The power vested in Congress to establish post offices and post
roads embraces the regulation of the entire postal system of the
country; Congress may designate what may be carried in, and what
excluded from, the mails, and the exclusion of articles equally
prohibited to all does not deny to the owners thereof any of their
constitutional rights.
Due process of law does not necessarily require the interference
of judicial power, nor is it necessarily denied because the
disposition of property is affected by the order of an executive
department.
Each executive department of the government has certain public
functions and duties the performance of which is absolutely
necessary to the existence of the government and although it may
temporarily operate with seeming harshness upon individuals, the
rights of the public must, in these particulars, overrule the
rights of individuals provided there be reserved to them an
ultimate recourse to the judiciary.
Where a person is engaged in an enterprise which justifies the
Postmaster General in issuing a fraud order, it is not too much to
assume that,
prima facie, at least, all of his letters are
identified with the business and § 3929, Rev.Stat., as amended by
the Act of September 19, 1890, is not unconstitutional because the
Postmaster General, in seizing and detaining all letters under a
fraud order, may include some having no connection whatever with
the prohibited enterprise.
Page 194 U. S. 498
The rights of the sender, and the addressees of letters returned
to the sender under a fraud order issued by the Postmaster General,
are not affected by the order except so far as the same is a
refusal on the part of Congress to extend the facilities of the
Post Office Department to the final delivery of the letter, and §
3929, Rev.Stat., as amended, is not unconstitutional, and does not
operate as a confiscation of the property of the person against
whom the order is issued. The misrepresentation of existing facts
is not always necessarily involved in a scheme or artifice to
defraud and where, after examination made, the Postmaster General
has issued a fraud order on the ground that the defendants were
engaged in a scheme for obtaining money or property by means of
false representations, and the master in the court below has found
that the scheme was, in effect, a lottery, the significant fact is
that the parties were engaged in a scheme within the meaning and
prohibition of §§ 3929 and 4101, Rev.Stat., and this Court will not
hold that the Postmaster General exceeded his authority in making
the fraud order.
This was a bill in equity by the Public Clearing House against
the Postmaster of the City of Chicago praying for an injunction to
restrain him from seizing and detaining appellant's mail, stamping
it "fraudulent," and returning it to the senders thereof, and from
denying to appellant the use of the money order and registered
letter system of the Post Office Department.
An answer and replication were filed, and the cause referred to
a master in chancery to take the testimony, and report the same
with his conclusions thereon.
The following contains the substance of the master's report:
"1. The complainant is a corporation organized under the laws of
the State of Illinois, for the purpose, as stated by its charter,
of doing a general brokerage and commission business, collecting
and disbursing money, and conducting an exchange or information
bureau for the benefit of patrons. The evidence shows that the said
complainant had made a beginning of several different kinds of
business, and its managers had opened negotiations with different
laundry proprietors, preparing to place laundries on a cooperative
basis; also to handle fruits and poultry in the same manner, and
also to purchase and sell goods on behalf of its patrons, on
commission, and to exchange goods in specie in the same manner for
a commission,
Page 194 U. S. 499
and had actually transacted some small amount of such business;
but the principal business and object for which the said
complainant was organized appears to have been to act as the fiscal
agent of a certain voluntary association called the League of
Equity. This League of Equity consists of a large number of people,
approximately 5,000 at present, of various occupations, and
scattered throughout the United States and Canada, each of whom, in
his application for membership, consents that the Public Clearing
House shall act as fiscal agent for said League of Equity. The said
League of Equity was in a way successor to a prior organization
called the League of Educators, and this in turn succeeded to a
still prior organization called the League of Eligibles, and a
certain organization or partnership called the board of managers of
the League of Educators and the board of managers of the League of
Eligibles were respectively fiscal agents for the two
organizations."
"The League of Eligibles was established in the year 1898, and
was a voluntary association of unmarried people. Their certificates
became matured or realized upon the contingency of marriage,
provided that such marriage did not occur within one year from the
time when they joined the league. The certificate had a fixed
realization value of five hundred dollars, and was paid out of the
monthly
pro rata assessment levied upon all members of the
league for the benefit of those members whose certificates were
matured or realized."
"The plan of the League of Educators was the same, except that
it substituted a fixed time for the realization of the
certificates, and eliminated the marriage contingency feature."
