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Interstate and Intrastate Business—

Difficulties of Differentiating Between Them

The existence of statutes in practically all of the American states (which in many are highly penal) regulating the right of foreign corporations to do business therein continues to be a matter of concern to all corporations which look for business outside of the state of their incorporation. The failure to comply with the laws of another state before attempting to do business therein may be attended with serious financial loss, either by way of fines and penalties to be collected by the state itself, or by way of inability to recover the purchase price of goods delivered under contracts made in violation of such statutes.

Subject only to the limitations of the Federal Constitution, the power of a state to exclude a foreign corporation altogether, or to prescribe terms and conditions upon which it may do business therein seems to be absolute. From the nature of the case some terms and conditions are necessary. For example, there is no reason why a foreign corporation should be permitted to enter another state and do a local business therein upon more favorable terms than are enjoyed by corporations organized under the laws of such state. This would imply the filing of copies of certificates of incorporation, lists of officers and directors, annual reports covering prescribed items, and the designation of resident agents upon whom court processes may be served. It would also justify the imposition of reasonable franchise and other taxes and the establishment of suitable fines and penalties to secure compliance with the statutes. Unless there exists some ulterior purpose-some desire to punish or to discriminate against foreign corporations-legislation could hardly be expected to go much beyond these limits.

As a matter of fact, the treatment of foreign corporations by the various states differs so greatly as to force the conclusion either that some legislatures have failed in their duty, or that others have seriously overshot the mark.

In some states the peculiar burdens placed upon foreign corporations are practically negligible, but from this extreme of moderation there is an ascending scale of severity which attains to the imposition of fines up to $1,000 for each day during which a corporation does business without having complied with the statutes; to which imprisonment of officers and agents may be added. In many states also offending corporations are denied the use of local courts, and contracts made before compliance are declared to be void or un

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Empire Building, Pittsburg, Pa.

enforcible. To many persons such extreme statutes seem to be out of harmony with the conception that, in spite of the existence of fortyeight states, we constitute but one nation, and to be evidence of a desire unduly to favor local business by placing unreasonable burdens upon those who happen to dwell outside of the particular state. But, be that as it may, the existence of so many drastic statutes imposes a duty upon the managers of all corporations which seek business beyond the borders of their home state.

Among the limitations contained in the Federal Constitution upon the power of states to regulate foreign corporations is the clause which gives to Congress power to regulate commerce among the several states. This clause has been construed to prevent the several states from placing burdens upon interstate commerce. It is, therefore, the law that corporations which go beyond their home jurisdiction only for the transaction of an interstate business are not subject to the statutes which regulate the right of foreign corporations to do a local business in another jurisdiction.

A recent case in Arkansas is worthy of note, not only because of its attempt to define interstate commerce, but also because of the effect of the decision upon the negotiability of commercial paper originating in that state. This is the case

of Hogan vs. Intertype Corporation, 206 Southwestern Reporter, 58, decided October 7, 1918, by the Supreme Court of Arkansas.

It appeared that a representative of the New Orleans agency of the International Typesetting Machine Co., a New York corporation, called upon one Dan Hogan, the appellant, at his office in Huntington, Arkansas, on May 24, 1914, and offered to sell him a machine upon terms agreed to, which included a demonstration in Huntington that the machine was able to do the required work. A contract was then signed by Hogan (which, however, was not in evidence) and sent to the agency in New Orleans. The manager of the New Orleans office considered it a contract which should be ratified by the company itself, and for that purpose sent it to the main office in New York, recommending its acceptance. May 28 the manager of the New Orleans agency consigned the machine to the International Typesetting Machine Company at Huntington, Arkansas, requesting the carrier to "notify Dan Hogan." Hogan paid the freight and had it delivered to his office about June 5. The contract which had been sent to New York was accepted

LAZARUS SHENFIELD

ATTORNEY AND COUNSELLOR
AT LAW

Equitable Building

On

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at the home office and notice sent to Hogan by

a letter dated June 15. About June 20 an agent Important to Corporations

of the Vendor company went to Huntington, set the machine up and made a satisfactory demonstration, following which Hogan gave his promissory notes for the price and secured them by chattel mortgage, which was duly filed for record in Arkansas. Subsequently the International Typesetting Machine Co. was placed in the hands of a receiver and, by court order, the notes and mortgage in question were sold to the plaintiff, the Intertype Corporation, which brought this action to recover judgment upon the notes and to enforce the lien and the mortgage. The plaintiff was successful in the lower court and obtained a judgment for $2,137.90. Hogan, however, appealed to the Supreme Court of Arkansas, where, by a divided court, judgment was reversed and the cause dismissed.

