PERSONS.
§ 108. =The Nature of Personality.=
The purpose of this chapter is to investigate the legal conception of
personality. It is not permissible to adopt the simple device of saying
that a person means a human being, for even in the popular or non-legal
use of the term there are persons who are not men. Personality is a
wider and vaguer term than humanity. Gods, angels, and the spirits of
the dead are persons, no less than men are. And in the law this want of
coincidence between the class of persons and that of human beings is
still more marked. In the law there may be men who are not persons;
slaves, for example, are destitute of legal personality in any system
which regards them as incapable of either rights or liabilities. Like
cattle, they are things and the objects of rights; not persons and the
subjects of them. Conversely there are, in the law, persons who are not
men. A joint-stock company or a municipal corporation is a person in
legal contemplation. It is true that it is only a fictitious, not a real
person; but it is not a fictitious _man_. It is personality, not human
nature, that is fictitiously attributed by the law to bodies corporate.
So far as legal theory is concerned, a person is any being whom the law
regards as capable of rights or duties. Any being that is so capable is
a person, whether a human being or not, and no being that is not so
capable is a person, even though he be a man. Persons are the substances
of which rights and duties are the attributes. It is only in this
respect that persons possess juridical significance, and this is the
exclusive point of view from which personality receives legal
recognition.
But we may go one step further than this in the analysis. No being is
capable of rights, unless also capable of interests which may be
affected by the acts of others. For every right involves an underlying
interest of this nature. Similarly no being is capable of duties, unless
also capable of acts by which the interests of others may be affected.
To attribute rights and duties, therefore, is to attribute interests and
acts as their necessary bases. A person, then, may be defined, for the
purposes of the law, as any being to whom the law attributes a
capability of interests and therefore of rights, of acts and therefore
of duties.
Persons as so defined are of two kinds, distinguishable as natural and
legal. A natural person is a being to whom the law attributes
personality in accordance with reality and truth. Legal persons are
beings, real or imaginary, to whom the law attributes personality by way
of fiction, when there is none in fact. Natural persons are persons in
fact as well as in law; legal persons are persons in law but not in
fact.[256]
§ 109. =The Legal Status of the Lower Animals.=
The only natural persons are human beings. Beasts are not persons. They
are merely things—often the objects of legal rights and duties, but
never the subjects of them. Beasts, like men, are capable of acts and
possess interests. Yet their acts are neither lawful nor unlawful; they
are not recognised by the law as the appropriate subject-matter either
of permission or of prohibition. Archaic codes did not scruple, it is
true, to punish with death in due course of law the beast that was
guilty of homicide. “If an ox gore a man or a woman that they die: then
the ox shall be surely stoned and his flesh shall not be eaten.”[257] A
conception such as this pertains to a stage that is long since past; but
modern law shows us a relic of it in the rule that the owner of a beast
is liable for its trespasses, just as a master must answer for his
servant, or a slave-owner for his slave.[258] This vicarious liability,
however, does not involve any legal recognition of the personality of
the animal whose misdeeds are thus imputed to its owner.
A beast is as incapable of legal rights as of legal duties, for its
interests receive no recognition from the law. _Hominum causa omne jus
constitutum._[259] The law is made for men, and allows no fellowship or
bonds of obligation between them and the lower animals. If these last
possess moral rights—as utilitarian ethics at least need not scruple to
admit—those rights are not recognised by any legal system. That which is
done to the hurt of a beast may be a wrong to its owner or to the
society of mankind, but it is no wrong to the beast. No animal can be
the owner of any property, even through the medium of a human trustee.
If a testator vests property in trustees for the maintenance of his
favourite horses or dogs, he will thereby create no valid trust
enforceable in any way by or on behalf of these non-human beneficiaries.
The only effect of such provisions is to authorise the trustees, if they
think fit, to expend the property or any part of it in the way so
indicated; and whatever part of it is not so spent will go to the
testator’s representatives as undisposed of.[260]
There are, however, two cases in which beasts may be thought to possess
legal rights. In the first place, cruelty to animals is a criminal
offence, and in the second place, a trust for the benefit of particular
classes of animals, as opposed to one for individual animals, is valid
and enforceable as a public and charitable trust; for example, a
provision for the establishment and maintenance of a home for stray dogs
or broken-down horses.[261] Are we driven by the existence of these
cases to recognise the legal rights and therefore the legal personality
of beasts? There is no occasion for any such conflict with accustomed
modes of thought and speech. These duties towards animals are conceived
by the law as duties towards society itself. They correspond not to
private rights vested in the immediate beneficiaries, but to public
rights vested in the community at large—for the community has a rightful
interest, legally recognised to this extent, in the well-being even of
the dumb animals which belong to it.
§ 110. =The Legal Status of Dead Men.=
Dead men are no longer persons in the eye of the law. They have laid
down their legal personality with their lives, and are now as destitute
of rights as of liabilities. They have no rights because they have no
interests. There is nothing that concerns them any longer, “neither have
they any more a portion for ever in anything that is done under the
sun.” They do not even remain the owners of their property until their
successors enter upon their inheritance. We have already seen how, in
the interval between death and the entering of the heir, Roman law
preferred to personify the inheritance itself, rather than attribute any
continued legal personality or ownership to the dead man.[262] So in
English law the goods of an intestate, before the grant of letters of
administration, have been vested in the bishop of the diocese or in the
judge of the Court of Probate, rather than left to the dead until they
are in truth acquired by the living.
