187 U.S. 606 (1903), 4, Otis v. Parker

Docket NºNo. 4
Citation187 U.S. 606, 23 S.Ct. 168, 47 L.Ed. 323
Party NameOtis v. Parker
Case DateJanuary 05, 1903
CourtUnited States Supreme Court

Page 606

187 U.S. 606 (1903)

23 S.Ct. 168, 47 L.Ed. 323

Otis

v.

Parker

No. 4

United States Supreme Court

January 5, 1903

Argued December 11-12, 1902

ERROR TO THE SUPREME COURT

OF THE STATE OF CALIFORNIA

Syllabus

The provision in article IV, section 26 of the Constitution of California, providing that

all contracts for the sales of shares of the capital stock of any corporation or association on margin, or to be delivered at a future day, shall be void, and any money paid on such contracts may be recovered by the party paying it by suit in any court of competent jurisdiction,

is not contrary to the first section of the Fourteenth Amendment of the Constitution of the United States so far as it relates to sales on margins.

The case is stated in the opinion of the Court.

HOLMES, J., lead opinion

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is an action in three counts, for money had and received,

Page 607

for money paid and promised to be repaid, and for margins paid to the defendants as stock brokers on contracts to buy and sell mining stocks, respectively. The answers to the first two counts are general denials and other matters now immaterial. The answer to the third count, beside a general denial, sets up that the count is based upon a provision in article IV, section 26, the Constitution of California, and that that provision is contrary to the first section of the Fourteenth Amendment of the Constitution of the United States. It appears by the record that the only cause of action was that stated specifically in the third count, and that the defendants interposed the constitutional objection at the trial, and that it was overruled. The plaintiff had a general verdict on all three counts. The case was taken from the superior to the Supreme Court of California on appeal, and the judgment of the superior court was affirmed, with an immaterial modification. It now is brought here by a writ of error to the supreme court of the state.

We must take it as established that the plaintiff did enter into transactions prohibited by the Constitution of California, and that he had a right to his judgment under that Constitution if the clause relied upon is not contrary to the Constitution of the United States. There is no question that the parties were subject to the provisions of the latter Constitution, and no doubt that the question whether it invalidated the state constitution necessarily was passed upon, and was answered in the negative by the state court. 130 Cal. 322.

The provision of the state constitution is as follows:

All contracts for the sales of shares of the capital stock of any corporation or association, on margin, or to be delivered at a future day, shall be void, and any money paid on such contracts may be recovered by the party paying it by suit in any court of competent jurisdiction.

There was some suggestion that these words might be narrowed by construction to contracts not contemplating a bona fide acquisition of the stock, but intended to cover only a wager or contemplated settlement of differences. Of course, if they were construed in that sense there would be no doubt of their validity. Booth v. Illinois, 184 U.S. 425. But while the Supreme Court of California says

Page 608

in this case that it "will always see that legitimate business transactions are not brought under the ban," in the same sentence it leaves open the hypothesis that the provision "fails to distinguish between bona fide contracts and gambling contracts," and sustains it as a proper police regulation, even if it does fail as supposed. Therefore it may be held hereafter that ordinary contracts for the sale of stocks on margin are not legitimate transactions, and it would not be safe for us to take the words in any other than their literal meaning, or to assume in advance of a decision that they will be taken in a narrow sense. In this case, the jury were instructed broadly to find for the plaintiff if he had paid any money to the defendants as a margin for the purchase of stock of a corporation, and this instruction was sustained.

