The judgment of the court below reversed on the authority of
Western Union Telegraph Company v. Kansas, ante, p.
216 U. S. 1, and
also
held that:
A corporation organized in one state and doing an interstate
business is not bound to obtain the permission of another state to
transact interstate business within its limits, but can go into the
latter, for the purposes of that business, without liability to
taxation there with respect to such business, although subject to
reasonable local regulations for the safety, comfort, and
convenience of the people which do not, in a real, substantial
sense, burden or regulate its interstate business nor subject its
property interests outside of that state to taxation.
The requirement that such a company, as a condition of its right
to do intrastate business, shall, in the form of a fee, pay to the
state a
Page 216 U. S. 57
specified percent of its authorized capital is a violation of
the Constitution of the United States in that such a single fee,
based on all the property, interests, and business of the company
within and out of that state, is in effect a tax both on the
interstate business of that company and on its property outside of
that state, and compels the company, in order that it may do local
business in connection with its interstate business, to waive its
constitutional exemption from state taxation on its interstate
business and on its property outside of the state.
A state can no more exact such a waiver than it can prescribe as
a condition of the company's right to do local business that it
agree to waive the constitutional guaranty of the equal protection
of the laws, or the guaranty against being deprived of its property
otherwise than by due process of law.
A decree ousting and prohibiting a company from doing intrastate
business within a state for refusing to pay such a tax should not
be granted, but the aid of the court should be refused because a
decree would, in effect, recognize the validity of a condition
which the state could not constitutionally prescribe under the
guise of a fee for permission to do intrastate business.
75 Kan. 664 reversed.
The facts, which involve the constitutionality of certain
features of the Bush Act, which was under consideration in the
preceding case, are stated in the opinion.
Page 216 U. S. 58
MR. JUSTICE HARLAN delivered the opinion of the Court.
This is a proceeding in
quo warranto, instituted by the
state in the Supreme Court of Kansas against the Pullman Company, a
corporation of Illinois, in which the state, by its petition, prays
that the defendant be required to show by what authority it
exercises within Kansas the corporate right and power of charging
compensation for the use of reserved stats in its cars by day and
sleeping berths during the night, and of serving meals in its
dining cars within the State of Kansas, such services, it is
alleged, being rendered to and said fees being collected from
passengers transferring upon railroads from places within the state
to other places within the state, and that it be adjudged that the
defendant has no authority of law for the performance of such
corporate acts, powers, franchises, and business in the State of
Kansas, and be ousted of and from the exercise within the State of
the said corporate rights and franchises, and of receiving
compensation therefor.
On the petition of the company, the case was removed to the
circuit court of the United States, but that court remanded it to
the state court, where the defendant filed an answer resisting the
relief asked on various grounds, one of which was that such relief
could not be granted consistently with the power of Congress to
regulate commerce among the several states, or with rights
belonging to the defendant under the Constitution of the United
States. A demurrer to the answer was sustained, and a decree
rendered by which it was adjudged that the Pullman Company be
ousted, prohibited, restrained, and enjoined from transacting, as a
corporation, any business of a domestic or intrastate character
within the State of Kansas. The decree declared that it should in
nowise affect or restrict the interstate business of the company,
nor affect any of its contracts, obligations, or corporate duties
with or to the government of the United States.
The business of the Pullman Company, under its charter,
Page 216 U. S. 59
was that of furnishing sleeping, parlor, and tourist cars on
railroads, the company reserving to itself the right to charge a
certain price for the use of reserved seats in such cars during the
day-time and sleeping berths during the night. The company's
business extended throughout the United States where any trunk line
railroad was operated. It is not necessary to go into detail as to
the mode in which that business was conducted further than to say
that the business was and is principally that of interstate
commerce.
This case arises under the statute of Kansas which was examined
in
Western Union Telegraph Company v. Kansas, recently
decided,
ante, p.
