Connecticut Gen Life Ins Co v. Johnson

303 U.S. 77
Connecticut Gen Life Ins Co v. Johnson
Argued: January 14, 1938
Decided: January 31, 1938


Messrs. Wm. Marshall Bullitt, of Louisville, Ky., and B. M. Anderson, of Hartford, Conn., for appellant.
Mr. Neil Cunningham, of San Francisco, Cal., for appellee.
Mr. Justice STONE delivered the opinion of the Court.

Dissenting Opinion

Mr. Justice BLACK (dissenting).

I do not believe that this California corporate franchise tax has been proved beyond all reasonable doubt to be in violation of the Federal Constitution [1] and I believe that the judgment of the Supreme Court of California should be affirmed. Traditionally, states have been empowered to grant or deny foreign corporations the right to do business within their borders, [2] and ‘may exclude them arbitrarily or impose such conditions as (they) will upon their engaging in business within (their) jurisdiction.’ [3]

California laid an annual tax upon gross insurance premiums which the Supreme Court of California, Consolidated Title Securities Co. v. Hopkins, 1 Cal.2d 414, 35 P.2d 320, 323, has construed to be ‘a franchise tax exacted for the privilege of doing business.’ In measuring this franchise tax imposed upon corporations the state includes reinsurance premiums paid to the corporation on contracts made without the state, where such reinsurance protects citizens of the State of California. There is no attempt by this tax to regulate the business of the insurance company in any state except California.

The record does not indicate that California made any contract with this Connecticut corporation guaranteeing it a permanent franchise to do business in California on the same terms and conditions upon which it entered the state.

‘A state which freely granted the corporate privilege for intrastate commerce may change its policy. * * * In the absence of contract, there is no vested interest which requires the continuance of a legislative policy however expressed-whether embodied in a charter or in a system of taxation.’ [4]

It may be that California believes that by this tax it can stimulate the reinsurance business of companies making their reinsurance contracts in California. The right of a state to foster its own domestic industries by its taxing system has been sustained by this Court. [5]

This Court has also frequently sustained the right of a state to impose conditions on foreign corporations in order to favor its own corporations. [6] If a state did not have this privilege it could not protect the domestic business of its own corporations from undesirable competition by foreign corporations. The state of California has the constitutional right to limit the privileges of its own corporations and to reserve the right to control their privileges and to define and limit their activities. [7] If California has the lawful constitutional right (as this Court has many times said it has) to impose conditions upon foreign corporations so as to protect domestic corporations, its own elected legislative representatives should be the judges of what is reasonable and proper in a democracy.

With reference to a corporate tax imposed by the state of Louisiana, this Court has said: ‘The appellants, by incorporating in some other state, or by spreading their business and activities over other states, cannot set at naught the public policy of Louisiana (California?). * * * The policy Louisiana (California?) is free to adopt with respect to the business activities of her own citizens she may apply to the citizens of other states who conduct the same business within her borders, and this irrespective of whether the evils requiring regulation arise solely from operations in Louisiana (California?) or are in part the result of extrastate transactions.’ [8]

But it is contended that the due process clause of the Fourteenth Amendment prohibits California from determining what terms and conditions should be imposed upon this Connecticut corporation to promote the welfare of the people of California.

I do not believe the word ‘person’ in the Fourteenth Amendment includes corporations. ‘The doctrine of stare decisis, however appropriate and even necessary at times, has only a limited application in the field of constitutional law.’ [9] This Court has many times changed its interpretations of the Constitution when the conclusion was reached that an improper construction had been adopted. [10] Only recently the case of West Coast Hotel Company v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703, 108 A.L.R. 1330, expressly overruled a previous interpretation of the Fourteenth Amendment which had long blocked state minimum wage legislation. When a statute is declared by this Court to be unconstitutional, the decision until reversed stands as a barrier against the adoption of similar legislation. A constitutional interpretation that is wrong should not stand. I believe this Court should now overrule previous decisions which interpreted the Fourteenth Amendment to include corporations.

Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protection. The historical purpose of the Fourteenth Amendment was clearly set forth when first considered by this Court in the Slaughter House Cases, 16 Wall. 36, 21 L.Ed. 394, decided April, 1873-less than five years after the proclamation of its adoption. Mr. Justice Miller, speaking for the Court, said:

‘Among the first acts of legislation adopted by several of the States in the legislative bodies which claimed to be in their normal relaions with the Federal government, were laws which imposed upon the colored race onerous disabilities and burdens, and curtailed their rights in the pursuit of life, liberty, and property to such an extent that their freedom was of little value, while they had lost the protection which they had received from their former owners from motives both of interest and humanity. * * *

‘These circumstances, whatever of falsehood or misconception may have been mingled with their presentation, forced * * * the conviction that something more was necessary in the way of constitutional protection to the unfortunate race who had suffered so much. (Congressional leaders) accordingly passed through Congress the proposition for the fourteenth amendment, and * * * declined to treat as restored to their full participation in the government of the Union the States which had been in insurrection, until they ratified that article by a formal vote of their legislative bodies.’ 16 Wall. 36, at page 70, 21 L.Ed. 394.

