Beryl Carroll v. Greenwich Insurance Company of New York

Decision Date27 November 1905
Docket NumberNo. 50,50
Citation199 U.S. 401,26 S.Ct. 66,50 L.Ed. 246
PartiesBERYL F. CARROLL, Auditor of State of the State of Iowa, Appt. , v. GREENWICH INSURANCE COMPANY OF NEW YORK et al
CourtU.S. Supreme Court

Messrs. Charles W. Mullan and Charles A. Clark for appellant.

Messrs.

[Argument of Counsel from pages 401-405 intentionally omitted] John G. Johnson, James C. Davis, and George H. Carr for appellees.

[Argument of Counsel from pages 405-407 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

This is a bill brought by a number of fire insurance companies, incorporated in states other than Iowa, to enjoin the auditor of that state from enforcing §§ 1754, 1755, and 1756 of the Iowa Code, 1897. The ground of the bill is that these sections are invalid under the state Constitution and the 14th Amendment of the Constitution and the United States. There is a reference also to article 1, § 10, and an oblique suggestion that the law impairs the obligation of contracts. The defendant demurred, and the circuit court issued an injunction as prayed, which was made perpetual by final decree. 125 Fed. 121. Thereupon the defendant appealed to this court.

By § 1754 'it shall be unlawful for two or more fire insurance companies doing business in this state, or for the officers, agents, or employees of such companies, to make or enter into any combination or agreement relating to the rates to be charged for insurance, the amount of commissions to be allowed agents for procuring the same, or the manner of transacting the fire insurance business within this state; and any such company, officer, agent, or employee violating this provision shall be guilty of a misdemeanor,' and a fine is imposed for each offense. By § 1755 it is made the duty of the auditor of state to summon for examination, under oath, any officer, agent, or employee suspected of violating § 1754, and if he determines that the company is guilty, or if the officer or agent fails to appear, to revoke the authority of the company to do business in the state for one year. By § 1756 an appeal is given from the decision of the auditor to the district court, the case to be tried de novo, as equitable causes are tried. By § 1757 the statements made upon the examination before the auditor or county court shall not be used in any criminal prosecution against the person making them.

The bill sets forth the necessity for every insurance company to gather all the experience available into one mass, and to analyze and classify it scientifically in order to ascertain the true value of risks, and that it will add greatly to the expense if each company is required to employ a separate person to do the work. It charges, upon information and belief, that if the plaintiffs attempt to combine their experience and to employ the same person to analyze it, the auditor will summon them and revoke their authority to do business in the state. It further alleges that the plaintiffs desire not only to do what has been stated for their guidance in establishing rates, but to agree what classes of risks are noninsurable, how various risks shall be classified, and as to other matters relating to the manner of doing business. It repeats the charge, upon information and belief, that if the plaintiffs proceed in this manner the auditor will order an examination and revoke their licenses, and prays for an injunction against enforcing in any manner the above-mentioned sections of the Iowa Code. The circuit court considered that the statute was not invalid under the Constitution of Iowa, but held that the prohibitions of agreements as to the amount of commissions to be allowed, or as to the manner of transacting the fire insurance business in the state, were contrary to the 14th Amendment. While waiving a discussion of the clause against combinations as to rates, it seemingly regarded the provisions of § 1754 as inseparable, and issued a general injunction forbidding the enforcement against the plaintiffs of §§ 1754, 1755, and 1756.

