App. Div.]

First Department, December, 1911.

ness or exercising its corporate franchises in this State." Argument seems unnecessary to show that said statutes are all parts of a single scheme of laws relating to the doing of business by corporations, the exercise of corporate franchises, in this State, and I shall waste no words to prove that a distinction cannot be maintained between the "doing" and the "transaction" of business, expressions which are interchangably used throughout the statutes.

It is settled that the defendant is not "doing business in this State" within the meaning of section 15 of the General Corporation Law (Cummer L. Co. v. Associated Mfrs.' Ins. Co., 67 App. Div. 151; affd., 173 N. Y. 633; Harvard Co. v. Wicht, 99 App. Div. 507; Burrowes Co. v. Caplin, 127 id. 317; Page & Co. v. Sherwood, 146 id. 618; Penn Collieries Co. v. McKeever, 183 N. Y. 98), or within the meaning of the Tax Law. (People ex rel. Parker Mills v. Commissioners of Taxes, 23 N. Y. 242; People ex rel. Sherwin Co. v. Barker, 5 App. Div. 246; affd., 149 N. Y. 623; People ex rel. Tower Co. v. Wells, 98 App. Div. 82; affd., 182 N. Y. 553.) The conclusion necessarily follows that the defendant is not transacting business in this State within the meaning of said section 33.

We might stop the discussion at this point, but there is a further, and to my mind controlling, reason for holding that the statute was not intended to apply to a case like this, and it may serve a useful purpose to state that reason. I have said that the general purpose of the entire body of statutory law on the subject of corporations was to provide for their organization, or, in the case of foreign corporations, for their authorization to do business, for their effective supervision and regulation and for their taxation. Authorization, regulation and taxation are the objects, the "doing" or the "transaction of .business, the exercise of corporate franchises within the State, is the subject, of all the provisions. Even if said section 33 be construed as an independent enactment, the expressed purpose of the requirement of keeping a stock book is that it may be inspected by stockholders and judgment creditors and by "any officer of the State authorized by law to investigate the affairs of any such corporation." It was first enacted in its present form by chapter 384 of the Laws of 1897, which amended

First Department, December, 1911.

[Vol. 147. chapter 564 of the Laws of 1890, as amended by chapter 688 of the Laws of 1892, and was entitled, "An act to amend the Stock Corporation Law, relating to annual reports and liabilities of officers, directors and stockholders of foreign stock corporations." The 1st section of said act of 1897 amended section 7, now section 14, relating to combinations in unlawful restraint of trade; the 2d section amended section 30, which (as amd. by Laws of 1901, chap. 354, and Laws of 1905, chap. 415) is now section 34, so as to require annual reports of foreign as well as of domestic corporations; and the 3d section amended section 53, now said section 33 in question here. Said section 53 of the act of 1892 was section 56 of the act of 1890. In that act it immediately followed sections relating to the election of directors and the qualifications of stockholders to vote, and it merely provided that the transfer agent in this State of any foreign corporation should "during the usual hours of transacting business" exhibit to any stockholder the transfer book and a list of the stockholders thereof. That section was a re-enactment of chapter 165 of the Laws of 1842. It is quite obvious that its primary purpose was to enable stockholders to obtain a list of other stockholders to use in influencing the election of directors, as was held to be the purpose of a somewhat similar statute relating to domestic corporations. (See Laws of 1825, chap. 325, § 1; 1 R. S. 601, § 1; People ex rel. Hatch v. L. S. & M. S. R. R. Co., 11 Hun, 1, 5.) Thus the internal evidence of the section itself, its context, its history and the general purview of the entire body of statutory law, of which it is a part, unmistakably show that its assumed purpose was directly to regulate the doing of business in this State by foreign corporations. If, therefore, it was intended to apply to a foreign corporation which merely employs instruments in this State incidental to its conduct in another State of its interstate business, it would violate the commerce clause of the Constitution of the United States. (See U. S. Const. art. 1, § 8, subd. 3.)

A corporation is not a citizen within the meaning of article 4, section 2, or the Fourteenth Amendment, of the Federal Constitution. (Paul v. Virginia, 8 Wall. 168; Hooper v. California, 155 U. S. 648; Waters-Pierce Oil Co. v. Texas, 177

App. Div.]

First Department, December, 1911.

id. 28.) Therefore, the recognition by one State of corporations created by other States depends wholly upon principles of comity. A State may exclude or impose conditions upon the admission into it of foreign corporations, but the prohibition of, or the imposition of terms upon, the exercise by a foreign corporation of its corporate franchise within the State is very different from the regulation of the interstate business of a foreign corporation which exercises its corporate franchise in another State and employs no means or agencies in this State except as incidental thereto. A State may not prohibit, regulate or impose conditions or burdens upon the doing of interstate business, whether conducted by natural persons or corporations. (Norfolk & Western R. R. Co. v. Pennsylvania, 136 U. S. 114; Crutcher v. Kentucky, 141 id. 47; International Text Book Co. v. Pigg, 217 id. 91.) The mere having an office or place of business within the State does not subject a foreign corporation to the regulation of its laws. (Attorney-General v. Electric Storage Battery Co., 188 Mass. 239; Norfolk & Western R. R. Co. v. Pennsylvania, supra; Green v. Chicago, B. & Q. R. Co., 205 U. S. 530.)