"2. The plan of the League of Equity differed from that of the
League of Educators only in having a fixed monthly payment of one
dollar, instead of a fluctuating or variable assessment. When the
first change was made, there were about thirteen hundred members of
the League of Eligibles, all of whom were given an opportunity to
become members of the League of Educators without additional cost
and without
Page 194 U. S. 500
losing the benefit of their previous term of cooperation, and
many of them availed themselves of this opportunity and became
members of the League of Educators. Again, when the League of
Equity was formed, the League of Educators consisted of some nine
thousand members, who were allowed the same privilege of joining
the League of Equity, and up to the time when the fraud order was
issued against the latter concern, between four and five thousand
members of the League of Educators had joined the League of
Equity."
"3. The evidence showed that, up to about the first of November,
1902, during the period of the existence of the League of Eligibles
and League of Educators, there had been collected from about 13,784
members a total of $137,390.66, out of which the board of managers
had taken about $36,000 for their expenses and compensation for
themselves and agents in the field. The remainder had been
distributed among some 600 or 700 members, and at that time the
board of managers had no money in their hands."
"In other words, 600 or 700 members had received an average of
something less than $170 each, and over ten thousand members had
received nothing."
"4. The board of managers of the League of Educators had, during
its business as fiscal agent for said league, accumulated a large
number of address cards of different persons throughout the
country, which had been secured through the members or cooperators,
and these address cards were at or about the time of the
organization of the Public Clearing House, sold to said Public
Clearing House by the said board of managers for the sum of
$2,500."
"5. The complainant, The Public Clearing House, as such fiscal
agent of the League of Equity, invites people to join the said
league, and holds out inducements in the shape of a large return
for small amounts of money and for services to be rendered by
members or cooperators in inducing others to become members or
cooperators. There is no contract or agreement issued or entered
into with members by the League of Equity
Page 194 U. S. 501
itself as a body or association, but a certain so-called
cooperator's agreement, a copy of which is attached to the bill
herein, is issued to each member or cooperator, and is signed by
said Public Clearing House by its president and secretary as fiscal
agents for the League of Equity."
"In order to carry on successfully the business of the
complainant, it is necessary that it have the use of the United
States mails; but it has not had the use of the mails since
November 13, 1902, by reason of a 'fraud order' issued against it,
dated November 10, 1902, by the Postmaster General, and, as a
result, the business has practically been stopped."
"6. The plan or scheme of the League of Equity as set forth in
the cooperator's agreement and in other literature issued by said
complainant may be briefly stated as follows: each person who
becomes a member or cooperator pays three dollars as enrollment
fee, and agrees to pay the sum of one dollar per month for sixty
months or five years, and also agrees to 'cooperate' by inducing
other persons to become members or cooperators. The agreement
states that, in consideration of said enrollment fee"
"and the faithful compliance with the terms of this agreement
hereinafter contained, the above-named person shall receive his
pro rata share of the total amount realized (less ten
percent) when entitled to a realization, as hereinafter provided,
said realization to be in accordance with the following ordinary
causation and realization table."
Then follows a table showing that, if the league grows at the
rate of fifteen to one, the total realization of the member at the
end of five years will be at the same rate of increase -- that is,
he will receive nine hundred dollars for his sixty dollars paid in;
if the growth is at the rate of ten to one ,he will receive six
hundred dollars at the end of five years, and so forth and so on
down to a growth of only one to one, in which case he will receive
only his money back, less the ten percent, which is in each case
deducted as the compensation of the complainant for its services
and existence as fiscal agent, and less also the three dollar
enrollment fee. Aside from this
Page 194 U. S. 502
ten percent and the three dollar enrollment fee, the plan does
not contemplate that complainant shall retain any of the money paid
in by cooperators, or that any reserve fund shall be accumulated or
invested, but that the money paid in each month shall be regularly
paid out each month (less ten percent) to the so-called realizing
cooperators,
i.e., those whose five years' period has
expired and who have continued to make the requisite monthly
payments during said five years. There is an additional provision
that each cooperator who shall have secured three new members in
any one year may realize or receive at the end of each year
one-fifth of the amount which he would be entitled to receive at
the end of five years, assuming that the growth for the five years
continued at the same rate; but the plan contemplates that, in the
end, the member who secures new members and the one who does not
shall receive the same amount.
