Opinion ID: 2149780
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Heading Rank: 2

Heading: The Section 23 Standard

Text: Properly interpreting a particular provision of the Indiana Constitution involves a search for the common understanding of both those who framed it and those who ratified it. Bayh v. Sonnenburg (1991), Ind., 573 N.E.2d 398, 412, reh'g denied, cert. denied (1992), 502 U.S. 1094, 112 S.Ct. 1170, 117 L.Ed.2d 415. The constitutional convention met in late 1850 and early 1851 against a backdrop of problems associated with states' efforts to develop their infrastructures and stimulate economic progress. Beginning in 1836, the State of Indiana had engaged in a general system of internal improvements, issuing bonds which were then sold in the market at a heavy discount, with the resulting money squandered on various railroads and canals, none of which were completed. Lafayette, M. & B.R.R. v. Geiger (1870), 34 Ind. 185, 205. The bonds greatly depreciated in value, the state's credit was utterly ruined in the money market, and the state abandoned the completion of the improvement projects in 1842. Id. Our legislature then authorized the continuance of these public works by private companies and empowered counties to purchase stock therein, financed by issuing bonds or levying taxes. Id. at 205-06. By 1850, the state had become bankrupt and many of the counties had created heavy and onerous debts. Id. at 206. The substance of Section 23 was first proposed on December 31, 1850, by Monroe County delegate Daniel Read. Mr. Read's remarks to delegates before and during the convention reveal his intent on this issue. Subsequent writers have noted that his convention speeches were in stout opposition to all laws providing for state construction of internal improvements, against laws involving the funds of the state in banking, and against laws lending the credit or trust funds of the state to corporations. 1 James Albert Woodburn, History of Indiana University, 1820-1902 191 (1940). Mr. Read asserted that the state ought not in any way to become the partner of the merchant, the manufacturer, or the banker. 1 id. at 192. Two months prior to his introduction of Section 23, he quoted to the convention sections of Andrew Jackson's farewell address, urging that: unless you become more watchful in your States, and check this spirit of monopoly and thirst for exclusive privileges, you will, in the end, find that the most important powers of government have been given or bartered away, and the control over your dearest interests has passed into the hands of these corporations. 1 Report of the Debates and Proceedings of the Convention for the Revision of the Constitution of the State of Indiana 1850 221-22 (1850). One month before introducing Section 23, Read advised: Money making is not the business of the State... . If she sells out a monopoly for a bonus, the robbery upon the citizens is ordinarily still worse, as being paid for and sanctified by a right purchased from government. If the State becomes a partner with a few of her citizens, to the exclusion of others, offering the same terms, it is still a most odious and anti-republican principle, and more worthy of the days of monopoly... . 1 id. at 646. Several weeks before introducing Section 23, Read, speaking against perpetuities and monopolies, declared, I think both are contrary to the spirit of a free State, and that we ought to make a declaration of that kind in our Bill of Rights. 1 id. at 975. The comments of others during the convention reveal that the purpose of Section 23 was to prohibit state entanglement in private profit-seeking ventures and to avoid the creation of monopolies. Mr. Biddle of Cass County stated: [T]he proposition is a plain one, that there shall be no exclusive monopolies  no privilege granted to one man which shall not, under the same circumstances, belong to all men... . This principle leaves men of capital precisely where it leaves men in their natural condition  equal. If the majority of this Convention will not grant to all men equal rights, let them vote against the proposition. If they do not desire to leave the road of capital, of skill, of enterprise, of talent, of industry, of worth, open alike to every citizen of Indiana, let them vote against it. 2 id. 1394. Mr. Pepper of Ohio County declared, The section proposed by the gentleman from Monroe, is intended to prohibit the Legislature from establishing monopolies, or granting special privileges. 2 id. at 1395. Similarly, Mr. Clark of Tippecanoe, though expressing concern about the precise effects of the section, generally noted that the proposal provides that if the Legislature grant to one set of persons a privilege, it shall grant the same privilege to all other persons. If they grant a privilege to a corporation, they shall grant the same privilege to all other persons who ask for the privilege. 2 id. at 1397. Responding to a concern that the section would improperly extinguish the possibility of a state bank, Mr. Read declared that, should a state bank be authorized upon the principle of the proposed section [23] ... every branch would have to come in on the same terms.... This [Section 23] destroys the monopoly principle, and I think that there are not twenty gentlemen even among those who are in favor of the State Bank, who would be in favor of this principle of monopoly. The doctrine of the section carried out in the laws and the Constitution would destroy monopoly State banking, but not prevent every system of State banking which might be devised. 