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interstate or foreign commerce. Before we drafted this bill we assured ourselves—although we may not be able to convince the committee, whose opinion, or some of the members, at least, may be otherwise--but we assured ourselves that there were not enough individuals at least, engaged in the mining and shipping of coal to make any difference in the operation, the successful operation of this statute if enacted. We may be wrong in our view, but it is based upon that theory.
Now, if I may go ahead with the proposition that I started with; For the purpose of showing the relation that a corporation bears to another State, I mean an artificial person called into life by one sovereignty when it tries to transact business in another sovereignty, to show what the limitations are upon it, I want to refer to the case of Hammond Packing Co. v. Arkansas, 212 U. S. 322. This case was tried in the lower court and an appeal was finally taken to the Supreme Court. The following quotation from the syllabus succinctly states the holding of the court :
The right of a State to prevent foreign corporations from continuing to do business within its borders is a correlative of its right to exclude them therefrom; and, as the power is plenary, the State, so long as no contract is impaired, may exert it from consideration of acts done in another jurisdiction.
There they ousted the Hammond Packing Co. on account of transactions that they thought were immoral and in violation of the policy of that State, done in another State than Arkansas:
The difference between the extent of power which the State may exert over the doing of business within its borders by an ind.vidual, and that which it can exercise as to corporations
The point I first made: furnishes a distinction authorizing a classification between the two which does not violate the equal-protection clause of the fourteenth amendment.
Let me read a few extracts further on that will demonstrate that a purely artificial character of this kind is not entitled, as stated in numerous cases, to that provision of the fourteenth amendment, which says that a citizen of one State is entitled to the immunities and privileges of a citizen of another State; a constitutional provision that reposes in the citizen, the natural person, the right to go where he pleases to transact business, to transact business where he pleases, a right which the corporation does not have.
In Hooper v. California, 155 U. S. 148, at page 152, the United States court says:
The principle 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, has been long settled, and many phases of its application have been illustrated by the decisions of this court. (Citing cases.)
Whilst there are exceptions to this rule they embrace 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.
That is where they are transacting an interstate-commerce business: As, for instance, where it has derived its being from an act of Congress, and has become a lawful agency for the performance of Government or quasi Gorernment functions, or when it is necessarily an instrument of interstate commerce, or its business constitutes such commerce, and is, therefore, solely within the paramount authority of Congress.
In the case of Crutcher v. Kentucky (141 U. S. 47) the court said: It is clear * * that it would be a regulation of interstate commerce.
There a license was required by the State of Kentucky of a foreign express company, and that was held improper because the foreign express company was transacting an interstate-commerce business. And the court said: It is clear
that it would be a regulation of interstate commerce in its application to corporations or associations engaged in that business;
And that was an express business : and that is a subject which belongs to the jurisdiction of the national and not the State legislature. Congress would undoubtedly have the right to exact from associations of that kind any guaranties it nright deem necessary for the public security and for the faithful transaction of business; and as it is within the province of Congress, it is to be presumed that Congress has done, or will do, all that is necessary and proper in that regard.
And the court further said: To carry on interstate commerce is not a franchise or privilege granted by the State; it is a right which every citizen of the United States is entitled to exercise under the Constitution and laws of the United States; and the accession of mere corporate facilities, as a matter of convenience in carrying on their business, can not have the effect of depriving them of such right, unless Congress should see fit to interpose some contrary regulations on the subject.
Now, there are two limitations upon the right of a State to exclude an artificial person created by another State. One of them is-but I would rather discuss that a moment later-but one of them is that the State regulating it, licensing it, fixing rules for the conduct of their business, or excluding them, and they can not exclude them or regulate them on the condition that they surrender some constitutional right, such as the right to sue in the Federal courts, such as the right of enforcing their contracts, such as the right to not be deprived of their property without due process of law; that limitation upon the right of one sovereignty to exclude artificial creations in another I will discuss later.
The other limitation is that if the corporation created by a State is engaged in interstate commerce it can not be excluded from the State or licensed or regulated in that respect. Why? Because that is a subject that falls within the paramount sovereignty of the Congress, the national sovereignty.