The defendant gets no privilege from and is not in any just sense exercising its corporate franchise within this State.

It gets the privilege or franchise of transacting business as a corporation from the State of Pennsylvania, and it exercises the corporate franchise thus conferred in that State. The only privilege exercised by it in the State of New York is the privilege of doing an interstate business which it gets from the Congress of the United States, whether from action or non-action of that body is immaterial, for its jurisdiction is exclusive. The State of New York has no power to prohibit, regulate or burden the exercise of that privilege.

As I have endeavored to show, the provision in question is a part of a statute and of a general scheme of laws which purport directly to regulate the doing of business within the State by corporations, or corporations doing business within the State. It is immaterial which expression is used, as both amount to one and the same thing, and it seems to me that it is not permissible to extract from the statute a single section and to construe it without regard to the purview of the entire act, even

First Department, December, 1911.

[Vol. 147. assuming that said section 33, thus extracted and construed, might be held to be applicable to the defendant. It is unnecessary, therefore, to consider whether, if applicable, it would be unconstitutional for imposing a burden on interstate commerce, or whether, if construed as an exercise of the police power, only indirectly affecting commerce, it might be held to be valid within cases like Western Union Tel. Co. v. James (162 U. S. 650); Chicago, M., etc., Railway v. Solan (169 id. 133); Lake Shore & Michigan Southern Railway v. Ohio (173 id. 2×51. Construed according to its assumed and virtually expressed purpose, it is invalid, if applicable to the defendant. The alternative is to adopt a construction in harmony with the Constitution.

I have considered the expressions used in said statutes. “doing business" and "exercising its corporate franchises,” as synonymous, and it seems plain that they are so used. I am aware that it has been said that the so-called "franchise tax" on corporations (domestic and foreign) is in respect to the latter "imposed solely upon business," not on a corporate franchise (People v. Equitable Trust Co., 96 N. Y. 387), and that "a corporation can have no legal existence out of the boundaries of the sovereignty by which it is created." (Bank of Augusta v. Earle, 13 Pet. 519, 588.) Any discussion in this connection of the nature of the artificial entity called a "corporation" would be purely academic. Many cases bearing on the subject may be found in the note to the case last above cited, published in the Lawyers' Edition of the Supreme Court reports. A critical analysis of them will disclose that the apparent conflicts are almost wholly in the terminology employed. Many corpora tions do no business in the States of their creation and in fact are never intended to do any. Upon their organization they acquire the bare privilege or franchise of being corporate entities. When such a corporate entity by its agents goes into another State and seeks to do business, it finds that it has no existence there, that it is only recognized by comity, and that it can only do business or exercise its corporate franchises by permission. It is quite immaterial whether that permission be termed a "privilege" or a "franchise," though it seems to me that the privilege to do business within its jurisdiction, extended by one

App. Div.]

First Department, December, 1911.

sovereign to intangible creatures of another sovereign, may well be termed a "franchise." In Home Ins. Co. v. New York (134 U. S. 594) Mr. Justice FIELD made a distinction between the franchise given to two or more persons to be a corporation or to do business in a corporate capacity, and the franchise which, when incorporated, the company may exercise; and in subsequent decisions of the United States Supreme Court the taxes imposed by this State on foreign corporations were considered as taxes imposed on the franchise to do business as a corporation within the State. (See Horn Silver Mining Co. v. New York, 143 U. S. 305; New York State v. Roberts, 171 id. 658.) Foreign corporations, then, doing business or exercising their corporate franchises, within this State, within the meaning of its laws, are subject to the regulation of those laws, irrespective of the nature of the business or whether it be interstate. (People ex rel. Union Sulphur Co. v. Glynn, 125 App. Div. 328, and cases cited.) But the power of the State depends on the exercise of the privilege or franchise to do business within the State in a corporate or organized capacity, not on the exercise of the privilege to do interstate business, which Congress alone can grant and regulate. The underlying principle, if I have discerned it, is that the corporation statutes of this State become operative upon foreign corporations only perforce of some privilege which the State has the power to grant or withhold. Those statutes, construed in the light of that principle, form a consistent scheme in harmony with the Federal Constitution. I shall not hazard a general definition of what constitutes the exercise of a corporate franchise within this State. It is sufficient for this case to state a rule of exclusion, i. e., that the mere employment in this State of means and agencies as incident to the conduct in another State of an interstate business does not constitute the "doing or the "transaction" of business or "the exercise of a corporate franchise" in the State within the meaning of its statutes.

The determination of the Appellate Term should be reversed and the judgment of the Municipal Court affirmed, with costs. SCOTT, J., concurred.

Determination affirmed, with costs.