Certain foreign corporations which had been authorized to do
business in Ohio and which operated manufacturing plants there had
their principal places of business in other states, where all
orders were accepted, credits extended, books kept, and where all
accounts receivable were payable. The corporations had paid all
franchise taxes and all taxes on real and personal property located
within Ohio. In addition, the State levied an
ad valorem
tax on their accounts receivable derived from sales of goods
manufactured within the State. The accounts receivable were not
used in the conduct of the business of the corporations in Ohio,
but in their general business. Accounts receivable of identical
nature which were owned by residents and domestic corporations were
exempt from the tax.
Held:
1. The tax denied the foreign corporations the equal protection
of the laws, in violation of the Fourteenth Amendment of the
Federal Constitution. Pp.
337 U. S.
563-574.
(a) After a state has chosen to admit foreign corporations to do
business within it, they are entitled to equal protection with
domestic corporations at least to the extent that their property is
entitled to an equally favorable
ad valorem tax basis. Pp.
337 U. S.
571-572.
(b) The inequality to which the foreign corporations are
subjected is not based on Ohio's relation to the decisive
transaction, but solely on difference in residence of the owner of
the accounts receivable. P.
337 U. S.
572.
2. The tax was not saved from constitutional invalidity by the
"reciprocity" provisions of the statute imposing it, since the plan
of reciprocity is not one which, by credits or otherwise, protects
the nonresident or foreign corporation against the discriminations
apparent in the Ohio statute. Pp.
337 U. S.
572-574.
150 Ohio St. 229, 80 N.E.2d 863, reversed.
Page 337 U. S. 563
An Ohio
ad valorem tax on foreign corporations,
challenged as violating the Federal Constitution, was sustained by
the State Supreme Court. 150 Ohio St. 229, 80 N.E.2d 863. On
appeals to this Court,
reversed, p.
337 U. S.
574.
MR. JUSTICE JACKSON delivered the opinion of the Court.
The Ohio has laid an
ad valorem tax against certain
intangible property, consisting of notes, accounts receivable, and
prepaid insurance, owned by foreign corporations. As applied to
appellants in these two cases, the tax is challenged as violating
the Federal Constitution on several grounds which may conveniently
be considered in a single opinion. Facts are not in dispute.
Appellant Wheeling Steel Corporation is organized under the laws
of Delaware, where it maintains a statutory office. Ohio has
authorized it to do business in that State, and four of its eight
manufacturing plants are located there. General offices, from which
its entire business is controlled and conducted, are in Wheeling,
West Virginia. Its officers there have custody of its money, notes,
and books of account. In twelve other states, including Ohio, it
maintains sales offices which solicit and receive orders for its
products subject to acceptance or rejection at the Wheeling office,
to which all are forwarded.
Page 337 U. S. 564
From this office only may credit be extended to purchasers.
Accounts are billed and collected from the Wheeling office, and the
sales offices have no powers or duties with respect to collection.
All accounts or notes receivable are payable at Wheeling, where the
written evidences thereof are kept. Proceeds from receivables are
taken into appellant's treasury at Wheeling and there applied to
general purposes of the business.
Appellant National Distillers Products Corporation is organized
under the laws of Virginia, where it has a statutory office and
holds annual stockholders meetings. It is admitted to do business
in Ohio, where it maintains a distillery, or rectifying plant, and
warehouse, as it does also in six other states. Payroll checks for
plant employees are drawn on funds deposited in banks in the
locality of the plant. Appellant also is licensed to do business in
New York, where it maintains its principal business office and
conducts its fiscal affairs and from which all business activities
are directed and controlled. The Corporation maintains regional
sales offices in various of those states which permit private
distribution of liquor. In such states, customers are solicited and
orders taken, subject to acceptance or rejection at New York. It
maintains no sales office in Ohio, where dispensing liquor is a
state monopoly. Orders from Ohio state authorities are forwarded
directly to the offices in New York, and are subject to acceptance
or rejection there. When the New York office accepts an order from
any source, it sends shipping orders to various plants, none of
which makes any shipments except upon such orders. Only in New York
can any credits be approved, and all books, records, and evidences
of accounts receivable are kept there. Collections are managed from
New York, which is the place of payment of all receivables. During
the tax year in question, the Corporation solicited and took orders
through agents in states other than Ohio
Page 337 U. S. 565
for a large quantity of liquor shipped from its plants and
warehouses in Ohio to customers elsewhere.
