In determining the constitutionality of a state statute, this
Court must follow the construction given thereto by the highest
court of the state, and a ruling by that court that the provisions
of a statute prohibiting the purchasing of a commodity on margin,
and the carrying on of "bucket
Page 203 U. S. 532
shops" for dealing in such commodity are separable is conclusive
on this Court, and refutes the contention of one convicted of
carrying on a "bucket shop" that the law is void as to in because
certain presumptions created by the statute in regard to the
prohibitions of purchasing on margins may be repugnant to the
Fourteenth Amendment; nor will this Court determine that the
creation of certain presumptions of guilt by a state statute is
repugnant to the due process clause of the Fourteenth Amendment
when the record does not show that the conviction sought to be
reviewed was based on these presumptions, and could not have been
based on independent evidence.
138 N.C. 149 affirmed
The facts are stated in the opinion.
Page 203 U. S. 535
MR. JUSTICE WHITE delivered the opinion of the Court.
North Carolina in 1889 enacted "An Act to Suppress and Prevent
Certain Kinds of Vicious Contracts." Laws N.Car. 1889, c. 221. This
law was thus summarized by the Supreme Court of that state in
State v. McGinnis, 138 N.C. 724:
"Section one made void all contracts for the sale of articles
therein named for future delivery, wherein (notwithstanding any
terms used) it is not intended that the articles agreed to be sold
and delivered shall be actually delivered, but only the difference
between the contract price and the market value at the time
stipulated shall be paid. Section two enacted that, when the
defense provided by that act is set up in a verified answer the
burden shall be upon the plaintiff to prove a lawful contract, but
the answer shall not be used against the defendant on an indictment
for the transaction. Section three made the parties to such
contract, and agents concerned therein, indictable, and section
four made persons, while in this state, consenting to become
parties to such contract, made in another state, and all agents in
this state, aiding and furthering such contract, made in another
state, indictable."
In 1905, there was adopted "An Act . . . to Prevent the Dealing
in Futures." This law contains seven sections. The first and second
made it
"unlawful for any person, corporation, or other association of
persons, either as principal or agents, to establish or open an
office or other place of business . . . for the purpose of carrying
on or engaging in any such business as is forbidden in this act or
in chapter 221
Page 203 U. S. 536
of the Public Laws of North Carolina of 1889,"
and affixed a penalty for so doing. The law of 1889 referred to
is the one of which we have just previously given a summary.
The acts made punishable by the first and second sections of the
act of 1905 were thus defined in
State v. McGinnis,
supra:
"The business forbidden by the act of 1905 is -- to avoid a
paraphrasis, and following the usual American method of
describing an act by a word or a phrase -- the business of running
a 'bucket shop,' which is defined by the Century dictionary as"
"an establishment, nominally for the transaction of a stock
exchange business, or business of a similar character, but really
for the registration of bets or wagers, usually for small amounts,
on the rise or fall of the prices of stocks, grain, oil, etc.,
there being no transfer or delivery of the stock or commodities
nominally dealt in."
The third section provided that no person should be excused from
testifying in any prosecution under the act of 1889, or its
amendments, on the ground of self-incrimination, the section
granting immunity to such persons so obliged to testify. It was
declared by the fourth, fifth and sixth sections of the act that in
all prosecutions for a violation of the provisions of the act of
1889, or the act of 1905, a
prima facie presumption of
guilt should arise from the proof of certain facts stated in the
sections in question. These sections are reproduced in the margin.
* The seventh and
last section of the act contained
Page 203 U. S. 537
provisions concerning dealing in futures by those engaged in the
business of manufacturing or wholesale merchandising, which we do
not presently reproduce, as we shall hereafter consider the
section.
