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Subject Area: Law
Topic: The American Revolution and Constitution

§ 90.: Regulations to prevent fraud.— - Christopher G. Tiedeman, A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, vol. 1 [1900]

Edition used:

A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint (St. Louis: The F.H. Thomas Law Book Co., 1900). Vol. 1.

Part of: A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, 2 vols.

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§ 90.

Regulations to prevent fraud.—

In the preceding section, a number of regulations, for the purpose of preventing fraud in the sale of goods, wares and merchandise, have been explained, and their constitutionality elucidated. Fraud is of course hydra-headed, and threatens every business relation in life. And the only constitutional question, which can be raised, in respect to legislation which is designed to prevent and punish fraud in intra-State transactions, is whether the regulations go no farther than is necessary to prevent or punish the fraud, and do not infringe any vested rights, which can be enjoyed without the commission of the fraud. In this section, are included whatever regulations to prevent and punish fraud have been enacted, which do not specifically refer to sales of merchandise.

A very common regulation is that which requires the names of partners of a firm to be made public, so that the creditors of the partnership may know to what individuals they are giving credit. These regulations are varied in form; but in the main they are reasonable, and their constitutionality cannot be successfully contested.3

There is no business, in which popular confidence in the honesty and reliability of those engaged therein, and the protection against fraud and imposition, are so necessary to the public welfare, as those of banking and insurance. For that reason, we find in every State, officials, whose duty is to look into and superintend these businesses, so that a trusting and unsuspecting public may not be defrauded.

The State superintendent of banking has power to examine the books of any banking institution, operating under State laws, while the Controller of the Currency has the same power of control over national banks, which have been chartered under the national banking law. These officers are authorized and empowered to close up and force into liquidation all banks and bankers, who are found to have an impaired capital, or who are in an insolvent condition. So far as the author knows, the constitutionality of these regulations has been questioned in only one case; and in that case, their constitutionality has been sustained.1 A very common regulation of the banking business is that of making it criminal for any banker, or officer of a bank, to receive money or deposit when he knows that he or the bank is at the time in an insolvent condition. The constitutionality of this law has been sustained.2 The superintendence of the business of insurance is equally common, and in every State, officials have the power to refuse the right of doing business to any insurance company, whose financial condition does not comply with and satisfy the requirements of the State law. These laws, so far as it is known, have never been questioned. But in Pennsylvania, a statute makes it unlawful for a policy of insurance to be issued by any person, persons or firm or association, unless authority to do so is expressly conferred by a charter of incorporation. The constitutionalty of the law has been sustained.1

[3]In the Ohio statute, partnerships transacting business under a fictitious name were required to file with the clerk of court of common pleas a certificate giving the names in full of all the partners, before they are entitled to maintain an action on any partnership transaction or contract. The act was held to be constitutional. Hartzell v. Warren, 11 Ohio C. C. 269; s. c. 10 C. D. 183.

[1]Blaker v. Hood, 53 Kan. 499. In that case the law was enforced against a private banker.

[2]Meadowcroft v. People, 163 Ill. 56.

[1]Commonwealth v. Vrooman, 164 Pa. St. 306. See post, § 105, for a fuller discussion of the constitutionality of this law.