Frost v. Corporation Commission

Citation26 F.2d 508
Decision Date13 November 1927
Docket NumberNo. 793.,793.
PartiesFROST v. CORPORATION COMMISSION OF OKLAHOMA et al.
CourtU.S. District Court — Western District of Oklahoma

Rainey, Flynn, Green & Anderson, of Oklahoma City, Okl., for complainant.

E. S. Ratliff, of Oklahoma City, Okl., for Corporation Commission.

Geo. F. Short, Atty. Gen., for defendants.

Before VAN VALKENBURGH, Circuit Judge, and COTTERAL and WILLIAMS, District Judges.

WILLIAMS, District Judge.

In the bill filed by complainant in this court on April 14, 1926, it is alleged that he is, and was at all times hereinafter mentioned, engaged in and duly authorized to engage in the operation of a cotton gin in the city of Durant, Okl., under a license duly and regularly issued by the Corporation Commission of the state of Oklahoma under and by virtue of article 4 of chapter 20, Compiled Statutes of Oklahoma of 1921, and by chapter 109 of the Session Laws of Oklahoma of 1925, and that the defendant Durant Cotton Gin Company is a domestic corporation organized under and pursuant to article 19 of chapter 34 of the Compiled Statutes of Oklahoma of 1921; that cotton gins are public utilities, and the operation of same for the purpose of ginning seed cotton is a public business, and that complainant is engaged in public business as such, its said cotton gin being a public utility, and that under and by virtue of section 3715 of said chapter and article the Corporation Commission is vested with the power and charged with the duty of regulating and controlling such cotton gins in all matters relating to the performance of such duties and the charges therefor, with power to fix rates, rules, charges, and regulations to be observed by complainant and all others operating gins in the state of Oklahoma, and that by virtue of section 3717 of said chapter and article said Corporation Commission is vested with the power to enforce its orders against any person, firm, company, or corporation maintaining or operating a gin or gins, by imposing fines against him or them for the violation of any of its said orders, and that under the provisions of section 3713 of said chapter and article no person or persons or corporations in the state of Oklahoma are permitted to maintain and operate a gin for the purpose of ginning cotton seed, without first having secured a license for such purpose from said Corporation Commission; that by virtue of section 3714 of said chapter and article, as amended by chapter 109 of the Session Laws of 1925, all persons and corporations are prohibited from constructing or installing, and the Corporation Commission is prohibited from licensing, any new gin plant until satisfactory showing shall have been made to the Corporation Commission, setting forth that such gin is a needed utility, and that the proposed corporation, company, firm, or individual is a competent and desirable corporation, company, firm, or individual to establish and operate said gin, as may appear in the discretion of said commission, and that said provision apply to all persons, firms, corporations, and classes of people with the exceptions hereinafter set forth; that section 3714, as amended by chapter 109 of the Session Laws of 1925, contains the following proviso:

"That on the presentation of a petition for the establishment of a gin to be run co-operatively, signed by one hundred citizens and taxpayers of the community where the gin is to be located, the Corporation Commission shall issue a license for said gin."

It is the contention of said complainant that said proviso violates the Fourteenth Amendment to the Constitution of the United States, and for that reason no license should be issued to the Durant Co-operative Gin Company for such purpose.

