Paul v. Virginia
|Paul v. Virginia by
|United States Supreme Court held that a corporation is not a citizen within the meaning of the Privileges and Immunities Clause. Of greater consequence, the Court further held that "issuing a policy of insurance is not a transaction of commerce," effectively removing the business of insurance beyond the United States Congress's legislative reach. — Excerpted from Paul v. Virginia on Wikipedia, the free encyclopedia.Paul v. Virginia, 75 U.S. (8 Wall) 168 (1869), was a historic case in corporate law in which the|
ERROR to the Supreme Court of Appeals of the State of Virginia. The case was thus:
An act of the legislature of Virginia, passed on the 3d of February, 1866, provided that no insurance company, not incorporated under the laws of the State, should carry on its business within the State without previously obtaining a license for that purpose; and that it should not receive such license until it had deposited with the treasurer of the State bonds of a specified character, to an amount varying from thirty to fifty thousand dollars, according to the extent of the capital employed. The bonds to be deposited were to consist of six per cent. bonds of the State, or other bonds of public corporations guaranteed by the State, or bonds of individuals, residents of the State, executed for money lent or debts contracted after the passage of the act, bearing not less than six per cent. per annum interest.
A subsequent act passed during the same month declared that no person should, 'without a license authorized by law, act as agent for any foreign insurance company' under a penalty of not less than $50 nor exceeding $500 for each offence; and that every person offering to issue, or making any contract or policy of insurance for any company created or incorporated elsewhere than in the State, should be regarded as an agent of a foreign insurance company.
In May, 1866, Samuel Paul, a resident of the State of Virginia, was appointed the agent of several insurance companies, incorporated in the State of New York, to carry on the general business of insurance against fire; and in pursuance of the law of Virginia, he filed with the auditor of public accounts of the State his authority from the companies to act as their agent. He then applied to the proper officer of the district for a license to act as such agent within the State, offering at the time to comply with all the requirements of the statute respecting foreign insurance companies, including a tender of the license tax, excepting the provisions requiring a deposit of bonds with the treasurer of the State, and the production to the officer of the treasurer's receipt. With these provisions neither he nor the companies represented by him complied, and on that ground alone the license was refused. Notwithstanding this refusal lCircuit Court of the city of Petersburg, the New York companies without any license, and offered to issue policies of insurance in their behalf, and in one instance did issue a policy in their name to a citizen of Virginia. For this violation of the statute he was indicted, and convicted in the Circuit Court of the city of Petersburg, and was sentenced to pay a fine of fifty dollars. On error to the Supreme Court of Appeals of the State, this judgment was affirmed, and the case was brought to this court under the 25th section of the Judiciary Act, the ground of the writ of error being that the judgment below was against a right set up under that clause of the Constitution of the United States,  which provides that 'the citizens of each State shall be entitled to all the privileges and immunities of citizens in the several States;' and that clause  giving to Congress power 'to regulate commerce with foreign nations, and among the several States.'
The corporators of the several insurance companies were at the time, and still are, citizens of New York, or of some one of the States of the Union other than Virginia. And the business of insurance was then, and still is, a lawful business in Virginia, and might then, and still may, be carried on by all resident citizens of the State, and by insurance companies incorporated by the State, without a deposit of bonds, or a deposit of any kind with any officer of the commonwealth.
Messrs. B. R. Curtis and J. M. Carlisle, for the plaintiff in error:
The single question is, whether under both or either of the clauses of the Constitution relied on by the insurance agent, the act of the legislature of Virginia in the particulars complained of, is unconstitutional.
I. A corporation created by the laws of one of the States, and composed of citizens of that State, is a citizen of that State within the meaning of the Constitution. 
