Palmer v. Hussey, 119 U.S. 96 (1886)

J/r. Edgar AL. Johnson, (with whom were ALr. George Hoadly and ALr. Edward Colston on the brief,) for plaintiff in error, cited: RussJI v. Hudson River Railroad, 17 N. Y. 134; Luby v. Hudson River Railroad, 17 N. Y. 131; Michigan Central Railroad v. Cougar, 55 Ill. 503; Horse v. Connecticut River Railroad, 6 Gray, 450; Lame v. Bryant, 9 Gray, 245; N. C. 69 Am. Dec. 282; Curl v. Chicago & Rock Island Railroad, 11 Am. & Eng. Railroad Cas. 85; Dietrrich v. p. 100Baltimore &c. Railroad, 58 Maryland, 347; Furst n. Second Avenue Railroad, 72 N. Y. 542; Bellefontaine Railroad v. Hunter, 33 Ind. 335; Sins v. Macon & Western Railroad, 28 Georgia, 94; Enos v. Tuttle, 3 Conni 247; Fuller v. Naugatuck Rail/road, 21 Conn. 557; Baltimore City Railway Co. v. Kemp, 61 Maryland, 74.

1. At the trial the plaintiffs offered to read to the jury the deposition of a physician, and did read the first, second, and third interrogatories propounded to him, and the answers thereto. Responding to the first and second interrogatories, he stated, among other things, that his attendance upon Mrs. O’Brien commenced on the 16th of September, 1881; that he found her suffering extreme pain and in a very nervous condi■ tion, resulting a few hours before from a railroad accident on defendant’s road; that such was the cause of her injuries p. 101he knew from her own answers, from the statement of her brother-in-law, and from attending others who were on the train with her. The third interrogatory and answer were as follows:

We are of opinion that this ruling cannot be sustained upon any principle recognized in the law of evidence. The p. 102authorities are uniform in holding that a witness is at liberty to examine a memorandum prepared by him, under the circumstances in which this one was, for the purpose of refreshing or assisting his recollection as to the facts stated in it.

2. At the trial below, plaintiffs introduced one Roach as a witness, who, during his examination, was asked whether he did not, shortly after the accident, have a conversation with the engineer having charge of defendant’s train at the time of the accident, about the rate of speed at which the train was moving at the time. To that question the defendant objected, but its objection was overruled, and the witness permitted to answer. The witness had previously stated that, on examination of the track after the accident, he found a cross-tie or cross-ties under the broken rail in a decayed condition. His answer to the above question was : “ Between ten and thirty minutes after the accident occurred, I had such a conversation p. 104with Morgan Herbert, the engineer having charge of the locomotive attached to the train at the time of the accident, and he told me that the train was moving at the rate of eighteen miles an hour.” The defendant renewed its objection to this testimony by a motion to exclude it from the jury. This motion was denied, and an exception taken. As bearing upon the point here raised it may be stated that, under the evidence, it became material — apart from the issue as to the condition of the track — to inquire, whether, at the time of the accident, (which occurred at a place on the Une where the rails in the track were, according to some of the proof, materially defective,) the train was being run at a speed exceeding fifteen miles an hour. In this view, the declaration of the engineer may have had a decisive influence upon the result of the trial.

There can be no dispute as to the general rules governing the admissibility of the declarations of an agent to affect the principal. The acts of an agent, within the scope of the authority delegated to him, are deemed the acts of the principal. Whatever he does in the lawful exercise of that authority is imputable to the principal, and may be proven without calling the agent as a witness. So, in consequence of the relation between him and the principal, his statement or declaration is, under some circumstances, regarded as of the nature of original evidence, “ being,” says Phillips, “ the ultimate fact to be proved, and not an admission of some other fact.” 1 Phil. Ev. 381. “But it must be remembered,” says Greenleaf, “that the admission of the agent cannot always be assimilated to the admission of the principal. The party’s own admission, whenever made, may be given in evidence against him; but the admission or declaration of his agent binds him only when it is made during the continuance of the agency in regard to a transaction then depending, et dum ferret opus. It is because it is a verbal act and part of the res gestae that it is admissible at all; and, therefore, it is not necessary to call the agent to prove it; but wherever what he did is admissible in evidence, there it is competent to prove what he said about the act while he was doing it” 1 Greenleaf, § 113. This court had occasion p. 105in Packet Co. v. Clough, 20 Wall. 540, to consider this question. Referring to the rule as stated by Mr. Justice Story in his Treatise on Agency § 134, that “ where the acts of the agent will bind the principal, there his representations, declarations, and admissions respecting the subject-matter will also bind him, if made at the sa/me time, and constituting part of the res gestaef the court, speaking by Mr. Justice Strong, said: “ A close attention to this rule, which is of universal acceptance, will solve almost every difficulty. But an act done by an agent cannot be varied, qualified, or explained, either by his declarations, which amount to no more than a mere narrative of a past occurrence, or by an isolated conversation held, or an isolated act done, at a later period. The reason is that the agent to do the act is not authorized to narrate what he had done, or how ho had done it, and his declaration is no part of the res gestae?'

