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 Front Page arrow Titles (by Subject) arrow § 130.: When ordinary occupations may be made exclusive monopolies—Saloons—Banking—Insurance—Peddling—Building and loan associations—Restriction of certain trades to certain localities—Slaughterhouses—Markets.— - 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

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Subject Area: Law
Topic: The American Revolution and Constitution

§ 130.: When ordinary occupations may be made exclusive monopolies—Saloons—Banking—Insurance—Peddling—Building and loan associations—Restriction of certain trades to certain localities—Slaughterhouses—Markets.— - 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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§ 130.

When ordinary occupations may be made exclusive monopolies—Saloons—Banking—Insurance—Peddling—Building and loan associations—Restriction of certain trades to certain localities—Slaughterhouses—Markets.—

Notwithstanding the contradictions of the authorities, it is not difficult to determine on principle, as enunciated above, that the grant of privileges not otherwise acquirable may be made a monopoly, but that a monopoly cannot be made of the ordinary lawful occupations. The difficulty becomes almost inexplicable, when the exclusive privilege is granted of carrying on a business, which is prohibited to others, because the unlimited pursuit of it works an injury to society. There is no doubt that a trade or occupation, which is inherently and necessarily injurious to society, when it is unrestricted and left open to private enterprise, may be prohibited altogether. If it is lawful for the State to prohibit a particular business altogether, the pursuit of such a business would, if permitted to anyone, be a privilege or franchise, and like any other franchise may be made exclusive. This is but a logical consequence of the admission, that the State has the power to prohibit the trade altogether. Such an admission is fatal to a resistance of the power to make it a monopoly. It has thus been held to be constitutional to limit the number of saloons or bar-rooms for which licenses will be issued. A Massachusetts statute provided that the number shall not exceed one for each one thousand of the population of a city or town, and it was held not to violate the constitutional prohibition of unequal privileges; the court resting its judgment on the proposition that the liquor business may be prohibited altogether; and hence the limitation of the number of saloons was only a reasonable police regulation, which the legislature could lawfully adopt in the place of total prohibition, in the exercise of its wise discretion.1

Banking and insurance are in one sense of the word ordinary callings, which the man of sufficient capital could successfully pursue; and, in the case of banking, he could without doubt safeguard the interests of depositors within the utmost reason. It is probably true that this could be effected in the case of all kinds of insurance other than life; inasmuch as marine, fire, storm, and other like kinds of insurance are taken out usually to cover only one, three and five years. But in a policy of life insurance, interests are created and acquired, which it might require many years to realize. To permit private individuals, no matter how wealthy they are, to engage in the business of life insurance, would be a gross wrong to policy holders, because by no measures could their interests be properly safe-guarded against the likely accident of the death of the insurer. A statute, which would prohibit any person or corporation from issuing a policy of life insurance, unless expressly authorized by the laws of the State,1 would be clearly constitutional. And it would not be unconstitutional to prohibit absolutely a natural person from issuing a policy of life insurance under any circumstances. But it would be more open to question, how far the business of marine, fire and other like insurance could by statute be converted into a monopoly or exclusive franchise, and be denied altogether to natural persons. That the business may be subject to regulations, which are needed to assure the policy holder of the possession by the insurer of ample funds to pay the losses under the policies when they occur, is unquestioned. But this can be readily accomplished in all other kinds of insurance, other than life, without denying to the natural person absolutely the right to issue a policy of insurance. The limited duration of policies of insurance, other than life, makes the accident of death of the insurer a matter of little moment.

The same principles apply to the business of banking. There is no reason why a successful police regulation of the business of banking, in the interests of depositors and other creditors, is not consistent with the recognition and permission of the existence of private banks and banking houses; at least so far as the necessary, and what might be called the legitimate and invariable, business of banking is concerned; viz., the receipt of deposits and the lending of money to borrowers. It is plain that the government could not allow private bankers to issue bank notes, which shall pass current, as a substitute for legal tender. But that is an extraordinary function of banks, which is easily separable from the common and ordinary banking business, and which in this country is now practically prohibited to all banks and bankers, other than the national banks, i. e., banks which have been incorporated under the National Banking Act. I believe, therefore, the Supreme Court of South Dakota was right, when it declared that the State banking law was unconstitutional, so far as it prohibited any person or firm from carrying on the business of banking, by receiving deposits, by discounting and negotiating notes, buying and selling exchange, coin and bullion, etc., without first becoming an incorporated association under the act.1 The right of doing a banking business of the kind described was properly characterized by the court as a right of the citizen, which could not be taken away from him, without violating his constitutional liberty. He may be rightfully subjected to all kinds of reasonable police regulations, which are designed to protect depositors against the fraud and insolvency of the banker; but the absolute prohibition of the business, to any but incorporated companies, is not sanctioned by any threatened danger or injury to the public. However, the Supreme Court of North Dakota reached a different conclusion, holding that a similar law was constitutional.2

