Philadelphia Fire Assn. v. New York

Me. Justice Habían

dissenting.

Under the decision just rendered, the State of New York is permitted to subject a corporation of another State, within her limits by her consent, to higher taxes in respect to its business than is imposed there upon similar corporations of other States.

At the last term of this court, when counsel were about to enter upon the argument of the case of Santa Clara County v. Southern Pacific Railroad, 118 U. S. 394, 396 — involving the validity of a system devised by one of the States for the taxation of railroad corporations of a certain class — the Chief Justice observed: “ The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. Ve are all of opinion'that it does.” This, it is true, was said in regard to corporations of the particular State whose legislation was assailed as unconstitutional; but it is equally clear that a corporation of one State, doing business in another State by her consent, is to be deemed, at least in respect to that business, a “person ” within the jurisdiction of the latter State, in the meaning of the Fourteenth Amendment.

The denial of the equal protection of the laws may occur in various ways. It will most often occur in the enforcement of laws imposing taxes. An individual is denied the equal protection of the laws if his property is subjected by the State to higher taxation than is imposed upon like property of other individuals in the same community. So, a corporation is-denied that protection when its property is subjected by the State, under whose laws it is organized, to more burdensome taxation than is imposed upon other domestic corporations- of the same class. So, also, a' corporation of one State, doing business, by its agents, in another State, by the latter’s consent, is denied the equal protection of the laws if its business there is subjected to higher taxation than is imposed upon the business of like corporations from other States. These propositions seem to me to be indisputable. They are necessarily involved in the concession that corporations, like individuals, are entitled to the equal protection of the laws.

' The plaintiff in error is a corporation of Pennsylvania. In 1872 it established and has ever since maintained an agency in the State of New York. It had its agents there when the' taxes for 1881, here in question, were assessed.

. The laws of New York prescribe certain conditions precedent to the right of a fire insurance company from another State to transact business there. It must possess a certain amount of actual capital; appoint an attorney in the State, service of process upon whom is to be “ deemed a valid personal service upon the corporation” in any action “upon a ■policy or liability issued or contracted while such corporation transacted business” there; file in the insurance department a certified copy of its charter, together with a statement, verified by the oath of its chief officer and secretary, showing the name of the company, place where located, amount of its capital and assets, the extent to which its real estate is encumbered, the par and market value of all shares of stock held by it, the estimated value of its bonds, mortgages, and other securities, the extent of its indebtedness, the amount of its losses, adjusted and unpaid or incurred and in process of adjustment, the losses disputed, and the claims existing against it. It is also provided that no business shall be transacted in tbe State by .the agent of any company from another State, while its capital is impaired to the extent of twenty per cent. It further requires from such companies an annual statement, showing in detail the items making up their capital, and the deductions to be made therefrom. It was made the duty, first. of the State comptroller, and subsequently of the superintendent of insurance — these requirements of the statute being first complied with • — to issue to the company, thus seeking admission into the State, a certificate showing its lawful right to transact, business within her limits. Laws of N. Y., 1853, c. 466'; Laws of 1862, c. 6, § 1, and c. 367, § 5; 1871, c. 888; Laws of 1874, c. 331, § 1; Laws of 1875, c. 555, § 1.

That the plaintiff in error conformed to thesé . statutory provisions, and was admitted into New York for the transaction of business is shown by; the agreed case, from which it appears that it “has uniformly complied with all the re- ' quirements and conditions imposed by the laws of this State upon fire insurance companies from other States establishing and maintaining agencies in this State, except the payment of the tax now in dispute upon premiums received by it in 1881 upon risks located within the State of New York, and which is the subject of this controversy, and has received from year to year certificates of authority from the superintendent of the insurance department of this State, as provided to he issued wider the act, c. 466 of the laws of 1853, and the subsequent acts amendatory thereofP

In view of these admitted facts, how can it be said that this • Pennsylvania corporation was not, in respect'" to its corporate business, within the jurisdiction of New York during the year when the tax in dispute accrued ? That a corporation of one State, doing business in another State by the latter’s consent, evidenced by the official certificate given by her insurance department in conformity with her laws, and hable, precisely as domestic corporations are, to be brought into her courts, through service of process upon its duly appointed attorney or agent, in reference to any business transacted or liability incurred by it there, is to be deemed "within the jurisdiction of that State, seems to me entirely clear. In Ex parte Schollen-berger, 96 U. S. 369, 374, it was decided.'that a foreign insurance company, doing business in Pennsylvania, under the-authority of a statute of that Commonwealth requiring, as a condition precedent to its being there, an agreement that judicial process served upon its agent should have the same effect as if served upon the corporation, was, within the meaning of. the act of Congress of 1875, “found” in that State so as to give jurisdiction to the courts of the United Statps sitting in that State "of suits brought there against such company, accompanied by service of process upon its agent. The subject was again considered in St. Clair v. Cox, 106 U. S. 350, 357, where it was said that there Avas no sound reason why, in the case of an insurance company doing business in another State, by an agent, under statutes such as those referred to, it should not be • deemed to be represented in the latter by such agent, and held responsible for its obligations and liabilities there incurred. See also Railroad Co. v. Harris, 12 Wall. 65 ; Railway Co. v. Whitton, 13 Wall. 270, 285.

