Waters-Pierce Oil Company v. Texas (177 U.S. 28)/Opinion of the Court

by Joseph McKenna

United States Supreme Court

177 U.S. 28

Waters-Pierce Oil Company  v.  Texas

 Argued: January 8, 9, 1900. --- Decided: March 19, 1900

Transactions of interstate commerce were withdrawn from the consideration of the jury and were also excepted from the judgment. The transactions of local commerce which were held by the state courts, trial and appellate, to be violations of the statutes consisted in contracts with certain merchants by which the plaintiff in error required them to buy oils exclusively from it, 'and from no other source;' or buy oils exclusively from it and not to sell to any person handling competing oils; or to buy exclusively from it and to sell at a price fixed by it.

The statutes must be considered in reference to these contracts. In any other aspect they are not subject to our review on this record, except the power of the state court to restrict their regulation to local commerce, upon which a contention is raised. It is based on the following provision:

'Every foreign corporation violating any of the provisions of this act is hereby denied the right and prohibited from doing any business within this state, and it shall be the duty of the attorney general to enforce this provision by injunction or other proceedings in the district court of Travis county in the name of the state of Texas.'

The claim is, if we understand it, that the statute prohibits all business of foreign corporations, and hence is unconstitutional as including interstate business, and cannot be limited by judicial construction to local business, and the unconstitutional taint thereby removed. To sustain the contention, United States v. Reese, 92 U.S. 221, 23 L. ed. 565; Trade Mark Cases, 100 U.S. 82, 25 L. ed. 550; United States v. Harris, 106 U.S. 629, 27 L. ed. 290, 1 Sup. Ct. Rep. 601; Baldwin v. Franks, 120 U.S. 678, 30 L. ed. 766, 7 Sup. Ct. Rep. 656, 763; and some other cases, are cited. They do not sustain the contention. The interpretation of certain statutes of the United States was involved, and the court, finding the meaning of the statutes plain, decided that it could not be changed by construction even to save the statutes from unconstitutionality. This was but an exercise of judicial interpretation.

The courts of Texas have like power of interpretation of the statutes of Texas. What they say the statutes of that state mean we must accept them to mean whether it is declared by limiting the objects of their general language or by separating their provisions into valid and invalid parts. Tullis v. Lake Erie & W. R. Co. 175 U.S. 348, 20 Sup. Ct. Rep. 136, 44 L. ed. --; St. Louis, I. M. & S. R. Co. v. Paul, 173 U.S. 404, 43 L. ed. 746, 19 Sup. Ct. Rep. 419.

We may return, therefore, to the propositions which were submitted to the jury.

They have been broadly discussed, and considerations have been presented which transcend them, and relate to grievances which do not affect plaintiff in error. We are confined to its grievance. Clark v. Kansas City, 176 U.S. 114, 20 Sup. Ct. Rep. 284, 44 L. ed. --; Tullis v. Lake Erie & W. R. Co., L. ed. --.

What is it? It is said that the statutes of Texas limit its right to make contracts and take away the property or liberty assured by the [[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|Fourteenth Amendment]]]]]] of the Constitution of the United States. Besides, it is asserted that the statutes make many discriminations between persons and classes of persons, and able arguments are built upon their alleged injustice and oppression. We are not called upon to answer those arguments or to condemn or vindicate the statutes on this record.

The plaintiff in error is a foreign corporation, and what right of contracting has it in the state of Texas? This is the only inquiry, and it cannot find an answer in the rights of natural persons. It can only find an answer in the rights of corporations and the powers of the state over them. What those rights are and what that power is has often been declared by this court.

A corporation is the creature of the law and none of its powers are original. They are precisely what the incorporating act has made them, and can only be exerted in the manner which that act authorizes. In other words, the state prescribes the purposes of a corporation and the means of executing those purposes. Purposes and means are within the state's control. This is true as to domestic corporations. It has even a broader application to foreign corporations.

Bank of Augusta v. Earle, 13 Pet. 519, 10 L. ed. 274, involved the power of the Bank of Augusta, chartered by the state of Georgia, and invested by its charter with a function of dealing in bills of exchange, to exercise that function in the state of Alabama. In passing on the question certain principles were declared which have never since been disturbed.

A contract of the corporation, it was declared, is the contract of the legal entity, and not of its individual members. Its rights are those given to it in that character, and not the rights which belong to its constituent citizens.

Its charter confers its powers and the means of executing them, and such powers and means can only be exercised in other states by the permission of the latter.

Chief Justice Taney said, delivering the opinion of the court:

'The nature and character of a corporation created by a statute, and the extent of the powers which it may lawfully exercise, have, upon several occasions, been under consideration in this court. In the case of Head v. Providence Ins. Co. 2 Cranch, 127, 2 L. ed. 229, Chief Justice Marshall, in delivering the opinion of the court, said: 'Without ascribing to this body, which in its corporate capacity is the mere creature of the act to which it owes its existence, all the qualities and disabilities annexed by the common law to ancient institutions of this sort, it may correctly be said to be precisely what the incorporating act has made it; to derive all its powers from that act, and to be capable of exerting its faculties only in the manner in which that act authorizes. To this source of its being, then, we must recur to ascertain its powers; and to determine whether it can complete a contract by, such communications as are in this record.' In the case of Dartmouth College v. Woodward, 4 Wheat. 636, 4 L. ed. 659, the same principle was again decided by the court. 'A corporation,' said the court, 'is an artificial being, invisible, intangible, and existing only in contemplation of law. Being a mere creature of the law, it possesses only those properties which the character of its creation confers upon it, either expressly or as incidental to its very existence.' And in the case of Bank of United States v. Dandridge, 12 Wheat. 64, 6 L. ed. 552, where the question in relation to the powers of corporations and their mode of action were very carefully considered, the court said: 'But whatever may be the implied powers of aggregate corporations, by the common law, and the modes by which those powers are to be carried into operation, corporations created by statute must depend, both for their powers and the mode of exercising them, upon the true construction of the statute itself."