216
U. S. 1. Laws of Kansas, Special Session, 1898, p. 27;
General Stat.Kansas, 1901, Title, "Corporations," p. 280;
id., 1905, same title, p. 284. The only provisions of that
statute which need be recalled for the purposes of this opinion are
these:
"Each corporation which has received authority from the [state]
Charter Board to organize shall, before filing its charter with the
Secretary of State, as provided by law, pay to the state treasurer
of Kansas,
for the benefit of the permanent school fund, a
charter fee of
one-tenth of one percent of its authorized
capital, upon the first one hundred thousand dollars
of
its capital stock, or any part thereof, and upon the next four
hundred thousand dollars, or any part thereof,
one-twentieth of
one percent, and for each million or major part thereof over
and above the sum of five hundred thousand dollars,
two hundred
dollars. . . . In addition to the charter fee herein provided,
the Secretary of State shall collect a fee of two dollars and fifth
cents for filing and recording each charter containing not to
exceed ten folios, and an additional fee of twenty-five cents for
each folio in excess of ten contained in any charter. The fee for
filing and recording a charter shall also entitle the corporation
to a certified copy of its charter. All the provisions of this act,
including the payment of the fees herein provided, shall apply to
foreign corporations
seeking to do business in this
state, except that, in lieu of their charter, they shall file
with the
Page 216 U. S. 60
Secretary of State a certified copy of their charter, executed
by the proper officer of the state, territory, or foreign country
under whose laws they are incorporated, and any corporation
applying for a renewal of its charter shall comply with all the
provisions of this act in like manner, and to the same extent, as
is herein provided for the chartering and organizing of new
corporations. . . . Any corporation organized under the laws of
another state, territory, or foreign country, and authorized to do
business in this state, shall be subject to the same provisions,
judicial control, restrictions, and penalties, except as herein
provided as corporations organized under the laws of this
state."
Id., ยงยง 1264, 1267.
Proceeding under the statute of Kansas, the Pullman Company made
written application to the Charter Board for permission to engage
in business in that state. The application was granted, and the
Board made the following order:
"The board having under consideration the application of the
Pullman Company, a foreign corporation organized under the laws of
the State of Illinois, for leave to transact the business of a
sleeping car company in the State of Kansas, and it appearing that
said foreign corporation has, in due form of law, filed with the
Secretary of State a certified copy of its charter, executed by the
proper officers of the state of its domicil, and the written
consent, irrevocable, of said corporation that actions may be
commenced against it in the proper court of any county in this
state in which the cause of action may arise, accompanied by a duly
certified copy of the resolution of the board of directors of said
corporation, authorizing the proper officers to execute the same,
it is, upon motion, thereupon ordered that said application be
granted, and that said applicant be authorized and empowered to
transact the business of operating sleeping cars, dining cars,
tourist cars, and other cars within the State of Kansas, and
receiving money for such services, and transacting within the state
its business of a sleeping car and transportation company,
provided, that this order shall not take effect and no
Page 216 U. S. 61
certificate of such authority shall issue or be delivered to
said company until such applicant shall have paid to the state
treasurer of Kansas, for the benefit of the permanent school fund,
the sum of fourteen thousand eight hundred dollars, being the
charter fees provided by law, necessary to be paid by the
corporation with a capital of $74,000,000, seeking to transact
business within this state. It is further understood, ordered,
and provided that nothing herein contained shall apply to nor be
construed as restricting in anywise the transaction by said
applicant of its interstate business, but that this grant of
authority and requirement as to payment relate only to the business
transacted wholly within the State of Kansas."
We have seen from the provisions of the statute, as set forth in
Western Union Telegraph Company v. Kansas, ante, p.
216 U. S. 1, that it
is made a
condition of the right of a foreign corporation
seeking to do local business in Kansas that it should apply to the
state Charter Board for permission to do so. It is also prescribed
as a
condition of the right of a foreign corporation to do
intrastate business in Kansas that it shall pay not only an
application fee of $25, but a charter fee
"
of one percent of its authorized capital upon the
first one hundred thousand dollars
of its capital stock or any
part thereof, and upon the next four hundred thousand dollars,
or any part thereof,
one-twentieth of one percent, and for
each million or major part thereof over and above the sum of five
hundred thousand dollars, two hundred dollars."
The Pullman Company is admittedly engaged, as it has been
continuously for many years, in commerce among all the states of
the Union, as well as in intrastate business in Kansas. The Charter
Board, we have seen, gave it permission to engage in intrastate
business in Kansas on
condition that it should pay to the
State Treasurer
for the benefit of the permanent school fund of
the state, as a charter fee, the sum of $14,800, which is the
prescribed statutory percent of the company's authorized capital,
representing
all of its property and interests everywhere,
in and out of the state, and
all its
Page 216 U. S. 62
business, both interstate and intrastate. It does not appear how
much of the single "fee" demanded by the state is to be referred to
the interstate business of the company, nor how much to its
property outside of the state, nor what part has reference to its
intrastate business, or to its property within the state.