Yet although all a man’s rights and interests perish with him, he does
when alive concern himself much with that which shall become of him and
his after he is dead. And the law, without conferring rights upon the
dead, does in some degree recognise and take account after a man’s death
of his desires and interests when alive. There are three things, more
especially, in respect of which the anxieties of living men extend
beyond the period of their deaths, in such sort that the law will take
notice of them. These are a man’s body, his reputation, and his estate.
By a natural illusion a living man deems himself interested in the
treatment to be awarded to his own dead body. To what extent does the
law secure his desires in this matter? A corpse is the property of no
one. It cannot be disposed of by will or any other instrument,[263] and
no wrongful dealing with it can amount to theft.[264] The criminal law,
however, secures decent burial for all dead men, and the violation of a
grave is a criminal offence.[265] “Every person dying in this country,”
it has been judicially declared,[266] “has a right to Christian burial.”
On the other hand the testamentary directions of a man as to the
disposal of his body are without any binding force,[267] save that by
statute he is given the power of protecting it from the indignity of
anatomical uses.[268] Similarly a permanent trust for the maintenance of
his tomb is illegal and void, this being a purpose to which no property
can be permanently devoted.[269] Even a temporary trust for this purpose
(not offending against the rule against perpetuities) has no other
effect than that already noticed by us as attributed to trusts for
animals, its fulfilment being lawful but not obligatory.[270] Property
is for the uses of the living, not of the dead.
The reputation of the dead receives some degree of protection from the
criminal law. A libel upon a dead man will be punished as a
misdemeanour—but only when its publication is in truth an attack upon
the interests of living persons. The right so attacked and so defended
is in reality not that of the dead, but that of his living descendants.
To this extent, and in this manner only, has the maxim _De mortuis nil
nisi bonum_ obtained legal recognition and obligation.[271]
By far the most important matter, however, in which the desires of dead
men are allowed by the law to regulate the actions of the living is that
of testamentary succession. For many years after a man is dead, his hand
may continue to regulate and determine the disposition and enjoyment of
the property which he owned while living. This, however, is a matter
which will receive attention more fitly in another place.
§ 111. =The Legal Status of Unborn Persons.=
Though the dead possess no legal personality, it is otherwise with the
unborn. There is nothing in law to prevent a man from owning property
before he is born. His ownership is necessarily contingent, indeed, for
he may never be born at all; but it is none the less a real and present
ownership. A man may settle property upon his wife and the children to
be born of her. Or he may die intestate, and his unborn child will
inherit his estate. Yet the law is careful lest property should be too
long withdrawn in this way from the uses of living men in favour of
generations yet to come; and various restrictive rules have been
established to this end. No testator could now direct his fortune to be
accumulated for a hundred years and then distributed among his
descendants.
A child in its mother’s womb is for many purposes regarded by a legal
fiction as already born, in accordance with the maxim, _Nasciturus pro
jam nato habetur_. In the words of Coke: “The law in many cases hath
consideration of him in respect of the apparent expectation of his
birth.”[272]
To what extent an unborn person can possess personal as well as
proprietary rights is a somewhat unsettled question. It has been held
that a posthumous child is entitled to compensation under Lord
Campbell’s Act for the death of his father.[273] Wilful or negligent
injury inflicted on a child in the womb, by reason of which it dies
after having been born alive, amounts to murder or manslaughter.[274] A
pregnant woman condemned to death is respited as of right, until she has
been delivered of her child. On the other hand, in a case in which a
claim was made by a female infant against a railway company for injuries
inflicted upon her while in her mother’s womb through a collision due to
the defendant’s negligence, it was held by an Irish court that no cause
of action was disclosed.[275] The decision of two of the four judges,
however, proceeded upon the ground that the company owed no duty of care
towards a person whose existence was unknown to them, and not upon the
ground that an unborn child has in no case any right of immunity from
personal harm.
The rights of an unborn person, whether proprietary or personal, are all
contingent on his birth as a living human being. The legal personality
attributed to him by way of anticipation falls away _ab initio_ if he
never takes his place among the living. Abortion is a crime; but it is
not homicide, unless the child is born alive before he dies. A
posthumous child may inherit; but if he dies in the womb, or is
stillborn, his inheritance fails to take effect, and no one can claim
through him, though it would be otherwise if he lived for an hour after
his birth.
§ 112. =Double Personality.=
It often happens that a single human being possesses a double
personality. He is one man, but two persons. _Unus homo_, it is said,
_plures personas sustinet_. In one capacity, or in one right as English
lawyers say, he may have legal relations with himself in his other
capacity or right. He may contract with himself, or owe money to
himself, or transfer property to himself. Every contract, debt,
obligation, or assignment requires two persons; but those two persons
may be the same human being. This double personality exists chiefly in
the case of trusteeship. A trustee is, as we have seen, a person in whom
the property of another is nominally vested, to the intent that he may
represent that other in the management and protection of it. A trustee,
therefore, is for many purposes two persons in the eye of the law. In
right of his beneficiary he is one person, and in his own right he is
another. In the one capacity he may owe money to himself in the other.
