National Cotton Oil Company v. State of Texas

• Court: U.S. Supreme Court
• Writing for the Court: McKenna
• Citation: National Cotton Oil Company v. State of Texas, 197 U.S. 115, 25 S.Ct. 379, 49 L.Ed. 689 (1905)
• Decision Date: 27 February 1905
• Docket Number: No. 37,37
• Parties: NATIONAL COTTON OIL COMPANY et al., Plffs. in Err. , v. STATE OF TEXAS

197 U.S. 115

25 S.Ct. 379

49 L.Ed. 689

NATIONAL COTTON OIL COMPANY et al., Plffs. in Err.,

v STATE OF TEXAS.

No. 37.

Argued November 1, 2, 1904.

Decided February 27, 1905.

This suit was brought under the antitrust acts of the state of Texas, to forfeit the license of the National Cotton Oil Company to do business in the state of Texas, for violating those acts. The defense is that they are repugnant to the 14th Amendment of the Constitution of the United States.

The suit was instituted by the attorney general of the state and the district attorney of the twenty-sixth judicial district, and the petition alleged the following facts: The National Cotton Oil Company and the Southern Cotton Oil Company are New Jersey corporations, doing and transacting business in the state of Texas by reason of a permit issued to them respectively on the 2d day of May, 1900, and the 3d day of June, 1897.

The Taylor Cotton Oil Works is a Texas corporation doing business in the state under a charter granted August 25, 1898. The said foreign corporations, from the date of their respective permits and the Taylor Cotton Oil Works from the date of its charter have been and are 'engaged in the business of the manufacture and sale of cotton-seed oil, cotton-seed meal, and the other by-products of cotton seed; that the business in which each and all of such corporations were engaged necessitated the purchased of cotton seed from which the products which they manufactured and sold were made, and that said cotton seed was an article and commodity of merchandise.'

Each of them on or about the 1st of November, 1901, and on every day prior and subsequently thereto, has been engaged in the business of buying cotton seed in the various counties of the state, and on the 1st of November, 1901, the National Cotton Oil Company made and entered into a combination with each of the other companies, and they with it, and each of them with various other persons, firms, and corporations, whose names are to the defendant in error unknown, and the said corporations 'became members of and parties to a pool, trust, agreement, confederation, and understanding with each of the other of said corporations, firms, and persons, whereby they did each for itself and with each other and all together agree to regulate and fix, and did regulate and fix, the price at which they would buy cotton seed; that they especially regulated and fixed the price of cotton seed throughout the state of Texas at $14.00 per ton, and agreed amongst and with each other that they would not give more than said $14.00 per ton for cotton seed in any of the towns and communities of the state of Texas.' Whereby, 'and by maintaining the agreement to regulate and fix the price of cotton seed aforesaid, the defendant (the National Cotton Oil Company) was guilty of a violation of the laws of the state of Texas,' and in consequence has forfeited its permit to transact business in the state.

The cancelation and forfeiture of the permit was prayed, and that the oil company be enjoined from transacting business in the state. A demurrer was filed to the petition for insufficiency in law to entitle the state to any relief, and alleged against each of the anti-trust acts of the state and the provisions of the Penal Code based thereon, that they violated § 1, article 14 of the Amendments to the Constitution of the United States, in that the act of March 30, 1889, and the Code provisions based thereon, deprived the company of the equal protection of the laws, because it was provided by § 13 of said act and article 988 of the Penal Code that the said statutes 'shall not apply to agricultural products or live stock while in the hands of the producer or raiser.' And that the act of April 30, 1895, and certain sections of the Revised Statutes of Texas and of the Penal Code were likewise discriminatory because of the same exceptions, and the further exception that said statutes should not be held to 'be understood or considered to prevent the organization of laborers for the purpose of maintaining any standard of wages;' and the act of May 25, 1899, because it was cumulative and a mere supplement to the others, and carried, therefore, the same unconstitutional discriminations.

All of the acts and Code provisions are charged with depriving the oil company of its property without due process of law and in violation of the 14th Amendment, in that the penalties are excessive and their provisions so vague and uncertain that the company is denied a resort to the tribunals of the country to defend its rights, except on the condition that, if not successful, it shall subject its property to confiscation and forfeit its right to do business in the state.