The Pullman Company refused to pay the fee so demanded, upon the
general ground, among others, that the state could not,
consistently with the Constitution of the United States or with the
company's rights under the Constitution, make it a condition of its
doing intrastate business in Kansas that the company should pay, in
the form of a fee, a specified percent of all its authorized
capital; that such a fee necessarily operated as a burden on the
company's interstate business as well as a tax on its property
interests outside of the state, and was hostile to its
constitutional right of exemption from local taxation in reference
to its property beyond the jurisdiction or the state.
For the reasons, and under the limitations, expressed in the
opinion delivered in
Western Union Telegraph Company v. Kansas,
ante, p.
216 U. S. 1, and
without expressing any opinion upon questions raised by the
pleadings, but not covered by this opinion, we hold, 1. that the
Pullman Company was not bound to obtain the permission of the state
to transact interstate business within its limits, but could go
into the state, for the purposes of that business, without
liability to taxation there with respect to such business, although
subject to reasonable local regulations for the safety, comfort,
and convenience of the people which did not, in a real, substantial
sense, burden or regulate its interstate business, nor subject its
property interests outside of the state to taxation in Kansas; 2.
that the requirement that the company, as a condition of its right
to do intrastate business in Kansas, should, in the form of a fee,
pay to the state a specified percent of its authorized capital was
a violation of the Constitution of the United States, in that such
a single fee, based
Page 216 U. S. 63
as it was on all the property interests, and business of the
company, within and out of the state, was, in effect, a tax both on
the interstate business of that company, and on its property
outside of Kansas, and compelled the company, in order that it
might do local business in Kansas in connection with its interstate
business, to waive its constitutional exemption from state taxation
on its interstate business and on its property outside of the
state, and contribute from its capital to the support of the public
schools of Kansas; that the state could no more exact such a waiver
than it could prescribe as a condition of the company's right to do
local business in Kansas that it agree to waive the constitutional
guaranty of the equal protection of the laws, or the guaranty
against being deprived of its property otherwise than by due
process of law; 3. that a decree ousting and prohibiting the
company from doing intrastate business in Kansas was improperly
granted, the aid of the court should have been refused and the bill
dismissed, because a decree such as the state asked would, in
effect, have recognized the validity of a condition which the state
could not constitutionally prescribe under the guise of a fee for
permission to do intrastate business.
MR. JUSTICE MOODY heard the argument of this case, participated
in its decision, and approves this opinion.
On the authority of
Western Union Telegraph Company v.
Kansas, ante, p.
216 U. S. 1, and for
the reasons and with the reservations therein set forth in the
opinion in that case, the decree must be reversed and the cause
remanded for such further proceedings as may be consistent with
this opinion.
It is so ordered.
MR. JUSTICE WHITE, concurring:
It is not disputed that the Pullman Company, many years ago,
entered Kansas, and has since therein operated its cars for the
purposes of interstate as well as local business. Although the
cars, in passing in and out of the state, may not have been
constantly the same, it was long ago settled (
Pullman's
Page 216 U. S. 64
Palace Car Co. v. Pennsylvania, 141 U. S.
18) that a proportionate number of the cars so used are
to be considered as having a definite situs in the state, and
therefore as property permanently therein, subject to the power of
the state to tax. Taking this rule into consideration, in my
opinion, the case is controlled by the reasons given for my
concurrence in the
Western Union Telegraph Co. v. Kansas,
ante, p.
216 U. S. 1. That is
to say, as a due proportion of the cars of the Pullman Company used
in the State of Kansas were there permanently, I am not able to
conclude that the company or its property were not permanently in
the state, and hence that such property can be taken by the state
without due process of law as a condition of the right to bring the
property into the state and there carry on local business. To so
hold without overruling
Pullman's Car Co. v. Pennsylvania
and the many cases which have followed it would be to place the
Court in the position of saying, on the one hand, for the purpose
of upholding the state's lawful power of taxation, that the
property of the company was permanently in the state, and, on the
other, of deciding, for the purpose of enabling the state to impose
an unconstitutional tax, that the company was outside of the state
and had no property permanently employed in carrying on business
therein. True it is that my concurrence in
Western Union
Telegraph Co. v. Kansas was placed upon the ground that the
company was in the state, and consequently was not subject to be
dealt with upon the fictitious assumption that such was not the
fact. However, it was also said that I did not dissent from the
fundamental application which the Court made of the commerce clause
of the Constitution. As the reasons for this statement differed
somewhat from those expressed by the Court in its opinion, it seems
to me, in view of the importance of the subject, that it is my duty
now to state as briefly as possible my reasons for thinking that
the tax in question is repugnant to the commerce clause of the
Constitution even under the assumption that the corporation and its
property
Page 216 U. S. 65
were out of the state, and that the tax is a condition affixed
to the privilege of coming in to do a local business, and may
therefore be escaped by not doing such business.
