foreign corporations to appoint the Superintendent of Insurance agent to receive process; and in another section provided that in the absence of such appointment, the corporation should be deemed to have assented to such service. The corporation had in fact made the appointment. The facts therefore were no different from those in the New York cases above quoted; and the decision might have been placed on the same ground. The court interpreted the Simon case, however, to apply only to what it termed the " "poaching contracts" of foreign corporations to contracts made in violation of the state laws, or torts committed while carrying on business within the state without authority of the law. It applies, the court considered, only where the statute forbids the transaction of business within the state unless an express appointment has been made. This, it must be admitted, is a most curious doctrine. Can it be contended that a corporation occupies a more favorable constitutional position because it has violated a state law? If the Louisiana statute were amended by eliminating the section requiring express appointment, thus founding jurisdiction in every case on implied consent to service on the state official, could it be supposed that the result would be any different? It might be added that in the Simon case the corporation was engaged in interstate commerce, and hence could not be accused of poaching. To limit the rule of the Simon case to cases of service on a public officer, as was done by the Texas court, seems on the other hand to be entirely reasonable. The method of service on a statutory officer is open to serious abuse, and it may well be justified only as a necessary protection to residents of the state. The distinction acted upon in the New York cases where there had been an express appointment, suggests on 1 The case has since been affirmed by the Supreme Court, upon this ground, 243 U. S. 93 (1917). the other hand, a host of perplexing questions yet to be litigated. If the state cannot, constitutionally, treat as done what should have been done, can it bring mandamus to compel it to be done? Or can it indict the corporation, or its officers, for failing to obey the statute requiring the express appointment? Or can it exercise its absolute power of excluding the corporation from doing business in the state, until it shall have complied with the law, and given its "voluntary" consent? A later chapter will indicate a possible solution of these difficulties.1 The developments traced in this chapter point, it seems to me, to a total abandonment of the traditional theory, so often reaffirmed since the decision in Bank of Augusta v. Earle, that a corporation has no existence outside the state of it creation. We have seen that the English courts, and several state courts, have expressly adopted the opposite theory, that the corporation is in fact present, and for that reason alone liable to suit regardless of any consent. And the Supreme Court itself, in recent times, while not expressly repudiating Chief Justice Taney's famous dictum, has tended more and more to use language implying the corporation's presence. I shall try later to show that the traditional theory is founded on a fundamental theoretical misconception, that it has in fact no substantial meaning. But first it is necessary to trace the subsequent development of another great dictum of Chief Justice Taney, that a state has an unrestrained constitutional power to refuse recognition to a foreign corporation and to exclude it from doing business within its boundaries. 1 Ch. vii: "The Doctrine of Unconstitutional Conditions." CHAPTER VI THE POWER TO EXCLUDE FOREIGN CORPORATIONS THE third of the important dicta of Taney in Bank of Augusta v. Earle received its first direct confirmation in the famous case of Paul v. Virginia,1 involving the validity of a Virginia law imposing special regulations on foreign insurance companies doing business within the state. Statutes of this type had long been familiar. The earliest seems to have been adopted in New York, in 1824,2 requiring all foreign insurance companies to make reports. The following year Massachusetts prescribed elaborate regulations for foreign insurance companies, requiring the agents of such a company to file a copy of its charter, of the power of attorney under which they acted, and a sworn statement of a majority of the directors as to the capital stock, debts, investments, etc., of the corporation, and forbidding its doing business at all unless it had more than $200,000 paid-in stock, and was restricted by its charter or otherwise to individual risks of not more than 10 per cent of the capital. The policy of many of these restrictions seems to have been to put foreign insurance companies on a parity with domestic corporations. Many of the states had elaborate provisions designed to insure the solvency and conservative management of their own insurance companies, and they could not be expected to permit these laws to be evaded by the device of foreign incorporation. But this was not the policy of the Penn 1 8 Wall. 168 (1868). One aspect of this case was considered, supra, 64. * See, for instance, the preamble to the New Jersey statute, Laws 1826, 67: "Whereas it is represented to the legislature that associations or companies of individuals, not resident in this state, nor incorporated by its laws, do nevertheless ΙΟΙ sylvania act of 1810,1 making it criminal for companies or individuals of any foreign country to write insurance in the state; or of the act of April 23, 1829, in the same state,2 imposing a tax of 20 per cent on all premiums collected by agents of insurance companies incorporated in another state; or of a 10 per cent tax of the same character in the New York laws. Here were discriminations against foreign corporations obviously designed to protect local insurance interests against interstate or foreign competition. It was an attempt, fortunately abortive, to make the business of insurance a protected franchise, of the same character as banking. 3 A series of carefully reasoned state decisions had upheld these statutes. The first reported case was that of Commonwealth v. Milton, sustaining a $100 license tax required of foreign insurance companies, but not of domestic ones. The court's reasoning was that corporate charters were "peculiar privileges, creations of the local law," and not privileges of citizens as such; and that the federal constitution preserved to citizens "not the laws or the peculiar privileges which they may be entitled to in their own state, but such protection and benefit of the laws of any and every other state, as are common to the citizens thereof, in virtue of their being citizens." Even the more moderate position, that foreign corporations should have the right to do business if they complied with the terms applying to domestic companies, was rejected, on the ground that it "allows a state to keep out foreign corporations" only upon condition that it shall create none for itself." The constitutional rights of the 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-Therefore," etc. 1 Ch. 59, 81. • Acts of 1828–29, 264. Acts of 1824, ch. 277. Reduced to 2 per cent in 1837. 12 B. Mon. (Ky.), 212 (1851). incorporators, therefore, had not been violated. And the corporation itself, the Supreme Court had repeatedly held, was not a citizen. Before this case had appeared in the reports, the Supreme Court of New Jersey came to substantially the same conclusion, though on very different grounds.1 A statute imposed a license tax on agents of foreign insurance companies, whereas none was imposed on agents of domestic companies. It was attacked under the privileges and immunities clause of the Constitution, counsel quoting opinions of eminent lawyers, including Daniel Webster, and Chief Justice Jones of the New York Superior Court, declaring a similar New York law in conflict with this clause. The court, however, sustained the law. The opinion denies that there is a real discrimination: The legislature has seen fit to subject our local corporations to the burthen of very stringent laws, from which foreign corporations are entirely exempt. Can 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 business in this state. May they not, then, permit upon terms what they might prohibit altogether? The court adopted, however, the dictum in Bank of Augusta v. Earle, that a corporation is not a citizen within the privileges and immunities clause. Elmer, J., who concurred, based his decision entirely on this latter ground, conceding that the privileges embraced in the clause " comprehend an exemption from higher taxes or impositions than are paid by other citizens of the state." In Slaughter v. Commonwealth,2 the indictment was for conducting an insurance agency for a foreign corporation without a license. The court denied, as did the New Jersey 1 Tatem v. Wright, 3 Zabr. 429 (1852). 2 13 Gratt. 767 (1856). |