State v. Mason , 94 Utah 501 ( 1938 )

W.B. Mason was convicted of the charge of engaging in the business of a "dealer" in farm products without a license, upon a complaint filed in the city court of Brigham City, Box Elder County, Utah; a representative of the State Board of Agriculture being complainant on behalf of the State. The charging part of the complaint alleges that W.B. Mason, acting as a "dealer" without a license, committed a misdemeanor in that "said defendant did then and there [January 17, 1936] wilfully and unlawfully for the purpose of resale obtain from R.S. Rice, a producer, possession and control of 1000 bushels of barley without at the time of such delivery paying the full agreed purchase price of such commodity in lawful money of the United States," in violation of chapter 4, Laws of Utah 1935.

The defendant demurred to the complaint in the justice's court upon the ground that the complaint fails to state facts sufficient to constitute a public offense. The demurrer was overruled. The defendant thereupon pleaded "not guilty" for the reason the portion of the act relating to "dealers" is unconstitutional. He was found guilty in the justice's court and appealed to the district court.

In the district court the defendant again relied upon his demurrer and waived trial by jury. The demurrer was overruled. The cause was then submitted to the district court upon the following stipulated facts:

"It is stipulated between the plaintiff and defendant that the following are the facts which may be deemed in evidence and considered by the court to determine the guilt or innocence of the defendant of the crime of acting as a dealer without a license, a misdemeanor, charged in the complaint on file herein, to-wit, that the said defendant, on or about the 5th day of September, 1935, did then and there purchase and obtain from one R.S. Rice, a producer of farm produce, for the purpose of resale,or possession, of one thousand bushels of barley, without paying at the time of such delivery the full and agreed purchase price of said commodity in lawful money of the United States. That at the time of the acquisition and purchase of the barley, the defendant drew his check made payable to R.S. Rice, drawn on the Commercial Security Bank of Ogden, Utah, for the agreed full purchase price of the commodity and delivered the same to Mr. Rice, who immediately thereafter and in due course presented the check for payment, and the same was duly and regularly paid in regular course. That at the time in question, the defendant did not obtain a dealer's license before the acquisition and purchase of the barley in question, and that the defendant was engaged in the business of buying farm produce and giving in payment therefor his check in the same manner as in this case, and that the defendant does not come within any of the exemptions provided in said Act. That the defendant desires a decision squarely on the question of the constitutionality of the statute."

The trial court found the defendant guilty. The case is a test case and no moral turpitude attaches to the defendant because of the alleged infraction of the law as is indicated by the sentence of the district court of one day in jail with the sentence stayed.

Appeal brings this cause to this court with the assignments of error being the overruling of the demurrer and entry of judgment of conviction. Appellant contends the act is void as relating to "dealers" because "it is unreasonable, discriminatory class legislation, and that the control sought to be exercised bears no reasonable relation to the evils sought to be prevented." The statute says:

"The term `dealer' means any person other than a commission merchant who for the purpose of resale obtains from the producer thereof possession or control of any farm products, except by payment to the producer at the time of obtaining such possession or control, of the full agreed purchase price of such commodity in lawful money of the United States; provided, however, that the term `dealer' as herein defined shall not be construed to include those who are regularly licensed under the laws of this state to sell tangible personal property exclusively at retail." Section 2(g), chapter 4, Laws of Utah 1935.

"No person shall act as a * * * dealer, * * * withouthaving obtained a license as provided in this act. Every person, acting as a * * * dealer, * * * shall file an application with the state board of agriculture for a license to transact the business of * * * dealer, * * * and such application shall be accompanied by the license fee." Section 5, chapter 4, Laws of Utah 1935.

"For filing the applications herein described, each applicant must pay a fee as follows: * * *

"(b) Dealers: $35 for each year. * * *

"Any person who shall have been licensed as a commission merchant shall, upon application, be licensed also as a dealer and as a broker as defined herein, without payment of further fees, and shall thereupon conform to the parts of this act regulating the business of a dealer or broker." Section 6, chapter 4, Laws of Utah 1935. (Italics mine.)

Each of the sections, a part of which is above quoted, has been amended by chapter 8, Laws of Utah 1937, but none of the amendments affect any part of the quoted portions of the above sections.