It is stipulated that appellants each paid all franchise or
other taxes required by Ohio for admission to do business in the
State, and paid all taxes assessed upon real and personal property
located in said State.
The Wheeling Company also paid to the West Virginia, for the
year in question,
ad valorem taxes on all of its
receivables, including those sought to be taxed by Ohio, pursuant
to this Court's decision in
Wheeling Steel Corp. v. Fox,
298 U. S. 193.
Neither Virginia nor New York has sought to tax the accounts
receivable of National Distillers involved herein.
The Ohio Tax Commissioner, applying §§ 5328-1 and 5328-2 of the
General Code of Ohio, [
Footnote
1] assessed for taxation
Page 337 U. S. 566
in Ohio a large amount of notes and accounts receivable which
each appellant derived from shipments originating at Ohio
manufacturing plants. The specific ground stated for assessment was
that such receivables "result from the sale of property from a
stock of goods maintained within this State."
The Board of Tax Appeals affirmed both assessments, and, in the
Distiller's case, set forth the above mentioned statutes and
pointed out wherein its own views and practices as to their
application to accounts receivable had been modified by decisions
of the Ohio Supreme Court, whose interpretations, for our purposes,
become a part of the statutes. The Board said:
Page 337 U. S. 567
". . . On a consideration of the statutory provisions above
noted, the Board of Tax Appeals was of the view that, before a
business situs of accounts receivable and other intangible
property, for purposes of taxation, could be given to a state other
than the state of the domicile of the taxpayer, it must appear that
such receivables or other intangible property not only arose in the
conduct of the business of the taxpayer in such other state, but
were therein so used as to become an integral part of the business
carried on in such other state, and that it was not sufficient that
such accounts receivable and other intangible property be used in
business generally by the taxpayer. And, on this view, the Board
held that the accounts receivable there in question, although they
arose in the conduct of taxpayer's business in the States of
Indiana and Michigan, did not have a business situs in such states,
and that such accounts receivable were taxable in Ohio."
"On the appeal of the decision of the Board of Tax Appeals in
the
Ransom & Randolph Co. case to the Supreme Court of
Ohio, that Court reversed the decision of the Board of Tax Appeals
upon the point above indicated. 142 Ohio St. 398, 404, 52 N.E.2d
738. That Court, upon consideration of the applicable provisions of
section 5328-2 and related sections of the General Code above
noted, held that the accounts receivable of a taxpayer which arose
in the conduct of its business in a state or states other than the
state in which it had its domicile or place of residence, had a
business situs in such other state or states if such accounts
receivable or the avails thereof are being applied or are intended
to be applied in the conduct of the taxpayer's business, whether,
in this State or elsewhere. This view of the Supreme
Page 337 U. S. 568
Court as to the construction to be placed upon the statutory
provisions here in question was later followed by that Court in its
decisions in the cases of the
Haverfield Company v. Evatt, Tax
Comm'n, 143 Ohio St. 58, 54 N.E.2d 149, and
National Cash
Register Company v. Evatt, Tax Comm'n, 145 Ohio St. 597, 62
N.E.2d 327."
". . . In this situation, and applying the statutory provisions
here in question as the same have been construed by the Supreme
Court of this State, it follows that, since the accounts receivable
of the appellant corporation involved in this case arose -- as this
Board hereby find -- in the conduct of its business in the Ohio by
the sale of its products from a stock of goods located in this
State, and since, further, such accounts receivable or the avails
thereof were used or were intended to be used by the appellant in
its business, whether in this State or elsewhere, such accounts
receivable have a business and taxable situs in the Ohio, as found
and determined by the tax commissioner."
"With respect to a question such as that here presented, to-wit,
that as to the taxation of the accounts receivable of a foreign
corporation arising in the conduct of its business in this State,
the application of the above noted provisions of sections 5328-1,
5328-2 and other related sections of the General Code, as the same
have been construed by the Supreme Court, presents, to our mind, a
serious question as to the constitutionality of said statutory
provisions as so construed under the Due Process of Law clause of
the Federal Constitution. . . ."
