Hill v. Wallace

• Decision Date: 15 May 1922
• Docket Number: No. 616,616
• Citation: 259 U.S. 44,42 S.Ct. 453,66 L.Ed. 822
• Parties: HILL et al. v. WALLACE, Secretary of Agriculture et al
• Court: U.S. Supreme Court

259 U.S. 44

42 S.Ct. 453

66 L.Ed. 822

HILL et al.

v WALLACE, Secretary of Agriculture et al.

No. 616.

Argued Jan. 11, 1922.

Decided May 15, 1922.

This is a suit attacking the validity of the Future Trading Act, approved August 24, 1921. 42 Stat. 187, c. 86. The act imposes a tax of 20 cents a bushel on all contracts for the sale of grain for future delivery, but excepts from its application sales on boards of trade designated as contract markets by the Secretary of Agriculture, on fulfillment by such boards of certain conditions and requirements set forth in the act.

The bill is filed by eight members of the Board of Trade of the city of Chicago, who sue in behalf of all other members of that body who may wish to join and share in the relief granted, against the Secretary of Agriculture, the Commissioner of Internal Revenue, the United States district attorney for the Northern district of Illinois, the collector of internal revenue for the First District of that state, the Board of Trade of the city of Chicago, its president, vice presidents, and directors. The bill avers that the appellants applied to the directors of the Board of Trade to institute a suit to have the Future Trading Act adjudged unconstitutional before they should comply with it, but the board of directors refused to take any steps, and announced that they intended to comply with the provisions of the act; that the board refused because they feared to antagonize the public officials whose duty it was to construe and enforce the act, and the complainants feared that, acting under the coercion imposed upon them by the act, the board of directors would admit to membership on the board the representatives of the co-operative associations of producers; that the Secretary of Agriculture would designate such board as a contract market, and that such action by the board of directors would cause irreparable injury to the complainants and all the other members of the board. Complainants set out the character of the Board of Trade of Chicago and its organization as a corporation under a special charter of the state of Illinois in 1859, of which certain persons engaged in the purchase and sale of grain were created a corporation and given power to admit members, and expel them, to adopt regulations and by-laws for the management of the business and the mode in which it should be transacted; to appoint committees of arbitration for the settlement of differences between the members; to appoint persons to examine, measure, weigh, gauge, inspect grain and other articles of produce, with authority to issue a certificate as to quality or quantity; to make the brand or mark thereof evidence between any buyer and seller assenting to the employment of such person; and to do and carry on business usual in the management of boards of trade.

The bill avers that the board has 1,610 members, of whom the complainants are members in good standing; that its memberships are salable for more than $7,000 apiece; that in recent years there have been organized in most of the grain-producing states, among so-called farmers, co-operative societies who desire to market their crops at actual cost, and to market them through the exchanges at actual cost, and without paying the commissions charged by the members of such exchange, the plan being to sell all grain through an authorized member of such organization admitted to the exchange who shall charge the prescribed commission and ultimately rebate back to the members of such organization the aggregate of such commissioners after paying his salary and incidental expenses, on the basis of the number of bushels of grain which each producer has sold through said organization; that the admission of such representatives of co-operative societies to the Chicago Board of Trade would destroy the business of its members, and the value of the memberships, and make it difficult for the board to maintain sufficient members to pay the assessments to meet the expenses of its maintenance; that many of its members engage in making contracts with other members for the purchase and sale of grain for future delivery; that during the years from 1884 to 1913, wheat of the grade contemplated in the contracts for future delivery on the board sold as low as 48 7/8 cents per bushel, and never for more than $2 per bushel; and that during most of said time its price was below $1; that during the same years corn sold as low as 19 1/2 cents a bushel, and never higher than $1, and most of the time sold below 60 cents; that oats sold as low as 14 3/4 cents per bushel and never higher than 62 1/2 cents, and much the greater part of said period under 40 cents per bushel; that at the time of the filing of the bill, contract wheat was selling for $1.05 per bushel, and that no member of the board could afford to make contracts for future delivery and pay the tax thereon imposed by the Future Trading Act of 20 cents a bushel; that the law in effect prohibits all those who are not members of a board of trade, which has been designated by the Secretary of Agriculture a contract market under said act, from making any contracts of sales for future delivery.

