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In 1900, 24.9 per cent of all the coal mined was mined by machinery, while in 1926, 71.7 per cent was mined by machinery. The pick miner is rapidly disappearing.
Consolidation.-Consolidation is the remedy for the coal situation. Stabilization, brought about by a modification of the antitrust laws or by the establishment among the operators and miners themselves of a code of ethics and fair practices, would not be objectionable to the American people. Stable employment, stable output, and stable markets will mean satisfactory and constant employment of workers, satisfactory and profitable returns for operators, and a steady and regular flow of coal to supply the needs of industrial and domestic consumers.
Any plan with such a contemplation would require the earnest cooperation and aid of the railway and transportation compan.es, the manufacturing enterprises, and the public-utilities companies.
If the more than 7,000 separate mines could be brought under the control of between 100 and 200 different companies, coal would be preserved and efficiency promoted ; and the companies would be able to finance and purchase necessary machinery. Large units could buy and store their coal in large quantities and it would not be necessary to open new mines.
Government regulation.-In answer to a query as to whether the public would stand to see the Sherman Antitrust Act repealed, in so far as the coal interests are concerned, unless there was some governmental regulation of it, Secretary Davis said:
"The Government always has regulation of it. I used to be afraid of every large corporation, but since I have become Secretary of Labor and can see what the Government can do, even without direct power, I am satisfied we ought not to fear large corporations."
In reply to a question by Senator Goff, of West Virginia, which was substantially a replication of a similar question put by Senator Sackett, of Kentucky, as to whether or not the limitation by a Federal power of the opening of mines and the production of coal in an economic sense would constitute the taking of private property without due process of law, as that phrase is used in the fourteenth amendment the United States Constitution, Secretary Labor Davis said that he did not advocate Government ownership; that if voluntary consolidations were effected Government ownership would not necessarily follow; that his only desire was to see the abolition of the deplorable conditions now existing in the coal fields; and that he thought the committee should make inquiry of the Attorney General of the United States as to the legal principles involved in connection with the coal situation, the pending bill, and any other matters relating to the same.
BRIEF OF THE LAW AND FACTS IN SUPPORT OF SENATE BILL 4490 PROVIDING FOR A
BITUMINOUS COAL COMMISSION BY COUNSEL FOR UNITED MINE WORKERS OF AMERICA
THE POWER OF CONGRESS
This bill deals exclusively with corporations engaged in shipping coal in interstate commerce and is predicated on the power of Congress to license and regulate such corporations. The bill does not affect corporations that are engaged simply in mining coal. It does not regulate or license individuals engaged in shipping coal; except that section 2 permits marketing pools by corporations for the purpose of agreeing on prices; and any individual shipper may jo'n such pool upon the same terms that a corporation may. The bill does not require the individual to do this but permits him to do so, in order that there may be no claim that the individual was discriminated against in the allowance of such marketing pools. Apart from this instance in which the hand of Congress is not laid upon the individual but simply holds the door open for him, there is no reference to the rights of natural persons.
(1) Nature of a corporation.-A corporation is an artificial person which can have not legal existence out of the boundaries of the sovereignty by which it is created.” (Bank v. Earl, 13 Pet. (U. S.) 519, p. 588.) In Paul v. Virginia (8 Wall. (U. S.) 168) the court said at page 181 :
"A grant of corporate existence is a grant of special privilege to the corpora. tion, enabling them to act for certain designated purposes as a single individual, and exempting them (unless otherwise specially provided) from individual
liability. The corporation being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created, The recognition of its existence even by other States and the enforcement of its contracts made therein, depend purely upon the comity of those Statesma comity which is never extended where the existence of the corporation or the exercise of its powers are prejudicial to their interests or repugnant to their policy. 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."