The Ohio Supreme Court affirmed in both cases, [
Footnote 2] which were brought here by
appeals. [
Footnote 3]
Page 337 U. S. 569
Appellants urge that the question which the Board of Tax Appeals
regarded as serious should be resolved against the State on the
ground that these intangibles had no situs in Ohio to sustain its
power under the Due Process Clause so to tax them, and also that to
do so imposes an undue burden on interstate commerce in violation
of the Commerce Clause. They point out that the credits sought to
be taxed here were not created in Ohio, not payable there, and
neither the payor nor payee, debtor nor creditor, was resident
there. Moreover, the receivables arose from a contract for sale of
goods, but the contracts were not made in Ohio nor performed in
Ohio, and neither buyer nor seller resided there. On the assumption
that Ohio could not follow tangible goods into a foreign state and
tax them, either in the hands of the vendor before delivery or in
the hands of a vendee after delivery, it is argued that she has no
greater power to tax intangibles substituted in a foreign state for
them, and has no right to tax intangible proceeds of the sale of
tangible goods that had passed beyond her taxing power.
In their original application of the statutory scheme, the
taxing authorities sought to overcome this hurdle by requiring an
additional and more substantial connection between the taxed
intangibles and the state taxing power. For purpose of an Ohio tax,
the Board of Tax Appeals held intangibles to have a situs in that
State only when and to the extent "so used as to become an integral
part of the business carried on" in Ohio. It was this requirement
which the Supreme Court of the State eliminated by
Ransom &
Randolph Co. v. Evatt, 142 Ohio St. 398, 52 N.E.2d 738, when
it held that any use of the intangibles in the general business was
sufficient to make them taxable. Thus was cut the connection which
the Board of Tax Appeals originally invoked to confer
jurisdiction
Page 337 U. S. 570
to tax, and thus was raised the question of constitutionality
regarded by the Board as serious.
However, we find it inappropriate to decide the Due Process
question. The State action, which is reviewable under the
Fourteenth Amendment, is the composite result of both legislation
and its judicial interpretation. Ohio does not attempt, and has not
asserted power, to tax all such intangibles, but only those owned
by nonresidents and foreign corporations. It has given no
indication that it intends to or would reach out to tax such
intangibles as we have here unless it may at the same time exempt
identical ones owned by its residents and domestic corporations.
The contrary is indicated by § 5328-2, which makes the two
inseparable. We deal with the taxing plan as an entirety as we find
it in operation, and pass only on the constitutionality of that
which the State has asserted power and purpose to do.
The State action and policy resulting from statute and decisions
is certified to us by the appellee, the Tax Commissioner or Ohio,
to be as follows:
". . . since the decision of he Supreme Court of Ohio in
Ransom & Randolph v. Evatt, 142 Ohio St. 398, 52
N.E.2d 738 (January 12, 1944), and in obedience thereto, it has
been the policy and practice of said Department of Taxation to
construe and apply sections 5328-1 and 5328-2 of the General Code
of Ohio"
"(A) so as to exempt from taxation in Ohio accounts receivable
of Ohio residents, including domestic corporations, which
arise"
"~(1) from a sale of goods by an agent having an office in
another state, even though such goods be shipped from Ohio, or"
"~(2) from a sale of goods shipped from another state, even
though such goods be sold by an agent having an office in Ohio:
"
Page 337 U. S. 571
"(B) so as to tax in Ohio accounts receivable of nonresidents of
Ohio, including foreign corporations, which arise either"
"~(1) from a sale of goods shipped from Ohio, even though such
goods be sold by an agent having an office in another state,
or"
"~(2) from a sale of goods by an agent having an office in Ohio,
even though such goods be shipped from another state."
"That the foregoing have been in effect as the only tests of
taxability of accounts receivable in Ohio since the decision of the
Supreme Court of Ohio in the case of
Ransom & Randolph v.
Evatt, 142 Ohio St. 398, 52 N.E.2d 738, and that said tests
have been applied without deviation both by affiant and by his
predecessor in office, William S. Evatt, as the result of the
holding in that case."
Under long settled principles of our Federation, Ohio was not
required to admit these foreign corporations to carry on intrastate
business within its borders. The State may arbitrarily exclude them
or may license them upon any terms it sees fit, apart from exacting
surrender of rights derived from the Constitution of the United
States.
Hanover Insurance Co. v. Harding, 272 U.
S. 494,
272 U. S. 507;
Connecticut General Co. v. Johnson, 303 U. S.