"7. All members who join the League of Equity during the same
month constitute a class by themselves, and are entitled to realize
in all respects precisely the same amount, and at the same time,
excepting the member who obtains new cooperators may receive his
realization in yearly installments, instead of in one lump at the
end of the five years' period."
"The only source of income to the league, and the only funds to
which its members can look for payment of the promised amount, or
any amount whatever, is the fund created each month by the payment
of monthly dues, and the realization of any amount whatever by the
new members is conditioned absolutely upon the constant acquisition
of other new members and the new payments to be made by such new
members. And what amount the members or cooperators will realize,
as is stated by the league literature, depends entirely upon the
ratio of growth of the league. No reserve fund is accumulated, and
no investments whatever are made of any portion of the money paid
in by members."
Upon this state of facts, the master came to the conclusion that
the scheme of the complainant was, in effect, a lottery,
Page 194 U. S. 503
and as such was not entitled to the use of the mails, and also
reported to the court that the fraud order which had been issued by
the Postmaster General in October, 1902, was fully justified, and
that the injunction should be denied. His action was affirmed by
the Circuit Court, and the bill dismissed for the want of
equity.
Page 194 U. S. 504
MR. JUSTICE BROWN delivered the opinion of the Court.
By § 3929 of the Revised Statutes, as amended by the
Page 194 U. S. 505
Act of September 19, 1890, 26 Stat. 465,
"The Postmaster General may, upon evidence satisfactory to him
that any person or company is engaged in conducting any lottery,
gift enterprise, or scheme for the distribution of money, or of any
real or personal property by lot, chance, or drawing of any kind,
or that any person or company is conducting any other scheme or
device for obtaining money or property of any kind through the
mails by means of false or fraudulent pretenses, representations,
or promises, instruct postmasters at any post office at which
registered letters arrive directed to any such person or
company . . . to return all such registered letters to the
postmaster at the office at which they were originally mailed, with
the word 'fraudulent' plainly written or stamped upon the outside
thereof."
By § 4041, the Postmaster General is authorized in similar terms
to forbid the payment by any postmaster of any postal money order
drawn in favor of any person engaged in the prohibited business,
and by section 4 of the Act of March 2, 1895, 28 Stat. 963, the
power thus conferred upon the Postmaster General by the preceding
section, 3929 (U.S.Comp.Stat. 1901, p. 2686), is extended and made
applicable to
all letters or other matter sent by
mail.
These acts apply to two classes of cases: First, to schemes for
the distribution of money, etc., by lot, chance, or drawing of any
kind; second, to all schemes or devices for obtaining money or
property of any kind by means of false or fraudulent pretenses,
representations, or promises.
It seems that the Postmaster General, in issuing the fraud order
in this case, acted upon the theory that the complainant was
engaged in conducting a scheme or device for obtaining money
through the mails by means of false and fraudulent pretenses, etc.,
and not in conducting a lottery; but if the order detaining the
letters was properly issued, in view of all the evidence introduced
in the court below, we do not think it was vitiated by the fact
that the Postmaster General acted upon the hypothesis that the
business in which complainant was engaged
Page 194 U. S. 506
was a fraudulent scheme, instead of a lottery, since both are
within the purview of these statutes.
We find no difficulty in sustaining the constitutionality of
these sections. The postal service is by no means an indispensable
adjunct to a civil government, and for hundreds, if not for
thousands, of years, the transmission of private letters was either
entrusted to the hands of friends or to private enterprise. Indeed,
it is only within the last three hundred years that governments
have undertaken the work of transmitting intelligence as a branch
of their general administration. While it has been known in this
country since colonial times, and was recognized in the
Constitution and in some of the earliest acts of Congress, the
rates of postage were so high, and the methods of transmission so
slow and uncertain, that it was not until 1845, when the postage
was reduced to five and ten cents, according to the distance, and a
stamp or stamps introduced, that it assumed anything of the
importance it now possesses.
It is not, however, a necessary part of the civil government in
the same sense in which the protection of life, liberty, and
property, the defense of the government against insurrection and
foreign invasion, and the administration of public justice are; but
is a public function, assumed and established by Congress for the
general welfare, and in most countries its expenses are paid solely
by the persons making use of its facilities, and it returns, or is
presumed to return, a revenue to the government, and really
operates as a popular and efficient method of taxation. Indeed,
this seems to have been originally the purpose of Congress. The
legislative body, in thus establishing a postal service, may annex
such conditions to it as it chooses.