Gatewood, plaintiff in error, was indicted for the offense of
establishing and keeping an office and place of business for the
purpose of carrying on or engaging in the character of business
made unlawful by the first section of the act of 1905 -- that is,
the opening and carrying on a "bucket shop." The indictment,
moreover, in an additional paragraph, alleged the doing of certain
acts as though it was intended to charge them as distinct offenses
from the one charged in the first paragraph. The two things thus
alleged were as follows: First. That, on a date named, the
accused
"unlawfully and willfully did post and publish, from information
received over his wires, the fluctuations in prices of grain,
cotton, provisions, stocks, bonds, and other commodities, contrary
to the form of statute in such case made and provided,"
the acts so charged being those from the proof of which it was
provided in the sixth section of the act of 1905 that a
prima
facie presumption of guilt would arise as to the commission of
the acts forbidden by the first section of that act. Second. That,
on a date named, the accused
"unlawfully and willfully did take and receive from E. T. Lea an
order or contract to purchase on margin 100 bales of cotton for
future delivery, to-wit, August delivery at 7 56.100 per pound, and
that said Lea did deposit with said
Page 203 U. S. 538
defendant at said time in said county the sum of $50.00 by way
of margin fluctuations in said cotton, and that settlement between
said parties for said cotton was agreed to be made upon the
difference in value of said cotton at said date and the date of its
delivery, contrary to the form of the statute in such cases made
and provided, and against the peace and dignity of the state."
The acts thus charged being among those from which, when proved,
there would arise a
prima facie presumption of a guilty
violation of certain of the provisions of the act of 1889.
The case was tried to a jury, and, as stated in the record,
after proof and hearing, a special verdict was returned. By this
verdict, it was separately found that the defendant had committed
the several acts separately charged in the indictment -- that is,
in separate numbered paragraphs the jury returned that the
defendant had kept an office for the unlawful dealing in futures
forbidden by the first section of the act of 1905, that he had
posted and published in such office the fluctuating prices of
grain, etc., and that he had made the contract for future delivery
upon margin with Lea. The evidence at the trial upon which the jury
acted is not in the record. The court then directed a general
verdict of guilty, and judgment was entered thereon. A motion for a
new trial was made,
"because the act of 1905, chapter ___, is in conflict with the
Fourteenth Amendment, section 1, of the Constitution of the United
States, to-wit, the guaranty of equal protection of the laws."
The new trial having been refused, and a fine of five dollars
and costs having been imposed, the case was taken to the Supreme
Court of North Carolina. That court affirmed the conviction. The
reasoning by which the action of the court was controlled was
stated as follows: "Upon the authority of
State v.
McGinnis at this term, there is no error." And in the judgment
of affirmance there was embodied the record and opinion in
State v. McGinnis, and such record and opinion are
contained in the transcript before us.
Page 203 U. S. 539
The assignments of error and the argument in support thereof
involve three general contentions,
viz.: the asserted
repugnancy of the statute to the equal protection of the law clause
of the Fourteenth Amendment, and the alleged want of power of the
state to enact the statute, because its provisions not only abridge
the privileges and immunities of the plaintiff in error as a
citizen of the United States, but also deprive him of his properly
without due process of law in violation of the same Amendment. The
contention that the statute denied the equal protection of the laws
rests upon the terms of the seventh section, reading as
follows:
"SEC. 7. That this act shall not be construed so as to apply to
any person, firm, corporation, or his or their agent, engaged in
the business of manufacturing or wholesale merchandising, in the
purchase or sale of the necessary commodities required in the
ordinary course of their business."
The alleged repugnancy of section 7, and consequently of the
entire act, to the equality clause of the Fourteenth Amendment, is
sought to be sustained upon two grounds: first, because it is
asserted that those engaged in the business of manufacturing or
wholesale merchandising are permitted to commit without offense the
act or acts which are made criminal by the laws of 1889 and 1905,
when done by any other person; and, second, because, even if the
terms of the seventh section do not effect such a result, the
section nevertheless operates to produce an unlawful inequality,
since it creates a
prima facie presumption of guilt from
the proof of certain acts as against all persons but those engaged
in the business of manufacturing and wholesale merchandising.