It has been held in Oklahoma to be an unconstitutional grant of a special privilege to provide by law that all the territorial printing shall be done by a particular named company, in violation of the act of Congress, July 30, 1886, which prohibits the territorial legislature from passing any special law, granting any exclusive privilege, immunity or franchise.3

The most remarkable case, involving the creation of an exclusive privilege of the pursuit of an ordinary calling or business, is that of an act of the legislature of Pennsylvania which requires all peddlers to take out licenses, before they can lawfully ply their business; and restricts the issue of such licenses to physically disabled persons. And the denial of the right to peddle to able-bodied persons is declared by the Supreme Court of Pennsylvania to be a constitutional exercise of the police power to protect society against lawless able-bodied vagrants. It was held, for that reason, that the statute did not violate any inherent and indefeasible right of “acquiring, possessing and protecting property.”1 Surely it is a gross misstatement of fact that able-bodied peddlers are necessarily vagrants and lawless persons. Doubtless, the peddlers commit many frauds upon the credulous and ignorant. But they are not all dishonest; and the business of peddling is not necessarily dishonest, any more than is the business of any other small tradesman, who deals in lawful articles of trade, and who has his established place of business. The only necessary distinction between a peddler and the ordinary small tradesman, lies in the fact that the former has no permanent place of business, but carries his stock of goods, on his back or in a wagon, from place to place, and from house to house. The peddlers may be lawfully required to submit themselves to police regulations, for the prevention of the practice of frauds; and they may be lawfully required to take out a license, and to pay a reasonable fee therefor; but the business of peddling cannot be lawfully converted by statute into an exclusive privilege of the halt and the blind, without violating the natural right of the able-bodied person to pursue the calling. The business is not inherently and necessarily harmful to society. It cannot, therefore, according to the prevalent principles of constitutional limitations, be made the exclusive privilege or monopoly of certain classes of the population.

Another peculiar immunity or privilege is the exemption by statute of building and loan associations from the prohibitions of the laws against usury. Such exemptions have been declared to be constitutional.1 In a previous section,2 I have explained my reasons for declaring all laws against usury, which are nothing more than regulations of the borrowing price of money, to be an unconstitutional interference with the liberty of contract. But if it is constitutional to prohibit one man from charging more than a stated rate of interest for the loan of money, it certainly cannot be constitutional to permit another or a particular class of corporations, to charge a higher rate. The constitutional guaranty, both State and Federal, of the equal protection of the laws, is most clearly violated by any such discrimination. I am not unaware of the argument that the contractual relations of a building and loan association and a borrowing member of such an association are peculiar, and contain features which are absent from the ordinary relation of debtor and creditor. But if it is allowable for the government to prohibit in any case the stipulation for more than the stated maximum rate of interest, in any instrument of indebtedness, the prohibition should be uniform and applicable alike to all debtors and creditors, including building and loan associations.3

Not only is it true that, where the public interests require it, ordinary callings and businesses may be converted by statute into more or less exclusive monopolies, but the same principle applies to those cases, where the law provides that a particular trade shall be conducted in certain buildings or localities. We have seen that it is reasonable to prohibit the prosecution of certain trades except within a certain area, or in certain public buildings, owned and managed by the State or town. But the same objection is raised, if the State or town, instead of constructing and maintaining these public buildings, authorizes a private individual or corporation to erect and conduct them under police regulations. The monopoly, thus created, is not any more objectionable on principle, because it does not interfere to any greater degree, or in any different way, with the liberties of others who are prohibited, than the erection and maintenance of such buildings by the government. If the State has the constitutional power to prohibit the prosecution of such a trade in all other buildings, the prohibition is equally irksome, whether the buildings are owned by the public or by private individuals; and the grant of the right to prosecute an otherwise prohibited trade in the buildings of a private individual or corporation would create a privilege, and may therefore be made a monopoly. If there is any valid objection to this regulation, it will be found to apply equally to all like cases, whether the buildings in which the trade is required to be conducted belong to the State or private persons; and the regulation is unconstitutional, because the prosecution of the business anywhere will not produce any injury to the public.