The constitutional principles underlying the administration of
the Post Office Department were discussed in the opinion of the
court in
Ex Parte Jackson, 96 U. S.
727, in which we held that the power vested in Congress
to establish post offices and post roads embraced the regulation of
the entire postal system
Page 194 U. S. 507
of the country; that Congress might designate what might be
carried in the mails and what excluded, and that, in the
enforcement of such regulations, a distinction was made between
letters and sealed packages subject to letter postage and such
other packages as were open to inspection, such as newspapers,
magazines, pamphlets, and other printed matter, and that the
constitutional guaranty against unreasonable searches and seizures
extended to letters, but did not extend to printed matter. In
establishing such system, Congress may restrict its use to letters,
and deny it to periodicals; it may include periodicals, and exclude
books; it may admit books to the mails, and refuse to admit
merchandise; or it may include all of these and fail to embrace
within its regulations telegrams or large parcels of merchandise,
although in most civilized countries of Europe these are also made
a part of the postal service. It may also refuse to include in its
mails such printed matter or merchandise as may seem objectionable
to it upon the ground of public policy as dangerous to its
employees or injurious to other mail matter carried in the same
packages. The postal regulations of this country, issued in
pursuance of act of Congress, contain a long list of prohibited
articles dangerous in their nature, or to other articles with which
they may come in contact -- such, for instance, as liquids,
poisons, explosives, and inflammable articles, fatty substances, or
live or dead animals, and substances which exhale a bad odor. It
has never been supposed that the exclusion of these articles denied
to their owners any of their constitutional rights. While it may be
assumed for the purpose of this case that Congress would have no
right to extend to one the benefits of its postal service and deny
it to another person in the same class and standing in the same
relation to the government, it does not follow that, under its
power to classify mailable matter, applying different rates of
postage to different articles, and prohibiting some altogether, it
may not also classify the recipients of such matter and forbid the
delivery of letters to such persons or corporations as, in its
judgment, are making
Page 194 U. S. 508
use of the mails for the purpose of fraud or deception or the
dissemination among its citizens of information of a character
calculated to debauch the public morality. For more than thirty
years, not only has the transmission of obscene matter been
prohibited, but it has been made a crime, punishable by fine or
imprisonment, for a person to deposit such matter in the mails. The
constitutionality of this law, we believe, has never been attacked.
The same provision was, by the same act, extended to letters and
circulars connected with lotteries and gift enterprises, the
constitutionality of which was upheld by this Court in
In re
Rapier, 143 U. S. 110.
It is contended, however, that the laws in question are
unconstitutional in that they authorize the Postmaster General to
seize and return to sender all letters addressed to a particular
person, firm, or corporation which he is satisfied is making use of
the mail for an illegal purpose. Their constitutionality is
attacked upon three grounds: first, because they provide no
judicial hearing upon the question of illegality; second, because
they authorize the seizure of all letters, without discriminating
between those which may contain and those which may not contain
prohibited matter; and third, because they empower the Postmaster
General to confiscate the money, or the representative of money, of
the addressee which has become his property by the depositing of
the letter in the mails.
1. It is too late to argue that due process of law is denied
whenever the disposition of property is affected by the order of an
executive department. Many, if not most, of the matters presented
to these departments require for their proper solution the judgment
or discretion of the head of the department, and in many cases,
notably those connected with the disposition of the public lands,
the action of the department is accepted as final by the courts,
and, even when involving questions of law, this action is attended
by a strong presumption of its correctness.
Bates & Guild
Co. v. Payne, 194 U. S. 106.
That due process of law does not necessarily require the
interference of the judicial power is laid down in many cases
and
Page 194 U. S. 509
by many eminent writers upon the subject of constitutional
limitations.
Murray's Lessee v. Hoboken
Co., 18 How. 272,
59 U. S. 280;
Bushnell v. Leland, 164 U. S. 684. As
was said by Judge Cooley in
Weimer v. Bunbury, 30 Mich.
201:
"There is nothing in these words [due process of law], however,
that necessarily implies that due process of law must be judicial
process. Much of the process by means of which the government is
carried on and the order of society maintained is purely executive
or administrative. Temporary deprivations of liberty or property
must often taken place through the action of ministerial or
executive officers or functionaries, or even of private parties,
where it has never been supposed that the common law would not
afford redress."
