Ernest Gatewood v. State of North Carolina

• Decision Date: 24 December 1906
• Docket Number: No. 105,105
• Citation: 203 U.S. 531,51 L.Ed. 305,27 S.Ct. 167
• Parties: ERNEST GATEWOOD, Plff. in Err., v. STATE OF NORTH CAROLINA
• Court: U.S. Supreme Court

203 U.S. 531

27 S.Ct. 167

51 L.Ed. 305

ERNEST GATEWOOD, Plff. in Err.,

v STATE OF NORTH CAROLINA.

No. 105.

Argued November 16, 1906.

Decided December 24, 1906.

Messrs. Robert W. Winston and Victor S. Bryant for plaintiff in error.

[Argument of Counsel from pages 532-533 intentionally omitted] Messrs. Walter Clark, Jr. (by spec

ial leave) and Robert D. Gilmer for defendant in error.

[Argument of Counsel from page 534 intentionally omitted] Mr. Justice White delivered the opinion of the court:

North Carolina in 1889 enacted 'An Act to Suppress and Prevent Certain Kinds of Vicious Contracts.' Laws N. C. 1889, chap. 221. This law was thus summarized by the supreme court of that state in State v. McGinnis, 138 N. C. 724, 51 S. E. 51:

'Section 1 made void all contracts for the sale of articles therein named for future delivery, wherein (notwithstanding any terms used) it is not intended that the articles agreed to be sold and delivered shall be actually delivered, but only the difference between the contract price and the market value at the time stipulated shall be paid. Section 2 enacted that when the defense provided by that act is set up in a verified answer the burden shall be upon the plaintiff to prove a lawful contract, but the answer shall not be used against the defendant on an indictment for the transaction. Section 3 made the parties to such contract, and agents concerned therein, indictable, and § 4 made persons, while in this state, consenting to become parties to such contract, made in another state, and all agents in this state, aiding and furthering such contract, made in another state, indictable.'

In 1905 there was adopted 'An Act . . . to Prevent the Dealing in Futures.' This law contains seven sections. The first and second made it 'unlawful for any person, corporation, or other association of persons, either as principal or agents, to establish or open an office or other place of business . . . for the purpose of carrying on or engaging in any such business as is forbidden in this act or in chapter 221 of the Public Laws of North Carolina of 1889,' and affixed a penalty for so doing. The law of 1889, referred to, is the one of which we have just previously given a summary.

The acts made punishable by the 1st and 2d sections of the act of 1905 were thus defined in State v. McGinnis, supra:

'The business forbidden by the act of 1905 is—to avoid a paraphrasis, and following the usual American method of describing an act by a word or a phrase—the business of running a 'bucket shop,' which is defined by the Century dictionary as 'an establishment, nominally for the transaction of a stock exchange business, or business of a similar character, but really for the registration of bets or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the stock or commodities nominally dealt in."

The 3d section provided that no person should be excused from testifying in any prosecution under the act of 1889, or its amendments, on the ground of self-incrimination, the section granting immunity to such persons so obliged to testify. It was declared by the 4th, 5th and 6th sections of the act that in all prosecutions for a violation of the provisions of the act of 1889, or the act of 1905, a prima facie presumption of guilt should arise from the proof of certain facts stated in the sections in question. These sections are reproduced in the margin.¹ The 7th and last section of the act contained provisions concerning dealing in futures by those engaged in the business of manufacturing or wholesale merchandising, which we do not presently reproduce, as we shall hereafter consider the section.

Gatewood, plaintiff in error, was indicted for the offense of establishing and keeping an office and place of business for the purpose of carrying on or engaging in the character of business made unlawful by the 1st section of the act of 1905; that is, the opening and carrying on a 'bucket shop.' The indictment, moreover, in an additional paragraph, alleged the doing of certain acts as though it was intended to charge them as distinct offenses from the one charged in the first paragraph. The two things thus alleged were as follows: First. That, on a date named, the accused 'unlawfully and wilfully did post and publish, from information received over his wires, the fluctuations in prices of grain, cotton, provisions, stocks, bonds, and other commodities, contrary to the form of statute in such case made and provided,' the acts so charged being those from the proof of which it was provided in the 6th section of the act of 1905 that a prima facie presumption of guilt would arise as to the commission of the acts forbidden by the 1st section of that act. Second. That, on a date named, the accused 'unlawfully and wilfully did take and receive from E. T. Lea an order or contract to purchase on margin 100 bales of cotton for future delivery, to wit, August delivery, at 7 56.100 per pound, and that said Lea did deposit with said defendant at said time in said county the sum of $50.00 by way of margin fluctuations in said cotton, and that settlement between said parties for said cotton was agreed to be made upon the difference in value of said cotton at said date and the date of its delivery, contrary to the form of the statute in such cases made and provided, and against the peace and dignity of the state.' The acts thus charged being among those from which, when proved, there would arise a prima facie presumption of a guilty violation of certain of the provisions of the act of 1889.

The case was tried to a jury, and, as stated in the record, after proof and hearing, a special verdict was returned. By this verdict it was separately found that the defendant had committed the several acts separately charged in the indictment; that is, in separate numbered paragraphs the jury returned that the defendant had kept an office for the unlawful dealing in futures forbidden by the 1st section of the act of 1905, that he had posted and published in such office the fluctuating prices of grain, etc., and that he had made the contract for future delivery upon margin with Lea. The evidence at the trial upon which the jury acted is not in the record. The court then directed a general verdict of guilty, and judgment was entered thereon. A motion for a new trial was made, 'because the act of 1905, chapter—, is in conflict with the 14th Amendment, § 1, of the Constitution of the United States, to wit, the guaranty of equal protection of the laws.' The new trial having been refused, and a fine of $5 and costs having been imposed, the case was taken to the supreme court of North Carolina. That court affirmed the conviction. The reasoning by which the action of the court was controlled was stated as follows: 'Upon the authority of State v. McGinnis, at this term, there is no error.' And in the judgment of affirmance there was embodied the record and opinion in State v. McGinnis, and such record and opinion are contained in the transcript before us.

The assignments of error and the argument in support thereof involve three general contentions, viz.: the asserted repugnancy of the statute to the equal protection of the law clause of the 14th Amendment, and the alleged want of power of the state to enact the statute, because its provisions not only abridge the privileges and immunities of the plaintiff in error as a citizen of the United States, but also deprive him of his properly without due process of law, in violation of the same Amendment. The contention that the statute denied the equal protection of the laws rests upon the terms of the 7th section, reading as follows:

'Sec. 7. That this act shall not be construed so as to apply to any person, firm, corporation, or his or their agent, engaged in the business of manufacturing or wholesale merchandising, in the purchase or sale of the necessary commodities required in the ordinary course of their business.'

The alleged repugnancy of § 7, and consequently of the entire act, to the equality clause of the 14th Amendment, is sought to be sustained upon two grounds: First, because it is asserted that those engaged in the business of manufacturing or wholesale merchandising are permitted to commit without offense the act or acts which are made criminal by the laws of 1889 and 1905, when done by any other person; and, second, because, even if the terms of the 7th section do not effect such a result, the section nevertheless operates to produce an unlawful inequality, since it creates a prima facie presumption of guilt from the proof of certain...