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The Public Service Origins of the American Business Corporation

Published online by Cambridge University Press:  11 June 2012

Ronald E. Seavoy
Affiliation:
Associate Professor of History, Bowling Green State University

Abstract

The corporate charter, so restricted in its use in England, found a constantly broadening range of applications in America from the colonial period onward. The test of importance to the general welfare, originally confined to municipal, benevolent, or at most public-utility enterprises, was being applied to manufacturing ventures by the second decade of the nineteenth century.

Type
Research Article
Copyright
Copyright © The President and Fellows of Harvard College 1978

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References

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23 The same pattern was repeated in the 1840s and 1850s when many state constitutions required business corporations to be chartered by general incorporation status because most people thought that profit making opportunities should be a matter of individual energy and skill, free from state imposed restraints or state bestowed privileges.

24 The triennial reports proved completely inapplicable to rural congregations that had no endowments, and in 1798 those congregations that had failed to file reports and were legally dissolved were authorized to re-incorporate without penalty if they filed reports within three years. Soon afterwards the law became a dead letter and not until 1850 were the arrears of reports forgiven, and further reports required only from congregations with annual investment incomes in excess of $6,000. Laws of N.Y. 1798, Ch. 87; 1850, Ch. 122.

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26 Laws of N.Y. 1788, Ch. 62 (overseers of the poor); Ch. 63 (counties); Ch. 64 (townships). New York townships were land survey units that were entitled to organize local governments when enough people settled there. They were equivalents of the speculative towns of New England. Massachusetts passed a similar statute for towns in 1786 (Ch. 34), which specifically recognized all existing towns as corporations.

27 Jackson v. Corey (N.Y.) 1811, 8 Johns 385-387 and Jackson v. Hartwell (N.Y.) 1811, 8 Johns 422-425. Finally, in Denton v. Jackson (N.Y.) 1817, 2 Johns Chancery 325-327, the Court recognized that townships and counties were corporations for limited purposes. When the conveyance of real property to township overseers of the poor was litigated because of a deficient title, the Court, in Overseers of the Poor of Pittstown v. Overseers of the Poor of Pittsburgh (N.Y.), 1820,Google Scholar 18 Johns 418, defined overseers of the poor as corporations to the extent of performing their public trust. Not until the adoption of the revised statutes in 1828 were these units of government given a statute definition as corporations known by the names they possessed.

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30 The sale of one section of land per township to aid public education (in the 1786 New York statute) was the model for a similar provision of the Northwest Ordinance of 1787. Massachusetts set up a common school system in 1789 and Connecticut established a School Fund in 1795 with the capital coming from the sale of western lands.

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34 Chroust, Anton-Hermann, The Rise of the Legal Profession in America (Norman, 1965), Vol. 2, 3637, 250252.Google Scholar The services that these agencies regulated were vital to public welfare, yet they were not public bodies, as were the courts; therefore, the legislature enacted reserve clauses to protect the public interest. A reserve clause allowed the legislature to amend or repeal any charter of incorporation at any time, for any reason. It was not until the adoption of the Revised Statutes in 1828 that this restraint was applied to all corporations.

35 A charter was denied the Connecticut Medical Society in 1787 because it would be a dangerous monopoly. Davis, Joseph S., Essays in the Earlier History of American Corporations (Cambridge, Mass., 1917), Vol. 2, 304.Google Scholar County societies created by a general incorporation procedure overcame this objection.

36 Transactions of the Medical Society of the State of New York, 1807-1831, 27.

37 Laws of N.Y. 1784, Ch. 52; 1797, Ch. 43.

38 Durrenburger, Joseph A., Turnpikes: A Study of the Toll Road Movement in the Middle Atlantic States and Maryland (Valadosta, 1931), 103104.Google Scholar For statistics on the large number of corporations that were chartered to improve overland transportation before 1800 see Joseph S. Davis, Essays in the Earlier History of American Corporations, Vol. 2, 22-23 and after 1800 see Evans, George H., Business Incorporations in the United States, 1800-1943 (New York, 1948), 17, 2021.Google Scholar

38 Lincoln, Charles Z., ed. Messages from the Governors (Albany, N.Y., 1909), Vol. 2, 450Google Scholar (John Jay, January 28, 1800). Governor Jay may have had the recent example of the Manhattan Company in mind when he said this, but it could as well have applied to turnpikes. Messages, Vol. 2, 511 (George Clinton, January 26, 1802); Vol. 2, 574 (Morgan Lewis, January 28, 1806). Laws of N.Y. 1807, Ch. 38. Massachusetts passed a similar statute on March 16, 1805.

