ERROR to the Supreme Judicial Court of Massachusetts; the case being this:
A statute of the State just named imposes upon 'each fire, marine, and fire and marine insurance company, incorporated or associated under the laws of any government or State other than one of the United States, a tax of 4 per cent. upon all premiums charged or received on contracts made in this commonwealth for insurance of property.' The same statute imposes a tax of but 2 per cent. upon such premiums when the company is incorporated under the laws of any one of the United States other than Massachusetts; upon which premiums, where the company is incorporated by itself, it imposes but 1 per cent.; while no tax is imposed by the laws of the State upon the business of insurances transacted by any natural persons citizens of the same.
With the enactment just mentioned on its statute-book, the State of Massachusetts, in 1868, filed a bill in its Supreme Judicial Court against the Liverpool and London Life and Fire Insurance Company (a company doing a large business in that State), to collect a tax of 4 per cent. on its premiums upon contracts made in Massachusetts for insurance of property, and to restrain the company from doing further business till the tax was paid. The company set up that it was not 'incorporated' at all, but was an association, under the laws of Great Britain, of natural persons, some of whom were citizens and residents of the country just named; and some citizens and residents of the State of New York; formed for the purpose of conducting the business of insurance under certain deeds of settlement, and having the legal character of a partnership; that accordingly it could not be taxed as a 'company incorporated under the laws of any government or State other than one of the United States;' while, in so far as the discriminating tax of 4 per cent. was sought to be laid against it as a company associated simply and not incorporated, it violated, in regard to the members of the company who were subjects of Great Britain, a provision in the treaty of 1815, between that country and the United States, by which it is agreed that the merchants and traders of each nation respectively shall enjoy the most complete protection and security for their commerce; and-in regard to the citizens of New York, that provision in section 2, article 4, of the Federal Constitution which secures to the citizens of each State all the privileges and immunities of citizens in the several States.
Of course, if the company was a corporation, the defence failed: and it not being denied that the persons composing the company were British subjects, with certain citizens of New York with rights like theirs, the first question-and the only one if it was resolved affirmatively-was whether the company was a corporation or not.
The company had been originally formed, in May, 1836, in Liverpool, by a 'deed of settlement.'
This instrument, as far as it could be done without the aid of Parliament, established a company under the name of 'The Liverpool Life and Fire Insurance Company,' with a capital of 2,000,000 sterling, which was divided into 100,000 shares of 20 each, and declared its purpose to be making insurance on life and against fire. These shares could be sold and transferred, and executors and administrators represented them in the company on the death of the owner. If, by the laws of the association, a share became forfeited, the owner was released from all further liability to the company. The business of the company was to be conducted by a board of directors exclusively, and they could make by-laws and change and modify them. There was a covenant that suits might be brought by or against the company in the names of one or more directors, which should bind the stockholders, and that no stockholder would plead in abatement the nonjoinder of the others; and it was further covenanted that a judgment so obtained against a director might be made out of the property of any of the stockholders. Numerous other provisions were found in the original articles, which consisted of over a hundred sections, but only those are referred to here which bear on the question which the court had before it. There were also three subsequent deeds of settlement, and three acts of Parliament were passed to give efficiency to the purposes of the association.
The first of these acts provided that the association might sue and be sued in the name of the chairman or deputy chairman of the board of directors; that the stockholders might sue the company as plaintiffs, or be sued by it as defendants. It regulated the manner in which the shareholders might be made individually liable for the debts of the association; and it declared that the act should not be construed to incorporate the company or relieve its members from their individual liability, except as provided in the act.
The second act of Parliament changed the name of the company to that which it now bears, and authorized it to make contracts by the new name, and it also contained a provision that the act should not make the company a corporation; and there was a third act which authorized amalgamation with another company, and which again provides against its being construed into an act of incorporation or a limited liability partnership.
The Supreme Judicial Court of Massachusetts gave a decree against the company, and enjoined it from the further prosecution of its business till the taxes found to be due were paid.
The case was now brought to this court on the ground that in its application to the company the statute of Massachusetts was in conflict with the provision of the Constitution, which confers on Congress the right to regulate commerce with foreign nations and among the States, and with that which secures to the citizens of each State all the privileges and immunities of citizens in the several States.
Messrs. B. R. Curtis and J. G. Abbott, for the company, plaintiff in error:
Whatever may be the character of the defendants, their association together and their relations to others, they must depend upon the laws of Great Britain. If the defendants are not a corporation by the English law, then they are not by our law, because here they have done no act in any way to alter or change their legal status or their relations to others. Indeed, our law does not in any way apply to them, act upon or affect their character, or profess to do it; it leaves that to be defined by the laws of the country under which they formed their association.
Now, under the laws of Great Britain, it cannot be maintained that the defendants are a corporation, or in fact anything more than a partnership of a large number of natural persons, having procured certain privileges from the government, under which they associated together for the convenience of those who deal with them.