In the one capacity he may own an encumbrance over property which
belongs to himself in the other. He may be his own creditor, or his own
landlord; as where a testator appoints one of his creditors as his
executor, or makes one of his tenants the trustee of his land.[276] In
all such cases, were it not for the recognition of double personality,
the obligation or encumbrance would be destroyed by merger, or
_confusio_ as the Romans called it, for two persons at least are
requisite for the existence of a legal relation. No man can in his own
right be under any obligation to himself, or own any encumbrance over
his own property. _Nulli res sua servit._[277]
§ 113. =Legal Persons.=
A legal person is any subject-matter to which the law attributes a
merely legal or fictitious personality. This extension, for good and
sufficient reasons, of the conception of personality beyond the limits
of fact—this recognition of persons who are not men—is one of the most
noteworthy feats of the legal imagination, and the true nature and uses
of it will form the subject of our consideration during the remainder of
this chapter.
The law, in creating legal persons, always does so by personifying some
real thing. Such a person has to this extent a real existence, and it is
his personality alone that is fictitious. There is, indeed, no
theoretical necessity for this, since the law might, if it so pleased,
attribute the quality of personality to a purely imaginary being, and
yet attain the ends for which this fictitious extension of personality
is devised. Personification, however, conduces so greatly to simplicity
of thought and speech, that its aid is invariably accepted. The thing
personified may be termed the _corpus_ of the legal person so
created;[278] it is the body into which the law infuses the _animus_ of
a fictitious personality.
Although all fictitious or legal personality involves personification,
the converse is not true. Personification in itself is a mere metaphor,
not a legal fiction. Legal personality is a definite legal conception;
personification, as such, is a mere artifice of speech devised for
compendious expression. In popular language, and in legal language also,
when strictness of speech is not called for, the device of
personification is extensively used. We speak of the estate of a
deceased person as if it were itself a person. We say that it owes
debts, or has debts owing to it, or is insolvent. The law, however,
recognises no legal personality in such a case. The rights and
liabilities of a dead man devolve upon his heirs, executors, and
administrators, not upon any fictitious person known as his estate.
Similarly we speak of a piece of land as entitled to a servitude, such
as a right of way over another piece. So, also, in the case of common
interests and actions, we personify as a single person the group of
individuals concerned, even though the law recognises no body corporate.
We speak of a firm as a person distinct from the individual partners. We
speak of a jury, a bench of judges, a public meeting, the community
itself, as being itself a person instead of merely a group or society of
persons. But legal personality is not reached until the law recognises,
over and above the associated individuals, a fictitious being which in a
manner represents them, but is not identical with them.
Legal persons, being the arbitrary creations of the law, may be of as
many kinds as the law pleases. Those which are actually recognised by
our own system, however, all fall within a single class, namely
corporations or bodies corporate. A corporation is a group or series of
persons which by a legal fiction is regarded and treated as itself a
person. If, however, we take account of other systems than our own, we
find that the conception of legal personality is not so limited in its
application, and that there are at least three distinct varieties. They
are distinguished by reference to the different kinds of things which
the law selects for personification.
1. The first class of legal persons consists of corporations, as already
defined, namely those which are constituted by the personification of
groups or series of individuals. The individuals who thus form the
_corpus_ of the legal person are termed its _members_. We shall consider
this form of fictitious personality more particularly in the sequel.
2. The second class is that in which the _corpus_, or object selected
for personification, is not a group or series of persons, but an
institution. The law may, if it pleases, regard a church, or a hospital,
or a university, or a library, as a person. That is to say, it may
attribute personality not to any group of persons connected with the
institution, but to the institution itself. Our own law does not,
indeed, so deal with the matter. The person known to the law of England
as the University of London is not the institution that goes by that
name, but a personified and incorporated aggregate of human beings,
namely the chancellor, vice-chancellor, fellows, and graduates. It is
well to remember, however, that notwithstanding this tradition and
practice of English law, fictitious personality is not limited by any
logical necessity, or, indeed, by any obvious requirement of expediency,
to the incorporation of bodies of individual persons.
3. The third kind of legal person is that in which the _corpus_ is some
fund or estate devoted to special uses—a charitable fund, for example,
or a trust estate, or the property of a dead man or of a bankrupt. Here,
also, English law prefers the process of incorporation. If it chooses to
personify at all, it personifies not the fund or the estate, but the
body of persons who administer it. Yet the other way is equally
possible, and may be equally expedient. The choice of the _corpus_ into
which the law shall breathe the breath of a fictitious personality is a
matter of form rather than of substance, of lucid and compendious
expression rather than of legal principle.
§ 114. =Corporations.=
We have now to consider more particularly the nature and purposes of the
legal conception of incorporation, inasmuch as legal personality goes no
further than this in English law. Much of what is said in this special
connection, however, will be applicable _mutatis mutandis_ to the other
classes of legal persons also.