It was said in argument that the plaintiff in error entered New York with the knoAvledge, derived from the act of 1865, that if Pennsylvania thereafter subjected New York insurance companies to higher taxes than the latter State imposed upon Pennsylvania corporations of the same class doing business in NeAV York, the taxes levied upon it Avould be correspondingly increased; therefore, it is argued, the entrance of the plaintiff in error into New York Avas subject to the reserAmd right of that State thus to increase the taxes upon its business. The same idea is embodied in the suggestion that New York made it a prerequisite, from and after 1865, to the right of a fire insurance corporation of another State to transact business in NeAV York, that it should pay such increased taxes, however much they might be in excess of the taxes imposed there upon corporations of the same class from the remaining States. Now, it is submitted: 1. That no such obligation was imposed by the statute upon the plaintiff in error as a prerequisite to its right to enter New York and transact business there. The agreed case shoAvs not only that the insurance department of New York has certified its right to do business in that State, but tbat the certificate was made as provided in the Act of 1853 and .the acts amendatory thereof. Besides, there is no clause in the statute directing that department to withhold or to revoke a certificate upon the failure or refusal of the company to pay these increased taxes. The regularity and validity of that .certificate was not questioned in argument, is not now disputed, and there is not a word in the statute to the effect that the payment of these increased taxes is & prerequisite to the right of the company to remain in the State and transact business. Indeed, it is evident that the State purposely .-avoided establishing any such prerequisite to the right to enter her limits. She only seeks, after admitting the plaintiff in error and certifying its right to do business, to subject it to the taxation in question. 2. The power of New York to impose this increased tax surely cannot depend upon the fact that she gave notice of what she would do in the contingency expressed' in the Act of 1805. Such notice neither creates a power to do that which the State could not otherwise constitutionally do, nor makes it the duty of the plaintiff in error to submit to an illegal exaction. At last, the real question presented is, whether Pennsylvania corporations can be subjected to higher taxes in New York, than are imposed there upon corporations of the same class from other States.

It is said that a State may exclude altogether from its borders a corporation of another State, or may admit it upon such terms or conditions as she may elect to prescribe. It is quite true that general language to that effect was employed in Paul v. Virginia, 8 Wall. 168, where the only question necessary to be determined was as to the validity of a statute of Virginia, providing that before an insurance company, not incorporated by that State, should carry on business there, it. must obtain a license therefor, and deposit with the State treasurer, as security for its engagements, bonds of a specified character and amount. In the course of the opinion which disposed of that question, it was said that a corporation of one State, “ having no absolute right of recognition in other States, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course, that such assent may be granted upon such, terms and conditions as those States may think proper to impose. They may. exclude the foreign corporation entirely; they may restrict its business to particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interests. The whole matter-rests in their discretion.” But, I submit that it is the settled doctrine of this court, that the terms and conditions so prescribed must not ,be repugnant to the Constitution of the United States, or inconsistent with any right granted or secured by that instrument. In Ducat v. Chicago, 10 Wall. 410, 415, it was said by Mr. Justice Nelson, speaking for the court, that, in respect to the nature or degree of discrimination which a State may make between her own corporations and those of other States, “ it belongs to the State to determine, subject only to such limitations on her sovereignty as may be found in the fundamental law of the Union.” It was so decided in Insurance Co. v. Morse, 20 Wall. 445, 455, 456, where the question was as to the validity of a statute of Wisconsin relating to the admission into that State of fire insurance companies incorporated by other States. Besides the condition that they should designate some attorney in Wisconsin upon whom process against the company could be served, it imposed the further one that it should file in the proper office an agreement stipulating that it would not remove to the courts of the United States any suit brought against it .in the local courts. An insurance company of New York established an agency in Wisconsin,' and complied in all respects with these conditions; it filed the required agreement. In support of the validity of those conditions, the State relied upon the very language above quoted from Paul v. Virginia. But the court was careful to say that that language must be understood with reference to the facts in the case and to the question to be decided, which was stated to be simply “ whether the State might require a foreign insurance company to take a license for the transaction of its business, giving security for the payment of its debts.” Care was taken to further announce, that the general language employed in Paul v. Virginia was not intended to impair the language in La Fayette Ins. Co. v. French 18 How. 404, 407, where the court, speaking by Mr. Justice Curtis, said: “ A corporation created by Indiana can transact business in Ohio only with the consent, express or implied, of the latter State. This consent may be accompanied by such conditions as Ohio may think fit to impose, and these conditions must be deemed valid and effectual by other States and by this court; provided, they are not repugnant to the Constitution and laws of the United States, or inconsistent with those rules of public law which secure the jurisdiction and authority of each State from encroachment of all others, or that principle of natural justice which forbids condemnation without opportunity for defence.” Upon these grounds it was held, in Insurance Co. v. Morse, that the Wisconsin statute, so far as it required insurance companies of other States to stipulate that they would not exercise the right to, have suits against them removed to the national courts, was void, equally because it created an'obstruction to the exercise of a privilege granted by the Constitution and laws of the United States, and tended to oust the courts of the Union of a jurisdiction conferred upon them. Much that was said in that case is pertinent to the present one. After observing that the courts would not enforce an agreement between a citizen of New York and a citizen of Wisconsin, that the former would, in no event, resort to the Federal courts sitting in Wisconsin for the protection of his rights of property, or an agreement between the same parties, upon whatever consideration, that the citizen of New York would in no case, when called into the courts, either of Wisconsin or of the Federal courts sitting in that State, demand a jury to determiné his rights of property, but would submit such rights to arbitration or to the decision of a single judge, the court said: “We see no difference in principle between the cases supposed and the case before us. Every citizen is entitled to resort to all the courts of the countiy, and to invoke the protection' which all the laws or all those courts may afford.” The court further said that the right of the insurance company to'remove the suit was “denied to it by the State court on the ground that it had made the agreement referred to, and that the statute of the State authorized. and required the making of the agreement. We are not able .to fliptiugnish this agreement and this requisition, on principle, from a similar one made in the case of an individual citizen of New York. A corporation has the same right to the1 protection of the laws as a natural citizen, and the same right to ‘appeal to all the courts' of the country. The rights of an individual are not superior, in this respect, to that of a corporation. - The State of "Wisconsin can regulate its own corporations and the affairs of its own citizens, in subordination, however, to the Constitution of the United States. The requirement of an . agreement like this from their own corporations would be brutvm f ulmén, because they possess no such right under the Constitution of the United States. A foreign citizen, whether natural or corporate, in this respect possesses a right not pertaining to one of her own citizens. There must necessarily be a difference between the status of the two in this respect.”

