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Did the Framers of the Constitution Intend - Research Paper Example

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This research paper "Did the Framers of the Constitution Intend" shows that according to French (1979), of these theories, the Reality Theory, which is the aggregate theory described above, acknowledges de facto corporate personhood, therefore it is the description as a moral person.  …
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Did the Framers of the Constitution Intend
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? Is a corporation a person? This is a question that has vexed legal scholars for years. If a corporation is a person, does it have a sense of morality? After all, a sense of moral purpose is one of the reasons why a corporation would be considered to be a person for the purposes of suing and being sued. According to French (1979), “following many writers on jurisprudence, a juristic person may be defined as any entity that is a subject of a right. There are good etymological grounds for such an inclusive neutral definition. The Latin “persona” originally referred to dramatis personae, and in Roman law the term was adopted to refer to anything that could act on either side of a legal dispute” (French, 1979, p. 208). Persons, according to Roman law, do not have any kind of existence outside that of the legal sphere, and the law recognizes entities, regardless of whether or not they have a biological status. This view is called the “fiction theory” – this means that the personality of a corporation is a fiction, and that the corporation owes its very existence to the state (French, 1979, p. 208). Rivaling this theory in American jurisprudence is that of the “Legal Aggregate Theory of the Corporation” – this means that the corporate body is a shield or an umbrella for the individual persons that make up that corporation. In this theory, biological status is what matters, and has legal priority. In this theory, the corporation is synonymous with the board of directors and other leaders of the companies, while employees are generally ignored (French, 1979, p. 209). Another competing theory is that of the Germans, who regard corporations as having a de jarte personality, “which the law only declares to be a judicial fact” (French, 1979, p. 209). According to French (1979), of these theories, the Reality Theory, which is the aggregate theory described above, acknowledges de facto corporate personhood, therefore it is more amenable to the description of corporations as a moral person. According to him, “the de facto peronhood of the Reality Theory is that of a sociological entity only, of which no claim is or need be made regarding agency or rationality, etc. One could, without contradiction, hold the Reality Theory and deny the metaphysical or moral personhood of corporations. What is needed is a Reality Theory that identifies a de facto metaphysical person not just a sociological entity” (French, 1979, p. 210) While these are the popular theories about corporate personhood, the focus of this paper is whether or not the Framers meant for a corporation to be considered a person for the purposes of suing and being sued is a question that has a confused answer. The answer is confused because Supreme Court decisions have contradictory analysis on whether or not a corporation is considered to be a person under the Constitution as written. One case indicated that a corporation can sue in its own name, but that the corporation itself is not a citizen, but, rather, is composed of individual citizens, and that these individual citizens are what a court must look to when deciding if a court has jurisdiction over corporation lawsuits. Another case says, no, a corporation is an entity of its own, and the individual members of the corporation are not what matters – what matters is the corporation itself. The differences between these two cases is that the former was a case involving corporate lawsuits and the latter involved a corporation’s ability to make contracts. Then along came a case whose dicta established that a corporation is a person, but did not give any kind of reasoning behind why it believes this to be so. Nevertheless, this is considered to be a landmark case in that the case affirmatively established that a corporation is indeed a person. But, since the reasoning behind this is unclear, it is likewise unclear as to whether this court decided that the Framers intended this to be so. In other words, the Supreme Court cases that have dealt with the issue of corporate personhood, as contemplated by the Framers, have been contradictory, confused and have not provided a firm answer. The starting point for this analysis would be Bank of the United States v. Deveaux 9 U.S. 61 (1809). In this case, the Defendant, Peter Deveaux, went to the premises of the Plaintiff, the Bank of the United States, and took possessions from the plaintiff including “two boxes…containing each one thousand dollars in silver, then and there found in the possession of your petitioners, and being of the value of two thousand and four dollars, and carried the same away, and converted and disposed thereof to their own use…” (Bank of the United States v. Deveaux at 62). The defendant sought to dismiss the suit on the grounds that the plaintiff was a corporation, and as such “cannot sue or be sued, plead or be impleaded in this honorable court by anything contained in the Constitution or laws of the same United States…wherefore for want of jurisdiction in this behalf, they pray judgment, and their costs” (Bank of the United States v. Deveaux at 63). Therefore, the defendant sought dismissal on the grounds that a corporation is not a citizen for the purposes of the constitution, and cannot sue or be sued