2 id. at 1393. Newspaper coverage of the convention debates, although not widespread or detailed with respect to Section 23, illustrates the public perception as to the purpose and intent of the section. For example, The New Albany Daily Ledger reported that Mr. Read of Monroe read a speech of much force and power as well as logical argument. He is extremely hostile to exclusive privileges, as the section [23] he introduced against class legislation will show. Constitutional Convention, New Albany Daily Ledger, Jan. 13, 1851, at 2. From all available indications, we conclude that at the time of the adoption of Section 23 and its ratification as part of the 1851 Indiana Constitution, the principal purpose was to prohibit the state legislature from affirmatively granting any exclusive privilege or immunity involving the state's participation in commercial enterprise. Section 23 does not appear to have been enacted to prevent abridgement of any existing privileges or immunities, nor to assure citizens the equal protection of the laws. However, in reviewing historical underpinnings to reinterpret Section 23 and reformulate a standard for its practical application, our inquiry does not necessarily end with a literal reading of the provision and of the expressed purposes and intent of its framers and ratifiers. Early decisions of this Court interpreting our Constitution, particularly those contemporaneous with its adoption and practiced and acquiesced in for a period of years, have been accorded strong and superseding precedential value. Lafayette, M. & B.R.R. v. Geiger, 34 Ind. 185, 213. See also Board of Comm'rs v. Gwin (1894), 136 Ind. 562, 590, 36 N.E. 237, 246. Prior cases construing and applying Section 23 independently from federal equal protection analyses are important sources for our consideration. During the years following the adoption of the 1851 Constitution, Section 23 was often applied to invalidate enactments which, rather than granting special privileges, imposed special burdens. In Graffty v. City of Rushville , Section 23 was used to invalidate a Rushville municipal ordinance which imposed a vendor's fee for sales by all but Rushville citizens (and specified others) of goods not grown or manufactured in Rush County. Graffty, 107 Ind. 502, 8 N.E. 609. The statute was viewed as an attempt to grant privileges to the citizens of Rushville, which are not equally and upon the same terms open to all citizens. Id. at 508-09, 8 N.E. at 612. Similarly, a statute prohibiting merchants, but not others, from issuing tokens in exchange for wage assignments from coal mine employees was found to violate Section 23 in Dixon v. Poe (1902), 159 Ind. 492, 65 N.E. 518. We are unaware of any cases in which this Court has expressly declined to apply Section 23 protection simply because an enactment created a special burden rather than a special privilege. However, this is not surprising, because implicit in an enactment that imposes an unequal burden is the grant of a special privilege or immunity to persons or classes exempted from the new burden. Longstanding decisions of this Court have expanded the function of Section 23 not only by failing to restrict its application to legislation granting, rather than abridging, privileges or immunities, but also by repeatedly applying Section 23 to matters unconnected with the state's involvement in commercial enterprise, thereby giving preference to the literal language of Section 23 rather than to the intent of its framers. See, e.g., Needham v. Proffitt (1942), 220 Ind. 265, 41 N.E.2d 606 (invalidating prohibition of newspaper advertisement of funeral prices); State Bd. of Barber Examiners v. Cloud (1942), 220 Ind. 552, 44 N.E.2d 972, reh'g denied (finding a regulation of barbershop hours to be violation); Martin v. Loula (1935), 208 Ind. 346, 194 N.E. 178, reh'g denied, (finding in violation a law permitting wage garnishment notwithstanding statutory exemptions); Sperry & Hutchinson Co., 188 Ind. 173, 122 N.E. 584 (invalidating prohibitory license fee for distribution and redemption of trading stamps); Cleveland, C., C. & St. L. Ry. v. Schuler (1914), 182 Ind. 57, 105 N.E. 567 (striking down employee termination pay requirement imposed exclusively on railroads); Dixon, 159 Ind. 492, 65 N.E. 518 (invalidating prohibition on issuing merchandise tokens in exchange for coal miners' wage assignments); In re Leach (1893), 134 Ind. 665, 34 N.E. 641 (preventing the exclusion of women from admission to law practice); City of Evansville v. State (1888), 118 Ind. 426, 21 N.E. 267 (overturning political and local residency requirements for certain city employees); State ex rel. Holt v. Denny (1888), 118 Ind. 449, 21 N.E. 274 (precluding residency and political limitations for fire and police commissioners); Graffty, 107 Ind. 502, 8 N.E. 609 (invalidating fee for sale of goods not manufactured or grown in local county). Excluding the line of cases which have applied federal equal protection methodology to state Section 23 issues, there exists a considerable body of case law reviewing the state constitutional question, from which a substantially uniform, though still evolving, analytical standard has emerged. Our review discloses several recurrent themes which we