Corporations are of two kinds, distinguished in English law as
corporations aggregate and corporations sole. “Persons,” says Coke,[279]
“are of two sorts, persons natural created of God, ... and persons
incorporate or politique created by the policy of man (and therefore
they are called bodies politique); and those be of two sorts, viz.,
either sole, or aggregate of many.” A corporation aggregate is an
incorporated _group_ of coexisting persons, and a corporation sole is an
incorporated _series_ of successive persons. The former is that which
has several members at a time, while the latter is that which has only
one member at a time. Corporations aggregate are by far the more
numerous and important. Examples are a registered company, consisting of
all the shareholders, and a municipal corporation, consisting of the
inhabitants of the borough. Corporations sole are found only when the
successive holders of some public office are incorporated so as to
constitute a single, permanent, and legal person. The Sovereign, for
example, is a corporation of this kind at common law, while the
Postmaster-General,[280] the Solicitor to the Treasury,[281] and the
Secretary of State for War[282] have been endowed by statute with the
same nature.[283]
It is essential to recognise clearly the element of legal fiction
involved in both those forms of incorporation, for this has been made by
some writers a matter of dispute. A company is in law something
different from its shareholders or members.[284] The property of the
company is not in law the property of the shareholders. The debts and
liabilities of the company are not attributed in law to its members. The
company may become insolvent, while its members remain rich. Contracts
may be made between the company and a shareholder, as if between two
persons entirely distinct from each other. The shareholders may become
so reduced in number that there is only one of them left; but he and the
company will be distinct persons for all that.[285]
May we not go further still, and say that a company is capable of
surviving the last of its members? At common law indeed, a corporation
is dissolved by the death of all its members.[286] There is, however,
no logical necessity for any such rule, and it does not apply to
corporations sole, for beings of this sort lead a continuous life,
notwithstanding the intervals between the death or retirement of each
occupant of the office and the appointment of his successor. Nor is
there any reason to suppose that such a ground of dissolution is known
to the trading corporations which are incorporated under the Companies
Acts. Being established by statute, they can be dissolved only in
manner provided by the statute to which they owe their origin.[287]
The representatives of a deceased shareholder are not themselves
members of the company, unless they become registered as such with
their own consent. If, therefore, on the death of the last surviving
members of a private company, their executors refuse or neglect to be
registered in their stead, the company will no longer have any
members. Is it, for that reason, _ipso jure_ dissolved? If not, it is
clear that since a company can survive its members and exist without
them, it must be something entirely distinct from them.[288]
In all those respects a corporation is essentially different from an
unincorporated partnership. A firm is not a person in the eye of the
law; it is nothing else than the sum of its individual members. There is
no fictitious being, standing over against the partners, as a company
stands over against its shareholders. The property and debts of the firm
are nothing else than those of the partners. A change in the list of
partners is the substitution of a new firm for the old one, and there is
no permanent legal unity, as in the case of the company. There can be no
firm which consists of one partner only, as a company may consist of one
member. The incorporation of a firm—that process by which an ordinary
partnership is transmuted into a company—effects a fundamental change in
the legal relations of its members. It is nothing less than the birth of
a new being, to whom the whole business and property of the partnership
is transferred—a being without soul or body, not visible save to the eye
of the law, but of a kind whose power and importance, wealth and
activity, are already great, and grow greater every day.
In the case of corporations sole, the fictitious nature of their
personality is equally apparent. The chief difficulty in apprehending
the true nature of a corporation of this description is that it bears
the same name as the natural person who is its sole member for the time
being, and who represents it and acts for it. Each of them is the
Sovereign, or the Solicitor to the Treasury, or the Secretary of State
for War. Nevertheless under each of these names two persons live. One is
a human being, administering for the time being the duties and affairs
of the office. He alone is visible to the eyes of laymen. The other is a
mythical being whom only lawyers know of, and whom only the eye of the
law can perceive. He is the true occupant of the office; he never dies
or retires; the other, the person of flesh and blood, is merely his
agent and representative, through whom he performs his functions. The
living official comes and goes, but this offspring of the law remains
the same for ever.
The doctrine that corporations are _personae fictae_, though generally
received, has not passed unchallenged. Attempts have been made in
recent years, especially by German jurists, to establish in place of
it a new theory which regards corporate personality as a reality, and
not a fictitious construction of the law. A corporation, it is said,
is nothing more, in law or in fact, than the aggregate of its members
conceived as a unity, and this unity, this organisation of human
beings, is a real person and a living organism, possessed of a real
will of its own, and capable of actions and of responsibility for
them, just as a man is.
With respect to this theory it is to be observed that, even if
applicable to corporations aggregate, it must leave corporations sole
and the other classes of legal persons to be explained in the older
fashion. And even in the case of corporations aggregate it seems
impossible to admit that their personality is anything more than the
outcome of metaphor and fiction. A society is not a person, but a
number of persons. The so-called will of a company is in reality
nothing but the wills of a majority of its directors or shareholders.
Ten men do not become in fact one person, because they associate
themselves together for one end, any more than two horses become one
animal when they draw the same cart. The apparent absurdity of holding
that a rich and powerful joint-stock company is a mere fiction of the
law, and possesses no real existence, proceeds not from the
fiction-theory, but from a misunderstanding of it. No one denies the
reality of the company (that is to say, the group of shareholders).