We are of opinion that the declaration of the engineer Herbert to the witness Roach was not competent against the defendant for the purpose of proving the rate of speed at which the train was moving at the time of the accident. It is true that, in view of the engineer’s experience and position, his statements under oath, as a witness, in respect to that matter, if credited, would have influence with the jury. Although the speed of the train was, in some degree, subject to his control, still his authority, in that respect, did not carry with it authority to make declarations or admissions at a subsequent time, as to the manner in which, on any particular trip, or at any designated point in his route, he had performed his duty. His declaration, after the accident had become a completed fact, and when he was not, performing the duties of engineer, that the train, at the moment the plaintiff was injured, was being run at the rate of eighteen miles an hour, was not explanatory of anything in which he was then engaged. It did not accompany the act from which the injuries in question arose. It was, in its essence, the mere narration of a past occurrence, not a part of the res gestae — simply an assertion or representation, in the course of conversation, as to a matter not then pending, and in respect to which his authority as p. 106engineer had been fully exerted. It is not to be deemed part of the res gestw, simply because of the brief period intervening between the accident and the making of the declaration. The fact remains that the occurrence had ended when the declaration in question was made, and the engineer was not in the act of doing anything that could possibly affect it. If his declaration had been made the next day after the accident, it would scarcely be claimed that it was admissible evidence against the company. And yet the circumstance that it was made between ten and thirty minutes — an appreciable period of time — after the accident, cannot, upon principle, make this case an exception to the general rule. If the contrary view should be maintained, it would follow that the declarations of the engineer, if favorable to the company, would have been admissible in its behalf as part of the res gestae,, without calling him as a witness — a proposition that will find no support in the law of evidence. The cases have gone far enough in the admission of the subsequent declarations of agents as evidence against their principals. These views are fully sustained by adjudications in the highest courts of the States.1*&

As the declaration was made between ten and thirty minutes after the accident, we may well conclude that it was made in sight of the wrecked train, and in presence of the injured parties, and whilst surrounded by excited passengers. The p. 108engineer was the only person from whom the company could have learned of the exact speed of the train at the time; to him it would have been obliged to apply for information on that point. It would seem, therefore, that his declaration, as that of its agent or servant, should have been received. The modern doctrine has relaxed the ancient rule, that declarations, to be admissible as part of the res gestce, must be strictly contemporaneous with the main transaction. It now allows evidence of them, when they appear to have been made under the immediate influence of the principal transaction, and are so connected with it as to characterize or explain it.

What time may elapse between the happening of the event in respect to which the declaration is made, and the time of the declaration, and yet the declaration be admissible, must depend upon the character of the transaction itself. An accident happening to a railway train, by which a car is wrecked, would naturally lead to a great deal of excitement among the passengers on the train, and the character and cause of the accident wTould be the subject of explanation for a considerable time afterwards by persons connected with the train. The admissibility of a declaration, in connection with evidence of the principal fact, as stated by Greenleaf, must be determined by p. 109the judge according to the degree of its relation to that fact, and in the exercise of a sound discretion ; it being extremely difficult, if not impossible, to bring this class of cases within the limits of a more particular description. The principal points of attention are, he adds, whether the declaration was contemporaneous with the main fact, and so connected with it as to illustrate its character.

I am authorized to state that the Chief Justice, Mr. Justice Miller, and Mr. Justice Blatchford concur in this dissent. p. 110Philadelphia fire association v. new york.

“ The Act of the People of the State of New York, passed May 11, 1865, three fifths being present, being c. 694 of the laws of 1865, entitled ‘ An Act in relation to the deposits required to be made, and the taxes, fines, fees, and other charges payable by insurance companies of sister States,’ as amended by the Act of 1875, c. 60, provides as follows, viz.: ‘ Whenever the existing or future laws of any other State of the United States shall require of insurance companies, incorporated by or organized under the laws of this State, and having agencies in such other States, or of the agents thereof, any deposit of securities in such State for the protection of policy-holders or otherwise, or any payment for taxes, fines, penalties, certificates of authority, license fees, p. 112or otherwise, greater than, the amount required for such purposes from similar companies of other States by the then existing laws of this State, then, and in every such case, all companies of such States establishing, or having heretofore established, an agency or agencies in the State, shall be and are hereby required to make the same deposit for a like purpose in the Insurance Department of the State, and to pay the Superintendent of said Department for taxes, fines, penalties, certificates of authority, license fees, and otherwise, an amount equal to the amount of such charges and payments imposed by the laws of such State upon the companies of this State and the agents thereof ; and the Superintendent of the Insurance Department is hereby authorized to remit any of the fees and charges which he is required to, collect by existing laws, except such as he is required to collect under and by virtue of this Act, provided, however, that no discrimination shall be made in favor of one company over any other from the same State.’

