Legal Personality Research Paper

Every legal system must decide which individuals and collectivities, whether formally or informally constituted, or anything else, have legal personalities and what the content of those legal personalities might be. Some legal systems assume that certain actors have rights within the system based on inherent features of the actors, such as their humanity. Every legal system also grants certain actors not assumed to be able to act within the system the right, sometimes limited, to pursue their legal aims. This ascription of rights and duties upon an entity not presumed to be able to act within the system is its legal personality. Some legal systems, notably those premised on natural law, but certainly not limited to such systems, have recognized that some actors have inherent legal personalities. In systems of positive law, however, no quantum of rights inheres in any actor, at least in theory. Nonetheless, the history of legal personality is replete with examples of legal systems recognizing inherent rights in individuals, groups, and entities, whether their right to participate in the system is presupposed or granted as a matter of positive law.

The most prominent twentieth century example of an entity granted legal personality is the business corporation, though the history and theory of legal personality long antedate the business corporation. Religious, charitable, and governmental bodies are among the entities that have historically been granted legal personalities, especially insofar as legal systems have recognized distinctions between the rights of an office as distinct from the rights of the person occupying the office. Moreover, in legal systems characterized by hierarchies of actors not all human beings have been assumed to have full legal personalities. Therefore, women, children, slaves, and foreigners, among others, have had to have their legal personality defined. Recently, the possibility of ascribing legal personality to animals and other entities has entered jurisprudential debates, largely in the hope that in doing so the legal system would necessarily find that they have rights that might be vindicated.

1. Legal Personality, Inherent Rights, And Positive Law

Two theoretical difficulties attend the concept of legal personality. The first is the class or classes of entities which have personality in the eyes of the law. The second is whether legal personality inheres in any entity and what the content of inherent legal personality might be. Systems premised in natural law of some variety, for example, assume both that individual human beings have an irreducible quantum of legal personality and that the content of that personality provides each individual with a certain level of protection and dignity. Such systems need not, however, treat all human beings as having equivalent legal personality. An aristocrat and a slave may each possess a legal personality, but they need not be equal. Nor do political systems have to limit their vision to an individualist conception of personality. Theories of organic polities, for example those premised in republican or communitarian ideologies, maintain that group identity is fundamental to social organization and should be recognized at law. Even societies with a largely individualist politics recognize the legitimacy of some group Activity. Legal personality may therefore be presumed to inhere in collectivities within society, such as tribes, governments, churches, and even offices, such as governmental or religious offices. The difficulty in any such system is, of course, that human beings are required to discover both who and what might have a legal personality and then to discover the content of that personality.

Systems of positive law appear to solve the problem of legal personality present in systems which maintain beliefs in inherent legal personality. Under positive law legal personality does not inhere in anything or anybody but is rather the result of a grant by the sovereign authority. Hence, legal personality is a fiction created by the sovereign for instrumental purposes. The sovereign may decide to grant the right to act within the legal system to a person, to a class of persons, or to groups of people, constituted either formally or informally within the social structure. Indeed, the sovereign may grant the right to act to inanimate objects or to entities which are themselves the creation of the sovereign, such as corporate or subsidiary political entities. The difficulty presented by systems of positive law is, however, one of rights consciousness within a culture. That is, cultural conceptions of the dignity of human beings, either individually or collectively, the naturalness of human associations, or even conceptions of the inherent rights of, for example, animals, may war with the sovereign’s willingness to grant legal personality, no matter how minimal.

In practice virtually no system is either purely one in which legal personality inheres in people or things or in which the sovereign jealously guards the prerogative of the grant of personality. Systems premised on an understanding of inherent legal personality find themselves constantly revising the classes of individuals and entities covered and constantly discovering new aspects of their legal personalities. Moreover, sovereigns within such systems also indulge in the power to grant legal personality. Systems of positive law regularly discover that they must recognise aspects of legal personality that are not spelled out within the grant of personality. Couched sometimes as inferences from the grant and sometimes as necessary components of any grant of personality, these redefinitions of legal personality depend upon changing cultural, especially changing political and economic, circumstances for their content, even though the content of the changes must be recognized by some arm of the sovereign, for example, the courts. The history of legal personality demonstrates, moreover, that conceptions of legal personality have not neatly evolved from concepts of inherent personality to positive grants of personality. Instead, concepts of legal personality both depend upon and in turn influence surrounding circumstance.

2. Legal Personality In Jurisprudential History

The conflict between inherent and fictive conceptions of legal personality has a long history. Among the first instances in which the distinction between inherent and fictive legal personalities arose in western culture came during the thirteenth century during the papacy of Innocent IV. The Pope, attempting to consolidate the power of the Church and to harmonize society under its auspices, used the concept to delegitimate the authority of institutions inferior to the Church. As the Church was the agent of God, all collective human Activity was subordinate to it. Thus, other institutions were inferior to the Church and owed their existence not to their independent authority but existed at the behest of the Church or by its grace. They were, therefore, legal fictions. The Church was not alone in its attempt to subordinate other human institutions by fictionalizing their existence.

