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466

*Mr. Justice MCKENNA delivered the opin- state. ion of the Court.

An act of South Carolina approved March 2, 1916 (29 St. at Large, p. 676), entitled "An act to provide for the licensing of insurance brokers," defines in its first section an insurance broker "to be such person as shall be licensed by the insurance commissioner to represent citizens" of the state in placing insurance with insurers in the "state or in any other state or country." And it is provided in section 2 of the act, among other conditions, that only such persons may be licensed as are residents of the state and have been licensed insurance agents of the state for at least two years.

La Tourette offered to comply with all of the provisions of the act, but could not comply with the requirement of section 2, he being, as he alleged, a resident and citizen of New York; and he attacked the requirement

by a petition in the Supreme Court of the state by which he charged it to be a violation 'of the Constitution of the state and of section 2 of article 4 and the Fourteenth Amendment of *the Constitution of the United States in that he, a citizen of New York, was denied the privileges and immunities granted to citizens of the state of South Carolina and deprived of liberty and property without due process of law. He further alleged that the

commissioner had refused to issue a license

to him and prayed that he be required to

do so.

And it necessarily follows that, as insurance is affected with a public interest, those engaged in it or who bring about its consummation are affected with the same interest and subject to regulation as it is. A broker is so engaged-is an instrument of such consummation. The statute makes him the representative of the insured. He is also the representative of the insurer (Hooper v. California, 155 U. S. 648, 657, 15 Sup. Ct. 207, 39 L. Ed. 297), and his fidelity to both may be the concern of the state to secure. As said by the Supreme Court of the state (104 S. C. 501, 89 S. E. 398):

"It is important for the protection of the interests of the people of the state that the business should be in the hands of competent and trustworthy persons."

And we may say that this result can be more confidently and completely secured through resident brokers, they being immesioner of insurance.1 The motive of the statdiately under the inspection of the commisute, therefore, is benefit to insurer and insured and the means it provides seem to be appropriate.

"But we need not cast about for reasons

for the legislative judgment. We are not required to be sure of the precise reasons for of its exercise." It is enough if the legislation be passed in the exercise of a power of

its exercise or be convinced of the wisdom

government and has relation to that power. Rast v. Van Deman & Lewis, 240 U. S. 342,

365, 366, 36 Sup. Ct. 370, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455, and cases cited; also Bunting v. Oregon, 243 U. S. 426, 437, 37 Sup. Ct. 435, 61 L. Ed. 830, Ann. Cas. 1918A, 1043.

The insurance commissioner, by the Attorney General of the state and other counsel, demurred to the petition, asserting as the ground thereof that the requirement of the act was a legal exercise of the police power of the state and that La Tourette was not [3, 4] 2. This contention, that is, that the deprived of any privilege or immunity secured to citizens of other states by the Con-act discriminates against citizens of other states and thereby offends the *Constitution sustained the demurrer and dismissed the pe-mate reliance, and to it his counsel devote of the United States, is La Tourette's ultitition, and to that action this writ of error is directed.

stitution of the United States. The court

The pleadings and the action of the court indicate the question in the case, and, it would seem, the elements of it, but they are not clearly segregated in the argument of counsel. They seem to be (1) That La Tourette is deprived of his liberty and a property right by the act of the state in violation of the due process clause of the Fourteenth Amendment. (2) That the act discriminates against citizens of other states in favor of citizens of the state of South Carolina in violation of section 2, article 4, of the Constitution of the United States.

