Petitt v. Field, 48139

• Decision Date: 12 December 1960
• Docket Number: No. 1,No. 48139,48139,1
• Citation: 341 S.W.2d 106
• Parties: Leonard PETITT et al., Respondents, v. Lyman FIELD et al., Appellants
• Court: Missouri Supreme Court

Page 106

341 S.W.2d 106

Leonard PETITT et al., Respondents, v. Lyman FIELD et al., Appellants.

No. 48139.

Supreme Court of Missouri, Division No. 1.

Dec. 12, 1960.

John M. Dalton, Atty. Gen., Julian L. O'Malley, Asst. Atty. Gen., for appellants.

Ben W. Swofford, Laurence R. Smith, Hammond C. Woods, Kansas City, Swofford, Smith & Waisblum, Kansas City, of counsel, for respondents.

HYDE, Judge.

Declaratory judgment action to have declared unconstitutional and void House Bill 238 enacted by the 1959 General Assembly (Sale of Checks Law, Secs. 405.010-405.150, 1960 Pocket Part, V.A.M.S.) and to enjoin its enforcement. The court's decree so declared and ordered a permanent injunction, and defendants have appealed.

The Act was entitled 'An Act relating to the definition, licensing and regulating of the sale and issue of checks, drafts and money orders in this state as a service for a fee or other consideration, providing for investigation, licensing and regulation by the Commissioner of Finance of Missouri of persons engaged in such business providing certain exemptions to its application based upon classification of business conducted providing for judicial review of certain orders of the Commissioner of Finance and prescribing penalties for its violation.' Plaintiffs claim Sec. 3, subd. B makes the act unconstitutional as discriminatory class legislation, depriving them of due process and equal protection of law and grants special and exclusive rights, privileges and immunities in violation of the 14th Amendment to the U. S Constitution, Article I, Secs. 2 and 10, and Art. III, Sec. 40(28), (30), Mo.Constitution, V.A.M.S. Section 3 is as follows:

'Section 3. A. No person shall sell or issue checks in this state as a service for a fee or other consideration without first obtaining a license from the commissioner pursuant to the provisions of this Act, provided, however, that this Act shall not apply to the receipt of money by an incorporated telegraph company at any office or agency of such company for immediate transmission by telegraph.

'B. No license shall be issued or renewed to any person who is engaged in any business the major portion of which involves the processing, manufacture or purchase and sale of commodities or articles of tangible personal property.'

Plaintiffs are retail merchants engaged in the purchase and sale of commodities or articles of tangibel personal property; and bring this action on their own behalf and on behalf of others similarly situated. The parties stipulated that the Act is 'intended to exercise the police powers of the State with reference to licensing and regulation of sale and issue of checks, drafts and money orders as a service for a fee and that such field is a proper one for the exercise of the police power and there is a need therefor.' Written applications for licenses were required to be made to the Commissioner of Finance (See. 5), 'accompanied by an investigation fee of $500' (Sec. 6); and by a corporate surety bond of $25,000 (Sec. 7). An annual license fee of $500 was also required (Sec. 10); and a licensee could conduct business at several locations through agents or employees who were not required to be licensed (Sec. 11). It was stated (Sec. 4) that the Act should not apply to banks, trust companies or savings and loan associations or to 'the Government of the United States or any department or agency thereof.'

Plaintiffs' evidence showed that between 50 and 75 individual merchants engaged in such service in Jackson County, about 87 in St. Louis, and some in other cities such as St. Joseph and Springfield. This service was rendered mostly to workers, who did not have bank accounts and who would cash pay checks after banking hours, taking money orders usually for such purposes as paying accounts to utility companies, finance companies, mortgage companies or for rent. A charge of a few cents (maximum 50 cents on money orders up to $100) was made for issuing money orders by one of plaintiffs (operating two drug stores) who said his net profit from this service had been $2,303.64 in the last eleven months. He also said that this service created customers' good will and increased his sales of merchandise. An agent for a licensee would not get more than 40% of the charge for this service. It was shown that only ten licenses had been issued by the commissioner but that those licensees had 2271 listed agents.

Defendants contend Sec. 3, subd. B in its exclusion from licensing designates a broad class and therefore cannot be held to have made an arbitrary or unreasonable classification, citing such cases as ABC Liquidators, Inc. v. Kansas City, Mo. Sup., 322 S.W.2d 876 (prohibiting Sunday auctions); Poole & Creber Market Co. v. Breshears, 343 Mo. 1133, 125 S.W.2d 23 (porhibiting sale of filled milk); Bellerive Investment Co. v. Kansas City, 321 Mo. 969, 13 S.W.2d 628 (limiting storage of automobiles in buildings occupied as living quarters). However, as plaintiffs point out persons operating an advertising agency, accountant, barber shop, bowling alley, broker, collection agency, insurance agency, laundry, night club, parking garage, pool hall, travel agency, real estate office, theatre and many other service or amusement businesses, as well as those in the business of transporting persons or goods, would be eligible for licensing. Likewise, persons engaged in the purchase and sale of commodities or articles of tangible personal property would be eligible for licensing if such activities did not constitute 'the major portion' of their business. Thus disqualification for licensing even of one carrying on a mercantile business would not depend on the kind of business engaged in but on the amount of such business in proportion to any other kinds of business activities carried on by him. If 49% of a person's business was buying and selling goods, he could be licensed but if it was 51% he could not be. We can find no reasonable basis for such a classification. 'Arbitrary selection can never be justified by calling it classification.' Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 22 S.Ct. 431, 439, 46 L.Ed. 679. Of course, if it were provided that each licensed check exchange must be a separate entity conducted apart from any other business, trade or profession, as required in the Illinois law described in Morey v. Doud, 354 U.S. 457, 461, 77 S.Ct. 1344, 1347, 1 L.Ed.2d 1485, we would have a different situation because it would be reasonable to place such a business in a class of its own. (See also Currency Services, Inc. v. Matthews, D.C., 90 F.Supp. 40, 42, stating similar provision in the Wisconsin law.) This, of course, has been done with the banking business. (Chapters 362-364, RSMo, particularly Sec. 362.420 RSMo, V.A.M.S.) However, as the Morey case shows, it is arbitrary discrimination violating the Equal Protection Clause of the 14th Amendment to make exclusions not based on differences reasonably related to the purposes of the Act. Defendants contend this purpose was to protect the public by separating the check and money order writing business from the mercantile business on the theory that the funds so received might be used by merchants in financing their mercantile business and thus impair the financial responsibility of such writers. Hewever, persons engaged in other businesses or occupations the major portion of which was not sale of goods could also use funds received in check and money order writing to finance their operations. Therefore, permitting the latter and not the former to be licensed would have no reasonable relation to this purpose. Thus Sec. 3, subd. B would not meet the test of the Equal Protection Clause of the 14th Amendment or of Sec. 2, Art. I, Missouri Constitution. Furthermore, any merchant (without any requirement for licensing or inspection) could receive money and issue money orders at his place of business as an agent of a licensee, under this Act....