Colonial CHAPTER IV EARLY BACKGROUNDS OF THE AMERICAN CONSTITUTION THE TRADING COMPANIES A DISTINGUISHED statesman has observed that as the British Constitution is the most subtile organism which has proceeded from... progressive history, so the American Constitution is . . . the most wonderful work ever struck off at a given time by the brain and purpose of man." 1 With this commendation of the Constitution the layman is likely to agree, but the historian would dissent, unless Mr. Gladstone's statement, for it was he who made the remark, is to be construed in such a way that the American like the British constitution be looked upon as the most subtile organism which has proceeded from progressive history. For the fact is that, with the Saxon conquest of England, progressive history began in England, and with the advent of the first English settler to America, progressive history began in America, and the culminations were the unwritten constitution of Great Britain on the one hand and the written Constitution of the United States on the other. If, however, the constitution of Great Britain were that of America, it would not have required the calling of a convention to reduce it to writing, and although it was undoubtedly in the minds of those who framed the American instrument of government, it was not the British constitution of 1787 but the British constitution as expressed in colonial charters adjusted to the conditions and circumstances of the new environment and incorporated in the Constitutions of the several independent states of America (to quote the title of a Congressional publication of 1781 2), which formed the firm and sure foundation upon which the new structure was reared. It is common knowledge that the territories which formed the thirteen British colonies, and ultimately the thirteen original States, were settled under charters granted by the Crown; that the earliest of these charters, to the London and New England Companies, were in form and content similar to, if not identical with the charters granted to the Trading Companies of England, of which the East India Company is the most famous and typical example; 1 William E. Gladstone, Gleanings of Past Years, 1843-78, Vol. i, p. 212. 2 The Constitutions of the several independent states of America; the Declaration of independence; the Articles of confederation between the said states; the treaties between His Most Christian Majesty and the United States of America. Published by order of Congress, Philadelphia, 1781. that the form of government developed in Virginia under its charter was followed by the colonies south of Mason and Dixon's line; and that the form of government developed in Massachusetts under its charter, was followed by the colonies to the north of that line. It is important to dwell upon these facts, because they show how naturally the framers of the American Constitution were consciously or unconsciously influenced by generations of colonial experience and practice to authorize the judicial power of the United States to declare unconstitutional those acts of Congress and of the States forming the American union inconsistent with that charter which we call the Constitution, just as the courts of the mother-country had from time to time declared null and void legislation on the part of the colonies in excess of the grants contained in the charters creating these bodies politic. In the first volume of his history of Massachusetts, published in 1764, Thomas Hutchinson, then Chief Justice and Lieutenant Governor, and soon to become the last Royal Governor of that Commonwealth, said, in speaking of the original charter of the colony granted on March 4, 1628: It is evident from the charter that the original design of it was to constitute a corporation in England, like to that of the East-India and other great companies, with powers to settle plantations within the limits of the territory, under such forms of government and magistracy as should be fit and necessary.1 More recently Mr. George Cawston, a specialist in such matters and an incorporator of the British South African Company, has said: Most of the colonial possessions of this Empire were in the first place settled through the agency of Chartered Companies, and that our foreign trade and commerce principally originated in the same manner. In his interesting and instructive volume entitled The Early Chartered Companies, Mr. Cawston quotes with approval in the preface that "individuals cannot extend society to distant places without forming a compact amongst themselves, and obtaining some guarantee for its being observed," to which he adds upon his own authority: All the old and most successful British colonies in America, Virginia, Massachusetts, Connecticut, Rhode Island, Pennsylvania, Maryland, and Georgia, which formed the basis of that most wonderful country, the United States of America, were founded by individuals whose public spirit, prudence, and resolution were not otherwise assisted by the Government of their country. The charter from the Crown simply erected each of those bodies of individuals into a corporation, with authority required for accomplishing, to use the words of several of these charters, "their generous and noble purpose." 1 Thomas Hutchinson, The History of the Colony of Massachusets-Bay, 1764, p. 13. 2 George Cawston and A. H. Keane, The Early Chartered Companies, 1896, Preface, pp. vii-viii. Genesis of Authority Court in of Supreme Questions of Constitutionality Two Corporations In Chapter X of the volume to which reference has been made, a careful and readable account is given of "The Virginia and New England Companies and Provincial Charters," in the course of which attention is directed to a distinction which should have been made by the Crown on its own motion, but which was ultimately wrung from the mother country as the result of a bitter experience: And here a distinction should be drawn between charters granted to English trading companies, which on the whole were injurious, and charters granted to the settlers themselves, which were often beneficial and highly prized as legal instruments affording protection against the oppressive or unconstitutional measures of the Crown and the provincial Governors. In general it may be said that charters of this second category should alone have been granted, or at least the others should have been withdrawn as soon as the colonists felt themselves strong enough for self-government. Indeed, there was a natural tendency in this direction, and the control of the trading associations was ultimately everywhere replaced by representative assemblies. But the change was not always effected without considerable friction, which was due to the fact that the Home Government was slow to recognize the true relations that ought to have prevailed from the first between the colonies and the mother country. Those colonies were, and should have been regarded as, mere extensions of England beyond the seas, as Professor Seeley has clearly shown in his Expansion of England,' and had this patent fact been grasped by the ruling classes in the eighteenth century, there need, perhaps, never have been an American Revolution.1 The settlers in the new world were therefore bound to be familiar with corporations, the characteristics of which are stated by Mr. Stewart