now distill into two general factors. The considerations embodied in the first of the two factors focus upon the nature of the classifications of citizens upon which the legislature is basing its disparate treatment. Numerous cases have stated that the basis of such classification must inhere in the subject matter. See, e.g. Railroad Comm'n v. Grand Trunk W.R.R. (1913), 179 Ind. 255, 262, 100 N.E. 852, 854; Hirth-Krause Co. v. Cohen (1912), 177 Ind. 1, 10, 97 N.E. 1, 5; Bank of Commerce v. Wiltsie (1899), 153 Ind. 460, 474, 53 N.E. 950, 955, reh'g denied. In Heckler v. Conter (1933), 206 Ind. 376, 381, 187 N.E. 878, 879, we stated that legislative classification must be: based upon substantial distinctions germane to the subject matter and the object to be attained. The distinctions must involve something more than mere characteristics which will serve to divide or identify the class. There must be inherent differences in situation related to the subject-matter of the legislation which require, necessitate, or make expedient different or exclusive legislation with respect to the members of the class. Id. Similar language has been used in other cases. See School City of Elwood v. State (1932), 203 Ind. 626, 635-36, 180 N.E. 471, 474 (There must be some inherent and substantial difference germane to the subject and purpose of the legislation between those included within the class and those excluded); Dowd v. Stuckey (1943), 222 Ind. 100, 104, 51 N.E.2d 947, 948 (classification must rest upon some rational and substantial basis inherent in the subject-matter, some difference in situation which distinguishes those within the class from those without, and which rationally justifies different or unequal treatment). More recently, our decisions have summarily stated that legislative classifications must be based on substantial distinctions with reference to the subject matter. Chaffin v. Nicosia (1974), 261 Ind. 698, 701, 310 N.E.2d 867, 869; Phillips, 233 Ind. at 421, 120 N.E.2d at 401. The significant common theme shared by such formulations is the requirement that, where the legislature singles out one person or class of persons to receive a privilege or immunity not equally provided to others, such classification must be based upon distinctive, inherent characteristics which rationally distinguish the unequally treated class, and the disparate treatment accorded by the legislation must be reasonably related to such distinguishing characteristics. We believe that this requirement incorporates and satisfies the often expressed concerns that such legislative classifications be just, natural, reasonable, substantial, not artificial, not capricious, and not arbitrary. See Barrett v. Millikan (1901), 156 Ind. 510, 516, 60 N.E. 310, 312 (just, natural, and reasonable); Hirth-Krause, 177 Ind. at 10, 97 N.E. at 5 (natural and substantial); Sperry & Hutchinson Co., 188 Ind. at 183, 122 N.E. at 587-88 (just and reasonable, not manifestly and unmistakably arbitrary, resting on some substantial and not merely artificial reason); School City of Elwood, 203 Ind. at 635, 180 N.E. at 474 (reasonable and natural, not capricious and arbitrary); Dowd, 222 Ind. at 104, 51 N.E.2d at 948 (rational and substantial). This requirement, then, comprises the first prong of the two-part Section 23 standard we articulate today. The second of the two factors embraces concerns, frequently expressed in Section 23 cases, regarding the need for uniformity and equal availability of the preferential treatment for all persons similarly situated. In Dixon, 159 Ind. 492, 65 N.E. 518, an enactment was invalidated because it failed to embrace all of the class to which it is naturally related. Id. at 496, 65 N.E. at 519. Section 23 was found to be violated when a law creates a preference, and establishes an inequality among a class of citizens all of whom are equally meritorious or which applies to persons in certain situations, and excludes from effect other persons who are not dissimilar in these respects. Id. at 497, 65 N.E. 518. Similar considerations are emphasized in numerous cases reviewing Section 23 issues. For example, in McErlain v. Taylor (1934), 207 Ind. 240, 192 N.E. 260, this Court stated: But, if there are other general classes situate[d] in all respects like the class benefitted by the statute, with the same inherent needs and qualities which indicate the necessity or expediency of protection for the favored class, and legislation. .. . withholds the same protection from, the other class or classes in like situation, it cannot stand. Id. at 243-44, 192 N.E. at 262, quoted with approval in Hicks v. State (1967), 249 Ind. 24, 30, 230 N.E.2d 757, 760. See also Heckler, 206 Ind. at 381, 187 N.E. at 879-80 (the classification must embrace all who possess the attributes or characteristics which are the basis of classification, and their difference from those excluded must be substantial and related to the purpose of the legislation); School City of Elwood, 203 Ind. at 635, 180 N.E. at 474 (classification must embrace all who naturally belong to the class); Grand Trunk W.R.R., 179 Ind. at 262, 100 N.E. at 854 (classification must operate equally upon all within the class and must also embrace all within the class to which it naturally belongs); State v. Richcreek (1906), 167 Ind. 217, 224, 77 N.E. 1085, 1087 (the provisions of the restrictive act be in fact open alike to all