Source: https://www.legalcrystal.com/case/85268/philadelphia-fire-ass-n-vs-new-york
Timestamp: 2019-04-25 04:51:53+00:00

Document:
A Pennsylvania fire insurance corporation began doing business in New York in 1872, and continued it afterwards till 1882, receiving from year to year certificates of authority from the proper officer under a statute of New York passed in 1853. Chapter 694 of the laws of New York of 1865, as amended by c. 6O of the laws of 1870, provided that whenever the laws of any other state should require from a New York fire insurance company a greater license fee than the laws of New York should then require from the fire insurance companies of such other state, all such companies of such other state should pay in New York a license fee equal to that imposed by such other state on New York companies. In 1873, Pennsylvania passed a law requiring from every insurance company of another state, as a prerequisite to a certificate of authority, a yearly tax of three percent on the premiums received by it in Pennsylvania during the preceding year. In 1882, the insurance officer of New York required the Pennsylvania corporation to pay, as a license fee, a tax of three percent on the premiums received by it in New York in 1881. In a suit against such corporation in a court of New York to recover such tax, it was set up as a defense that the tax was unlawful because the corporation was a "person" within the "jurisdiction" of New York, and "the equal protection of the laws" had been denied to it in violation of a clause in the Fourteenth Amendment to the Constitution of the United States. On a writ of error to review the judgment of the highest court of New York overruling such defense, held that such clause had no application, because, the defendant, being a foreign corporation, was not within the jurisdiction of New York until admitted by the state on a compliance with the condition of admission imposed -- namely the payment of the tax required as a license fee.
The business carried on by the corporation in New York was not a transaction of commerce.
The opinion of the highest court of New York, duly authenticated by the proper officer and transmitted to this Court with the record in compliance with the 8th Rule, was examined to aid in determining whether that court decided such federal question against the defendant.
"The defendant, the Fire Association of Philadelphia, is a corporation created and organized in the year 1820 by and under the laws of the State of Pennsylvania for the transaction of the business of fire insurance, and having its principal place of business in the City of Philadelphia. In the year 1872, it established an agency in the State of New York, which it has ever since maintained. No question is here raised but that it has uniformly complied with all the requirements 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 be issued under the act, chapter 466 of the Laws of 1853, and the subsequent acts amendatory thereof."
"The act of the people of the State of New York passed May 11, 1865, three-fifths being present, being chapter 694 of the Laws of 1865, entitled 'An act in relation to the deposits required to be made, and the taxes, fines, fees, and other charges payable by insurance companies of sister states,' as amended by the act of 1875, c. 60, provides as follows, viz., "
or otherwise, greater than the amount required for such purposes from similar companies of other states by the then existing laws of this state, then and in every such case, all companies of such states establishing, or having heretofore established, an agency or agencies in the state shall be, and are hereby, required to make the same deposit for a like purpose in the insurance department of the state, and to pay the superintendent of said department, for taxes, fines, penalties, certificates of authority, license fees, and otherwise, an amount equal to the amount of such charges and payments imposed by the laws of such state upon the companies of this state, and the agents thereof, and the Superintendent of the Insurance Department is hereby authorized to remit any of the fees and charges which he is required to collect by existing laws, except such as he is required to collect under and by virtue of this act, provided, however, that no discrimination shall be made favor of one company over any other from the same state."
"The State of Pennsylvania, by an act passed April 4, 1873, and ever since in force, enacted as follows, viz., "
tax of three percent upon said premiums, and the commissioner shall not have power to grant a renewal of the certificate of said company or association until the tax aforesaid is paid into the state treasury."
