When the writ of error from this Court is not allowed until
after the record has been sent back by the state appellate court to
the trial court, the writ is directed to that court.
It is within the province of the highest court of a state in
construing a state statute to depart from prior decisions upon the
subject if deemed untenable, and in such event, this Court, upon a
writ of error to that court, accepts the latest construction and
confines its attention to determining whether the statute, as so
construed, violates the federal Constitution.
While a state may adopt a reasonable police measure, even though
interstate commerce be incidentally or indirectly affected, it has
no power to exclude from its limits foreign corporations or other
engaged in interstate commerce or to impose such conditions as will
fetter their right to carry on such commerce, or subject them in
respect to their transactions therein to unreasonable
requirements.
The right to demand and enforce payment for goods sold in
interstate commerce is directly connected with, and essential to,
such commerce, and the imposition of unreasonable conditions on
such right operates as a burden and restraint upon interstate
commerce.
While a state may restrict the right of foreign corporations to
sue in its courts and to engage in business within its limits, its
power in this respect, like all other state powers, can only be
exerted within the limitations placed on state action by the
federal Constitution.
A corporation authorized by the state of its creation to engage
in interstate commerce may not be prevented from coming into the
limits of another state for all legitimate purposes of such
commerce.
A state may require a foreign corporation seeking to enforce
rights in its courts to conform to prevailing modes of procedure
and usual rules respecting costs, security therefor, and the like,
but it may not impose conditions such as filing its certificate,
paying recording fees, and appointing a resident agent which have
no bearing on mere question of
Page 235 U. S. 198
procedure or costs. Such conditions, by their necessary
operation, are burdens on interstate commerce.
A requirement that a foreign corporation appoint a resident
agent on whom process may be served in an action against it, as a
condition precedent to suing in the courts of the state to collect
a claim arising out of interstate commerce transactions, is a
burden on interstate commerce, because it necessarily operates to
thwart the purpose of the Constitution to secure and maintain the
freedom of such commerce by whomsoever conducted.
The South Dakota statute, §§ 883-885, Rev.Codes 1903, as the
same has been construed by the state courts, requiring foreign
corporations, before bringing suit on claim arising in interstate
commerce in the courts of the state, to file certificate of
incorporation and other papers and pay recording fees and also to
appoint resident agents on whom process can be served, is an
unconstitutional burden on interstate commerce.
The facts, which involve the constitutionality under the
commerce clause of the federal Constitution of a statute of South
Dakota regarding the right of foreign corporations to sue in the
courts of the state, and prescribing conditions to be performed in
regard thereto, are stated in the opinion.
Page 235 U. S. 199
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
This is an action by an Iowa corporation to enforce payment of
the purchase price, amounting to $80, of merchandise sold in
interstate commerce under a written contract which was made in
South Dakota, and required that the merchandise be shipped by the
plaintiff from its place of business in Iowa to the defendants at
their place of business and residence in South Dakota. The action
was brought in a court of the latter state, and the defendants
interposed a plea to the effect that the action could not be
maintained because, as was the fact, the plaintiff had not complied
with a South Dakota statute prescribing conditions upon which
corporations of other states would be permitted to sue in the
courts of that state. The plea was sustained, and the action
dismissed. An appeal to the supreme court of the state resulted in
in a judgment of
Page 235 U. S. 200
affirmance,
* from which one
member of the court dissented. 28 S.D. 397.
In that court, it was contended that the statute upon which the
plea was grounded is, when applied in a case like this, repugnant
to the commerce clause of the Constitution of the United
States.
The statute (Rev.Civ.Code 1903) declares (§ 883) that no
corporation created under the laws of any other state or territory
for other than religious and charitable purposes
"shall transact any business within this state, or acquire,
hold, and dispose of property, real, personal, or mixed, within
this state, or sue or maintain any action at law or otherwise in
any of the courts of this state"
until it shall have filed in the office of the Secretary of
State an authenticated copy of its charter or articles of
incorporation, and also (§ 885) that
"no action shall be commenced or maintained in any of the courts
of this state by such corporation on any contract, agreement, or
transaction made or entered into in this state by such
corporation"
unless it shall have appointed a resident agent upon whom
process may be served in any action to which it may be a party, and
shall have filed an authenticated copy of such appointment in the
office of the Secretary of State and of the register of deeds of
the county where the agent resides. The corporation is also
required to pay the fees, amounting to about $25, for filing and
recording these instruments.
