'Since the ordinary administration of the law is carried on by the state courts, it necessarily happens that by the course of their decisons certain rules are established which become rules of property and action in the state, and have all the effect of law, and which it would be wrong to disturb. This is especially true with regard to the law of real estate and the construction of state constitutions and statutes. Such established rules are always regarded by the Federal courts, no less than by the state courts themselves, as authoritative declarations of what the law is. But where the law has not been thus settled, it is the right and duty of the Federal courts to exercise their own judgment; as they always do in reference to the doctrines of commercial law and general jurisprudence. So, when contracts and transactions have been entered into, and rights have accrued thereon under a particular state of the decisions, or when there has been no decision of the state tribunals, the Federal courts properly claim the right to adopt their own interpretation of the law applicable to the case, although a different interpretation may be adopted by the state courts after such rights have accrued. But even in such cases, for the sake of harmony and to avoid confusion, the Federal courts will lean towards an agreement of views with the state courts if the question seems to them balanced with doubt. Acting on these principles, founded as they are on comity and good sense, the courts of the United States, without sacrificing their own dignity as independent tribunals, endeavor to avoid, and in most cases do avoid, any unseemly conflict with the well-considered decisions of the state courts.'
Applying these principles to the case at bar, we solve its questions. The supreme court of the state in passing on the case, not only considered the acts of the 9th and 10th of April, 1872, regarding municipalities, but also, as we have said, the general incorporation act of April 18, 1872. Under the latter the plaintiff was incorporated, and it was held that the act 'must be regarded as entering into and forming part of the charter' of the plaintiff. The statute reserves to the general assembly the power to prescribe in the government of corporations 'such regulations and provisions as it may deem advisable.' The language is very comprehensive. Regarding it alone, it is difficult to conceive what objects of legislation are not covered by it. The supreme court of the state has construed it to be of greater import than the usual reservation of the power to alter and amend the charters of corporations.
The plaintiff, however, contends that it was not intended by the terms, 'regulations and provisions,' 'to interfere with the internal business management of the corporation itself,' but to regulate 'those classes of acts which control the relation existing between stockholders as individuals and the corporation as an entirety, and the relations between corporations and third persons; that is, the manner of carrying on their business or exercising the powers of a corporation.' We think the construction is too narrow. The statute made no distinction between the internal and the external business of corporations,-between their relations to stockholders and their relations to third persons. Such are but special exertions of the power which the legislature possesses.
In Boston Beer Co. v. Massachusetts, 97 U.S. 25, 24 L. ed. 989, a provision was passed on, of an act defining the general powers and duties of manufacturing corporations, as affecting the beer company. The general statute was enacted in 1809, and the provision construed was as follows: Provided always, that the legislature may from time to time, upon due notice to any corporation, make further provisions and regulations for the management of the business of the corporation and for the government thereof, or wholly repeal any act or part thereof, establishing any corporation, as shall be deemed expedient. The beer company was incorporated in 1828 'for the purpose of manufacturing malt liquors in all their varieties.' It was held that the provisions of 1809 were adopted in the charter of the beer company, and were a part of the contract between the state and the company, rendering the latter subject to the exercise of that power; and the seizure and forfeiture of certain malt liquors, which were intended to be sold in violation of the prohibitory liquor law passed in 1869, were sustained.