Humes v. City of Ft. Smith

• Decision Date: 02 May 1899
• Citation: 93 F. 857
• Parties: HUMES v. CITY OF FT. SMITH, ARK.
• Court: U.S. District Court — Western District of Arkansas

93 F. 857

HUMES v. CITY OF FT. SMITH, ARK.

United States Circuit Court, W.D. Arkansas, Fort Smith Division.

May 2, 1899

The legislature of Arkansas passed an act authorizing cities of the first and second class to license, tax, and regulate gift enterprises by imposing a license tax on any person, firm, or corporation engaged in such enterprises not exceeding $1,000 per year, and on any person, firm, or corporation aiding or patronizing the same not exceeding $500 per year. It defined gift enterprises as including the premium stamp, periodical ticket, trading stamp, and similar schemes and devices by means of which certain merchants, manufacturers, and other persons engaged in lawful callings are advertised, exploited and patronized to the exclusion of others on like terms. A city of the first class passed an ordinance in conformity to such statute, containing the same definitions, and imposing monthly licenses on all persons or concerns engaged in gift enterprises or patronizing the same, within the limits fixed by the statute. Held, that the act and ordinance were not in violation of a provision of the state constitution requiring equality of taxation, as applied to the business of a dealer in trading stamps, which he sold to certain merchants of the city only to be given by them to their customers with their purchases, and which were redeemed by the seller in "presents" on their being presented by the customers in certain numbers.

On the 24th of March, 1899, the complainant, John C. Humes, filed his bill in equity in this court, alleging that he is a citizen of the state of Missouri, and that the defendant is a municipal corporation existing under the laws of Arkansas. He also alleges that he is engaged in business within the corporate limits of said city, under the style of the Co-operative Premium Association; that in conducting his business he solicits merchants of the city to patronize him and that to such as agree to do so he issues stamps, for which they pay; that he issues a great number of copies of a little book in which these stamps can be pasted, and which also contains a directory, giving the names, addresses, and occupations of all the merchants so agreeing to patronize him; that he sends out a large number of canvassers, who place copies of the book in every household in the city, and explain to every one the advantages of patronizing the merchants holding the stamps; that when a person purchases goods from a merchant who does business with complainant, and pays cash for the amount of his purchase, or pays his bill therefor promptly on first presentation at the end of the month, he is entitled to demand and receive stamps issued by complainant in exact proportion to the amount of his purchase; that he has a store in said city, in which he keeps a stock worth several thousands of dollars, embracing a vast assortment of useful and ornamental articles for the home varying in cost from some trifles to things of considerable expense; and the persons receiving these stamps can, whenever they desire, present them at complainant's store, and receive in exchange therefor any article they may select of the value of the stamps surrendered. The complainant attaches to his bill a copy of the book above referred to, which he makes an exhibit, and which will be referred to hereafter. He alleges that the tendency of his business is to encourage thrift and prompt payment of debts, and that it is beneficial alike to the public and the merchants who use the system, it enabling the former to get more for the money, while it advertises the latter, increases their custom and their cash sales, and aids them in the collection of their debts. He alleges that the defendant, urged thereto by sundry merchants who have conspired to break up his business, passed the following ordinance:

'Ordinance No. 496.

'An ordinance defining gift enterprises, and fixing a license and tax thereon.

'Be it ordained by the city council of Fort Smith:

'Section 1. That it shall be unlawful hereafter for any person, firm or corporation to engage in, aid, abet or patronize any gift enterprise as hereinafter defined without having first obtained and paid for a city license therefor from the proper city authorities, as provided in section 2 of this ordinance.

'Sec. 2. That every person, firm or corporation who shall engage in or pursue the avocation, business or enterprise of selling or giving away premium stamps, periodical tickets, trading stamps, or checks or other devices to merchants, manufacturers or other persons engaged in mercantile business, shall pay to the city of Fort Smith a license of seventy-five dollars a month, in advance on the first day of each and every month, and license taken out at any time during a month shall be for the sum of a full month's license, and expire on the first day of the succeeding month.