A private corporation has also been defined by our Supreme Court, in a case involving an excise tax upon all corporations with income of more than $5,000, as follows:
“The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed and which are not enjoyed by private firms or individuals. These advantages are obvious and have led to the formation of such companies in nearly all branches of trade. The continuity of the business, without interruption by death or dissolution, the transfer of property interests by the disposition of shares of stock, the advantages of business controlled and managed by corporate directors, the general absence of individual liability, these and other things inhere in the advantages of business thus conducted, which do not exist when the same business is conducted by private individuals or partnerships. It is this distinctive privilege which is the subject of taxation, not the mere buying or selling or handling of goods, which may be the same, whether done by corporations or individuals.” (Flint v. Stone Tracy Co., 220 U. S. 161.) (2) In relation to the fifth and fourteenth amendments.-A corporation is a
” within the due-process clause of the fifth amendment, and the "equal protection" clause of the fourteenth amendment. But it is not a citizen within the clause of the fourteenth amendment that "no State shall make or enforce any law which shall abridge the privileges or immunities of a citizen of the United States." A natural person (citizen) has a right to transfer himself and his activities from one State to another and to do business in any State. This is not true of a corporation. A State can not, by creating a corporation, endow it with the absolute right to transact interstate commerce. (Northern Securities Co. v. United States, 193 U. S. 345.) (As stated in the recent case of Liberty Warehouse Co. v. Burley Tobacco Association, decided February 20, 1928;
"A corporation does not possess the privileges and immunities of a citizen of the United States within the meaning of the Constitution." (Citing cases.)
The artificial person created by the State is as much a foreign corporation to the national sovereignty as it is foreign to the sovereignty of another State; and when it undertakes to exercise a franchise under the national sovereignty it becomes subject to license and regulation if Congress sees fit to require such license and regulation. The right of Congress to regulate commerce applies to natural as well as artificial persons. But the right to admit or reject, license or regulate artificial persons created by States that seek to exercise corporate franchises under national sovereignty arises out of the inherent nature of sovereignty. The power of Congress over such artificial persons is not to be measured by its power over natural persons. Logically it must be measured by the analogous power which a State has over a corporation created by another State which ventures within the former's dominion.
(3) State and national sovereignties.—In Buffington v. Day (11 Wal. (U. S.) 113) the Supreme Court said at page 124:
“ 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."
The State is no more a sovereignty than is the Nation. The first has general powers, the latter limited powers, but within the domain of the subjects com. mitted to the latter, its sovereignty is paramount and supreme. In Champion v. Ames (the lottery case) (188 U. s. 321) the court at page 347 quotes from Gibbons v. Ogden the following statement by Marshall, C. J.:
“If, as has always been understood, the sovereignty of Congress, though limited to specific objects, is plenary as to those objects, the power over commerce with foreign nations, and among the several States, is vested in Congress as absolutely as it would be in a single government, having in its constitution the same restrictions on the exercise of the power as are found in the Constitution of the United States."
The court continued to quote from the concurring opinion of Justice Johnson as follows:
"The power to regulate commerce' here meant to be granted was that power to regulate commerce which previously existed in the States. But what was that power? The States were, unquestionably, supreme; and each possessed that power over commerce which is acknowledged to reside in every sovereign State.
The law of nations, regarding man as a social animal, pronounces all commerce legitimate in a state of peace, until prohibited by positive law. The power of a sovereign State over commerce, therefore, amounts to nothing more than a power to limit and restrain it at pleasure. And since the power to prescribe the limits to its freedom necessarily implies the power to determine what shall remain unrestrained, it follows that the power must be exclusive; it can reside but in one potentate; and hence the grant of this power carries with it the whole subject, leaving nothing for the State to ct upon."
If within this national sovereignty an artificial person created by another sovereignty assumes to exercise its franchise, the scope of national control must be measured by the power of control universally exercised by the State in analogous cases; otherwise the sovereignty of the Nation breaks down in its contact with these foreign artificial persons and becomes a mere caricature of the sovereignty which the law. recognizes in the State.