In addition to the above sections, we find a declared purpose of the statute in section 3 to be:

"It is recognized that the producer of farm products as defined in this act (the term `producer' means any person engaged in the business of growing or producing any farm product, section 2, (c.) is subject to unusual hazards and losses in his dealings with certain persons (not `dealers,' presumably) who seek to obtain and do obtain from such producer his products for resale upon a speculative basis." (Parenthetical words added.)

Another of the declared purposes of the act reads:

"And it is further recognized that it is in the public interest that such hazards and losses shall be minimized to the end that the production of such products shall be stabilized and perpetuated in order that the consumer [in this State] of such products may depend upon a constant and adequate supply thereof."

Then the following enlightening clause is added to complete the section:

"And to the end and purpose it is hereby declared to be the policy of the legislature that such dealings shall be regulated and systematized so as to safeguard such producer against such hazards and losses, and this measure is enacted for the purpose of providing such regulations."

As indicated, the objections to the statute are: (1) That it is unreasonable, discriminatory class legislation; and (2) that the control sought to be exercised bears no reasonable relation to the evils sought to be prevented. One of the declared purposes is to protect the producer from unusual hazards and losses in his dealings with certain persons who seek to obtain his products upon "a speculative basis." Another is the stabilization that the consumer may depend upon an adequate supply; and the third is that the dealings shall be regulated andsystematized so as to safeguard the producer against hazards and losses.

Under subsection (g) of section 2, supra, one licensed to sell tangible personal property is not a dealer and yet he and all in his class may buy without paying the "full agreed purchase price * * * in lawful money of the United States," or without a "dealer's" license. The same would seem to be true of commission merchants, except that a commission merchant's license also licenses the holder as a "dealer" and "broker." This seems to be discriminatory.

Going back to the term "dealer." By exclusion, the statute makes "any person" who, for the purpose of resale, obtains anyfarm products from a producer, a "dealer." Any person is probably the equivalent of all persons as used in the statute. Then all persons who obtain the products specified from the producer, whether engaged in any business as such or not, are dealers, except those excluded by the statute, who are commission merchants and those who sell tangible personal property exclusively at retail and hold licenses for such purposes.

The statute does not purport to regulate or license a business. By its terms it requires a license for individual transactions on credit, or, put in the terms thereof, any person, other than the classes mentioned, who buys or otherwise obtains possession of the specified products without paying the full agreed purchase price in lawful money of the United States, is guilty of a misdemeanor. It is thus made a crime to do what all citizens had heretofore been presumed to have, in the very nature of commercial existence, a fundamental right to do.

The law may not be supported as a revenue measure, and the question of classification does not apply as there is no regulation involved. Why should the State or any municipality or agency of the State be concerned whether A and B deal upon a credit or a cash basis in their individual transactions? I have no quarrel with my brethren of the court as to the power of the Legislature to make reasonable classifications for regulatory purposes. However, neither the statute nor the application of it in the instant case bear any reasonable relation to the declared purposes set out therein. Because a person seeks to obtain products for resale upon a speculative basis applies to cash as well as credit sales, whether licensed or not. How the fact that any person who buys on credit or who is required to pay money for his purchase will tend to stabilize and perpetuate an adequate and orderly supply to the consumer, others may be able to determine better than I. In the last analysis, it is an attempt to require the farmer or producer to sell to licensees on credit or for cash as he may be able to bargain, or hold his products until a cash customer arrives. Take an illustration: A says to B, "I will give you $1000 for 1000 bushels of barley and will pay you cash." B says: "If you will give me your note for $1050.00 payable in six months, I will sell it to you." A replies: "Nothing doing, I do not want to go to jail." B then says: "I do not need the money now. You do and can use it to advantage. I will take your note at 6 per cent, payable in six months." A would again be compelled to get a license or refuse the deal. Where does the element of regulation come in? What right is conferred upon A that he should not otherwise be entitled to exercise without the license? And wherein is B benefited or the public concerned whether he sells or holds his produce till kingdom come, or as long as he chooses to do so? Quoting from and citing the case of Matthews v.Jensen, found in 21 Utah 207, on page 218, 61 P. 303, we find the following:

"`License,' in common parlance, implies permission to do something which may not be done without a license. In this sense we are to understand the word was used in the constitution and statutes, unless the context indicates a different or more comprehensive meaning. `The object of a license,' says Mr. Justice Manning in Chilvers v. People, 11 Mich. 43, `is to confer a right that does not exist without a license.' A mere tax imposed upon a business or occupation, therefore, is not a license, unless the levy confers a right or privilege as to the business which would not otherwise exist. So, a right to license a business or occupation does not imply a right to exact a tax merely for revenue, and where the object is revenue the power to license for that purpose must be conferred in unequivocal terms. Cooley's Const. Lim. 242.

"`License,' in general, implies privilege and regulation, and the imposition of it falls within the police power of the state. That power may be exercised, and license taxes are frequently imposed, with a view to discourage business and occupations which are injurious in their tendencies and prejudicial to the public good, but, `to justify a restrictive license, the business must of itself be of such a nature that its prosecution will do damage to the public, whatever may be the character and qualifications of those who engage in it.' Tied. Lim., p. 278."

The above case was cited and favorably commented upon in the later case of Salt Lake City v. Christensen Co., 34 Utah 38,95 P. 523, 17 L.R.A., N.S., 898.

Every doubt as to the constitutionality of a statute must be resolved in favor of its validity and before a statute may be declared invalid the repugnancy between the statute and the constitution must clearly appear. Such has been and now is the rule of construction in this State as to such matter. Rio GrandeLumber Co. v. Darke, 50 Utah 114, 167 P. 241, L.R.A. 1918A, 1193; Stillman v. Lynch, 56 Utah 540, 192 P. 272, 12 A.L.R. 552; Blackmarr v. City Court of Salt Lake City, 86 Utah 541,38 P.2d 725. On the other hand, "while courts do not lightly interfere with the Legislature in choosing or selecting methods of classification, yet they do not, and may not, shut their eyes to classifications that clearly and manifestly operate unequally, unjustly, and unfairly upon those who come within the same class." Board of Education of Ogden City v. Hunter, 48 Utah 373,159 P. 1019, 1024. It was likewise stated in the case ofState v. Packer Corporation, 77 Utah 500, 297 P. 1013, 1019, that a classification in order to be valid "must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike," the quotation coming fromRoyster Guano Co. v. Virginia, 253 U.S. 412, 40 S.Ct. 560,64 L.Ed. 989; Blackmarr v. City Court, supra. Upon this statement of the law we seem to agree.

Section 3 of the act discloses the purpose of the act and it appears clear that such purpose bears no relation to public health, morals, or even the general welfare of the people of the State. It is declared that the producers of farm products, as defined in the act, seem to be subject to unusual hazards and losses wherein the producers have dealings with "certain persons." Who are these "certain persons," wicked, designing, or otherwise, with whom the producer is unable to cope, and how long since? Under the act all commission merchants must take out a license to carry on the business of a commission merchant. They are not required to take out a "dealer's" license, but, on the other hand, they are exempt.

If the act was intended to protect against cheats and frauds, it would seem not only to have failed, but to have opened the door to such by luring the producer into a false sense of security by the exhibition of a "dealer's" license when no such security may exist. The statute appears to be designed to compel the purchasers of farm products to pay in lawful money at the time of purchase or obtain a license. Carry cash and purchase at will — fail to do so and go to jail or pay a fine, where the purchase of farm products for resale is involved. The real effect of the statute seems to be to enable a particular class of producers to collect for their sales from persons not licensed, while trade moves unhampered between those licensed though they may not be able to collect.

The Fourteenth Amendment forbids the State to "deny to any person * * * the equal protection of the laws," and "equal protection of the laws" stands for the passage of such laws as will give such protection and forbids "class legislation." Discrimination as to legal rights and duties is forbidden. All persons under the same conditions are entitled to exercise the same rights and receive the same benefits and protection. Regulations for different localities, different classes, and different conditions, in order to be valid, must be reasonable and based upon real differences affecting fundamental rights and privileges.

