Ozan Lumber Company v. Union County National Bank of Liberty, Indiana

• Decision Date: 02 December 1907
• Docket Number: No. 37,37
• Citation: 28 S.Ct. 89,207 U.S. 251,52 L.Ed. 195
• Parties: OZAN LUMBER COMPANY, Petitioner, v. UNION COUNTY NATIONAL BANK OF LIBERTY, INDIANA
• Court: U.S. Supreme Court

207 U.S. 251

28 S.Ct. 89

52 L.Ed. 195

OZAN LUMBER COMPANY, Petitioner,

v UNION COUNTY NATIONAL BANK OF LIBERTY, INDIANA.

No. 37.

Submitted November 5, 1907.

Decided December 2, 1907.

This case comes here upon certiorari directed to the circuit court of appeals for the eighth circuit. The action was commenced in the United States circuit court for the western district of Arkansas, upon certain promissory notes, which the defendant, the Ozan Lumber Company, in its answer alleged had been given by it in payment for a patented article, such notes not being executed upon a printed form, showing they were given in consideration of a patented machine, as required by the statute of Arkansas. Kirby's Digest Laws of Arkansas, §§ 513 to 516, inclusive.

A demurrer to the defense was interposed on the ground that it did not state facts constituting a defense. The circuit court sustained the demurrer, because, as it held, the act was in violation of the 14th Amendment, as denying to the plaintiff the equal protection of the laws. 127 Fed. 206. The case was taken by writ of error to the circuit court of appeals, where the judgment was affirmed for the reason that the act was an illegal discrimination against patented articles. 76 C. C. A. 218, 145 Fed. 344. The application by defendant for a certiorari to review that judgment was granted.

Messrs. U. M. Rose and Thomas C. McRae for petitioner.

[Argument of Counsel from page 252 intentionally omitted] Mr. Morris M. Cohn for respondent.

[Argument of Counsel from page 253 intentionally omitted] Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

The validity of this very statute of Arkansas (at least, until Congress legislates upon the subject) has already been affirmed by this court (Woods v. Carl, 203 U. S. 358, 51 L. ed. 219, 27 Sup. Ct. Rep. 99), and the validity of statutes of a somewhat similar nature has also been affirmed in the case of Allen v. Riley, 203 U. S. 347, 51 L. ed. 216, 27 Sup. Ct. Rep. 95, immediately preceding the case above cited.

It is sought to avoid the authority of our decision upon this Arkansas statute by asserting that nothing was therein decided except the validity of the 1st section of the act, and that the validity of the act when considered in connection with the 4th section was not argued or decided. The 4th section reads as follows: 'This act shall not apply to merchants and dealers who sell patented things in the usual course of business.' Other reasons for an affirmance are set up in the brief of respondent.

The grounds given for the decision by the circuit court and the circuit court of appeals differ somewhat. The circuit court says that the effect of the 4th section of the statute is to violate that portion of the 14th Amendment to the Federal Constitution which provides that no state shall deny to any person within its jurisdiction the equal protection of the laws; while the circuit court of appeals bases its judgment upon the unlawful discrimination evidenced by the act against those who are protected by a patent granted by the United States.

In 203 U. S. 358 (supra) this court held the statute valid as against an objection of the same nature as that taken herein by the circuit court of appeals. Our decision in that case had not been made at the time of the decision of this case in the courts below. The ground taken by the circuit court was not discussed in our opinion in 203 U. S., and although it might be urged that all objections to its validity arising upon the face of the statute, even if not specially discussed, were overruled by the decision, yet, assuming that the particular question now presented is still open in this court, we are of opinion that the exception contained in § 4 does not render the statute invalid. The plain purpose of the whole statute is to create and enforce a proper police regulation. Its passage showed that the legislature was of opinion that fraud and imposition were frequent in the sale of property of this nature, except in the cases mentioned in § 4, and that temptations to false representations in regard to the virtues and value of the article sold were also frequently yielded to. When the sale of the article was effected by such representations, and a note given for the amount of the sale, a transfer of the note to a bona fide purchaser for value before its maturity prevented the vendee from showing the fraud by which the sale had been accomplished. In order to reach such a transaction and to permit the vendee to show the fraud, the statute was passed. It was doubtless thought that merchants and dealers, as mentioned in the statute, while dealing with the patented things in the manner stated, would not be so likely to make representations or to engage in a fraud to effect a sale, as those covered by the statute. The various...