What is in truth denied is the reality of its personality. A group or
society of men is a very real _thing_, but it is only a fictitious
_person_.[289]
§ 115. =The Agents, Beneficiaries, and Members of a Corporation.=
Although corporations are fictitious persons, the acts and interests,
rights and liabilities, attributed to them by the law are those of real
or natural persons, for otherwise the law of corporations would be
destitute of any relation to actual fact and of any serious purpose.
Every corporation, therefore, involves in the first place some real
person or persons whose interests are fictitiously attributed to it, and
in the second place some real person or persons whose acts are
fictitiously imputed to it. A corporation, having neither soul nor body,
cannot act save through the agency of some representative in the world
of real men. For the same reason it can have no interests, and therefore
no rights, save those which are attributed to it as a trustee for or
otherwise on behalf of actual human beings.[290] Whatever a company is
reputed to do in law is done in fact by the directors or the
shareholders as its agents and representatives. Whatever interests,
rights, or property it possesses in law are in fact those of its
shareholders, and are held by it for their benefit. Every legal person,
therefore, has corresponding to it in the world of natural persons
certain agents or representatives by whom it acts, and certain
beneficiaries on whose behalf it exists and fulfils its functions. Its
representatives may or may not be different persons from its
beneficiaries, for these two capacities may or may not be united in the
same individuals. The shareholders of a company are not merely the
persons for whose benefit it exists; they are also those by whom it
acts. In the case of a corporation established for charitable purposes
it is otherwise, for the beneficiaries may have no share whatever in the
management of its affairs.
The representatives and beneficiaries of a corporation must not be
confounded with its members. These last are, as we have seen, the
individuals who form the group or series personified by the law, and who
so constitute the _corpus_ or body of the fictitious person thus
created. Membership of a corporation does not in itself affect in any
way the rights or liabilities of the members, for it is nothing more
than a matter of form. A man’s privileges and responsibilities in
respect of a corporation depend on whether he is one of its
representatives or beneficiaries, not on whether he is formally
accounted by the law as one of its members. Municipal corporations are
constituted by the incorporation of the inhabitants of boroughs; but if
by statute it were declared that they should consist for the future of
the mayor, aldermen, and councillors, the change would not affect the
rights, powers, or liabilities of any human being.
The extent to which the three classes of persons with whom a corporation
is concerned, namely its members, its representatives, and its
beneficiaries, are coincident and comprise the same persons, is a matter
to be determined as the law thinks fit in the particular case. The
members of a corporation may or may not be those by whom it acts, and
they may or may not be those on whose behalf it exists.
It is worth notice that some or all of the members of a corporation may
be corporations themselves. There is nothing to prevent the shares of a
company from being held by other companies. In this case the fiction of
incorporation is duplicated, and the law creates a fictitious person by
the personification of a group of persons who themselves possess a
merely legal and artificial personality.
§ 110 =The Acts and Liabilities of a Corporation.=
When a natural person acts by an agent, the authority of the agent is
conferred, and its limits are determined, by the will and consent of the
principal. In general only those acts of the agent are imputed by the
law to the principal, which are within the limits of the agent’s
authority as thus created and circumscribed. But in the case of a
corporation it is necessarily otherwise. A legal person is as incapable
of conferring authority upon an agent to act on its behalf, as of doing
the act _in propria persona_. The authority of the agents and
representatives of a corporation is therefore conferred, limited, and
determined, not by the consent of the principal, but by the law itself.
It is the law that determines who shall act for a corporation, and
within what limits his activity must be confined. Any act which lies
beyond these legally appointed limits will not be imputed to the
corporation, even though done in its name and on its behalf. It is said
to be _ultra vires_ of the corporation, and as a corporate act it is
null and void.
Speaking generally, we may say that a corporation can do those things
only which are incidental to the fulfilment of the purposes for which
the law created it. All its acts must be directed to its legally
appointed end. Thus the memorandum of association of a company must set
forth the purposes for which it is established; and even the unanimous
consent of the whole body of shareholders cannot effectively enable the
company to act beyond the limits so marked out for its activity.
It is well settled in the law of England that a corporation may be held
liable for wrongful acts, and that this liability extends even to those
cases in which malice, fraud, or other wrongful motive or intent is a
necessary element. A company may be sued for libel, malicious
prosecution, or deceit.[291] Nor is this responsibility civil only.
Corporations, no less than men, are within reach of the arm of the
criminal law. They may be indicted or otherwise prosecuted for a breach
of their statutory duties, and punished by way of fine and
forfeiture.[292]
Although this is now established law, the theoretical basis of the
liability of corporations is a matter of some difficulty and debate. For
in the first place it may be made a question whether such liability is
consistent with natural justice. To punish a body corporate, either
criminally or by the enforcement of penal redress, is in reality to
punish the beneficiaries on whose behalf its property is held, for the
acts of the agents by whom it fulfils its functions. So far, therefore,
as the beneficiaries and the agents are different persons, the liability
of bodies corporate is an instance of vicarious responsibility, and it
is to be justified on the same principles as are applicable to the
vicarious liability of a principal for the unauthorised acts of his
agent—principles which will be considered by us at a later stage of our
enquiry. For although the representatives of a corporation are in form
and legal theory the agents of that fictitious person, yet in substance
and fact they are the agents of the beneficiaries. A company is justly
held liable for the acts of its directors, because in truth the
directors are the servants of the shareholders.