It is also urged as a ground of demurrer that the act of 1895 violated a provision of the Constitution of the state which prohibited a bill to contain more than one subject.

The demurrer was overruled. The company declined to answer further, and judgment was entered forfeiting the license or permit of the company, and enjoining the company from transacting any business in the state, 'except such business as may be and constitute interstate commerce.' The judgment was affirmed by the court of civil appeals. A rehearing was denied and a writ of error from the supreme court refused. This writ of error was then granted.

Messrs. William V. Rowe, R. S. Lovett, Ralph Oakley, and James A. Baker for plaintiffs in error.

[Argument of Counsel from pages 118-126 intentionally omitted]

Page 126

Mr. C. K. Bell for defendant in error.

Statement by Mr. Justice McKenna:

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Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court:

The charges made against the statutes of Texas are that they deny the oil company the equal protection of the law, and take its property without due process of law. The answer to the first depends upon the effect of the statutes. The answer of the second involves their validity and broader considerations. We will deal with it first.

The specification in the demurrer of wherein the statutes deprive the oil company of its property without due process of law is indefinite and peculiar. It may be different from an attack on the validity of the statutes but counsel have treated it as tantamount to such attack, and we will so treat it.

Defendant in error contends that it is not open to the oil company to attack the constitutionality of the statutes, either as discriminating against it or as depriving it of property without due process of law, and cites Waters-Pierce Oil Co. v. Texas, 177 U. S. 28, 44 L. ed. 657, 20 Sup. Ct. Rep. 518. Counsel for the company contests the application of that case; and we will assume (not decide) with them that it is not determinative of their contention.

The acts of 1889 and 1895 are set out at length in Waters-Pierce Oil Co. v. Texas. The act of 1899, so far as the present question is concerned, is substantially the same as they. All of the acts are directed to the prohibition of combinations to restrict trade, or in any way limit competition in the pro-

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duction or sale of articles, or to increase or reduce their price in order to preclude a free and unrestricted competition in them. The various ways in which these purposes can be accomplished are enumerated and forbidden. Penalties are affixed to the violation of the acts, offending domestic corporations forfeit their charters, and offending foreign corporations forfeit their privileges to do business in the state.

There was also an act passed in 1903, which repealed all laws or parts of laws in conflict with it, and expressly repealed certain provisions of the Penal Code of the state, and the acts of 1895 and 1899. The right to recover penalties or to forfeit charters of domestic, or the permits of foreign, corporations, for acts committed before the going into effect of the statute, was reserved.

The argument, which is directed against the validity of the statutes, is drawn from extremes. It is difficult to present its elements in a concise way. Its ultimate foundation is the right of individuals and corporations as well, under the Constitution of the United States, to make contracts and combine in business enterprises; and, it is argued, to prohibit them from so doing 'in the ordinary way through the making of purchases and sales and the fixing of prices, is clearly to work a deprivation of property without due process of law, and to impair the well-recognized liberty of contract, involved in the acquiring, using, and dealing with property,' assured by the Federal Constitution.

To support the argument the usages and necessity of business are adduced, and partnerships and their effect are brought forward as illustrations. There are some things which counsel easily demonstrate. They easily demonstrate that some combination of 'capital, skill, or acts' is necessary to any business development, and that the result must inevitably be a cessation of competition. But this does not prove that all combinations are inviolable, or that no restriction upon competition can be forbidden. To contend for these extremes is to overlook the difference in the effect of actions, and to limit too

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much the function and power of government. By arguing from extremes almost every exercise of government can be shown to be a deprivation of individual liberty. It is common-place to say that it is the purpose, and indeed duty, of government, to get all it can of good out of the activities of men, and limit or forbid them when they become or tend to evil. Of course, what is evil may not be always clear; but to be able to dispute the policy of a law is not to establish its invalidity. It is certainly the conception of a large body of public opinion that the control of prices through combinations tends to restraint of trade and to monopoly, and is evil. The foundations of the belief we are not called upon to discuss, nor does our...