The provision in Act No. 66 of the Louisiana laws of 1894
that
"any person, firm or corporation . . . who in any manner
whatever does an act in that state to effect, for himself or for
another, insurance on property then in that state, in any marine
insurance company which has not complied in all respects with the
laws of the state, shall be subject to a fine,"
etc., when applied to a contract of insurance made in the New
York, with an insurance company of that state, where the premiums
were paid, and where the losses were to be paid, is a violation of
the Constitution of the United States.
Hooper v. California, 155 U. S. 648,
distinguished from this case, and it is further held that by the
decision in this case it is not intended to
Page 165 U. S. 579
throw any doubt upon, or in the least to shake the authority of,
that case.
When or how far the police power of the state may be
legitimately exercised with regard to such subjects must be left
for determination in each case as it arises.
The Legislature of Louisiana, in the year 1894, passed an act
known as Act No. 66 of the acts of that year. It is entitled "An
act to prevent persons, corporations or firms from dealing with
marine insurance companies that have not complied with law."
The act reads as follows:
"
Be it enacted by the General Assembly of the State of
Louisiana that any person, firm or corporation who shall fill
up, sign, or issue in this state any certificate of insurance under
an open marine policy, or who in any manner whatever does any act
in this state to effect for himself or for another insurance on
property then in this state in any marine insurance company which
has not complied in all respects with the laws of this state shall
be subject to a fine of one thousand dollars for each offense,
which shall be sued for in any competent court by the Attorney
General for the benefit of the charity hospitals in New Orleans and
Shreveport."
By reason of the provisions of this act, the State of Louisiana
on the 21st of December, 1894, filed its petition in one of the
courts of first instance for the Parish of Orleans, and alleged in
substance that the defendants, E. Allgeyer & Co., had violated
the statute by mailing in New Orleans a letter of advice or
certificate of marine insurance on the 27th of October, 1894, to
the Atlantic Mutual Insurance Company of New York, advising that
company of the shipment of 100 bales of cotton to foreign ports in
accordance with the terms of an open marine policy, etc. The state
sought to recover for three violations of the act the sum of
$3,000.
The defendants filed an answer in which, among other things,
they averred that the above-named act was unconstitutional in that
it deprived them of their property without due process of law and
denied them the equal protection of
Page 165 U. S. 580
the laws in violation of the Constitution of the State of
Louisiana and also of the Constitution of the United States. They
also set up that the business concerning which defendants were
sought to be made liable, and the contracts made in reference to
such business, were beyond the jurisdiction of the State of
Louisiana, and that the defendants were not amenable to any
penalties imposed by its laws; that the contracts of insurance made
by defendants were made with an insurance company in the State of
New York, where the premiums were paid and where the losses
thereunder, if any, were also to be paid; that the contracts were
New York contracts, and that, under the Constitution of the United
States, the defendants had the right to do and perform any act or
acts within the State of Louisiana which might be necessary and
proper for the execution of those contracts, and that insofar as
Act No. 66 of the General Assembly of the State of Louisiana of the
year 1894 might be construed to prevent or interfere with the
execution of such contracts, the same was unconstitutional and in
violation of the Constitution of both the State of Louisiana and
the United States.
The case was tried upon an agreed statement of facts, as
follows: the Atlantic Mutual Insurance Company is a corporation,
created by the laws of the State of New York and domiciled and
carrying on business in that state, and the defendants made a
contract with that company for an open policy of marine insurance
for $200,000 on account of themselves and to cover cotton in bales
purchased and shipped by them on which drafts might be drawn for
the purchaser upon "Whom it might Concern." By the terms of the
policy, among other things, it was stated:
"Shipments applicable to this policy, to be reported to this
company by mail or telegraph the day purchased, warranted not to
cover cotton in charge of carriers on shore or during inland
transportation. No risk is to be insured by this policy until a
letter signed by _____, and addressed to the president of this
company, detailing the name of the vessel, particulars of the
shipment, with description of the property and amount to be
insured, is deposited in the post office at _____, which must be
done
Page 165 U. S. 581
while the property is in good safety, and in all cases prior to
the departure of the risk from _____, a duplicate of such letter to
be sent by the following mail. A new and separate policy to be
issued for each risk, the premium on which is to be paid in cash
upon the delivery of such policy in New York to E. Allgeyer &
Company."