The conflict of opinion as to the decisive effect of certain
prior decisions of the Court exacts that the principles which this
case involves should be first definitely brought into view in order
that the appositeness of the cases referred to may be determined in
the light of the true doctrine by which the case should be
controlled. I therefore at once summarily state certain dominant
propositions which are, to my mind, not subject to be controverted
because, whatever may be the differences of opinion as to some of
them, considered originally, they are all so conclusively
established by the previous decisions of this Court as to be now
beyond dispute.
1. A state may not exert its concededly lawful powers in such a
manner as to impose a direct burden on interstate commerce. This is
so elementary as to require no reference to the multitude of
authorities by which it is sustained.
2. Even though a power exerted by a state, when inherently
considered, may not, in and of itself, abstractly impose a direct
burden on interstate commerce, nevertheless such exertion of
authority will be a direct burden on such commerce if the power as
exercised operates a discrimination against that commerce or, what
is equivalent thereto, discriminates against the right to carry it
on.
Darnell v. Memphis, 208 U. S. 113;
Am. Steel & Wire Co. v. Speed, 192 U.
S. 500, and authorities there cited.
3. Subject to constitutional limitations, the states have the
power to regulate the doing of local business within their borders.
As a result of this power, and of the authority which government
may exert over corporations, the states have the right to control
the coming within their borders of foreign corporations. In cases
where this power is absolute, the states may affix to the privilege
such conditions as are deemed proper, or, without giving a reason,
may arbitrarily forbid such corporation from coming in. When,
therefore,
Page 216 U. S. 66
in a case where the absolute power to exclude obtains, a
condition is affixed to the right to come into a state and a
foreign corporation avails of such right, it may not assail the
constitutionality of the condition because, by accepting the
privilege, it has voluntarily consented to be bound by the
condition. In other words, in such case, the absolute power of the
state is the determining factor, and the validity of the condition
is immaterial. This doctrine finds, in the decided cases, no terser
and clearer statement than that expressed in the opinion in
Horn Silver Mining Company v. New York, 143 U.
S. 305. In that case, a manufacturing company, organized
under the laws of Utah, was sought to be made liable for a tax on
the franchise of carrying on, in the State of New York, a
manufacturing business. It contested liability on the ground that
the tax was repugnant to the Constitution of the United States. The
Court, in deciding that the constitutionality of the burden was an
irrelevant consideration because of the absolute power of the state
to impose it as a condition on the right of the corporation to come
into the state and do a manufacturing, and therefore local,
business, said, speaking of the power of the state (p.
143 U. S.
315):
"Having the absolute power of excluding the foreign corporation,
the state may, of course, impose such conditions upon permitting
the corporation to do business within its limits as it may judge
expedient, and it may make the grant or privilege dependent upon
the payment of a specific license tax, or a sum proportioned to the
amount of its capital. No individual member of the corporation, or
the corporation itself, can call in question the validity of any
exaction which the state may require for the grant of its
privileges. It does not lie in any foreign corporation to complain
that it is subjected to the same law with the domestic
corporation."
And in a passage of the opinion previous to the one just quoted
concerning the right of a state, where its power to exclude was
absolute, to impose such condition as it pleased, it was observed
(p.
143 U. S.
314):
Page 216 U. S. 67
"This doctrine has been so frequently declared by this Court
that it must be deemed no longer a matter of discussion, if any
question can ever be considered at rest."
In addition, the following cases, either directly, expressly, or
by fair implication, must be taken as sustaining the right of the
state, where it has the absolute power to exclude, to affix
whatever condition it deems proper to the right of a foreign
corporation to come in, and the consequent inability of such
corporation, after accepting the privilege, to assail the
constitutionality of the condition:
Paul v.
Virginia, 8 Wall. 168;
Postal Telegraph Co. v.
Charleston, 153 U. S. 693;
Hooper v. California, 155 U. S. 648;
Waters-Pierce Oil Co. v. Texas, 177 U. S.
28;
Pullman Co. v. Adams, 189 U.
S. 420;
Allen v. Pullman's Palace Car Co.,
191 U. S. 171;
Security Mut. Ins. Co. v. Prewitt, 202 U.