"In the year 1881, the defendant, through its authorized agents in the State of New York, received for insurance against loss or injury by fire upon property located within the State of New York premiums to the aggregate amount of $196,170.22. The Superintendent of the Insurance Department of New York claimed that the defendant ought to pay as a tax for the year 1881 $1,848.45, with proper interest, being the amount arrived at by deducting from $5,885.10 (which would be a tax of three percent on $196,170.22) the sum of $4,036.65, which the defendant, as a Pennsylvania corporation, had paid as a tax on premiums during 1881 under laws of New York in force in 1881, other than the act of 1865, as amended by the act of 1875. The case then states that"
" The controversy between the parties is as to whether the defendant is liable to pay any tax to the Superintendent of the Insurance Department of the state upon the said premiums received by it in the year 1881, and, if any, what amount;"
" The defendant claims that it is not liable to the plaintiffs for any amount, insisting first that the said act of 1865, as amended by the act of 1875, is unconstitutional and void, and not a legitimate exercise of legislative power,"
"and making further claims as to the amount due from it if the act in question is valid; that"
"the question submitted to the court for decision upon the foregoing statement of facts is whether the defendant is liable to pay to the plaintiffs, or to the superintendent, the whole or any, and if any, what part, of the"
"$1,848.45, and that judgment is to be entered according to its decision."
The agreed case having been heard by the supreme court in general term, as required by law, it rendered a judgment to the effect that the defendant was not liable to pay any part of such amount claimed by the superintendent. Two of the three judges holding the court concurred in that judgment.
The third dissented. The opinions of the majority and minority accompany the record. The majority held that the statutes of New York in question were void because in conflict with the Constitution of New York, and did not discuss any question arising under the Constitution of the United States. The dissenting judge differed with the majority as to the question adjudged by them, and further said: "Nor can I agree with the claim that this statute is contrary to the Fourteenth Amendment to the Constitution of the United States."
The plaintiffs having appealed to the Court of Appeals of New York, that court reversed the judgment of the supreme court and rendered judgment for the plaintiffs for $1,848.45, with interest an costs, and remitted the record to the supreme court, where a judgment to that effect was entered, to review which the defendant has brought a writ of error. The Court of Appeals, in its decision, 92 N.Y. 311, after overruling the view taken by the majority of the judges of the supreme court as to the validity of the statute under the Constitution of New York, proceeds to consider its constitutionality under that clause of the Fourteenth Amendment to the federal Constitution which commands that no state shall "deny to any person within its jurisdiction the equal protection of the laws." It holds that that clause has no application to the rights of the defendant because, being a foreign corporation, it was not within the jurisdiction of New York until it was admitted by the state upon a compliance with the conditions of admission which the state imposed and had the right to impose.
MR. JUSTICE BLATCHFORD, after stating the case as above reported, delivered the opinion of the Court.
agreed statement of facts. But all that is there said is that the defendant insists that the statute is "unconstitutional and void, and not a legitimate exercise of legislative power." The question was considered in both the supreme court and the Court of Appeals as to the validity of the statute under the Constitution of New York as being a law made to depend for its operation on the legislation of a foreign state, and thus an illegitimate exercise of legislative power. This contention is fairly within the words of the agreed statement, and if it depended wholly on that statement to determine whether the record raises a federal question, some doubt might exist. But in view of what was said in Murdock v. Memphis, 20 Wall. 590, 87 U. S. 633 , in Gross v. United States Mortgage Co., 108 U. S. 477 ; and in Adams County v. Burlington & Missouri Railroad Co., 112 U. S. 123 , we think that we are at liberty to look into the opinion of the Court of Appeals, a copy of which, duly authenticated by the proper officer, is transmitted to us with the record in compliance with our eighth rule, for the purpose of aiding in determining what was decided by that court. From that opinion it appears that the court not only decided against the defendant all the questions other than federal which were raised, including two under the Constitution of New York, but also decided against it the federal question referred to. If the court had decided in its favor any one of the other questions which went to the whole cause of action, there would have been no necessity for considering the federal question. But as it was, the decision of that question became necessary to the disposition of the case, and was fully considered, not sua sponte, but as a point presented by the defendant.