77,
303 U. S. 79-80.
Ohio elected, however, to admit these corporations to transact
businesses and operate manufacturing plants in the State. For that
privilege, they have paid all that the State required by way of
franchise or privilege tax, which includes in its measure the value
of all property owned and business done in Ohio. §§ 5495, 5497,
5498 and 5499 of the Ohio General Code.
See International
Harvester Co. v. Evatt, 329 U. S. 416.
After a state has chosen to domesticate foreign corporations, the
adopted corporations are entitled to equal protection with the
state's own corporate progeny, at least to the extent that
Page 337 U. S. 572
their property is entitled to an equally favorable
ad
valorem tax basis.
Hanover Insurance Co. v. Harding,
272 U. S. 494,
272 U. S.
510-511;
Power Co. v. Saunders, 274 U.
S. 490,
274 U. S. 493,
274 U. S. 497.
Ohio holds this tax on intangibles to be an
ad valorem
property tax,
Bennett v. Evatt, 145 Ohio St. 587, 62
N.E.2d 345, and in no sense a franchise, privilege, occupation or
income tax.
The Ohio statutory scheme assimilates its own corporate
creations to natural residents and all others to nonresidents.
While this classification is a permissible basis for some different
rights and liabilities, we have held, as to taxation of
intangibles, that the federal right of a nonresident "is the right
to equal treatment."
Hillsborough v. Cromwell,
326 U. S. 620,
326 U. S.
623.
The certificate of the Tax Commissioner discloses how
fundamentally discriminatory is the application of this
ad
valorem tax to intangibles when owned by a resident or a
domestic corporation, as contrasted with its application when those
are owned by a domesticated corporation or a nonresident. If, on
the taxing date, one of these petitioners and an Ohio competitor
each owns an account receivable of the same amount from the same
out-of-state customer of the same kind of commodity, both shipped
from a manufacturing plant in Ohio and both sold out of Ohio by an
agent having an office out of the State, appellant's account
receivable would be subject to Ohio's
ad valorem tax, and
the one held by the competing domestic corporation would not. It
seems obvious that appellants are not accorded equal treatment, and
the inequality is not because of the slightest difference in Ohio's
relation to the decisive transaction, but solely because of the
different resident of the owner.
The State does not seriously deny this unequal application of
its own tax, but claims that reciprocity provisions of the statute
reestablish equality. Those provisions therefore require
scrutiny.
Page 337 U. S. 573
This entire taxing plan rests on a statutory formula for fixing
situs of intangible property both within and without the State.
This is provided by § 5328-2 of the Code. These intangibles "shall
be considered to arise out of business transacted
in a state
other than that in which the owner thereof resides" under
certain circumstances. (Emphasis supplied.) This basic rule
separates the situs of intangibles from the residence of their
owner, whereas it has traditionally been at such residence, though
with some exceptions. The effect is that intangibles of nonresident
owners are assigned a situs within the taxing reach of Ohio, while
those of its residents are assigned a situs without. The plan may
be said to be logically consistent in that, while it draws all such
intangibles of nonresidents within the taxing power of Ohio, it, by
the same formula, excludes those of residents. The exempted
intangibles of residents are offered up to the taxing power of
other states which may embrace this doctrine of a tax situs
separate from residence. This is what is meant here by reciprocity,
and the two provisions are declared inseparable; so that, if the
formula by which Ohio takes unto itself the accounts of
nonresidents is held invalid, "such decision shall be deemed also
to affect such provision as applied to the property of a
resident."
It is hard to see that this offer of reciprocity restores to
appellants any of the equality which the application of the Ohio
tax, considered alone, so obviously denies. There is no indication
of a readiness by other states to copy Ohio's situs scheme so as to
tax that which Ohio exempts. The proffered exchange of residents
for intangible tax purposes may not commend itself as an even
bargain between states. Ohio, being large, populous, and highly
industrialized, with heavy and basic industries, may well have much
more to gain from a plan the effect of which is to tax credit
exports to other states than most states would have from a
privilege to tax its own
Page 337 U. S. 574
exports into Ohio. In the several years that the Ohio statute
has been on the books, no other state has sought to take advantage
of the "reciprocity" proffer. And, if it did, the equality of rates
which would also be necessary to equalize the burden between
nonresidents and their resident competitors could be hardly
expected nor is it provided for. Far from acceding to the situs
doctrine which allocates these receivables to Ohio, the State of
West Virginia stands on the very different situs doctrine approved
by this Court in
Wheeling Steel Corp. v. Fox, 298 U.
