In a Kentucky case the legislature by statute 42 incorporated a company to construct a railroad from Lexington to the Ohio River, giving to said corporation perpetual succession, and the power to raise funds by subscription in shares, to purchase ground for a railway, and for the erection of suitable buildings for the safe-keeping of articles received for transportation, and for shops for the accommodation of the company, cars, vehicles, etc., and to charge toll, and make a dividend of the profits among the shareholders according to the amount of stock held by each. It was determined that the right conferred on each shareholder was unquestionably an incorporeal hereditament. The court said: "It is a right of perpetual duration; and though it springs out of the use of personalty, as well as lands and houses, this matters not. It is a franchise which has ever been classed in that class of real estate denominated an incorporeal hereditament. An annuity, though only chargeable upon the person of the grantor is an incorporeal hereditament; and though the owner's security is merely personal, yet he may have a real estate in it.43 Much less can it be doubted that a franchise created by act of in

like property. The property which the corporator acquires is not visible, tangible property; but it is none the less property because it is invisible and intangible. It is not a corporeal here litament; but it is incorporeal. Blackstone, in his commentaries, volume 2, page 21, says: That incorporeal hereditaments are divided into ten sorts; one of these consists of franchises. * * * The law books are full of the doctrine that persons may have a property in incorporeal hereditaments, franchises, etc. Property, says Bouvier, volume 2, page 381, is divided into corporeal and incorporeal. The former comprehends such property as is perceptible to the senses, as lands, houses, goods, merchandise and the like; the latter consists in legal rights, as choses in action,

easement and the like. Blackstone says, volume 2, page 37, it is likewise a franchise for a number of persons to be incorporated and subsist as a body politic, with power to maintain perpetual succession, and to do other corporate acts, and each individual member of such corporation is also said to have a franchise or freedom. We think it well settled by these and other authorities, that a corporator in a private civil corporation has a property in the franchise, of which he cannot be deprived without due process of law."

See Bank of California v. City & County of San Francisco, 142 Cal. 276, 64 L. R. A. 918, 75 Pac. 832, Approved Jan'y 27, 1830. sion Acts 1829, 126.

42

43

Ses

Citing 2 Blackstone's Comm. 40.

corporation, unlimited in duration, and springing out of the combined use of lands and personalty, should be denominated and classed as real estate." 44 So in the Dartmouth College case it is declared that the franchise of a corporation and that of its members, "like other franchises, is an incorporeal hereditament, issuing out of something real or personal, or concerning or annexed to, and exercisable within, a thing corporate. To this, grant, or this franchise, the parties are the king and the persons for whose benefit it is created, or trustecs for them. The assent of both is necessary.'

11 45

§ 29. Corporate Franchises are Legal Estates, not Mere Naked Powers. In respect to corporate franchises, they are, properly speaking, legal estates vested in the corporation itself as soon as it is in esse. They are not mere naked powers granted to the corporation, but powers coupled with an interest, which vest in the corporation by virtue of its charter. The property of the corporation vests upon the possession of its franchises; and whatever may be thought as to the corporators, it cannot be denied that the corporation itself has a legal interest in such franchises. It may sue and be sued for them.46

"Price v. Price's Heirs, 6 Dana (36 Ky.), 107, citing 2 Blackstone's Comm, 20-22, 37-38; Co. Litt. 19, 20; Com. Dig., title "Franchise."

45 Dartmouth College v. Woodward, 4 Wheat. (17 U. S.) 518, 657, 4 L. ed. 629, per Washington, J., Id., 700, per Story, J.

40 Dartmouth College v. Woodward, 4.Wheat. (17 U. S.) 518, 700, 4 L. ed. 629, per Story, J.; Hamilton Mfg. Co.

v. Massachusetts, 6 Wall. (73 U. S.) 632, 638, 18 L. ed. 904, per Clifford, J.; Society for Savings v. Corte, 6 Wall. (73 U. S.) 594, 606, 18 L. ed. 897, per Clifford, J. (a case of imposition of franchise tax); Bank of California v. San Francisco, 142 Cal. 276, 281, 75 Pac. 832, per Angellotti, J. See also Commonwealth v. Standard Oil Co., 101 Pa. 119, 127 (a case of taxation).

CHAPTER IV.

NATURE OF FRANCHISE CONTINUED DISTINCTIONS.