S. 246;
National Council v. State Council,
203 U. S. 151.
4. The absolute power of the state, as stated in the preceding
proposition, does not include the right to exclude a foreign
corporation from doing in a state interstate commerce business,
since the regulation of such business is vested by the Constitution
in Congress, and the states are impotent, as stated in the first
and second propositions, to directly burden the right to do such
business or to discriminate against those doing it.
Crutcher v.
Kentucky, 141 U. S. 47. And,
indeed, by necessary implication, the want of power in the states
to exclude corporations as well as individuals from carrying on
within their borders interstate commerce results, by implication,
from the decisions in the cases previously cited under proposition
3. This is aptly illustrated by the
Horn Silver Mining
case, where, after stating in the clearest way the absolute power
of the state, generally speaking, to exclude a foreign corporation,
it was declared (143 U.S.
143 U. S.
314-315):
"Only two exceptions or qualifications have been attached to it,
in all the numerous adjudications in which the subject has been
considered since the judgment of this Court was announced more than
half a century ago in
Bank of Augusta
Page 216 U. S. 68
v. Earle, 13 Pet. 519. One of these qualifications is
that the state cannot exclude from its limits a corporation engaged
in interstate or foreign commerce, established by the decision in
Pensacola Telegraph Co. v. Western Union Telegraph Co.,
96 U. S.
1,
96 U. S. 12. The other
limitation on the power of the state is where the corporation is in
the employ of the general government -- an obvious exception, first
stated, we think, by the late Mr. Justice Bradley in
Stockton
v. Baltimore & New York Railroad, 32 F. 9, 14. As that
learned Justice said:"
"If Congress should employ a corporation of shipbuilders to
construct a man-of-war, they would have the right to purchase the
necessary timber and iron in any State of the Union."
"And this Court, in citing this passage, added, 'without the
permission and against the prohibition of the state.'
Pembina
Mining Co. v. Pennsylvania, 125 U. S. 181,
125 U. S.
186."
Let me, then, test the question for decision by the light of
these principles.
As it is obvious that the Pullman Company, insofar as it was
engaged in interstate commerce within the State of Kansas, was
independent of the will of the state, it follows that the state had
no absolute power to exclude the corporation, and therefore no
authority to impose an unconstitutional burden as the price for the
privilege of doing local in conjunction with the interstate
commerce business. The power to exclude in such a case, being only
relative, affords no warrant for the exertion by the state of an
absolute prohibition. That is to say, the exerted power could not,
in the nature of things, be wider than the authority in virtue of
which alone it could be called into play. Moreover, to me it seems
that, where the right to do an interstate commerce business exists,
without regard to the assent of the state, a state law which
arbitrarily forbids a corporation from carrying on with its
interstate commerce business a local business would be a direct
burden upon interstate commerce, and in conflict with the
principles stated in proposition 1. This follows since the
imposition on a corporation which has the right to do interstate
commerce
Page 216 U. S. 69
business within the State of an unconstitutional burden for the
privilege of doing local business is, in my opinion, the exact
equivalent of placing a direct burden on its interstate commerce
business. It is not by me doubted that, as a practical question,
the arbitrary prohibition against doing a local business, imposed
on one engaged in, and having the right to engage in, interstate
commerce, is to burden that business. But passing, for argument's
sake, the considerations just stated, if a state, in express terms,
enacted that all foreign corporations which availed of the right
granted them by the Constitution of the United States to carry on
interstate commerce within the state without the previous consent
of the state should, as a penalty for not obtaining that consent,
be deprived of all right to transact local business, it would not,
I assume, be contended that such an enactment was not a
discrimination against the corporations to which it applied because
of their possession of a right conferred upon them by the
Constitution of the United States. And yet such must be the direct
and immediate result of applying an absolute act of exclusion to
corporations who are not subject to such absolute exercise of power
because of the right bestowed upon them by the Constitution of the
United States to carry on within a state an interstate commerce
business. Nor is it an answer to say that, as a state may exclude a
foreign corporation from doing local business, the exertion of its
lawful power may not be prevented because a bad reason is given or
an illegal condition imposed, since the power exerted is the test,
and not the reason which has been given for exerting the power. But
the proposition in effect assumes the question at issue, since,
however controlling it may be conceded to be, when applied to a
case where the absolute power to exclude exists, it can have no
application to a case where the power of the state is relative,
because it may not extend to prohibiting the doing of an interstate
commerce business. In such a case, the limitation upon the power
operates not only to forbid the exclusion, as the result of the
expressed enactment
Page 216 U. S. 70
of an unconstitutional condition, but also, in the nature of
things, prohibits the absolute exclusion, although the reason for
the attempted exertion of such a power be not given. In other
words, where the power to exclude is absolute, no inquiry as to the
reasons for its exertion need be resorted to in order to determine
its constitutionality. But, where the power is only relative,
because it may not be exerted under particular conditions and
circumstances, the violation of the Constitution cannot be
accomplished by a failure to express the reason for the exclusion,
and thus absolute power be exerted where such power does not exist.