[1, 2] 1. This contention depends upon the character of the business of insurance, and it was decided in German Alliance Insurance Co. v. Kansas, 233 U. S. 389, 34 Sup. Ct. 612, 58 L. Ed. 1011, L. R. A. 1915C, 1189, to be clothed with a public interest and subject, therefore, to the regulating power of the 39 SUP.CT.-11

their entire argument. The state replies its power over insurance and that the legislation it justifies extends to its agents and is best executed when they are residents of the state. This view we have sustained, and manifestly to declare the legislation illegal

1 Sec. 3. Such insurance broker shall exercise due

care in the placing of insurance and shall procure from the supervising official in the state or county in which the home office of the insurer is located a solvent and is authorized to do business. He shall furnish the insured a statement showing the finanmation as the insured may require. He shall report

certificate to the effect that the insurer is safe and

cial condition of the insurer and such other infor

to the insurance commissioner in detail the amount

of insurance placed and the premiums paid therefor, and shall pay to the insurance commissioner the additional license fee herein provided. He shall submit to the insurance commissioner within thirty days after December 31 of each year an annual report of his transactions, and his books, papers and accounts shall at all times be open to the inspection of the insurance commissioner or a deputy appointed by him.

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Judgment affirmed.

is to put a restraint upon a power that has | so, it avoids discrimination. In other words, practical justifications. it is the effect of the statute that its reThe illegality of the act is, however, earn- quirement applies as well to citizens of the estly urged and that it is a "trade regulation" | state of South Carolina as to citizens of other and recognizes "the business, trade or occupa- states, residence and citizenship being diftion of an insurance broker as proper and le- ferent things. gitimate," and yet denies to La Tourette, a citizen of New York, the right to engage in it and thereby abridges the privileges and immunities that he has as a citizen. The contention is expressed and illustrated in a number of ways, and the privilege of a citizen is defined to be "the right to pursue and obtain happiness and safety" and "to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others," and that whatever rights a state

(248 U. S. 471)

POSTAL TELEGRAPH-CABLE CO. V.
TONOPAH & TIDEWATER
R. CO.
WESTERN UNION TELEGRAPH CO. v.
BALTIMORE & O. R. Co. POSTAL TEL-
EGRAPH-CABLE CO. V. CHICAGO
GREAT WESTERN R. R.

1919.)

Nos. 130, 217, and 404.

TELEGRAPHS AND TELEPHONES 32-REG-
CARRIER.

ULATION-"EXCHANGE" OF SERVICES WITH

grants to its own citizens are the measure (Argued Jan. 7 and 9, 1919. Decided Jan. 20, within its jurisdiction of the rights of the citizens of other states, and for these propositions the Slaughterhouse Cases, 16 Wall. 36, 21 L. Ed. 394, and Butchers' Union v. Crescent City Co., 111 U. S. 746, 4 Sup. Ct. 652, 28 L. Ed. 585, are cited. Other cases are also cited in illustration. We do not dispute the propositions, and to see if they determine against the act under review we must turn to its words, as did the Supreme Court of the state, whose interpretation of them we must accept. It said, speaking by Mr. Justice Hydrick:

"A citizen of any state of the Union who is a resident of this state and has been a licensed insurance agent of this state for at least two years may obtain a broker's license; on the other hand, a citizen of this state, who is not a resident of the state and has not been a licensed insurance agent of this state for two years, may not be licensed. No discrimination is made *on account of citizenship. It rests alone on residence in the state and experience in the business."

And the court further said:

"Citizenship and residence are not the same thing, nor does one include the other. Cummings v. Wingo, 31 S. C. 427, 435, 10 S. E. 107, and authorities cited. But our conclusion is not rested upon the mere use of the word 'residents'; for no doubt it might appear from the purpose and scope of an act that 'residents' was used in the sense of citizens.' If so, the

of

the act to regulate commerce (Comp. St. Act June 18, 1910, § 7, amending section 1 8563), by bringing telegraph, telephone, and cable companies within the act, with a proviso that nothing in the act shall be construed to prevent such companies from entering into contracts with common carriers, for the exchange of service, allows "exchange," which is barter, and carries with it no implication of reduction to money, as a common denominator, of services off the line as well as on it.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Exchange.]

In Error to the Supreme Court, Appellate Division, First Department of the State of New York.

Appeal from the United States Circuit Court of Appeals for the Second Circuit. Appeal from the United States Circuit Court of Appeals for the Seventh Circuit.