S. 193, and, under its authority, has for the year in
question taxed all of the receivables of the Wheeling Company,
including those Ohio seeks to claim as having situs in Ohio. It is
clear that this plan of "reciprocity" is not one which, by credits
or otherwise, protects the nonresident or foreign corporation
against the discriminations apparent in the Ohio statute. We think
these discriminations deny appellants equal protection of Ohio
law.
The judgments are reversed, and the causes remanded for
proceedings not inconsistent herewith.
Reversed.
*Together with No. 448,
National Distillers Products Corp.
v. Glander, Tax Commissioner of Ohio, on appeal from the same
Court, argued March 30, 1949.
[
Footnote 1]
Pertinent parts of the Ohio law read as follows:
"SEC. 5328-1: . . . Property of the kinds and classes mentioned
in section 5328-2 of the General Code, used in and arising our of
business transacted in this state by, for or on behalf of a
nonresident person . . . shall be subject to taxation, and all such
property of persons residing in this state used in and arising out
of business transacted outside of this state by, for or on behalf
of such persons . . . shall not be subject to taxation. . . ."
"
* * * *"
"SEC. 5328-2: . . . Property of the kinds and classes herein
mentioned, when used in business, shall be considered to arise out
of business transacted in a state other than that in which the
owner thereof resides in the cases and under the circumstances
following:"
"In the case of accounts receivable, when resulting from the
sale of property sold by an agent having an office in such other
state or from a stock of goods maintained therein, or from services
performed by an officer, agent or employee connected with, sent
from, or reporting to any officer or at any office located in such
other state."
"
* * * *"
"The provisions of this section shall be reciprocally applied,
to the end that all property of the kinds and classes mentioned in
this section having a business situs in this state shall be taxed
herein and no property of such kinds and classes belonging to a
person residing in this state and having a business situs outside
of this state shall be taxed. It is hereby declared that the
assignment of a business situs outside of this state to property of
a person residing in this state in any case and under any
circumstances mentioned in this section is inseparable from the
assignment of such situs in this state to property of a person
residing outside of this state in a like case and under similar
circumstances. . . ."
"SEC. 5-1: . . . Moneys, deposits, investments, accounts
receivable and prepaid items, and other taxable intangibles shall
be considered to be 'used' when they or the avails thereof are
being applied, or are intended to be applied in the conduct of the
business, whether, in this state or elsewhere. . . ."
"
* * * *"
"SEC. 5638: Annual taxes are hereby levied on the kinds and
classes of intangible property, hereinafter enumerated, on the
classified tax list in the offices of the county auditors and
duplicates thereof in the offices of the county treasurers at the
following rates, to-wit:"
". . . moneys, credits and all other taxable intangibles so
listed, three mills on the dollar. . . ."
"SEC. 5327: The term 'credits' as so used, means the excess of
the sum of all current accounts receivable and prepaid items [used]
in business when added together estimating every such account and
item at its true value in money, over and above the sum of current
accounts payable of business, other than taxes and assessments. . .
."
Ohio Gen.Code Ann. (1945).
[
Footnote 2]
150 Ohio St. 229, 80 N.E.2d 863.
[
Footnote 3]
28 U.S.C. § 1257(2).
By MR. JUSTICE JACKSON.
The writer of the Court's opinion deems it necessary to complete
the record by pointing out why, in writing by assignment for the
Court, he assumed without discussion that the protections of the
Fourteenth Amendment are available to a corporation. It was not
questioned by the State in this case, nor was it considered by the
courts below. It has consistently been held by this Court that the
Fourteenth Amendment assures corporations equal protection of the
laws at least since 1886,
Santa Clara Co. v. Southern Pacific
R. Co., 118 U. S. 394,
118 U. S. 396,
and that it entitles them to due process of law at least since
1889,
Minneapolis R. Co. v. Beckwith, 129 U. S.
26,
129 U. S.
28.
Page 337 U. S. 575
It is true that this proposition was once challenged by one
Justice.
Connecticut General Co. v. Johnson, 303 U. S.
77,
303 U. S. 83
(dissenting opinion). But the challenge did not commend itself,
even to such consistent liberals as Mr. Justice Brandeis and Mr.