The controlling influence of the Constitution may not be destroyed
by doing indirectly that which it prohibits from being done
directly.
It is to be observed that the conclusions just expressed take
away from the states no lawful power. It leaves to the states the
right to exert absolute authority where such power is possessed,
and simply requires that where, as a result of the Constitution of
the United States, the power is not absolute, but is merely
relative, not only the right of regulation, but likewise the right
to exclude must be exerted conformably to the requirements of the
Constitution of the United States -- that is, in such a manner as
not, either directly, by the expression of a condition, or
indirectly, by its nonexpression, to deprive of rights secured by
that instrument.
The principal cases relied upon to establish that the prior
decisions support the right of the states to impose the
unconstitutional tax here in question are reviewed in the opinion
of the Court, and I might well rest content with that review. But,
in addition, it to me seems that none of the cases relied upon are
apposite here for two obvious reasons -- because they either
involved the exercise of state power concerning subjects over which
the authority of the state was absolute or considered state burdens
which were upheld as being in effect neither direct burdens upon
interstate commerce nor discriminatory against such commerce.
A very summary reference to the cases will be made for
Page 216 U. S. 71
the purpose of indicating why this is said.
Paul v.
Virginia, 8 Wall. 168, involved the validity of a
state statute which prescribed certain conditions for the doing of
the business of insurance within a state by a foreign insurance
company, and it was held that such business was not commerce, and
therefore was within the absolute regulating power of the states.
Horn Silver Mining Company v. New York, 143 U.
S. 305, as previously shown, involved no question of
interstate commerce, but the right of a foreign corporation to
carry on in a state a manufacturing business without compliance
with the laws of the state. And although the ruling of the court,
as heretofore stated, was, in express terms, placed upon the
absolute power of the state over the subject, the Court was careful
to point out that such power did not embrace the right to exclude a
foreign corporation from doing an interstate commerce business in
the state, or extend to excluding a corporation chartered by the
United States for governmental purposes.
Postal Telegraph Co.
v. Charleston, 153 U. S. 693,
involved a tax concerning which the Court said (p.
153 U. S.
699):
"The express terms of the ordinance restricts the tax to
'business done exclusively within the City of Charleston, and not
including any business done to or from points without the state,
and not including any business done for the government of the
United States, its officers or agents.'"
It is certain that the burden was sustained on its inherent
merit as a purely lawful tax on a subject within the state's
authority, and not as an unconstitutional tax on interstate
commerce, which, although void, was to be enforced because it was a
mere condition for the privilege of doing local business, which
privilege had been accepted. This is certain, since the Court said
(p.
153 U. S.
695):
"That this license is not a condition upon which the right to do
business depends, but is a tax, is shown by the case of
Home
Insurance Co. v. City Council, 93 U. S.
116,
93 U. S. 122."
How the ruling thus made is applicable here, my mind does not
perceive. The distinction between this case and that is but the
difference which exists between
Page 216 U. S. 72
the exertion of a lawful power and the attempt to violate the
Constitution by doing that which it forbids to be done. The gulf
which separates the case referred to from this, it may be, can be
made plainer by observing that this case involves no issue as to
the right of a state to lawfully tax the local business of
corporations, whether domestic or foreign. That right is fully
conceded. The only right here challenged is the authority of a
state to impose an unconstitutional tax, and validate the tax by
making the payment of the unlawful tax a condition of the right to
do a local business. And this upon the false assumption that
absolute power to exclude exists -- that is, to impose an unlawful
tax and sustain it by another unlawful assumption of power, a
process of reasoning which, to my mind, must rest on the
proposition that, in deciding questions of constitutional power, it
is to be held that two wrongs make a right.
Hooper v.