This doctrine has been established and applied to the case of slaughter-houses. The legislature of Louisiana provided for the erection by a certain private corporation of slaughter-houses on the Mississippi, near New Orleans, to which all butchers within a certain area were required to bring their cattle for slaughtering. The law compelled the corporation to provide convenient accommodation for all butchers, who applied, upon the payment of a reasonable compensation, and the slaughtering of animals elsewhere was absolutely interdicted. Suits were brought to resist the enforcement of the law, on the ground that it interfered with the constitutional rights of those interdicted and created a monopoly, not allowed by the constitution. The cases finally reached the Supreme Court of the United States, and the law was declared, by a divided court, to be constitutional. In delivering the opinion of the court Justice Miller said:—

“It cannot be denied that the statute under consideration is aptly framed to remove from the more densely populated part of the city the noxious slaughter-houses, and large and offensive collections of animals necessarily incident to the slaughtering business of a large city, and to locate them where the convenience, health and comfort of the people require they shall be located. And it must be conceded that the means adopted by the act for this purpose are appropriate, are stringent, and effectual. But it is said that, in creating a corporation for this purpose and conferring upon it exclusive privileges—which it is said constitute a monopoly—the legislature has exceeded its power. If this statute had imposed on the city of New Orleans precisely the same duties, accompanied by the same privileges, which it has on the corporation which it created, it is believed that no question would have been raised as to its constitutionality. In that case the effect on the butchers’ pursuit of their occupation and on the public would have been the same as it is now. Why cannot the legislature confer the same powers on another corporation, created for a lawful and useful public object, that it can on the municipal corporation already existing? That wherever a legislature has the right to accomplish a certain result, and that result is best attained by means of a corporation, it has the right to create such a corporation, and to endow it with the power necessary to effect the desired and lawful purpose, seems hardly to admit of debate. The proposition is ably discussed and affirmed in the case of McCulloch v. State of Maryland, in relation to the power of Congress to organize the Bank of the United States to aid in the fiscal operations of the government. * * *

“Unless, therefore, it can be maintained that the exclusive privileges granted by this charter for the corporation, is beyond the power of the legislature of Louisiana, there can be no just exception to the validity of the statute. And in this respect we are not able to see that these privileges are especially odious or objectionable. The duty imposed as a consideration for the privilege is well defined, and its enforcement well guarded. The prices or charges to be made by the company are limited by the statute, and we are not advised that they are on the whole exorbitant or unjust.”

“The proposition is, therefore, reduced to these terms: Can any exclusive privilege be granted to any of its citizens, or to a corporation, by the legislature of the State? * * *

“But it is to be observed, that all such references are to monopolies established by the monarch in derogation of the rights of the subjects, or arise out of transactions in which the people were unrepresented and their interests uncared for. The great Case of Monopolies, reported by Coke, and so fully stated in the brief, was undoubtedly a contest of the Commons against the monarch. The decision is based upon the ground that it was against common law and the argument was aimed at the unlawful assumption of power by the crown; for whoever doubted the authority of Parliament to change or modify the common law? The discussion in the House of Commons cited from Macaulay clearly establishes that the contest was between the crown and the people represented in Parliament.

“But we think it may be safely affirmed that the Parliament of Great Britain, representing the people in their legislative functions, and the legislative bodies of this country, have from time immemorial to the present day, continued to grant persons and corporations privileges—privileges denied to other citizens—privileges which come within any just definition of the word monopoly, as much as those now under consideration, and that the power to do this has never been questioned or denied. Nor can it be truthfully denied that some of the most useful and beneficial enterprises set on foot for the general good, have been made successful by means of these exclusive rights, and could only have been conducted to success in that way.

“It may, therefore, be considered as established, that the authority of the legislature of Louisiana to pass the present statute is ample, unless some restraint in the exercise of that power be found in the constitution of that State, or in the amendments to the constitution of the United States.”