If the ordinary daily transactions of the departments, which
involve an interference with private rights, were required to be
submitted to the courts before action was finally taken, the result
would entail practically a suspension of some of the most important
functions of the government. Even in the recent case of the
School of Magnetic Healing v. McAnnulty, 187 U. S.
94, the constitutionality of the law authorizing
seizures of this kind by the Postmaster General was assumed, if not
actually decided, the only reservation being that the person
injured may apply to the courts for redress in case the Postmaster
General has exceeded his authority, or his action is palpably
wrong. So too, in the recent case of
Bates & Guild Co. v.
Payne, 194 U. S. 106, the
law was also assumed to be constitutional, the only doubtful
question being whether this Court should accept the findings of the
Postmaster General as to the classification of the mail matter as
final under the circumstances of the case. Inasmuch as the action
of the Postmaster in seizing letters and returning them to the
writers is subject to revision by the judicial department of the
government in cases where the postmaster has exceeded his authority
under the statute,
School of Magnetic Healing v.
McAnnulty, 187 U. S. 94, we
think it within the power of Congress to entrust him with the power
of seizing and detaining
Page 194 U. S. 510
letters upon evidence satisfactory to himself, and that his
action will not be reviewed by the court in doubtful cases.
2. Nor do we think the law unconstitutional because the
Postmaster General may seize and detain all letters, which may
include letters of a purely personal or domestic character and
having no connection whatever with the prohibited enterprise. In
view of the fact that, by these sections, the postmaster is denied
permission to open any letters not addressed to himself, there
would seem to be no possible method of enforcing the law except by
authorizing him to seize and detain all such letters. It is true,
it may occasionally happen that he would detain a letter having no
relation to the prohibited business; but where a person is engaged
in an enterprise of this kind, receiving dozens and perhaps
hundreds of letters every day containing remittances or
correspondence connected with the prohibited business, it is not
too much to assume that,
prima facie. at least, all such
letters are identified with such business. A ruling that only such
letters as were obviously connected with the enterprise could be
detained would amount to practically an annulment of the law, as it
would be quite impossible, without opening and inspecting such
letters, which is forbidden, to obtain evidence of the real facts.
Powell v. Pennsylvania, 127 U. S. 678,
127 U. S. 685;
Lawton v. Steele, 152 U. S. 133.
Whether, in case a private registered letter was thus seized and
detained, and damage was thereby occasioned to the addressee, an
action would lie against the Postmaster General is not involved in
this case. It certainly is not made the basis of the present
suit.
Another answer to this argument, which seems to be conclusive,
is that the fraud order in this case is not open to this objection,
as the Postmaster General only forbids the postmaster at Chicago to
pay any postal money orders, drawn to the order of the League of
Equity and the Public Clearing House, or their officers or agents
in their capacity as such, and to inform the remitter of any such
postal money order that payment thereof has been forbidden, etc.,
and
"to return all
Page 194 U. S. 511
letters, whether registered or not, or other mail matter which
shall arrive at your office directed to such concerns or their
officers or agents as such, to postmasters at the office at which
they were originally mailed."
There is nothing in the order thus worded that would authorize
the postmaster at Chicago to return letters addressed to an
individual unless addressed to such individual as officer or agent
of the League of Equity or the complainants. There is nothing in
this order that would authorize the interference with the private
or domestic mail matter of individuals.
3. The objection that the Postmaster General is authorized by
statute to confiscate the money, or the representative of money, of
the addressee is based upon the hypothesis that the money or other
article of value contained in a registered letter becomes the
property of the addressee as soon as the letter is deposited in the
post office. The action of the Postmaster General in seizing the
letter does not operate as a confiscation of the money, or the
determination of the title thereto, but merely as a refusal to
extend the facilities of the Post Office Department to the final
delivery of the letter. Congress might undoubtedly have authorized
the postmaster at the depositing office to decline to receive the
letter at all if its forbidden character were known to him; but, as
this would be impossible, we think the power to refuse the
facilities of the department to the transmission of such letter
attends it at every step, from its first deposit in the mail to its
final delivery to the addressee, and as the character of the letter
cannot be ascertained until it arrives at the office of delivery,
the government may then act and refuse to consummate the
transaction. If the letter and its contents become the property of
the addressee when deposited in the mail, the subsequent seizure by
the government would not impair his title or prevent an action by
him for the amount of remittance. True, this might be of no
practical value to him, but it is a sufficient reply to show that
the title to the letter did not change by its seizure by the
postmaster.