The defendant claims here the benefit of the Fourteenth Amendment, and a question has occurred as to whether the record presents that point for our review. There being no pleadings, the obvious place to look for the claim would be the p. 116agreed statement of facts. But all that is there said is, that the defendant insists that the statute is “ unconstitutional and void and not a legitimate exercise of legislative power.” The question was considered, in both the Supreme Court and the Court of Appeals, as to the validity of the statute, under the Constitution of New York, as being a law made to depend for its operation on the legislation of a foreign state, and thus an illegitimate exercise of legislative power. This contention is fairly within the words of the agreed statement, and, if it depended wholly on that statement to determine whether the record raises a Federal question, some doubt might exist. But in view of what was said in Murdock v. Memphis, 20 Wall. 590, 633, in Gross v. United States Mortgage Co., 108 U. S. 477, and in Adams County v. Burlington & Missouri Bailroad Co., 112 U. S. 123, we think that we are at liberty to look into the opinion of the Court of Appeals, a copy of which, duly authenticated by the proper officer, is transmitted to us with the record, in compliance with our 8th Rule, for the purpose of aiding in determining what was decided by that court. From that opinion it appears that the court not only decided against the defendant all the questions other than Federal which were raised, including two under the Constitution of New York, but also decided against it the Federal question referred to. If the court had decided in its favor any one of the other questions which went to the whole cause of action, there would have been no necessity for considering the Federal question. But as it was, the decision of that question became necessary to the disposition of the case, and was fully considered, not sua sponte, but as a point presented by the defendant.

The defendant, on the assumption that if it was within the jurisdiction of the State of New York, it was, though a foreign p. 117corporation, “ a person,” and so entitled to the benefit of the Amendment, contends that it was within such jurisdiction. The argument is, that it established an agency within the State in 1872, which it had ever since maintained; that it complied, from year to year, with all the requirements and conditions imposed by the laws of the State on foreign fire insurance companies doing business in the State; that it received from year to year certificates of authority from the Superintendent of the Insurance Department, as provided by statute; that, under those circumstances, it was legally within the State and within its jurisdiction; that, being in the State, by permission of the State, continuously from 1872 to 1882, the State imposed on it, while there, in 1882, an unequal and unlawful burden; and that the New York Act of 1865 did not come into effect as to Pennsylvania corporations until the Pennsylvania Act of 1873 was passed, at which time the defendant had already been a year in the State.

But we are unable to take that view of the case. In Paul v. Virginia, 8 Wall. 168, at December Term, 1868, a statute of Virginia required that every insurance company not incorporated by Virginia should, as a condition of carrying on business in Virginia, deposit securities with the State treasurer, and afterwards obtain a license; and another statute made it a penal offence for a person to act in Virginia as agent for an insurance company not incorporated by Virginia, without such license. A person having acted as such agent without a license, and been convicted and fined under the statute, this Court held that there had been no violation of that clause of Article 4, § 2, of the Constitution of the United States which provides that “ the citizens of each State shall be entitled to all privileges and immunities of citizens in the several States;” nor any violation of the clause in Article 1, § 8, giving power to Congress “to regulate commerce with foreign nations and among the several States.” The view announced was, that corporations are not citizens within the clause first cited, on the ground that the privileges and immnnities secured to the citizens of each State in the several StateSj are those which are common to the citizens of the latter States, p. 118under their Constitutions and laws, by virtue of their being citizens; and that, as a corporation created by a State is a mere creation of local law, even the recognition of its existence by other States, and the enforcement of its contracts made therein, depend purely on the comity of those States — a comity which is never extended where the existence of the corporation or the exercise of its powers is “ prejudicial to their interests or repugnant to their policy.” And the court, speaking by Mr. Justice Field, said: “ Having no absolute right of recognition in other States, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course, that such assent may be granted upon such terms and conditions as those States may think proper to impose. They may exclude the foreign corporation entirely, they may restrict its business to particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interest. The whole matter rests in their discretion.” As to the power of Congress to regulate commerce among the several States, the court said, that while the power conferred included commerce carried on by corporations as well as that carried on by individuals, “ issuing a pokey of insurance is not a transaction of commerce.” This decision only followed the principles laid down in the earlier cases of Bank of Augusta v. Earle, 13 Pet. 519, 588, and Lafayette Ins. Co. v. French, 18 How. 404.

