Bank of Augusta v. Earle 13 Peters 519 (1839)

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BANK OF AUGUSTA v. EARLE 13 Peters 519 (1839)

This case was vitally important to corporations because it raised the question whether a corporation chartered in one state could do business in another. Justice john mckinley on circuit duty ruled against corporations, provoking Justice joseph story to say that McKinley's opinion frightened "all the corporations of the country out of their proprieties. He has held that a corporation created in one State has no power to contract or even to act in any other State.… So, banks, insurance companies, manufacturing companies, etc. have no capacity to take or discount notes in another State, or to underwrite policies, or to buy or sell goods." McKinley's decision seemed a death sentence to all interstate corporate business. On appeal, daniel webster, representing corporate interests, argued that corporations were citizens entitled to the same rights, under the comity clause in Article IV, section 2, of the Constitution, as natural persons to do business. With only McKinley dissenting, Chief Justice roger b. taney for the Court steered a middle way between the extremes of McKinley and Webster. He ruled that a corporation, acting through its agents, could do business in other states if they did not expressly prohibit it from doing so. In the absence of such a state prohibition, the Court would presume, from the principle of comity, that out-of-state corporations were invited to transact business. Thus a state might exclude such corporations or admit them conditionally; but the Court overruled McKinley's decision, and corporations as well as whigs, like Webster and Story, rejoiced.

Leonard W. Levy

(see also: Citizenship; Privileges and Immunities.)