It suffices to say, as to the first of these propositions, that
the supreme court of the state, in the case upon the authority of
which it placed its decision in this, expressly decided that the
statute did not operate the asserted discrimination. Thus, after
expressly holding that the effect of section 7 was not to relieve
those engaged in manufacturing and wholesale merchandising from the
operation of the provisions of section 1 of
Page 203 U. S. 540
the act of 1905, prohibiting the opening and keeping of a place
for gambling dealings in futures, denominated by the court a
"bucket shop," the court came to consider whether the provisions of
section 7 operated to relieve manufacturers or wholesale merchants
from the prohibitions of the act of 1889, concerning the making of
gambling contracts for future delivery. Considering this subject,
the court, in express terms, decided that the seventh section did
not have that effect, since the dealings which were prohibited by
the acts of 1889 were alike prohibited as to all, including
manufacturers and wholesale merchants. The court said:
"Section 7 does not confer any exclusive right or privilege upon
manufacturers or wholesale merchants. It does not authorize them to
engage in any business prohibited by the act of 1889. It does not
authorize them to speculate in cotton or other commodities. It
simply provides that the courts shall not construe the act of 1905
to have the effect of preventing . . . [manufacturers or wholesale
merchants] from buying and selling for future delivery the
necessary commodities required in their ordinary business."
"
* * * *"
"But a purchase for actual future delivery of necessary
commodities, required in the ordinary course of business, and not
for 'wagering' or gambling on the fluctuations of the market, would
not be against the statute. The statute of this state does not
prohibit all purchases or sales for future delivery, but only such
dealings as are in the nature of gambling or wagering contracts.
Though section 7 mentions only manufacturers and wholesale
mercantile establishments as authorized to make
bona fide
dealings in 'futures,' this was done unnecessarily, we think, and
only out of abundant caution. It is not a discrimination, for there
is no prohibition upon anyone else or any other business to buy
commodities for future delivery
bona fide in the 'ordinary
course of such business,' when not for speculative or gambling
purposes. That no other businesses or persons are mentioned as
authorized to deal
bona fide for the purchase of
commodities on 'margin'
Page 203 U. S. 541
is not an implied restriction upon others to do an act not
forbidden by any statute."
In the argument, it is insisted that the construction given by
the Supreme Court of North Carolina to the statute is wrong, since,
in effect, it reads out the provisions of section 7, and it is
urged that it is the duty of this Court to disregard the
interpretations affixed by the state court, thereby bringing the
statute within the prohibitions of the Fourteenth Amendment. But it
is elementary that, under the circumstances, we must follow the
construction given by the state court, and test the
constitutionality of the statute under that view.
Armour
Packing Co. v. Lacy, 200 U. S. 226;
Smiley v. Kansas, 196 U. S. 447,
196 U. S. 455,
and cases cited.
As to the second proposition,
viz., the asserted
discrimination, because of inequality produced by the engendering a
prima facie presumption of guilt from the proof of certain
acts when done by persons generally, and not raising such
prima
facie presumption from the same acts when done by those
engaged in manufacturing or wholesale merchandising, we think the
question is not open on this record. As we have stated, the
indictment distinctly charged the commission of the offense
prohibited by the first section of the act of 1905,
viz.,
the keeping a place for gambling in futures, and at the same time
in a separate paragraph charged the doing of acts from which the
presumption of guilt was authorized by certain sections of the act
of 1905. Upon the indictment so framed, a special verdict was
returned, finding that the prohibited place of business had been
opened and kept as charged, and that the other acts separately
charged in the indictment had been committed. Now, as the evidence
upon which the jury acted is not in the record, and as there is
nothing in the verdict tending to show that the separate conclusion
as to the commission of the act forbidden by section 1 of the
statute of 1905,
viz., the keeping of a place for gambling
in futures, was found by the jury because of the presumptions
authorized by the statute, it cannot be affirmed that the finding
of the jury
Page 203 U. S. 542
as to the keeping of the place for gambling in futures was not
based upon independent evidence, wholly irrespective of any
presumption authorized by the act of 1905. And this conclusion
becomes irresistible when it is considered that there is nothing in
the record disclosing any request made to the trial court for
instructions concerning the effect of the presumption created by
the act of 1905, or that any express rulings on that subject were
made by the court.
