George Sutherland

“ It was within the power of the Legislature, at any time after the granting of Frost's license, to abrogate the requirement of a certificate of necessity, thus opening the business to the competition of all comers. It is difficult to see how the lesser enlargement of the possibilities of competition by a license granted under the 1925 proviso could operate as a denial of constitutional rights.
It must also be borne in mind that a franchise to operate a public utility is not like the general right to engage in a lawful business, part of the liberty of the citizen ”

“ Frost claims that to grant a license to the Durant Company without a showing of public necessity would involve taking his property without due process. The only property which he asserts would be so taken is the alleged right to be immune from the competition of persons operating without a valid license. But for the statute, he would obviously be subject to competition from any one. Whether the license issued to him under section 3714 conferred upon him the property right claimed is a question of statutory construction, and thus, ordinarily, a question of state law. ”

“ As the proviso was construed and applied by the commission and by the court below, its effect is to relieve all corporations organized under the act of 1919 from an onerous restriction upon the right to engage in a public business which is imposed by the statute upon appellant and other individuals, as well as corporations organized under general law, engaging in such business. That a greater burden thereby is laid upon the latter than upon the former is clear. Immunity to one from a burden imposed upon another is a form of classification and necessarily results in inequality ”

“ We first consider the preliminary contention made on behalf of appellees that appellant has no property right to be affected by operations of the Durant Company, and therefore no standing to invoke the provisions of the Fourteenth Amendment or to appeal to a court of equity.
It already appears that cotton gins are declared by the Oklahoma statute to be public utilities, and their operation for the purpose of ginning seed cotton to be public business. No one can operate a cotton gin for such purpose without securing a permit from the commission. ”

“ Is he, thereby, precluded from assailing the proviso upon the ground that one who claims the benefit of a statute may not assert its invalidity? It is not open to question that one who has acquired rights of property necessarily based upon a statute may not attack that statute as unconstitutional, for he cannot both assail it and rely upon it in the same proceeding. ”

“ To me it would seem that there are such differences in organization, management, financial structure and practical operation between the business conducted by appellant, a single individual, and that conducted by a corporation organized as is appellee, as to justify the classification and discrimination made by the statute. ”

“ The assertion is that co-operatives organized under the law of 1919, being stock companies, do business with the general public for the sole purpose of making money, as do individual or other corporate competitors; whereas co-operatives organized under the law of 1917 are 'for mutual help, without capital stock, not conducted for profit, and restricted to the business of their own members.' The fact is that these tow types of co-operative corporations-the stock and the nonstock-differ from one another only in a few details, which are without significance in this connection ”

“ The nonstock co-operative also may reject applicants for membership; and no member may have more than one vote. This type of co-operative is called a nonprofit organization; but the term is merely one of art, indicating the manner in which the financial advantage is distributed. This type also is organized and conducted for the financial benefit of its members and requires capital with which to conduct its business. In the stock type the capital is obtained by the issue of capital stock, and members are not subjected to personal liability for the corporation's business obligations. ”

“ Nor would appellant seem to be placed in any better position to challenge the constitutionality of the statute by recourse to the rule that the possessor of a nonexclusive franchise may enjoin competition unauthorized by the state. Appellee's business is not unauthorized. It is carried on under the sanction of a statute to which appellant himself can offer no constitutional objection, for even unconstitutional statutes may not be treated as though they had never been written. They are not void for all purposes and as to all persons. ”

“ The differences relied upon to justify the classification are, for that purpose, without substance. The provision for paying a portion of the profits to members or, if so determined, to nonmembers, based upon the amounts of their sales to or purchases from the corporation, is a device which, without special statutory authority, may be and often is resorted to by ordinary corporations for the purpose of securing business. ”

“ The farmers seek through both to secure a more efficient system of production and distribution and a more equitable allocation of benefits. But this is not their only purpose. Besides promoting the financial advantage of the participating farmers, they seek through co-operation to socialize their interests-to require an equitable assumption of responsibilities while assuring an equitable distribution of benefits. Their aim is economic democracy on lines of liberty, equality and fraternity. ”

“ By an act of the state Legislature, passed in 1917 (Comp. Stats. 1921, § 5599) , co-operative agricultural or horticultural associations not having capital stock or being conducted for profit, may be formed for the purpose of mutual help by persons engaged in agriculture or horticulture. Under a statute passed in 1919 (Comp. Stats. 1921, § 5637 et seq.) 10 or more persons may form a corporation for the purpose of conducting, among others, an agricultural or horticultural business upon a co-operative plan. ”

