Union Brokerage Co v. Jensen

• Citation: 322 U.S. 202,88 L.Ed. 1227,152 A.L.R. 1072,64 S.Ct. 967
• Decision Date: 08 May 1944
• Docket Number: No. 291,291
• Parties: UNION BROKERAGE CO. v. JENSEN et al
• Court: United States Supreme Court

322 U.S. 202

64 S.Ct. 967

88 L.Ed. 1227

UNION BROKERAGE CO.

v JENSEN et al.

No. 291.

Argued Feb. 1, 1944.

Decided May 8, 1944.

Mr. Leonard Eriksson, of Fergus Falls, Minn., for petitioner.

Ordner T. Bundlie, of Pipestone, Minn., for respondents.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

This is a suit brought in one of the lower courts of Minnesota by the Union Brokerage Company against Jensen and Rime for breach of fiduciary obligations in relation to Union's business, that of customhouse brokerage. The only defense to the suit with which we are concerned is the alleged disability of Union to resort to Minnesota's courts for want of compliance with her laws governing the transaction of business in the State as a foreign corporation. Minn.L.1935, c. 200, Minn.Stat.1941, c. 303. The Supreme Court of Minnesota sustained this defense, reversed the judgment in favor of the peti- tioner, and ordered the suit dismissed. 215 Minn. 207, 9 N.W.2d 721. We brought the case here to determine the important question whether enforcement of the Minnesota Foreign Corporation Act in this situation runs counter to federal law pertaining to customhouse brokers or is barred by the Commerce Clause, Const. art. 1, § 8, cl. 3. 320 U.S. 724, 64 S.Ct. 70.

Another claim that state authority must yield to controlling federal authority over interstate and foreign commerce is thus presented. It becomes necessary therefore to ascertain precisely what demand the State has here made, in relation to what transactions or activity it is making such demand, in what way federal authority has regulated such transactions or activity, and, finally, whether the Commerce Clause by its own force, in case federal law has not actually taken control, excludes the State from the exercise of the power it has here asserted.

For many years the petitioner, a North Dakota corporation, conducted a customhouse brokerage business at Portal, North Dakota, a port of entry from Canada by way of the Canadian Pacific Railway. In July, 1940, the Canadian Pacific re-routed most of its shipments whereby they no longer entered the United States through Portal but came through Noyes, Minnesota, with the result that more than 90% of Union's business was diverted from Portal. After November, 1940, at which time respondent Jensen resigned as officer of Union under circumstances giving rise to this suit, Union began to do business at Noyes and was doing business in Minnesota when it brought this suit. We shall outline the nature of this customhouse brokerage business only so far as is relevant to a consideration of our problem.

On goods shipped from Canada into this country the consignee of imported merchandise must 'make entry' of them at the office of the collector of customs at Noyes either in person or by an authorized agent, and this must be done within forty-eight hours of the report of the vehicle which carried the goods unless the collector extends the time. Tariff Act of 1930, 46 Stat. 590, 722, 52 S.Ct. 1083, 19 U.S.C. § 1484(a), 19 U.S.C.A. § 1484(a). To make entry, the contents and value of the shipment must be declared and the tariff estimated, and the production of a certified invoice and a bill of lading is generally required. 19 U.S.C. § 1484(b)(c)(e)(g), 19 U.S.C.A. § 1484(b, c, e, g). Speed in making entry is vital, because goods cannot proceed to their ultimate destination until its completion. Apart from the fact that importers cannot always or even often make entries in person, the procedure makes demands upon skill and experience. The specialist in these services is the customhouse broker. In addition, he advances the duty in order that the goods may be cleared. 19 U.S.C. § 1505, 19 U.S.C.A. § 1505. The competence of the broker also bears on the efficient collection of customs duties in that the likelihood of additional assessment or refund after final determination of the duty is greatly lessened by accuracy in the tentative computation. But since errors and differences of opinion are inevitable, to insure collection of deficiencies, the Government requires a bond prior to release. 19 U.S.C. § 1499, 19 U.S.C.A. § 1499; 19 Code Fed.Reg. § 6.27.