because of this. The starting point of the Deveaux’ court’s analysis was that, in order to be able to sue in federal court, there must be a controversy between citizens of two different states; therefore, both entities must be considered to be “citizens” (Bank of the United States v. Deveaux at 86). The Deveaux court noted that the Constitution is a general article, not one of detail, because the framers could not anticipate every contingency that would face the nation, so it was based upon broad and general principles. After noting this, the Deveaux court also noted that a corporation, that is an entity with a corporate name, cannot be an alien or a citizen. Rather, the corporation is made up of individuals “against whom the suit may be instituted” and, if the members of the corporation are aliens or citizens under the meaning of “citizen” in the Constitution, then the corporation “come within the spirit and terms of the jurisdiction conferred by the Constitution of the national tribunals” (Bank of the United States v. Deveaux at 87-88). The Deveaux court went on to examine English law for further authority in making their decision. They stated that a London case was brought by a corporate, in the corporation’s name, and a judgment was brought, yet reversed because the court was deprived of jurisdiction due to the nature of the individuals who composed the corporation. The objection in that case was that the corporation “was an invisible, intangible thing, a mere incorporeal legal entity in which the characters of the individuals who composed it were completely merged” (Bank of the United States v. Deveaux at 90). However, the judges in that case decided that this was not the case, and that they could look beyond the corporate veil to determine the nature of the individuals who comprise the corporation. The Deveaux court seemed to indicate that the Constitution did not intend for corporations to be an entity that could sue. They stated that “if, then, the Congress of the United States had in terms enacted that incorporated aliens might sue a citizen or that the incorporated citizen of one state might sue a citizen of another state in the federal courts by its corporate name, this Court would not have felt justified in declaring that such a law transcended the Constitution” (Bank of the United States v. Deveaux at 91). In other words, the Deveaux court felt that a law authorizing suits brought in the corporate name to be a law that went beyond the Constitution, which implies that it was not contemplated by the Constitution’s framers. The Deveaux Court goes on to state that the term citizen, as used in the Constitution, is understood as meaning, in the cases of corporations, the “real persons who come into court, in this case under their corporate name” (Bank of the United States v. Deveaux at 91). Therefore, the Deveaux court decided that a corporation may sue, but that the character of its members are what determines the jurisdiction of the court. In other words, if the members are comprised of individuals who do not qualify for diversity in that they are not members of a different state than the plaintiff, then that corporation would lose jurisdiction. Conversely, if the members of the corporation do meet this threshold, the corporation may sue. In the process, the Deveaux court seemed to indicate that the Framers did not intend that a corporation may sue or be sued in its own name, as it stated that such a principle “transcended the Constitution, and stated that the term citizen means the real people who comprise the corporation and sue in the name of the corporation. This decision would indicate that a corporation is not an entity or a citizen per se as envisioned by the Framers, but is, rather, a kind of vessel for the individuals who make up the corporation. Only these individuals can be considered to be citizens as contemplated by the Framers, but they can go ahead and use the corporation to sue. Although this reasoning is somewhat confusing, the Deveaux Court would indicate that a corporation is not a “person” per se, but is an entity that can be used by persons to sue. This interpretation is contradicted by Bank of Augusta v. Earle 38 U.S. 519 (1839). The Court in Earle noted that earlier case of Deveaux, and stated that Deveaux only extended to a corporation’s right to sue. Earle’s analysis on the nature and character of a corporation began with noting that a corporation only has powers given to it by its charter (Dartmouth College v. Woodward 17 US 519 (1819)), and that “can have no legal existence out of the boundaries of the sovereignty by which it is created” (Bank of Augusta v. Earle at 520) and that if the law under which the corporation is created ceases to exist, then so does the corporation. Yet Earle also stated that a corporation is a “person for certain purposes in contemplation of law, and has been recognized as such by the decisions of this Court” (Bank of Augusta v. Earle at 520). Earle also stated that under the legislation of Congress there was evidence that corporations were allowed to make contracts with others. It stated that, for purposes of making a contract that the corporation is not comprised of individual members as it is in Earle, but is, rather, “a contract of the legal entity—the artificial being created by the charter - - and not the contract of the individual members” (Bank of Augusta v. Earle at 587). The Earle Court’s reasoning was that, if the contract were the contract of the individual members “each stockholder would be liable to the whole extent of his property for the debts of the corporation, and he might be sued for them in any state in which he might happen to be found. The clause of the Constitution referred to certainly never intended to give to the citizens of each state the privileges of citizens in the several