A more serious difficulty in imposing liability upon bodies corporate
arises from the following consideration. The wrongful acts so attributed
by the law to fictitious persons are in reality the acts of their
agents. Now we have already seen that the limits of the authority of
those agents are determined by the law itself, and that acts beyond
those limits will not be deemed in law to be the acts of the
corporation. How, then, can an illegal act be imputed to a corporation?
If illegal, it cannot be within the limits of lawful authority; and if
not within these limits, it cannot be the act of the corporation. The
solution of this difficulty is twofold. In the first place, the argument
does not extend to wrongful acts of _omission_, for these are done by
the body politic in person, and not merely by its representatives. No
fictitious person can do in person what by law it ought not to do, but
it can in person fail to do what in law it ought. And in the second
place, the liability of a corporation for the acts of its
representatives is a perfectly logical application of the law as to an
employer’s liability for his servants. The responsibility of a master
does not depend on any authority given to his servant to commit the
wrongful act. It is the outcome of an absolute rule of law that the
employer is himself answerable for all wrongs committed by his servant
in the course and process of doing that which he is employed to do. I am
liable for the negligence of my servant in driving my carriage, not
because I authorised him to be negligent, but because I authorised him
to drive the carriage. So in the case of the agents of a corporation:
the law imputes to the corporation not only all acts which its agents
are lawfully authorised to do, but all unlawful acts which they do in or
about the business so authorised. The corporation is responsible not
only for what its agents do, being thereunto lawfully authorised, but
also for the manner in which they do it. If its agents do negligently or
fraudulently that which they might have done lawfully and with
authority, the law will hold the corporation answerable.[293]
§ 117. =The Uses and Purposes of Incorporation.=
There is probably nothing which the law can do by the aid of the
conception of incorporation, which it could not do without it. But there
are many things which it can by such aid do better or more easily than
would otherwise be possible. Among the various reasons for admitting
this fictitious extension of personality, we may distinguish one as of
general and fundamental importance, namely, the difficulty which the law
finds in dealing with common interests vested in large numbers of
individuals and with common action in the management and protection of
such interests. The normal state of things—that with which the law is
familiar, and to which its principles are conformed—is individual
ownership. With a single individual the law knows well how to deal, but
common ownership is a source of serious and manifold difficulties. If
two persons carry on a partnership, or own and manage property in
common, complications arise, with which nevertheless the law can deal
without calling in the aid of fresh conceptions. But what if there are
fifty or a hundred joint owners? With such a state of facts legal
principles and conceptions based on the type of individual ownership are
scarcely competent to deal. How shall this multitude manage its common
interests and affairs? How shall it dispose of property or enter into
contracts? What if some be infants, or insane, or absent? What shall be
the effect of the bankruptcy or death of an individual member? How shall
one of them sell or otherwise alienate his share? How shall the joint
and separate debts and liabilities of the partners be satisfied out of
their property? How shall legal proceedings be taken by or against so
great a number? These questions and such as these are full of difficulty
even in the case of a private partnership, if the members are
sufficiently numerous. The difficulty is still greater in the case of
interests, rights, or property vested not in individuals or in definite
associations of individuals, but in the public at large or in
indeterminate classes of the public.
In view of these difficulties the aim of the law has been to reduce, so
far as may be, the complex form of collective ownership and action to
the simple and typical form of individual ownership and action. The law
seeks some instrument for the effective expression and recognition of
the elements of unity and permanence involved in the shifting multitude
with whose common interests and activities it has to deal. There are two
chief devices for this purpose, namely trusteeship and incorporation.
The objects of trusteeship are various, and many of its applications
have a source and significance that are merely historical. In general,
however, it is used as a mode of overcoming the difficulties created by
the incapacity, uncertainty, or multiplicity of the persons to whom
property belongs. The property is deemed by the law to be vested, not in
its true owners, but in one or more determinate individuals of full
capacity, who hold it for safe custody on behalf of those uncertain,
incapable, or multitudinous persons to whom it in truth belongs. In this
manner the law is enabled to assimilate collective ownership to the
simpler form of individual ownership. If the property and rights of a
charitable institution or an unincorporated trading association of many
members are held in trust by one or two individuals, the difficulties of
the problem are greatly reduced.
It is possible, however, for the law to take one step further in the
same direction. This step it has taken, and has so attained to the
conception of incorporation. This may be regarded from one point of view
as merely a development of the conception of trusteeship. For it is
plain that so long as a trustee is not required to _act_, but has merely
to serve as a depositary of the rights of beneficiaries, there is no
necessity that he should be a real person at all. He may be a mere
fiction of the law. And as between the real and the fictitious trustee
there are, in large classes of cases, important advantages on the side
of the latter. He is _one_ person, and so renders possible a complete
reduction of common to individual ownership; whereas the objections to a
single trustee in the case of natural persons are serious and obvious.
