Tatem v. Weight

23 N.J.L. 429 | N.J. | 1852

Potts, J.

The act relative to insurance companies {Rev. Staf. 1016) imposes a special tax of two and a half per cent, upon the gross amount received as premiums for insurance in this state by non-resident individuals or companies not incorporated by the laws of the state. The reason assigned for passing this act, in the preamble, is, “ that associations or companies of individuals, not resident in this state, nor incorporated by its laws, do nevertheless, by means of agents appointed by them in this state, effect many insurances within the same against losses by fire and otherwise, thereby securing to themselves all'the benefits, without being subject to any of the burthens of insurance companies regularly incorporated by law of this state.” The defendants in this case, acting in behalf of a foreign insurance company, resist the payment of this tax, on the ground that the act is a violation of that clause in the constitution of the United States, which provides that “ the citizens of. each state shall be entitled to all privileges and immunities of citizens in the several states.”

It is admitted that the legislature may impose a tax on any particular kind of business carried on in the state, either by non-residents, through their agents, or by their own citizens, by individuals or corporations. The power to regulate, by the imposition of conditions, limitations, and restrictions upon the exercise of particular kinds of business in the community, is equally clear. Thus the sale of spirituous liquors, the manufacture of gunpowder, the business of banking, &c., are subjected to stringent regulations, under which, only, are they permitted to be exercised. The legislature, under the old constitution, allowed or prohibited lotteries at their discretion. The power to regulate, to impose terms and conditions upon the exercise of a business, necessarily includes the power to prohibit it, unless the conditions are complied with. The business of insurance, like that of banking, is liable to great abuse. The legislature, except so far as they are committed by charters granted, may, in their discretion, prohibit or impose any conditions deemed proper upon the exercise of either. They may therefore impose conditions with which, in the nature of things, it is impossible for non-resident corporations to comply; it may bo essential to the protection of our eilixens that they should do so. If these propositions are not sound ; if the state legislatures do not possess these general powers ; if their exercise infringes the clause of the constitution of the United States above quoted, then there has been a great deal of unconstitutional legislation by every state in the Union.

It is a foreign corporation which, by its agent, is here complaining that this act is unconstitutional, and the complaint is, that tine act discriminates between the corporations of this, and the corporations of other states ; that it imposes a tax on the foreign, which is not imposed upon the domestic corporation. But the legislature has seen fit to subject our local corporations to the burthen of very stringent laws, from which foreign corporations are entirely exempt. Gan it be successfully contended that the legislature had not a right to say that those stringent provisions were necessary for the safety of the community? And if they had a right to say so, it follows that they had a right to prohibit all corporations, which were not in a condition to be subjected to them, from engaging in the business in this state. May they not., then, permit upon terms, what they might prohibit altogether? Admitting, for the present, that for the purposes of this case, corporations are to be considered as “ citizens ” within the meaning of the constitution, and that the corporation represented by the defendants is entitled to “all the privileges and immunities” of corporations of this state, the inquiry remains, what are the privileges and immunities enjoyed by insurance companies in this state? They-may be embraced in this — the privilege of doing the business of insurance, and immunity from this special tax, but subject to the provisions, liabilities and penalties of the several acts relative to incorporated companies. Under these regulations, alone, do we authorize our own companies to engage in this business. But to these regulations foreign corporations are not, and cannot be subjected ; and therefore to permit them to engage in the business in this state, would be not to allow them the same privileges and immunities as are enjoyed by our own insurance companies, but to allow them all the privileges, and much larger immunities than we allow our own. Upon no fair construction are we required todo tin’s. As foreign corporations are not within the reach of those regulations which we deem essential to the safe exercise of the business of insurance here, they may be excluded altogether, and the)' cannot complain if, instead of excluding, we admit them upon the payment of a reasonable tax upon their business.

