eigners. Mr. Barlow, in the same relation, referred to four railroad corporations-the New York Central, the Erie, the Pennsylvania, and the Reading-and said it would not infrequently be found, as he was informed, that a large majority of the stock of each of those companies was for the time being owned abroad. This correspondence is printed in S. Doe. 264, 57 Cong. 1 sess. 232-235. (2) INTERPOSITION IN BEHALF OF SECURITY HOLDERS. $985. In 1865 a local official in Colombia, whose action was afterwards ratified by the Colombian Government, seized the steamer Antioquia, belonging to the "Compañia Unida de Navegación por vapor en el Rio Magdalena." The origin and constitution of this company were not stated, but it appeared that less than half of a majority of the stock was held by American citizens, the rest being owned by British subjects, citizens of Hamburg, and citizens of Colombia. Next to the amount held by Americans, the largest was owned by British subjects. The grounds of the seizure were (1) that the steamer had violated an order prohibiting the transportation of political suspects, and (2) that military necessity required the pressing of the steamer into the public service for the transportation of troops. The Presi dent of Colombia offered to return the vessel and make compensation for her use, but, as an agreement on this point could not be reached, directed that the necessary documents be collected and submitted to the legal tribunals. To this course the owners objected, and the American shareholders appealed to their Government. Mr. Seward intimated that they should not object to going to the courts; but he then went on to say that a more general question seemed to be involved in the case. It was argued, said Mr. Seward, that, when an American citizen went abroad and invested his money in the shares of an artificial body, which held the general title to the property con cerned and gave to the associates shares assignable at pleasure, the shares of the American citizen were in such case a species of property not partaking of his national character, and in respect of which, whatever might be fall the property of the association, he had no valid claim for the intervention of his Government. If his individual shares, specifically as the property of an American, should be unjusti fiably confiscated, a different question would be raised; but as a corporator he had no individual property in the chattels or credits of the corporation. The Supreme Court of the United States had, said Mr. Seward, recently decided that a tax on an individual's shares in a national bank was not a tax on the capital of the bank, and in so deciding had declared that the corporation was the legal owner of all the property of the bank, real and personal, and within its corporate powers could deal with such property as absolutely as a private individual could deal with his own. Still more pertinent, said Mr. Seward, was the case of Queen . Arnold, 9 Adolph. & Ellis, N. S. 806, in which the Pacific Steam Navigation Company, a British corporation, on applying for a British register for one of its ships, met with a refusal on the ground that the British statute of 8 & 9 Vict., chap. 9, prohibited foreigners from being entitled to be owners, in whole or in part, directly or indirectly, of any vessel requiring to be registered, and made it a condition that the vessel should belong wholly to British subjects, while a portion of the stock of the Pacific Steam Navigation Company was owned by citizens and residents of Mexico. The court, however, commanded the issuance of the register, Lord Denman, who delivered the opinion, observing that the British corporation was, as such, "the sole owner of the ship, and a British subject, notwithstanding some foreigners may individually have shares in the company, and such individual owners are not entitled, in whole or in part, directly or indirectly, to be owners of the vessel." Applying this doctrine, said Mr. Seward, to the company owning the Antioquia, the association as an entity was "to be assimilated to a citizen of Colombia. If it has sustained a wrong, is it not for it to pursue such remedy as it may have in the same manner as a private Colombian would be obliged to do, without the aid of any government external to Colombia? "It may well be that subjects of Great Britain, France, and Russia, are stockholders in our national banks. Such persons may own all the shares except a few necessary to qualify the directors whom they select. Is it to be thought of that each of those powers shall intervene when their subjects consider the bank aggrieved by the operations of this Government? If it were tolerated, suppose England to agree to one mode of adjustment, or one measure of damages, while France should insist upon another, what end is conceivable to the complications that might ensue? "It is argued that there is no wise policy which requires us to encourage the employment of American capital abroad by extending to it any protection beyond what is due the strictest obligation. There is no wise policy in enlarging the capacity of our citizens domiciled abroad for purposes of mere pleasure, ease, or profit, to involve this Government in controversy with foreign powers. The tendency of things, it is urged, is to an increase year by year of just such companies in the South American States as that which presents the claim under consideration, while no very proximate period can be foreseen at which we may expect their exposure to the hazards of intestine commotion to be sensibly diminished. "We are sufficiently impressed by these considerations to pause for further information, especially as the affair seems to be in a way of an adjustment, unless the claimants impede it, to which there is great difficulty in objecting. Any further evidence, however, or arguments which the American claimants may deem pertinent to a just disposition of their case, on the part of this Government, will be attentively considered." Mr. Seward, Sec. of State, to Mr. Burton, min. to Colombia, April 27, 1866, Dip. Cor. 1866, III. 522. See, also, id., 454, 478, 480. By a law of 1875 the Peruvian Government was authorized to expropriate the nitrate establishments of Tarapacá, giving in provisional payment there for certificates or bonds bearing interest and guaranteed by a pledge of the nitrate property. In order to carry out the transaction, the Peruvian Government placed these certificates or bonds with a Peruvian company, called the "Compañia Salitrera del Peru." In this company a large interest was held by the Banco Nacional del Peru," the shareholders of which thus became indirectly shareholders in the company. Certain American citizens who were shareholders both of the company and of the bank afterwards sought the intervention of the United States as against the Government of