Powers and rights appertaining to the national sovereignty are as certain as the powers and rights of any sovereignty. For instance, the right of eminent domain is an attribute of national sovereignty, though not expressly set out in the Federal Constitution. In United States v. Jones (109 U. S. 513, p. 518), the court said:
"The power to take private property for public uses, generally termed the right of eminent domain, belongs to every independent government. It is an incident of sovereignty and, as said in Boom Co. v. Patterson (98 U. S. 406) requires no constitutional recognition.
It is undoubtedly true that the power of appropriating private property to public uses vested in the General Government-its right of eminent domain, which Vattel defines to be the right of disposing, in case of necessity, and for the public safety, of all the wealth of the country-can not be transferred to a State any more than its other sovereign attributes."
The power, of course, to create corporations is nowhere conferred by the Federal Constitution, but the right to do so has often been sustained. Such corporations may be for the purpose of carrying out some governmental function, in which case the corporate franchise extends to the Territorial limits of the Nation and is beyond State regulation; or, as the sovereign legislative power over Territorial possessions and the District of Columbia, Congress has often created private corporations, which are universally treated as foreign corporations by the States.
In McCulloch v. Maryland (4 Wheat. (U. S.) 316), the State undertook to tax a branch of the United States bank established in Maryland. Marshall, C. J., said at page 410:
"The creation of a corporation, it is said, appertains to sovereignty. This is admitted. But to what portion of sovereignty does it appertain? Does it helong to one more than another? In America the powers of sovereignty are divided between the Government of the Union and those of the State. They are each sovereign with respect to the objects committed to it and neither sovereign with respect to the objects committed to the other."
(4) The right to exercise a corporate franchise in another sovereignty.-It is the universal rule that a private corporation acquires no right through its charter by a State to project itself or its business into another sovereignty. Another State may license, regulate, or exclude it as it sees fit. The limitations upon this rule will be considered under the next heading; but the general rule to license, regulate, or exclude such a corporation rests fundamentally in the sovereignty invaded by the artificial creation of another sovereignty.
In Hammond Packing Co. 6. Arkansas (212 V. S. 322) the following from the syllabus states the law:
“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, as long as no contract is impaired, may exert it from consideration of acts done in another jurisdiction.
“The difference between the extent of power which the State may exert over the doing of business within its borders by an individual and that which it can exercise as to corporations, furnishes a distinction authorizing a classification between the two which does not violate the equal-protection cause of the fourteenth amendment.”
(5) Constitutional limitations. There are two constitutional limitations upon this right of a State to license, regulate, or exclude a corporation created by another sovereignty. First, it can not impose conditions upon its acceptance of such corporation, which deprives it of constitutional rights. In Hanover Fire Ins. Co. 1. Carr (272 U. S. 494) the court said:
“It was settled in Bank of Augusta t. Earle (13 Pet. 519, 10 L. ed. 274), Paul v. Virginia (8 Wall. 168, 19 L. ed. 357); Ducat v. Chicago (10 Wall. 410, 19 L. ed. 972), and Horn Silver Min. Co. 1. New York (143 U. S. 305, 36 L. ed. 164, 4 Inters. Com. Rep. 57, 12 Sup. Ct. Rep. 403), that foreign corporations can not do business in a State except by the consent of the State ; that the State may exclude them arbitrarily or impose such conditions as it will upon their engaging in business within its jurisdiction. But there s a very important qualification to this power of the State, the recognition and enforcement of which are shown in a number of decisions of recent years. That qualification is that the State may not exact as a condition of the corporation's engaging in business within its limits that its rights secured to it by the Constitution of the United States may be infringed."
Second, if the corporation created by one State desires to transact interstate commerce in another State, it can not be depriced of that right by the latter State. The reason for this is, the corporate franchise thus to be exercised (namely, interstate commerce) is a subject within the paramount sovereign control of Congress. This limitation illustrates the distinction between the State and national sovereignties in their relation to those artificial persons. The States have surrendered all sovereignty in this field to Congress, including the sovereign right to license, régulate, or exclude a foreign corporation, with respect to the exercise of its corporate franchise in interstate State commerce. Certainly that right, which in the absence of the Federal Constitution would rest in the State, must rest in Congress.