“The statute under consideration defines these localities, and forbids slaughtering in any other. It does not, as has been asserted, prevent the butcher from doing his own slaughtering. On the contrary, the Slaughter-House Company is required, under a heavy penalty, to permit any person who wishes to do so, to slaughter in their houses; and they are bound to make ample provision for the convenience of all the slaughtering for the entire city. The butcher then is still permitted to slaughter, to prepare and to sell his own meats; but he is required to slaughter at a specified place and to pay a reasonable compensation for the use of the accommodations furnished him at that place. The wisdom of the monopoly granted by the legislature may be open to question, but it is difficult to see a justification for the assertion that the butchers are deprived of the right to labor in their occupation, or the people of their daily service in preparing food, or how this statute, with the duties and guards imposed upon the company, can be said to destroy the business of the butcher, or seriously interfere with its pursuit.”1

This is not the only case in which the right of the government to create such a monopoly has been sustained. In Iowa, a law was sustained, which granted to private individuals the exclusive right to erect and maintain a public market in which all vendors of fresh meat and vegetables were required to ply their trade.1 And in Louisiana it was held that, not only may the municipality of New Orleans grant to private persons the exclusive privilege of erecting and maintaining a public market, in partnership with the city, but that the city council cannot legislate in respect to the regulation of the markets, without consulting the partners, where the regulation is likely to affect the financial interest of the partnership.2 So, also, it has been held in Kansas, that a law is not unconstitutional which restricts the sale of liquors to druggists and for special purposes.3 On the other hand, in an early case in New York, it was declared to be unconstitutional to prohibit to persons in general the manufacture of pressed hay in the thickly settled parts of a city, on account of the danger of fire, and grant to one or more the exclusive privilege of engaging in that business within the prohibited district. The court says:—

“If the manufacture of pressed hay within the compact parts of the city is dangerous in causing or promoting fires, the common council have the power expressly given by their charter to prevent the carrying on of such manufacture; but as all by-laws must be reasonable, the common council can not make a by-law which shall permit one person to carry on the dangerous business, and prohibit another who has an equal right from pursuing the same business.”1

In a case, parallel with the slaughter-house cases of Louisiana, the city of Chicago passed an ordinance designating certain buildings for slaughtering all animals intended for sale or comsumption in the city, the owners of the buildings being granted for a specified period the exclusive privilege of having all such animals slaughtered in their establishment, and exacting a certain fee from the owners of animals so slaughtered. In passing upon the constitutionality of this law, the Supreme Court of Illinois pronounced the following opinion: “The charter authorizes the city authorities to license or regulate such establishments. When that body has made the necessary regulations, required for the health or comfort of the inhabitants, all persons inclined to pursue such an occupation should have an opportunity of conforming to such regulations; otherwise the ordinance would be unreasonable and tend to oppression. Or if they should regard it for the interest of the city that such establishments should be licensed, the ordinance should be so framed that all persons desiring it might obtain licenses by conforming to the prescribed terms and regulations for the government of such business. We regard it neither as a regulation nor a license of a business, to confine it to one building or to give it to one individual. Such an action is oppressive, and creates a monopoly that never could have been contemplated by the general assembly. It impairs the rights of all other persons, and cuts them off from a share in not only a legal, but a necessary business. Whether we consider this as an ordinance or a contract, it is equally unauthorized, as being opposed to the rules governing the adoption of municipal by-laws. The principle of the equality of rights is violated by this contract. If the common council may require all of the animals for the consumption of the city to be slaughtered in a single building, or on a particular lot, and the owner be paid a specific sum for the privilege, what would prevent the making a similar contract with some other person that all of the vegetables or fruits, the flour, the groceries, the dry goods, or other commodities should be sold on his lot and he receive a compensation for the privilege? We can see no difference in principle.”1

This presentation of the subject readily indicates an almost hopeless contradiction of authorities; but it seems to be without doubt, that the doctrine laid down by the Supreme Court of the United States in the Slaughter-house Cases will ultimately come to be recognized as the correct one.

[1]Decie v. Brown, 167 Mass. 290. See, to the same effect, Plumb v. Chrystie, 103 Ga. 686; Deal v. Singletary, 105 Ga. 466. This general principle is the one which underlies the law of restrictive licenses. The reader is referred to § 119 for a fuller discussion of the matter.

[1]Commonwealth v. Vrooman, 164 Pa. St. 306.

[1]State v. Scougal, 3 S. D. 55 (51 N. W. 858).

[2]State ex rel. Goodsill v. Woodmause, 1 N. D. 246 (46 N. W. 970).

[3]Guthrie Daily Leader v. Cameron, 3 Okl. 677 (41 Pac. Rep. 635).

[1]Commonwealth v. Brinton, 132 Pa. St. 62; Commonwealth v. Gardner, 133 Pa. St. 284.

[1]Vermont Loan & Trust Co. v. Whithed, 2 N. D. 82; Cook v. Equitable Bldg. & Loan Assn., 104 Ga. 814; Livingston Loan & Building Assn., 49 Neb. 200; Smoot v. People’s Perpetual Loan & Building Assn. (Va.), 29 S. E. 746; Iowa Savings & Loan Assn. v. Heidt, 107 Iowa, 297; Zenith Building & Loan Assn. v. Heimbach (Minn. ’99), 79 N. W. 609. But see Gordon v. Winchester Building & Loan Association, 75 Ky. 110.