The bill charges that the Future Trading Act violates the Constitution of the United States (1) in depriving the members of the board of their property without due process of law, in the compulsory admission to membership on said board of representatives of the co-operative associations of producers, in accord with section 5 of the act; (2) in that it attempts to regulate commerce, which is not commerce with foreign governments or among several states, but is commerce wholly between persons contracting within the state of Illinois respecting the purchase or sale of grain which forms a part of the common property of that state, and is intrastate and not interstate; (3) in that it violates the Tenth Amendment to the constitution, by interfering with the right of the state of Illinois to provide for and regulate the maintenance of grain exchanges within its borders upon which is conducted the making of contracts which are merely intrastate transactions.

The bill avers the complainants are not in collusion with defendants or any of them to confer on a court of the United States jurisdiction of a cause of which it would not otherwise have jurisdiction, and that the amount involved in the matters in dispute is, exclusive of interest and costs, more than $3,000.

The decrees prayed for are:

To enjoin the Secretary of Agriculture from taking any steps to induce or compel the Board of Trade or its directors to comply with the provisions of the act;

To enjoin the Commissioner of Internal Revenue, the collector of internal revenue and the district attorney named as parties from attempting to collect by suits or prosecutions or otherwise, any tax, penalty, or fine, under the act; and

To enjoin the Board of Trade and each of its officers and directors from applying to the Secretary of Agriculture to have the board designated as a contract market under the act, and from admitting to membership into such board any representative or any co-operative association of producers in compliance with section 5 of the act, or from taking any other steps to comply with the act.

The Board of Trade and its president, its officers, and directors moved to dismiss the bill of complaint on the ground that it was without equity on its face and did not state facts sufficient to constitute a cause of action in a court of equity.

The Secretary of Agriculture appeared specially to move the court to dismiss the suit as to him, because he was not a resident of the Northern district of Illinois and had not been served with process, and the court had no jurisdiction over him.

The United States attorney for the Northern district of Illinois, and the collector of internal revenue, moved the court to dismiss on the grounds that the suit was to restrain the collection of a tax contrary to section 3224 of the Revised Statutes (Comp. St. § 5947), and that the bill sought to restrain the enforcement of a criminal statute without showing that the complainants suffered irreparable injury. The District Court denied the motion for a temporary injunction and ordered that the bill be dismissed as to all the defendants for want of equity.

Mr. Henry S. Robbins, of Chicago, Ill., for appellants.

[Argument of Counsel from pages 49-56 intentionally omitted]

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Mr. Solicitor General Beck, of Washington, D. C., for appellees.

[Argument of Counsel from pages 56-60 intentionally omitted]

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Mr. Chief Justice TAFT, after making the foregoing statement of the case, delivered the opinion of the court.

The first question for our consideration is whether, assuming the act to be invalid, the complainants on the

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face of their bill state sufficient equitable grounds to justify granting the relief they ask. We think it clear that within the cases of Smith v. Kansas City Title Co., 255 U. S. 180, 41 Sup. Ct. 243, 65 L. Ed. 577, Brushaber v. Union Pacific R. R., 240 U. S. 1, 10, 36 Sup. Ct. 236, 60 L. Ed. 493, Ann. Cas. 1917B, 713, L. R. A. 1917D, 414, Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 15 Sup. Ct. 673, 39 L. Ed. 759, and Dodge v. Woolsey, 18 How. 331, 341, 346, 15 L. Ed. 401, the averments of the bill entitle them to relief against the Board of Trade of Chicago, its president and its directors. The bill shows that the act, if enforced, will seriously injure the value of the Board of Trade to its members, and the pecuniary value of their memberships. If the law be unconstitutional then, it was the duty of the board of directors to bring an action to resist its enforcement. It is quite like the case of Dodge v. Woolsey, in which the court said with respect to a similar refusal:

'Now, in our view the refusal upon the part of the directors by their own showing partakes more of disregard of duty than of an error of judgment. It was a...