The contention that the judgment of conviction should be
reversed, even although it does not appear that the same was based
upon the presumptions authorized by the act of 1905, because of the
inseparability of the alleged unequal presumptions, is without
merit. In
State v. McGinnis, supra, after expressing an
opinion as to the right of a state under its police power, without
violating the Fourteenth Amendment, to create presumptions of guilt
as to some classes of persons which would not be applicable to the
same acts when done by other classes, the court said:
"But, aside from what we have already said, the defendant is
indicted for carrying on a 'bucket shop' business. The legislature
had unquestionably power to make such business indictable.
Booth v. Illinois, 184 U. S. 425, and other cases
cited
supra. The facts found are that the defendant was
carrying on the forbidden business. It can in no wise affect the
validity of the statute making such business indictable that the
purchase of commodities by others upon 'margin' shall, under
certain circumstances, raise a
prima facie case that such
purchases were void, and under other circumstances shall not
constitute such
prima facie evidence. A statute may be
void in part and valid in part. If the provision as to
prima
facie evidence, as to certain purchases upon 'margin,' were
null, because not applying to all purchases upon 'margin,' this
would in no wise invalidate that part of the statute which forbids
carrying on the business of running a 'bucket shop.' The defendant
is not indicted for buying commodities for future delivery upon a
'margin;' nor are manufacturers and
Page 203 U. S. 543
wholesale merchants, nor anyone else, exempted from the
prohibition of carrying on the 'bucket shop' business. Upon the
special verdict, the defendant was properly adjudged guilty."
This ruling as to the separability of the statute is conclusive,
and refutes the contention that the entire law is void, even upon
the hypothesis that the creation of presumptions as to one class,
not applicable to another class or classes, was repugnant to the
Fourteenth Amendment.
It remains only to consider the contentions that the statute
upon which the conviction was had was repugnant to the due process
clause of the Fourteenth Amendment, and was, moreover, void because
it abridged the privileges and immunities of the plaintiff in error
as a citizen of the United States. As the first rests solely upon
the proposition that there was a want of due process of law,
because the state was without power to authorize a presumption of
guilt on proof of the doing of certain acts specified in the
statute, it is disposed of by what we have already said. And as the
second was not pressed in argument, and is not shown by the record
to have been raised or even suggested in the court below, we need
not further consider it.
Affirmed.
*
"SEC. 4. That in all prosecutions under said act and amendment,
proof that the defendant was a party to a contract, as agent or
principal, to sell and deliver any article, thing, or property
specified or named in said act, chapter 221, Public Laws of 1889,
or that he was the agent, directly or indirectly, of any party in
making, furthering or effectuating the same, or that he was the
agent or officer of any corporation or association, or person in
making, furthering, or effectuating the same, and that the article,
thing, or property agreed to be sold and delivered was not actually
delivered, and that settlement was made or agreed to be made, upon
the difference in value of said article, thing, or property, shall
constitute against such defendant
prima facie evidence of
guilt."
"SEC. 5. That proof that anything of value agreed to be sold and
delivered was not actually delivered at the time of making the
agreement to sell and deliver, and that one of the parties to such
an agreement deposited or secured, or agreed to deposit or secure,
what are commonly called 'margins,' shall constitute
prima
facie evidence of a contract declared void by chapter 221 of
the Public Laws of 1889."
"SEC. 6. That proof that any person, corporation, or other
association of persons, either principals or agents, shall
establish an office or place where are posted or published from
information received the fluctuating prices of grain, cotton,
provisions, stocks, bonds, and other commodities, or of any one or
more of the same, shall constitute
prima facie evidence of
being guilty of violating section 1 of this act, and of chapter 221
of the Public Laws of 1889."