State v. Gage

• Decision Date: 21 March 1905
• Docket Number: 8681
• Citation: 72 Ohio St. 210,73 N.E. 1078
• Parties: The State Of Ohio v. Gage.
• Court: Ohio Supreme Court

73 N.E. 1078

72 Ohio St. 210

The State Of Ohio v. Gage.

No. 8681

Supreme Court of Ohio

March 21, 1905

Act of April 19, 1898 - Defining trusts and prohibiting them - Is a valid act - Authorizing punishment and imprisonment - Valentine-Stewart law - Constitutional law.

The act of April 19, 1898, defining trusts and prohibiting them under penalties (93 O. L., 143) by a valid exercise of the police power, authorizes the punishment by fine and imprisonment of a person who is an active member of, and assists in carrying out the purposes of, an association formed to prevent competition in the sale of an article of merchandise.

Gage was indicted in Delaware county under the act of April 19 1898, entitled "An act to define trusts and to provide for criminal penalties and civil damages, and punishment of corporations, persons, firms and associations, or persons connected with them, and to promote free competition in commerce and all classes of business in the state."

The indictment charged "that Perley W. Gage of said county on the first day of November in the year of our Lord, one thousand nine hundred and two, with force and arms, in said county of Delaware, and state of Ohio, and until this sixth day of January in the year of our Lord, one thousand nine hundred and three, said Perley W. Gage, late of said county of Delaware, was an active member of, acted with and in pursuance of, aided and assisted in carrying out the purposes of The Delaware Coal Exchange, an association of persons organized for the purpose of preventing competition in the sale, and to maintain a uniform and graduated figure for the sale of coal, and to directly preclude a free and unrestricted competition among the members of said association, purchasers and consumers in the sale and transportation of coal, contrary to the form of the statute in such case made and provided, and against the peace and dignity of the state of Ohio."

To this indictment the defendant demurred upon the two grounds that the facts charged do not constitute an offense against the laws of Ohio and that the statute under which the indictment was presented is unconstitutional and void. The demurrer having been overruled, the defendant entered a plea of guilty, and then moved in arrest of judgment upon the same grounds stated in his demurrer. The court overruled this motion and adjudged that the defendant pay a fine of $100 and the costs of prosecution and that he stand committed to the jail of the county until the fine and costs should be paid. On Gage's petition in error the judgment of the court of common pleas was reversed by the circuit court.

Mr Wade H. Ellis, attorney general; Mr. E. T. Humes, prosecuting attorney; Mr. E. M. Wickham and Mr. H. Kenneth Rogers, for the State.

The Valentine law, sections 4, 5, 6 and 7, do not contravene the provisions of either the federal constitution or the constitution of Ohio.

The affirmative of this proposition we maintain.

The sections declared by the circuit court to be unconstitutional are 4, 5, 6 and 7.

On reading the opinion of the circuit court, it appears that its decision was based on the theory that the law is unconstitutional because it is in general restraint of trade and makes criminal an act of making an agreement or contract in partial restraint of trade, which is legal at common law.

It is a sufficient answer to the argument above that the Valentine act affirmatively recognizes partnerships, corporations, and other associations of persons, with their incidents, as legal entities, by naming them in the first section of the act in defining a trust, and also in section 7.

An additional answer is that such agreements are not within the statute. Courts never construe an act to be within the prohibition of a statute merely because it comes within the terms of the statute. When a statute is penal it is not enough to make an act criminal that is within the mere terms of the statute; it must come within the logic, reason and spirit of the statute; it must be within the motives and purposes of the legislators. People v. Utica Insurance Co. 15 Johns., 358.

The Valentine act never intended to prohibit and make criminal the formation of partnerships, corporations, or joint stock companies, or to prohibit such organizations from making any agreement about their production and prices.

The reasons given by the circuit court to sustain its decision, in the main, are the same as those given by counsel in their arguments to show that the act is unconstitutional, in all the cases under the federal law, known as the Sherman anti-trust act, and the anti-trust laws of other states.