Now, if Ohio can not regulate or exclude an Illinois corporation in so far as it is engaged in interstate commerce because that right belongs to the paramount sovereignty of the National Government, then why is it, how can it be said, with what logic can it be asserted that Congress with this paramount authority over corporations that undertake to exercise franchises within the national sovereignty, can not license and regulate those corporations engaged in interstate and foreign commerce?
There are two sovereignties in this country as we all know. It has been referred to here in these hearings. Mr. Loos speaks of national sovereignty as half-portion sovereignty, but the national sovereignty is a paramount sovereignty in this country, and it is a sovereignty that is to be measured in its powers, in its authorty with respect to the functions that are conferred upon it by the National
Constitution, as fully as the sovereignty of a State is to be measured with reference to the things that remain to the State. That the State is such half-portion sovereignty we know, as the Nation is such half-portion sovereignty under certain circumstances. There are many things that a State can not do. It can not levy customs duties, can not regulate interstate commerce, as is recognized by all the decisions, or have the right to say to an artificial creature, a corporation created by another State, you can not conduct interstate commerce in this State. The State has limitations upon its sovereignty, but where its sovereignty prevails it has as full and complete authority and power as the word “sovereignty” indicates, because sovereignty after all is simply that repository of the ultimate and superme political power of the people that is manifested in their forms and in their functions of government.
Senator Couzens. Would you mind if I interrupted you for a question?
Mr. WARRUM. No.
Senator COUZENS. In that connection you disagree with the attorney general of West Virginia that they have the right which they would not waive in a bill of this kind to regulate the production of coal in their own State?
Mr. WARRUM. Why, Mr. Chairman, the attorney general, or the gentleman who represented the attorney general, of West Virginia, comes here and talks to you about West Virginia resisting the right of Congress to regulate local matters, mining matters, as he says, of local concern. Why did not the gentleman who represents the State of West Virginia be fair with this bill if not with the committee and say that West Virginia resents the Federal Government regulating corporations that it creates, and that it undertakes to give a corporate franchise to project itself into other States and to function under the national sovereignty? That is the proposition that the attorney general and his representative, is confronted with, whether or not West Virginia can create an artificial person and give it the power to go through the length and breadth of this country, exercising its corporate franchise, because that is what this bill deals with.
In this connection let me just quote to you from the Northern Securities case:
No State can by merely creating a corporation, or in any other mode, project its authority into other States and across the continent so as to prevent Congress from exercising the power it possesses under the Constitution over interstate and international commerce, or so as to exempt its corporation engaged in interstate commerce from obedience to any rule lawfully establisheil by Congress for such commerce. And in a later
Hale v. Henkle (201 U. S. 43), where the question arose as to the right of the Federal Government through its laws and officers and agents to exercise an inquisitorial right over corporations engaged in interstate commerce and compel them to produce their books even though those books might incriminate them, and even though it be before a Federal grand jury that was undertaking to determine whether or not the corporation was guilty of crime, something that they could not do with the individual unless pursuant
to the immunity statute; and the Federal court said this with reference to a franchise granted to a corporation by a State: so far as they involve questions of interstate commerce, must be exercised in subordination to the power of Congress to regulate such commerce, and in respect to this the General Government may assert a sovereign authority to ascertain whether such franchises have been exercised in a lawful manner with due regard to its own laws.
The powers of the General Government in this particular in the vindication of its own laws are the same as if the corporation had been created by act of Congress.
A moment ago before you asked me that question—and I do not object to questions, but I think the most of them will be developed as I go along—I wanted to call attention to the fact that sovereignty of the Nation with respect to the things that have been intrusted to the Nation is just as certainly a complete sovereignty as the sovereignty of a State is with reference to the things that have been reserved to the State.
In Buffington v. Day (11 Wall. 113,) that has been repeatedly cited, the court says—and these quotations are brief, but they establish propositions about which there ought not to be any dispute:
The General Government and the States, although both exist within the same territorial limits, are separable and distinct sovereignties, acting separately and independently of each other, within their respective spheres.
