Grisim v. South St. Paul Live Stock Exchange
| Decision Date | 02 June 1922 |
| Docket Number | 22,581 |
| Citation | 188 N.W. 729,152 Minn. 271 |
| Parties | GEORGE GRISIM v. SOUTH ST. PAUL LIVE STOCK EXCHANGE |
| Court | Minnesota Supreme Court |
Action in the district court for Ramsey county to restrain defendant from collecting a fine imposed upon plaintiff or from interfering with his rights as a member of defendant corporation. From an order, Michael, J., granting a temporary injunction, defendant appealed. Affirmed.
Statute applicable to live stock exchange.
1. Chapter 344, Laws 1921, applies to a live stock exchange although stock is neither bought nor sold at its place of business.
State may regulate association of live stock dealers.
2. An association of commission men, dealing in live stock at public stockyards, may be required to observe such reasonable regulations as the state sees fit to impose in the exercise of its police power.
Act of 1921 valid.
3. Chapter 344 is such a regulation and has a substantial relation to its ostensible object and a tendency to accomplish it, and does not transcend the limitations the legislature must observe in exerting the police power.
By-laws of exchange may be annulled by statute.
4. By-laws regulating the business conduct of members of an incorporated live stock exchange may be annulled by the legislature in the proper exercise of the police power without impairing the contract obligations of the state and the corporation or of the corporation and its members.
Property in exchange membership not taken without due process of law.
5. The rights and privileges of membership in a corporation are property and are subject to reasonable restraints and regulations imposed by the legislature. Chapter 344 does not deprive defendant's members of property without due process of law.
Morphy Bradford & Cummins, for appellant.
P. H. O'Keefe, for respondent.
Clifford L. Hilton, Attorney General, and Montreville J. Brown, filed a brief for the state as amicus curiae.
Defendant appeals from an order restraining it from collecting a fine imposed upon plaintiff for a violation of its rules. Defendant is a corporation without capital stock and was organized pursuant to the provisions of chapter 138, p. 193, Laws of 1883, and acts amendatory thereof, now embraced in sections 6536 and 6537, G.S. 1913. One of the objects for which it was organized was to facilitate and regulate the business of dealing in live stock at South St. Paul. It has 98 members, of whom plaintiff is one. Members pay an initiation fee of $5,000 and execute a bond of $20,000 to guarantee payment for live stock sold on consignment or bought of other members. Defendant's rules prohibit members from buying live stock from other commission merchants who are not members of the exchange and from trading with nonmember yard dealers and order buyers, or cappers, buying and selling live stock at the South St. Paul yards. They also prohibit them from dealing with country buyers when accompanied by a capper, yard dealer or order buyer not a member of the exchange. Plaintiff made a purchase from an outside yard dealer, was fined for this violation of the rules, and brought this action to restrain the collection of the fine.
Chapter 344, p. 524, Laws of 1921, declares that a by-law of a live stock exchange maintaining a place of business for its members where live stock is bought, sold or exchanged, which prohibits members from buying, selling or exchanging live stock with nonmembers, is contrary to public policy and shall be null and void.
Defendant does not deal in live stock and is not engaged in the commission business. It does not maintain or operate a trading room, but has an office at South St. Paul in charge of its secretary, where the board of directors meet, and also the members when annual or special meetings are held. The members do no trading at this office. Their business is carried on either at their individual offices or in the yards of the St. Paul Union Stockyards Company, an independent corporation. If defendant is such a live stock exchange chapter 344 is aimed at and the act is constitutional, the restraining order must be upheld.
1. We are of the opinion that defendant comes within the terms of the act, although live stock is neither bought nor sold at its place of business. The legislature intended to regulate the business of buying and selling live stock. That is the business in which defendant's members are engaged. In a practical sense, they are the exchange. Their organization is an auxiliary of their business. By means of it supervisory powers are exercised over the business. Members of the organization are not free to do business as they see fit. They are controlled by the corporation and its rules. It is the only live stock exchange in the state. It may be conceded that, literally construed, the act does not apply to defendant, but it should not be thus construed. It is our duty to ascertain and give effect to the intention of the legislature rather than to give a literal reading to a statute which would defeat its essential object. The act is futile if defendant does not come within its purview. 3 Dunnell, Minn. Dig. §§ 8940-8943.
2. In State v. Rogers, 149 Minn. 151, 182 N.W. 1005, it was held that the business of commission merchants, buying and selling live stock at the South St. Paul yards, is one affected with a public interest. In Stafford v. Wallace, 258 U.S. 495, 516, 42 S.Ct. 397, decided May 1, 1922, the Supreme Court of the United States said:
And again [p. 515]:
"The packers and their agents and the dealers who are the buyers are at the elbow of the commission men, and their relations are constant and close."
Defendant, through its control over its members, has a direct connection with their business. The conclusion follows that, since public stockyards and the commission men who there transact business are subject to regulation, an association of such commission men may also be required to observe such reasonable regulations as the state sees fit to impose in the exercise of its police power. House v. Mayes, 219 U.S. 270, 31 S.Ct. 234, 55 L.Ed. 213; Brodnax v. Missouri, 219 U.S. 285, 31 S.Ct. 238, 55 L.Ed. 219.
3. Is chapter 344 a reasonable regulation having a substantial relation to its ostensible object and a tendency to accomplish it? In general, a police regulation to be valid must tend to promote the general welfare; must not be arbitrary or unreasonable; must not capriciously strike down liberty or the rights of property; and must have some substantial relation to evils sought to be eradicated or benefits sought to be secured to the public. The nature of the police power and the limitations to which it is subject have frequently been discussed. Rippe v. Becker, 56 Minn. 100, 57 N.W. 331, 22 L.R.A. 857; State v. Chicago, M. & St. P. Ry. Co. 68 Minn. 381, 71 N.W. 400, 38 L.R.A. 672, 64 Am. St. 482; State v. Wagener, 77 Minn. 483, 80 N.W. 633, 778, 1134, 46 L.R.A. 442, 77 Am. St. 681; State v. Ryder, 126 Minn. 95, 147 N.W. 953, 5 A.L.R. 1449; State v. Houghton, 134 Minn. 226, 158 N.W. 1017, L.R.A. 1917F, 1050; Williams v. Evans, 139 Minn. 32, 165 N.W. 495, 166 N.W. 504, L.R.A. 1918F, 542. All questions respecting the propriety and public necessity of exercising the power are committed to the legislature and its determination is ordinarily final and not open to judicial review. Its determination that public interests require a particular exercise of the power is presumptively valid, but the presumption is not conclusive. State v. St. Paul City Ry. Co. 122 Minn. 163, 142 N.W. 136.
To answer the question now under consideration, we must inquire into the purpose of the legislature in abrogating rules of live stock exchanges which prohibit members from dealing with outside traders. The effect of such rules is to limit the field of activity of the members. At first blush they appear to be in partial restraint of trade although it was held in Anderson v. United States, 171 U.S. 604, 19 S.Ct. 50, 43 L.Ed. 300, that they did not transgress the Act of Congress of July 2, 1890, prohibiting monopolies and combinations in restraint of commerce between the states. In State v. Stock Exchange, 211 Mo. 181, 109 S.W. 675, 124 Am. St. 776, and State v. Aikins, 83 Kan. 792, 112 P. 605, the evils which resulted from the activities of the Kansas City Exchange are described. In the Kansas case, after adverting to the genuine public service which the exchange was capable of rendering and did in fact render, the court remarked that "these traders have never been able to resist the temptation to grasp the reins of the market and sit in the seat of monopoly." The record before us discloses no abuses of defendant's potential power over the live stock...
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