The power of the bank to deal in bills of exchange in the state of Alabama was sustained, but it was put upon the ground that neither the policy of the state nor its laws forbade it, and that the law of international comity which prevailed there sustained it.

In Paul v. Virginia, 8 Wall. 168, 19 L. ed. 357, the dependent and derivative rights of corporations were again declared. Bank of Augusta v. Earle was quoted from, and it was again decided that a corporation is the mere creation of local law, and can have no legal existence beyond the limits of the sovereignty where created, and the recognition of its existence in other states and the enforcement of its contracts made therein depend purely upon the comity of those states.

'Having no absolute right of recognition in other states, but depending for such recognition and 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.'

And it was also decided that a corporation did not have the rights of its personal members, and could not invoke that provision of § 2, article 4, of the Constitution of the United States, which gave to the citizens of each state the privileges and immunities of citizens of the several states. See also Pembina Consol. Silver Min. & Mill. Co. v. Pennsylvania, 125 U.S. 181, 31 L. ed. 650, 8 Sup. Ct. Rep. 737; Ducat v. Chicago, 10 Wall. 410, 19 L. ed. 972. And it has since been held in Blake v. McClung, 172 U.S. 239, 43 L. ed. 432, 19 Sup. Ct. Rep. 165, and in Orient Ins. Co. v. Daggs, 172 U.S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281, that the prohibitive words of the [[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|Fourteenth Amendment]]]]]] have no broader application in that respect.

In Blake v. McClung, a Virginia corporation was denied the right to participate upon terms of equality with Tennessee creditors in the distribution of the assets of a British corporation in the hands of a Tennessee court.

In Orient Ins. Co. v. Daggs, the right of the company, a Connecticut corporation, to limit by contract its liability to the actual damages caused by fire, notwithstanding a provision in a statute of Missouri making the measure of damages in case of total loss the value of the property stated in the policy, was denied.

See also Pembina Consol. Min. & Mill. Co. v. Pennsylvania, 125 U.S. 181, 31 L. ed. 650, 8 Sup. Ct. Rep. 737.

In Hooper v. California, 155 U.S. 648, 39 L. ed. 297, 15 Sup. Ct. Rep. 207, conditions upon a foreign corporation were considered, and a statute of California sustained, making it a misdemeanor for a person in that state to procure insurance for a resident in the state from an insurance company not incorporated under its laws, and which had not filed a bond required by the law of the state. All preceding cases were cited, and it was assumed as settled 'that the right of a foreign corporation to engage in business within a state other than that of its creation depends solely upon the will of such other state.' And the exception to the rule was stated to be 'only cases where a corporation created by one state rests its right to enter another and to engage in business therein upon the Federal nature of its business.'

This exception was recognized in the case at bar, and the business of the plaintiff in error of a Federal nature excluded from the operation of the judgment.

The pending case might be rested on Hooper v. California, simply as authority, and we have entered upon the reasoning upon which it was based because its application to the contentions of the plaintiff in error is not properly estimated in the arguments of counsel.

Nor can the plaintiff in error claim an exemption from the principle on the ground that the permit of the company was a contract inviolable against subsequent legislation by the state. That contention was presented to the court of civil appeals, and the court properly replied: 'After the act of 1889 went into effect the state granted to appellant [plaintiff in error here] authority to engage in its business within the state for a period of ten years. The act of 1889, as well as that of 1895, provides for the forfeiture of the permit of a foreign corporation which may violate any of the provisions of the statute. . . . The action in force when the appellant entered the state informed it that for a violation of its terms the permit to do business here would be forfeited. This provision of the law was as much a part of the obligation, and as binding upon the appellant, as if it had been expressly made part of the permit.' [19 Tex. Civ. App. 19, 44 S. W. 945.]

The statute of 1889, therefore, was a condition upon the plaintiff in error within the power of the state to impose, and whatever its limitations were upon the power of contracting, whatever its discriminations were, they became conditions of the permit and were accepted with it.

The statute was not repealed by the act of 1895. The only substantial addition made by the latter was to exclude from its provisions organizations of laborers, for the purpose of maintaining a standard of wages. The court of civil appeals said of it:

'If the clause in the act of 1895 which exempts from its operation labor organizations for the purpose of maintaining their wages would render that statute obnoxious to the [[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|[[Additional amendments to the United States Constitution#Amendment XIV|Fourteenth Amendment]]]]]] to the Constitution (which we do not think the case), the entire act would be void, and could not operate as a repeal of the former law of 1889; and so that if it should be determined that this latter act was unconstitutional, the former act would be in force, and would not be subject to the objections urged against it, for the reasons stated by us in passing upon these objections, and therefore the state could maintain a case under this act.' [19 Tex. Civ. App. 18, 44 S. W. 945.]

In other words, as to that act the situation is this: It is either constitutional or unconstitutional. If it is constitutional, the plaintiff in error has no legal cause to complain of it. If unconstitutional, it does not affect the act of 1889, and that, as we have seen, imposes valid conditions upon the plaintiff in error, and their violation subjected its permit to do business in the state to forfeiture.

Judgment affirmed.

Mr. Justice Harlan dissented.

Notes