La Tourette v. McMaster, 248 U.S. 465 (1919)

They contended that under the provisions guaranteeing the privileges and immunities of citizens, contained in § 2, Art. IV, of the Constitution, the Fourteenth Amendment, and § 5, Art. I, of the constitution of South Carolina, the statute in question was void. The following authorities were cited. Commonwealth v. Milton, 51 Kentucky, 212, 219; Corfield v. Coryell, 4 Wash. C. C. 380; Slaughter-House Cases, 16 Wall. 36, 97; Butchers1 Union Co. v. Crescent City Co., Ill U. S. 746, 757; Ward v. Maryland, p. 46612 Wall. 418, 424, 425, 430, 432; In re Watson, 15 Fed. Rep. 511, 512; Cole v. Cunningham, 133 U. S. 107, 114; Blake v. McClung, 172 U. S. 239, 254, 256; Sayre Borough v. Phillips, 148 Pa. St. 482, 488, 489; State v. Montgomery, 94 Maine, 192; Simrall & Co. v. Covington, 90 Kentucky, 444; Booth v. Lloyd, 33 Fed. Rep. 593; Robbins v. Shelby County Taxing District, 120 U. S. 489; Laurens v. Anderson, 75 S. Car. 62; Hoadley v. Board of Insurance Commrs., 37 Florida, 564; Cooley, Const. Lam., 7th ed., p. 567.

La Tourette offered to comply with all of the provisions of the act, but could not comply with the requirement of § 2, he being, as he alleged, a resident and citizen of New York; and he attacked the requirement by a petition in the Supreme Court of the State by which he charged it to be a violation of the constitution of the State and of § 2 of Article IV and the Fourteenth Amendment of p. 467the Constitution of the United States, in that he, a citizen of New York, was denied the privileges and immunities granted to citizens of the State of South Carolina and deprived of liberty and property without due process of law. He further alleged that the Commissioner had refused to issue a license to him and prayed that he be required to do so.

(1) This contention depends upon the character of the business of insurance, and it was decided in German Alliance Insurance Co. v. Lewis, 233 U. S. 389, to be clothed with a public interest and subject, therefore, to the regulating power of the State. And it necessarily follows that, as insurance is affected with a public interest, those engaged in it or who bring about its consummation are affected with the same interest and subject to regulation as it is. A broker is so engaged—is an instrument of such consummation. The statute makes him the p. 468representative of the insured. He is also the representative of the insurer (Hooper v. California, 155 U. S. 648, 657), and his fidelity to both may be the concern of the State to secure. As said by the Supreme Court of the State: “It is important for the protection of the interests of the people of the State that the business should be in the hands of competent and trustworthy persons/’ And we may say that this result can be more confidently and completely secured through resident brokers, they being immediately under the inspection of the Commissioner of Insurance.1 The motive of the statute, therefore, is benefit to insurer and insured and the means it provides seem to be appropriate.

The illegality of the act is, however, earnestly urged and that it is a “trade regulation” and recognizes “the business, trade or occupation of an insurance broker as proper and legitimate,” and yet denies to La Tourette, a citizen of New York, the right to engage in it and thereby abridges the privileges and immunities that he has as a citizen. The contention is expressed and illustrated in a number of ways, and the privilege of a citizen is defined to be “the right to pursue and obtain happiness and safety” and “to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others,” and that whatever rights a State grants to its own citizens are the measure within its jurisdiction of the rights of the citizens of other States, and for these propositions Slaughter-House Cases, 16 Wall. 36, and Butchers' Union Co. v. Crescent City Co., Ill U. S. 746, are cited. Other cases are also cited in illustration. We do not dispute the propositions, and to see if they determine against the act under review we must turn to its words, as did the Supreme Court of the State, whose interpretation of them we must accept. It said, speaking by Mr. Justice Hydrick: “A citizen of any State of the Union who is a resident of this State and has been a licensed insurance agent of this State for at least two years may obtain a broker’s license; on the other hand, a citizen of this State, who is not a resident of the State and has not been a licensed insurance agent of this State for two years, may not be licensed. No discrimination is made p. 470on account of citizenship. It rests alone on residence in the State and experience in the business.” And the court further said: “Citizenship and residence are not the same thing, nor does one include the other. Cummings v. Wingo, 31 S. C. 427, 435, 10 S. E. 107, and authorities cited. But our conclusion is not rested upon the mere use of the word ‘residents’; for no doubt it might appear from the purpose and scope of an act that ‘residents’ was used in the sense of ‘citizens.’ If so, the Court would so construe it; and in no event would the Court sanction an evasion of the purpose and intent of this wise and wholesome provision of the Constitution based on mere verbiage. But there is nothing in the act to suggest any such intention. On the contrary, the words ‘residents’ and ‘citizens’ are both used, each apparently in its ordinary legal sense, which is well defined and understood, making a distinction which is substantial in its purpose and one that is sanctioned by the highest judicial authority.”

