in the place where its business is carried on. Taylor v. Gas and Coke Co., 11 Ex. 1 Miller v. Ewer, 27 Me. 509; Aspin- 1; see Connecticut and Passumsic wall v. Ohio, etc., R. R. Co., 20 Ind. Rivers R. R. Co. v. Cooper, 30 Vt. 492; Freeman v. Machias W. P. Co., 476, 481; Stout v. Sioux City, etc., R. 38 Me. 343; Ormsby v. Vermont C. R. Co., 3 McCrary, 1; but see PlimpM'g Co., 56 N. Y. 623; Jones v. Pearl ton v. Bigelow, 93 N. Y. 592, reversM'g Co., 20 Col. 417. Cf. Copp v.ing S. C., 12 Abb. N. C. (N. Y.) Lamb, 12 Me. 312. No legal organization of a corporation can be affected by action taken outside of the state granting the charter. Freeman v. Machias W. P. Co., supra; Smith v. Silver Valley M'g Co., 64 Md. 86; Taylor v. Branham, 35 Fla. 202. 3 Derby Council v. State Council, 197 Pa. St. 413; Sovereign Camp W. O. W. v. Fraley, 94 Tex. 200. 4 Missouri Lead M'g Co. v. Reinhard, 114 Mo. 218. See Camp v. Byrne, 41 Mo. 525. Resolutions (to § 383. Legal effect of the act in the foreign state. A different question is the one regarding the legal effect of the act within the limits of the state where it was done. There the legal effect depends ordinarily on whether that state will give effect to provisions in the laws of the state incorporating the corporation. For corporations are not citizens within the meaning of the provisions in the Federal constitution guaranteeing to the citizens of each state all the privileges and immunities of citizens in the several states; and, accordingly, a state may prohibit a corporation incorporated by another state from contracting within the limits of the former, or may exact a license fee from the corporation for the privilege of having an office within the state, unless that corporation be engaged in interstate commerce, or the service of the Federal government; or may deny to a foreign corporation the right to share in the assets of an insolvent corporation, in course of distribution in its courts." 3 increase capital stock) passed at a See Milnor v. N. Y. and N. H. R. R. stockholders' meeting held without the state are binding on all taking part or profiting by them (as e. g., by accepting the new shares). Handley v. Stutz, 139 U. S. 417. 1 Art. IV., § 2. Co., 53 N. Y. 363; People v. Fire Ass'n, 92 N. Y. 311; Tatem v. Wright, 23 N. J. L. 429; cf. Sandal v. Atlanta L. I. Co., 53 S. C. 241 ; also § 480. But it is doubtful, when congress 2 Paul v. Virginia, 8 Wall. 168; has conferred on a railroad corporaLafayette Ins. Co. v. French, 18 How. tion created by a state the power to 404, 407; Ducat v. Chicago, 10 Wall. construct its road within an organ410; Liverpool Ins. Co. v. Massachu-ized territory, whether such terrisetts, ib. 566; Doyle v. Continental tory after it has become a state can Ins. Co., 94 U. S. 535; Pembina impose any impediment to the full Mining Co. v. Pennsylvania, 125 U. enjoyment of the right thus conS. 181; Orient Ins. Co. v. Daggs, 172 ferred. Van Wyck v. Knevals, 106 U. U. S. 557; Warren M'f'g Co. v. Etna S. 360, 369; Railroad Co. v. Baldwin, Ins. Co., 2 Paine, 501; Home Ins. Co. 103 U. S. 426. "It could only do v. Davis, 29 Mich. 238; Common- this on the same terms that it could wealth v. Milton, 12 B. Mon. (Ky.) refuse a recognition of its own pre212; Phoenix Ins. Co. v. Common-viously granted right, for in such wealth, 5 Bush (Ky.), 68; Gill's matters the state would succeed Adm. v. Kentucky, etc., Gold M'g only to the authority of congress Co., 7 Bush, 635; Matthews v. Trus- over the territory." Railroad Co. v. tees, 2 Brewst. (Pa.) 541; Fire Dept. Baldwin, 103 U. S. 426, 431. v. Noble, 3 E. D. Smith (N. Y.), 449 ; Slaughter v. Commonwealth, 13 Gratt. (Va.) 767; Western Union Tel. Co. v. Mayer, 28 Ohio St. 521. 3 Pembina Mining Co. v. Pennsylvania, 125 U. S. 181. See Southern B'ld'g Ass'n v. Norman, 98 Ky. 294. 4 Blake v. McClung, 172 U. S. 239. "Every power which a corporation exercises in another state depends for its validity upon the laws of the sovereignty in which it is exercised, and no corporation can make a valid contract without the sanction, expressed or implied, of such sovereignty; unless a case should be presented in which the right claimed by the corporation should appear to be secured by the constitution of the United States."1 states. § 384. The right, however, of a state to exclude foreign corporations and prevent them from making con- Comity tracts or transacting business within the state is not among ordinarily exercised; and the general rule may be stated, subject to qualifications hereafter to be mentioned, that the various states of the Union will permit foreign corporations, which are not expressly or impliedly forbidden by their respective constitutions to transact business outside of the state incorporating them, to contract and transact such business as their constitutions authorize them to execute; and to resort to the state courts for the enforcement of their rights. This general rule was first authoritatively expressed in Bank of Augusta v. Earle, as follows: "We think it is well settled that by the law of comity among nations, a corporation created by one sovereignty is permitted to make contracts in another, and to sue in its courts; and that the same law of comity prevails among the several sovereignties of this Union. The public and well-known and long-continued usages of trade, the general acquiescence of the states, the particular legislation of 1 Runyan v. Coster's Lessee, 14 | Union Tel. Co. v. Massachusetts, 125 Pet. 122, 129. A state cannot deny U. S. 530; also § 480. to a corporation any right protected 2 A foreign corporation in suing by the Federal constitution; see Erie need not set out in its pleading the R. Co. v. State, 31 N. J. L. 531; State terms of its charter showing its v. American Exp. Co., 7 Biss. 230; capacity to maintain the action. and see § 400. Nor can state legisla- | Smith v. Weed Sewing Machine Co., tion restrict foreign corporations 26 Ohio St. 563. But see Savage v. when by so doing it interferes with Russell, 84 Ala. 103. It is not Federal powers, as, e. g., the power against public policy to organize a to regulate interstate commerce. corporation to act as the agent withSee Pensacola Tel. Co. v. Western in the state of a foreign corporation. Un. Tel. Co., 96 U. S. 1; American Day v. Postal Telegraph Co., 66 Md. Un. Tel. Co. v. Western Un. Tel. Co., 355. 67 Ala. 26; Pembina Mining Co. v. Pennsylvania, 125 U. S. 181; Western 3 13 Pet. 519, 592, per Taney, C. J. |