The provision of the Fourteenth Amendment, which went into effect in July, 1868, is that no state shall "deny to any person within its jurisdiction the equal protection of the laws." The first question which arises is whether this corporation was a person within the jurisdiction of the State of New York with reference to the subject of controversy, and within the meaning of the amendment.
corporation, a "person," and so entitled to the benefit of the amendment, contends that it was within such jurisdiction. The argument is that it established an agency within the state in 1872 which it had ever since maintained; that it complied from year to year with all the requirements and conditions imposed by the laws of the state on foreign fire insurance companies doing business in the state; that it received from year to year certificates of authority from the Superintendent of the Insurance Department, as provided by statute; that under those circumstances, it was legally within the state and within its jurisdiction; that being in the state, by permission of the state, continuously from 1872 to 1882, the state imposed on it, while there, in 1882, an unequal and unlawful burden, and that the New York act of 1865 did not come into effect as to Pennsylvania corporations until the Pennsylvania act of 1873 was passed, at which time the defendant had already been a year in the 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 an in their judgment will best promote the public interest. The whole matter rests in their discretion."
As to the power of Congress to regulate commerce among the several states, the Court said that while the power conferred included commerce carried on by corporations as well as that carried on by individuals, "issuing a policy of insurance is not a transaction of commerce." This decision only followed the principles laid down in the earlier cases of Bank of Augusta v. Earle, 13 Pet. 519, 38 U. S. 588 , and Lafayette Ins. Co. v. French, 18 How. 404.
The same rulings were followed in Ducat v. Chicago, 10 Wall. 410, where it was said that the power of a state to discriminate between her own corporations and those of other states desirous of transacting business within her jurisdiction being clearly established, it belonged to the state to determine as to the nature or degree of discrimination, "subject only to such limitations on her sovereignty as may be found in the fundamental law of the union." Other cases to the same effect are Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566; Doyle v. Continental Ins. Co., 94 U. S. 535 , and Cooper Mfg. Co. v. Ferguson, 113 U. S. 727 .
As early as 1853, the State of New York, by a statute, c. 466, required of every fire insurance company incorporated by any other state or any foreign government, as a prerequisite to doing business in the state, that it should file an appointment of an attorney on whom process was to be served, and a statement of its pecuniary condition, and procure from a designated public officer a certificate of authority stating that the company had complied with all the requisitions of the statute, and also required the renewal, from year to year, of the statement and evidence of investments, and provided that such public officer, on being satisfied that the capital of the company and its securities and investments remained secure, should furnish a renewal of the certificate of authority. A violation of the provisions was made a penal offense. This act, with immaterial amendments, is still in force.
condition of its admission within the jurisdiction of New York. It could not be of right within such jurisdiction until it should receive the consent of the state to its entrance therein under the new provisions, and such consent could not be given until the tax, as a license fee for the future, should be paid.
It is not to be implied from anything we have said that the power of a state to exclude a foreign corporation from doing business within its limits is to be regarded as extending to an interference with the transaction of commerce between that state and other states by a corporation created by one of such other states. Judgment affirmed.
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.
"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. We 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.
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 within her jurisdiction. 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 state by the agent of any company from another state while its capital is impaired to the extent of twenty percent. 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; Laws of 1871, c. 888; Laws of 1874, c. 331, § 1; Laws of 1875, c. 555, § 1.
"has uniformly complied with all the requirements 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 be issued under the act, c. 466 of the Laws of 1853, and the subsequent acts amendatory thereof. "
Schollenberger, 96 U. S. 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 States 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. 357 , where it was said that there was 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 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. 285.
but that 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 a 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 1865. 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.
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."
"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."
"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 defense."
"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 country, and to invoke the protection which all the laws or all those courts may afford."
to, and that the statute of the state authorized and required the making of the agreement. We are not able to distinguish 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 the 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 brutum fulmen, 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."
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 of the state which because that corporation came within the jurisdiction of the state which assumed to make such denial, and received from her 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, I 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 for 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 1873, 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.
and the rate in respect to corporations of other states being higher than she imposes upon 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.

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