Although the net result of the transaction between the International Typesetting Machine Co. and Hogan was the sale and delivery to Hogan in Arkansas of a machine which was constructed and owned outside of that state, the Supreme Court of Arkansas refused to treat the transaction as constituting interstate commerce, largely upon the ground that the machine had been consigned, not to the ultimate purchaser, but to the vendor company itself, in Arkansas. The court said "An interstate transaction contemplates a consignor without and a consignee within a state, or vice versa." While to many minds it would seem that the court, by holding that the transaction as described did not constitute an interstate transaction, placed too great emphasis upon the form as against the substance of the transaction, the most serious part of the decision was the ruling that the notes given for the purchase price were unenforcible in the hands of an innocent purchaser for value. The court said, "We think the note and mortgage evidenced a contract made by the corporation in violation of the statute laws of the state. The defect was inherent in the notes and mortgage, and therefore a subsequent purchaser must take notice of the defect."

This is all the more surprising because the statute of Arkansas does not specifically declare that contracts made in violation of the statute are void. It only imposes a penalty of not less than $1,000 upon offending corporations and prescribes that foreign corporations, until compliance, cannot make any contracts in Arkansas which can be enforced by it either in law or in equity.

Two members of the court, while apparently agreeing that the transaction did not constitute interstate commerce, did attempt to show that neither the contract of sale, nor the notes and mortgage given pursuant thereto, were void, and that the disability imposed by the statute upon the International Typesetting Machine Co. was personal to it and did not attach to the purchaser of the notes in question. They ask, "Can it be the law that commercial paper originating in Arkansas cannot be safely purchased in the usual course of business without inquiry as to whether foreign corporations connected with such paper have complied with the laws of this state?

As an answer to this question the dissenting judges quote from Section 1,038, of the article

Your attention is called to the importance of following the requirements of the statutes of other States than your own where these statutes have, as in many cases, made requirements upon "foreign" corporations, and affixed penalties for failure to comply therewith. In many cases, statutes recite that where the requirements of the law are not strictly followed "foreign" or outside corporations shall not have the privilege of enforcing contracts in the local courts. Many corporations doing business beyond the limit of their own State are negligent in this matter, and frequently find themselves unable to maintain their rights because of their failure to take the steps necessary. The publishers of this magazine have printed below a 1st of Attorneys, one for each State, residing in an important business center, who are unquestionably competent to see that your papers conform to the requirements of the law, attend to having them properly filed, and obtain your certificate. Where it is required that you shall have an office in the State. we would suggest tha you make arrangements with the attorneys named to designate their ofce as your particular place OT office of business in the States named, and make arrangements with them that they or some member of their firm may be named as the person upon whom process may be served. Make arrangements with them for an annual fee for attending to this service, which ought not to be less than $10. nor more than $25 per annum. Neglect in attending to this matter may deprive you of the right to do business in some desirable territory or to bring suit in some Important matter. These attorneys would then inform you what it is necessary that you do, and whether or not the provisions of the law refer to Corporations who Bell within the State by means of traveling salesmen. while having no branch or factory or other business office in the State.

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IOWA-B. J. Cavanagh, Fleming Bldg., Des Moines.

LOUISIANA-Lawrence M. Janin, 837 Maison Blanche Bldg., New Orleans. MAINE Harry L. Cram, 102 Exchange St., Portland.

MICHIGAN-Selling & Brand, 502-3-4-5-6-
7-8-9-10 Hammond Building, Detroit.
MISSISSIPPI-R. H. & J. H. Thompson,
Thompson Building, Jackson.

NEW YORK-Lester T. Hubbard, 227
Arkay Bldg., State and Pearl Sts., Albany.
NORTH DAKOTA-M. J. George, First
National Bank Bldg., Ashley.
OHIO-Miller, Thompson & Dunbar,
No. 8 East Long Street, Columbus.
PENNSYLVANIA-Conard, Middleton &
Orr, Lincoln Building, Philadelphia.

DAVENPORT IOWA PENSACOLA, FLORIDA

ISAAC PETERSBERGER

CORPORATION AND COMMERCIAL LAW

THE LEGAL BUSINESS OF NON-RESIDENTS A SPECIALTY

on bills and notes in the 8th Volume of Corpus Juris, as follows:

"If a negotiable note is given to a foreign corporation in a transaction which is illegal because of the corporation's failure to comply with the conditions precedent to the right to do business prescribed by statute, the illegality cannot be set up as against a bona fide purchaser for value without notice, and the word 'assigns' as used in a statute making the contract void, on behalf of such corporation or its assigns' does not include the bona fide holder in due course of a negotiable instrument."