The supreme court of the state construed the statute as
requiring a foreign corporation to subject itself to the
jurisdiction of all the courts of the state as a condition to
invoking the aid of any one of them, and as embracing
Page 235 U. S. 201
actions to enforce contracts directly arising out of and
connected with interstate commerce equally with actions having no
relation to such commerce, and, after so construing the statute,
the court held it to be a reasonable exercise of the police power
of the state and in no wise repugnant to the commerce clause of the
Constitution of the United States. In two earlier cases, the court
had taken a different view of the statute (
Rex Buggy Co. v.
Dinneen, 23 S.D. 474;
Sioux Remedy Co. v. Lindgren,
27 S.D. 123), but, in the opinion rendered in this case, they were
disapproved.
Recognizing that it was within the province of the supreme court
of the state to construe the statute, and to depart from prior
decisions upon the subject if deemed untenable, we accept the
construction applied in this case, and confine our attention to the
federal question whether, as so construed, the statute, by its
necessary operation, materially or directly burdens interstate
commerce.
Through a long series of decisions dealing with the scope and
effect of the commerce clause, it has come to be well settled that
a state, while possessing power to adopt reasonable measures to
promote and protect the health, safety, morals, and welfare of its
people, even though interstate commerce be incidentally or
indirectly affected, has no power to exclude from its limits
foreign corporations or others engaged in interstate commerce, or,
by the imposition of conditions, to fetter their right to carry on
such commerce, or to subject them in respect to their transactions
therein to requirements which are unreasonable or pass beyond the
bounds of suitable local protection.
Crutcher v. Kentucky,
141 U. S. 47;
Minnesota Rate Cases, 230 U. S. 352,
230 U. S.
401-402,
230 U. S. 410,
and cases cited;
Barrett v. New York, 232 U. S.
14,
232 U. S. 31,
and cases cited. And so the solution of the question here presented
lies within narrow lines.
The contract and sale out of which the action arose
Page 235 U. S. 202
were transactions in interstate commerce, and entirely
legitimate notwithstanding the plaintiff's noncompliance with the
state statute.
International Textbook Co. v. Pigg,
217 U. S. 91;
Buck Stove Co. v. Vickers, 226 U.
S. 205;
Flint & Walling Mfg. Co. v.
McDonald, 21 S.D. 526. After delivery of the merchandise
according to the contract, the plaintiff was lawfully entitled to
the purchase price. The defendants were likewise obligated to pay
it. And, by reason of their refusal, the plaintiff had a right of
action on the contract. Thus much was recognized by the supreme
court of the state and is now conceded by counsel for the
defendants. But it was held by that court, and is here contended,
that, while the state could not make noncompliance with the statute
a ground for forbidding or invalidating sales in interstate
commerce, it could make such noncompliance a ground for preventing
the maintenance of any action in the courts of the state based upon
such a sale -- in other words, that the state, although unable to
condition the right to make the sale or its validity upon a
compliance with the statute, could so condition the right to sue
for the purchase price in the courts of the state.
The argument advanced in support of this position is first that
the right to demand and enforce payment for merchandise sold in
interstate commerce is no part of such commerce, and therefore may
be encumbered without burdening the latter; second, that a state
may impose such conditions as it deems appropriate upon the right
of foreign corporations to sue in its courts; and, third, that, in
any event, the conditions imposed by the statute are not
unreasonable or burdensome. The supreme court of the state
sustained the second and third points and passed the other without
comment.
Of the first point, it is enough to say that the right to demand
and enforce payment for goods sold in interstate commerce, if not a
part of such commerce, is so directly
Page 235 U. S. 203
connected with it and is so essential to its existence and
continuance that the imposition of unreasonable conditions upon
this right must necessarily operate as a restraint or burden upon
interstate commerce. The form or mode of imposing the conditions is
not nearly so important as their necessary and practical operation,
for, as was said in
Western U. Telegraph Co. v. Kansas,
216 U. S. 1,
216 U. S. 27:
"If the statute, reasonably interpreted, either directly or by
its necessary operation, burdens interstate commerce, it must be
adjudged to be invalid, whatever may have been the purpose for
which it was enacted and although the company may do both
interstate and local business. This Court has repeatedly adjudged
that, in all such matters, the judiciary will not regard mere
forms, but will look through forms to the substance of things."
It may be conceded in a general way that a state may restrict
the right of a foreign corporation to sue in its courts.
Bank of Augusta v.
Earle, 13 Pet. 519,
38 U. S.
589-591;
Anglo-American Provision Co. v. Davis
Provision Co., 191 U. S. 373.
