Source: https://supreme.justia.com/cases/federal/us/278/515/
Timestamp: 2019-04-19 10:28:44+00:00

Document:
1. By the statutes of Oklahoma, cotton gins operated for the ginning of seed cotton for the public for profit are declared to be public utilities in a public business, and no one may engage in the business without first securing a permit from a public commission, which is empowered to regulate the business and its rates and charges, as in the case of transportation and transmission companies. Held: that the right of one who has complied with the statutes and secured his permit is not a mere license, but a franchise granted by the state in consideration of the performance of a public service, and, as such it constitutes a property right within the protection of the Fourteenth Amendment. P. 278 U. S. 519.
2. While the franchise thus acquired does not preclude the state from making similar valid grants to others, it is exclusive against attempts to operate a competing gin without a permit or under a void permit, in either of which events the owner may resort to a court of equity to restrain the illegal operation as an invasion of his property rights if it threaten an impairment of his business. P. 278 U. S. 521.
3. An individual who obtained his permit to operate a cotton gin upon showing a public necessity therefor, as required by the statute, held entitled to an injunction restraining the state commission from granting a permit to a corporation without such a showing under a separable provision of the statute violating the equal protection clause of the Fourteenth Amendment. Id.
. 4. A state statute regulating the business of ginning cotton for the general public for profit which permits an individual to engage in such business only upon his first showing a public necessity therefor, but allows a corporation to engage in the same business, in the same locality, without such showing, discriminates against the individual in violation of the equal protection clause. The classification attempted is essentially arbitrary because based upon no real or substantial differences reasonably related to the subject of the legislation. P. 278 U. S. 521.
5. A cooperative ginning corporation formed under Oklahoma Comp.Stats.1921, § 5637, et seq., having a capital stock which, up to a certain amount, may be subscribed for by anyone; which is allowed to do business for others than its members, and to make profits and declare dividends not exceeding 8% per annum, and to apportion the remainder of its earnings among its members ratably upon the amount of products sold by them to the corporation is not a mutual association. P. 278 U. S. 523.
6. A proviso added to an existing statutory provision by a subsequent legislature, and the effect of which if it were part of the original enactment would be to render the whole unconstitutional, may be treated as a separate nullity, allowing the original to stand. P. 278 U. S. 525.
7. In such case, one who sought and obtained property rights under the original and valid part of the statute is not estopped from attacking the proviso. P. 278 U. S. 527.
Commission of Oklahoma from issuing to a corporation a license to operate a cotton gin, and to enjoin the corporation from establishing and operating one. At an earlier stage, there was an order denying a preliminary injunction, which was affirmed by this Court, 274 U.S. 719.
"Provided, that, on the presentation of a petition for the establishment of a gin to be run cooperatively, signed by one hundred (100) citizens and taxpayers of the community where the gin is to be located, the Corporation Commission shall issue a license for said gin."
horticultural associations not having capital stock or being conducted for profit may be formed for the purpose of mutual help by persons engaged in agriculture or horticulture. Under a statute passed in 1919 (Comp.Stats.1921, § 5637 et seq.), 10 or more persons may form a corporation for the purpose of conducting, among others, an agricultural or horticultural business upon a cooperative plan. A corporation thus formed is authorized to issue capital stock to be sold at not less than its par value. The number of shares which may be held by one person, firm, or corporation is limited. Dividends may be declared by the directors at a rate not to exceed 8 percent per annum. Provision is made for setting aside a surplus or reserve fund, and 5 percent may be set aside for educational purposes. The remainder of the profits of the corporation must be apportioned and paid to its members ratably upon the amounts of the products sold to the corporation by its members and the amounts of the purchases of members from the corporation, but the corporation may adopt bylaws providing for the apportionment of such profits in part to nonmembers upon the amounts of their purchases and sales from or to the corporation.
appellant brought this suit to enjoin the commission from issuing the permit prayed for and to enjoin the Durant company from the establishment of a cotton gin at Durant, upon the ground that the proviso, as construed and applied by the commission (see Mont. Bank v. Yellowstone County, 276 U. S. 499, 276 U. S. 504), was invalid as contravening the due process and equal protection of the law clauses of the Fourteenth Amendment. The court below, consisting of three judges under § 266, Judicial Code, denied the prayer for an injunction and entered a final decree dismissing the bill. 26 F.2d 508.
1. We first consider the preliminary contention made on behalf of appellees that appellant has no property right to be affected by operations of the Durant company, and therefore no standing to invoke the provisions of the Fourteenth Amendment or to appeal to a court of equity.
It already appears that cotton gins are declared by the Oklahoma statute to be public utilities, and their operation for the purpose of ginning seed cotton to be public business. No one can operate a cotton gin for such purpose without securing a permit from the commission. In their regulation and control, the commission is given the same authority which it has in respect of transportation and transmission companies, and the same power to fix rates, charges, and regulations. Comp.Stats.1921, §§ 3712, 3713, 3715. Under § 3714 as amended, supra (laying the proviso out of consideration for the moment), the commission may deny a permit for the operation of a gin where there is no public necessity for it, and may authorize a new ginning plant only after a showing is made that such plant is a needed utility. Both parties definitely concede the validity of these provisions, and, for present purposes at least, we accept that view.
a mere license, but a franchise, granted by the state in consideration of the performance of a public service, and as such it constitutes a property right within the protection of the Fourteenth Amendment. See Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 172 U. S. 9; California v. Pacific Railroad Co., 127 U. S. 1, 127 U. S. 40-41; Monongahela Navigation Co. v. United States, 148 U. S. 312, 148 U. S. 328-329; Owensboro v. Cumberland Telephone Co., 230 U. S. 58, 230 U. S. 64-66; Boise Water Co. v. Boise City, 230 U. S. 84, 230 U. S. 90-91; McPhee & McGinnity Co. v. Union Pac. R. Co., 158 F. 5, 10-11.