states and at the same time to exempt them from the liabilities which the exercise of such privileges would bring upon individuals who were citizens of the state” (Bank of Augusta at 586). In other word, the Earle Court found just the opposite of Deveaux – whereas Deveaux stated that a corporation, while being able to sue in its own name, was not a person per se under the Constitution, but was comprised of the individual members and their characteristics, the Earle Court indicated that the individual members cannot be considered when a corporation makes a contract, but, rather, the entity itself is the only thing that can be considered. In so doing, the Earle Court decided that the Constitution never intended for the corporation to be seen as merely a conduit for its members, at least when considering the making of a contract. Earle has considerable authority, notably a landmark case in England called Continental Tyres and Rubber Co. Ltd. v. Daimler Co. Ltd., (1915) K.B. 888. This case involved an English company, Continental Tyre, that was incorporated in England and carried on business there. However, all of its directors were German subjects who lived in Germany, and all of its shares but one was possessed by German subjects. The issue in Tyre was whether or not the company could bring suit in England against an English subject, because it was incorporated in England. In other words, if the court looked at Continental Tyre as simply an amalgamation of its individual shareholders and leaders, then the company could not bring suit in England. However, if the English court took the Deveaux approach and state that the corporation is an independent entity from its individuals, then the company would be able to bring suit in England. The Tyre court found that the corporation was “a different person altogether from the subscribers to the memorandum or the shareholders on the register” (Continental Tyre at 893). Therefore, Continental Tyre was held to have “a personality at law distinct from the personalties of its members and could therefore sue in the English Courts as a British Subject” (Continental Tyre at 908). That said, the House of Lords overturned this decision, stating that “the character in which the property is held and the character in which the capacity to act is enjoyed and acts are done are not in pari materia. The latter character is a quality of the company itself, and conditions its capacities and its acts and is attributable only to human beings” (Continental Tyre (1916) 2 A.C. 328). In other word, the House of Lords subscribed to the aggregate theory of corporate personhood. Then along came the case of Santa Clara County v. Southern Pacific Railroad Company, 118 US 394 (1886). In the headnotes of this case, the following words that were pronounced before the argument began established the question of whether a corporation is a person once and for all, and these words have been followed by cases ever since “the court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We all agree that it does” (Korten, 1999, pp. 185-186). Thus, the Santa Clara Court affirmatively established that a corporation is, indeed a person, although the reasoning left much to be desired, for the Court’s reasoning did not indicate why it thought this. Did they believe that the Framer’s intended this? This is a question that is certainly open to interpretation, because the Santa Clara Court only mentioned the Fourteenth Amendment which was, of course, not an Amendment that was put forth by the Framers of the Constitution. However, the terse dicta does seem to indicate that this is most likely what the Santa Clara Court intended, for they defined a corporation as a “person” without comment. And, since the Supreme Court is bound by the Constitution and Constitutional interpretation, it stands to reason that, by defining a corporation as a person, it fully meant that the Constitution meant it as such. However, this is only conjecture as to what this Court was thinking. What is clear is that this dicta definitively established a corporation as a person. Whether or not the Framers intended it that way is open to discussion. Conclusion The question of whether the Framers intended a corporation to be a person that is allowed to sue and be sued in its name is one that has not been adequately answered. The Deveaux case indicates that a corporation is not a person per se, but nevertheless may sue in its name. But, the characteristics of the individual members are what one looks to when deciding jurisdictional issues, not the characteristic of the corporation. This further bolsters the idea that the Deveaux Court did not consider the corporation itself to be a person, even if it could sue. Yet the Earle case came along and stated that this was not the case, and that a corporation must be considered a separate entity from its individual members when making a contract. This would indicate that this Court found that the Framers did in fact consider corporations to be separate entities, if not entirely a citizen or person under the Constitution. Then the Santa Clara Court decides, once and for all, that a corporation is a person, but, by not explaining its reasoning, did not provide a ground for why it believes this to be so. Therefore, it is still unclear whether the Supreme Court finds that a corporation is a person contemplated by the Framers, although one thing is clear – a corporation is considered to be a person now. Sources Used Bank of Augusta v. Earle 38 U.S. 519 (1839). Bank of the United States v. Deveaux 9 U.S. 61 (1809). Korten, David C. The Post-Corporate World: Life After Capitalism. San Francisco: Berrett- Koehler Publishers, Inc., 1999. Santa Clara County v. Southern Pacific Railroad Company, 118 US 394 (1886). Read More
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