Justice Stone, and I had supposed it was no longer pressed.
See the same Justice's separate opinion in
International Shoe Co. v. Washington, 326 U.
S. 310,
326 U. S. 322,
making no mention of this issue.
Without pretending to a complete analysis, I find that, in at
least two cases during this current term, the same question was
appropriate for consideration, as here. In
Railway Express v.
New York, 336 U. S. 106, a
corporation claimed to be deprived of both due process and equal
protection of the law, and in
Ott v. Mississippi Barge
Line, 336 U. S. 169, a
corporation claimed to be denied due process of law. At prior
terms, in many cases, the question was also inherent, for
corporations made similar claims under the Fourteenth Amendment.
See, e.g., Illinois Central R. Co. v. Minnesota,
309 U. S. 157;
Lincoln Life Insurance Co. v. Read, 325 U.
S. 673;
Queenside Hills Co v. Saxl,
328 U. S. 80.
Although the author of the present dissent was the writer of each
of the cited Court's opinions, it was not intimated therein that
there was even doubt whether the corporations had standing to raise
the questions or were entitled to protection of the Amendment.
Instead, in each case, the author, as I have done in this case,
proceeded to discuss and dispose of the corporation's contentions
in their merits, a quite improper procedure, I should think, if the
corporation had no standing to raise the constitutional questions.
Indeed, if the corporation had no such right, it is difficult to
see how this Court would have jurisdiction to consider the case at
all.
It may be said that, in the foregoing cases, other grounds might
have been found upon which to defeat the corporations' claims,
while, in the present case, apparently there is none.
Page 337 U. S. 576
However, in at least two cases, this Court, joined by both
Justices now asserting that corporations have no rights under the
Fourteenth Amendment, recently has granted relief to corporations
by striking down state action as conflicting with corporate rights
under that Amendment. In
Times-Mirror Co. v. California,
companion case to
Bridges v. California, 314 U.
S. 252, a newspaper corporation persuaded this Court
that a $500 fine assessed against it violated its rights under the
Fourteenth Amendment. In
Pennekamp v. Florida,
328 U. S. 331, a
newspaper corporation was convicted along with an individual
defendant, and this Court set aside the conviction upon the ground
that the Fourteenth Amendment prohibited such state action. In
neither or these cases was the corporation's right to raise the
issue questioned, and the result in each case was irreconcilable
with the position now asserted in dissent.
It cannot be suggested that, in cases where the author is the
mere instrument of the Court, he must forego expression of his own
convictions. Mr. Justice Cardozo taught us how Justices may write
for the Court and still reserve their own positions, though
overruled.
Helvering v. Davis, 301 U.
S. 619,
301 U. S.
639.
In view of this record, I did not, and still do not, consider it
necessary for the Court opinion to review the considerations which
justify the assumption that these corporations have standing to
raise the issues decided.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK concurs,
dissenting.
It has been implicit in all of our decisions since 1886 that a
corporation is a "person" within the meaning of the Equal
Protection Clause of the Fourteenth Amendment.
Santa Clara Co.
v. South. Pacific R. Co., 118 U. S. 394,
118 U. S. 396,
so held. The Court was cryptic in its decision. It was so sure of
its ground that it wrote no
Page 337 U. S. 577
opinion on the point, Chief Justice Waite announcing from the
bench:
"The court does not wish to hear argument on the question
whether the provision in the Fourteenth Amendment to the
Constitution, which forbids a State to deny to any person within
its jurisdiction the equal protection of the laws, applies to these
corporations. We are all of opinion that it does."
There was no history, logic, or reason given to support that
view. Nor was the result so obvious that exposition was
unnecessary.
The Fourteenth Amendment became a part of the Constitution in
1868. In 1871, a corporation claimed that Louisiana had imposed on
it a tax that violated the Equal Protection Clause of the new
Amendment. Mr. Justice Woods (then Circuit Judge) held that
"person," as there used, did not include a corporation, and
added,
"This construction of the section is strengthened by the history
of the submission by Congress, and the adoption by the States, of
the 14th amendment, so fresh in all minds of as to need no
rehearsal."
Insurance Co. v. New Orleans, 1 Woods 85, 88.