Kyd, a contemporary of the framers of the Constitution, in his treatise on the law of corporations, published in 1793-4, shortly after the Constitution of the United States went into effect. Mr. Kyd, dating the second of the two volumes from the Tower, to which he had been committed on a charge of high treason because of his liberal views more unfashionable then than they are today - thus speaks of corporations: Among the institutions of almost all the states of modern Europe, but among none more than those of England, many of these collective bodies of men, under the names of bodies politic, bodies corporate, or corporations, make a conspicuous figure. At their first introduction, they were little more than an improvement on the communities which had grown up imperceptibly, without any positive institution; and, for a considerable period, the shade which separated the one from the other, was of a touch so delicate as to require the most minute attention, and the most discerning eye, to distinguish. One essential characteristic of a corporation is an indefinite duration, by a continued accession of new members to supply the place of those who are removed by death, or other means, which, in the language of the law, is called perpetual succession: . . . 1 Cawston and Keane, The Early Chartered Companies, pp. 198–9. It is another characteristic of a corporation, that it is capable in its collective capacity of possessing property, and transmitting it in perpetual succession; A third characteristic of a corporation is, that the members of which it is composed, are subject to common burthens; . Another characteristic of a corporation is, that it may sue and be sued in its collective capacity; . . . And after stating what he calls the essentials, he continues: A CORPORATION then, or a body politic, or body incorporate, is a collection of many individuals, united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by the policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.1 The views which Mr. Kyd expressed and which were no doubt shared by American lawyers of his day were, it is believed, also the views of the early settlers; and these views were based upon reported cases decided by English Judges during the period of American colonization. Thus, Sir Henry Hobart, 66 a most learned, prudent, grave and religious Judge," Attorney General from 1606-13, when the early American charters were granted, and Chief Justice of the Court of Common Pleas from the latter date to his death in 1625, said in the case of Norris v. Staps (Hobart, 211), decided in 1617: 66 Now I am of opinion, that though power to make laws, is given by spe- By-Laws cial clause in all incorporations, yet it is needless; for I hold it to be included by law, in the very act of incorporating, as is also the power to sue, to purchase, and the like. For, as reason is given to the natural body for the governing of it, so the body corporate must have laws as a politick reason to govern it, but those laws must ever be subject to the general law of the realm as subordinate to it. And therefore though there be no proviso for that purpose, the law supplies it. And if the King in his letters patents of incorporation do make ordinances himself, as here it was (as aforesaid) yet they are also subject to the same rule of law. In his treatise on the law of corporations Mr. Kyd laid it down that “not only all bye-laws must be reasonable and consistent with the general principles of the law of the land" for which Lord Hobart's authority is sufficient, but also their reasonableness and legality must be determined by the Judges in the Superior Courts when they are properly before them"; for which statement the learned author invoked the authority of the Master and Company of Framework-Knitters v. Green (1 Lord Raymond, 114), decided in 1695, in which it was said by the Justices that "members of corporations are not bound 1 Stewart Kyd, A Treatise on The Law of Corporations, 1793, Vol. i, pp. 2, 3-4, 7, 10, 13. Develop ment of Trading Companies to perform by-laws unless they are reasonable, and the reasonableness of them is examinable by the Judges." Finally, for present purposes, another quotation may be made from Kyd, as it is material to the subject in hand. Thus he says: When the corporate body has a jurisdiction over certain limits, a bye-law made by them for the public good, and whose object is general without being limited to people of any particular description, binds every body coming within the limits of the jurisdiction, whether strangers or members of the corporate body [Brownl. and Goulds, 179]; for every man, says Holt, who comes within the limits of the local jurisdiction of a corporation, must take notice of their bye-laws at his peril [Per Holt, Skin. 35].i The charter granted territory within which the trading companies should operate. It incorporated certain persons, making of them and their successors a body politic, providing for a governor or treasurer, whom we today would call a president or chairman; for a general court, council, or assistants, whom we today would call a board of directors; and a more numerous body of persons declared to be "free of the company," whom we would today call stockholders in a company engaged in a common venture upon a joint capital, but who would be tradesmen in a trading company, where each member acted individually, not jointly. The nature of this process, its development and its consequences are thus stated by Messrs. Cawston and Keane in their work on The Early Chartered Companies: The trading associations that were now springing up and clamouring for the aegis of the most high, mightie and magnificent Empresse Elizabeth were constituted on two distinct principles. First in the natural and actual order came the so-called Regulated Companies, which were suitable to the first efforts of the nation to acquire a share of the world's trade, but destined eventually to be superseded by the far more powerful and efficient JointStock Companies. For a long time all belonged to the first category, and even so late as the end of the seventeenth century there existed in England only three founded on the joint-stock principle, although these three-the East India, the Royal African, and the Hudson Bay-were perhaps more important than all the rest put together. In the regulated' companies, at that time chiefly represented by the Russia, the Turkey, and the Eastland, every member or 'freeman' traded solely on his own account, subject only to the regulations' of the association. In fact, they may be regarded as growing out of the trade guilds, modified to meet the requirements of their more enlarged sphere of action. In the guilds each member purchased a license to ply his trade in his own district at his personal risk, the guild itself being irresponsible for his liabilities in case of failure. On the other hand, he enjoyed all the advantages of membership in an incorporated trade, which could not be exercised by outsiders, even though residents in the district. In the same way no subject of the Crown could trade in any foreign 'district' where a regulated company was established without first acquiring membership by the payment of a fee.2 1 Kyd, A Treatise on the Law of Corporations, Vol. ii, p. 104. * Cawston and Keane, Early Chartered Companies, pp. 9-10. |