'Sec. 3. Every person, firm or corporation who shall offer premium stamps, periodical tickets, trading stamps, or similar schemes and devices for the purpose of inducing trade within the city of Fort Smith, shall pay a license to the city of Fort Smith of forty dollars per month, to be paid in advance on the first day of each and every month while so engaged in said business, and said license taken out at any time during a month shall be for the sum of a full month's license, and expire on the first day of the succeeding month.

'Sec. 4. Any person, firm or corporation who shall violate any of the provisions of this ordinance shall be fined in any sum not less than ten dollars nor more than twenty-five dollars, and each day that any person, firm or corporation shall be engaged in business in violation of this ordinance shall be deemed and considered a separate offence.

'Sec. 5. The term 'gift enterprise' as herein employed shall include the premium stamp, periodical ticket, trading stamp, and similar schemes and devices wherein by means of stamps, checks, tickets or other devices certain merchants, manufacturers and other persons engaged in lawful occupations or callings are advertised, exploited and patronized to the exclusion of others on like terms.

'Sec. 6. All ordinances or parts of ordinances in conflict with this ordinance are hereby repealed, and this ordinance shall be in full force and effect from and after its passage and publication.

'Passed and approved March 20, 1899.

'(Signed) Tom Ben Garrett, Mayor.

'Attest: D. B. Sparks, City Clerk.'

The complainant also alleges that the license is vastly in excess of the possible expense of regulating his business, and that it is many times larger than the license fee imposed on any other legitimate business conducted in said city; that the object of fixing the license at so high a rate was to destroy his business, and that, if the ordinance is enforced, that result will follow. He also alleges that the 38 merchants who have adopted his scheme will be liable to prosecution in civil actions, as well as all the numerous agents and canvassers employed by him, and a multiplicity of litigation will result, unless the ordinance is enjoined; that the contracts of the complainant with said merchants require them to use the stamps for the term of a year, and, if said merchants are prevented from using the same, it will bring about a multiplicity of suits between them and the complainant; and that, unless the defendant is restrained, it will use said ordinance as a means of destroying his business, harassing and oppressing himself and customers by civil suits and by prosecution. He then alleges that the city is insolvent, and that, if he should pay the license, he could not recover it at law; that it would require many years to determine the validity of said ordinance in the courts, and all license fees paid by him and his customers in the meantime would be lost; that the defendant city consumes in its running expenses all the money that it can raise under the constitutional limit of taxation, so that there would be no way of enforcing the collection of any judgment which the complainant might recover against it for license fees paid. Upon these facts he prays for an injunction restraining the enforcement of the ordinance.

When the bill was filed, by consent of parties a temporary restraining order was issued. On the 31st of March the defendant city filed its answer, in which it states: That it is a municipal corporation, and a city of first class organized and existing under the laws of the state of Arkansas, and within the jurisdiction and limits of this court. Denies that the complainant has a store within said city in which he keeps a stock of goods worth several thousand dollars, embracing the articles mentioned in the bill, and alleges that said stock is of slight value, and consists of cheap and invaluable articles. Denies that the business conducted by complainant encourages thrift, or the prompt payments of debt, and alleges that said business is beneficial to no one except the complainant, and alleges that the said business adds to the expenses of the public generally to the extent of the cost of the stamps sold, and for which there is no corresponding benefit; that its tendency is to divert from the regular channel of business all cash trade to those who patronize the complainant, which is an interference with the regular and legitimate course of trade, and tending to cause a great loss to all those merchants who are not allowed to patronize the complainant. It alleges that complainant will only sell and furnish stamps to certain merchants and persons in each line and branch of trade, and not to all merchants. It denies that the ordinance was passed because it was urged thereto by sundry merchants who refused to patronize the complainant. Denies...