We cite the cases of State v. Smiley, 69 Pac. Rep., 199, decided by the supreme court of Kansas, in which was involved the question of the constitutionality of an act precisely the same as the Valentine law; indeed, it appears from a comparison of the two, that the Valentine law is a copy of the Kansas statute. Domats, Rules; Dwar. St., 138.

And in answer to the argument of counsel against the constitutionality of the law, the Kansas court expressed itself in this vigorous language: "It is certainly competent for the legislature to make penal the doing of that which the courts themselves recognize as hurtful to the body politic, and for that reason to refuse to countenance. The legislature of 1897 did that; nor did it do anything more. It is no argument to launch the platitudes of personal liberty, and freedom of contract, and due process of law, etc., against this statute. What specific prohibition does it contain that the common law has not contained for ages past? Absolutely none.

Another reason for holding the act unconstitutional the circuit court said: "There can be no legal injury to the public, unless there be legal injury to some individual or class of individuals, from the act which is the object of the agreement or combination," and the case of State ex rel. v. Buckeye Pipe Line Co., 61 Ohio St. 520, is cited to sustain the proposition. There can be no doubt of the correctness of the principle, but it can have no application to the case, except on the assumption that such matters as the formation of partnerships, the organization of corporations and joint stock companies, the sale of the good will of a business concern, and other acts mentioned by the circuit court are within the provisions of the Valentine law. We have already shown that such acts are not within the spirit of the statute, and, therefore, not within its prohibition; the state of Ohio in this case did not prosecute Gage for being a member of a partnership, or for assisting in the organization of a corporation, or joint stock company, or for the sale or purchase of the good will of any business concern, or for making any contract or agreement that is valid at common law; no such case was before the court; and all that was said by the circuit court in its opinion on that head does not exceed in importance the merest obiter dictum.

A corporation has the same right and freedom of contract that an individual possesses, unless it is limited by its charter or the laws that create it; the contracts of a corporation in restraint of trade, or in restriction of competition would be as hurtful to the public, as those of an individual; no substantial difference in their effect could be discovered; therefore, the law would be equally applicable to both, and the language of the Supreme Court in State v. Buckeye Pipe Line Co., 61 Ohio St. 520, is applicable in any case in which individuals combine to restrain trade or to restrict competition in business.

It was held by the circuit court that the Valentine law is an infringement on the freedom of contract. The liberty, or freedom of contract is guaranteed by both our state and federal constitutions. There is no difference in meaning in the guarantee of our state constitution and that of our federal constitution. Section 1 of article 1 of our state constitution is substantially the same as section 1 of article 14 of the constitution of the United States; it was intended to be the same, but is expressed in slightly different terms. Our contention is, that if the Sherman law is a valid enactment, so is the Valentine law for the same reason; that if the federal act does not infringe upon the citizen's rights under the federal constitution, so neither does the Valentine act conflict with the guarantee of the state constitution.

Sections 1, 2 and 3 of the criminal part of the federal anti-trust law, are just as drastic and comprehensive in their scope as sections 4, 5, 6 and 7 of the Valentine law. If the liberty of contract is infringed upon by those sections of the Valentine law, so it is by the first three sections of the federal act. The federal statute prohibits all combinations and contracts, no matter what form they may assume, that are in restraint of trade or commerce among the states, and also prohibits a monopoly of such trade or commerce. The Valentine act prohibits combinations whose purpose is the restraint of trade, or the limiting of competition. The objects of both statutes are the same. The one applies to interstate commerce only, the other to commerce among the citizens of the state of Ohio.

The close relationship of these two laws was recognized in State ex rel. v. Buckeye Pipe Line Co. And to support this view Judge Shauck in that case cites United States v. Trans-Missouri Freight Assn., 166 U.S. 290; United States v. Joint Traffic Assn., 171 U.S. 505; and United States v. Pipe & Steel Co., 85 F. 271, and he further observed in substance, that the fact that the federal act was limited to interstate commerce, was not material.

In explicit language the United States Supreme Court held that the Sherman law did not...