This Pennsylvania corporation came into the State of New York to do business by the consent of the State, under this Act of 1853, with a license granted for a year, and has received such license annually, to run for a year. It is- within the State for any given year under such license, and subject to the conditions prescribed by statute. The State, having the power to exclude entirely, has the power to change the conditions of admission at any time, for the future, and to impose as a condition the payment of a new tax, or a further tax, as a license fee. If it imposes such license fee as a prerequisite for the future, the foreign corporation, until it pays such license fee, is not admitted within the State or within its jurisdiction. It is outside, at the threshold, seeking admission, with consent not yet given. The Act of 1865 had been passed when the corporation first established an agency in the State. The amendment of 1875 changed the Act of 1865 only by giving to the superintendent the power of remitting the fees and charges required to be collected by then existing laws. Therefore, the corporation was at all times, after 1872, subject, as a prerequisite to its power to do business in New York, to the same license fee its own. State might thereafter impose on New York companies doing business in Pennsylvania. By going into the State of New York in 1872, it assented to such prerequisite as p. 120a condition of its admission within the jurisdiction of New York. It could not be of right within such jurisdiction, until it should receive the consent of the State to its entrance therein under the new provisions, and such consent could not be given until the tax, as a license fee for the future, should be paid.

The denial of the equal protection of the laws may occur in p. 121various ways. It will most often occur in the enforcement of laws imposing taxes. An individual is denied the equal protection of the laws if his property is subjected by the State to higher taxation than is imposed upon like property of other individuals in the same community. So, a corporation is denied that protection when its property is subjected by the State, under whose laws it is organized, to more burdensome taxation than is imposed upon other domestic corporations of the same class. So, also, a corporation of one State, doing business, by its agents, in another State, by the latter’s consent, is denied the equal protection of the laws if its business there is subjected to higher taxation than is imposed upon the business of like corporations from other States. These propositions seem to me to be indisputable. They are necessarily involved in the concession that corporations, like individuals, are entitled to the equal protection of the laws.

The laws of New York prescribe certain conditions precedent to the right of a fire insurance company from another State to transact business there. It must possess a certain amount of actual capital; appoint an attorney in the State, service of process upon whom is to be “ deemed a valid personal service upon the corporation ” in any action “ upon a policy or liability issued or contracted while such corporation transacted business ” there; file in the insurance department a certified copy of its charter, together with a statement, verified by the oath of its chief officer and secretary, showing the name of the company, place where located, amount of its capital and assets, the extent to which its real estate is encumbered, the par and market value of all shares of stock held by it, the estimated value of its bonds, mortgages, and other securities, the extent of its indebtedness, the amount of its losses, adjusted and unpaid or incurred and in process of adjustment, the losses disputed, and the claims existing against it. It is also provided that no business shall be transacted in p. 122the State by the agent of any company from another State, while its capital is impaired to the extent of twenty per cent. It further requires from such companies an annual statement, showing in detail the items making up their capital, and the deductions to be made therefrom. It was made the duty, first of the State comptroller, and subsequently of the superintendent of insurance — these requirements of the statute being first complied with—to issue to the company, thus seeking admission into the State, a certificate showing its lawful right to transact business within her limits. Laws of N. Y., 1853, c. 466; Laws of 1862, c. 6, § 1, and c. 367, § 5; 1871, c. 888; Laws of 1874, c. 331, § 1; Laws of 1875, c. 555, § 1.

It was said in argument that the plaintiff in error entered New York with the knowledge, derived from the act of 1865, that if Pennsylvania thereafter subjected New York insurance companies to higher taxes than the latter State imposed upon Pennsylvania corporations of the same class doing business in New York, the taxes levied upon it would be correspondingly increased; therefore, it is argued, the entrance of the plaintiff in error into New York was subject to the reserved right of that State thus to increase the taxes upon its business. The same idea is embodied in the suggestion that New York made it a prerequisite, from and after 1865, to the right of a fire insurance corporation of another State to transact business in New York, that it should pay such increased taxes, however much they might be in excess of the taxes imposed there upon corporations of the same class from the remaining States. Now, it is submitted: 1. That no such obligation was imposed by the statute upon the plaintiff in error as a prerequisite to its right to enter New York and transact business there. The agreed case shows not only that the insurance department of New York has certified its right to do business in that State, p. 124but that the certificate was made as provided in the Act of 1853 and the acts amendatory thereof. Besides, there is no clause in the statute directing that department to withhold or to revoke a certificate upon the failure or refusal of the company to pay these increased taxes. The regularity and validity of that certificate was not questioned in argument, is not now disputed, and there is not a word in the statute to the effect that the payment of these increased taxes is & prerequisite to the right of the company to remain in the State and transact business. Indeed, it is evident that the State purposely avoided establishing any such prerequisite to the right to enter her limits. She only seeks, after admitting the plaintiff in error and certifying its right to do business, to subject it to the taxation in question. 2. The power of New York to impose this increased tax surely cannot depend upon the fact that she gave notice of what she would do in the contingency expressed in the Act of 1865. Such notice neither creates a power to do that which the State could not otherwise constitutionally do, nor makes it the duty of the plaintiff in error to submit to an illegal exaction. At last, the real question presented is, whether Pennsylvania corporations can be subjected to higher taxes in New York, than are imposed there upon corporations of the same class from other States.