The first of these cases, Postal Telegraph-Cable Co. v. Tonopah & Tidewater R. R. Co., was a suit in the Municipal Court of the City of New York for services rendered to the Railroad Company. The defendant set up that the services consisted of the sending of telegrams relating to the defendant’s business and were covered by a contract such as usually is made between railroads and telegraphs, under which such telegrams were to be sent free of specific charge. The question raised was the validity of the agreement. The Court decided that it was valid and judgment for the defendant was affirmed on appeal. The next case in number, Western Union Telegraph Co. v. Baltimore & Ohio R. R. Co., was brought by the Railroad Company in the District Court of the United States for the Southern District of New York and sets up a similar contract, which the Telegraph Company p. 473now refuses to perform in consequence of a ruling of the Interstate Commerce Commission. It prays a declaration of the validity of the contract and specific performance. The plaintiff obtained a decree in the District Court, 241 Fed. Rep. 162, which was affirmed by the Circuit Court of Appeals, 242 Fed. Rep. 914. The last of the three cases, Postal Telegraph-Cable Co. v. Chicago Great Western Railroad, was another bill in equity, brought by the Railroad Company in the District Court of the United States for the Northern District of Illinois upon a similar contract, to prevent a multiplicity of suits by the Telegraph Company like that first above mentioned, to have the validity of the contract declared, and to obtain a decree that it be performed. The defendant prevailed in the District Court, 245 Fed. Rep. 592, but the decision was reversed by the Circuit Court of Appeals, and there the plaintiff obtained a decree. 249 Fed. Rep. 664. The only question upon which bur decision is sought is the validity of the agreements, which are so far alike as to present a single issue here.

The contracts elaborately provide for the reciprocal rights of the companies, for a division of expenses between the railroad and telegraph, for the use by the telegraph of the railroad’s right of way for its poles, for monthly payment of a certain sum by the telegraph, and then agree, this being the point now material, that up to a certain amount calculated at the regular day rates of the telegraph, it should deliver free of charge messages pertaining to the railroad business to any points on its system on or beyond the railroad lines, and that up to an amount calculated in similar manner the railroad should transport the materials, supplies and employees of the telegraph, needed for the construction, maintenance or renewal of the telegraph lines whether on or off the lines of the road. The latest ruling of the Interstate Commerce Commission is that these contracts for an exchange of service while p. 474valid for services on the line are invalid as to services off the line, which last, it is held, must be charged for by the railroad upon the basis of its published rates and by the telegraph upon that of its charges reasonably charged to other customers for similar services. The Commission construes in this way a proviso added to § 1 of the Act to Regulate Commerce by an amendment of June 18, 1910, c. 309, § 7. [36 Stat. 539, 544.] This amendment brought telegraph, telephone and cable companies within the act but also inserted a proviso “that nothing in this Act shall be construed to prevent telephone, telegraph, and cable companies from entering into contracts with common carriers, for the exchange of services.” The question more specifically stated is whether the construction adopted by the Commission is right.

We do not see how that construction can be got from the words of the act. The words are general and as certainly allow services off the line as services on it to be exchanged. In fact they do so almost in terms by allowing common carriers to exchange with cable companies. This being obvious, it is said that while the abstinence of the act from preventing exchanges covers the whole ground, the exchange of services off the line must be on the terms that we have stated, which makes the act as to them merely a superfluous permission to settle accounts periodically instead of paying for each transaction in cash. But “exchange” is barter and carries with it no implication of reduction to money as a common denominator. It contemplates simply an estimate, determined by self interest, of the relative value and importance of the services rendered and those received. This is admitted with regard to services on the line, and if so whatever services can be exchanged can be exchanged in the same way. We cannot follow the argument from Santa Fe, Prescott & Phoenix Ry. Co. v. Grant Brothers Construction Co., 228 U. S. 177, that the exchange properly p. 475so called should be confined to cases where the common carrier is not acting as such. That seems to us a perverse conclusion from a proviso permitting “common carriers” to exchange.