§ 30. Franchises Essential and not § 40. Franchise Distinguished from

30. Franchises Essential and not Essential to Corporate Existence " Essentially Corporate Franchises."-It may be stated generally that a marked distinction exists between a

franchise which is essential to the creation and continued existence of a corporation, to its right to exist as an artificial being, and inseparable from it, and other franchises, rights and privileges, subsidiary in their nature, which it possesses and may exercise under and by virtue of the franchise to be and to the enjoyment of which corporate existence is not a prerequisite. So it is declared that: "The essential properties of corporate existence are quite distinct from the franchises of the corporation. The franchise to be is distinct from a franchise as a corporation to maintain and operate a railway. The latter may be mortgaged without the former, and may pass to a pur1 As to primary and secondary fran- v. Western North Carolina Rd. Co., chises of corporations, see § 8, herein. 89 Fed. 24, 31, per Simonton, Cir. J. "The Western North Carolina "The right to be a corporation is Railroad Company was created a itself a separate, distinct and indecorporation by the legislature of that pendent franchise, complete within State in the exercise of a sovereign itself, and a corporation having been power. This sovereign power made created, enjoying this franchise, of several persons a single entity, may receive a grant and enjoy other and conferred on them the franchise distinct and independent franchises, of acting as one person. This new such as may be granted to and enperson, creature of the law, and ex- joyed by natural persons; but beisting through the grace and at the cause it enjoys the latter franchises, will of the sovereign, was then clothed they do not, therefore, constitute a with certain powers, and granted part of the distinct and independent certain privileges. These are its essential franchise,-the right to be franchises. First, the franchise of a corporation. They are additional existence as a corporation,-its life franchises given to the corporation, and being. This is inseparable from and not parts of the corporation itit. When it parts with it, with this franchise,-it parts with its life. But, with respect to the other franchises with which it has been clothed, the right and privilege to act as a common carrier, to carry a passengers and goods, to charge tolls, is the right or to operate a railroad,—these it en- privilege given by the State to two joys as an individual could, and or more persons of being a corpothey are not inseparable from its ex- ration, that is, of doing business in a istence. They are its property. A corporate capacity, and not the privifranchise to be a corporation is dis- lege or franchise which, when intinct from a franchise, as a corpo- corporated, the company may exerration to maintain and operate a rail- cise." Cobb v. Commissioners of road." Central Trust Co. of N. Y. Durham County, 122 N. C. 307, 309,

self,-not of the essence of the corporation." Southern Pacific Rd. Co. v. Orton, 32 Fed. 457, 474, per Sawyer, J.

* *

"By the term 'corporate franchise
business' as here used
meant

* * *

chaser at a foreclosure sale. And a franchise to take tolls, which comes into existence by grant, not directly from the State, but from a local board, is distinct from a corporate franchise. So a franchise to be a corporation may continue to exist, though any particular franchise annexed to it may have been surrendered or forfeited. In a California case it is said: "This corporate franchise-viz., the franchise to be and exist as a corporation for the purposes specified in the articles of incorporation—appertains to every corporation, for whatever purpose it may be formed, and there is no distinction in this regard between the banking or grocery corporation, and the railroad, water or gas corporation. The right to engage in every such business is open to all citizens, independent of any grant from the sovereign, but it is available to no one to conduct any such business through the agency of a corporation without such grant. Certain occupations are, however, of such a nature that various privileges conferrable only by the sovereign power are convenient, and in most cases absolutely essential, to the successful maintenance of the business to be carried on, whether it be carried on by a corporation or by an individual-such, for instance, as the right to use public highways. Such rights and privileges are also known as franchises, but they constitute a class entirely distinct from and independent of the corporate franchise."4 Again, what have been called "Essentially corporate franchises" are those without which the corporation could not exist, and which are, in their nature, incapable of being vested in, or enjoyed by, a natural person-such as the right or franchise of being a corporation, of having a corporate succession, etc. But the franchise of taking private property, or the right of eminent domain, is not perhaps necessarily a corporate right. So the franchises to

30 S. E. 338, per Montgomery, J., quoting Home Ins. Co. v. New York, 134 U. S. 594, 599, 33 L. ed. 1025, 10 Sup. Ct. 593, per Field, J.

Memphis & Little Rock Rd. Co. v. Commissioners, 112 U. S. 609, 619, 28 L. ed. 837, 5 Sup. Ct. 299.

Grand Rapids Bridge Co. v. Prange, 35 Mich. 400, 405, 24 Am. Rep. 585.

Bank of California v. San Francisco, 142 Cal. 276, 280, 75 Pac. 832, per Angellotti, J.