The Atlantic Mutual Insurance Company is engaged in the business
of marine insurance, and has appointed no agent in the State of
Louisiana, and has not complied with the conditions required by the
laws of that state for the doing of business within the same by
insurance companies incorporated and domiciled out of the
state.
On the 23d of October, 1894, the defendants mailed to that
company a communication, stating insurance was wanted by defendants
for account of same (the open policy); loss, if any, payable at
Paris, in French currency, etc., for $3,400 on 100 bales of cotton,
which at the time of the communication, were within the State of
Louisiana. The premiums to be paid under the contract of insurance,
and the loss or losses under the same, were payable in the City of
New York, the premiums being remitted by the defendants from New
Orleans by exchange.
Defendants are exporters of cotton from the port of New Orleans
to ports in Great Britain and on the continent of Europe. They sell
cotton in New Orleans to purchasers at said ports. For the price of
every sale of cotton made by them, they, in accordance with the
general custom of business, draw a bill of exchange against the
purchaser, attaching to the same the bill of lading for the cotton
and an order on the Atlantic Mutual Insurance Company for a new and
separate policy of insurance, spoken of in the open policy, and the
form of the said order is as follows:
"Attached to draft No. ___ on _____, from E. Allgeyer & Co.,
New Orleans, 189, to Atlantic Mutual Ins. Co., New York."
"Marks and numbers, ___."
"Please deliver to _____ ________or order special policy for
Page 165 U. S. 582
$_____ on _____ bales cotton, per _____, from New Orleans to
_____."
"Respectfully,"
"E. Allgeyer & Co."
"Per __________"
This bill of exchange, with the bill of lading attached, is
sometimes negotiated with banks in the City of New York; sometimes
it is not negotiated at all, but forwarded direct for collection
from the purchaser of the cotton. The bill of exchange, with bill
of lading and order for insurance attached, in either case is sent
from New Orleans first to New York, where, after its negotiation or
before being forwarded from thence for collection, the order for
insurance is presented to the Atlantic Mutual Insurance Company.
Upon this showing, the insurance company in New York issues and
delivers to the holder of the exchange and bill of lading when the
former has been negotiated, or to the agent of defendant when the
exchange has not been negotiated, a new and a separate policy of
insurance for the cotton, in accordance with the contract made with
the defendants and evidenced by the policy above mentioned and
described. This new and separate policy, when received, is attached
to the bill of exchange. The exchange cannot be negotiated in New
York unless it is accompanied by both the bill of lading and order
for insurance and unless the new and separate policy issued by the
company is attached to it the purchaser of the cotton is under no
obligation to pay the bill drawn on him for the price of the
cotton. The new and separate policy delivered to the holder of the
exchange and bill of lading in New York, or to defendants' agent
there, as the case may be, is for the benefit of the holder of the
latter, or of defendants, according as the exchange has been
negotiated or not. The holder of the exchange becomes the owner of
the cotton covered by the bill of lading attached, and is the owner
of the policy of insurance covering the same in the event of a loss
within the terms of the policy.
The business thus described is conducted as above by the general
custom and agreement of all parties concerned.
Page 165 U. S. 583
The court of first instance before which the trial was had
ordered that plaintiff's demand be rejected and that judgment in
favor of the defendants be given. An appeal was taken from that
judgment to the supreme court of the state, which, after argument
before it and due consideration, reversed the judgment of the court
below and gave judgment in favor of the plaintiff for $1,000, as
for one violation of the statute, being the only one which was
proved.
State v. Allgeyer, 48 La.Ann. 104. The plaintiffs
in error ask a review in this Court of the judgment entered against
them by directions of the Supreme Court of Louisiana.
MR. JUSTICE PECKHAM, after stating the facts, delivered the
opinion of the Court.
There is no doubt of the power of the state to prohibit foreign
insurance companies from doing business within its limits. The
state can impose such conditions as it pleases upon the doing of
any business by those companies within its borders, and unless the
conditions be complied with, the prohibition may be absolute. The
cases upon this subject are cited in the opinion of the Court in
Hooper v. California, 155 U. S. 648.