The early modern state and its successors have also tried to centralize power by subordinating other human institutions in the name of sovereignty. For example, guilds could only be legitimate to the extent that they acknowledged their derivative status. Similarly, corporate bodies could maintain corporate status only by virtue of charters. Under the Bubble Act collective corporate Activity in England could be prosecuted unless done under charter, though such prosecutions were evidently quite rare. In the United States the power of cities, towns, and other local entities derives from the individual states. Indeed, even the sovereign authority of the states and the other sovereignty recognized within the United States, that of the Indian nations, have their own tortured histories. The reason they are tortured, of course, is that modern political consciousness accepts Innocent’s positivist precept, that authority to act within a legal system depends on a grant from the sovereign authority, turning the concept of a sovereign existing within another sovereign into a first-rank problem of political logic.

By way of contrast, the concept that legal personality is inherent stems both from aspects of natural law and political conceptions of an organic society. The religious traditions that informed natural law suggested that individuals possessed a minimum of dignity that others, the sovereign included, were bound to respect. Failure to respect human dignity imperilled one’s soul. The history of the law of slavery is, for example, in many ways dependent on the distinction between the recognition of a slave’s human dignity and the consideration of the slave’s status as mere property. Parallel considerations animating organic politics legitimate recognition of groups and group Activity. Some political theorists have long argued that social groups and collective Activity are fundamental aspects of human life and therefore the recognition by a legal system of collective identity and the legal right of collective Activity is not a function of sovereign grace but rather a function of the human condition. Such recognition has taken a variety of forms throughout history. Recognition of social and political class divided parliamentary bodies in England and France, whereas, at least in the pre-Civil War United States, one’s loyalty to a state, defined formally as a geographic matter and informally as a matter of culture and politics, in part grounded the legitimacy of the federal system. Belief in the inherent legitimacy of group Activity has informed spirited intellectual and political Activity, such as Frederic Maitland’s late nineteenth and early twentieth-century desire to undermine certain individualist premises in the common law and to personify at law labor unions in an attempt to protect concerted Activity by the working class in England.

In modern jurisprudence, however, no form of collective Activity has caused more ink to be spilled in the debate over the nature of legal personality than the business corporation. Nowhere was the debate over the meaning of corporate personality as keenly debated in such a concentrated period as in the United States from the end of the second decade of the nineteenth century through the first third of the twentieth century. No mere academic dispute, the debate over corporate personality was framed by the twin considerations of society’s power to promote and regulate economic Activity on the one hand and the nature of collective Activity, in this case entrepreneurial Activity, on the other.

While English and American discussions of corporate personality existed before the nineteenth century, both in the common law and elsewhere, the first definitive exploration of the American position came in the Supreme Court’s decision in Dartmouth College vs. Woodward, 17 US 518 (1819). In that case Chief Justice John Marshall wrote that a corporation ‘is an artificial being, invisible, intangible, … possess[ing] only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created.’ The declaration of the Chief Justice appeared to put the United States squarely in the camp of positive law insofar as corporate personality was concerned. Considering that elsewhere in American jurisprudence the legal personality of white male property-owning citizens was assumed, it is, however, quite clear that neither a belief in inherent legal personality nor a purely positivist vision animated overall American legal thought. Indeed, even within the realm of corporate personality both the case generally and Marshall’s own opinion left room for both visions. Despite the clear import of Marshall’s language, the case held that the sovereign could not unilaterally alter the charter of its own creation when that creation was a private entity, which the college was. Even within the realm of positive law, therefore, Innocent’s vision was subtly altered. The sovereign could, of course, reserve the power to alter charters it granted, and the chartering states quickly proceeded in that direction by legislative act. Nevertheless, even without recourse to the legislature, Marshall had left open the potential expansion of corporate personality by recognition of the necessary incidents of corporate existence.

Dartmouth itself was, of course, an educational and not a business institution. In the United States, however, the expansion of the economy and the entrepreneurial fervor of the citizenry meant that individuals looking for vehicles under which to organize their capital for business purposes quickly adopted the corporate form as their preferred mode. States, eager to accommodate, granted corporate charters in ever greater numbers. As the corporate form grew to be the natural mode for organizing capital, Marshall’s supposition that corporations were ‘artificial being[s]’ grew ever more suspect. Rather than beings created by the state, they seemed creations of entrepreneurs. These creations, moreover, did not have simply the rights granted by the sovereign, but had whatever properties necessary to accomplish their object. Business existed in environments which required properties of great flexibility in order to operate and to achieve their object. They needed, among many other things for example, the right to own property, both real and personal, including intellectual property; they needed the right to operate across jurisdictional lines in order to better exploit markets for their products; they needed to be able to exploit resources in different jurisdictions, be they natural resources, pools of labor, sources of power or transport, or even pockets of capital. In addition to finding the elementary aspects of legal personality, such as the right to sue and to be sued, courts began to find other rights incidental to corporate existence. What is equally interesting is the tension between the legislature, which had the right to set the terms of a corporation’s legal personality, and the courts, upon which fell the interpretive burden of discovering rights which were incidental and through their discovery legitimating those rights. To be sure, legislatures often resisted granting certain rights and American courts moved in fits and starts in recognizing incidental rights, but the direction was clear. Marshall’s qualification was, therefore, one of the ways in which the American jurisprudential image of the corporation reversed itself.