"a right, privilege, or power of public concern, which ought not to be exercised by private individuals at their mere will and pleasure, but should be reserved for public control and administration, either by the government directly or by public agents, acting under such conditions and regulations as the government may impose in the public interest, and for the public security. . . . No private person can establish a public highway, or a public ferry, or railroad, or charge tolls for the use of the same, without authority from the legislature, direct or derived. These are franchises. . . . The list might be continued indefinitely."
of rates, charges, and regulations. Under these conditions, to engage in the business is not a matter of common right, but a privilege, the exercise of which, except in virtue of a public grant, would be in derogation of the state's power. Such a privilege, by every legitimate test, is a franchise.
Appellant, having complied with all the provisions of the statute, acquired a right to operate a gin in the City of Durant by valid grant from the state, acting through the corporation commission. While the right thus acquired does not preclude the state from making similar valid grants to others, it is, nevertheless, exclusive against any person attempting to operate a gin without obtaining a permit, or, what amounts to the same thing, against one who attempts to do so under a void permit, in either of which events the owner may resort to a court of equity to restrain the illegal operation upon the ground that such operation is an injurious invasion of his property rights. 6 Pomeroy's Equity Jurisprudence, 3d ed. (2 Equitable Remedies) §§ 583, 584; People's Transit Co. v. Henshaw, 20 F.2d 87, 90; Bartlesville El. L. & P. Co. v. Bartlesville I. R. Co., 26 Okl. 453; Patterson v. Wollmann, 5 N.D. 608, 611; Millville Gas L. Co. v. Vineland L. & P. Co., 72 N.J.Eq. 305, 307. The injury threatened by such an invasion is the impairment of the owner's business, for which there is no adequate remedy at law.
If the proviso dispensing with a showing of public necessity on the part of the Durant and similar companies is invalid as claimed, the foregoing principles afford a sufficient basis for the maintenance of the present suit, against not only the Durant company, but the members of the commission who threaten to issue a permit for the establishment of a new gin by that company without a showing of public necessity.
and applied by the commission and by the court below, its effect is to relieve all corporations organized under the act of 1919 from an onerous restriction upon the right to engage in a public business which is imposed by the statute upon appellant and other individuals, as well as corporations organized under general law, engaging in such business. That a greater burden thereby is laid upon the latter than upon the former is clear. Immunity to one from a burden imposed upon another is a form of classification, and necessarily results in inequality, but not necessarily that inequality forbidden by the Constitution. The inequality thus prohibited is only such as is actually and palpably unreasonable and arbitrary. Arkansas Gas Co. v. Railroad Comm'n, 261 U. S. 379, 261 U. S. 384, and cases cited.
"must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike."
and just relation to the act in respect to which the classification is proposed and can never be made arbitrarily and without any such basis."
"Gulf, Colorado & Santa Fe Ry. v. Ellis, 165 U. S. 150, 165 U. S. 155."
Louisville Gas Co. v. Coleman, supra, p. 277 U. S. 37.
By the terms of the statute here under consideration, appellant, an individual, is forbidden to engage in business unless he can first show a public necessity in the locality for it; while corporations organized under the act of 1919, however numerous, may engage in the same business in the same locality no matter how extensively the public necessity may be exceeded. That the immunity thus granted to the corporation is one which bears injuriously against the individual does not admit of doubt, since, by multiplying plants without regard to necessity, the effect well may be to deprive him of business which he would otherwise obtain if the substantive provision of the statute were enforced.
because based upon no real or substantial differences having reasonable relation to the subject dealt with by the legislation. Power Co. v. Saunders, 274 U. S. 490, 274 U. S. 493; Louisville Gas Co. v. Coleman, supra, p. 277 U. S. 39; Quaker City Cab. Co. v. Pennsylvania, supra, p. 277 U. S. 402.
3. The further question must be answered: are the proviso and the substantive provisions which it qualifies separable, so that the latter may stand although the former has fallen? If the answer be in the negative -- that is to say, if the parts of the statute be held to be inseparable -- the decree below should be affirmed, since, in that event, although the proviso be bad, the inequality created by it would disappear with the fall of the entire statute, and no basis for equitable relief would remain. But, for reasons now to be stated, we are of opinion that the substantive provisions of the statute are severable, and may stand independently of the proviso.
If § 3714 as originally passed had contained the proviso, the effect would be to render the entire section invalid, because then the result of upholding the substantive part of the section notwithstanding the invalidity of the proviso would have been to make applicable to the Durant company and others similarly organized, the requirement in respect of a showing of public necessity, although the legislative will contemporaneously expressed as part of the same act was to the contrary. In this state of the matter, to hold otherwise would be to extend the scope of the law in that regard so as to embrace corporations which the legislature passing the statute had, by its very terms, expressly excluded, and thus to go in the face of the rule that, where the excepting proviso is found unconstitutional, the substantive provisions which it qualifies cannot stand. Davis v. Wallace, 257 U. S. 478, 257 U. S. 484.
is ineffective for want of power as from that which is authorized by law."
State ex rel. McNeal v. Dombaugh, 20 Ohio St. 167, 174-175.
