Union County Nat. Bank v. Ozan Lumber Co.

• Decision Date: 02 January 1904
• Citation: 127 F. 206
• Parties: UNION COUNTY NAT. BANK OF LIBERTY, IND., v. OZAN LUMBER CO.
• Court: U.S. District Court — Western District of Arkansas

127 F. 206

UNION COUNTY NAT. BANK OF LIBERTY, IND., v. OZAN LUMBER CO.

United States Circuit Court, W.D. Arkansas, Texarkana Division.

January 2, 1904

Morris M. Cohn, for plaintiff.

McRae &amp Tompkins and C. C. Hamby, for defendant.

ROGERS District Judge.

plaintiff, the assignee of certain promissory notes, drawn in the usual form, sued the defendant, who is the maker of the notes. The defendant answered in two counts. plaintiff interposed a general demurrer to the second count, which is as follows:

'That said notes were given for a patented article, covered by letters patent No. 621,043, granted March 14, 1899, and by letters patent No. 654,954, granted July 31, 1900, to George W. Decker, copies of which letters patent and of the specifications and drawings of said patents, authenticated by the seal and certified by the Commissioner of Patents defendant holds subject to inspection by the plaintiff, and subject to the orders of the court; that said notes were given for said machine patented as aforesaid, and were not executed upon a printed form which showed upon its face that said notes were executed in consideration of a patented machine, implement, substance, or instrument, as required by section 493 of Sandel & Hill's Digest of the Statutes of Arkansas; and that the plaintiffs herein have taken said notes well knowing the same to be executed for such patented article, and therefore defendant denies that the plaintiff is an innocent holder, and says that said notes are absolutely null and void.'

This count is based on the act of the Legislature of the state of Arkansas approved April 23, 1891 (Sand. & H. Dig. Secs 493-496, inclusive). The act is as follows:

'Section 1. That hereafter any vendor of any patented machine, implement, substance, or instrument of any kind. or character whatsoever, when the said vendor of the same effects the sale of the same to any citizen of this state on a credit, and takes any character of negotiable instrument, in payment of the same, the said negotiable instrument shall be executed upon a printed form, and show upon its face that it was executed in consideration of a patented machine implement, substance or instrument, as the case may be, and no person shall be considered an innocent holder of the same, though he may have given value for the same before maturity, and the maker thereof may make defense to the collection of the same in the hands of any holder of said negotiable instrument, and all such notes not showing on their face for what they were given shall be absolutely void.

'Sec. 2. That the foregoing section shall also apply to vendors of patent rights, and family rights to use any patented thing of any character whatever.

'Sec. 3. That any vendor of any patented thing of any character, or any vendor of any patented right or family right to use any patented thing of any act, shall upon conviction be punished by a fine of not more than three hundred dollars.

'Sec. 4. This act shall not apply to merchants and dealers who sell patented things in the usual course of business.

'Sec. 5. This act shall take effect from and after its passage.

'Approved April 23, 1891. ' Sess. Acts 1891, p. 296.

If this act is constitutional, the demurrer must be overruled; if unconstitutional it must be sustained.

In Wyatt v. Wallace, 67 Ark. 575, 55 S.W. 1105, the Supreme Court of Arkansas had under consideration the construction to be placed upon this act in so far as it applied to the sale of 'patent-right territory in the state of Arkansas,' and the act was upheld. In that case the note sued on was given for a one-third interest in a 'patent-right territory.' The court, speaking through Mr. Justice Hughes, simply set out the statute at length as I have, supra, and then adds:

'This act is plain and emphatic. The note sued on in this case was void for noncompliance with section 493 of the statute quoted above. The note could not be the basis of recovery in this suit. As an evidence of indebtedness, it was void under section 493.'

