Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/51

 CHAP. III.] ANALYSIS OF A CORPORATION. [§51. shareholders whose acts cause the operation of the rules of law in the constitution. In these two meanings of the term the old idea of the " legal person " has no place. 1 There is, 1 How persons could succeed each other in the enjoyment of the same rights was a puzzle iu the early law, to be solved only through regarding the successor as continuing in some way the legal personality of his prede- cessor. See the chapters on Succes- sion in Holmes, "On the Common Law." The best known instance of the continuance of legal personality is the universal succession of the Roman law. But the early common law notions of succession resemble those of the Roman law more closely than is ordinarily supposed. The fiction of a legal person was largely due to the difficulties of the early lawyers regarding the succes- sion of oue person to the rights of another. Even to-day we help out our thought by saying that an as- signee "stands in the shoes" of his assignor. However useful this fic- tion may once have been, it is to-day inadequate for the purpose of doing justice among persons interested in corporate enterprises. And even where it can still be used, matters may be frequently simplified by avoiding it. Take, for instance, the following passage: " If a person be- comes surety to several people for the conduct of a servant in their em- ploy, and those people are after- wards incorporated, the surety is dis- charged; for the person created by the act of incorporation is different from the persons in whose employ the servant was, and with whom the surety contracted." 1 Lindley on Part., 214; see Bensingeru. Wren, 100 Pa. St. 500. In this passage a fiction is used to prove a legal proposition, the plain reasons of which lie on the sur- face. The contract of suretyship is strictly construed in favor of the surety. In the passage quoted, the liability of the corporators for acts of their servants, as well as their rela- tions to the latter, were changed by their own incorporation. Any such change discharges the surety, who made a certain distinct contract, which was not a contract to guaranty the fidelity of a servant of an in- corporated body of men. It is in respect of the doctrine of ultra vires, that the fiction of a legal person is most pernicious, as this fic- tion involves regarding a corporation as a unit, and retards the proper dis- crimination of the rights of different persons in regard to ultra vires acts. Moreover, in the present condition of business enterprises in this country, this fiction may give rise to insol- vable problems. For instance, a rail- road company, whose road extends through two states, is organized un- der charters from both, each charter being the counterpart of the other. Is the result one or two " legal per- sons"? Since as much may be said on one side as the other, the problem is as insolvable as it is gratuitous. The question of real importance is: What are the rights and liabilities arising under these charters in re- spect of the corporate enterprise? And this question may be answered without reference to whether this raiload company is one or two " per- sons," or Siamese twins born of dif- ferent mothers. Two recent judicial utterances re- garding the fiction of a " legal per- son" are of interest: "The abstract idea of a corporation, the legal entity, 31