Now, what does all that mean? It means that if the power of national sovereignty, if the extent of the national sovereignty over foreign corporations--and by“ foreign corporations,” Mr. Chairman, as lawyers all know, they are corporations created by another sovereignty. It does not mean an alien corporation. A Michigan corporation is foreign in Indiana, and an Indiana corporation that goes to Michigan is a foreign corporation. It means this: That if one sovereignty creates, by breathing through its sovereignty artificial life into a legal entity—that is, not a natural person, but an artificial person—and that artificial person desires to exercise its corporate franchise within another sovereignty, that it is subject to regulation. And the rule that is applied, the law that has been laid down over and over again with reference to the sovereignty of one State to license, regulate, and even exclude artificial persons created by another sovereign State is the rule that must measure the power of the national sovereignty in dealing with corporations, created, forsooth, by the State of West Virginia and that undertake to exercise its corporate franchises under the sovereignty conferred upon the National Government.
Now, let us get to that by the reverse process: Congress creates corporations, and there have been many corporations created by Congress, and some of them have been created as governmental agencies, and some of them have been created for purely private profit. Now, when the National Congress creates a corporation to carry out some governmental agency no State can tax or regulate that corporation because it is a governmental agent, because, forsooth, when it undertakes to exercise some corporate authority or function, or to transact some corporate business in Illinois or West Virginia, it is still functioning under the national sovereignty that pervades all our territory.
In the case of McCulloch v. Maryland (4 Wheat. 316), the State
undertook to tax a branch of the United States Bank which had been chartered by Congress for governmental fiscal purposes. The United States Bank undertook to establish branches in Maryland, and the State of Maryland undertook to tax them, and the question came to the Federal court, and at the very outset of the argument the Attorney General of Maryland protested that Maryland had the right in the exercise of its sovereignty to meet at its borders an artificial person created by the national sovereignty and to exclude it or to tax it or to regulate it, and he urged that corporations are the creations of the sovereignty. He contended that the act of creating them is an attribute of sovereignty, and that the State of Maryland, in its sovereign capacity, had the right to regulate it or to tax the branch bank. Chief Justice Marshall says this:
The creation of a corporation, it is said, appertains to sovereignty. This is admitted. But to what portion of sovereignty d&es it appertain? Does it belong to one more than another? In America the powers of sovereignty arp divided between the Government of the Union and those of the States.
And Chief Justice Marshall held in that case that the Bank of the United States was exercising its franchise in Maryland, its corporate franchise conferred on it by the Government under the national sovereignty, under the national sovereignty that prevailed in Maryland just as it prevailed elsewhere.
Now, take the case of a private corporation created by Congress. and could that argument be urged? In a later case Chief Justice Marshall decided that if a corporation had been created by Congress, by the national sovereignty, that if the national sovereignty had built up an artificial person and breathed the breath of artificial life into that entity and it was organized for private profit, for gain, for pecuniary ends, that a State could meet it at the borders and regulate it just as it could a creation of another State.
I have an interesting case right on that very question, from the Indiana Supreme Court, that has never been reviewed by the Supreme Court of the United States and a number of these cases will be found in any digest, corpus juris, or encyclopedia upon the same proposition.
Now, in this case the Congress created by charter the National Life Insurance Co., with headquarters in the District of Columbia. Of course that was not a governmental agency but a private corporation. Indiana treated that company as a foreign corporation and required it to submit to certain conditions because, as I say, Indiana and every other State has an elaborate code regulating the admission and control of foreign corporations.
In Daly v. The National Life Insurance Co. (64 Ind. 1), the court said:
The appellee was not incorporated or organized in this State, but it was and is a corporation created by and under the laws of another Government. to wit, that of the United States. The appellee was incorporated by an act of the Congress of the United States, and its counsel claim that for this reason it is “ governed by a law paramount to the laws of this State." The United States is a Government whose powers are limited by the Constitution of the United States. The Congress of the United States, in so far as it legislates for that Government, has neither the right nor the power to incorporate a private corporation, such as is the appellee. In addition, however, to the power conferred upon Congress by the Constitution of the United States. to legislate for that Government, it is expressly provided in that instrument