40 Joseph A. Durrenburger, Turnpikes: A Study of the Toll Road Movement in the Middle Atlantic States and Maryland, 82.

41 Joseph S. Davis, Essays in the Earlier History of American Corporations, Vol. 1, 81-84, 101; Vol. 2, 234-242. Baldwin, Simeon E., “American Corporations Before 1786,” American Historical Review, Vol. 8 (1908), 457462.Google ScholarLaws of N.Y. 1798, Ch. 40 (firemen); Ch. 41 (stock fire); Ch. 46 (mutual fire); Ch. 49 (charitable); Ch. 71 (stock fire).

42 Laws of N.Y. 1785, Ch. 39. Laws of Mass. 1784, Ch. 39 (p. 138). On occasion, the New York legislature did erect the heirs of commonly held land into a corporation to facilitate dividing it: Laws of N.Y. 1808, Ch. 202.

43 Livingston, William and Smith, William Jr, eds., Laws of N.Y. 1671-1751 (New York, 1752)Google Scholar: 1737, Ch. 666, sec. 11. This statute was extended in 1743, Ch. 745; 1744, Ch. 768; 1750, Ch. 897.

44 Hammond, Bray, Banks and Politics in America (Princeton, 1967), 9599.Google ScholarMcDonald, Forest, We the People (Chicago, 1965), 293296.Google ScholarThayer, TheodoreThe Land Bank System in the American Colonies,” Journal of Economic History, Vol. 13 (1953), 148157.CrossRefGoogle Scholar Joseph S. Davis, Essays in the Earlier History of American Corporations, Vol. 1, 73; Vol. 2, 42-43. In 1785 the Pennsylvania legislature incorporated the trustees of the state loan office, but this action merely duplicated the incorporation of the loan office of 1773. New Jersey also incorporated county loan commissioners in 1773, Ch. 111, and 1774, Ch. 591, sec. 22.

45 The first bank chartered by the New York legislature was the Bank of, North America, June 1782, a reincorporation of a bank chartered by the United States Congress to facilitate the war. It never operated in New York. The Massachusetts Bank, chartered in 1784 (Ch. 2), was also conceived as a public service institution. Oscar Handlin and Handlin, Mary F., Commonwealth (Cambridge, Mass., 1969), 99101.Google Scholar

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50 Attorney General v. Utica Insurance Company (N.Y.), 1817, 2 Johns Chancery 390-391.

51 The People v. Utica Insurance Company (N.Y.) 1818, 15 Johns 366367.Google Scholar

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54 The People v. Utica Insurance Company (N.Y.), 1818, 15 Johns 381382.Google Scholar

55 Messages from the Governors of New York (Albany, 1909), Vol. 2, 916917Google Scholar (DeWitt Clinton, January 27, 1818).

56 N.Y. Senate Journal 1818, 163, 166.

57 Bray Hammond, Banks and Politics in America, 178-183.

58 Bray Hammond, Banks and Politics in America, 578-579.

59 Seavoy, Ronald E., “Laws to Encourage Manufacturing: New York Policy and the 1811 General Incorporation Statute,” Business History Review, Vol. 46 (Spring, 1972), 8791.CrossRefGoogle Scholar

60 Laws of N.Y. 1814, Ch. 12 (second session).

61 Lincoln, Charles Z., ed., Messages from the Governors (Albany, 1909), Vol. 2, 899Google Scholar (DeWitt Clinton, January 27, 1818). Cadman, John W., The Corporation in New Jersey (Cambridge, Mass., 1949), 2025.CrossRefGoogle Scholar

62 Aaron Clark, ed., “A List of all Incorporations in New York," Assembly Journal of N.Y. 1819, Appendix. Gillet, T. S., ed., General Index of the Laws of the State of New York (Albany, 1859).Google Scholar

63 Ronald E. Seavoy, “Laws to Encourage Manufacturing: New York Policy and the 1811 General Incorporation Statute,” 92-95. Pursell, Carroll W. Jr, Early Stationary Steam Engines in America (Washington, 1969), 6168.Google Scholar Business incorporation policy was fully democratized in Connecticut by a statute passed in 1837 (Ch. 63), which allowed three or more persons to form corporations for any land of manufacturing, mechanical, mining, quarrying, or other lawful business.

64 Aubrey, Henry G., “Investment Decisions in Underdeveloped Countries,” in Novack, David E. and Lekachman, Robert, eds., Development and Society (New York, 1968), 98100Google Scholar. Evans, George H., “A Theory of Entrepreneurship,” Journal of Economic History, Vol. 2 (1942 supplement), 142144.CrossRefGoogle Scholar

65 Schumpeter, Joseph A., Capitalism, Socialism, and Democracy (New York, 1942), 132.Google Scholar

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