This case has been set out at such length for the purpose of indicating the danger which corporations incur in attempting to do business without authority in foreign jurisdictions. It does not appear that the vendor corporation or its agents or its assigns were attempting to evade the statutes of Arkansas. They undoubtedly believed that they were engaged in interstate commerce, yet Dan Hogan, by interposing a technical defense, was permitted to escape the payment of what to most persons would seem to be a just debt, involving a loss to the plaintiff of $2,137.90 in addition to the fees and expenses of its attorneys and the time of its agents, and also apparently, the risk of fine and imprisonment with respect to the offending corporation and its officers.

What constitutes "doing business" in a foreign state within the meaning of the statutes relating to foreign corporations will always be a question incapable of arbitrary decision. Each case will depend upon its own facts and upon the particular statute involved, but it is clear that no corporation can afford to take the risk of the consequences of doing business in a foreign state in violation of its statutes.-Credit Men's Bulletin.

Oneof the best of recent legal anecdotes emanated from that distinguished wit and scholar, Lord Morley, who recently celebrated his 80th birthday.

A certain rich litigant (said Lord Morley) went away to his country seat at the conclusion of an important case before judgment had been pronounced.

A few hours later his lawyer wired him as follows:

"Right has triumphed."

The rich litigant wired back: "Appeal at once."

"After trying in vain to collect his $4 the colored man consulted a lawyer.

"What reason,' the lawyer asked, 'does the debtor give for not paying his debt?'

"Boss,' said the colored gentleman anxiously,

'he gimme a mighty good reason, sah.' "Well, what is it?"

"He done say, boss, dot he's been owin' me dat money so long dat de interest has et it all up.'"-Washington Star.

H. J. MACKEY, Attorney REMITTANCES on collections made daily.

REPORTS: Mercantile and individual reports made from investigations after receipt of inquiry.

GROWING TENDENCY FOR STATES TO LEVY TAX ON PERSONAL INCOMES.

The income tax is firmly established. It has come to stay. Its status has been clearly demonstrated. With one great source of revenue eliminated, and with expenses amounting ever higher, several of the states have been forced to turn to it as a solution of the problem of taking in more money than is paid out. Before long, others besides the states listed below will undoubtedly impose a tax upon personal incomes. Even the municipalities threaten to do so.

The ease with which an income tax can be collected has caused many states to seriously consider its adoption. Each year will undoubtedly impose a tax upon personal incomes. Even the municipalities threaten to do so.

The ease with which an income tax can be collected has caused many states to seriously consider its adoption. Each year will undoubtedly see additional ones added to the list of those which have already followed the lead of the Federal Government.

The following states now have income taxes upon individuals and corporations:

Alabama, Missouri, New York, Virginia, Massachusetts, New Mexico, North Dakota, Wisconsin.

These states have a tax on individual incomes only: Delaware, North Carolina, Mississippi, North Carolina, Oklahoma.

A number of legislatures meet the coming month and there are rumors that some will adopt income tax laws. A review of the provisions of the acts now in force shows that they are based upon the Federal law in many respects, and that the rulings and regulations of the state commissioners or other taxing body closely follow those of the Federal Government.-(Editorial in The Corporation Journal.)

An official of a certain Baltimore court is, during his leisure moments, much addicted to photography, a fact of which his twelve-year-old daughter is aware.

One afternoon not long ago the child, who was to take a little trip with her father, went to the court-house to await until his duties for the day should have been discharged. She thought she might as well drop into the court-room to see what was going on. This is her account of the judge's charge to the jury:

"The judge made a long speech to the jury of twelve men and then sent them off into a little dark room to develop."

BYRON, LONGBOTTOM LONGBOTTOM & PAPE

620-627 Stephen Girard Bldg., 21 South 12th St.

PHILADELPHIA

General Practice in all Courts-Collection Dept. ROBT. J. BYRON. A. S. LONGBOTTOM, G. L. PAPE, C. O'BRIEN, Attorneys at Law GEORGE T. SCHIEDER, WILLIAM RITTERHOFF, M. WISEMAN. Collection Department Issue commission to take depositions to George T. Schieder, Notary Public.