Certainly, when the Fourteenth Amendment was submitted for approval, the people were not told that the states of the South were to be denied their normal relationship with the Federal Government unless they ratified an amendment granting new and revolutionary rights to corporations. This Court, when the Slaughter House Cases were decided in 1873, had apparnetly discovered no such purpose. The records of the time can be searched in vain for evidence that this amendment was adopted for the benefit of corporations. It is true that in 1882, twelve years after its adoption, and ten years after the Slaughter House Cases, supra, an argument was made in this Court that a journal of the joint Congressional Committee which framed the amendment, secret and undisclosed up to that date, indicated the committee’s desire to protect corporations by the use of the word ‘person.’ [11] Four years later, in 1886, this Court in the case of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, 6 S.Ct. 1132, 30 L.Ed. 118, decided for the first time that the word ‘person’ in the amendment did in some instances include corporations. A secret purpose on the part of the members of the committee, even if such be the fact, however, would not be sufficient to justify any such construction. The history of the amendment proves that the people were told that its purpose was to protect weak and helpless human beings and were not told that it was intended to remove corporations in any fashion from the control of state governments. The Fourteenth Amendment followed the freedom of a race from slavery. Jusice Swayne said in the Slaughter Houses Cases, supra, that: ‘By ‘any person’ was meant all persons within the jurisdiction of the State. No distinction is intimated on account of race or color.’ Corporations have neither race nor color. He knew the amendment was intended to protect the life, liberty, and property of human beings.

The language of the amendment itself does not support the theory that it was passed for the benefit of corporations.

The first clause of section 1 of the amendment reads: ‘All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.’ Certainly a corporation cannot be naturalized and ‘persons’ here is not broad enough to include ‘corporations.’

The first clause of the second sentence of section 1 reads: ‘No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.’ While efforts have been made to persuade this Court to allow corporations to claim the protection of his clause, these efforts have not been successful. [12]

The next clause of the second sentence reads: ‘Nor shall any State deprive any person of life, liberty, or property, without due process of law.’ It has not been decided that this clause prohibits a state from depriving a corporation of ‘life.’ This Court has expressly held that ‘the liberty guaranteed by the 14th Amendment against deprivation without due process of law is the liberty of natural, not artificial persons.’ [13] Thus, the words ‘life’ and ‘liberty’ do not apply to corporations, and of course they could not have been so intended to apply. However, the decisions of this Court which the majority follow hold that corporations are included in this clause in so far as the word ‘property’ is concerned. In other words, this clause is construed to mean as follows:

‘Nor shall any State deprive any human being of life, liberty or property without due process of law; nor shall any State deprive any corporation of property without due process of law.’

The last clause of this second sentence of section 1 reads: ‘Nor deny to any person within its jurisdiction the equal protection of the laws.’ As used here, ‘person’ has been construed to include corporations. [14]

Both Congress and the people were familiar with the meaning of the word ‘corporation’ at the time the Fourteenth Amendment was submitted and adopted. The judicial inclusion of the word ‘corporation’ in the Fourteenth Amendment has had a revolutionary effect on our form of government. The states did not adopt the amendment with knowledge of its sweeping meaning under its present construction. No section of the amendment gave notice to the people that, if adopted, it would subject every state law and municipal ordinance, affecting corporations, (and all administrative actions under them) to censorship of the United States courts. No word in all this amendment gave any hint that its adoption would deprive the states of their long-recognized power to regulate corporations.

The second section of the amendment informed the people that representatives would be apportioned among the several states ‘according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed.’ No citizen could gather the impression here that while the word ‘persons’ in the second section applied to human beings, the word ‘persons’ in the first section in some instances applied to corporations. Section 3 of the amendment said that ‘no person shall be a Senator or Representative in Congress,’ (who ‘engaged in insurrection’). There was no intimation here that the word ‘person’ in the first section in some instances included corporations.

This amendment sought to prevent discrimination by the states against classes or races. We are aware of this from words spoken in this Court within five years after its adoption, when the people and the courts were personally familiar with the historical background of the amendment. ‘We doubt very much whether any action of a State not directed by way of discrimination against the negroes as a class, or on account of their race, will ever be held to come within the purview of this provision.’ [15] Yet, of the cases in this Court in which the Fourteenth Amendment was applied during the first fifty years after its adoption, less than one-half of 1 per cent. invoked it in protection of the negro race, and more than 50 per cent. asked that its benefits be extended to corporations. [16]

If the people of this nation wish to deprive the states of their sovereign rights to determine what is a fair and just tax upon corporations doing a purely local business within their own state boundaries, there is a way provided by the Constitution to accomplish this purpose. That way does not lie along the course of judicial amendment to that fundamental charter. An amendment having that purpose could be submitted by Congress as provided by the Constitution. I do not believe that the Fourteenth Amendment had that purpose, nor that the people believed it had that purpose, nor that it should be construed as having that purpose.