Said defendants in their joint answer allege that the allegations contained in plaintiff's bill are insufficient in law or equity to constitute a basis for the relief sought, and that the defendant Durant Co-operative Gin Company had filed its application with said Corporation Commission for the establishment of a gin to be run co-operatively at Durant, in Bryan county, Oklahoma, under and by virtue of the provisions of said proviso, and further deny that the provisions of said proviso are discriminatory, arbitrary, or in any way violative of or contrary to the due process clause or equal protection clause of the Fourteenth Amendment to the Constitution of the United States. They further allege that in the operation of the cotton gins now located in the city of Durant, engaged in ginning seed cotton as public utilities, the facts will show that for the year 1924-25, under the rate in effect at that time with the gins operating therein, the gins in which complainant is interested as owner or stockholder have made excessive profits upon said operation; that complainant herein, in addition to his ownership in what is known as the Mitchell Gin, is also an interested owner and stockholder in a cooperative gin of Durant, and that the facts and records available disclose that for the ginning season of 1924-25 the Mitchell gin enjoyed a net earning, over and above all operating expenses, taxes, and other charges, of 18 per cent., upon the book value thereof undepreciated; that what is known as the co-operative gin, ____ per cent. of the stock of which is owned by plaintiff, for the ginning season of 1924-25, enjoyed a net earning on the book value undepreciated of 153.6 per cent., after allowing all operating expenses, including taxes, and that the two gins for the same year enjoyed an average net earning, after deducting all operating expenses, of 85.8 per cent.; that the cotton production industry, including the gathering, picking, ginning, and storing and marketing thereof, is a leading agricultural pursuit in so far as values are concerned within the state of Oklahoma; that the ginning, marketing, and processing of said product is one that is subject to continual abuse, in that a large proportion of the gins in the state of Oklahoma have been constructed and are operated by those persons who are also interested in the purchase of cotton seed extracted from the cotton, as well as in the purchase of the staple after it is grinned and processed for marketing; that such concerns as are engaged in the cotton seed business, as well as the cotton buying business, and also operating gins in connection therewith have an advantage amounting to a virtual monopoly of such products within the state of Oklahoma; that the state of Oklahoma, through legislative enactments throughout the past, has by the adoption of legislation designated to foster and encourage agriculture enacted statutes permitting all persons, as well as those engaged in agriculture and horticulture, to organize for the purpose of conducting agricultural, dairy, live stock, irrigation, horticultural, mercantile, manufacturing, mechanical, and industrial business upon a co-operative plan; that pursuant to said policy the Legislature of the state of Oklahoma has enacted two statutes, the first of which, enacted by the 1917 session of the Legislature of the state of Oklahoma and effective June 14, 1917, is found in article 16, chapter 34, Compiled Oklahoma Statutes 1921, and provides that co-operative agricultural or horticultural associations instituted for the purpose of mutual help, and not having capital and stock, and not conducted for profit, may be formed under provisions of said act by any number of persons, not less than five, to engage in agriculture and horticulture. It outlines the provisions which are to be incorporated in the articles of association, the powers of such associations, the admission of members into the association, the manner and way in which the business of such concern may be operated, all of which is for the mutual benefit and for the purpose of rendering services described in its articles of association to membership only, this act being for strictly and distinctly nonprofit, mutual, self-help organization, and clearly distinguishable in every material respect from the ordinary private corporation organized for profit.

The second statute, adopted by the session of the Legislature of 1919 and approved April 4, 1919 (Laws 1919, c. 147), provides that ten or more persons may form a corporation for the purpose of conducting an agricultural, dairy, live stock, irrigation, horticultural, mercantile, mining, manufacturing, mechanical, or industrial business upon a co-operative plan, and with their associates, successors, and assigns may become and be a body politic and corporate by complying with the provisions of this act, and this act, as amended by the Legislature of 1923, as shown by chapter 167, Session Laws 1923, authorizes ten or more persons who may so desire to incorporate co-operatively to engage in the enterprises and the businesses set forth in the first section thereof. The act provides in detail the requisites for articles of incorporation, the way and manner in which said articles may be amended, the powers to be exercised by said corporations, the amount of stock to be held, and that no stock shall be sold at less than par value; that 20 per cent. of the par value of the stock subscribed for shall be paid in before the corporation commences business, and that no certificate of stock shall be issued to any person until the full amount of the subscription thereof shall have been paid; that no person shall become a shareholder, except by consent of the board of directors, and that not more than 5 per cent. of the stock outstanding at any time, and not more than $500 in par value, shall be held by or for one person, firm, or corporation; that each shareholder or subscriber shall only be entitled to one vote, and no more, irrespective of the number of shares owned; that, if the indebtedness at any time of the corporation shall exceed the amount of its subscribed capital stock and surplus, the directors assenting thereto shall be personally and individually liable for...

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2 cases
  • Smith v. Thompson
    • United States
    • Iowa Supreme Court
    • December 11, 1934
    ... ... 548; State v. Darling, 216 ... Iowa 553, 246 N.W. 390, 88 A. L. R. 218; Frost v. Corp ... Commission (D. C.) 26 F.2d 508 ...          The act ... in question is ... ...
  • Florsheim Bros. Dry Goods Co. v. United States, 1623.
    • United States
    • U.S. District Court — Western District of Louisiana
    • February 4, 1928

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