What was obvious to Mr. Justice Woods in 1871 was still plain to
the Court in 1873. Mr. Justice Miller in the
Slaughter
House Cases, 16 Wall. 36,
83 U. S. 71,
adverted to events "almost too recent to be called history" to show
that the purpose of the Amendment was to protect human rights --
primarily the rights of a race which had just won its freedom. And,
as respects the Equal Protection Clause, he stated,
"The existence of laws in the States where the newly emancipated
negroes resided, which discriminated with gross injustice and
hardship against them as a class, was the evil to be remedied by
this clause, and by it such laws are forbidden."
16 Wall. at
83 U. S. 81.
Moreover what was clear to these earlier judges was apparently
plain to the people who voted to make the
Page 337 U. S. 578
Fourteenth Amendment a part of our Constitution. For as MR.
JUSTICE BLACK pointed out in his dissent in
Connecticut General
Co. v. Johnson, 303 U. S. 77,
303 U. S. 87,
the submission of the Amendment to the people was on the basis that
it protected human beings. There was no suggestion in its
submission that it was designed to put negroes and corporations
into one class, and so dilute the police power of the States over
corporate affairs. Arthur Twining Hadley once wrote that
"The Fourteenth Amendment was framed to protect the negroes from
oppression by the whites, not to protect corporations from
oppression by the legislature. It is doubtful whether a single one
of the members of a Congress who voted for it had any idea that it
would touch the question of corporate regulation at all. [
Footnote 2/1]"
Both Mr. Justice Woods in
Insurance Co. v. New Orleans,
supra, p. 88, and MR. JUSTICE BLACK in his dissent in
Connecticut General Co. v. Johnson, supra, pp.
303 U. S. 88-89,
have shown how strained a construction it is of the Fourteenth
Amendment so to hold. Section 1 of the Amendment provides:
"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. No State
shall make or enforce any law which shall abridge the privileges or
immunities of
citizens of the United States; nor shall any
State deprive any
person of life, liberty, or property,
without
Page 337 U. S. 579
due process of law; nor deny to any
person within its
jurisdiction the equal protection of the laws."
(Italics added.)
"Persons' in the first sentence plainly include only human
beings, for corporations are not 'born or naturalized."
Corporations are not "citizens" within the meaning of the first
clause of the second sentence.
Western Turf Assn. v.
Greenberg, 204 U. S. 359,
204 U. S. 363;
Selover, Bates & Co. v. Walsh, 226 U.
S. 112,
226 U. S. 126.
[
Footnote 2/2]
It has never been held that they are persons whom a State may
not deprive of "life" within the meaning of the second clause of
the second sentence.
"Liberty" in that clause is "the liberty of natural, not
artificial, persons."
Western Turf Assn. v. Greenberg,
supra, p.
204 U. S.
363.
But "property," as used in that clause, has been held to include
that of a corporation since 1889, when
Minneapolis R. Co. v.
Beckwith, 129 U. S. 26, was
decided.
It requires distortion to read "person" as meaning one thing,
then another within the same clause and from clause to clause. It
means, in my opinion, a substantial revision of the Fourteenth
Amendment. As to the matter of construction, the sense seems to me
to be with Mr. Justice Woods in
Insurance Co. v. New Orleans,
supra, p. 88, where he said,
"The plain and evident meaning of the section is that the
persons to whom the equal protection of the law is secured are
persons born or naturalized or endowed with life and liberty, and
consequently natural, and not artificial, persons."
History has gone the other way. Since 1886, the Court has
repeatedly struck down state legislation as applied
Page 337 U. S. 580
to corporations on the ground that it violated the Equal
Protection Clause. [
Footnote 2/3]
Every one of our decisions upholding legislation as applied to
corporations over the objection that it violated the Equal
Protection Clause has assumed that they are entitled to the
constitutional protection. But, in those cases, it was not
necessary to meet the issue, since the state law was not found to
contain the elements of discrimination which the Equal Protection
Clause condemns. But, now that the question is squarely presented,
I can only conclude that the
Santa Clara case was wrong,
and should be overruled.
One hesitates to overrule cases, even in the constitutional
field, that are of an old vintage. But that has never been a
deterrent heretofore, [
Footnote
2/4] and should not be now.
Page 337 U. S. 581
We are dealing with a question of vital concern to the people of
the nation. It may be most desirable to give corporations this
protection from the operation of the legislative process. But that
question is not for us. It is for the people. If they want
corporations to be treated as humans are treated, if they want to
grant corporations this large degree of emancipation from state
regulation, [
Footnote 2/5] they
should say so. The Constitution provides a method by which they may
do so. We should not do it for them through the guise of
interpretation.