But there is another, and still more conclusive answer to the defendants’ case. Corporations are not citizens within the meaning of 'the clause referred to. The second section of the third article of the constitution of the United States provides that the judicial power shall extend, among other cases, to controversies between citizens of different states; and the question, whether a corporation could be considered a citizen, even for the purpose of giving.jurisdiction to the federal courts, came first before the Supreme Court of the United States in the case of The Hope Insurance Company v. Boardman et al., and The Bank of the United States v. Deveaux et al., 5 Cranch 57, 61. The first was an action brought in the Circuit Court for the district of Rhode Island. The plaintiffs were described, in the declaration, as “citizens of Massachusetts,” and the defendants as “ The Hope Insurance Company, a company legally incorporated by the legislature of Rhode Island, &c., .and established in Providence, in said district.” There was judgment for the plaintiffs in the circuit, and a writ of error to the Supreme Court, where it was contended, for the insurance company, that a corporation aggregate could not be a citizen of any state, and therefore that it did not appear on the face of the proceedings that the court had jurisdiction. Mr. Adams, who argued for the defendant in error, admitted that the term “ citizen ” could not with propriety be applied to a corporation aggregate ; that it could only be a citizen by intendment of law : he said, “ it may be a citizen quoad hoe, i. e. in the sense in which the term citizen is used in that part of the constitution which speaks of the jurisdiction of the judicial power of tke United States. The term is indeterminate in its signification ; it has a different meaning in different parts of the constitution. Where it says, ‘ the citizens of each state shall be entitled to all privileges and immnnities of citizens in the several states,’ the term citizen has a different meaning from that in which it is used in describing the jurisdiction of the court.” Chief Justice Marshall, in delivering the opinion of the court in both cases, said, “ the invisible, intangible, and artificial being, that mere legal entity, a corporation aggregate, is certainly not a citizen, and consequently cannot sue or be sued in the courts of the United States, unless the rights of the members in this respect can he exercised in their corporate name.” And the court held, in both cases, that a corporation aggregate cannot, in its corporate capacity, be a citizen ; though if it were composed of citizens of one state, it might sue a citizen of another state in the circuit courts. In The Bank of Augusta v. Earle, 13 Peters 519, these cases were approved, but the court held that, “by the comity of nations and between the states, the corporations of one state are permitted to make contracts in anotherand that “the comity thus extended to other nations is no impeachment of sovereignty; it is the voluntary act of the nations by which it is offered, and is inadmissible where contrary to Us policy or prejudicial to its interests.” This case is, therefore, equally decisive with the former against the proposition sought to he maintained by the defendants; for if a foreign corporation can only make contracts in this state by mere comity, and this comity is inadmissible where it is contrary to our policy to admit it, there can be no pretence that it stands, in this respect, clothed with the rights of a citizen of another state. The Supreme Court of the United States, subsequently, in the case of The Louisville Railroad Company v. Letson, 2 Howard 497, far modified the doctrine of The Bank of the United States v. Deveaux as to hold that a corporation aggregate, for the purpose of suing and being sued, might be deemed a citizen without regard to the particular residence of its members ; but in all other respects approved the preceding eases.

So far, then, as we are referred to reliable authorities, the case is with the plaintiff. If the construction contended for by the defendant is correct, it is at least remarkable that no well authenticated decision can be produced to support it. The legislation of many of the states, through a long course of years, has presented opportunities for raising the question. Laws discriminating to some extent, at least, between foreign and domestic corporations have-been common. Some states not only impose a special tax upon corporations of other states doing business within their limits, but exact of them oppressive conditions. Pennsylvania now allows privileges to her own banking corporations which she refuses to those of other states, and prohibits foreign corporations from holding real estate within her jurisdiction. These and many other laws now existing, and which have long existed, are unconstitutional, if the act here complained of is so.

The demurrer must be overruled, and judgment for plaintiff.

Elmer, J. The only question in this ease is, whether the act of the legislature of this state, entitled “ An act relative to insurance companies,” (Rev. Stat. 1016) is repugnant to that clause of the constitution of the United States which declares “ that the citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.” The act prescribes, in substance, that no person shall act as an agent for any individuals, or associations of individuals, resident out of this state, and not incorporated by some law of this state, until he has given bond to the collector of the county within which he may reside, that he will comply with the requisitions of the act, the most important of which is that he will pay a tax upon the premiums he receives. No such tax is imposed by that, or any other law, upon insurance companies within the state or incorporated by its laws.