Three cases-one an action by the Postal Telegraph-Cable Company against the Tonopah & Tidewater Railroad Company, in which there was judgment for defendant, affirmed

court would so construe it; and in no event would the court sanction an evasion of the pur-by the Supreme Court of New York (176 App. pose and intent of this wise and wholesome Div. 910, 162 N. Y. Supp. 1140), and plainprovision of the Constitution based on mere verbiage. But there is nothing in the act to suggest any such intention. On the contrary, the words 'residents' and 'citizens' are both used, and each apparently in its ordinary legal sense, which is well defined and understood, making a distinction which is substantial in its purpose and one that is sanctioned by the highest judicial authority."

The court thus distinguishes between citizens and residents and decides that it is the purpose of the statute to do so and, by doing

tiff brings error; another a suit by the Baltimore & Ohio Railroad Company against the Western Union Telegraph Company, in which decree for plaintiff (241 Fed. 162) was affirmed by the Circuit Court of Appeals (242 Fed. 914, 155 C. C. A. 502), and defendant appeals; and the third a suit by the Chicago Great Western Railroad against the Postal Telegraph-Cable Company, in which decree for defendant (245 Fed. 592) was reversed by the Circuit Court of Appeals (249 Fed. 664), and defendant appeals. Affirmed.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

+473

Messrs. Jacob E. Dittus and Ode L. Rankin, both of Chicago, Ill., and Bynum E. Hinton, of Washington, D. C., for Postal Telegraph-Cable Co.

vision of expenses between the railroad and telegraph, for the use by the telegraph of the railroad's right of way for its poles, for monthly payment of a certain sum by the

*Mr. Rush Taggart, of New York City, for telegraph, and then agree, this being the Western Union Telegraph Co.

point now material, that up to a certain

Mr. Ralph M. Shaw, of Chicago, Ill., for amount calculated at the regular day rates Chicago Great Western R. R.

Messrs. J. Du Pratt White and Roberts Walker, both of New York City, for Baltimore & O. R. Co.

Mr. Charles W. Needham, of Washington, D. C., for Interstate Commerce Commission (by leave).

of the telegraph, it should deliver free of charge messages pertaining to the railroad business to any points on its system on or beyond the railroad lines, and that up to an amount calculated in similar manner the railroad should transport the materials, supplies and employés of the telegraph, needed for the construction, maintenance or renewal of

Mr. Justice HOLMES delivered the opinion the telegraph lines whether on or off the of the Court.

The first of these cases, Postal TelegraphCable Co. v. Tonopah & Tidewater Railroad Co., was a suit in the Municipal Court of the City of New York for services rendered to the Railroad Company. The defendant set up that the services consisted of the sending of telegrams relating to the defendant's business and were covered by a contract such as usually is made between railroads and telegraphs, under which such telegrams were to be sent free of specific charge. The question raised was the validity of the agreement. The Court decided that it was valid and judgment for the defendant was affirmed on appeal, 176 App. Div. 910, 162 N. Y. Supp. | 1140. The next case in number, The Western Union Telegraph Co. v. The Baltimore & Ohio Railroad Co., was brought by the Railroad Company in the District Court of the United States for the Southern District of New York and sets up a similar contract, which the Telegraph Company *now refuses to perform in consequence of a ruling of the Interstate Commerce Commission. It prays a declaration of the validity of the contract and specific performance. The plaintiff obtained a decree in the District Court, 241 Fed. 162, which was affirmed by the Circuit Court of Appeals, 242 Fed. 914. The last of the three cases, Postal Telegraph-Cable Co. v. Chicago Great Western Railroad, was another bill in equity, brought by the Railroad Company in the District Court of the United States for the Northern District of Illinois upon a similar contract, to prevent a multiplicity of suits by the Telegraph Company like that first above mentioned, to have the validity of the contract declared, and to obtain a decree that it be performed. The defendant prevailed in the District Court, 245 Fed. 592, but the decision was reversed by the Circuit Court of Appeals, and there the plaintiff obtained a decree, 249 Fed. 664. The only question upon which our decision is sought is the validity of the agreements, which are so far alike as to present a single issue here.