[
Footnote 2/1]
The Constitutional Position of Property in America, 64
Independent 834, 836 (1908). He went on to say that the
Dartmouth
College case (4 Wheat. 518) and the construction
given the Fourteenth Amendment in the
Santa Clara case
"have had the effect of placing the modern industrial corporation
in an almost impregnable constitutional position."
Id., p.
836.
As to whether the framers of the Amendment may have had such an
undisclosed purpose,
see Graham, The "Conspiracy Theory"
of the Fourteenth Amendment, 47 Yale L.J. 371.
[
Footnote 2/2]
Cf. McGovney, A Supreme Court Fiction, 56 Harv.L.Rev.
853, 1090, 1225, dealing with corporations in the diverse
citizenship jurisdiction of the federal courts.
[
Footnote 2/3]
See Chicago & R. Co. v. Minnesota, 134 U.
S. 418;
Gulf, Colorado & Santa Fe R. Co. v.
Ellis, 165 U. S. 150;
Cotting v. Kansas City Stockyards Co., 183 U. S.
79;
Connolly v. Union Sewer Pipe Co.,
184 U. S. 540;
Southern R. Co. v. Greene, 216 U.
S. 400;
Herndon v. Chicago, Rock Island & Pac.
R. Co., 218 U. S. 135;
Roach v. Atchison, T. & Santa Fe R. Co., 218 U.
S. 159;
Atchison & Santa Fe R. Co. v.
Vosburg, 238 U. S. 56;
Gast Realty Co. v. Schneider Granite Co., 240 U. S.
55;
McFarland v. American Sugar Co.,
241 U. S. 79;
Royster Guano Co. v. Virginia, 253 U.
S. 412;
Bethlehem Motors Co. v. Flynt,
256 U. S. 421;
Kansas City So. Co. v. Road Imp. Dist. No. 6, 256 U.
S. 658;
Chicago & N.W. R. Co. v. Nye Co.,
260 U. S. 35;
Sioux City Bridge v. Dakota County, 260 U.
S. 441;
Thomas v. Kansas City So. R. Co.,
261 U. S. 481;
Kentucky Co. v. Paramount Exch., 262 U.
S. 544;
Air-Way Corp. v. Day, 266 U. S.
71;
Hanover Ins. Co. v. Harding, 272 U.
S. 494;
Power Co. v. Saunders, 274 U.
S. 490;
Louisville Gas Co. v. Coleman,
277 U. S. 32;
Quaker City Cab Co. v. Pennsylvania, 277 U.
S. 389;
Cumberland Coal Co. v. Board,
284 U. S. 23;
Liggett Co. v. Lee, 288 U. S. 517;
Concordia Ins. Co. v. Illinois, 292 U.
S. 535;
Stewart Dry Goods Co v. Lewis,
294 U. S. 550;
Mayflower Farms v. Ten Eyck, 297 U.
S. 266;
Hartford Co. v. Harrison, 301 U.
S. 459.
[
Footnote 2/4]
In re Ayers, 123 U. S. 443,
overruled in part
Osborn v. United States
Bank, 9 Wheat. 738, a decision 63 years old;
Leisy v. Hardin, 135 U. S. 100,
overruled
Peirce v. New
Hampshire, 5 How. 504, a decision 42 years old.
Erie R. Co. v. Tompkins, 304 U. S. 64,
overruled
Swift v. Tyson,
16 Pet. 1, a decision 95 years old;
Graves v. New York ex rel.
O'Keefe, 306 U. S. 466,
overruled
Collector v.
Day, 11 Wall. 113, a decision 68 years old.
United States v. South Eastern Underwriter's Assn.,
322 U. S. 533,
overruled in part
Paul v.
Virginia, 8 Wall. 168, a decision 75 years old.
[
Footnote 2/5]
The restrictions on state power which are contained in the
Commerce Clause and which may prevent the States from burdening
interstate commerce,
see Southern Pacific Co. v. Arizona,
325 U. S. 761;
Morgan v. Virginia, 328 U. S. 373; or
discriminating against it,
see Nippert v. Richmond,
327 U. S. 416,
rise from a different source, and are not relevant here.