California, 155 U. S. 648, was
a case involving only the right of a state to absolutely control
the doing of insurance business within the state, and the doctrine
of
Paul v. Virginia was reiterated. The Court, however,
was sedulous to declare that, as that particular subject was not
commerce, the authority of the state was absolute, and not
relative; but it expressly pointed out the limitation upon the
absolute power which would obtain where a right arose in favor of a
corporation under the Constitution of the United States to engage
within the state in interstate commerce. In
Waters-Pierce Oil
Co. v. Texas, 177 U. S. 28, the
oil company had accepted a permit from the State of Texas to engage
for the period therein stated in local as well as interstate
commerce within the state, upon the conditions therein set forth.
No question was raised as to what would have been the rights of the
company had it gone into the state for the purpose of transacting
therein a purely interstate commerce business without the consent
of the state. Indeed, the decision proceeded upon the theory that
no such question was involved in the case, since it was assumed in
the opinion that, under the circumstances of the case, the
power
Page 216 U. S. 73
of the state was absolute, and not relative.
Paul v.
Virginia and cases of that character were cited.
Hooper v.
California was referred to, and the exception as to interstate
commerce business which that case enunciated was pointed out. It
was declared that the case could have been rested upon the
Hooper case without saying anything further -- a
conclusion wholly incompatible with any other conception than that
the right recognized was based upon the absolute power of the
state, and did not come within the exception based upon the right
to do an interstate commerce business, even by a foreign
corporation, which the
Hooper case had announced and which
the case of
Horn Silver Mining Company had in effect
treated as being as well established as the principle of absolute
power. It is true that, in
Pullman Co. v. Adams,
189 U. S. 420, and
Allen v. Pullman's Palace Car Co.,191
U.S. 171, the taxes which were assailed as invalid were treated
as conditions imposed for the privilege of carrying on local
business, and which were therefore considered to be optional, as
the right to escape payment would result upon discontinuing the
doing of the local business. But the taxes in question in those
cases were not levied upon interstate commerce, either directly or
indirectly, but only upon the business done within the state, and
therefore substantially involved no question of the absolute right
of the state to impose an unconstitutional condition where the
power of the state was not absolute, but only relative. No
reference was made in the opinion to the distinction stated in the
previous cases between the absolute power to exclude, generally
considered, and the relative character of that power where the
foreign corporation possessed the power to do an interstate
commerce business, irrespective of the consent of the state.
Security Mutual Insurance Company v. Prewitt, 202 U.
S. 246, involved the right of the state to deal with the
business of insurance -- a matter purely of state concern,
involving interstate commerce in none of its aspects, and the case
of
National Council v. State Council, 203 U.
S. 151, also involved the right of a
Page 216 U. S. 74
state to control the doing within the state of a business purely
local in character, as distinct from an interstate commerce
business.
Moreover, none of the cases referred to prevent me in this case
from acting upon my independent convictions, even if it be conceded
that expressions may be found in the opinions in some of the cases
which, when separated from their context and apart from the subject
matter of the controversies which the cases presented, would tend
to conflict with the views I have expressed. This is said because
certain is it that in none of the cases is the slightest reference
made to the distinction between the absolute and relative power
which this case involves and the direct burden which must result to
interstate commerce from the attempt to exert absolute power where,
as the result of the interstate commerce clause of the
Constitution, relative power alone obtains. When first after the
duty came to me of taking part in the work of the Court, the
question arose of the right of a state, in cases where it had
absolute authority, to impose an unconstitutional condition as a
prerequisite to the right to do local business, my individual
convictions were suppressed and my opinion yielded because of the
conception that it was my duty to enforce in such a case the
previous rulings of the Court, however much, as an original
question, I would have held a contrary view. But because my
convictions were thus yielded in such a case affords no reason why
I now should assent to extending the doctrine of the previous cases
to conditions to which, in my opinion, they do not apply. And
certainly this should not be done when the result of such extension
of the previous cases would be to destroy the efficiency of the
commerce clause of the Constitution, to restrict the powers of
Congress conferred by that clause, and ultimately, by the doctrine
to result from the unwarranted extension of the cases, to destroy
the substantial powers of both Congress and the states and
establish a system from which it would come to pass that, instead
of living under a constitutional government, we would live
under
Page 216 U. S. 75
a government of unconstitutional exactions, sanctioned by means
of the exertion of arbitrary and absolute power, although the right
to exert such power did not exist.
MR. JUSTICE HOLMES, dissenting:
As this case has received some further discussion beyond that in
Western Union Telegraph Company v. Kansas, I will
contribute my mite. I do not care to add to what I said the other
day as to the supposed accession of rights to a corporation because
it already has property in the state. Argument from
Pullman's
Palace Car Co. v. Pennsylvania, 141 U. S.