It may be this statute is valid where the consideration is an interest in a 'patent-right territory,' and yet invalid where the consideration is for a machine protected by a patent, as in the case at bar. The cases make a wide distinction on that point. See notes to Commonwealth of Ky. v. Petty, 29 L.R.A. 786 et seq.; Patterson v. Kentucky, 97 U.S. 501, 24 L.Ed. 1115; First Nat. Bank of Chattanooga v. Stockwell, 20 L.R.A. 548, and notes; Castle v. Hutchinson (C.C.) 25 F. 394; Reeves v. Corning (C.C.) 51 F. 774. At page 506, 97 U.S., 24 L.Ed. 1115 (Patterson v. Kentucky), the distinction referred to above is clearly recognized. I need not stop to multiply, review, or distinguish the cases on that point. If the only question involved was the constitutionality of the first section of the act of April 23, 1891, I should feel inclined to uphold the statute in this case where the consideration of the note is for a patented machine, and not for an interest in a patent right, or patent-right territory. See the cases cited supra. But the third section of the act makes it a criminal offense to violate the first section, and the fourth section of the act excepts from the provisions of the act 'merchants and dealers who sell patented things in the usual course of business. ' Section 1 of article 14 of the Constitution of the United States provides that 'no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. ' It will be observed that the provisions of section 4 of the act, which excepts from the operation of the act 'merchants and dealers who sell patented things in the usual course of business,' does not except from the operation of the act merchants and dealers who sell patent rights or patent-right territory. In other words, the exception is limited to patented things sold by merchants and dealers in the usual course of business; so that it may be that the case at bar is distinguished from the case of Wyatt v. Wallace, supra. It is, however, not necessary in this case to express any opinion as to the correctness of the decision in that case, or to criticise or distinguish it from the case at bar. Any opinion in reference to the questions involved in that case is distinctly reserved until the necessity arises for their consideration. By the plain provisions of this act it is made to apply to all persons except 'merchants and dealers who sell patented things in the usual course of business. ' How shall this act be reconciled with the last paragraph of the first section of the fourteenth article of the Constitution of the United States, which forbids in terms any state to 'deny to any person within its jurisdiction the equal protection of the laws'? How can the state, acting within this provision of the Constitution, protect by its laws 'merchants and dealers who sell patented things in the usual course of business,' and deny the same protection to other persons; as, for instance, manufacturers of the same patented things who 'sell them in the usual course of business'? If a merchant or dealer had sold the article in the usual course of business, for which the notes in question were given, and, having sued on them, could recover, notwithstanding the statute in question, must not the same right to recover be accorded all other persons under like circumstances? If the statute in question is a perfect defense for this defendant, must it not also be a perfect defense in all similar cases, without reference to who the plaintiff may be, or what his business may be? If any citizen of this state has a right to set up a certain statutory defense, must not all other citizens, without reference to their occupation, whether of this or any other state, have the same right? The decision of this case involves the answer to these questions. The principle is not a new one. It has arisen in many cases; and sometimes they leave the line between the police powers of the state and the powers of the United States, as found in their Constitution, but dimly drawn, and even in apparent conflict. Nevertheless, each case must be met, having due regard for the rights, duties, and powers of both governments.

In Gulf, Colorado & Santa Fe Ry. v. Ellis, 165 U.S. 150, 17 Sup.Ct. 255, 41 L.Ed. 666, the state of Texas had enacted a statute providing that:

'Any person in this state having a valid bona fide claim for personal services rendered or labor done, or for damages, or for overcharges on freight, or claims for stock killed or injured by the train of any railway company, provided that such claim for stock killed or injured shall be presented to the agent of the company nearest to the point where such stock was killed or injured, against any railway corporation operating a railroad in this state, and the amount of such claim does not exceed $50.00, may present the same, verified by his affidavit, for payment to such corporation by filing it with any station agent of such corporation in any county where suit may be instituted for the same, and if, at the expiration of thirty days after such presentation, such claim has not been paid or satisfied, he may immediately institute suit thereon in the proper court; and if he shall finally establish his claim, and obtain judgment for the full amount thereof, as presented for payment to such corporation in such court, or any court to which the suit may have been appealed he shall be entitled to recover the amount of such claim and all the costs of suit, and in addition thereto all reasonable...