citizens who may bring themselves within its terms); Seelyville Coal & Mining Co. v. McGlosson (1906), 166 Ind. 561, 566, 77 N.E. 1044, 1046 (upholding statute, finding that it operates upon all persons who come within the class to which it applies); Barrett, 156 Ind. at 516, 60 N.E. at 312 (applies equally to all the citizens of the state who bring themselves within the remedial scope of this act); Hancock v. Yaden (1890), 121 Ind. 366, 374, 23 N.E. 253, 255 (All who are members of the classes named are entitled to its benefits or subjected to its burdens. It is open to every citizen to become a member of any of the classes designated, and the privileges conferred belong on equal terms to all). We conclude that, as the second general requirement of Section 23 compliance, any privileged classification must be open to any and all persons who share the inherent characteristics which distinguish and justify the classification, with the special treatment accorded to any particular classification extended equally to all such persons. It is important to note that, in applying the two-part standard we articulate today to claims asserted under Section 23, the courts must accord considerable deference to the manner in which the legislature has balanced the competing interests involved. Johnson, 273 Ind. at 404-05, 404 N.E.2d at 604. Presuming the statute to be constitutional, courts place the burden upon the challenger to negative every conceivable basis which might have supported the classification. Id. at 392, 404 N.E.2d at 597. The question of classification under Section 23 is primarily a legislative question. Chaffin (1974), 261 Ind. at 701, 310 N.E.2d at 869. As this Court has stated: Legislative classification becomes a judicial question only where the lines drawn appear arbitrary or manifestly unreasonable. So long as the classification is based upon substantial distinctions with reference to the subject matter, we will not substitute our judgment for that of the legislature; nor will we inquire into the legislative motives prompting such classification. Id. In Sperry & Hutchinson Co., 188 Ind. at 183, 122 N.E. at 587, we said that [i]f any state of facts within the fair range of probability can be reasonably supposed, which would supply an adequate reason on which to base the classification made, such state of facts will be assumed to have existed when the law was enacted. Id. Similarly, we have described the proper judicial role as follows: The power of the legislature is not without limitations but, necessarily, this power must have a wide range of discretion. There is no precise rule of reasonableness of classification, and the rule of equality permits many practical inequalities. A classification having some reasonable basis is not to be condemned merely because it is not framed with such mathematical nicety as to include all within the reason of the classification and to exclude all others. Exact exclusion and inclusion is impractical in legislation. It is almost impossible to provide for every exceptional and imaginary case, and a legislature ought not to be required to do so at the risk of having its legislation declared void, even though appropriate and proper as applied to the general subject upon which the law intended to operate. Cincinnati, H. & D. Ry., 183 Ind. at 561, 109 N.E. at 208 (citations omitted). To summarize, we hold that Article 1, Section 23 of the Indiana Constitution imposes two requirements upon statutes that grant unequal privileges or immunities to differing classes of persons. First, the disparate treatment accorded by the legislation must be reasonably related to inherent characteristics which distinguish the unequally treated classes. Second, the preferential treatment must be uniformly applicable and equally available to all persons similarly situated. Finally, in determining whether a statute complies with or violates Section 23, courts must exercise substantial deference to legislative discretion. The resolution of Section 23 claims does not require an analytical framework applying varying degrees of scrutiny for different protected interests. [2] The protections assured by Section 23 apply fully, equally, and without diminution to prohibit any and all improper grants of unequal privileges or immunities, including not only those grants involving suspect classes or impinging upon fundamental rights but other such grants as well. For example, this Court has applied Section 23 to invalidate grants of privilege which were improperly gender-based without using a heightened level of scrutiny. See Reilly, 266 Ind. 29, 360 N.E.2d 171 (invalidating under an independent Section 23 standard a state pension scheme which discriminated on the basis of gender); In re Leach (1893), 134 Ind. 665, 34 N.E. 641 (applying independent Section 23 analysis to reverse lower court's interpretation of statute as prohibiting the practice of law by women, without mention of the Fourteenth Amendment's Equal Protection Clause). The multiple-level system remains, of course, an integral aspect of the test of a statute's constitutionality under federal Fourteenth Amendment jurisprudence. This Court anticipates that our independent state privileges and immunities jurisprudence will evolve in future cases facing Indiana courts to assure and extend protection to all Indiana citizens in addition to that provided by the federal Fourteenth Amendment.