Mr. Seward to Mr. Burton
Sir: I have to acknowledge the receipt of your despatch No. 214, dated January 20th, 1866, with the enclosures relating to the seizure on the Magdalena river, in December last, of the steamer Antioquia.
An examination of the voluminous papers upon this subject discloses so many and so grave questions as to induce the determination to suspend the further prosecution of the claims of the Amercican citizens interested in that vessel.
The facts appear to be that the steamer is owned by the “Compania Unida de Navegacion por vapor en el Rio Magdalena.” The origin and constitution of this company are not stated, but an attested list of its shareholders is among the documents presented by its financial agent. From this it appears that of the $360,000 forming the nominal capital of the company, $162,500, less than half, is held by American citizens, $128,000 by British subjects; $22,500 by citizens of Hamburgh; $5,000 by those of Colombia; $40,700 marked as Colombian, but also stated to be the property of Granados, Garcia & Co., of Paris, and as ordered to be transferred to the British firm of Isaac & Samuel; $1,300 marked as Colombian, but in process of transfer from the holders to J. A. Catano, a Colombian. The stock would therefore appear to be transferable at will, and the company to have in this respect at least the attributes of a corporation.
The seizure of the steamer was made by order of an officer exercising for the time supreme executive functions in the State of Magdalena, and was subsequently ratified by the President of Magdalena and acknowledged by the minister for foreign affairs of the United States of Colombia as an act for which the general government is responsible.
The officer directing the seizure put it upon two grounds: 1st. That the vessel had, in violation of an express order prohibiting the giving passage to two political suspects, taken them on board and transported them to an unusual landing place on the river in the vicinity of a town in insurrection, where they united themselves with the insurgents. Upon this point it may be remarked that the company appear to make a somewhat lame defence to the charge, but that its consideration is of minor importance, as the Colombian government may be deemed to have in a manner waived it, in adopting the second ground of seizure, viz: 2d. A military necessity of pressing the steamer into the public service for the transportation of troops.
The steamer was in fact employed in such a service. Upon its termination the President of Magdalena requested the agent of the company to designate some person who should go to the point upon the river where the steamer was then located, and there receive possession of her. This was declined on the score that it was the duty of the government to redeliver her at the port where the headquarters of the company were established. This branch of the controversy is unimportant in principle, insomuch as it relates only to the question of damages.
In respect to the allegation that the Antioquia was selected for appropriation [Page 523] to the use of the government by reason of an interest of the officer who directed it, in a rival lien which had steamers equally convenient and serviceable, it may be observed that the general right of a government in time of war or insurrection to press into its transport service a foreign vessel within its territory is not to be disputed. When there is any reasonable color of a necessity for such a measure, the government must in the nature of things be allowed a large discretion in judging of its degree. It cannot be called upon to enter into any discussion with private parties as to the grounds upon which it esteems the act necessary, or the motives upon which it selects one vessel rather than another; this would substantially defeat the right a branch of sovereign power exercised confessedly upon exceptional grounds over property ordinarily exempt from local burdens, and under the obligation to make plenary compensation. If a tribunal adjusting the damages might be tempted to measure them more liberally in a case where manifest partiality had been exercised by the government agent at the expense of the claimant, it is only in that aspect that the circumstance may appear to become a proper subject of discussion.
The secretary for foreign affairs of the United States of Colombia declares that the President of Magdalena “lamented the abuse referred to,” and in the same connection he states the President’s offer to return the vessel and make prompt indemnification without the necessity of a reclamation or of judgment by the courts.
I appreciate but imperfectly the stress which is laid by the claimants upon the guarantees of the Colombian constitution and laws for the free navigation of rivers, and upon the contract with the steamship company for the transportation of the mails in part, perhaps, because the text of these documents is not fully presented. So far as cited they do not seem to have any just relation to the anomalous exigencies of war and rebellion. The circumstance that the Antioquia was engaged in carrying the Colombian mails is one apparently excusing rather than condemning the temporary appropriation of her in preference to other vessels equally adapted for use as transports; she was already to a certain extent in the public service.