Page 194 U. S. 512
4. The main question involved in this case, however, is whether
the scheme of the complainant was within the language of sections
3929 and 4041. The Postmaster General, in his fraud order, a copy
of which is found in the bill, assumed that the League of Equity
and the Public Clearing House were engaged in conducting a scheme
for obtaining money by means of false and fraudulent
representations or promises; but, as the master found in his report
that the Clearing House and its officers had dealt fairly and
honestly in respect to the collection and distribution of funds
collected by them, and had not been guilty of false or fraudulent
representations in order to induce persons to become members of the
league, this theory was abandoned by the government, and the case
put upon the ground that these corporations were engaged in
conducting a "lottery or scheme for the distribution of money . . .
by lot, chance, or drawing." That they were not engaged in
conducting a lottery in the sense in which that word is ordinarily
used is entirely clear, since this involves fixed prizes and the
allotment of the prizes to the holder of numbered tickets, which
are drawn from a box. In such case, the word "lot" or "chance"
attaches only to the name or number of the ticket drawn, and not to
the amount of the prize, but the statute covers any scheme for the
distribution of money by lot or chance, as well as by drawing, and
by the word chance, as defined by Webster, is meant
"something that befalls as the result of unknown or unconsidered
forces; the issue of uncertain conditions; an event not calculated
upon; an unexpected occurrence; a happening; accident, fortuity,
casualty."
As stated by the master, the plan contemplates that each person
who becomes a member or cooperator pays three dollars as enrollment
fee, and agrees to pay the sum of one dollar per month for sixty
months or five years, and also agrees to cooperate by inducing
other members or persons to become cooperators, shall receive his
pro rata share of the total amount realized when entitled
to a "realization" as provided at the end of five years; or, in
case he shall have secured three new
Page 194 U. S. 513
members in any one year, he may realize or receive at the end of
each year one-fifth of the amount which he would be entitled to
receive at the end of five years, assuming that the growth of the
five years continued at the same rate. The plan also contemplates
that, in the end, the member who secures new members and the one
who does not shall receive the same amount. All members joining the
league during the same month constitute a class by themselves, and
are entitled to realize in all respects precisely the same amount,
and at the same time, excepting the member who obtains new
cooperators may receive his realization in yearly installments
instead of in one lump at the end of the five years' period.
We do not consider it necessary to enter into the details of the
plan, which is a somewhat complicated one, and the success of which
obviously depended upon constantly and rapidly increasing the
number of subscribers or cooperators. The only money paid in was a
small enrollment fee of three dollars and a monthly payment of one
dollar for five years. The return to the subscribing member, which
is called a realization, is not only uncertain in its amount, but
depends largely upon the number of new members each subscriber is
able to secure, as well as the number of members which his
cooperators are able to secure. The return to members who have been
able to secure a large number of other members, and to pay their
own monthly dues, may be very large in comparison with the amount
paid in, but the amount of such return depends so largely, and,
indeed, almost wholly, upon conditions which the member is unable
to control, that we think it fulfills all the conditions of a
distribution of money by chance. In becoming a cooperator, each new
member evidently contemplates that a large number, probably a large
majority, of those subscribing will drop out before the end of five
years; that some will and some will not induce others to become
members, and that the amount ultimately realized depends not only
upon his own prompt payment of dues, and his own exertions, but
upon a corresponding action by other
Page 194 U. S. 514
cooperators. One thing, however, is entirely clear, and that is,
the success of the scheme depends wholly upon the ability of the
members to increase the number of subscribers, and, as there is no
reserve fund provided for their indemnification, there is sure to
be a loss to every one interested in the enterprise as soon as the
number of new members ceases to increase.