18, is excluded by
New York Central Railroad v.
Miller, 202 U. S. 584,
which shows that the question whether there is any necessary
parallelism between liability to taxation elsewhere and immunity at
home still is an open question (p.
202 U. S. 598),
and points out that, in the earlier case, the same cars were
continuously receiving the protection of Pennsylvania (p.
202 U. S.
597). In the present case, it is alleged that the cars
are taxed in other states as well as in Kansas, and that the
property represented by the capital of the company has no situs in
Kansas. If I thought it material, I should say that, on the
declaration, the cars were taxable at the Pullman Company's domicil
more certainly than anywhere else. But I think it immaterial, for
the reasons that I gave last week, and, furthermore, the argument
drawn from the presence in the State of cars that can be and are
rolled out of it at will cannot, I should think, be meant to be
pressed.
I will add a few words on the broader proposition put forward,
that the Constitution forbids this charge, whether the corporation
was established previously in the state or not. I do not see how or
why the right of a state to exclude a corporation from internal
traffic is complicated or affected in any way by the fact that the
corporation has a right to come in for another purpose. It is said
that, in such a case,
Page 216 U. S. 76
the power of the state is only relative, and, in the sense that
it is confined to the local business, I agree. But in the sense
that it is not absolute over that local business, the statement
seems to me merely to beg the question that is to be discussed. I
do not understand why the power is less absolute over that because
it does not extend to something else. So again, the proposition
that a state may not subject all corporations that enter the state
for commerce with other states to such conditions as it sees fit to
impose upon local business, no matter how offensive the terms,
seems to me a proposition not to be assumed, but to be proved; or
again, that the arbitrary prohibition of local business is a burden
on commerce among the states. I am quite unable to believe that an
otherwise lawful exclusion from doing business within a state
becomes an unlawful or unconstitutional burden on commerce among
states because, if it were let in, it would help to pay the bills.
Such an exclusion is not a burden on the foreign commerce at all;
it simply is the denial of a collateral benefit. If foreign
commerce does not pay its way be itself, I see no right to demand
an entrance for domestic business to help it out.
The distinction that I believe exists is sanctioned by many
cases earlier than those referred to in my former dissent. That the
local business of telegraph and railroad companies may be taxed by
the states has been held over and over again, with full acceptance
of the doctrine that,
quoad hoc, "the power to tax
involves the power to destroy,"
M'Culloch
v. Maryland, 4 Wheat. 316,
17 U. S. 431,
essentially the doctrine on which the power of the states to tax
interstate commerce was denied.
82 U. S. Co. v.
Pennsylvania ("Case of the State Freight Tax"), 15 Wall. 232.
Thus, in
Western Union Telegraph Company v. Alabama,
132 U. S. 472, it
was held that the telegraph company could be taxed upon all
messages carried and delivered wholly within the state, and the
principle was stated by Mr. Justice Miller (p.
132 U. S. 473)
to be that this "class are elements of internal commerce solely
within the limits and jurisdiction of the state, and therefore
subject to its taxing
Page 216 U. S. 77
power." This was by a unanimous Court, and followed the
intimations and decisions of earlier cases. The above passage was
cited and followed in
Postal Telegraph Co. v. Charleston City
Council, 153 U. S. 692,
when a license fee or tax was exacted in respect of local business,
and the previous decisions were cited and commented upon by Mr.
Justice Shiras. One of the arguments repudiated was that the tax
was a burden upon commerce among the states. I do not see how the
reasoning that denies the power to tax one kind of commerce and
asserts it with regard to the other can be reconciled with the
denial of the power of the state to exclude the latter altogether,
or to tax it for whatever sum it likes. The right to tax "in its
nature acknowledges no limits."
Weston v.
Charleston, 2 Pet. 449,
27 U. S. 466;
People ex Rel. Bank of
Commerce v. Commissioners of New York, 2 Black
620.
I think that the tax in question, for I am perfectly willing to
call it a tax, was lawful under all the decisions of this Court
until last week. From other points of view, if I were at liberty to
take them, I should agree that it deserved the reprobation it
receives from the majority. But I have not heard, and have not been
able to frame, any reason that I honestly can say seems to me to
justify the judgment of the Court in point of law.
THE CHIEF JUSTICE concurs in this dissent.
MR. JUSTICE McKENNA also dissents.