Corporation Commission of Oklahoma v. Lowe

• Decision Date: 19 May 1930
• Docket Number: No. 454,454
• Citation: 50 S.Ct. 397,74 L.Ed. 945,281 U.S. 431
• Parties: CORPORATION COMMISSION OF OKLAHOMA et al. v. LOWE
• Court: U.S. Supreme Court

281 U.S. 431

50 S.Ct. 397

74 L.Ed. 945

CORPORATION COMMISSION OF OKLAHOMA et al.

v LOWE.

No. 454.

Argued April 29, 1930.

Decided May 19, 1930.

Messrs. S. P. Freeling and E. S. Ratliff, both of Oklahoma City, Okl., for appellants.

Mr. Robert M. Rainey, of Oklahoma City, Okl., for appellee.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

This suit was brought by the appellee, William Lowe, to restrain the Corporation Commission of Oklahoma from issuing a license to the Farmers' Union Co-operative Gin Company to construct and operate a cotton gin at Packingtown, Okl. The appellee operates a cotton gin at Capitol Hill, Oklahoma City, under a license issued by the Corporation Commission, and the ground of the suit was that the issuing of a license to the Farmers' Union Co-operative Gin Company, in view of the privileges with which that company would be able to operate under the applicable statute of Oklahoma, would constitute an injurious invasion of the appellee's business and an unreasonable discrimination against him, thus depriving him of his property without due process of law and denying him the equal protection of the laws in violation of the Fourteenth Amendment of the Federal Constitution.

The District Court, composed of three judges, entered a final decree granting a permanent injunction against the issuing of the license, and the defendants in the suit, the Corporation Commission and the Farmers' Union Co-operative Gin Company, have brought this appeal.

Upon the hearing in the District Court there was an agreed statement of facts, from which it appears that the appellant company is a domestic corporation of Oklahoma organized under article 19 of chapter 34, Compiled Statutes of Oklahoma of 1921; that the company filed with the Corporation Commission an application for a license to operate a cotton gin as a public utility at Packingtown, a part of Oklahoma City; that the place where it was proposed to locate the gin is about two and one-half miles from appellee's gin at Capitol Hill; that the appellee also operates a cotton gin at Wheatland, Okl., about ten miles from the proposed site of the gin of the appellant company; and that these gins of the appellee and of the appellant company would be in the same cotton producing territory and would be in competition. It was also agreed that the appellee had filed with the Corporation Commission his written protest against the granting of the license to the appellant company; that the Corporation Commission had heard the application and considered the objection, and that, unless restrained by the court, the Corporation Commission would issue the license to the appellant company, and its proposed gin would be put in operation.

The bill of complaint alleged that cotton gins are public utilities under the law of Oklahoma and that the Corporation Commission is vested with authority to regulate them and to fix the rates, charges, and rules to be observed in their operation. There is no controversy upon these points. The dispute grows out of the privileges accorded by statute to the appellant company as a corporation formed to conduct business upon a cooperative plan. Compiled Statutes of 1921, §§ 5637-5652, as amended in 1923 (Laws Okl. 1923, c. 167). The particular statutory provision involved is found in section 5648, as follows:

'Dividends and profits-reserve fund. The directors, subject to revision by the stockholders, at any general or special meeting lawfully called, shall apportion the net earnings and profits thereof from time to time at least once in each year in the following manner:

'(1) Not less than ten per cent. thereof accruing since the last apportionment shall be set aside in a surplus or reserve fund until such fund shall equal at least fifty per cent. of the paid up capital stock.

'(2) Dividends at a rate not to exceed eight per cent. per annum, may, in the discretion of the directors, be declared upon the paid up capital stock. Five per cent may be set aside for educational purposes.

'(3) The remainder of such net earnings and profits shall be apportioned and paid to its members ratably upon the amounts of the products sold to the corporation by its members, and the amounts of the purchases of members from the corporation: provided, that if the by-laws of the corporation shall so provide the directors may apportion such earnings and profits in part to nonmembers upon the amounts of their purchases and sales from or to the corporation.'

The precise contention of the appellee is that under this statute, if a license is granted to appellant company, it will be able to carry on its business on more favorable terms than are available to the appellee, since, it is said, it 'will be compelled, although engaged in a regulated public business as a public utility, to grant refunds and rebates to its patron members and will have the right and privilege of making such refunds and rebates to nonmember patrons upon the amount of their patronage.' The appellee argues that he is prohibited from making refunds and rebates, and is compelled, in the performance of his public duty, to charge rates fixed by the Corporation Commission, which will compel him to compete with appellant gin company upon unequal terms.

In Frost v. Corporation Commission of Oklahoma, 278 U. S. 515, 49 S. Ct. 235, 73 L. Ed. 483, the Court concluded that one who had complied with the statutes of Oklahoma, and had obtained a permit to operate a cotton gin, held a franchise which constituted a property right, and that, while this right did not preclude the state from making similar valid grants to others, it was an exclusive right as against attempts to operate a competing gin without a permit or under a void permit. In this view, it was decided that a state statute which permitted an individual to engage in such a business only upon his first showing a public necessity, but...