But the proviso here in question was not in the original section. It was added by way of amendment many years after the original section was enacted. If valid, its practical effect would be to repeal by implication the requirement of the existing statute in respect of public necessity insofar as the Durant and similar corporations are concerned. But since the amendment is void for unconstitutionality, it cannot be given that effect, "because an existing statute cannot be recalled or restricted by anything short of a constitutional enactment." Davis v. Wallace, supra, p. 257 U. S. 485.
To this effect also is Truax v. Corrigan, 257 U. S. 312, 257 U. S. 341-342. In that case, there had been in force in Arizona, both as a state and a territory, for many years a general statute granting authority to judges of the courts of first instance to issue writs of injunction. The statute was amended so as to except from its operation certain cases between employers and employees. The amendment was declared invalid as denying the equal protection of the laws, but the general provision of the statute as it originally stood was upheld upon the ground that it had been in force for many years, and that an exception in the form of an unconstitutional amendment could not be given the effect of repealing it. And see Waters-Pierce Oil Co. v. Texas, 177 U. S. 28, 177 U. S. 47.
the existing statute, that statute must stand as the only valid expression of the legislative intent.
"But nothing can come in conflict with a nullity, and nothing is therefore repealed by this act on the ground solely of its being inconsistent with a section of this law which is entirely unconstitutional and void."
"We suppose it clear that no law can be changed or repealed by a subsequent act which is void because unconstitutional. . . . An act which violates the Constitution has no power, and can, of course, neither build up nor tear down. It can neither create new rights nor destroy existing ones. It is an empty legislative declaration without force or vitality."
See also People v. Butler Street Foundry, 201 Ill. 236, 257-259; People v. Fox, 294 Ill. 263, 269; McAllister v. Hamlin, 83 Cal. 361, 365; State ex rel. v. Mills, 231 Mo. 493, 498-499; Ex parte Davis, 21 F. 396, 397. The question is not affected by the fact that the amendment was accomplished by inserting the proviso in the body of the original section and reenacting the whole at length. Truax v. Corrigan, supra; People v. Butler Street Foundry, supra, pp. 258-259; State ex rel. v. Mills, supra, p. 499.
v. Commission of Fisheries, 257 U. S. 223, 257 U. S. 225. But here, the proviso under attack, having been adopted by a subsequent act and being invalid, had no effect, as we have already said, upon the provisions of the statute. As applied to this case, it began and ended as a futile attempt by the legislature to bring about a change in the law which a previous legislature had enacted. For this purpose, and as construed and applied below, it was a nullity, wholly "without force or vitality," leaving the provisions of the existing statute unchanged. It necessarily results that appellant's rights came into being and owed their continued existence wholly to that statute, disconnected from the ineffective proviso, and it is that statute, so disconnected, which measures the extent to which he may enjoy and defend such rights. In seeking and obtaining the benefits of the statute, appellant proceeded without regard to the proviso, neither affirming nor denying nor in contemplation of law acquiescing in its validity, and his action cannot be made a basis upon which to rest a successful claim of an estoppel in pais or of a waiver of the right to maintain the constitutional challenge here made.
We conclude that the proviso is unconstitutional as contravening the equal protection clause of the Fourteenth Amendment; that the remainder of the statute is separable, and affords the sole rule in respect of the questions here to be determined; that the Corporation Commission is without power to issue permits to corporations organized under the act of 1919 without a showing of public necessity; that the Durant company is without authority to do business in the absence of a permit thus issued, and that appellant is entitled to the relief for which he prays.
from the Corporation Commission a license to operate a cotton gin in the City of Durant. [Footnote 1] Later, the Durant Cooperative Gin Company applied to the Commission under that statute for a license to operate a gin in the same city. In support of its application, it presented a certificate of organization under Chapter 147 of the Laws of 1919, entitled "An act providing for the organization and regulation of cooperative corporations" (Oklahoma Compiled Statutes 1921, §§ 5637-5652), and a petition signed by one hundred citizens and taxpayers of that community requesting that the license be issued. Frost objected to the granting of a license on the ground that there was no necessity for an additional gin in that city. The Commission ruled that, upon the showing made, it was obliged by § 3714, as so amended, to issue a license without hearing evidence as to necessity, and indicated its purpose to issue the license. Thereupon, Frost brought this suit under § 266 of the Judicial Code against the Commission, the Attorney General, and the Durant Company to enjoin granting the license. A restraining order issued upon the filing of the bill.
by the Durant Company would be illegal, and that to issue a license which authorized such competition would take Frost's property without due process of law and deny to him the equal protection of the law. The district court denied both the injunction and the motion to dismiss, and it dissolved the restraining order. Upon direct appeal by Frost, this Court affirmed the interlocutory decree per curiam in Frost v. Corporation Commission, 274 U.S. 719, on the authority of Chicago Great Western Ry. Co. v. Kendall, 266 U. S. 94, 266 U. S. 100. Thereupon, the facts being stipulated, the case was submitted in the district court on final hearing to the same judges, and a decree was entered dismissing the bill. 26 F.2d 508. This appeal presents the same questions which were argued on the appeal from the interlocutory decree.
citizens and taxpayers of the community where the gin is to be located, the Corporation Commission shall issue a license for said gin."
Session Laws 1925, c. 109. In 1926, the Supreme Court of Oklahoma held in Choctaw Cotton Oil Co. v. Corporation Commission, 121 Okl. 51, 52, that a corporation organized under Chapter 147 of the Laws of 1919 was run cooperatively within the meaning of § 3714 as so amended.