The federal government of Colombia declares that it has instructed its procurador to collect the necessary documents and submit them to the legal tribunals, with a view to the liquidation of damages. It thereupon invites the agent of the company to furnish his bill of charges and his proofs. With this I think the claimants must rest satisfied. We are unfortunately too familiar with complaints of the delay and inefficiency of the courts in the South American republics. We must, however, continue to repose confidence in their independence and integrity, or we must take the broad ground that those States are like those of Oriental semi-civilized countries—outside the pale within which the law of nations, as generally accepted by Christendom, is understood to govern. The people who go to these regions and encounter great risks in the hope of great rewards, must be regarded as taking all the circumstances into consideration, and cannot with reason ask their government to complain that they stand on a common footing with native subjects in respect to the alleged wants of an able, prompt, and conscientious judiciary. We cannot undertake to supervise the arrangements of the whole world for litigation, because American citizens voluntarily expose themselves to be concerned in their deficiencies.
There is a more general question now under consideration by this government, which seems to be involved in this case. Further information in respect to the organization and character of the company owning the Antioquia may show that the question does not arise.
It is argued that when an American citizen goes abroad, and fuses his property or invests his funds in any form of special association created by the law of the region where the association conducts its business, by which the general title to the property with which the company operates is vested in an artificial body, [Page 524] giving to the associates shares assignable at pleasure, in that case the shares of the American citizen are a species of property, not partaking of his national character, and in respect to whatever may befall the property of the association the American shareholder has no valid claim for the intervention of his government. If his shares, specifically as the property of an American, in that shape should be the subject of unjustifiable confiscation or other outrages, that would raise what is conceived to be a different question, with which we are not at present concerned.
A corporator as such has no property in the chattels or credits in which the capital of himself and his associates may have been invested by the governing body of the corporation. All that he has is a right to an account and a distribution between himself and his associates of what may remain after converting the property of the corporation in cash, or other desirable assets, after paying its debts, together with the faculty of transferring this right to an account to any third person, by assigning his stock without consulting his associates.
A very recent decision of the Supreme Court of the United States has furnished a striking elucidation of the nature of this property. The Constitution, as interpreted by that tribunal, exempts the stocks of the federal government from taxation by the States and municipalities. A national bank invests its entire capital in federal bonds or certificates of indebtedness, or such capital may have been constituted by the specific contribution of each stockholder of his aliquot share of such bonds or certificates. In the hands of the corporation they are exempt from State taxation. Congress, however, thought proper to subject to State taxation the stock of individual shareholders in the national banks. This was resisted as an indirect mode of evading the constitutional immunity as taxing, in effect, the same property under one name which was exempt under another. The court decided against the right to exemption, and in an answer to the argument first suggested, it said, “the tax on the shares is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal, and within the powers conferred upon it by the charter and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. This is familiar law, and will be found in every work that may be opened on the subject of corporation. A striking exemplification may be seen in the case of the Queen vs. Arnold, (9 Adolph & Ellis, N. S., p. 806.) The question related to the registry of a ship owned by a corporation. Lord Denman observed: “It appears to me that the British corporation is, as such, the sole owner of the ship. The individual members of the corporation are, no doubt, interested in one sense in the property of the corporation, as they may derive individual benefits from its increase, or loss from its decrease, but in no legal sense are the individual members the owners.’
“The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the number of his shares, and, upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts. This is a distinct, independent interest or property held by the slaveholder like any other property that may belong to him. Now it is this interest which the act of Congress has left subject to taxation by the States.”
The case of the Queen vs. Arnold thus cited approvingly is even more pertinent to the question in hand.
The Pacific Steam Navigation Company, a corporation created by the law of Great Britain, upon applying for a British register for one of its ships, met with a refusal on the ground that the statute in force (8 and 9 Victoria, chapter 9) prohibited foreigners being entitled to be owners in whole or in part, directly or indirectly, of any vessel requiring to be registered; and in another place made it a condition that the vessel should wholly belong to her Majesty’s subjects, [Page 525] while a portion of the stock of the Pacific Navigation Company was owned by citizens and residents of Mexico. Lord Denman, delivering the opinion of the Court of Queen’s Bench, which commanded the issuing of the register, observed, in addition to the remarks quoted by the Supreme Court, “the British corporation is, as such, the sole owner of the ship, and a British subject, within the meaning of the 5th section, 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.”
Apply this doctrine to the case in hand. The value of the Antioquia is stated by the agent of the company which owns it at $50,000, while the whole capital is $360,000. Can the owners of $162,500 of this capital lay claim to that proportion, 162½ 360ths, or any proportion of that steamboat? It is entirely consistent with anything that appears, that the company may be insolvent, and that the resulting interests to the claimants in all its property may be nothing.
Is not this the proper view justified by the authorities cited? The association as an entity, is 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 of 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.
I am, sir, your obedient servant,
Allan A. Burton, Esq., &c., & c., & c.