The contracts elaborately provide for the reciprocal rights of the companies, for a di

lines of the road. The latest ruling of the Interstate Commerce Commission is that these contracts for an exchange of service while *valid for services on the line are invalid as to services off the line, which last, it is held, must be charged for by the railroad upon the basis of its published rates and by the telegraph upon that of its charges reasonably charged to other customers for similar services. The Commission construes in this way a proviso added to section 1 of the act to regulate commerce (Act Feb. 4, 1887, c. 104, 24 Stat. 379) by an amendment of June 18, 1910, c. 309, § 7, 36 Stat. 544 (Comp. St. § 8563). This amendment brought telegraph, telephone and cable companies within the act but also inserted a proviso "that nothing in this Act shall be construed to prevent telephone, telegraph, and cable companies from entering into contracts, with common carriers, for the exchange of services." The question more specifically stated is whether the construction adopted by the Commission is right.

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We do not see how that construction can be got from the words of the act. The words are general and as certainly allow services off the line as services on it to be exchanged. In fact they do so almost in terms by allowing common carriers to exchange with cable companies. This being obvious, it is said that while the abstinence of the act from preventing exchanges covers the whole ground, the exchange of services off the line must be on the terms that we have stated, which makes the act as to them merely a superfluous permission to settle accounts periodically instead of paying for each transaction in cash. But "exchange" is barter and carries with it no implication of reduction to money as a common denominator. It contemplates simply an estimate, determined by self interest, of the relative value and importance of the services rendered and those received. This is admitted with regard to serv ices on the line, and if so whatever services can be exchanged can be exchanged in the same way. We cannot follow the argument from Santa Fé, Prescott & Phoenix Ry. Co. v. Grant Brothers Construction Co., 228 U.

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it then stood contracts for services off the line were unlawful. 12 I. C. C. 10, 12. Then the Amendment of 1910 was passed, and passed, we must suppose, having the opinion of the Commission and the notorious longstanding form of existing contracts in view. The contracts are complex, as we have said, and entire. We cannot believe that an act which purported to allow them meant to break them up. The Commission seems not to have believed it in its first ruling upon the amended act.

Our opinion is confirmed by a consideration of the further additions to section 1, in 1910, allowing free passes to *be given to the employés of telegraph, telephone and cable lines, and by some further matters of detail referred to in the judgments of the Courts below of which we have cited the reports. The interdependence of the companies is very intimate, and the trouble that would be caus

Nothing is gained by referring to the provisions in other sections or to those of the section to which the proviso is attached, for the provision is that nothing in the act, in whatever section it may occur, shall be twisted into preventing the exchange. The passion for equality sometimes leads to hollow formulas and the attempt to bring these arrangements under the head of undue preferences and the like hardly seems a natural result of the statute. No one knows which of the two would be found to be preferred as having the best of a very complex bargain. All the great benefits derived on one side are the consideration for all those conferred upon the other. The railroad and the telegraphed by a narrow construction of the act we behave grown together in mutual dependence and we are told that contracts of this sort for long terms have been nearly universal for fifty years. The contracts had been called to the attention of Congress repeatedly by the Commission, which, in December, 1906, stated that, so far as it could see, the full performance of them by the carriers would not affect any public or private interest adversely. It held however that under the law as

lieve would be great, with no advantage so far as we can see to any other users of the lines or roads. We do not go into more minute discussion because the result reached must stand on the plain words of the act, the meaning of which is confirmed rather than made doubtful by the circumstances in which the proviso was enacted and the events that had gone before.

Judgment and decrees affirmed.

