Allgeyer v. State of Louisiana (1897)

US Constitutional Law

Allgeyer v State of Louisiana
Image: ‘Georgia Cotton’ by Marilyn M King

The powers of state legislation, while binding upon the citizens residing within its borders, doubtless remain subject to the supremacy of the constitution, and so on this occasion, a marine insurance policy drafted and bargained for in another part of the country, was held to allow for the unfettered rights of the insured, while reminding the pursuers that justice is a two-way process.

In the fall of 1894, the defendant cotton exporters negotiated an open marine insurance policy with providers based in New York. The terms of the agreement were drafted and released on the proviso that the defendant completed the transaction by way of written letter to the insurers operational address.

Around the same time, Act No.66 of the State of Louisiana was enacted, so as to prevent foreign insurance operators from issuing policies within the State unless licensed accordingly, as was expressed below:

“[A]ny person, firm or corporation who shall fill up, sign or issue in this state any certificate of insurance under an open marine policy, or who in any manner whatever does any act in this state to effect for himself, or for another, insurance on property then in this state, in any marine insurance company which has not complied in all respects with the laws of this state, shall be subject to a fine of one thousand dollars for each offense…”

Because the defendants were based in New Orleans, the claimants held that their entering into a contract with an insurance firm outside of Louisiana constituted a violation of those powers, and thus sought recovery of $3,000 in the courts.

In defence of the claim, it was argued that the terms of Act No.66 were unconstitutional in that such powers were an interference with the fundamental right to carry on business in a manner befitting the principles of the U.S. Constitution, while noting that the contract entered into was exempt from state jurisdiction, and executed in full accordance with the law.

While judgment was made in favour of the defendants, an appeal before the Supreme Court of Louisiana resulted in damages of £1000 for the claimants. It was at this point that the defendants requested a review by the U.S. Supreme Court on grounds that the judgment had been made in error.

With an appreciation of the absolute powers conferred under Act No.66 (or art.236), it was found by the Court that in State of Louisiana v. Williams the state court had ruled that:

“[A]n open policy of marine insurance, similar in all respects to the one herein described, and made by a foreign insurance company, not doing business within the state and having no agent therein, must be considered as made at the domicile of the company issuing the open policy, and that where in such case the insurance company had no agent in Louisiana it could not be considered as doing an insurance business within the state.”

While it was further noted that the writing and despatch of the acceptance letter by the appellants, was therefore nothing more than consideration within the terms of the agreement, and not sufficient enough to serve as evidence that the policy was underwritten and concluded within the state of Louisiana. The Court also drew reference to Butchers’ Union Slaughterhouse Co v. Crescent City Live-Stock Landing Co., in which Bradley J stipulated how:

“[T]he right to follow any of the common occupations of life is an inalienable right. It was formulated as such under the phrase ‘pursuit of happiness’ in the Declaration of Independence, which commenced with the fundamental proposition that ‘all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness.’”

And so it was with these salient observations, that the Court ruled Act No.66 as wholly unconstitutional to the Fourteenth Amendment of the Constitution, which itself reads:

“No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

And was therefore unsustainable as an argument for penalty, after which it was held that the Louisiana Supreme Court decision be reversed in lieu of recommencement of proceedings in keeping with the original judgment.

Milroy v Lord (1862)

English Equity & Trusts

Milroy v Lord
‘Louisiana Bayou’ by Joseph Rusling Meeker

When a man of standing sought to create a trust for the purposes of a relative’s benefit, he was careful enough to provide specific instructions to his trustee, but unfortunately erred in putting them into action.

A number of years after his death, the beneficiary challenged the assigned executor on grounds that his written desire for her to gain lawful receipt was sufficient enough to constitute an enforceable covenant and that the courts were inter alia wrong to deny it.

In 1852 the settlor drafted a deed-poll that enabled fifty shares of his stock held in the Louisiana Bank to be transferred to his associate (who had become his appointed trustee) on the proviso that under a number of specific conditions he was to hold the shares upon trust for the benefit of his beloved niece.

He also stipulated that during the time between his grant and the date of her marriage or his death, the trustee was to manage the trust and pay any profits arising from the dividend interest to the beneficiary.

During this period the settlor also granted the trustee power of attorney over all of his financial matters, and so while it was possible for the trustee to complete the request, he never managed to fully execute transferral under the banking practice policy, which required the participation of either the settlor himself or a qualified solicitor, and where neither was found, that the power of attorney rested not with the trustee but the bank.

In the first instance the presiding judge awarded that by virtue of the deed construction, a valid trust had existed, and that the fifty shares were to be reissued by the executor to the existing trustee, where they would be again held upon trust for the niece (as had been the case before the settlor’s death).

However under appeal the Court took the equitable view that a legally incomplete gesture cannot be enforced (equity will not perfect an imperfect gift), and so held that it was impossible for the settlor to become a self-appointed trustee for the shares discussed.

Rather it was declared that the funds were to be held upon trust by the executor until amendments could be made to the deed that provided for redistribution in the manner first intended, or until the trustee and beneficiary chose to take individual action against him, while the court reminded both parties that:

“[I]n order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.”