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172 practice notes
  • 149 Cal. 396, Crim. 1332, In re Application of Spencer
    • United States
    • California Supreme Court of California
    • July 9, 1906
    ...as special legislation. (Barbier v. Connolly, 113 U.S. 27, 5 S.Ct. 357; Cooley on Constitutional Limitations, p. 208; Otis v. Parker, 187 U.S. 606, 23 S.Ct. 168; Gundling v. Chicago, 177 U.S. 183, 20 S.Ct. 633; Darcy v. Mayor of San Jose, 104 Cal. 642, 38 P. 500; Matter of Ewer, 70 Hun, 239......
  • 297 N.W. 635 (Minn. 1941), 32,621, State v. Northwest Linseed Company.
    • United States
    • Minnesota Supreme Court of Minnesota
    • February 21, 1941
    ...which it enacted was appropriate." See also Central Lbr. Co. v. South Dakota, 226 U.S. 157, 33 S.Ct. 66, 57 L.Ed. 164; Otis v. Parker,187 U.S. 606, 23 S.Ct. 168, 47 L.Ed. 323; Patsone v. Pennsylvania, 232 U.S. 138, 34 S.Ct. 281,58 L.Ed. 539; State v. Fairmont Creamery Co. 162 Minn. 146......
  • 177 N.Y. 145, People v. Lochner
    • United States
    • New York New York Court of Appeals
    • January 12, 1904
    ...for inspection of mines at expense of owners (185 U.S. 203), and one declaring void all contracts for sales of stocks on margins (187 U.S. 606). I shall call special attention to but one other case, namely, Holden v. Hardy (169 U.S. 366).In that case the court reviews at length many of the ......
  • 151 P. 879 (Okla. 1915), 3929, St. Louis & S. F. R. Co. v. Crews
    • United States
    • Oklahoma Supreme Court of Oklahoma
    • September 14, 1915
    ...14, 46 L. R. A. (N. S.) 455; Central Loan & Trust Co. v. Campbell Com. Co., 173 U.S. 84, 19 S.Ct. 346, 43 L.Ed. 623; Otis v. Parker, 187 U.S. 606, 23 S.Ct. 168, 47 L.Ed. 323; Cantwell v. Missouri, 199 U.S. 602, 26 S.Ct. 749, 50 L.Ed. 329; Booth v. Illinois, 184 U.S. 425, 22 S.Ct. 425, 4......
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169 cases
  • 149 Cal. 396, Crim. 1332, In re Application of Spencer
    • United States
    • California Supreme Court of California
    • July 9, 1906
    ...as special legislation. (Barbier v. Connolly, 113 U.S. 27, 5 S.Ct. 357; Cooley on Constitutional Limitations, p. 208; Otis v. Parker, 187 U.S. 606, 23 S.Ct. 168; Gundling v. Chicago, 177 U.S. 183, 20 S.Ct. 633; Darcy v. Mayor of San Jose, 104 Cal. 642, 38 P. 500; Matter of Ewer, 70 Hun, 239......
  • 297 N.W. 635 (Minn. 1941), 32,621, State v. Northwest Linseed Company.
    • United States
    • Minnesota Supreme Court of Minnesota
    • February 21, 1941
    ...which it enacted was appropriate." See also Central Lbr. Co. v. South Dakota, 226 U.S. 157, 33 S.Ct. 66, 57 L.Ed. 164; Otis v. Parker,187 U.S. 606, 23 S.Ct. 168, 47 L.Ed. 323; Patsone v. Pennsylvania, 232 U.S. 138, 34 S.Ct. 281,58 L.Ed. 539; State v. Fairmont Creamery Co. 162 Minn. 146......
  • 177 N.Y. 145, People v. Lochner
    • United States
    • New York New York Court of Appeals
    • January 12, 1904
    ...for inspection of mines at expense of owners (185 U.S. 203), and one declaring void all contracts for sales of stocks on margins (187 U.S. 606). I shall call special attention to but one other case, namely, Holden v. Hardy (169 U.S. 366).In that case the court reviews at length many of the ......
  • 151 P. 879 (Okla. 1915), 3929, St. Louis & S. F. R. Co. v. Crews
    • United States
    • Oklahoma Supreme Court of Oklahoma
    • September 14, 1915
    ...14, 46 L. R. A. (N. S.) 455; Central Loan & Trust Co. v. Campbell Com. Co., 173 U.S. 84, 19 S.Ct. 346, 43 L.Ed. 623; Otis v. Parker, 187 U.S. 606, 23 S.Ct. 168, 47 L.Ed. 323; Cantwell v. Missouri, 199 U.S. 602, 26 S.Ct. 749, 50 L.Ed. 329; Booth v. Illinois, 184 U.S. 425, 22 S.Ct. 425, 4......
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