Well before the end of the nineteenth century, corporations asserted and courts recognized their changing legal personality. Though the object was clear, the protection of the property interests of the owners of corporations, the corporation’s malleable legal personality was deployed as a jurisprudential weapon. At the time of the Dartmouth College judgment, corporations were rare, the state’s imprimatur was thought to be useful in aggregating capital for risky and large ventures, and legislative consideration of corporate charters was real. A fictional understanding of the corporation’s legal personality made sense, both to the state and to the individuals who sought a charter. By the last quarter of the nineteenth century, however, none of those conditions obtained. Corporations, especially business corporations, were common. Organizing entrepreneurial Activity under corporate auspices was increasingly the norm. Capital markets had advanced to the point where the state’s grant was largely irrelevant to the capacity to obtain capital and, as important, the state’s stamp of approval was no longer felt to be necessary. Regulation of the behavior of corporations through their charters was largely nominal and the granting of charters was becoming an administrative rather than a legislative process. Indeed, the politics of regulation, always present, grew more contentious as the century progressed, especially as corporate Activity made state and local regulation problematic. Regulation of behavior, regardless of legal form, increasingly became the norm and owners of corporations, in turn, sought to protect their property through new conceptions of corporate legal personality.

American legal treatises concerned with corporate law at first edged in the direction of abandoning the conception of the corporation as an entity with a legal personality of its own and instead made a brief attempt to see the corporation as the aggregation of the property of individuals and protected as would be the individual property of those individuals. Decades of jurisprudence dealing with corporate personality, the separation of owner and entity powerfully reinforced by the limited liability of corporate shareholders, and the willingness of courts to find an ever greater sphere of corporate rights suggested a different path. By the end of the century American jurisprudence, while still paying verbal homage to Marshall’s understanding, had, in fact, begun to assume that many aspects of a corporation’s legal personality were inherent. Ironically, the American jurisprudence of corporate personality, which proved to be politically conservative, fed on many aspects of progressive jurisprudence. Maitland’s writings on personification of the corporation, for example, though designed to help the aspirations of English labor as part of a larger jurisprudential vision, abetted an understanding of the naturalness of corporate rights in the United States. Indeed, the use of the term legal person to describe the corporation carried with it strong implications of a legal personality the equivalent of other persons.

In American jurisprudence the debate over the personification of the corporation exhausted itself in the years immediately prior to the Second World War. In part the business corporation had achieved a legal personality sufficient for its needs and the needs of its owners. Further dispute on the reality and inherent content of a corporation’s legal personality seemed irrelevant. Corporations existed and their legal rights and duties gave them sufficient flexibility to operate, flourish, and protect themselves. Simultaneously, attacks on general conceptions of rights by legal realists and others in favor of concepts of legal interests that society ought to recognize turned out to be just as hospitable to corporations in an environment that valued economic productivity more highly than much else. Nonetheless, the instrumental value of asserting an inherent legal personality was far from lost. In the last 1980s, for example, the United States Supreme Court recognized free speech rights of corporate bodies premised on the First Amendment of the Constitution, going so far as to characterize as ‘extreme’ the position that corporations have only the rights granted to them by states.

Legal personality, as the history of corporate personality demonstrates, is a jurisprudential tool with an independent significance. Without a legal personality, no person, entity, or thing may actively participate in a legal system. Once having obtained a legal personality, either by the assertion of an inherent personality and the recognition of that personality by the appropriate political bodies, or by the grant of personality from the sovereign, the content of the personality is plastic but the capacity to participate, even if limited, is clear. By right of participation, the avenue to enlarging the content of that personality opens itself up to assertions of right and instrumental value.

Bibliography:

1. Dewey J 1926 The historic background of corporate legal personality. Yale Law Journal 35: 655–73
2. Gierke O 1900 Political Theories of the Middle Ages. Cambridge University Press, Cambridge, UK
3. Hallis F 1930 Corporate Personality. Oxford University Press, London
4. Hurst J 1970 The Legitimacy of the Business Corporation in the Law of the United States. University Press of Virginia, Charlottesville, VA
5. Laski H 1916 The personality of associations. Harvard Law Review 29: 404–26
6. Maitland F 1911 Moral personality and legal personality. The Collected Papers of Frederic William Maitland. Cambridge University Press, Cambridge, UK
7. Mark G 1987 The personification of the business corporation in American Law. University of Chicago Law Review 54: 1441–83
8. Nekam A 1938 The Personality Conception of the Legal Entity. Harvard University Press, Cambridge, MA
9. Vinogradoff P 1924 Juridical persons. Columbia Law Review 24: 594–604
10. Wolff M 1938 On the nature of legal persons. Law Quarterly Review 54: 494–521