Chile, on the ground that the company had been despoiled of its rights by the Chilean authorities. The request for intervention was denied on the following grounds: That the rights and privileges held by the company were in every sense Peruvian; that they could not be enjoyed without acting in a corporate capacity; that the American shareholders were not entitled to any advantages over the other shareholders; that the existing interest of the American shareholders was reduced to an equitable right to their distributive share of the funds of the corporation; that the rights of the corporation were involved, and not the individual rights of the shareholders, and that, even if all the individual members of the corporation were duly qualified American citizens, they could not present their complaint in their individual names as owners, but must present them as belonging wholly to the corporation as owner. It was added that the corporation must of necessity be made a party to any complaint that might be presented, since otherwise no cause of complaint would appear, and that an individual shareholder could not prosecute a corporate cause of action because the corporation failed or refused to do so. Finally, it was stated that the "good offices" of the United States might with propriety be exercised in behalf of the American claimants when the claims of the company were properly presented to Chile, but that the request that prompt and efficient diplomatic steps be taken in support of their individual interest as shareholders was out of the question. Mr. Frelinghuysen, Sec. of State, to Mr. Phelps, min, to Peru, Dec. 6, 1884, As being in harmony with the foregoing instruction, see the opinion of See, as to the citizenship of corporations, supra, § 485. The Portuguese Government in 1883 granted to Edward MacMurdo, a citizen of the United States, a concession for the construction of a railway from the port of Lourenço Marques, on Delagoa Bay, to the Transvaal frontier. For this purpose the concession stipulated that MacMurdo should form a company under the laws of Portugal, and such a company was accordingly organized under the name of Lourenço Marques and Transvaal Railway Company. In May, 1884, MacMurdo assigned his concession to this company, receiving there for 498,940 out of 500,000 shares of the company's stock. By the same instrument MacMurdo agreed to construct the railway, in consideration of the transfer to him of all the company's debenture bonds. These bonds MacMurdo unsuccessfully endeavored to float; and, after the company had obtained several extensions of time for the completion of the road, he obtained, in 1887, the assistance of English capitalists. These capitalists, however, insisted that their interests should be represented by the bonds and shares of a company to be incorporated under the laws of England. The Delagoa Bay and East African Railway Company was therefore formed in England, with a share capital of £500,000. To this English company MacMurdo assigned his shares and bonds of the Portuguese company, and also the benefit of his contract with that company, of May, 1884, the English company undertaking to indemnify him in respect of the contract, to pay him £115,000, and to give him its entire issue of stock. The English company then issued bonds to pay MacMurdo and to raise money to build the road. MacMurdo's course in securing the formation of the English company was approved by the Portuguese Government, the only reservation made in regard thereto being that the concession should not be transferred to it. In July, 1887, the Portuguese Government intimated that it would require an extension of the lines beyond the point at which the company alleged that the road was to end. A discussion ensued, and meanwhile the road was completed in accordance with the original plans and was accepted by the Portuguese Government, with a reservation of the question as to the extension. In the midst of controversies over this question the Portuguese Government, in June, 1899, seized the railway. Against this action both the United States and Great Britain pro tested. The Portuguese Government, however, took the ground that it could deal only with the Portuguese company, through which the rights of the American and British investors must be asserted. With reference to this contention, the Marquis of Salisbury, in an instruction to the British minister at Lisbon, September 10, 1889, said: "Her Majesty's Government are of opinion that the Portuguese Government had no right to cancel the concession, nor to forfeit the line already constructed. "They hold the action of the Portuguese Government to have been wrongful, and to have violated the clear rights and injured the interests of the British [construction] company, which was powerless to prevent it, and which, as the Portuguese company is practically defunct, has no remedy except through the intervention of its own Government. "In their judgment, the British investors have suffered a grievous wrong in consequence of the forcible confiscation by the Portuguese Government of the line and the materials belonging to the British company, and of the security on which the debentures of the British company had been advanced; and that for that wrong Her Majesty's Government are bound to ask for compensation from the Government of Portugal." a Mr. Blaine, in instructions to Mr. Loring, American minister at Lisbon, November 8, 1889, said: "Upon full consideration of the circumstances of the case, this Government is forced to the conclusion that the violent seizure of the railway by the Portuguese Government was an act of confiscation which renders it the duty of the Government of the United States to ask that compensation should be made to such citizens of this country as may be involved. With respect to the case of Colonel MacMurdo, who is now represented by his widow, Katherine A. MacMurdo, his sole executrix and legatee, it is to be observed that by the terms of the concession the company which he was required to form was to include himself and that his personal liability was not merged in that of the company. But in any case, the Portuguese company, being without remedy and having now practically ceased to exist, the only recourse of those whose property has been conficated is the intervention of their respective governments. "In this relation it is proper to advert to the note of Senhor Barros Gomes of the 22d of June last, above referred to, in which he stated that there were two ways in which an arrangement could then be made with the Portuguese company which would protect the interests of the share and bondholders. One of these ways was the acceptance by the company of the tariff of rates proposed by the Government of the Transvaal; the other, a radical alteration of the concession, which a Parl. Pap., Cd. 5903, p. 58. |