Currency Services v. Matthews

• Decision Date: 10 April 1950
• Docket Number: Civ. No. 2067.
• Citation: 90 F. Supp. 40
• Parties: CURRENCY SERVICES, Inc., et al. v. MATTHEWS et al.
• Court: U.S. District Court — Western District of Wisconsin

90 F. Supp. 40

CURRENCY SERVICES, Inc., et al. v. MATTHEWS et al.

Civ. No. 2067.

United States District Court W. D. Wisconsin.

April 10, 1950.

Dougherty, Arnold & Waters, Suel O. Arnold and E. J. Philipp, Jr., Milwaukee, Wis., and Carl Flom, Madison, Wis., for plaintiffs.

Thomas E. Fairchild, Attorney General of Wisconsin, Stewart G. Honeck, Deputy Attorney General, and Gordon Samuelsen, Assistant Attorney General, for defendants.

Before LINDLEY, Circuit Judge, and STONE and TEHAN, District Judges.

LINDLEY, Circuit Judge.

This action, pursuant to Sections 2281 and 2284, Title 28 United States Code Annotated, seeks to restrain defendants, the Commissioner of Banks and the Attorney General of Wisconsin, from enforcing the Wisconsin Community Currency Exchange Act, Section 218.05, Wisconsin Statutes. That statute, enacted in 1945, provides that "* * * no person, firm, association, partnership or corporation shall engage in the business of a community currency exchange without first securing a license * * *." The term "community currency exchange" is defined as "any person, firm, association, partnership or corporation (except state and national banks, and credit unions operating under chapter 186, Wisconsin Statutes), engaged in the business of and providing facilities for cashing checks, drafts, money orders and all other evidences of money acceptable to such community currency exchange for a fee or service charge, or other consideration, or engaged in the business of selling or issuing money orders under his or their or its name or any other money orders (other than United States post-office money orders, American Express money orders, Postal Telegraph money orders, or Western Union money orders), or engaged in both such businesses."

Under the statute, an application for license to operate a community currency exchange, which must be accompanied by a fee of $100 to cover cost of investigating the applicant, must, within 30 days, be granted or denied by the Commissioner, who must also make annual investigations of the business of each licensee, who is required to pay a fee of $20 for each day or part thereof required to complete such examinations. A successful applicant, in addition to the investigation fees, must pay an annual license fee of $50, file with the Commissioner a surety bond in the principal sum of $5,000, and submit policies insuring him against loss by burglary, larceny, robbery, forgery or embezzlement in such amount as shall be fixed by the Commissioner. Not more than one place of business may be operated under the same license, but a licensee may be granted additional licenses for each separate agent upon the latter's compliance with the provisions governing the original issuance of a license; and no community currency exchange can be conducted as a department of another business but must be an entity, financed and conducted as a separate business unit.

Plaintiffs, a Wisconsin corporation organized to engage in the business of issuing money orders in that state but not yet licensed to do so as required by the statute, and an individual retail druggist, who expresses a desire to become an agent of the corporation in the conduct of that business, contend that the act in so far as it provides for regulation of sale and issuance of money orders, other than United States post-office money orders, American Express money orders, and Western Union money orders, discriminates against plaintiffs and grants to American Express and Western Union (with which the company which formerly issued Postal Telegraph money orders has merged), a virtual monopoly, in violation of the Fourteenth Amendment's requirement of "equal protection of the laws." Plaintiffs also aver that the license and investigation fees mandatorily required by the statute are so excessive as to be prohibitive, so that their inevitable effect is to prevent any person from engaging in the business of conducting a community currency exchange without loss of capital, thus operating to deprive plaintiffs of their property without due process of law. Defendants maintain that the exemptions are based upon reasonable classification and do not violate the Constitution's equal protection clause; thus they deny that the effect of Section 218.05 is to deprive plaintiffs of their property without due process of law.

It is well settled that a state has the power to classify businesses and occupations carried on within its boundaries for licensing and taxation purposes, Louis K. Liggett Co. v. Lee, 288 U.S. 517, 53 S.Ct. 481, 77 L.Ed. 929, 85 A.L.R. 699, and that any such classification, so long as it is not arbitrary and capricious but bears a reasonable relation to the object of the legislation, does not impinge upon the equal protection of the laws guaranteed by the Fourteenth Amendment, Bayside Fish Flour Co. v. Gentry, 297 U.S. 422, 56 S.Ct. 513, 80 L.Ed. 772. It is equally clear that the courts, resolving all doubts as to the constitutionality of a statute in its favor, Interstate Commerce Commission v. Oregon-Washington Ry. & Nav. Co., 288 U.S. 14, 53 S.Ct. 266, 77 L.Ed. 588, will, in a case where the statute is reasonably susceptible of two interpretations, adopt that construction which renders the act constitutional rather than that which would result in its invalidity, Arkansas Natural Gas Co. v. Arkansas Railroad Commission, 261 U.S. 379, 43 S. Ct. 387, 67 L.Ed. 705. Plaintiffs, then, have the burden of proving that the statutory classification embodied in Section 218.05 is not merely unwise but unreasonable.

Plaintiffs assert that it is the law of Wisconsin that a statutory classification based on existing circumstances only, or so constituted as to preclude addition to the numbers included within a class, is discriminatory and unconstitutional. If this be true, — and a number of Wisconsin cases have stated this rule in broad language, Johnson v. City of Milwaukee, 88 Wis. 383, 60 N.W. 270; State ex rel. Risch v. Board of Trustees, 121 Wis. 44, 98 N.W. 954; State ex rel. Ford Hopkins Co. v. Mayor and Common Council, 226 Wis. 215, 276 N.W. 311,—it would seem to follow that plaintiffs must prevail, for Section 218.05 is certainly so constituted as to preclude addition to the members of the class expressly exempted from those provisions of the statute regulating the sale and issuance of money orders. However, the act of Congress under which this court has been convened, Sections 2281 and 2284, Title 28, United States Code Annotated confers on it no jurisdiction to enjoin enforcement of a state law which offends merely the provisions of a state constitution; it is only when the statute is repugnant to the United States constitution that its enforcement may be enjoined by this court. Consequently, we are concerned only with the question as to the validity of the statutory classification, viewed in the light of the provisions of the Fourteenth Amendment.

It is quite clear that, whatever may be the rule in Wisconsin, a statutory classification which results in a closed class does not automatically render a statute void under the equal protection clause of the Fourteenth Amendment; if there is a reasonable basis for the classification, the statute is valid. Watson v. State of Maryland, 218 U.S. 173, 30 S.Ct. 644, 54 L.Ed. 987. Examining the Wisconsin statute with this test in mind, the exclusion of state and national banks and credit unions operating under special statutes of Wisconsin, all of which are already subject to regulation by appropriate state or federal agencies, from the definition of the term "community currency exchange", seems to us a valid and reasonable exercise of legislative discretion.

We turn to the exemption accorded Western Union, American Express, and United States post-office money orders¹. It is obvious that a state legislature is without authority to regulate the exercise of a sovereign function of the United States government, State of Arizona v. State of California, 283 U.S. 423, 51 S.Ct. 522, 75 L.Ed. 1154, and it seems well established that issuance of United States post-office money orders is a governmental rather than commercial function. Bolognesi v. United...