[2]§ 106.

[3]See, to that effect, Gordon v. Building Association, 12 Bush, 110; Simpson v. Kentucky Citizens’ Bldg. & Loan Assn. (Ky.), 41 S. W. 570.

[1]Opinion of J. Miller in Slaughter-House Cases, 16 Wall. 36. C. J. Chase and JJ. Field, Swayne and Bradley, dissent. In delivering his dissenting opinion, Justice Field said: “By the act of Louisiana, within the three parishes named, a territory exceeding one thousand one hundred square miles, and embracing over two hundred thousand persons, every man who pursues the business of preparing animal food for market must take his animals to the buildings of the favored company and must perform his work in them, and for the use of the buildings must pay a prescribed tribute to the company, and leave with it a valuable portion of each animal slaughtered. Every man in these parishes who has a horse or other animal for sale, must carry him to the yards and stables of the company, and for their use pay a like tribute. He is not allowed to do his work in his own buildings or take his animals to his own stables, or keep them in his own yards, even though they should be erected in the same district as the buildings, stables and yards of the company, and that district embraces over eleven hundred square miles. The prohibitions imposed by this act upon butchers and dealers in cattle in these parishes, and the special privileges conferred upon the favorite corporation, are similar in principle and as odious in character as the restrictions imposed in the last century upon the peasantry in some parts of France, where, as says a French writer, the peasant was prohibited to ‘hunt on his own lands, to fish in his own waters, to grind at his own mill, to cook at his own oven, to dry his clothes on his own machines, to whet his instruments at his own grindstone, to make his own wine, his oil and his cider at his own press, * * * or to sell his commodities at the public markets. The exclusive right of all these privileges was vested in the lords of the vicinage. The history of the most execrable tyranny of ancient times,’ says the same writer, ‘offers nothing like this. This category of oppressions cannot be applied to a free man, or to the peasant, except in violation of his rights.’

“But if the exclusive privileges conferred upon the Louisiana corporation be sustained, it is not perceived why exclusive privileges for the construction and keeping of ovens, machines, grindstones, wine presses, and for all the numerous trades and pursuits for the prosecution of which buildings are required, may not be equally bestowed upon other corporations or private individuals and for periods of indefinite duration. * * * This equality of right, with exemption from all disparaging and partial enactments, in the lawful pursuits of life, throughout the whole country, is the distinguishing privilege of citizens of the United States. To them, everywhere, all pursuits, all professions, all avocations, are open without other restrictions than such as are imposed equally upon all others of the same age, sex, and condition. The State may prescribe such regulations for every pursuit and calling of life as will promote the public health, secure the good order and advance the general prosperity of society, but when once prescribed, the pursuits or calling must be free to be followed by every citizen who is within the conditions designated, and will conform to the regulations. This is the fundamental idea upon which our institutions rest, and unless adhered to in the legislation of the country our government will be a republic only in name. * * *

“The keeping of a slaughter-house is part of, and incidental to, the trade of a butcher—one of the ordinary occupations of human life. To compel a butcher, or rather all the butchers of a large city and an extensive district, to slaughter their cattle in another person’s slaughter-house and pay him a toll therefor, is such a restriction upon the trade, as materially to interfere with its prosecution. It is onerous, unreasonable, arbitrary and unjust. It has none of the qualities of a police regulation. If it were really a police regulation, it would undoubtedly be within the power of the legislature. That portion of the act which requires all slaughter-houses to be located below the city, and to be subjected to inspection, etc., Is clearly a police regulation. That portion which allows no one but the favored company to build, own, or have slaughter-houses is not a police regulation, and has not the faintest semblance of one.”

[1]Le Claire v. Davenport, 13 Iowa, 210; overruling Davenport v. Kelly, 7 Iowa, 109, 110. See the dissenting opinion in the latter case.

[2]New Orleans v. Guillotte, 12 La. Ann. 818.

[3]Intoxicating Liquor Cases, 25 Kan. 751 (37 Am. Rep. 284); Koester v. State, 36 Kan. 27. See In re Ruth, 32 Iowa, 253; Kohn v. Melcher (Iowa), 29 F. 433.

[1]Mayor City of Hudson v. Thorne, 7 Paige, 261.

[1]City of Chicago v. Rumpff, 45 Ill. 90.