In what way does compulsory payment in lawful money to the producer of farm products differ from the purchase of any other commodity? What is there in the purchase of such commodities for resale that constitutes a difference as to public health, public safety, peace, comfort, and general welfare; and the purchase for resale of lime, stone, cement, timber, lumber, or any other products, natural or manufactured? Differentiations and classifications must be based upon real differences and must be reasonable. Arbitrary classification is forbidden by the Constitution.

"If there be no real difference between the localities, or business, or occupation, or property, the state cannot make one in order to favor some persons over others." State v. Latham,115 Me. 176, 98 A. 578, 579, L.R.A. 1917A, 480.

The case just cited related to a statute by which any purchaser of milk for resale should, unless otherwise provided for in the written contract, pay therefor on the 1st and 15th of each month. It was there held that the statute provided for an arbitrary classification relating to the purchasers of a particular product intended for a particular use and had no relation to public health, safety, morals, or welfare, and offended against the Fourteenth Amendment. In support of the proposition that "If there be no real difference between the localities, or business, or occupation, or property, the state cannot make one in order to favor some persons over others," a number of cases are there cited which need not be repeated here. May milk be regarded as a farm product? May butter, cheese, flour? And Aunt Jemima's pancake flour? If so, may not timber, lumber, nursery stock, plants, or flowers, be likewise made the basis of a classification?

For the same and additional reasons the act as it relates to and defines "dealers" must fail as being discriminatory. One who writes a check or draws a draft or delivers any other indicia of payment or orders to pay other than in money should not be required to contribute more to the revenue of the State than one who carries his money in his pocket or perchance invites the producer to go to the bank for the cash while the produce is being loaded or shipped.

I am of the opinion that the act, in so far as it attempts to apply to and regulate "dealers" as therein defined, offends against section 1 of the Fourteenth Amendment to the Federal Constitution, and sections 7 and 24 of article 1 of the Constitution of Utah. The purchase of farm produce from a producer is essentially no different as an exercise of a common right than the purchase of farm produce from one not a producer. The statute attempts to license, not a business, but impose a burden upon individual transactions exercised as a common right. This may not be done. New State Ice Co. v. Liebmann,285 U.S. 262, 52 S.Ct. 371, 76 L.Ed. 747. As was aptly said by Mr. Justice Frick in the case of State v. Holtgreve, 58 Utah 563,200 P. 894, 899, 26 A.L.R. 696, relating to a tax on trading stamps of merchants obtaining them from third persons, but not on stamps of merchants issuing their own:

"It is the duty of this court to exercise the greatest caution so as not to interfere with the rights of the Legislature in passing laws, yet we must also be ever mindful of the obligation that we have assumed to obey and to defend the Constitution. In meeting the obligation imposed upon us in that regard, it is just as much our duty to prevent others from violating the Constitution as it is that we shall not do so. While it is entirely within the province of the Legislature to regulate commerce, traffic, trade, and business, in so far as such regulation may be necessary for the protection and welfare of the community, it is nevertheless the duty of the courts to protect and safeguard the rights of the individual whenever such rights are invaded from whatever source. Liberty in conducting one's own affairs in his own way where no rights of another or those of the community are invaded is just as essential as is the liberty of movement and thought. The right of transacting business should therefore be interfered with only in cases of necessity, and when the transactions do, or tend to, militate against the welfare of the community. If, however, business requires regulation, no exceptions should be made except such as are based upon reasonable and proper distinctions." Salt Lake City v. UtahLight Ry. Co., 45 Utah 50, 142 P. 1067; Park City v.Daniels, 46 Utah 554, 149 P. 1094, Ann. Cas. 1918E, 107.

The matter of penalty is not mentioned in the argument or briefs. It is, however, suggested that law enforcement officers may, with profit, examine section 21 of the act if other actions are instituted invoking the penalties of the act.

The act does not either define or license a produce dealer. It merely requires a license of any one buying for resale and not paying cash, without reference to the carrying on of a business. A question similar in its general import was discussed relating to this statute before the amendment was made generally defining a "dealer." See Maycock v. White, 83 Utah 446, 29 P.2d 934.

The judgment of the trial court should be reversed, and the cause remanded, with directions to dismiss the same.