The attack upon the statute is rested mainly upon the contention that, by requiring issuance of a license to so-called cooperative corporations organized under the law of 1919, the statute as amended in 1925 creates an arbitrary classification. The classification is said to be arbitrary because the differences between such concerns and commercial corporations or individuals engaged in the same business are in this connection not material. The contention rests, I think, upon misapprehensions of fact. The differences are vital, and the classification is a reasonable one. Before stating why I think so, other grounds for affirming the judgment should be mentioned.
First. The bill alleges, and the parties have stipulated, that Frost was licensed under § 3714 of the Compiled Statutes as amended by the Act of 1925. The stipulation does not show that, prior to the amendment he held any license. His alleged property right to conditional immunity from competition rests wholly on the statute now challenged. It is settled that one cannot in the same proceeding both rely upon a statute and assail it. Hurley v. Commission of Fisheries, 257 U. S. 223, 257 U. S. 225. Compare Great Falls Mfg. Co. v. Atty. General, 124 U. S. 581, 124 U. S. 598-599; Wall v. Parrot Silver & Copper Co., 244 U. S. 407, 244 U. S. 411-412; St. Louis Malleable Casting Co. v. Prendergast Co., 260 U. S. 469, 260 U. S. 472-473; Buck v. Kuykendall, 267 U. S. 307, 267 U. S. 316; Booth Fisheries Co. v. Industrial Commission, 271 U. S. 208, 271 U. S. 211; United Fuel Gas Co. v. Railroad Commission, ante, p. 278 U. S. 300. This established rule requires affirmance of the judgment below.
"What property rights are taken from petitioners by licensing another gin, under the foregoing proviso? What rights of any kind could the licensing of another gin affect? It does not disturb the property of petitioners, nor prevent the free operation of their gins. The only right which could be affected by such license is the right of petitioners to operate their gin without competition, a right which is not secured to them either by the state or federal Constitution, hence the contention as to taking their property without due process of law cannot be sustained."
As no property right of Frost is invaded -- his suit must fail however objectionable the statute may be.
violate the quality clause. Whether the license was issued to Frost upon a showing of necessity does not appear. The mere granting of a license to the Durant Company later on different, and perhaps easier, terms would not violate Frost's constitutional right to equality, since he has already secured his license under the statute as written. The fact that someone else similarly situated may hereafter be refused a license, and would be thereby discriminated against, is obviously not of legal significance here. Southern Railway Co. v. King, 217 U. S. 524; Standard Stock Food Co. v. Wright, 225 U. S. 540; Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571; Arkadelphia Co. v. St. Louis S.W. Ry. Co., 249 U. S. 134, 249 U. S. 149; Liberty Warehouse Co. v. Tobacco Growers, 276 U. S. 71.
bodies, as well as a legislature, may grant franchises, and that violations of franchise rights are remediable, whoever the transgressor. Moreover, the limited immunity from competition claimed as an incident of the license was obviously terminable at any moment. Compare Louisville Bridge Co. v. United States, 242 U. S. 409. It was within the power of the legislature at any time after the granting of Frost's license to abrogate the requirement of a certificate of necessity, thus opening the business to the competition of all comers. It is difficult to see how the lesser enlargement of the possibilities of competition by a license granted under the 1925 proviso could operate as a denial of constitutional rights.
"The right to operate gas works and to illuminate a city is not an ancient or usual occupation of citizens generally. No one has the right to . . . carry on the business of lighting the streets . . . without special authority from the sovereign. It is a franchise belonging to the state, and, in the exercise of the police power, the state could carry on the business itself or select one or several agents to do so."
"The restriction imposed by the contract upon the use by others than plaintiff of the public streets and ways for such purposes is not one of which the appellee can complain. He was not thereby restrained of any freedom or liberty he had before. . . ."
One who would strike down a statute must show not only that he is affected by it, but that, as applied to him, the statute exceeds the power of the state. This rule, acted upon as early as Austin v. The Aldermen, 7 Wall. 694, and definitely stated in Supervisors v. Stanley, 105 U. S. 305, 105 U. S. 314, has been consistently followed since that time.
1925 would be reasonable if it had been limited to cooperatives organized under Chapter 22 of the Laws of 1917. Thus, the contention that the classification is arbitrary is directed only to cooperatives organized under the law of 1919. It rests upon two erroneous assumptions: (1) that cooperatives organized under the law of 1919 are substantially unlike those organized under Chapter 22 of the Laws of 1917, and (2) that there are between cooperative corporations under the law of 1919 and commercial corporations no substantial differences having reasonable relation to the subject dealt with by the gin legislation.
end, both provide for restriction of voting privileges, for curtailment of return on capital, and for distribution of gains or savings through patronage dividends or equivalent devices.
In order to insure economic democracy, the Oklahoma Act of 1919 prevents any person from becoming a shareholder without the consent of the board of directors. It limits the amount of stock which one person may hold to $500. And it limits the voting power of a shareholder to one vote. Thus, in the Durant Company, the holder of a single share of the par value of $10 has as much voting power as the holder of 50 shares. The Act further discourages entrance of mere capitalists into the cooperative by provisions which permit five percent of the profits to be set aside for educational purposes; which require ten percent of the profits to be set aside as a reserve fund, until such fund shall equal at least fifty percent of the capital stock; which limit the annual dividends on stock to eight percent, and which require that the rest of the year's profits be distributed as patronage dividends to members except so far as the directors may apportion them to nonmembers.
The provisions for the exclusion of capitalist control of the nonstock type of cooperative organized under the Oklahoma Act of 1917 do not differ materially in character from those in the 1919 Act. The nonstock cooperative also may reject applicants for membership, and no member may have more than one vote. This type of cooperative is called a nonprofit organization, but the term is merely one of art, indicating the manner in which the financial advantage is distributed. This type also is organized and conducted for the financial benefit of its members, and requires capital with which to conduct its business. In the stock type the capital is obtained by the issue of capital stock, and members are not subjected to personal liability for the corporation's business obligations.