“ His real and only complaint is not that he has been discriminated against either in the grant or enjoyment of his license, but that in the exercise of his nonexclusive privilege of carrying on the cotton ginning business he will suffer from competition by the corporate appellee which, under local law, may secure a like privilege with possibly less difficulty than did appellant. ”

“ The act further discourages entrance of mere capitalists into the co-operative by provisions which permit 5 per cent. of the profits to be set aside for educational purposes; which require 10 per cent. of the profits to be set aside as a reserve fund, until such fund shall equal at least 50 per cent. of the capital stock; which limit the annual dividends on stock to 8 per cent.; and which require that the rest of the year's profits be distributed as patronage dividends to members, except so far as the directors may apportion them to nonmembers. ”

“ That the immunity thus granted to the corporation is one which bears injuriously against the individual does not admit of doubt, since by multiplying plants without regard to necessity the effect well may be to deprive him of business which he would otherwise obtain if the substantive provision of the statute were enforced. ”

“ More than two-thirds of all farmers' co-operatives in the United States are organized under the stock type laws. In 1925 there were 10,147 reporting organizations. Of these 68.7 per cent. were stock associations. In leading states the percentage was larger. In Wisconsin the percentage was 80; in North Dakota 87; in Nebraska, 91.3; and in Kansas, 92. Of the farmers' co-operatives existing in Oklahoma in 1925, 87.6 per cent. were stock associations. [20] The great co-operative systems of England, Scotland and Canada were developed and are now operated by organizations of the stock type. ”

“ The fact that, despite the regulatory provisions of the Public Service Law, a public utility is permitted to earn huge profits indicates that something more than rate regulation may be needed for the protection of farmers. Certainly, it cannot be said that the Legislature could not reasonably believe that co-operative ginning might afford a corrective for rates believed to be extortionate. ”

“ And the fact that even the marketing of some products may be better served by the stock type of co-operative organizations is so widely recognized that most of the marketing acts provide that associations formed thereunder may organize either with or without capital stock. [24]
Experience has demonstrated, also, that doing business for nonmembers is usually deemed essential to the success of a co-operative. [25] More than five-sixths of all the farmers' co-operative associations in the United States do business for nonmembers. ”

“ A ginner has a greater facility to purchase the seed than anyone else. As he gins the cotton, he catches the seed as they fall from the stand, and has the immediate means for storage and housing same. ”

“ He usually is engaged, not only in ginning cotton, but also in the purchase of seed cotton, cotton seed after he has ginned the cotton, and frequently in the purchase of cotton after it is ginned for profit. ”

“ Some of them, recognizing the need for elasticity, impose the single requirement that earnings be apportioned in part on a patronage basis, and leave all other provisions for organization and distribution of profits to the by-laws. ”

“ Specifically, the foregoing authorities establish that the right to supply gas or water to a municipality and its inhabitants, the right to carry on the business of a telephone system, to operate a railroad, a street railway, city waterworks or gasworks, to build a bridge, operate a ferry, and to collect tolls therefor, are franchises. ”

“ The patron, if he does not elect to sell to the ginner, must receive them and haul them away, when as a rule he has no place for storage for accumulating as much as a carload, so as to sell them to advantage. ”

“ Frost claims on another ground that his constitutional rights have been violated. He says that what the statute and the Supreme Court of Oklahoma call a license is in law a franchise; that a franchise is a contract ”

“ In support of its application, it presented a certificate of organization under chapter 147 of the Laws of 1919 entitled 'An act providing for the organization and regulation of co-operative corporations' (Oklahoma Compiled Statutes 1921, §§ 5637-5652) , and a petition signed by one hundred citizens and taxpayers of that community requesting that the license be issued. Frost objected to the granting of a license, on the ground that there was no necessity for an additional gin in that city. ”

“ Ex parte Davis (C. C.) 21 F. 396, 397. The question is not affected by the fact that the amendment was accomplished by inserting the proviso in the body of the original section and re-enacting the whole at length. Truax v. Corrigan, supra; People v. Butler Street Foundry, supra, 201 Ill. pages 258, 259, 66 N. E. 349; State ex rel. v. Mills, supra, 231 Mo. page 499, 133 S. W. 22.
4. It is true that appellant applied for and obtained a permit to do business under the statute to which it was sought to attach the proviso in question. ”