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STARTED just six years ago Ruling Case Law is all but completed, and in this short six years it has made for itself a unique record among legal publications.

¶ The sale of this great work has so far exceeded our expectations that in spite of the fact that we printed a large stock of each volume, as issued, and later put on a second press run, we are now faced with the necessity of again reprinting and binding the entire set. The costs of manufacturing to-day are more than double the costs five or even two years ago. Obviously, we can't sell R.C.L. at present prices after the present stock is exhausted.

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ULING CASE LAW is a text statement of the law from principle, arranged alphabetically under the 400 recognized titles. Complete in 28 volumes, including index. Authoritative, quotable, dependable. As simple as the ten commandments. Makes the law as easy to find as a word in the dictionary.

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Modern Problems for the Lawyer to Solve

By HENRY W. TAFT

(An Address to The New York Stock Bar Association)

The war has brought the political, social and industrial affairs of the world into an abnormal state of unrest. In Russia the revolt against the old order cannot be dismissed with the formula that her people should work out their own salvation, because its phychological effect has permeated far beyond Russia itself.

The Bolshevists proclaim to the world that ordered liberty as the rest of the world understands it, is a mere gesture or metaphor; that freedom of speech and of the press, equal protection of the laws, the right to assemble and to petition the government, prohibition of unreasonable searches, seizures and cruel and unusual punishments, and the safe-guarding of life, liberty or property by due process of law, merely facilitate the infliction of injustice.

They would substitute the despotism of the proletariat over every other class, the subversion of all freedom, morality and religion, and they would contemptuously reject as a moral force patriotism and love of country. But the most amazing thing is that they seek to perpetuate their rule, not by the consent of the governed, but through a small minority sustained by force.

Lenin himself has boasted that control of 180,000,000 of people is in the hands of not more than 200,000 industrial workers in the cities. This is made possible by giving the Red Army extraordinary privileges in the material things of life, and by vesting in them eight times the political power of the industrial workers in the city and eighty times that of the peasants who constitute 90 per cent of the population.

This rule of the minority was accomplished not so much by military force as by industrial strikes. The new possibilities in the use of that weapon have no doubt had a psychological relation to certain phases of recent strikes in other parts of the world.

In England the coal strike and the railroad strike struck at the very life of the British people, who had to unite in self-protection to avoid the terrible effects of a fuel famine and of the paralysis of the transportation system. The police strike in London threatened to overthrow law and order. The Boston police strike was a similar movement, of which Governor Coolidge truly said: "There is no right to strike against the public safety by anybody anywhere at any time." The coal strike here became a matter of national concern, not because the employers were illegally threatened by loss, or because the workers were unjustly treated, but because the vital necessities of the public compelled them to become a

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party to a controversy in which they had no

concern.

Our great business combinations, the interlocking of our essential industries, their interdependence and the far-reaching effects of an interference with the functioning of any of their parts, make a great strike today of far greater moment than at any time in our history. Whether a check in our industrial life result from the unreasonable,selfish or arbitrary policy of employers, or from the ill-considered or tyrannous action of the employes, in either case it tends to deprive the people of the right to pursue happiness in their own way, and our government ceases to derive its "powers from the consent of the governed" but from the dictation of a group. No one now denies the right of industrial workers to unite to better their condition. But if in increasing participation in the profits and management of industries they do not avoid excessive and unreasonable resort to strikes, we shall come perilously near a condition where minorities and not majorities rule.

Another subject engages the attention of the public.

We are in a maelstrom of constitutional agitation. If we could personify our fundamental charter our emotions would be repeatedly aroused by its merciless pulling and hauling. No question of vital national importance arises that does not evoke divergent views. One school of publicists insists upon the most extreme remedies that can be invoked for the cure of our ills. Another stands aghast at the remedies proposed by alarmists as an assault upon the most cherished principles of civil liberty.

Thus, perhaps the police are a little indiscreet and arrest a few fanatical but harmless paraders. A sensible police magistrate discharges the prisoners with an apology, and with good humor admonishes the police. But straightway persons charged by Divine Providence with the custody of the charter of our liberties, spring forth and announce that the curtain has fallen on the last act of the tragedy of the Constitution, and even one of our greatest journals gives up the game in these despairing words:

"There is no freedom of speech or of the press left, except by consent of government. Police authority everywhere is denying to small minorities whose doctrines are unpopular, the right of free speech. .

"Plainly, the American people are getting away from first principles; they are forgetting their traditions and losing sight of their ancient landmarks."

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