In the nonstock type, the capital is obtained partly from membership fees, partly through dues or assessments, and partly through loans from members or others. And for fixed capital, it substitutes in part personal liability of members for the corporation's obligations. [Footnote 7] In the stock type, there are eo nomine dividends on capital and patronage dividends. In the nonstock type, the financial benefit is distributed by way of interest on loans and refunds of fees, dues, and assessments. And all funds acquired through the cooperative's operations which are in excess of the amount desirable for a "working fund" are to be distributed as refunds of fees, dues, and assessments. Both acts allow business to be done for nonmembers, and though the nonstock association may, it is not required, to impose obligations on the nonmember for the liability of the association. Thus, for the purposes here relevant, there is no essential difference between the two types of cooperatives.
"That persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common, and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, that such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to one or both of the following requirements:"
"First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein, or,"
"Second. That the association does not pay dividends on stock or membership capital in excess of 8 percentum per annum. "
"And in any case to the following:"
"Third. That the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members."
"any such cooperative association because it has capital stock if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the state of incorporation or 8 percentum per annum, whichever is greater, . . . and if substantially all such stock . . . is owned by producers; . . . nor shall exemption be denied any such association because there is accumulated and maintained by it a reserve. . . . Such an association may market the products of nonmembers in an amount the value of which does not exceed the value of the products marketed for members."
This exemption was continued in the Revenue Act of 1928, c. 852, § 103 (45 Stat. 812).
Experience has demonstrated also that doing business for nonmembers is usually deemed essential to the success of a cooperative. [Footnote 25] More than five-sixths of all the farmers' cooperative associations in the United States do business for nonmembers. In 1925, 86.3 percent of the reporting organizations did so. In leading states, the percentage was even larger. In Wisconsin, the percentage was 89; in Missouri, 93.2; in Minnesota, 94.1; in Nebraska, 95.8; in Kansas, 96.5; in North Dakota, 97. In Oklahoma, 92 percent of all cooperatives did business for nonmembers. [Footnote 26] Of the cotton cooperatives in the United States, 93.9 percent did business for nonmembers. In Texas, where cooperative ginning has received successful trial, [Footnote 27] all the cotton cooperatives perform service for nonmembers.
202 cooperatives were formed under it, and, since then, 139 more. In the 12 years since 1917, only 60 nonstock cooperatives have been organized, most of them since 1923, when, through an amendatory statute, this type was made to offer special advantages for cooperative marketing. [Footnote 33] Thus, over 82 percent of all cooperatives in Oklahoma are organized under the 1919 stock act. One hundred and one Oklahoma cooperative cotton gins have been organized under the 1919 stock law; not a single one under the 1917 nonstock law. [Footnote 34] To deny the cooperative character of the 1919 Act is to deny the cooperative character not only of the gins in Oklahoma, which farmers have organized and operated for their mutual benefit, but also that of most other cooperatives within the state, which have been organized under its statutes in harmony with legislation of Congress and pursuant to instructions from the United States Department of Agriculture. A denial of cooperative character to the stock cooperatives is inconsistent also with the history of the movement in other states and countries. For the stock type of cooperative is not only the older form, but is the type more widely used among English-speaking peoples.
"When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time law was enacted must be assumed."
such control of gins may lead to excessive prices for the ginning service was recognized in the Crescent Oil case. The fact that, despite the regulatory provisions of the Public Service Law, a public utility is permitted to earn huge profits indicates that something more than rate regulation may be needed for the protection of farmers. Certainly, it cannot be said that the legislature could not reasonably believe that cooperative ginning might afford a corrective for rates believed to be extortionate.
"That W. A. Frost is engaged in the cotton ginning business under the name of Mitchell Gin Company and owns and operates a cotton gin in the City of Durant, Oklahoma; that said gin is operated under and by virtue of license duly issued by the Corporation Commission of the State of Oklahoma under and by virtue of Article 40, chapter 7, Compiled Oklahoma Statutes, 1921, as amended by Chapter 191, Session Laws of Oklahoma of 1923 and by chapter 109 of the Session Laws of Oklahoma of 1925."
Session Laws 1907-08, p. 756 (Comp.Stat. 1921, § 11032). See Oklahoma Gin Co. v. State, 63 Okl. 10; Mascho v. Chandler Cotton Oil Co., 7 Annual Corp. Comm'n Report 370. Compare Harriss-Irby Cotton Co. v. State, 31 Okl. 603.
Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 172 U. S. 9; California v. Pacific Railroad Co., 127 U. S. 1, 127 U. S. 40-41; Monogahela Navigation Co. v. United States, 148 U. S. 312, 148 U. S. 328-329; Owensboro v. Cumberland Telephone Co., 230 U. S. 58, 230 U. S. 64-66; Boise Water Co. v. Boise City, 230 U. S. 84, 230 U. S. 90-91; McPhee & McGinnity Co. v. Union P. R. Co., 158 F. 5, 10-11. California v. Pacific Railroad Co., 127 U. S. 1, 127 U. S. 40-41, merely describes the types of enterprises which may be made the subject of a franchise. The enterprises mentioned are all of the type which require the use of public property, so that the permission of the state is required to condone what would otherwise be a trespass. Further, it is not maintained that the state is restricted to the issuance of franchises for the carrying on of such callings.