A conditional prohibition in regard to foreign insurance
companies doing business within the State of Louisiana is to be
found in article 236 of the Constitution of that state, which reads
as follows:
"No foreign corporation shall do any business in this state
without having one or more known places of business and an
authorized agent or agents in the state upon whom process may be
served."
It is not claimed in this suit that the Atlantic Mutual
Insurance Company has violated this provision of the constitution
by doing business within the state.
Page 165 U. S. 584
In
Louisiana v. Williams, 46 La.Ann. 922, the Supreme
Court of that state held that an open policy of marine insurance,
similar in all respects to the one herein described and made by a
foreign insurance company not doing business within the state and
having no agent therein, must be considered as made at the domicile
of the company issuing the open policy, and that where in such case
the insurance company had no agent in Louisiana, it could not be
considered as doing an insurance business within the state.
The learned counsel for the state also admits in his brief the
fact that the contract (
i.e. the open policy) was entered
into at New York City.
In the course of the opinion delivered in this case by the
Supreme Court of Louisiana, that court said:
"The open policy in this case is conceded to be a New York
contract; hence the special insurance effected on the cotton
complained of here was a New York contract."
"The question presented is the simple proposition whether, under
the act, a party while in the state can insure property in
Louisiana in a foreign insurance company, which has not complied
with the laws of the state, under an open policy -- the special
contract of insurance and the open policy being contracts made and
entered into beyond the limits of the state."
"
* * * *"
"We are not dealing with the contract. If it be legal in New
York, it is valid elsewhere. We are concerned only with the fact of
its having been entered into by a citizen of Louisiana while within
her limits affecting property within her territorial limits. It is
the act of the party, and not the contract, which we are to
consider. The defendants who made the contract did so while they
were in the state, and it had reference to property located within
the state. Such a contract is in violation of the laws of the
state, and the defendants who made it were within the jurisdiction
of the state, and must be necessarily subject to its penalties
unless there is some inhibition in the federal or state
constitution, or that it violates one of those inalienable rights
relating
Page 165 U. S. 585
to persons and property that are inherent, although not
expressed, in the organic law. It does not forbid the carrying on
by the insurance company of its legalized business within the
state. It is a means of preventing its doing so without subscribing
to certain conditions which are recognized as legitimate and
proper. It does not destroy the constitutional right of the
citizens of New York to do business within the State of Louisiana
or of the citizens of Louisiana from insuring property. It says to
the citizens of New York engaged in insurance business that they
must, like its own citizens, pay a license and have an authorized
agent in the state as prerequisite to their doing said business
within its state, and says to its own citizens: you shall not make
a contract while in the state with any foreign insurance company
which has not complied with the laws. You shall not in this manner
contravene the public policy of the state in aiding and assisting
in the violation of the laws of the state. The sovereignty of the
state would be a mockery if it had not the power to compel its
citizens to respect its laws."
"
* * * *"
"The defendants while in the state undoubtedly insured their
property located in the state in a foreign insurance company under
an open policy. The instant the letter or communication was mailed
or telegraphed, the property was insured. The act of insurance was
done within the state, and the offense denounced by the statute was
complete."
"
* * * *"
"There is in the statute an apparent interference with the
liberty of defendants in restricting their rights to place
insurance on property of their own whenever and in what company
they desired, but in exercising this liberty, they would interfere
with the policy of the state that forbids insurance companies which
have not complied with the laws of the state from doing business
within its limits. Individual liberty of action must give way to
the greater right of the collective people in the assertion of well
defined policy designed and intended for the general welfare."
The general contract contained in the open policy, as well
Page 165 U. S. 586
as the special insurance upon each shipment of goods of which
notice is given to the insurance company, being contracts made in
New York and valid there, the State of Louisiana claims
notwithstanding such facts that the defendants have violated the
act of 1894 by doing an act in that state to effect for themselves
insurance on their property then in that state in a marine
insurance company which had not complied in all respects with the
laws of that state, and that such violation consisted in the act of
mailing a letter or sending a telegram to the insurance company in
New York describing the cotton upon which the defendants desired
the insurance under the open marine policy to attach. It is claimed
on the part of the state that its legislature had the power to
provide that such an act should be illegal, and to subject the
offender to the penalties provided in the statute. It is said by
the supreme court that the validity of such a statute has been
decided in principle in this Court in the case of
Hooper v.
