Source: https://www.legalcrystal.com/case/90219/ozan-lumber-co-vs-union-county-nat-bank
Timestamp: 2019-04-18 13:18:38+00:00

Document:
Woods & Sons v. Carl, 203 U. S. 358 , and Allen v. Riley, 203 U. S. 347 , followed as to the power of a state, until Congress legislates, to make such reasonable regulations in regard to the transfer of patent rights as will protect its citizens from fraud.
There cannot be an exact exclusion or inclusion of persons and things in a classification for governmental purposes, and a general classification, otherwise proper, will not be rendered invalid because certain imaginary and unforeseen cases have been overlooked. In such a case, there is no substantial denial of the equal protection of the laws within the meaning of the Fourteenth Amendment.
State legislation which regulates business may well make distinctions depend upon the degrees of evil without being arbitrary and unreasonable. See Heath & Milligan Mfg. Co. v. Worst, post.
The purpose of the statute of Arkansas providing that all notes given for payment of patented articles must show that they were so given, and permitting defenses to be made to such notes in the hands of third parties, is to create and enforce a police regulation, aimed principally at itinerant vendors of patented articles, and the distinction in § 4 that it shall not apply to merchants and dealers who sell patented articles in the usual course of business is founded upon fair reasoning, and is not such a discrimination as violates the equal protection provisions of the Fourteenth Amendment.
Where the case was decided below solely upon constitutional grounds upon which the decision cannot rest, it must be remanded and if there are any other facts they can be presented upon another trial.
This case comes here upon certiorari directed to the Circuit Court of Appeals for the Eighth Circuit. The action was commenced in the United States circuit court for the Western District of Arkansas, upon certain promissory notes, which the defendant, the Ozan Lumber Company, in its answer alleged had been given by it in payment for a patented article, such notes not being executed upon a printed form, showing they were given in consideration of a patented machine, as required by the statute of Arkansas. Kirby's Digest Laws of Arkansas, §§ 513 to 516, inclusive.
A demurrer to the defense was interposed on the ground that it did not state facts constituting a defense. The circuit court sustained the demurrer, because, as it held, the act was in violation of the Fourteenth Amendment, as denying to the plaintiff the equal protection of the laws. 127 F. 206. The case was taken by writ of error to the circuit court of appeals, where the judgment was affirmed for the reason that the act was an illegal discrimination against patented articles. 145 F. 344. The application by defendant for a certiorari to review that judgment was granted.
The validity of this very statute of Arkansas (at least, until Congress legislates upon the subject) has already been affirmed by this Court ( Woods v. Carl, 203 U. S. 358 ), and the validity of statutes of a somewhat similar nature has also been affirmed in the case of Allen v. Riley, 203 U. S. 347 , immediately preceding the case above cited.
It is sought to avoid the authority of our decision upon this Arkansas statute by asserting that nothing was therein decided except the validity of the first section of the act, and that the validity of the act when considered in connection with the fourth section was not argued or decided. The fourth section reads as follows: "This act shall not apply to merchants and dealers who sell patented things in the usual course of business." Other reasons for an affirmance are set up in the brief of respondent.
deny to any person within its jurisdiction the equal protection of the laws; while the circuit court of appeals bases its judgment upon the unlawful discrimination evidenced by the act against those who are protected by a patent granted by the United States.
become proverbial, were, of course, in the mind of the legislature, and were included in this legislation. Indeed, they are the principal people to be affected by it.
The manufacturer of a patented article, who also sells it in the usual course of business in his store or factory, would probably come within the exception of § 4. He may be nonetheless a dealer, selling in the usual course of his business, because he is also a manufacturer of the article dealt in. Exceptional and rare cases, not arising out of the sale of patented things in the ordinary way, may be imagined where this general classification separating the merchants and dealers from the rest of the people might be regarded as not sufficiently comprehensive, because in such unforeseen, unusual, and exceptional cases the people affected by the statute ought, in strictness, to have been included in the exception. See opinion of circuit court herein, 127 Fed., supra. But we do not think the statute should be condemned on that account. It is because such imaginary and unforeseen cases are so rare and exceptional as to have been overlooked that the general classification ought not to be rendered invalid. In such case, there is really no substantial denial of the equal protection of the laws within the meaning of the Amendment.
and we think the failure to exempt some few others, as above suggested, ought not to render the whole statute void as resulting in an unjust and unreasonable discrimination.
The case of Connolly v. Union Sewer Pipe Co., 184 U. S. 540 , one of the cases cited by the circuit court, is not, in our opinion, applicable. The statute did not apply to agricultural products or livestock while in the hands of the producer or raiser. It was held that this exemption rendered the statute void, as denying to persons within the jurisdiction of the state the equal protection of the laws. The statute was held to create a classification of an arbitrary nature, applicable to large numbers of people, and yet not based upon any reasonable ground. Those who were exempted from its provisions were numerous and stood practically in the same relation to the subject matter of the statute as did the other class upon whom the statute acted, and no valid reason could be given why, if one were included, the other should be exempted. The same reasons applied to all the classes, and should have led to the same results with regard to all. There was no room for a proper or fair discrimination.
We think there is a distinction, founded upon fair reasoning, which upholds the principle of exemption as contained in the fourth section, and that, consequently, the statute does not violate the Fourteenth Amendment on the ground stated.
The case was decided by the courts below solely upon constitutional grounds, and upon those grounds the decision cannot rest. It must therefore be remanded, and if there be any other facts to be urged they can be presented on another trial.
The judgments of the Circuit Court and the circuit court of appeals must be reversed and the case remanded to the Circuit Court for further proceedings not inconsistent with this opinion.

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