Clarence Caldwell v. Sioux Falls Stock Yards Company

• Decision Date: 22 January 1917
• Docket Number: No. 386,386
• Citation: 242 U.S. 559,37 S.Ct. 224,61 L.Ed. 493
• Parties: CLARENCE C. CALDWELL, as Attorney General for the State of South Dakota and ex officio Member of the State Securities Commission of the State of South Dakota, et al., Appts., v. SIOUX FALLS STOCK YARDS COMPANY, William Morley, and Harry Morley
• Court: U.S. Supreme Court

242 U.S. 559

37 S.Ct. 224

61 L.Ed. 493

CLARENCE C. CALDWELL, as Attorney General for the State of South Dakota and ex officio Member of the State Securities Commission of the State of South Dakota, et al., Appts.,

v SIOUX FALLS STOCK YARDS COMPANY, William Morley, and Harry Morley.

No. 386.

Argued October 16 and 17, 1916.

Decided January 22, 1917.

Mr. Clarence C. Caldwell, Attorney General of South Dakota, in propria persona, and Mr. Byron S. Payne for appellants.

Messrs. George J. Danforth, Hugh S. Gamble, Frank McLaughlin, and Edward E. Wagner for appellees.

[Argument of Counsel from pages 560-561 intentionally omitted] Mr. Justice McKenna delivered the opinion of the court:

This case was argued and submitted with Nos. 438, 439, and 440, just decided [242 U. S. 539, 61 L. ed. 480, 37 Sup. Ct. Rep. 217], and with No. 413 [242 U. S. 568, 61 L. 498, 37 Sup. Ct. Rep. 227], which concerns a statute of Michigan of like kind, the opinion in which is to follow. It involves the same general questions as those cases, and is presented to review a decree of the district court enjoining appellants from enforcing a statute of the state of South Dakota relating to the sale of securities. The act ([Sess. Laws 1915, chap. 275] § 23) makes violations of its provisions a misdemeanor, and criminal prosecutions under the act were the particular actions of the officers of the state that the appellees prayed to be enjoined.

After a consideration of the pleadings and argument the court, consisting of three judges, expressed the view that the statute violated the Constitution of the United States, and cited in confirmation Alabama & N. O. Transp. Co. v. Doyle, 210 Fed. 173; William R. Compton Co. v Allen, 216 Fed. 537; and Bracey v. Darst, 218 Fed. 482.

The court decreed that the appellants be enjoined from instituting and prosecuting any actions, civil or criminal, against complainants (appellees) under the statute for alleged violations thereof, and from taking any proceedings for its enforcement except such as might be deemed proper by them in the criminal actions already pending.

The Sioux Falls Stock Yards Company is a Colorado corporation, having its principal place of business at the city of Denver, and the Morleys are residents and citizens of Iowa.

The Stock Yards Company was at the times mentioned in the bill engaged in building and constructing a stock yard in Sioux Falls, South Dakota, and in selling a certain amount of its capital stock for raising sufficient capital for that purpose. The Morleys, at such time, were engaged in the buying and selling of stock and especially in selling the stock of the Stock Yards Company to various farmers and other purchasers, such sales being necessary to complete the construction of the stock yard, and also necessary to enable the Morleys to earn a livelihood.

Six informations were filed against appellees at the instigation of appellants for violations of the statute, and it is alleged that appellees will be prosecuted immediately under such informations and will be further prosecuted.

The statute, it is alleged, is an infraction of the 14th Amendment of the Constitution of the United States, and imposes a burden upon and practically amounts to a prohibition of interstate commerce, and hence offends the commerce clause of the Constitution of the United States; and 'that it attempts to vest in and delegate to the State Securities Commission judicial powers unauthorized by law.'

Against the bill appellants urge, besides asserting the validity of the statute, three defenses: (1) That com- plainants have a plain, speedy, and adequate remedy at law; (2) the suit is one against the state; (3) that the plea of the unconstitutionality of the statute was made in the criminal actions.

The three defenses are without merit. Six informations have already been filed against appellees and as many more may be brought as there may be violations of the statute, and a conviction of each may bear a fine of $1,000 or imprisonment, or both.

The suit manifestly is not one against the state, and the decree appealed from does not enjoin criminal actions commenced before the filing of the bill. We therefore pass to the merits.

A summary of the statute is all that is necessary. Its purpose as declared in its title is to prevent fraud in the sale and disposition of stocks, bonds, or other securities sold or offered for sale within the state. It creates a commission, called the State Securities Commission, of which the appellants—except Hanson, who is prosecuting attorney of Turner county—are members.

Those dealing in securities—and they may be persons, corporations, copartnerships, companies, or associations, incorporated or unincorporated—shall be known, it is provided, 'as a domestic investment company.' Those resident of or organized in any other state, territory, or government shall be known 'as a foreign investment company.'

Certain securities are exempt from the provisions of the act, and information as to those to which it applies must be furnished to the Commission as follows: If the securities are of the dealer's own issue, a statement must be filed with the Commission, showing in full detail (1) the plan upon which it proposes to transact business; (2) a copy of all contracts, stocks, and bonds which it proposes to make with or sell to contributors or customers, together with a copy of its prospectus and of the proposed advertisements of its securities; which statement shall also...