Liverpool Ins. Co. v. Massachusetts
77 U.S. 566

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U.S. Supreme Court

Liverpool Ins. Co. v. Massachusetts, 77 U.S. 10 Wall. 566 566 (1870)

Liverpool Insurance Company v. Massachusetts

77 U.S. (10 Wall.) 566




1. A corporation created by one state can only exercise its corporate franchises in another state by the comity of the latter.

2. A joint stock association, which by its deed of settlement in England and certain acts of Parliament is endowed with the faculties and powers mentioned below is a corporation, and will be so held in this country, notwithstanding the acts of Parliament, in accordance with a local policy, declare that it shall not be so held. These faculties and powers are:

1. A distinctive artificial name by which it can make contracts.

2. A statutory authority to sue and be sued in the name of its officers as representing the association.

3. A statutory recognition of the association as an entity distinct from its members by allowing them to sue it and be sued by it.

4. A provision for its perpetuity by transfers of its shares, so as to secure succession of membership.

3. In this country, the individual responsibility of the shareholder for the debts of the association is not incompatible with the corporate idea.

Page 77 U. S. 567

4. Such corporations, whether organized under the laws of a state of the Union or a foreign government, may be taxed by another state, for the privilege of conducting their corporate business within the latter.

A statute of the state just named imposes upon

"each fire, marine, and fire and marine insurance company, incorporated or associated under the laws of any government or state other than one of the United States, a tax of 4 percent upon all premiums charged or received on contracts made in this commonwealth for insurance of property."

The same statute imposes a tax of but 2 percent upon such premiums when the company is incorporated under the laws of any one of the United States other than Massachusetts, upon which premiums, where the company is incorporated by itself, it imposes but 1 percent, while no tax is imposed by the laws of the state upon the business of insurances transacted by any natural persons citizens of the same.

With the enactment just mentioned on its statute book, the State of Massachusetts in 1868 filed a bill in its Supreme Judicial Court against the Liverpool & London Life and Fire Insurance Company (a company doing a large business in that state), to collect a tax of 4 percent on its premiums upon contracts made in Massachusetts for insurance of property and to restrain the company from doing further business till the tax was paid. The company set up that it was not "incorporated" at all, but was an association, under the laws of Great Britain, of natural persons, some of whom were citizens and residents of the country just named, and some citizens and residents of the State of New York, formed for the purpose of conducting the business of insurance under certain deeds of settlement and having the legal character of a partnership; that accordingly it could not be taxed as a "company incorporated under the laws of any government or state other than one of the United States," while insofar as the discriminating tax of 4 percent was sought to be laid against it as a company associated simply and not incorporated, it violated, in regard to the members

Page 77 U. S. 568

of the company who were subjects of Great Britain, a provision in the treaty of 1815 between that country and the United States by which it is agreed that the merchants and traders of each nation respectively shall enjoy the most complete protection and security for their commerce, and, in regard to the citizens of New York, that provision in Section 2, Article IV, of the federal Constitution which secures to the citizens of each state all the privileges and immunities of citizens in the several states.

Of course if the company was a corporation, the defense failed, and it not being denied that the persons composing the company were British subjects, with certain citizens of New York with rights like theirs, the first question -- and the only one if it was resolved affirmatively -- was whether the company was a corporation or not.

The company had been originally formed, in May, 1836, in Liverpool, by a "deed of settlement."

This instrument, as far as it could be done without the aid of Parliament, established a company under the name of "The Liverpool Life & Fire Insurance Company," with a capital of

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