It is said that a State may exclude altogether from its borders a corporation of another State, or may admit it upon such terms or conditions as she may elect to prescribe. It is quite true that general language to that effect was employed in Paul v. Virginia, 8 Wall. 168, where the only question necessary to be determined was as to the validity of a statute of Virginia, providing that before an insurance company, not incorporated by that State, should carry on business there, it must obtain a license therefor, and deposit with the State treasurer, as security for its engagements, bonds of a specified character and amount. In the course of the opinion which disposed of that question, it was said that a corporation of one State, “ having no absolute right of recognition in other States, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course, p. 125that such assent may be granted upon such terms and conditions as those States may think proper to impose. They may exclude the foreign corporation entirely; they may restrict its business to particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interests. The whole matter rests in their discretion.” But, I submit that it is the settled doctrine of this court, that the terms and conditions so prescribed must not be repugnant to the Constitution of the United States, or inconsistent with any right granted or secured by that instrument. In Ducat v. Chicago, 10 Wall. 410, 415, it was said by Mr. Justice Nelson, speaking for the court, that, in respect to the nature or degree of discrimination which a State may make between her own corporations and those of other States, “ it belongs to the State to determine, subject only to such limitations on her sovereignty as may be found in the fundamental law of the Union.” It was so decided in Insurance Co. v. Horse, 20 Wall. 445, 455, 456, where the question was as to the validity of a statute of Wisconsin relating to the admission into that State of fire insurance companies incorporated by other States. Besides the condition that they should designate some attorney in Wisconsin upon whom process against the company could be served, it imposed the further one that it should file in the proper office an agreement stipulating that it would not remove to the courts of the United States any suit brought against it in the local courts. An insurance company of New York established an agency in Wisconsin, and complied in all respects with these conditions; it filed the required agreement. In support of the validity of those conditions, the State relied upon the very language above quoted from Paul v. Virginia. But the court was careful to say that that language must be understood with reference to the facts in the case and to the question to be decided, which was stated to be simply “whether the State might require a foreign insurance company to take a license for the transaction of its business, giving security for the payment of its debts.” Care was taken to further announce, that the general language employed in Paul v. Virginia was not p. 126intended to impair the language in La Fayette Ins. Co. v. French, 18 How. 404, 407, where the court, speaking by Mr. Justice Curtis, said: “ A corporation created by Indiana can transact business in Ohio only with the consent, express or implied, of the latter State. This consent may be accompanied by such conditions as Ohio may think fit to impose, and these conditions must be deemed valid and effectual by other States and by this court; provided, they are not repugnant to the Constitution and laws of the United States, or inconsistent with those rules of public law which secure the jurisdiction and authority of each State from encroachment of all others, or that principle of natural justice which forbids condemnation without opportunity for defence.” Upon these grounds it was held,'in Insura/nce Co. v. Horse, that the Wisconsin statute, so far as it required insurance companies of other States to stipulate that they would not exercise the right to have suits against them removed to the national courts, was void, equally because it created an obstruction to the exercise of a privilege granted by the Constitution and laws of the United States, and tended to oust the courts of the Union of a jurisdiction conferred upon them. Much that was said in that case is pertinent to the present one. After observing that the courts would not enforce an agreement between a citizen of New York and a citizen of Wisconsin, that the former would, in no event, resort to the Federal courts sitting in Wisconsin for the protection of his rights of property, or an agreement between the same parties, upon whatever consideration, that the citizen of New York would in no case, when called into the courts, either of Wisconsin or of the Federal courts sitting in that State, demand a jury to determine his rights of property, but would submit such rights to arbitration or to the decision of a single judge, the court said: “We see no difference in principle between the cases supposed and the case before us. Every citizen is entitled to resort to all the courts of the country, and to invoke the protection which all the laws or all those courts may afford.” The court further said that the right of the insurance company to remove the suit was “ denied to it by the State court on the ground that it had made the agreement p. 127roferred to, and that the statute of the State authorized and required the making of the agreement. We are not able to distinguish this agreement and this requisition, on principle, from a similar one made in the case of an individual citizen of New York. A corporation has the same right to the protection of the laws as a natural citizen, and the same right to appeal to all the courts of the country. The rights of an individual are not superior, in this respect, to that of a corporation. The State of Wisconsin can regulate its own corporations and the affairs of its own citizens, in subordination, however, to the Constitution of the United States. The requirement of an agreement like this from their own corporations would be brutum fulmén, because they possess no such right under the Constitution of the United States. A foreign citizen, whether natural or corporate, in this respect possesses a right not pertaining to one of her own citizens. There must necessarily be a difference between the status of the two in this respect.”

