National Council v. State Council, 203 U.S. 151 (1906)

U.S. Supreme Court

National Council v. State Council, 203 U.S. 151 (1906) National Council of Junior Order of United American Mechanics

of United States v. State Council of Virginia, Junior Order of

�United American Mechanics of State of Virginia

�No. 8

�Argued November 7, 8, 1906

�Decided November 1, 1906

�203 U.S. 151

ERROR TO THE SUPREME COURT OF

APPEALS OF THE STATE OF VIRGINIA

Syllabus

A benefit association incorporated under a state law and styling itself a National Council granted charters to various voluntary organizations in other states, styled State Councils, for similar purposes under conditions expressed in the charters. A dominant portion of the members of a State Council procured a charter from the state legislature granting the corporation so formed under the same name powers in some respects exclusive in that state to carry on a similar work, but saving any rights of property possessed by the National Council. In a suit, brought by the latter, held that:

Whatever relations may have existed between the National Council and the voluntary State Council, there was no contract between the former and the incorporated State Council which was impaired, and the act of incorporation was not void within the impairment clause of the federal Constitution.

A state has the right to exclude a foreign corporation and forbid it from constituting branches within its boundaries, and this power extends to a corporation already within its jurisdiction. A single foreign corporation may be expelled from a state by a special act if the act does not deprive it of property without due process of law.

The property of which a corporation cannot be deprived without due process of law under the Fourteenth Amendment does not include the mere right of a foreign corporation to extend its business and membership in a state which otherwise may exclude it from its boundaries.

104 Va. 197 affirmed.

The facts are stated in the opinion.

Page 203 U. S. 158

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is a writ of error to reverse a decree in favor of the defendant in error, the original plaintiff, and hereinafter called the plaintiff. 104 Va.197. The plaintiffs in error will be called the defendants. The plaintiff is a Virginia corporation. The principal defendant is a Pennsylvania corporation. The other defendants are alleged to be officers of a voluntary association, calling itself by the plaintiff's name, and are acting under a charter from the Pennsylvania corporation. The latter was incorporated in 1893, the articles of association reciting that the associates comprise the National Council, the supreme head of the order in the United States (where it previously had existed as a voluntary association). Its objects were to promote the interests of Americans and shield them from foreign competition, to assist them in obtaining employment, to encourage them in business, to establish a sick and funeral fund, and to maintain the public school system, prevent sectarian interference with the same, and uphold the reading of the Holy Bible in the schools. As the result of internal dissensions, the Virginia corporation was chartered in 1900, with closely similar objects, omitting those relating to the public schools. It seems to have consisted of the dominant portion of a former

Page 203 U. S. 159

voluntary State Council of the same name, from which a charter issued by the Pennsylvania corporation had been withdrawn. The act of incorporation declared that the new body "shall be the supreme head of the Junior Order of the United American Mechanics in the State of Virginia," and provides that it

"shall have full and exclusive authority to grant charters to subordinate councils, Junior Order United American Mechanics, in the State of Virginia, with power to revoke the same for cause."

The plaintiff and the voluntary organization of the defendants both have granted and intend to grant charters to subordinate councils in Virginia, and are obtaining members and fees which each would obtain but for the other, and are holding themselves out as the only true and lawful State Council of the Virginia Junior Order of United American Mechanics.

The plaintiff sued for an injunction, and the defendants, in their answer, asked cross-relief. The plaintiff obtained a decree enjoining the defendant corporation and the other defendants (declared to be shown by their answers to be its agents and representatives) as officers of the Virginia voluntary association, from continuing within the state the use of the plaintiff's name or any other name likely to be taken for it, from using the plaintiff's seal, from carrying out under such name the objects for which the plaintiff and the Virginia voluntary association were organized, from granting charters to subordinate councils in the state as the head of the order in the state, from interfering in any way with the pursuit of its objects by the plaintiff within the state, and from designating their officers within the state by applications set forth as used by the plaintiff. On appeal, the decree was affirmed, with a modification, merely by way of caution, providing that nothing therein contained should in anywise interfere with any personal or property rights that might have accrued before the date of the Virginia charter. The defendants had set up in their answer and insisted that the charter impaired the obligation of the contract existing between the plaintiff

Page 203 U. S. 160

and the principal defendant, contrary to Article I, § 10, of the Constitution, and also violated section 1 of the Fourteenth Amendment, and they took a writ of error from this Court.

The bill and answer state the two sides of the difference which led to the split at length. But those details have no bearing that needs to be considered here. The only question before us is the constitutionality of the act of the Virginia legislature granting the charter. The elements of that question are the appropriation of the name of the previously existing voluntary society and the exclusive right of granting subcharters in Virginia conferred by the words that we have quoted. Whether the persons who were using that name when they got themselves incorporated were using it rightly or wrongly does not matter if the legislature had the right to grant the name to them in either case. On the other hand, we do not consider the question stated to be disposed of by the limitation put upon the decree by the Supreme Court of Appeals. Unless the saving of personal and property rights existing at the date of the charter be read as a construction of the charter, it does not affect the scope or validity of the act. And, if so read, still it cannot be taken to empty the specific prohibitions in the decree of all definite meaning and to leave only an indeterminate injunction to obey the law at the defendants' peril. That injunction remains and imports what the words of the charter import -- that the plaintiff has been granted certain defined exclusive rights which the court will enforce.