The fictitious trustee, moreover, though not incapable of dissolution,
is yet exempt from the inevitable mortality that afflicts mankind. He
embodies and expresses, therefore, to a degree impossible in the case of
natural trustees, the two elements of unity and of permanence which call
for recognition in the case of collective interests. An incorporated
company is a permanent unity, standing over against the multitudinous
and variable body of shareholders whose rights and property it holds in
trust.
It is true, indeed, that a fictitious trustee is incapable of acting in
the matter of his trust in his proper person. This difficulty, however,
is easily avoided by means of agency, and the agents may be several in
number, so as to secure that safety which lies in a multitude of
counsellors, while the unity of the trusteeship itself remains
unaffected.
We have considered the general use and purpose of incorporation. Among
its various special purposes there is one which has assumed very great
importance in modern times, and which is not without theoretical
interest. Incorporation is used to enable traders to trade with limited
liability. As the law stands, he who ventures to trade _in propria
persona_ must put his whole fortune into the business. He must stake all
that he has upon the success of his undertaking, and must answer for all
losses to the last farthing of his possessions. The risk is a serious
one even for him whose business is all his own, but it is far more
serious for those who enter into partnership with others. In such a case
a man may be called upon to answer with his whole fortune for the acts
or defaults of those with whom he is disastrously associated.
It is not surprising, therefore, that modern commerce has seized eagerly
upon a plan for eliminating this risk of ruin. Incorporation has proved
admirably adapted to this end. They who wish to trade with safety need
no longer be so rash as to act _in propria persona_, for they may act
merely as the irresponsible agents of a fictitious being, created by
them for this purpose with the aid and sanction of the Companies Act. If
the business is successful, the gains made by the company will be held
on behalf of the shareholders; if unsuccessful, the losses must be borne
by the company itself. For the debts of a corporation are not the debts
of its members. _Si quid universitati debetur, singulis non debetur, nec
quod debet universitas singuli debent._[294] The only risk run by its
members is that of the loss of the capital with which they have supplied
or undertaken to supply the company for the purpose of enabling it to
carry on its business. To the capital so paid or promised, the creditors
of the insolvent corporation have the first claim, but the liability of
the shareholders extends no further.
The advantages which traders derive from such a scheme of limited
liability are obvious. Nor does it involve any necessary injustice to
creditors, for those who deal with companies know, or have the means of
knowing, the nature of their security. The terms of the bargain are
fully disclosed and freely consented to. There is no reason in the
nature of things why a man should answer for his contracts with all his
estate, rather than with a definite portion of it only, for this is
wholly a matter of agreement between the parties.
§ 118. =The Creation and Extinction of Corporations.=
The birth and death of legal persons are determined not by nature, but
by the law. They come into existence at the will of the law, and they
endure during its good pleasure. Corporations maybe established by royal
charter, by statute, by immemorial custom, and in recent years by
agreement of their members expressed in statutory forms and subject to
statutory provisions and limitations. They are in their own nature
capable of indefinite duration, this being indeed one of their chief
virtues as compared with humanity, but they are not incapable of
destruction. The extinction of a body corporate is called its
dissolution—the severing of that legal bond by which its members are
knit together into a fictitious unity. We have already noticed that a
legal person does not of necessity lose its life with the destruction or
disappearance of its _corpus_ or bodily substance. There is no reason
why a corporation should not continue to live, although the last of its
members is dead; and a corporation sole is merely dormant, not extinct,
during the interval between two successive occupants of the office. The
essence of a body corporate consists in the _animus_ of fictitious and
legal personality, not in the _corpus_ of its members.[295]
§ 119. =The State as a Corporation.=
Of all forms of human society the greatest is the state. It owns immense
wealth and performs functions which in number and importance are beyond
those of all other associations. Is it, then, recognised by the law as a
person? Is the commonwealth a body politic and corporate, endowed with
legal personality, and having as its members all those who owe
allegiance to it and are entitled to its protection? This is the
conclusion to which a developed system of law might be expected to
attain. But the law of England has chosen another way. The community of
the realm is an organised society, but it is no person or body
corporate. It owns no property, is capable of no acts, and has no rights
nor any liabilities imputed to it by the law. Whatever is said to the
contrary is figure of speech, and not the literal language of our law.
How, then, are we to account for this failure of the law to make so
obvious and useful an application of the conception of incorporation and
legal personality? Why has it failed to recognise and express in this
way the unity and permanence of the state? The explanation is to be
found in the existence of monarchical government. The real personality
of the King, who is the head of the state, has rendered superfluous any
attribution of fictitious personality to the state itself. Public
property is in the eye of the law the property of the King. Public
liabilities are those of the King; it is he, and he alone, who owes the
principal and interest of the national debt. Whatsoever is done by the
state is in law done by the King. The public justice administered in the
law courts is royal justice administered by the King through his
servants the judges. The laws are the King’s laws, which he enacts with
the advice and consent of his Parliament. The executive government of
the state is the King’s government, which he carries on by the hands of
his ministers. The state has no army save the King’s army, no navy save
the King’s navy, no revenues save the royal revenues, no territory save
the dominions of the King. Treason and other offences against the state
and the public interest are in law offences against the King, and the
public peace is the King’s peace. The citizens of the state are not
fellow-members of one body politic and corporate, but fellow-subjects of
one sovereign lord.