Noble state Bank v. Haskell, 219 U. S. 104, 219 U. S. 112-113.
Shallenberger v. First state Bank, 219 U. S. 114; Dillingham v. McLaughlin, 264 U. S. 370. Compare Assaria State Bank v. Dolley, 219 U. S. 121; German Alliance Ins. Co. v. Kansas, 233 U. S. 389, 233 U. S. 416.
Bank of August v. Earle, 13 Pet. 519, 38 U. S. 595; People's Railroad v. Memphis Railroad, 10 Wall. 38, 77 U. S. 51; California v. Pacific Railroad Co., 127 U. S. 1, 127 U. S. 40-41; Denver v. New York Trust Co., 229 U. S. 123, 229 U. S. 141-142.
"original liability for his per capita share of all contracts, debts, and engagements of the association existing at the time he becomes a member and created during his membership,"
and "additional liability" for his pro rata share of the liability of any other member whose liability may become uncollectible.
Nourse, The Legal Status of Agricultural Cooperation (1927), passim, particularly pages 11, 21, 35, 36.
Mass.St. 1866, c. 290. The type was called Rochdale because it was this type of organization which the pioneers of the present cooperation among English speaking peoples used there. This law, which served as a pattern for most of the cooperative incorporation laws passed by other states prior to 1900, contained fewer of the safeguards to assure preservation of cooperative principles than does the Oklahoma Act of 1919. No limitation was placed on the quantum of stock per member or on the voting privileges, and no restriction was placed on the amount of dividends to be paid on stock, the distribution of profits being left entirely to the bylaws and to the directors, save for the requirement that a portion of the earnings go into a reserve fund.
Pennsylvania, Public Laws 1868, Act 62; Minnesota, Laws 1870, c. 29; Michigan, Acts 1875, No. 75, amending Act 288 of 1865 so as to include agricultural cooperatives; Connecticut, Laws 1875, c. 62; California, Laws 1878, p. 883; New Jersey, Laws 1884, p. 63; Ohio, Laws 1884, p. 54; Kansas, Laws 1887, c. 116; Wisconsin, Laws 1887, c. 126; Montana, 1895, Code (1921), §§ 6375-6385. Tennessee, Laws 1882, c. 8, fails to specify whether the cooperatives to be incorporated thereunder shall be organized with or without capital stock.
Delaware and Vermont. Vermont, however, has a section in her general corporation law which makes provision for cooperative associations.
Arkansas, Acts 1921, p. 702; California, Laws 1878, p. 883; Colorado, Laws 1913, p. 220; Connecticut, Laws 1875, c. 62; Florida, Acts 1917, c. 7384; Georgia, Acts 1920, p. 125; Illinois, Laws 1915, p. 325; Indiana, Laws 1913, c. 164; Iowa, Code (1924) c. 389, §§ 8459-8485; Kansas, Laws 1913, c. 137; Kentucky, Laws 1918, c. 159; Maryland, Laws 1922, c.197; Massachusetts, Laws 1920, c. 349; Michigan, Acts 1921, No. 84, c. 4; Minnesota, Mason's Stats. (1927) §§ 7822-7847; Missouri, Laws, 1919, p. 116; Montana, Code (1921), §§ 6375-6396; Nebraska, Comp.Stats. (1922) §§ 642-648; New Jersey, Laws 1884, p. 63; New York, Laws 1913, c. 454; North Carolina, Laws 1915, c. 144; North Dakota, Laws 1921, c. 43; Oklahoma, Laws 1919, c. 147; Ohio, Laws 1884, p. 54; Oregon, Oregon Laws Supp. (1927), §§ 6954-6976; Pennsylvania, Public Laws, 1887, p. 365; Rhode Island, Laws 1916, c. 1400; South Carolina Acts, 1915, No. 152; South Dakota, Laws 1913, c. 145; Tennessee, Laws 1917, c. 142; Virginia, Laws 1914, c. 329; Washington, Laws 1913, p. 50; Wisconsin, Laws 1911, c. 368.
See, for example, Nebraska, Laws 1911, c. 32; Indiana, Laws 1913, c. 164; Colorado, Laws 1913, p. 220; North Dakota, Laws 1915, c. 92; Florida, Acts 1917, c. 7384.
Nourse, The Legal Status of Agricultural Cooperation (1927), pp. 51-72.
Laws 1895, c. 183. That this Act did not provide satisfactorily for all types of cooperative endeavor is evidenced by the fact that, prior to the passage of the Clayton Act (which offered substantial advantages to nonstock corporations), several of California's largest cooperatives did not incorporate under this or the similar act of 1909 (chap. 26), but were organized on a capital stock basis -- e.g., California Fruit Growers' Exchange, California raisin growers. See Nourse, The Legal Status of Agricultural Cooperation, p. 64, note.
Nevada, Stat. 1901, c. 60; Michigan, Public Acts 1903, No. 171; Washington, Laws 1907, p. 255; Alabama, Acts 1909, No. 145, p. 168; California, Laws 1909, c. 26; Florida, Laws 1909, c. 5958; Oregon, Laws 1909, c.190; Idaho, Laws 1913, c. 54; Colorado, Laws 1915, c. 57; New Mexico, Laws 1915, c. 64; Oklahoma, Laws 1917, c. 22; Texas, Laws 1917, c.193; Louisiana, Acts 1918, No. 98; New York, Laws 1918, c. 655; Pennsylvania, Laws 1919, Act 238; Iowa, Laws 1921, c. 122. In only two of the states is the doing of business for nonmembers expressly prohibited. Iowa, Laws 1921, c. 122; Texas, Laws 1917, c.193. The rest of the statutes, though some are perhaps ambiguous in their terminology, apparently do not impose any restraint in this regard. See Nourse, The Legal Status of Agricultural Cooperation, p. 62.