The only difference between Insurance Co. v. Horse and the present case is, that in the former the New York corporation expressly agreed, in writing, that it would not exercise its constitutional privilege of removing suits against it into the courts of the Union while the Pennsylvania corporation received an official certificate of its right to transact business in New York with notice derived from the act of 1865, that that State would after 1873—the date of the Pennsylvania statute—claim from it higher taxes than she imposed upon like corporations from the remaining States doing business in her limits by her consent. If the plaintiff in error, by merely maintaining its agencies in New York, is to be held to have impliedly agreed to submit to such increased taxation, is that anything more than an implied agreement that it would not assert a right secured to it by the Constitution of the United States ? Can it be that a corporation is estopped to claim the benefit of the constitutional provision securing to it the equal protection of the laws simply because it voluntarily entered and remained in a State which has enacted a statute denying such protection to it and to like corporations from the same State? Is the right to that protection any less valuable or fundamental than the right to p. 128remote a suit into the courts of the Union for trial? Will it be held that an express agreement by a corporation not to exercise the latter right is void and not enforceable, but that a local statute denying the equal protection of the laws to a corporation will be upheld, simply because that corporation came within the jurisdiction of the State which assumed to make such denial, and received from her officers, acting in conformity with her laws, a certificate of its right to transact business there? Will effect be given in one case to what (erroneously, I think) is called an implied agreement to surrender a constitutional right, while an express agreement in the other to surrender a constitutional right is held to be invalid ?

It would seem to be the result of the decision in this case, that New York may prescribe such varying rates of taxation upon insurance corporations of the remaining thirty-seven States, within her jurisdiction, as she chooses — the rate for corporations from each State differing from the rate established for corporations of the same class from all other States, p. 129and the rate in respect to corporations of other States being higher than she imposes upon her own corporations of the same class. Such legislation would be a species of commercial warfare by one State against the others, and would be hostile to the whole spirit of the Constitution, particularly the Fourteenth Amendment, securing to all persons within the jurisdiction of the respective States the equal protection of the laws.

1. Hereafter, it shall be the duty of the president or treasurer of every association, corporation or joint-stock company liable to be taxed on its corporate franchise or business1 as provided in section three of this act, to make report in writing to the comptroller, annually, on or before the fifteenth day of November, stating specifically the amount of capital paid in, the date, amount and rate per centum of each and every dividend declared by their respective corporations, joint-stock companies or associations, during the year ending with the first day of said month. In all cases where any such corporation, joint-stock company or association shall fail to make or declare any dividend upon either its common or preferred stock during the year ending as aforesaid, or in case the dividend or dividends made or declared upon either its common or preferred stock during the year ending as aforesaid, shall amount to less than six per centum upon the par value of the said common or preferred stock, the treasurer and secretary thereof, after being duly sworn or affirmed to do and perform the same with fidelity, according to the best of their knowledge and belief, shall, between the first and fifteenth days of November, in each year, in which no dividend has been made or declared as aforesaid, or in which the dividend or dividends made or declared upon either its common or preferred stock amounted to less than six per centum upon the par value of said common or preferred stock, estimate and appraise the capital stock of such company upon which no dividend has been made or declared, or upon the par value of which the dividend or dividends made or declared amounted to less than six per centum, at its actual value in cash, not less, however, than the average price which said stock sold for during said year; and when the same shall have been so truly estimated' and appraised, they shah forthwith forward to the comptroller a certificate thereof, accompanied by a copy of their said oath p. 131or affirmation,, by them signed, and attested by the magistrate or other person qualified to administer the same; provided, that if the comptroller is not satisfied with the valuation so made and returned, he is hereby authorized and empowered to make a valuation thereof and to settle an account upon the valuation so made by him for the taxes, penalties and interest due the State thereon; and any association, corporation or joint-stock company dissatisfied with the account so settled, may within ten days appeal therefrom to a board consisting of the secretary of state, attorney-general a/nd state treasurer} which board, on such appeal, shall affirm or correct the account so settled by the comptroller, and the decision of said board shall be final; but such appeal shall not stay proceedings unless the full amount of the taxes, penalties and interest as due on said account, as settled by the comptroller, be deposited with the state treasurer.’

‘ § 3. Every corporation, joint-stock company or association whatever, now or hereafter incorporated or organized under any law of this State, . . . shall be subject to and pay a tax, as a tax upon its corporate fra/nchise or business} into the treasury of this State, annually, to be computed as follows: If the dividend or dividends made or declared by such corporation, joint-stock company or association during any year ending with the first day of November amount to six or more than six per centum upon the par value of its capital stock, then the tax to be at the rate of one-quarter mill upon the capital stock for each one per centum of dividend so made or declared; or if no dividend be made or declared, or if the dividends made or declared do not amount to six per centum upon the par value of said capital stock, then the tax to be at the rate of one and one-half mills upon each dollar of a valuation of the said capital stock made in accordance with the provision of the first section of this act, and in case any such corporation, joint-stock company or association shall have p. 132more than, one kind of capital stock, as for instance common and preferred stock, and upon one of said stocks a dividend or dividends amounting to six or more than six per centum upon the par value thereof, has been made or declared, and upon the other no dividend has been made or declared, or the dividend or dividends made or declared thereon amount to less than six per centum upon the par value thereof, then the tax shall be at the rate of one quarter-mill for each one per centum of dividend made or declared upon the capital stock, upon the par value of which the dividend or dividends made or declared amount to six or more than six per centum, and in addition thereto tax shall be charged at the rate of one and one half mills upon each dollar of a valuation, made also in accordance with the provisions of this act, of the capital stock upon which no dividend was made or declared, or upon the par value of which the dividend or dividends made or declared did not amount to six per centum.’ ”