Counsel for complainant liken the scheme to that of an ordinary
life insurance company, which at an early date was thought by some
to involve the elements of chance, but was finally held to be a
legitimate business. In such policies, there is the payment of a
fixed sum, which matures either at the death of the assured or upon
the happening of some other contingency expressly provided for in
the policy. There is no uncertainty as to the amount to be paid, as
in this case, nor does it depend upon the conduct of other persons
insured in the same company, but simply upon payment of premiums by
insured. The only contingency is the time as to when the policy is
to mature, and the profits are calculated upon the theory that the
premiums paid, with the interest thereon, will in the end amount to
more than the sum becoming due upon the happening of the
contingency. There is also a reserve fund provided for the security
of policy holders in case no new applications are made for
insurance, or the business of the company is abandoned. As the only
fund provided in this scheme are small monthly payments which are
constantly being divided in the shape of monthly realizations,
there is no possibility of a reserve fund for the security of the
cooperators. The uncertainty of the amount realized upon these
settlements is evident from the fact that, while a member may
possibly realize as high as fifteen dollars for every dollar
invested by him, he may realize no profit at all, or, in case the
business is suspended, may realize nothing.
In the careful and satisfactory report of the master, the plan
of the complainant is briefly described
"as a plan for securing money from a constantly increasing large
number for the benefit of a constantly increasing smaller number,
with an
Page 194 U. S. 515
absolute certainty that, when the enterprise reaches an end for
any reason, the large number will lose every dollar they have put
into it, and, in the meantime, the smaller number will have
realized such amounts as may have resulted from the growth of the
larger number; but no one can predict what that growth will
be."
It is true, as urged by the counsel for complainant, that, in
investing money in any enterprise, the investor takes the chance of
small profits, or even of failure, as well as the hope of large
profits; but such enterprises contemplate the personal exertions of
the investor, or of his partners, agents, or employees, while, in
the present case, his profits depend principally upon the exertions
of others over whom he has no control and with whom he has no
connection. It is in this sense the amount realized is determinable
by chance.
The scheme lacks the elements of a legitimate business
enterprise, and we think there was no error in holding it to be a
lottery within the meaning of the statute. Indeed, we think that no
scheme of investment which must ultimately and inevitably result in
failure can be called a legitimate business enterprise. The cases
upon the subject of the definition of a lottery are carefully
collated and criticized by Mr. Justice Blatchford in
Horner v.
United States, 147 U. S. 449,
147 U. S. 458,
and are held to extend to all schemes for the distribution of
prizes by chance, such as policy playing, gift exhibitions, prize
concerts, raffles at fairs, etc., and various forms of
gambling.
That the party injured has a right to invoke the judicial power
of the government whenever his property rights have been invaded by
the exercise of such power was settled by this Court in
Noble
v. Union River Logging Railroad, 147 U.
S. 165, as well as in the
McAnnulty case. But,
as already indicated, it would practically arrest the executive arm
of the government if the heads of departments were required to
obtain the sanction of the courts upon the multifarious questions
arising in their departments before action were taken in any matter
which might involve the temporary disposition of private
Page 194 U. S. 516
property. Each executive department has certain public functions
and duties the performance of which is absolutely necessary to the
existence of the government, but it may temporarily, at least,
operate with seeming harshness upon individuals. But it is wisely
indicated that the rights of the public must in these particulars
override the rights of individuals, provided there be reserved to
them an ultimate recourse to the judiciary.
In the view we have taken of this case and of the action of the
court below, as well as of the course of the argument here, we have
not found it necessary to inquire whether the action of the
Postmaster General, in basing his fraud order upon the theory that
the defendants were engaged in a scheme for obtaining money or
property by means of false representations, was sustainable or not.
As already stated, the master found that there had been no false
representations of existing facts and no unfair dealing with the
cooperators; yet, as we held in
Durland v. United States,
161 U. S. 306, the
misrepresentation of existing facts is not necessary to a
conviction under a statute applying to "any scheme or artifice to
defraud." As was observed by MR. JUSTICE BREWER (p.
161 U. S.
313):
"Some schemes may be promoted through mere representations and
promises as to the future, yet are nonetheless schemes and
artifices to defraud. . . . In the light of this, the statute must
be read, and, so read, it includes everything designed to defraud
by representations as to the past or present, or suggestions and
promises as to the future. The significant fact is the intent and
purpose."
But, notwithstanding this question, we are satisfied the
Postmaster General did not exceed his authority in making the order
in this case, and the judgment of the court below is therefore
Affirmed.
MR. JUSTICE BREWER, MR. JUSTICE WHITE, and MR. JUSTICE HOLMES
concurred in the result.
MR. JUSTICE PECKHAM dissented.