We assume, for purpose of decision, that the bill means that the auditor threatens and intends to enforce the act in case the plaintiffs do what they desire to do, and that if § 1754 is contrary to the Constitution of the United States, a proper case for an injunction in made out. Osborn v. Bank of United States, 9 Wheat. 738, 839, 840, 6 L. ed. 204, 228. See Cleveland v. Cleveland City R. Co. 194 U. S. 517, 531, 48 L. ed. 1102, 1106, 24 Sup. Ct. Rep. 756;Detroit v. Detroit Citizens' Street R. Co. 184 U. S. 368, 378, 46 L. ed. 592, 600, 22 Sup. Ct. Rep. 410. We assume further that the position of the plaintiffs is not affected by the fact that they are foreign corporations. The act is in general terms, and hits all insurance companies. If it is invalid as to some, it is invalid as to all. United States v. Ju Toy, 198 U. S. 253, 262, 263, 49 L. ed. 1040, 1043, 1044, 25 Sup. Ct. Rep. 644. That the requirements of the act might have been made conditions to foreign companies' doing business in the state (Fidelity Mut. Life Asso. v. Mettler, 185 U. S. 308, 46 L. ed. 922, 22 Sup. Ct. Rep. 662; Waters-Pierce Oil Co. v. Texas, 177 U. S. 28, 44 L. ed. 657, 20 Sup. Ct. Rep. 518), is immaterial, since, as we understand the statute, the legislature did not attempt to reach the result in that way. A company lawfully doing business in the state is no more bound by a general unconstitutional enactment than a citizen of the state. W. W. Cargill Co. v. Minnesota, 180 U. S. 452, 45 L. ed. 619, 21 Sup. Ct. Rep. 423.

We pass to the question upon which the circuit court decided the case; namely, the constitutionality of § 1754, the only section which we find it necessary to consider. Whatever may be thought of the policy of such attempts, it cannot be denied in this court, unless some of its decisions are to be overruled, that statutes prohibiting combinations between possible rivals in trade may be constitutional. The decisions concern not only statutes of the United States (Northern Securities Co. v. United States, 193 U. S. 197, 48 L. ed. 679, 24 Sup. Ct. Rep. 436; Swift & Co. v. United States, 196 U. S. 375, 49 L. ed. 518, 25 Sup. Ct. Rep. 276), but also state laws of similar import (Smiley v. Kansas, 196 U. S. 447, 49 L. ed. 546, 25 Sup. Ct. Rep. 289; National Cotton Oil Co. v. Texas, 197 U. S. 115, 49, L. ed. 689, 25 Sup. Ct. Rep. 379).

In view of these cases further discussion is unnecessary; but we will add a few words. While we need not affirm that in no instance could a distinction be taken, ordinarily if an act of Congress is valid under the 5th Amendment it would be hard to say that a state law in like terms was void under the 14th. It is true that, by the provision in the body of the instrument, Congress has power to regulate commerce, and that the act of Congress referred to in the cases cited was passed in pursuance of that power. But even if the 5th Amendment were read as contemporaneous with the original Constitution, the power given in the commerce clause would not be taken to override it so far as the 5th Amendment protects fundamental personal rights. It is only on the ground that the right to combine at will is a fundamental personal right that it can be held to be protected by the 14th Amendment, from any abridgment by the states. Cincinnati Street R. Co. v. Snell, 193 U. S. 30, 36, 48 L. ed. 604, 607, 24 Sup. Ct. Rep. 319. Many state laws which limit the freedom of contract have been sustained by this court, and therefore an objection to this law on the general ground that it limits that freedom cannot be upheld. There is no greater sanctity in the right to combine than in the right to make other contracts. Indeed, Mr. Dicey, in his recent work on Law and Public Opinion in England during the Nineteenth Century, indicates that it is out of the very right to make what contracts one chooses, so strenuously advocated by Bentham, that combinations have arisen which restrict the very freedom that Bentham sought to attain, and which even might menace the authority of the state. If, then, the statute before us is to be overthrown, more special reasons must be assigned.

At the argument before us more special reasons were assigned. It was pressed that there is no justification for the particular selection of fire insurance companies for the prohibitions discussed. With regard to this it should be observed, as is noticed by the appellees, that a general statute of Iowa prohibits all contracts or combinations to fix the price of any article of merchandise or commodity, or to limit the quantity of the same produced or sold in the state (Code of 1897, § 5060), and that this section covers fire insurance (Beechley v. Mulville, 102 Iowa, 602, 63 Am. St. Rep. 479, 70 N. W. 107, 71 N. W. 428). Therefore the...

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