Brady v. Mattern

• Decision Date: 13 July 1904
• Citation: 100 N.W. 358,125 Iowa 158
• Parties: BRADY v. MATTERN.
• Court: Iowa Supreme Court

125 Iowa 158

100 N.W. 358

BRADY

v.MATTERN.

Supreme Court of Iowa.

July 13, 1904.

Appeal from District Court, Polk County; A. H. McVey, Judge.

Proceeding by habeas corpus to secure the release of plaintiff from imprisonment under arrest for the crime of soliciting and securing an application for a building and loan contract in violation of chapter 77, p. 45, of the Laws of the Twenty-Ninth General Assembly, prohibiting agents from soliciting or transacting business for an unincorporated building and loan association which has not complied with the provisions of that statute. The judge of the district court to whom the application for discharge was made, upon a hearing, sustained such application, and the state appeals from the order of discharge. Reversed.Chas. W. Mullan, Atty. Gen., and Lawrence De Graff, Asst. Atty. Gen., for appellant.

B. A. Younker, for appellee.

McCLAIN, J.

The trial judge discharged the plaintiff from custody on the ground that the statute which he was charged with violating is unconstitutional, and that is the sole question argued. Without setting out in full the provisions of Acts 29th Gen. Assem. p. 45, c. 77, it is sufficient to say that it is made applicable to all unincorporated organizations, associations, societies, partnerships, or individuals conducting and carrying on a business corresponding, as described, to the business authorized to be carried on by incorporated building and loan associations, as provided and regulated in chapter 13, tit. 9, of the Code, and chapter 69, p. 51, of the Acts of the Twenty-Eighth General Assembly, which statutory provisions are by the statute under consideration made to apply, so far as the same can be made applicable, to the unincorporated organizations, associations, partnerships, etc., to which the statute refers. The act, however, imposes a variety of conditions and restrictions on the transacting of such business by unincorporated organizations, associations, partnerships, etc., which are not imposed upon incorporated associations, among which are the conditions and requirements that the unincorporated organizations, associations, partnerships, etc., shall, before transacting any business, submit to the Executive Council of the state a sworn statement of resources and liabilities, and deposit with the Auditor of State at least $50,000 of negotiable notes, secured by first mortgages upon real estate in this state, bearing interest at a rate of not less than 5 per cent. per annum, and such further securities as the Auditor of State may require; the deposit to be for the protection of members of such organizations, to be held in trust for the purpose of fulfilling and carrying out their contracts with members and persons making periodical payments thereto. It is further required that on approval of the Executive Council of the plan or method of business of any such unincorporated organization, association, etc., the Auditor of State shall issue a certificate authorizing it to transact business upon the deposit with him of the securities required; that the Auditor may at any time make an examination of the association, and may revoke its certificate of authority if it shall be found not to have complied with, or to have violated, any of the conditions imposed; and that any officer, agent, or employé of such association, or any person transacting the business thereof, shall be subject to fine in a sum not exceeding $10,000, or imprisonment in the penitentiary not exceeding 10 years for soliciting, transacting, or attempting to transact any business for any such association which has not procured and does not hold a certificate of authority from the Auditor of State to transact business in the state. It is conceded that the petitioner in this case had been soliciting applications and transacting business in this state for a co-partnership operating under the name of the Home Co-operative Company of Kansas City, having its principal place of business in Kansas City, Mo., and engaged in the kind of business described by the statute, without complying with the provision of such statute.

The appellee contends that the statute is unconstitutional, for the following reasons: (1) That it confers upon a class of citizens privileges and immunities which upon the same terms do not belong to all the citizens of the state, and is therefore class legislation, repugnant to section 6 of article 1 and section 30 of article 3 of the state Constitution, and to section 1 of amendment 14 to the federal Constitution; (2) that the effect of the law is to prohibit individuals and unincorporated bodies from engaging in the building and loan business, which is permitted to corporations, and that it is therefore contrary to sections 1 and 9 of article 1 of the Constitution of Iowa, and to section 1 of amendment 14 to the federal Constitution; (3) that the effect of the law is to confer a monopoly of the building and loan business upon corporations, thereby depriving individuals of the common-law right to make contracts, contrary to section 6 of article 1 and section 30 of article 3 of the Constitution of Iowa, and section 1 of amendment 14 to the federal Constitution; (4) that the law delegates legislative functions to the Auditor of State and to the Executive Council, and thereby violates section 1 of article 3 of the state Constitution; (5) that the law impairs the obligation of existing contracts, in violation of the federal and state Constitutions. It will be convenient, however, to discuss the questions involved in the case, as we understand them, in a somewhat different order.

1. It is contended for the appellee that the statute, in effect, prohibits unincorporated associations, partnerships, and individuals from carrying on the business which is permitted to corporations known as “building and loan associations.” Prior to the passage of this statute the business of such corporations was regulated by statute, but there was no regulation of such business as conducted by individuals not incorporated; and, under the claim that the statutory regulations now applied to the latter are prohibitory, it is claimed that the statute is unconstitutional, as interfering with the right of individualsto contract and to engage in lawful business.

It will not be necessary to quote the provisions of the state Constitution and the fourteenth amendment to the federal Constitution relied on to support this contention. They are the usual provisions under which it is held that individuals are guarantied the right to acquire and own property, to make contracts, and to engage in business enterprises, so long as the public welfare is not infringed. Nor is it necessary, on the other hand, to cite the cases in which it has been held that an act of the Legislature will not be declared unconstitutional unless in plain violation of some provision of the Constitution, and that the courts will not interfere with the discretion of the Legislature in its exercise of the power to provide for the public welfare so long as it keeps within the fair and reasonable scope of its powers. That the Legislature may, in the exercise of the police power, regulate and control the carrying on of business which may be injurious to the public if not properly conducted, or may prohibit a business which is essentially injurious to the public, cannot be questioned. The concrete question here involved is whether the Legislature may prohibit one class, composed of unincorporated associations, partnerships, and individuals, from conducting the loan and building association business, which is permitted to another class, composed of artificial persons or corporations. It is to be noticed that there is no attempt to absolutely prohibit the carrying on of such business, and the cases involving the constitutional right to engage in a form of business activity not injurious to the public are not in point. The question is as to the right to discriminate between classes by way of regulation of the business. That such discrimination may be made, when based on a reasonable distinction, involving the public welfare, cannot be questioned; and if the distinction between classes is reasonable, and not purely artificial, and the statute is applicable to all who come within the limits of the classification, its constitutionality cannot be questioned.

Now, that there is some authority for making such discrimination has been recognized as to similar forms of business. The building and loan association business is to some extent analogous to the banking business, and, with reference to the latter, statutes limiting it to incorporated associations have been upheld. Thus in State ex rel. v. Woodmansee (N. D.) 46 N. W. 970, 11 L. R. A. 420, it is decided that the prohibition of private banks--that is, banks not operated by corporations as authorized by the laws of the state--is not unconstitutional. The court supports the conclusion reached by quoting as follows from Morse on Banking (2d Ed.) p. 1: “At common law the right of banking pertains equally to every member of the...