That the privileges and immunities of the citizen, embraced in this clause of the constitution, comprehend an exemption from higher taxes-or impositions than are paid by other citizens of the state, maybe safely assumed. It was so held in the case of Corfield v. Coryell, 4 Wash. C. Rep. 371. Conceding also, for the purposes of this case, what is perhaps more questionable, that a tax laid upon the agent of citizens of another state, and equally affecting agents who are citizens of this state with those who happen to be citizens of other states, inasmuch as it affects the business of the principals, and indirectly falls on them, comes within this provision, it remains to inquire whether an incorporated company is a citizen within its purport. The association for which the agent acted whose bond is now prosecuted, and upon which the tax is alleged to fall, is a company incorporated in the state of Connecticut, and not incorporated or in any way recognized by any law of this state. In the case of The Louisville Railroad Company v. Letson, 2 How. 297, it was decided by the Supreme Court of the United States, that for all the purposes of suing and being sued, a corporation created by and doing business in a particular state, is substantially a citizen of the state which created it, within the meaning of the constitution and law conferring jurisdiction on the courts of the United States in cases between citizens of different states. This decision, however, is expressly confined, and the reasoning upon which it is supported is applicable only to the case of citizenship for the purposes of bringing suit. In the prior case of Bank of Augusta v. Earle (13 Peters 586), Chief Justice Taney, in giving the opinion of the court, expressly denies that a corporation is a citizen within the clause in question. To hold this, he forcibly remarks, would be to deprive every state of all control over the extent of corporate franchises proper to be granted in the state, and corporations would be chartered in one state, to carry on their operations in another.

A citizen, properly speaking, is a human being inhabiting and having certain rights in some city or district; A person who is a citizen of Connecticut, or of any other state of the Union, is for many purposes a citizen of New Jersey and of all the other states, and is entitled to all such privileges and immunities, coming within the purview of the constitution, as the citizens of those states, permanently resident therein, are entitled to. The privileges and immunities intended to be secured by the constitution are personal privileges, and in the language of Judge Washington, in the case of Corfield v. Coryell, “are those which are in their nature fundamental, which belong of right to the citizens of all free governments, and which have at all times been enjoyed by the citizens of the several states which compose this Union, from the period of becoming free, independent, and sovereign.” In the very nature of things, the citizen referred to is a natural person, a human being having rights essential to his character as a member of a free government, and not a mere artificial person, the creature of a special charter, having no rights but such as are thereby granted. A corporation having a right to sue like a natural person, may well be considered an inhabitant or citizen of a particular state, for the purpose of bringing suit, when the general purpose and spirit of the law so requires. But it is otherwise when the general purpose and spirit of the law, so far from requiring such a construction, require the contrary.

An individual citizen possesses powers of locomotion, and has rights which are so essential as to make it highly desirable that they should be uniform throughout the Union, and which, in order to secure and perpetuate mutual friendship and intercourse, among the people of the different states, were with great propriety placed under the protection of the federal constitution. No such reason exists in the case of a corporation. As was said by Justice Thompson, who delivered the opinion of the Supreme Court of the United States in the case of Runyan v. Costar (14 Reters 129), a corporation must dwell in the place of its creation, and cannot migrate to another sovereignty. Other states recognise its existence and general powers, and by comity usually permit it to make contracts, and enforce them by legal remedies within their sovereignty, as if it was a natural person. But such contracts and remedies depend for their validity upon the laws of the state where made or used, and are not valid or to be enforced there without its express or implied sanction. Having the power to give, the state has the power to withhold such sanction; a power so essential to its well being that no court can venture to control it by construction, without a positive provision plainly designed for that object. If, then, the state can altogether prohibit a corporation created by one of the other states from exercising its powers within its limits, it may, of course, regulate or tax the exercise of suolj powers at its discretion. Having no right to come there, such a corporation, if it desires to do so, claims a boon, and must submit to whatever burthens may be imposed.

It is undoubtedly true that all corporations are composed of natural persons, and such persons are citizens. But it is the legal entity, the artificial being created by the charter, which has appointed the agent and which pays the tax out of its corporate "funds. The privilege and immunity of being exempt from any other taxes than such as are imposed on the corporations or citizens of this state, is claimed on behalf of the corporation as such, and not in behalf of the individual stockholders. The business transacted by the agent in this state is the business of the corporation. And although the several stockholders are interested in that business, and their profits may be affected by the taxes imposed, yet iuasmdch as they choose to transact it through the medium of an incorporated name, having no personal character or rights, and not properly within the designation of a citizen, they must take their charter with all the disabilities properly belonging to it, one of which is, that an incorporation has no right to go beyond the limits of the sovereignty which created it, and if it does, must submit to such terms as other sovereignties see fit to impose. In my opinion the demurrer must be overruled, and judgment rendered for the plaintiff.

The Chief Justice concurred.

Judgment for plaintiff.

Cited in State v. Newark, 1 Dutch. 317 ; State v. Haight, 6 Vr. 283.