Insomuch, therefore, as everything which is _public_ in fact is
conceived as _royal_ by the law, there is no need or place for any
incorporate commonwealth, _respublica_, or _universitas regni_. The King
holds in his own hands all the rights, powers and activities of the
state. By his agency the state acts, and through his trusteeship it
possesses property and exercises rights. For the legal personality of
the state itself there is no call or occasion.
The King himself, however, is in law no mere mortal man. He has a double
capacity, being not only a natural person, but a body politic, that is
to say, a corporation sole. The visible wearer of the crown is merely
the living representative and agent for the time being of this invisible
and undying _persona ficta_, in whom by our law the powers and
prerogatives of the government of this realm are vested. When the King
in his natural person dies, the property real and personal which he owns
in right of his crown and as trustee for the state, and the debts and
liabilities which in such right and capacity have been incurred by him,
pass to his successors in office, and not to his heirs, executors, or
administrators. For those rights and liabilities pertain to the King who
is a corporation sole, and not to the King who is a mortal man.[296]
In modern times it has become usual to speak of the Crown rather than of
the King, when we refer to the King in his public capacity as a body
politic. We speak of the property of the Crown, when we mean the
property which the King holds in right of his crown. So we speak of the
debts due by the Crown, of legal proceedings by and against the Crown,
and so on. The usage is one of great convenience, because it avoids a
difficulty which is inherent in all speech and thought concerning
corporations sole, the difficulty, namely, of distinguishing adequately
between the body politic and the human being by whom it is represented
and whose name it bears. Nevertheless we must bear in mind that this
reference to the Crown is a mere figure of speech, and not the
recognition by the law of any new kind of legal or fictitious person.
The Crown is not itself a person in the law. The only legal person is
the body corporate constituted by the series of persons by whom the
crown is worn. There is no reason of necessity or even of convenience,
indeed, why this should be so. It is simply the outcome of the resolute
refusal of English law to recognise any legal persons other than
corporations aggregate and sole. Roman law, it would seem, found no
difficulty in treating the treasure-chest of the Emperor (_fiscus_) as
_persona ficta_, and a similar exercise of the legal imagination would
not seem difficult in respect of the Crown of England.
Just as our law refuses to personify and incorporate the empire as a
whole, so it refuses to personify and incorporate the various
constituent self-governing states of which the empire is made up. There
is no such person known to the law of England as the state or government
of India or of Cape Colony.[297] The King or the Crown represents not
merely the empire as a whole, but each of its parts; and the result is a
failure of the law to give adequate recognition and expression to the
distinct existence of these parts.[298] The property and liabilities of
the government of India are in law those of the British Crown. The
national debts of the colonies are owing by no person known to the law
save the King of England. A contract between the governments of two
colonies is in law a nullity, unless the King can make contracts with
himself. All this would be otherwise, did the law recognise that the
dependencies of the British Empire were bodies politic and corporate,
each possessing a distinct personality of its own, and capable in its
own name and person of rights, liabilities, and activities. Some of the
older colonies were actually in this position, being created
corporations aggregate by the royal charters to which they owed their
origin: for example, Massachusetts, Rhode Island, and Connecticut. A
similar corporate character pertains to modern dependencies such as the
Chartered Company of South Africa. Even an unincorporated colony of the
ordinary type may become incorporate, and so possessed of separate
personality, by virtue of its own legislation.[299] In the absence of
any such separate incorporation of the different portions of the empire,
their separate existence can be recognised in law only by way of that
doctrine of plural personality which we have already considered in
another connection.[300] Although the King represents the whole empire,
it is possible for the law to recognise a different personality in him
in respect of each of its component parts. The King who owns the public
lands in Cape Colony is not necessarily in the eye of the law the same
person who owns the public lands in England. The King, when he borrows
money in his capacity as the executive government of Australia, may be
deemed in law a different person from the King who owes the English
national debt. How far this plural personality of the Crown is actually
recognised by the common law of England is a difficult question which it
is not necessary for us here to answer.[301] It is sufficient to point
out that in the absence of any separate incorporation this is the only
effective way of recognising in law the separate rights, liabilities,
and activities of the different dependencies of the Crown.
SUMMARY.
The nature of personality.
Persons { Natural.
{ Legal.
Natural persons—living human beings.
The legal status of beasts.
The legal status of dead men.
The legal status of unborn persons.
Double personality.
Legal persons.
Legal personality based on personification.
Personification without legal personality.
{ 1. Corporations.
Classes of Legal persons { 2. Institutions.
{ 3. Funds or Estates.
Corporations—the only legal persons known to English law.
Corporations aggregate and corporations sole.
The fiction involved in incorporation.
The beneficiaries of a corporation.
The representatives of a corporation.
The members of a corporation.
Authority of a corporation’s agents.
Liability of a corporation for wrongful acts.
The purposes of incorporation:
1. Reduction of collective to individual ownership and action.
2. Limited liability.
The creation and dissolution of corporations.
The personality of the state.