“IV. During the year 1881 the said company had part of its capital invested in bonds of the United States, being obligations of the United States, which, by the acts of Congress under which they are.issued, are exempt from State taxation, viz.; on January 1, 1881, and when the dividend was declared in that p. 133month it held such bonds of the par value of $3,300,000; on the first day of July, 1881, and when the dividend was declared in that month, and on November 1, 1881, and when the report hereinafter mentioned was made, it held such bonds of the par value of $1,940,000.

No tax can be imposed upon that part of defendant’s capital invested in United States bonds. A State cannot burden the p. 134operations of the national government by taxing its bonds without its consent. McCulloch v. Maryland, 4 Wheat. 316, 436; Weston v. Charleston, 2 Pet. 449 ; Banks v. Mayor, 1 Wall. 16; People v. Commissioners, 90 N. Y. 63. A tax upon the capital of a corporation is a tax upon the property in which the capital is invested. No part of the capital invested in United States bonds, therefore, is taxable. This is fully established in this court. Bank of Commerce n. Nero York, 2 Black, 620; Ba/nk Tax Case, 2 Wall. 200. If, then, this be a tax upon capital, it is without application to the part of the capital stock of plaintiff in error invested in United States bonds.

In Henderson v. Mayor of New York, 92 U. S. 259, a State p. 135statute provided, that the owners of steamers bringing passengers from foreign ports should give a bond for each passenger against his becoming a public charge, or, at their option, make a cash payment. It was claimed that, as the object of the provision was not taxation but protection against pauperism, it was valid as within the police power. But the court held otherwise. And to the same effect are Chy Lung v. Freemam, 92 U. S. 275 ; Inman Steamship Co. v. Tinker, 94 IT. S. 238; Cook v. Pennsylvania, 97 U. S. 566; and Transportation Co. v. Parkersburg, 107 IT. S. 691.

The statute has not the effect of imposing a tax upon franchise or business. The modes in which the franchises of a corporation may be taxed are clearly defined. It may be done by imposing a fixed sum, or “ a graduated contribution p. 136proportioned either to the value of the privileges granted, or to the extent of their exercise, or to the results of such exercise.” State Tax on Railway Gross Receipts, 15 Wall. 284\ Delaware Railroad Tax, 18 Wall. 206, 231. These provisions of the act do not impose a fixed sum. Nor do they impose a contribution proportioned to the extent of the exercise of the franchise — to the amount of business done. That species of tax is imposed by § 5 of the same act. But these provisions do not refer to the amount of the business in any way. Is this, then, “ a contribution proportioned to the value or results of the privileges granted ” ?

It is claimed that this is a tax upon the franchise or its results upon the ground that the tax is measured by the profits p. 137resulting from the use of the franchise — by the capacity of the company to declare dividends. This is clearly erroneous. The tax is a percentage upon that part of defendant’s income which it has distributed in dividends — its net income or profits — without discrimination as to the source thereof. This, of course, is a tax upon the property from which the income arises. Bank of Kentucky v. Commonwealth, 9 Bush, 46; Opinions of Justices, 53 N. H. 634; People v. Commissioners of Taxes, 90 N. Y. 63; Weston v. Charleston, 2 Pet. 449, 472, 475, 478. But the franchise is only one part of defendant’s property. It is only in part the source of the dividends or net profits. They are the product of all the property. Indeed, from the franchise without the other property no dividends or profits could possibly be made. This tax upon the entire amount of such dividends or profits is, therefore, a tax upon the value or result of the franchise only to the same extent and in the same manner that it is a tax upon the value or result of every other item of defendant’s property including its United States bonds. And, as it includes property not taxable, it cannot be sustained as a tax on the franchise. Santa Clara County v. Southern Pacific Railroad, 118 U. S. 394.

These cases were decided upon two grounds. (1) It was held that a tax consisting of a percentage upon the deposits made with a savings bank, is a tax upon its franchise or business, and not a tax upon the property in which such deposits may be invested after they are received. (2) It was held, further, that the decision of the State court, although criticised in one of the cases as “founded in unsubstantial distinctions,” was binding upon this court. Whatever may be thought of the soundness of this, (see Louisville and Nashville Railroad v. Palmes, 109 IT. S. 244,) it has no present application; for it is not sought to sustain the p. 138present tax by any decision of the courts of the State construing the statute by which it is imposed.