In Great Britain, the King and Parliament alone can create corporations. In this case, neither has exercised the power, but when Parliament granted to the company certain privileges, especial care was taken to declare that the grant made should not create a corporation. This seems conclusive.
With us the defendants would not possess and enjoy the privilege, or be subject to the liability of being sued, and suing in the name of an officer of their association, but would be obliged to sue or be sued in the name of all partners, for the acts of Parliament giving that right and imposing that liability, apply to the manner of enforcing a remedy, and cannot avail beyond its own limits and courts.
So that when the defendants transact their business in this country, the acts of Parliament, giving some of the privileges of corporations, are of no avail to them; in fact they are like any partnership of natural persons, and must be treated in the same way, entitled to the same rights and privileges, and subject to the same liabilities.
Numerous cases in the English Reports where the rights, privileges, and liabilities of such bodies as this one are passed upon, show that the association here is not a corporation. [1]
But if the defendants were an association of our own citizens, formed here under like deeds of settlement, and like acts of the legislature, they would not be held to be corporations. The association does not make out of its members a new artificial political person; it still remains a body of natural persons, with certain privileges conferred upon them. No new body is created by the legislature with the property of individuality, and the capacity of holding property and transacting business. Indeed, the association falls entirely short of being a corporation, as usually defined and understood. [2]
Nor does this case fall within a principle often acted upon by courts, that when a collective body of natural persons are granted powers, rights, and privileges by a collective name, and there is no mode in which they can be enjoyed and exercised, without acting in a corporate capacity, such a body is held to be a corporation by necessary implication. Here, such implication is precluded by the legislative declaration that a corporation shall not exist, and by the fact that the deeds and legislative acts very minutely and carefully provide in what manner the rights and powers granted shall be enjoyed and exercised. Indeed, it is always holden, that where a corporation is so established by implication, the legislative intention to confer a corporate existence must be certain and plain.
Assuming that the plaintiff in error was not a corporation, but was, as they above argued, a partnership or association of individuals, some of which were subjects of Great Britain and others citizens of the State of New York, the learned counsel argued further that the rights of the former were protected by the treaty between the United States and Great Britain, and the rights of the latter by section 2, article 4, of the Federal Constitution referred to in the statement of the case.
Mr. Charles Allen, Attorney-General of Massachusetts, contra:
It is true, that the various acts of Parliament conferring corporate privileges upon the plaintiffs in error declare that it is not the intention thereby to constitute them a corporation; and if merely saying that they are not to be a corporation, at the same time when all the essential qualities and privileges of a corporation are bestowed upon them, would make it that they are not in fact a corporation, then it would have to be admitted that they are not a corporation. But in ascertaining the legal character of the company, we are not to look at what they are called, but at what they are.
By what rule is the question to be tested? The essential characteristics of a corporation are not the same at different times and in different countries. The definitions of a corporation vary. Certain things were formerly deemed essential qualities of a corporation, which are so no longer. Thus, a common seal formerly had essential significance, in those days when it was considered that corporations could only act by deed; but now, in this country, the common seal is of no significance. It is a mere ornament, and without use.
The deeds of settlement of the company show that they strained all laws applicable to partnerships to the very utmost, in the endeavor to provide for the transaction of their business before applying to Parliament for corporate privileges. This company by their deeds of settlement, in fact, made provisions and took upon themselves powers which are inconsistent with the common law applicable to partnerships.
For instance, carrying on business by means of directors exclusively, and depriving the members of all voice in determining matters. This is one. But it was in vain, with the aid of all the provisions that were contained in the deed of settlement, or that could be included in a private agreement among individuals, to attempt to stretch the law of partnerships far enough to cover the business of this company.
Accordingly acts of Parliament were obtained, which gave them in direct terms the various powers; and among these, that they might sue and be sued in the name of one individual; that the company might sue and be used by members of the company; that an amalgamation with another company should be binding on all of their members, whether consenting or not.
After these acts this company lacked no quality or characteristic of a corporation.
The exemption from individual liability is not now (however it may have been heretofore) a characteristic test of a corporation.
[Mr. Allen then replied (though he considered that the court would not get so far as to these points) to the arguments as to rights of the British stockholders under the treaty with Great Britain and of those of New York under the Federal Constitution.]
Mr. Justice MILLER delivered the opinion of the court.
Notes edit
- ↑ Harrison v. Timmins, 4 Meeson & Welsby, 510; Bartlett v. Pentland, Barnewall & Adolphus, 704; Van Sandau v. Moore, 1 Russell, 441; Cape's Executors, 2 De Gex, Mylne & G. 562; Mahew's Case, 5 Id. 562; Blakeley's Exec., 13 Beavan, 133; Burnes v. Pennell, 2 House of Lord's Cases, 522.
- ↑ Dartmouth College v. Woodward, 4 Wheaton, 636; Providence Bank v. Billings, 4 Peters, 562.
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