California, 155 U. S. 648.
We think the distinction between that case and the one at bar is
plain and material. The State of California made it a misdemeanor
for a person in that state to procure insurance for a resident of
the state from an insurance company not incorporated under its
laws, and which had not filed a bond required by those laws
relative to insurance. Hooper was a resident of San Francisco, and
was the agent of the firm of Johnson & Higgins, who were
insurance brokers residing and having their principal place of
business in the City of New York, but having also a place of
business in the City and County of San Francisco, of which the
defendant had charge as their employee and agent. In response to a
request from a Mr. Mott, a resident of the State of California, the
defendant Hooper procured through his principals, Johnson &
Higgins, an insurance upon the steamer
Alliance, belonging
to said Mott, in the China Mutual Insurance Company, which was a
company not then and there incorporated under the laws of
California, and not having itself or by its agent filed the bond
required by those laws relating to insurance. The policy was
delivered by the defendant Hooper to Mott, the insured, at
Page 165 U. S. 587
San Francisco, who thereupon paid Hooper, as agent of Johnson
& Higgins, the premium for the insurance. The case states
that
"all the verbal acts of Mott, the insured, and also of the
defendant, and all his acts as agent in procuring said insurance,
were done in the City and County of San Francisco."
The Court held that the whole transaction amounted to procuring
insurance within the State of California by Hooper, residing there
and for a resident in the state, from an insurance company not
incorporated under its laws and which had not filed the bond
required by the laws of the state relative to insurance; that
Hooper, the defendant, acted as the agent of his principals in New
York City, who were average adjusters and brokers there, and who
had a place of business in San Francisco, and that Hooper, as such
broker, having applied for the insurance to his principals in New
York City, received the policy from them for delivery in San
Francisco, and the premium was there paid.
Upon the question as to the place where the contract was made,
MR. JUSTICE WHITE, speaking for the Court, said:
"It is claimed, however, that irrespective of this [commerce]
clause, the conviction here was illegal -- first because the
statute is, by its terms, invalid in that it undertakes to forbid
the procurement of a contract outside of the state, and secondly
because the evidence shows that the contract was in fact entered
into without the territory of California. The language of the
Statute is not fairly open to this construction. It punishes 'every
person who in this state procures or agrees to procure for a
resident of this state any insurance,' etc. The words 'who in this
state' cannot be read out of the law in order to nullify it under
the Constitution."
In the case before us, the contract was made beyond the
territory of the State of Louisiana, and the only thing that the
facts show was done within that state was the mailing of a letter
of notification, as above mentioned, which was done after the
principal contract had been made.
The distinction between a contract made within and that made
without the state is again referred to by MR. JUSTICE WHITE in the
same case, as follows:
"It is said that the
Page 165 U. S. 588
right of a citizen to contract for insurance for himself is
guarantied by the Fourteenth Amendment, and that therefore he
cannot be deprived by the state of the capacity to so contract
through an agent. The Fourteenth Amendment, however, does not
guaranty the citizen
the right to make within his state, either
directly or indirectly, a contract the making whereof is
constitutionally forbidden by the state. The proposition that
because a citizen might make such a contract for himself beyond the
confines of his state, therefore he might authorize an agent to
violate in his behalf the laws of his state, within her own limits,
involves a clear non sequitur,
and ignores the vital
distinction between acts done within and acts done beyond a state's
jurisdiction."
We do not intend to throw any doubt upon or in the least to
shake the authority of the
Hooper case, but the facts of
that case and the principle therein decided are totally different
from the case before us. In this case, the only act which it is
claimed was a violation of the statute in question consisted in
sending the letter through the mail notifying the company of the
property to be covered by the policy already delivered. We have,
then, a contract which it is conceded was made outside and beyond
the limits of the jurisdiction of the State of Louisiana, being
made and to be performed within the State of New York, where the
premiums were to be paid, and losses, if any, adjusted. The letter
of notification did not constitute a contract made or entered into
within the State of Louisiana. It was but the performance of an act
rendered necessary by the provisions of the contract already made
between the parties outside of the state. It was a mere
notification that the contract already in existence would attach to
that particular property. In any event, the contract was made in
New York, outside of the jurisdiction of Louisiana, even though the
policy was not to attach to the particular property until the
notification was sent.