Nourse, the Legal Status of Agricultural Cooperation (1927) pp. 73-92.
Colorado, Laws 1915, c. 57; New Mexico, Laws 1915, c. 64; Oklahoma, Laws 1917, c. 22; Texas, Laws 1917, c.193; Louisiana, Acts 1918, No. 98; New York, Laws 1918, c. 655; Pennsylvania, Laws 1919, Act 238; Iowa, Laws 1921, c. 122.
U.S. Dept. of Agriculture, Technical Bulletin No. 40 (1928), Agricultural, Cooperative Associations, p. 88. The figures for Oklahoma are obtained from the worksheets from which the table on page 88 was compiled.
See Fay, Cooperation at Home and Abroad (3d ed.1925) pp. 279-284, 356, 362-363; Year-Book of Agricultural Cooperation in the British Empire (1927) pp. 131-204; First Annual Report on Cooperative Associations in Canada (1928) pp. 65-78.
The average investment of a plant in Texas is about $40,000. Hathcock, Possible Services of Cooperative Cotton Gins (1928) p. 5.
Nourse, The Legal Status of Agricultural Cooperation, p. 54, note 3.
Alabama, Laws 1921, No. 31, § 2; Arizona, Laws 1921, c. 156, § 2; Arkansas, Acts 1921, No. 116, § 3; California, Laws 1923, c. 103, § 653cc; Colorado, Laws 1923, c. 142, § 3; Florida, Acts 1923, c. 9300, § 3; Georgia, Acts 1921, No. 279, § 2; Idaho, Laws 1921, c. 124, § 3; Illinois, Laws 1923, p. 286, § 3; Indiana, Laws 1925, c. 20, § 3; Kansas, Laws 1921, c. 148, § 3; Louisiana, Acts 1922, No. 57, § 3; Maine, Laws 1923, c. 88, § 3; Minnesota, Laws 1923, c. 264, § 3; Mississippi, Laws 1922, c. 179, § 3; Montana, Laws 1921, c. 233, § 3; New Hampshire, Laws 1925, c. 33, § 2; New Jersey, Laws 1924, c. 12, § 2; New Mexico, Laws 1925, c. 99, § 3; New York, Laws 1924, c. 616, § 3; North Carolina, Laws 1921, c. 87. § 3; North Dakota, Laws 1921, c. 44, § 3; Ohio, Laws 1923, p. 91, § 2; South Carolina, Acts 1921, No. 203, § 3; South Dakota, Laws 1923, c. 15, § 2; Tennessee, Laws 1923, c. 100, § 3; Texas, Laws 1921, c. 22, § 3; Utah, Laws 1923, c. 6, § 3; Virginia, Laws 1922, c. 48, § 3; Washington, Laws 1921, c. 115, § 2; West Virginia, Acts 1923, c. 53, § 3; Wyoming, Laws 1923, c. 83, § 3.
It is to be noted that statutes like the Bingham Cooperative Marketing Act (Acts Ky.1922, c. 1), which provide solely for the formation of marketing associations, restrict the service of the association (with the exception of storage) to the products of members. But such statutes do not purport to repeal earlier laws authorizing agricultural cooperation for other purposes which allow business for nonmembers. That the legislatures recognize that the problems of cooperative marketing and of other types of agricultural cooperation require different treatment is demonstrated by the retention of general laws providing for agricultural cooperation after passage of the standard marketing act. In Oklahoma, for example, in the same year that the Act of 1917 was amended so as to embody some of the features of the Bingham Act, the 1919 Act was amended in unimportant particulars, thus receiving express legislative recognition of its continued usefulness. Laws Okl.1923, cc. 167, 181.
U.S. Dept. of Agriculture, Technical Bulletin No. 40 (1928) Agricultural Cooperative Associations, p. 88. The figures for Oklahoma are obtained from the worksheets from which the table on page 88 was compiled.
Hathcock, Development of Cooperative Gins in Northwest Texas, p. 4.
U.S. Dept. of Agriculture, Technical Bulletin No. 40 (1928) Agricultural Cooperative Associations, p. 89. The figures for Oklahoma are obtained from the worksheets from which the table on page 89 was compiled.
See, e.g., Maryland, Laws 1922, c.197; New York, Laws 1926, c. 231; Oregon, Supp. 1927, §§ 6954-6976. The New York Law is known as the Cooperatives Corporations Law, and consolidates all prior acts for the formation of cooperative associations. Thus, marketing cooperatives, with or without capital stock, and other agricultural cooperatives, with or without capital stock and with or without restrictions as to business for nonmembers, are all organized under the same act.
". . . The various forms which cooperative organizations have taken demonstrate the adaptability and extensive usefulness of this form of business organization."
"A discussion of organization types is of value only when the conditions that make certain types necessary or valuable are taken into consideration. Attempts to build cooperative associations according to any special plan have met with failure in the past, and it is possible that, in the future, we shall see more, rather than fewer, types of cooperative organizations."
That the draftsmen of this law were influenced by the restrictions of the Clayton Act is evidenced by the fact that some of the language of § 2 of the 1917 Act is taken verbatim from § 6 of the Clayton Act.