In the case of Crutcher v. Kentucky (141 U. S. 47), the court was considering the validity of a Kentucky statute which undertook to require a license for foreign express companies, the license to be based on certain requiremennts. 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 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 guarantees it might 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."
In this case 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.".
This is a clear recognition of the power of Congress to license and regulate State corporations engaged in interstate commerce.
(6) Relation of either sovereignty to corporations created by the other.From the above it clearly appears that if an artificial person is created by one sovereignty it can only exercise its corporate franchise within the other sovereignty upon such terms as the latter sees fit to impose. If the corporation created by Congress is for public or governmental purposes, it can not be licensed, taxed, or regulated by a State. But corporations created by Congress for private purposes are universally treated as foreign corporations by the various States for the purpose of license, regulation, or tax. In Flint v. Stone Tracy Co. (220 U. S. 107, p. 152), the court 'said:
" In Osborn v. Bank of United States, supra, leading case upon the subject, whilst it was held that the Bank of the United States was not a private corporation but a public one, created for national purposes, and therefore beyond the taxing power of the State, Chief Justice Marshall, in delivering the opinion of the court, conceded that if the corporation had been originated for the management of an individual concern, with private trade and profit for its great end and principal object, it may be taxed by the State.”
In 19 Cyc. 1251 is found a list of cases in which the States have treated private corporations created by Congress as foreign corporations. In Daly v. National Life Insurance Co. (64 Ind. 1) the State of Indiana required a life insurance company chartered by Congress to submit to the State regulations governing foreign insurance companies. The following quotation from the syllabus states the holding:
“An insurance company created by an act of Congress is a foreign corporation subject to the requirements of the statute of this State approved June 17, 1852, respecting a foreign corporation and their agents in this State.'”
It is equally true that if the State creates a private corporation which undertakes to exercise its corporate franchise within and under the national sovereignty, it is a foreign corporation with reference to that sovereignty and subject to license and regulation as such. In Hale v. Henkel (201 U. S. 43) the question arose as to the right of the Federal Government to require an officer of a corporation engaged in interstate commerce to produce evidence and testify in a proceeding against the corporation. The distinction is made between the visitatorial rights of the Government over an individual and a corporation engaged in such commerce:
"Conceding that the witness was an officer of the corporation under investigation, and that he was entitled to assert the rights of the corporation with respect to the production of its books and papers, we are of the opinion that there is a clear distinction in this particular between an individual and a corporation, and that the latter has no right to refuse to submit its books and papers for an examination at the suit of the State. The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the State or to his neighbore to divulge his business or to open his doors to an investigation so far as it may tend to criminate him. He owes no such duty to the State, since he receives nothing therefrom beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the State and can only be taken from him by due process of law and in accordance with the Constitution.
“Upon the other hand, the corporation is a creature of the State. It receives certain special priviliges and franchises and holds them subiect to the laws of the State and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter.
It would be a strange anomaly to hold that a State, having chartered a corporation to make use of certain franchises, could not, in the exercise of its sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose.
“It is true that the corporation in this case was chartered under the laws of New Jersey, and that it receives its franchise from the legislature of that State; but such franchises, so far as they involve questions of interstate commerce, must also be exercised in subordination to the power of Congress to regulate such commerce, and in respect to this the General Government may also assert a sovereign authority to ascertain whether such franchises have been exercised in a lawful manner, with a due regard to its own laws. Being subject to this dual sovereignty, the General Government possesses the same right to see that its own laws are respected as the State would have with respect to the special franchises vested in it by the laws of the State. 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 an act of Congress. It is not intended to intimate, however, that it has a general visitatorial power over State corporations."
To compel a corporation (unlike an individual) to produce its books for evidence, though they be self-incriminating, is of itself a regulation. In the above case there was no statute requiring this. The Federal judiciary, in aid of a judicial process, compelled the New Jersey corporation to submit to this regulation, and on the ground that it was exercising its franchise in inter