Daily Los Angeles herald., 1879-04-09
New Constitution.
No. VII.

| tIcle are so numerous tnaC all Ol
them cannot be enumerated In the
limits Of a newspaper article. For.
tunately, they are 80 patent and
valid that every attentive reader
can discover.them for himself.
Article XII, on corporations. Ii
full of dangerous innovations. II
has been the general opinion thai
some constitutional or statutory
provision which might operate as
check on the too great facility fol
creating fraudulent and wildcat
corporations would be useful.
Such, for example, would have
been provision requiring some
certain proportion of capital stock
to be actually paid in as condi-
tion precedent to the assumption OF
corporate privileges. But the new
Constitution contains no such pro.
vision. The checks provided by 1t
are of different kind, and, such as,
10 my opinion, must operate as an
absolute prohibition to future busi-
ness corporations.
Section nine renders the "direct-
tors or trustees of Joint stock or in
"corporated companies jointly and
''severally liable TO the creditors or
stockholders for all moneys en-
"bszzled or misappropriated by
"the officers thereof during the
term of Office of each Director" etc.
Among the many unjust and odi-
GUS provisions of the new Constitu
ton, none are more unjust and
odious than this. 1t embouies In a
brief space all the worst features OF
the worst species of legal enact
meuts.
l. 1t is e1 post facto and applies
to all existing corporations, i'm
posing on one class Of corporate of
ieers obligations not contemplated
when the corporations were formed
2. It violates fundamental max
i'm of natural equity, by rendering
one class OF agents responsible for
the acts of another class which
may be in other respects almost or
entirely independent of the first. It
Is rule OF law that principal
shall be responsible for the acts of
his agents within the scope of hrs
agency. But the officers of cor,
poration are in no sense of the
word agents or servants of the d.
rectors. They, and the directors
alike, are the servants of the cor
poration, and the clause in ques-
tion, reduced to plain English,
simply means that one set of ser.
wants, entrusted with certain func-
lions, shall be responsible for the
acts of another set, entrusted with
entirely different functions.
8. It renders the directors respon-
sible for the acts of others as re.
CARDS whom they do not necessarily
exercise the right of selection. II
the power of selecting the corporate
officers was necessarily vested In
the directors, there might he pre-
text. however slight, for making |
tuo l'VmoI tluUI0 lOI tl0 dCLS Vi
those they should select. But this
is by no means the case. There is
in the existing law, moth
ing in the nature of corporations,
which prevents all the corporate
officers being elected by the corpor-
ators or stockholders at large.
4. There is no mutually in the
provision. One class OF agents il
made responsible for the acts of
another class, but the latter is not
made responsible for the acts fthe
former.
s. Lastly, the provision, If adopt.
I'd, will cause the disruption of ex-
isting, and prevent the organiza-
lion Of future corporations.
1t is too late in the day to deny
that business corporations by com.
bining and assooiating capital in
enterprises too costly and hazard
BUS for individual effort, may be,
and usually are, eminently useful
TO the community. But this pro-
vision Will obviously discourage,
and probably altogether prevent
such combinations in future. No
safe, prudent business man will
consent to act as director In any
however promising,
when, by so doing, he renders him.
self an involuntary surety for the
acts of others over whom he exer
cises, at best, but very limited
Ihave said that the effect of the
provision will be to destroy exist
ing, and prevent future corpora
tions. Bat this must be taken |
cum gran0. All corporations con-
Quoted by safe, prudent and honor
able men, will succumb to its dis |
astrous effects, because such men
will be the last to assume or con-
tinue subject to SO oppressive liza
bility.
Another class Of men-the care
less, the imprudent and the iaselv-
ent class-will have no hesitation
in assuming responsibility which
they know will never really affect
them; and thus while operating as
a complete bar and impediment
to bona fde, trustworthy corpora
tions subject to prudent, trust
worthy management, the provision
in question will operate as direct
premium to worthless. fraudulent
and wildcat schemes presenting
under the guise ana
protection of corporate franchises.
M.
The H Mediterranean Sweet"