And, in the same general way, it may be conceded that a state may
restrict the right of such corporations to engage in business
within its limits.
Paul v.
Virginia, 8 Wall. 168;
Hooper v.
California, 155 U. S. 648. But
the power so to deal with these subjects, like all other state
powers, can only be exerted within the limitations which the
Constitution of the United States places upon state action.
Missouri v. Lewis, 101 U. S. 22,
101 U. S. 30;
Blake v. McClung, 172 U. S. 239,
172 U. S. 256;
Chambers v. Baltimore & Ohio R. Co., 207 U.
S. 142,
207 U. S. 148;
Western Union Telegraph Co. v. Kansas, 216 U. S.
1,
216 U. S. 33;
Southern Railway Co. v. Greene, 216 U.
S. 400,
216 U. S. 413.
One of these limitations is that before indicated, arising from the
commerce clause, whose operation, as this Court has said, is such
that a corporation authorized by the State of its creation to
engage in interstate commerce "may not be prevented by another
state from coming into its limits for all the legitimate
Page 235 U. S. 204
purposes of such commerce."
Western Union Telegraph Co. v.
Kansas, 216 U. S. 1,
216 U. S. 27. We
think that, when a corporation goes into a state other than that of
its origin to collect, according to the usual or prevailing
methods, the purchase price of merchandise which it has lawfully
sold therein in interstate commerce, it is there for a legitimate
purpose of such commerce, and that the state cannot, consistently
with the limitation arising from the commerce clause, obstruct or
hamper the attainment of that purpose. If it were otherwise, the
purpose of the Constitution to secure and maintain the freedom of
commerce by whomsoever conducted could be largely thwarted by the
states, and the commerce itself seriously crippled.
We are thus brought to the question whether the particular
conditions imposed by this statute can be sustained when applied to
rights of action like that disclosed in the present case. Without
doubt, a foreign corporation seeking to enforce such a right in the
courts of a state may be required to conform to the prevailing
modes of proceeding in those courts, and to submit to the usual
rules respecting costs, the giving of security therefor (
see
Blake v. McClung, 172 U. S. 239,
172 U. S.
256), and the like. But incidents of this character
commonly attending litigation may be put out of view, for it is
with something quite different that we are here concerned. The
conditions which the statute imposes are first, that the company
shall file in the office of the Secretary of State an authenticated
copy of its charter or articles of incorporation; second, that it
shall appoint a resident agent upon whom process may be served in
any action against it, and shall file a copy of such appointment in
the office of the Secretary of State and of the register of deeds
of the county where the agent resides, and third, that it shall pay
the fees incident to filing and recording these instruments,
approximating $25. It will be perceived that these are the
conditions upon which many of the states permit foreign
corporations to engage in business
Page 235 U. S. 205
within their limits when no constitutional limitation is
involved -- that is, when the character of the business is such
that the state is free to exclude such corporations or to admit
them upon terms acceptable to it. But here, the conditions are
sought to be applied in a different way, and to a different
situation falling within the reach of the commerce clause. Out of
this arises the question of their validity. We think the mere
statement of the conditions shows that they have no natural or
reasonable relation to the right to sue which they are intended to
restrict. They have no bearing upon the merits or any question of
procedure or costs, are not directed against any abusive use of
judicial process, and are plainly onerous. The second one,
respecting the appointment of a resident agent upon whom process
may be served, is particularly burdensome, because, as the supreme
court of the state has said, it requires the corporation to subject
itself to the jurisdiction of the courts of the state in general as
a prerequisite to suing in any of them -- that is to say, it
withholds the right to sue even in a single instance until the
corporation renders itself amenable to suit in all the courts of
the state by whosoever chooses to sue it there. If one state can
impose such a condition, others can, and in that way corporations
engaged in interstate commerce can be subjected to great
embarrassment and serious hazards in the enforcement of contractual
rights directly arising out of and connected with such commerce. As
applied to such rights, we think the conditions are unreasonable
and burdensome, and therefore in conflict with the commerce
clause.
These views require that the judgment be reversed and the cause
remanded for further proceedings not inconsistent with this
opinion.
Judgment reversed.
* At the time of the allowance of the present writ of error, the
record had been sent to the Circuit Court of Turner County, and so
the writ was directed to that court.
See
Gelston v.
Hoyt, 3 Wheat. 246,
16 U. S. 304;
Atherton v. Fowler, 91 U. S. 143,
91 U. S.
146-149;
Polleys v. Black River Co.,
113 U. S. 81;
Lee v. Johnson, 116 U. S. 48.