The only difference between Insurance Co. v. Morse and the present case is, that in the former the New York corporation expressly agreed, in writing, that it would not exercise its con- • stitutional privilege of removing suits against it into the courts of the Union while the Pennsylvania corporation received an ■official certificate of its right to transact business in New York with notice derived from the act of 1865, that that State would after 1873 — the date of the Pennsylvania statute — claim from it higher taxes than she imposed upon like corporations from the remaining States doing business in her limits by her consent. If the plaintiff in error, by merely maintaining its agencies in New York, is to be held to have impliedly agreed to submit to such increased taxation, is that anything more than an implied agreement that it would not assert a right secured to it by the Constitution of the United States % Can it be that a corporation is estopped to claim the benefit of the constitutional provision seeming to it the equal protection of the laws simply because it voluntarily entered and remained in a State which has enacted a statute denying such protection to it and to like corporations from the same State ? Is the right to that protection any less valuable or fundamental than the right to remove a suit into the courts of the Union for trial? - ’Will it be held that an express agreement by a corporation not to exercise the latter right is void and not enforceable, but that a local statute denying the equal protection of the laws to a corporation will be upheld, simply because that corporation os me within the jurisdiction of the State which' assumed to make such denial, and received fromjher officers, acting in conformity with her laws, a certificate of its right to transact business there ? Will effect be given in one case to what (erroneously, .1 think) is called an implied agreement to surrender a constitutional right, while an express agreement in the other to surrender a constitutional right is held to be invalid?

Even if it were conceded that a State, which provides for the organization, under her own laws, of corporations for the transaction of every kind of business, could arbitrarily exclude from her limits similar corporations from the remaining States, and- declare all contracts made within her jurisdiction with corporations from other States, to be void — concessions to be made only fer the purposes of this case — it would not follow that she could subject corporations of other States, doing business within her limits under a license from the proper department, to higher taxes than she imposes upon other corporations of the same class from the remaining States. ^ The plaintiff in error having been in 1881 lawfully within New York, by its agents, cannot be denied there the equal protection of the laws because the State which created it may have adopted a system of taxation different from that devised by New-York. The case, in its legal aspects, is precisely the same as if Pennsylvania had never passed the statute of 1813, but New York had, in that year, imposed upon fire insurance companies from Pennsylvania higher taxes than- she imposed upon similar corporations from other States.

It would seem to be the result of the decision in this case, that New York may prescribe such varying rates of taxation upon insurance corporations of the remaining thirty-seven States, within her jurisdiction, as she chooses — :the rate for corporations from each State differing from tire rate established for corporations of the same class from all other States, and tbe rate in respect to corporations of other States being higher than she imposes npon her own corporations of the same class. Such legislation would be a species of commercial warfare by one State against the others, and would be hostile to the whole spirit of the Constitution, particularly the Fourteenth Amendment, securing to all persons within the jurisdiction of the respective States the equal protection of the laws.

For the reasons which have been stated, I feel obliged to withhold my assent to the opinion and judgment of the court.