The decree, however, goes beyond the rights which we have mentioned as given by the charter. In that respect, the discussion here must be limited again. Whether the plaintiff is using paraphernalia, or a ritual, or a seal which it should not be allowed to use is not before us here. T he charter says nothing about them, and its validity is not affected by any abuse of rights of property or of confidence which the plaintiff or its members may have practiced. This Court, we repeat,

Page 203 U. S. 161

cannot go beyond a decision upon the constitutionality of the charter granted, and we address ourselves to that.

The contract of which the obligation is alleged to have been violated is a contract between the plaintiff and the principal defendant. What that contract is supposed to have been is not stated, but manifestly there was none. It would have had to be a contract not to come into existence, at least with the plaintiff's present functions and name. There have been cases where administration was taken out on a prematurely born child and a suit brought for causing it to be born, per quod it died, but they have failed. Dietrich v. Northampton, 138 Mass. 14. See Walker v. Great Northern Ry. Co. of Ireland, 28 L.R.Ir. 69. An antenatal contract presents greater difficulties still. Even if we should substitute an allegation of a contract with the members of the plaintiff, the contention would fail. The contract, if any there was, was not that they would not become incorporated, but must be supposed to be that they would retain their subordination to the National Council or something of that sort. It is going very far to say that they contracted not to secede, but whether they did so or not, it was a matter outside the purview of the charter. There was nothing in that to hinder their returning to their allegiance. Whether any, and if any, what, contract was made (National Council, Junior Order United American Mechanics v. State Council, 64 N.J.Eq. 470, 473), and whether, if made, it must not be taken to have been made subject to the powers of the state, with which we are about to deal, are questions which we may pass. See Pennsylvania College Cases, 13 Wall. 190, 80 U. S. 218; Bedford v. Eastern Building & Loan Association, 181 U. S. 227.

The most serious aspect of the defense is presented by the matter of the plaintiff's name. If the legislation of a state undertook to appropriate to the use of its own creature a trade name of known commercial value, of course, the argument would be very strong that an act of incorporation could not interfere with existing property rights. And, no doubt,

Page 203 U. S. 162

within proper limits, the argument would be as good for a foreign corporation as for a foreign person. But that is not what has been done in this case.

The name in question is not the name of the principal defendant, but distinguished from that name as state and National Councils no doubt generally are distinguished by members of similar institutions. It is the name of a voluntary association of which the officers are defendants. But it is not used even by that association in its own right, but only under a charter from, and in the right of, the Pennsylvania corporation. Furthermore, the name is not associated with a product of any kind. Its only value to the defendants in a property sense is as tending to invite membership in a club which professes to derive its existence and its powers from the Pennsylvania company. It does not seem likely that anyone would join the plaintiff, and certainly no member could be retained, in ignorance of its alienation from the National Council. As the National Council has its branches elsewhere, and as the plaintiff is, on its face, a state organization, competition outside the state appears improbable. So that the claim of the defendants comes down to a claim of right to compete within the state, and a right, as we have said, of or in behalf of the Pennsylvania corporation, which controls the existence of its subordinate Virginia councils. Thus, the question as to the grant of the name passes over into the question as to the exclusive right of the plaintiff to issue charters, which was the other legislative grant.

The Supreme Court of Appeals was right, therefore, in treating the constitutional question as depending on the power of the state with regard to foreign corporations. That must decide the case. Now it is true, of course, that an unconstitutional law no more binds foreign corporations than it binds others. Carroll v. Greenwich Ins. Co., 199 U. S. 401, 199 U. S. 409. And no doubt a law specially directed against a foreign corporation might be unconstitutional, for instance, as depriving it of its property without due process of law. See Blake v.

Page 203 U. S. 163

McClung, 172 U. S. 239, 172 U. S. 260. But when the so-called property consists merely in the value that there might be in extending its business or membership into a state, that property, it hardly needs to be said, depends upon the consent of the state to let the corporation come into the state. The State of Virginia had the undoubted right to exclude the Pennsylvania corporation and to forbid its constituting branches within the Virginia boundaries. As it had that right before the corporation got in, so it had the right to turn it out after it got in. Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246. It follows that the state could impose the more limited restriction that simply forbade the granting of charters to "subordinate Councils, Junior Order United American Mechanics, in the State of Virginia."

It is argued that the power of the state in this case was less than it otherwise might have been, because it did not turn the Pennsylvania corporation out. The Supreme Court of Appeals says that the plaintiff's charter leaves the whole order of things as it existed unaffected except by the exclusive right of the plaintiff to issue subordinate charters. It is said that the general statutes recognized the defendant and authorized such associations to continue within the state. A subordinate Council of the order had been granted a special charter, which is not revoked. The conclusion is drawn that the restrictions upon the defendant which flow from the charter to the plaintiff amount to a denial of the equal protection of the laws of Virginia to a person within its jurisdiction. But the power of the state as to foreign corporations does not depend upon their being outside of its jurisdiction. Those within the jurisdiction, in such sense as they ever can be said to be within it, do not acquire a right not to be turned out except by general laws. A single foreign corporation, especially one unique in character like the National Council, might be expelled by a special act. It equally could be restricted in the more limited way.

There were many difficult questions presented to the state

Page 203 U. S. 164

court which cannot be reviewed here. As to the constitutionality of the plaintiff's charter, we are of opinion that the court was right.

Decree affirmed.