*476

(248 U. S. 476)
BANK OF CALIFORNIA, NATIONAL
ASS'N, v. RICHARDSON, Treasurer

of State of California.

able resources of banks for the purposes of taxation are reached under the law of California, not by an immediate levy on the banks as the owner, but by annual assessment

(Submitted Oct. 14, 1918. Decided Jan. 27, and tax thereon made by the State Board of

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Rev. St. § 5219 (Comp. St. § 9784), merely authorizing states to tax stock of national banks to the owners of the shares, does not allow stock of one national bank owned by another such bank, and so taxed to it, to be considered as assets of the owner bank for purpose of taxing its stockholders on their shares. 4. TAXATION

10-NATIONAL

STOCK OWNED IN STATE BANK.

BANKS

A national bank, being subject to state taxation as a federal agency only to the extent authorized by Rev. St. § 5219 (Comp. St. § 9784), is not taxable as a stockholder of a state bank. 5. TAXATION 11-NATIONAL BANKS STOCK OWNED IN STATE BANK AS ASSETS. Stock of a state bank owned by a national bank, but not taxable to it, is to be considered an asset of it, in determining the value of stock in it taxable under Rev. St. § 5219 (Comp. St. $9784), to its stockholders.

Equalization against the stockholders of banks. The state law places the duty upon the banks to pay the tax assessed against their stockholders, with the obligation on the

stockholders to repay, sanctioned by a right conferred upon the banks to sell the stock of any stockholder failing to refund.

The Bank of California, organized under the National Banking Law (Act June 3, 1864, c. 106, 13 Stat. 99) and established in San Francisco, commenced this suit to recover the amount of a tax, levied against its stockholders in 1915 under the law previously *stated, which it had paid under protest claiming that the tax was not only unlawful under the state law but illegal under the law of the United States governing the right of a state to tax national banks and their stockholders. The case is here to review a judgment denying the right to recover, on the ground that the tax had been lawfully exacted under both the law of the state and that of the United States.

The decision below, in so far as it rested upon the state law, is binding and we put that subject out of view. To understand the contentions as to the law of the United States requires a brief statement of the tax levied and the particulars in which it is complained of. The capital of the bank was $8,500,000, evidenced by 85,000 shares of the par value of $100 each. D. O. Mills & Company was a national bank established at Sacramento and the California Bank was a stockholder in that bank to the extent of 2,501 shares. The California Bank was also the owner of 1,001 Mr. Justice Pitney, Mr. Justice Brandeis, and shares of stock in the Mission Bank, a bankMr. Justice Clarke, dissenting. ing corporation organized under the state law

In Error to the Supreme Court of the State and doing business in San Francisco. The of California.

Board of Equalization in 1915 fixed the value of all the assets of the California Bank at Action by the Bank of California, National the sum of $15,775,252.67. The Board includAssociation, against Friend William Richard-ed in the assets making up this amount the

son, State Treasurer of California. Judgment for defendant was affirmed by the Supreme Court of California (175 Cal. 813, 165 Pac. 152), and plaintiff brings error. Reversed and remanded.

stock standing in the name of the California Bank, both in the D. O. Mills National Bank and in the Mission State Bank; the first, the Mills National Bank stock, being computed as worth $625,546.30, and the second, the Mission State Bank stock, as worth $121,916.50.

Mr. E. S. Pillsbury, Mr. F. D. Madison, Mr. Oscar Sutro, and Mr. Alfred Sutro, all of San Upon these valuations, the Board assessed Francisco, Cal., for plaintiff in error. the California Bank as a stockholder in the Mr. U. S. Webb and Mr. Raymond Ben-D. O. Mills National Bank and as a stockholdjamin, both of San Francisco, Cal., for de- er in the Mission State Bank for the shares of fendant in error.

stock which it held in those banks, valuing each at the sum previously stated. Besides,

*Mr. Chief Justice WHITE delivered the the stockholders of the California National opinion of the Court.

Except as to real estate, which is taxed directly in the name of the owner, all the avail

were assessed for the value of the assets of that bank, including in the amount *the full value of the shares of stock owned by the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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