The decision that even a tax consisting of a percentage upon all sums received by a savings bank was a tax upon franchise, was arrived at by a majority of the court, and in the face of emphatic dissent by three of the judges. That decision, therefore, should not be regarded as expressing the views of the court, save in cases identical in their facts. Much less can it be regarded as committing the court to the view that a tax upon the defendant which is a percentage upon its capital and surplus earnings distributed as dividends, p. 139is a tax upon corporate franchise. On the contrary, the court repeated in those cases the rule laid down in the Bank Tax Case that “ a tax levied under a law of the state ” enacting that corporations shall “ be liable to taxation on a valu - ation equal to the amount of their capital and their surplus earnings (is) a tax on the property of the corporation.” 6 Wall. 629. These authorities, therefore, are wholly without present application. Neither upon principle nor authority has the statute the effect of imposing a tax upon franchise or business.

The statute itself admits of no construction other than that which will produce this result. The tax is a percentage upon the capital. The amount of this percentage varies. But the subject-matter taxed remains the same. The rate of tax increases or diminishes with the rate of dividend. There is no method of determining, with absolute exactness, the actual value of the capital stock of a corporation during any considerable period. But no surer standard can be suggested than its results during that period — the dividends which it has earned. Oswego Starch Factory v. Dolloway, 21 N. Y. 449; Commonwealth v. Cleveland &c. Railroad, 29 Penn. St. 370; Lehigh Crane Iron Co. v. Commonwealth, 55 Penn. St. 448. A tax varying in proportion to the dividends must vary in proportion to the actual value of the capital stock. The provisions of this statute have been judicially construed in p. 141accordance with these views. They were copied literally from a statute of Pennsylvania, Laws of 1879, p. 114, § 4, and have long existed there in the same substantial form: Laws of 1844, p. 498, § 33; 1859, p. 529 ; 1868, p. 109, § 4. It is well settled there that they impose a tax upon the property of the corporation, Westchester Co. v. County of Chester, 30 Penn. St. 232; Lackawanna Co. v. Luzerne County, 42 Penn. St. 424, 430; Phœnix Lron Co. v. Commonwealth, 59 Penn. St. 104; Commonwealth v. Pittsburg, Fort Wayne <&c. Railroad, 74 Penn. St. 83; Catawissa Co.’s Appeal, 78 Penn. St. 59; Coatesville Gas Co. v. County of Chester, 97 Penn. St. 476, 481; and that the dividend of profit earned by the stock is but a means of ascertaining its value. Lehigh Co. v. Commonwealth, 55 Penn. St. 448, 451; Commonwealth v. Sta/ndard Oil Co., 101 Penn. St. 119. The Pennsylvania statute was before this court in Gloucester Ferry Co. v. Pennsylwamia, 114 U. S. 196, and was then regarded as imposing “ a tax upon the capital ” of corporations affected. The act comes precisely within the rules laid down above in Rank of Commerce v. New York, 2 Black, 620, and the Ba/nk Tax Case, 2 Wall. 200. Indeed, the tax in the latter case possessed in a much greater degree than the present, the character of a tax upon franchise. For there the tax was upon the amount of the stock. Even if, by reason of losses, the capital had possessed little or no value, it would equally have been taxable. But here, as has been shown, the tax depends entirely upon the actual value.

If, then, the tax upon this defendant be a tax upon p. 143franchise, the statute is unconstitutional. It denies to defendant equal protection of the laws.

Franchises are special privileges conferred by government, upon individuals j no franchise can be held which is not p. 144derived from a law of the State. Bank of Augusta v. Earle, 13 Pet. 519, 595.

But we are not without the decision of this court upon this question. A savings bank invested part of its deposits in securities of the United States, declared by Congress to be exempt from taxation by State authority. The State of p. 145Connecticut required savings societies to pay three quarters of one per cent, on the total amount of deposits on a given day. It was held that such tax was on the franchise and not on property; that it was valid; that the society was not exempt from taxation to the extent of the deposits so invested. Society for Savings v. Coite, 6 Wall. 594.

VOL. CXIX—io p. 146Southern Pacific Kailroad Company to recover State and county taxes assessed upon the property of the company upon which there was a mortgage. By the laws of California whenever an individual holds property incumbered with a mortgage, he is assessed at its value, after deducting from it the amount of the mortgage. If a railroad company holds property subject to a mortgage, it is assessed at its full value, without any deduction for the mortgage. The railroad company refused to pay said taxes upon several grounds, one of which was that there was a discrimination made, palpable and gross, between the taxation of the property of the individual and that of the corporation, and that thereby the corporation was denied the equal protection of the lawTs guaranteed by the Fourteenth Amendment to the Federal Constitution.