"In organizing these new corporations, the farmers had a real basis on which to organize. . . . The law was written by men who understood the farmer's condition and had some practical knowledge of real cooperative marketing on a business basis. The laws of Minnesota, Nebraska, and other states were studied. Conditions under which cooperative associations had failed in the Northern states and those which had succeeded were taken into careful consideration. The best points from the laws of the several states, which would be suitable for Oklahoma conditions, were incorporated, and the features of these laws which were not suitable were eliminated."
All figures here given are obtained from the files of the Department of Agriculture, Division of Cooperative Marketing.
Two of the leading farm newspapers in Oklahoma are the Oklahoma Cotton Grower and the Oklahoma Farmer-Stockman, the latter edited by Carl Williams. In an editorial on February 10, 1926, the Cotton Grower urges farmers to form cooperative gins as the only way to obtain economy in ginning service. On March 1, 1927, the Farmer-Stockman contains an editorial urging, as a partial solution of the ginning problem, the placing of members on the Corporation Commission who are interested in the farmer as well as in the commercial gin. On May 15, 1927, the same paper notes the great increase in cooperative ginning in the state, and says that it is due to the extortionate prices charged by private ginners. On August 15, 1927, the Farmer-Stockman speaks of the meeting of the Corporation Commission to fix rates for ginning as the "annual farce." It is stated that the meeting is called a farce because the rate is always set high enough so as to allow grossly excessive returns to the ginners at the expense of the farmers. The editor states that the only solution for the farmer is cooperation in ginning. On September 15, 1927, the same paper states that some privately owned gins have averaged a profit of over 100 percent on invested capital over a period of three years. On October 15, 1927, the Farmer-Stockman notes that poor ginning can cost the farmer at least 4 cents on each pound of cotton.
"The ordinary commercial ginner within the State of Oklahoma may gin either as an individual, a co-partnership, or a corporation; no statute, rule, or provision of law restricts him in any wise in the enjoyment of the full proceeds of the earnings under the rate fixed. He usually is engaged not only in ginning cotton, but also in the purchase of seed cotton, cotton seed after he has ginned the cotton, and frequently in the purchase of cotton after it is ginned for profit. A ginner has a greater facility to purchase the seed than anyone else. As he gins the cotton, he catches the seed as they fall from the stand, and has the immediate means for storage and housing same. The patron, if he does not elect to sell to the ginner, must receive them and haul them away when, as a rule he has no place for storage for accumulating as much as a carload, so as to sell them to advantage. A great percent of the gins so operated are owned and controlled by cotton seed crushers, operating cotton seed oil mills within the State of Oklahoma; such operation of gins not being entirely for the purpose of rendering a public service, but also for collecting cotton seed at a central point. Their gin business as ginners is incidental to that as crushers of seed, to the end that they may be enabled to purchase the seed under favorable conditions. See Choctaw Cotton Oil Co. v. Corporation Commission, 121 Okl. 51, 247 P. 390; Planters' Cotton & Glanning Co. v. West, 82 Okl. 145, 198 P. 855."
as is appellee as to justify the classification and discrimination made by the statute. But, assuming there were no such differences, I fail to perceive any constitutional ground on which appellant can complain of a discrimination from which he has not suffered. His real and only complaint is not that he has been discriminated against either in the grant or enjoyment of his license, but that, in the exercise of his nonexclusive privilege of carrying on the cotton ginning business, he will suffer from competition by the corporate appellee which, under local law, may secure a like privilege with possibly less difficulty than did appellant.
The proviso of the 1925 Act is held unconstitutional solely on the ground that "an onerous restriction upon the right to engage in a public business" was "imposed by the statute upon appellant" and others similarly situated which was not imposed on appellee. Appellant, if he had been denied a license or if his exercise of the privilege, when granted, were more limited by the statute than that of appellee, might invoke the equal protection clause. But he now requires no such protection, for he has received his license, and is in full and unrestricted enjoyment of the same privilege as that which the appellee seeks. This is not less the case even if the statute be assumed to have made it more difficult for him than for appellee to secure a license.
under the present alleged discriminatory statute would seem likewise to afford appellant no legal cause for complaint, for, a license not having been withheld from him, his position is precisely the same as though the statute authorized the grant of a license to him and to appellee on equal terms. He is suffering not from any application of the discriminatory feature of the statute, with which alone the Constitution is concerned, see Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571, 235 U. S. 576; Arkadelphia Co. v. St. Louis Southwestern Ry. Co., 249 U. S. 134, 249 U. S. 149, but merely from the increase in the number of his competitors -- an injury which would similarly have resulted from a nondiscriminatory statute granting the privilege to all on terms more lenient than those formerly accorded appellant. Of such a statute, appellant could not complain, and I can find no more basis for saying that constitutional rights are impaired where the discrimination which the statute authorizes has no effect than where the statute itself does not discriminate.
Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 232 U. S. 544; Tyler v. Judges of Court of Registration, 179 U. S. 405, 179 U. S. 410; Cusack Co. v. Chicago, 242 U. S. 526, 242 U. S. 530; Standard Stock Food Co. v. Wright, 225 U. S. 540, 225 U. S. 550; Mallinckrodt Chemical Works v. Missouri, 238 U. S. 41, 238 U. S. 54; Darnell v. Indiana, 226 U. S. 390, 226 U. S. 398.
It seems to me that a fallacy, productive of unfortunate consequences, lurks in the suggestion that one may maintain a suit to enjoin competition of a business solely because, hereafter, someone else might suffer from an unconstitutional discrimination and enjoin it. But more than that, even if the license had been withheld from appellant because he could not support the burden placed upon him by the statute, I should have thought it doubtful whether he would have been entitled to have had appellee's permit cancelled -- the relief now granted. He certainly could not have asked more than the very privilege which he now enjoys.

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