I believe the judgment of the Supreme Court of California should be sustained.


^1  Cf. Ogden v. Saunders, 12 Wheat. 213, 270, 6 L.Ed. 606.

^2  Bank of Augusta v. Earle, 13 Pet. 519, 10 L.Ed. 274; Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357; Ducat v. Chicago, 10 Wall. 410, 19 L.Ed. 972; Horn Silver Mining Co. v. New York, 143 U.S. 305, 12 S.Ct. 403, 36 L.Ed. 164.

^3  Hanover Fire Insurance v. Harding, 272 U.S. 494, 507, 47 S.Ct. 179, 182, 71 L.Ed. 372, 49 A.L.R. 713.

^4  Brandeis, J., dissenting, liggett Co. v. Lee, 288 U.S. 517, 546, 53 S.Ct. 481, 489, 77 L.Ed. 929, 85 A.L.R. 699.

^5  People of State of New York ex rel. Parke, Davis & Co. v. Roberts, 171 U.S. 658, 19 S.Ct. 58, 70, 43 L.Ed. 323; Magnano Co. v. Hamilton, 292 U.S. 40, 54 S.Ct. 599, 78 L.Ed. 1109; Fox v. Standard Oil Co., 294 U.S. 87, 55 S.Ct. 333, 79 L.Ed. 780; Aero Mayflower Transit Co. v. Georgia Public Service Comm., 295 U.S. 285, 55 S.Ct. 709, 79 L.Ed. 1439; Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44, 48, 41 S.Ct. 219, 65 L.Ed. 489.

^6  Prudential Insurance Co. v. Cheek, 259 U.S. 530, 536, 42 S.Ct. 516, 519, 66 L.Ed. 1044, 27 A.L.R. 27; Pembina Consol. Silver Mining & Milling Co. v. Pennsylvania, 125 U.S. 181, 189, 8 S.Ct. 737, 31 L.Ed. 650.

^7  Fifth Avenue Coach Co. v. New York, 221 U.S. 467, 31 S.Ct. 709, 55 L.Ed. 815; Stone v. Mississippi, 101 U.S. 814, 820, 25 L.Ed. 1079.

^8  Great Atlantic & Pac. Tea Co. v. Grosjean, 301 U.S. 412, 427, 57 S.Ct. 772, 778, 81 L.Ed. 1193, 112 A.L.R. 293.

^9  Stone and Cardozo, JJ., concurring, St. Joseph Stock Yards Co. v. United States et al., 298 U.S. 38, at page 94, 56 S.Ct. 720, 744, 80 L.Ed. 1033. fn*10 See Collection of cases, Notes 1, 2, 3 and 4, Dissenting Opinion of Justice Brandeis, Burnet v. Coronado Oil & Gas Co., 285 U.S. 393, 406, 407, 408, 409, 52 S.Ct. 443, 447, 448, 76 L.Ed. 815.

^10  See Collection of cases, Notes 1, 2, 3 and 4, Dissenting Opinion of Justice Brandels, Burnet v. Colorado Oil & Gas Co., 285 U.S. 393, 406, 407, 408, 409, 52 S.Ct. 443, 447, 448, 76 L.Ed. 815.

^11  San Mateo County v. Southern Pacific Railroad, 116 U.S. 138, 6 S.Ct. 317, 29 L.Ed. 589. See, Benj. B. Kendrick, ‘Journal of the Joint Committee on Reconstruction’ (1914, New York); Howard J. Graham, ‘The ‘Conspiracy Theory’ of the Fourteenth Amendment,’ 47 Yale Law Journal 371; Donald Barr Chidsey, ‘The Gentleman from New York-A Life of Roscoe Conklin,’, yale University Press (1935).

^12  Selover, Bates & Co. v. Walsh, 226 U.S. 112, 126, 33 S.Ct. 69, 57 L.Ed. 146.

^13  Western Turf Association v. Greenburg, 204 U.S. 359, 363, 27 S.Ct. 384, 51 L.Ed. 520.

^14  Gulf, C. & S.F. Ry. Co. v. Ellis, 165 U.S. 150, 154, 17 S.Ct. 255, 41 L.Ed. 666.

^15  Slaughter House Cases, supra.

^16  Charles Wallace Collins, ‘The Fourteenth Amendment and the States’ Boston (1912), page 138.

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