The business of customhouse brokers, it is apparent, demands a sense of responsibility and skill. To protect importers as well as the Treasury, Congress has authorized the Secretary of the Treasury to 'prescribe rules and regulations governing the licensing as customhouse brokers of citizens of the United States of good moral character, and of corporations, associations, and partnerships, and may require as a condition to the granting of any license, the showing of such facts as he may deem advisable as to the qualifications of the applicant to render valuable service to importers and exporters.' 46 Stat. 759, 19 U.S.C. § 1641(a), 19 U.S.C.A. § 1641(a). Elaborate regulations define the investigation to be made of the character and reputation of the applicant and his experience in customs matters. 31A Code Fed.Reg. § 11.3(b). The applicant is then directed to appear before an examining subcommittee which determines the 'applicant's knowledge of customs law and procedure and his fitness to render valuable serv- ice to importers and exporters.' 31A Code Fed.Reg. § 11.3(e)(f). On approval of a favorable report of the sub-committee by the Committee on Enrollment and Disbarment of the Treasury Department, a license issues. 31A Code Fed.Reg. §§ 11.3(f)(g), 11.4. 'A licensed customhouse broker requires no further enrollment under the regulations in this part for the transaction, within the customs districts in which he is licensed, of any business relating specifically to the importation or exportation of merchandise under customs or internal-revenue laws.' 31A Code Fed.Reg. § 11.5.

Union's license authorizes it to do business in District No. 34 which embraces both Portal, North Dakota, and Noyes, Minnesota. 19 Code Fed.Reg. § 1.2. The regulations require it to keep records of its financial transactions as customhouse broker, and its books and papers must be kept on file available for at least five years. 31A Code Fed.Reg. § 11.8. Business relations with those who have been denied a license because of moral turpitude or those whose license has been revoked are prohibited, and the licensee is under a duty not to promote evasion of obligations to the Government. Prompt payment and accounting of funds due to the Government or his client are required of the broker, and responsible and ethical conduct is generally enjoined. 31A Code Fed.Reg. § 11.9.

Does this scheme of federal regulation of the business of customhouse brokers preclude the requirement of Minne- sota legislation which the Supreme Court of that State has enforced against Union? This brings us to a consideration of the precise demand against which Union protests. Minnesota has not singled out the customhouse brokerage business for legislation nor has she made requirements of foreign corporations doing customhouse brokerage business. What is in controversy is the applicability of a general law of Minnesota dealing with all foreign corporations. More specifically, § 20 of the Minnesota Foreign Corporation Act requires a certificate of any foreign corporation doing business in the State as a prerequisite for maintaining an action in a court of that State. In addition a filing fee of five dollars and initial license fee of fifty dollars is exacted on making application for a certificate of authority. §§ 21(a)(1), 6. Such an application must contain the name of the corporation, its home state or country, the address of its principal office and that of its proposed registered office in Minnesota, the names and addresses of its directors and officers, a statement of its aggregate number of authorized shares and kindred information. § 5. The applicant must furthermore consent to the service of process upon it and appoint an agent upon whom service can be made, and in lieu of such appointment or if the agent cannot be found, service may be made upon the Secretary of State. §§ 5(6), 13(a)(2). A foreign corporation doing business in Minnesota without a certificate of authority is subject to a penalty not exceeding $1,000 and 'an additional penalty not exceeding $100.00 for each month or fraction thereof during which it shall continue to transact business in this state without a certificate of authority therefor.' § 20(c). Having obtained such a certificate, the corporation is required to file annual reports on the basis of which an annual fee is assessed. The measure of the fee is substantially the same as that set for domestic corporations but in its computation the property and gross receipts of a foreign corporation are allocated between those derived from within and those derived from without Minnesota and credit is given for the latter. § 15; cf. Minn.L.1935, c. 230, § 2.

We have before us only one narrow aspect of this Minnesota legislation, namely the power of Minnesota to deny to Union access to its courts because it has not obtained a certificate required of all foreign corporations doing business in the State. We have not before us the taxing power of Minnesota over such a business as that of Union, for we do not know the extent or nature of the power to tax that Minnesota would claim against Union.

Of course Minnesota could not deny access to its courts to Union merely because it is engaged in the customs brokerage business. See Second Employers' Liability Cases, Mondou v. N.Y., N.H. & H.R. Co., 223 U.S. 1, 32 S.Ct. 169. 56 L.Ed. 327, 38 L.R.A.,N.S., 44, and Douglas v. New York, New Haven & H.R. Co., 279 U.S. 377, 49 S.Ct. 355, 73 L.Ed. 747. But the limited and defined control which federal authority has thus far seen fit to assert over customhouse brokers does not deny to Minnesota the power to subject Union to the same demand which it makes of all other foreign corporations seeking the facilities of Minnesota's courts. The...