It is natural that the state court should have remarked that
there is in this
"statute an apparent interference with the liberty of defendants
in restricting their rights to place
Page 165 U. S. 589
insurance on property of their own whenever and in what company
they desired."
Such interference is not only apparent, but it is real, and we
do not think that it is justified for the purpose of upholding what
the state says is its policy with regard to foreign insurance
companies which had not complied with the laws of the state for
doing business within its limits. In this case, the company did no
business within the state, and the contracts were not therein
made.
The Supreme Court of Louisiana says that the act of writing
within that state the letter of notification was an act therein
done to effect an insurance on property then in the state, in a
marine insurance company which had not complied with its laws, and
such act was therefore prohibited by the statute. As so construed,
we think the statute is a violation of the Fourteenth Amendment of
the federal Constitution in that it deprives the defendants of
their liberty without due process of law. The statute which forbids
such act does not become due process of law, because it is
inconsistent with the provisions of the Constitution of the Union.
The "liberty" mentioned in that amendment means not only the right
of the citizen to be free from the mere physical restraint of his
person, as by incarceration, but the term is deemed to embrace the
right of the citizen to br free in the enjoyment of all his
faculties, to be free to use them in all lawful ways, to live and
work where he will, to earn his livelihood by any lawful calling,
to pursue any livelihood or avocation, and for that purpose to
enter into all contracts which may be proper, necessary, and
essential to his carrying out to a successful conclusion the
purposes above mentioned.
It was said by Mr. Justice Bradley in
Butchers' Union
Company v. Crescent City Company, 111 U.
S. 746,
111 U. S. 762,
in the course of his concurring opinion in that case, that
"the right to follow any of the common occupations of life is an
inalienable right. It was formulated as such under the phrase
'pursuit of happiness' in the Declaration of Independence, which
commenced with the fundamental proposition that 'all men are
created equal; that they are endowed by their Creator with certain
inalienable rights; that among these are life,
Page 165 U. S. 590
liberty, and the pursuit of happiness.' This right is a large
ingredient in the civil liberty of the citizen."
Again, on page
111 U. S. 764,
the learned Justice said: "I hold that the liberty of pursuit --
the right to follow any of the ordinary callings of life -- is one
of the privileges of a citizen of the United States." And again, on
page
111 U. S.
765:
"But if it does not abridge the privileges and immunities of a
citizen of the United States to prohibit him from pursuing his
chosen calling, and giving to others the exclusive right of
pursuing it, it certainly does deprive him (to a certain extent) of
his liberty, for it takes from him the freedom of adopting and
following the pursuit which he prefers, which, as already
intimated, is a material part of the liberty of the citizen."
It is true that these remarks were made in regard to questions
of monopoly, but they well describe the rights which are covered by
the word "liberty," as contained in the Fourteenth Amendment.
Again, in
Powell v. Pennsylvania, 127 U.
S. 678,
127 U. S. 684,
MR. JUSTICE HARLAN, in stating the opinion of the Court, said:
"The main proposition advanced by the defendant is that his
enjoyment upon terms of equality with all others in similar
circumstances of the privilege of pursuing an ordinary calling or
trade, and of acquiring, holding, and selling property, is an
essential part of his rights of liberty and property, as guarantied
by the Fourteenth Amendment. The Court assents to this general
proposition as embodying a sound principle of constitutional
law."
It was there held, however, that the legislation under
consideration in that case did not violate any of the
constitutional rights of the plaintiff in error.
The foregoing extracts have been made for the purpose of showing
what general definitions have been given in regard to the meaning
of the word "liberty" as used in the amendment, but we do not
intend to hold that in no such case can the state exercise its
police power. When and how far such power may be legitimately
exercised with regard to these subjects must be left for
determination to each case as it arises.
Has not a citizen of a state, under the provisions of the
federal Constitution above mentioned, a right to contract
outside
Page 165 U. S. 591
of the state for insurance on his property -- a right of which
state legislation cannot deprive him? We are not alluding to acts
done within the state by an insurance company or its agents doing
business therein, which are in violation of the state statutes.