Legislation imposing special and discriminating restrictions upon the carrying on of lawful business in one State by citizens of other States was expressly forbidden by an article of the Confederation,  by which it is provided, that 'the better to secure and perpetuate mutual friendship and intercourse among the people of the different States in this Union, the free inhabitants, & c., shall be entitled to all the privileges and immunities of free citizens in the several States, . . . and the people of each State shall have free ingress and egress to and from any other State, and shall enjoy therein all the privileges of trade and commerce, subject to the same duties, impositions, and restrictions as the inhabitants thereof respectively.'
It cannot be supposed that the Constitution-one of whose objects was to secure a more perfect Union-was intended to be less efficient in these respects than the Articles of Confederation had been. The defect in the article of the Confederation was not that it imposed too great restrictions upon the powers of the States, but that it was wholly without the protection and support of a supreme Federal power.
But insisting less upon this first head, we come to one which we deem conclusive.
II. The power conferred on Congress 'to regulate commerce,' does not exclude the commerce carried on by corporations.
(a.) The terms are broad enough to include it.
(b.) The state of facts existing at the time of the formation of the Constitution forbids the supposition that the commerce of corporations was excluded. From the time when commerce began to revive in the middle ages, corporations had been a great and important instrument of commerce. This fact is too conspicuous to be overlooked. The East India Company, founded 1599, and made perpetual in 1610, had, in its pursuit of commerce, conquered and held vast possessions. Every commercial people, from Wisby round to Venice, had employed these associations as the instruments of commerce. Morellet, a French writer on commercial subjects, whose book was published in 1770, gives a list of a large number of these companies. Postlethwaite, whose Dictionary of Trade appeared in 1774, does the same. We need but refer to The Merchant Adventurers' Company, in the time of Edward IV, to The Russian Merchants' Company, to The Levant Company, The Virginia Company, The Turkey Company, The Greenland Company, The Hudson Bay Company, The Hamburg Company, The Great Dutch East India Company. And when the Constitution was proposed, some of the States to be united under it, as ex. gr. Massachusetts and Plymouth, had their origin, and settlement, and growth under the charters of trading corporations. In 1776 Adam Smith, whose Wealth of Nations was extensively read and admired, speaks of them largely.
Even if it was not then known that corporations had been extensively employed as instruments of commerce, still it the terms of the Constitution were broad enough to include all instruments, all would be included. How much more, when the use of this instrumentality was then known, conspicuous, and of vast importance. The truth is, that the Constitution has no reference to the particular instruments to be employed. These instruments may be greatly varied, according to the views of interest and expediency of those who carry on commerce.
Single persons, general partnerships, special partnerships, associations not incorporated, but having some of the incidents, corporations technically, all these alike are agencies of commerce. The Constitution has no reference to the modes of association by which the commerce should be carried on. This was of no more importance than whether sails or steam were used in the matter.
Indeed, it seems absolutely necessary to hold commerce carried on by corporations to be included. No systematic and uniform plan would be otherwise secured, and we should have worse confusion than before the Constitution was adopted.
2. The business of insurance is commerce. It is intercourse for the purpose of exchanging sums of money for promises of indemnity against losses. The term 'commerce,' as used in the Constitution, has been authoritatively construed to have a signification wide enough to include this subject. In Gibbons v. Ogden,  Chief Justice Marshall said, 'Commerce undoubtedly is traffic, but it is something more; it is intercourse. It describes the commercial intercourse between nations, and parts of nations in all its branches.'
The contract of insurance is inseparable from commerce in modern times. It has become its indispensable handmaid. Indeed the right to sell merchandise, and the right to insure it, would seem in the nature of things to be inseparable. And so necessary an incident to commerce in its narrowest sense as the contract of insurance, must fall within the principles directly applicable to that commerce itself.
In Almy v. California,  Chief Justice Taney speaking of a tax on a bill of lading, uses this language:
^1 Art. IV, § 2.
^2 Art. I, § 8.
^3 Louisville Railroad Co. v. Leston, 2 Howard, 497.
^4 Article IV, § 1; 1 Stat. at Large, 4.
^5 9 Wheaton, 189.
^6 24 Howard, 169-174.
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