Such acts come within the principle of the
Hooper case,
supra, and would be controlled by it. When we speak of the
liberty to contract for insurance or to do an act to effectuate
such a contract already existing, we refer to and have in mind the
facts of this case, where the contract was made outside the state,
and as such was a valid and proper contract. The act done within
the limits of the state, under the circumstances of this case and
for the purpose therein mentioned, we hold a proper act -- one
which the defendants were at liberty to perform and which the state
legislature had no right to prevent at least with reference to the
federal Constitution. To deprive the citizen of such a right as
herein described without due process of law is illegal. Such a
statute as this in question is not due process of law, because it
prohibits an act which under the federal Constitution the
defendants had a right to perform. This does not interfere in any
way with the acknowledged right of the state to enact such
legislation in the legitimate exercise of its police or other
powers as to it may seem proper. In the exercise of such right,
however, care must be taken not to infringe upon those other rights
of the citizen which are protected by the federal Constitution.
In the privilege of pursuing an ordinary calling or trade, and
of acquiring, holding, and selling property, must be embraced the
right to make all proper contracts in relation thereto, and
although it may be conceded that this right to contract in relation
to persons or property or to do business within the jurisdiction of
the state may be regulated, and sometimes prohibited, when the
contracts or business conflict with the policy of the state as
contained in its statutes, yet the power does not and cannot extend
to prohibiting a citizen from making contracts of the nature
involved in this case outside of the limits and jurisdiction of the
state, and which are also to be performed outside of such
jurisdiction, nor can the
Page 165 U. S. 592
state legally prohibit its citizens from doing such an act as
writing this letter of notification, even though the property which
is the subject of the insurance may at the time when such insurance
attaches be within the limits of the state. The mere fact that a
citizen may be within the limits of a particular state does not
prevent his making a contract outside its limits while he himself
remains within it.
Milliken v. Pratt, 125 Mass. 374;
Tilson v.
Blair, 21 Wall. 241. The contract in this case was
thus made. It was a valid contract, made outside of the state, to
be performed outside of the state, although the subject was
property temporarily within the state. As the contract was valid in
the place where made and where it was to be performed, the party to
the contract, upon whom is devolved the right or duty to send the
notification in order that the insurance provided for by the
contract may attach to the property specified in the shipment
mentioned in the notice, must have the liberty to do that act and
to give that notification within the limits of the state, any
prohibition of the state statute to the contrary notwithstanding.
The giving of the notice is a mere collateral matter. It is not the
contract itself, but is an act performed pursuant to a valid
contract, which the state had no right or jurisdiction to prevent
its citizen from making outside the limits of the state.
The Atlantic Mutual Insurance Company of New York has done no
business of insurance within the State of Louisiana, and has not
subjected itself to any provisions of the statute in question. It
had the right to enter into a contract in New York with citizens of
Louisiana for the purpose of insuring the property of its citizens,
even if that property were in the State of Louisiana, and
correlatively the citizens of Louisiana had the right without the
State of entering into contract with an insurance company for the
same purpose. Any act of the state legislature which should prevent
the entering into such a contract, or the mailing within the State
of Louisiana of such a notification as is mentioned in this case,
is an improper and illegal interference with the conduct of the
citizen, although residing in Louisiana, in his right to contract
and to
Page 165 U. S. 593
carry out the terms of a contract validly entered into outside
and beyond the jurisdiction of the state.
In such a case as the facts here present, the policy of the
state in forbidding insurance companies which had not complied with
the laws of the state from doing business within its limits cannot
be so carried out as to prevent the citizen from writing such a
letter of notification as was written by the plaintiffs in error in
the State of Louisiana, when it is written pursuant to a valid
contract made outside the state and with reference to a company
which is not doing business within its limits.
For these reasons, we think the statute in question, No. 66 of
the Laws of Louisiana of 1894, was a violation of the federal
Constitution, and afforded no justification for the judgment
awarded by that court against the plaintiffs in error. That
judgment must therefore be
Reversed, and the case remanded to the Supreme Court of
Louisiana for further proceedings not inconsistent with his
opinion.
