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About The Sunday Oregonian. (Portland, Ore.) 1881-current | View Entire Issue (March 8, 1914)
15 THE SUNDAY ORE GO XI AN, PORTLAND, MARCH. 8, 1914. IW0 BLUE SKY ACTS ARE HELD INVALID Treasures Classed With One in Oregon Violate Fourteenth Amendment Is Ruling. OTHER OBJECTIONS CITED bi 11 ' 0 thiB People fcvery Point on Which Federal Court Finds Michigan Statute Void and Iowa Tribunal Issues In junction Raised Here. While admitting that blue sky laws are desirable and might be upheld if their provisions complied with the common understanding that blue sky laws are intended "to stop the sale ot stock in fly-by-night concerns and other like fraudulent exploitations," yet two courts, one in Michigan and one in Iowa, within the past two months, have declared unconstitutional acts passed in the respective states. The Michigan blue sky law was de clared unconstitutional by the District Court of the United States, Judges A.C. Denison, C. W. Sessions and Arthur J. Tuttle all signing the decision. Their decision sustained the views of those attacking the law in almost every par ticular. , The court found that the power given to the commissioners to forbid the sale of securities at less than what they think the proper price is a taking of property without due process of law .nd is not within the police power, and that' the act directly and substantially burdens interstate commerce. The de cision apparently leaves little ground for the carrying into effect many of the drastic features which clearly were the intent of the Legislature. -Enforcing Jowl Act Enjoined. In Iowa the enforcement of the blue Bky law has been enjoined by the State District Court of Polk County, but the decision follows closely the law as laid down by the United States District Court of Michigan. "The law is unconstitutional,' the court found, "in that it deprives per sons of liberty and property without due process of law and in that it dele gates legislative powers to state offi cials, and likewise because it discrimi nates between residents and non-resi-' dents and interferes with interstate commerce." Though there may be some difference In the details of the blue sky law of Oregon and the laws of Michigan and Iowa which have been declared uncon . Btitutional. the laws of the three states are classed by leading financial and bonding writers of the more drastic type, such as has been passed in Ar kansas. North and South Dakota, West Virginia, Missouri and Vermont. Coun sel in the Michigan case, who had made a study of the several types of blue sky laws, intimated that in a majority of the IS states that have passed similar statutes it would be hard for the courts to uphold the law. Point Raised In Oregon Salt. Every point on which the Michigan and Iowa laws were held void haa been raised in the suit filed last week at tacking the blue sky law of this state and asking for an injunction against the enforcement of the measure, , "We take judicial notice of the com mon understanding that the blue sky law was intended, as is said by the Attorney-General, 'to stop the sale of stock in fly-by-night concerns, vision ary oid wells, distant gold mines and other like fraudulent exploitations,' said the Michigan court. "If Just this intent had been carried into effect by the act as passed, these cases would not be here, but scrutiny of the law dis closes additional and very different ef fects. "It is not confined to corporations, but covers partnerships issuing and in dividuals dealing in securities. It does not relate alone to stocks, but as well to bonds, mortgages and promissory notes. It is not limited to Investment companies, as the term would ordi narily be defined, but extends the def inition so that it may include most of the private corporations and part nerships in the United States. It does not cover fraudulent securities merely, but reaches and prohibits the sale of securities that are honest, valid and safe. It does not simply protect the unwary citizen against fraud, but it prevents the experienced investor from dliberately assisting an enterprise which he thinks gives sufficient prom- ise of gain to offset the risk of loss, or which, from motives of pride, sym pathy or charity, he is willing to aid, notwithstanding a probability that his investment will prove unprofitable. 'Inventions Are Affected." "Tf a company is organized to make and sell a new invention, and if the commission thinks the enterprise will not succeed, the stock may not be sold, even to skilled bankers who have in vestigated thoroughly and still desire to buy." This constitutes deprivation of prop erty and rights without due process of law, the court held. Familiar defini tions of "property" and "liberty" adopted by the Supreme Court of the United States and by the Supreme Court of Michigan are cited in support of the ruling. Many of the transactions prohibited by the statute were not even or a quasi-public nature, the court found, but strictly private nature, - "with no real or substantial relation to the pub lic welfare." Thia . feature, the court held, carries the prohibitions beyond the valid exercise of the police power of the state. "Of like effect and subject to like infirmity." the court held, "is the pro vision forbidding the sale of securl ties, if the commission thinks that the company's organization or proposed plan of business Is not 'fair." Broader and vaguer language could not be found. Suah provisions deprive plain ' tiffs of property, and they do not carry the semblance of due process of law.' " Stork Subject of Commerce. Stocks and bonds are the subjects of Interstate commerce, and shipments and sales of them between the states are interstate commerce is laid down an a new principle ot law by the Mich igan case, but the court says that In the present development of commerce such a finding would be regarded as obvious. Other measures which might be considered as in conflict with the interstate commerce act have been up held under the police authority. "This statute finds no support In the police power, and accordingly. Its Ye , straint of Interstate commerce is not merely Indirect or incidental." the court announces after a long discussion of this feature of the law. Delegation ct legislative or judicial power to an administrative board Is another 'objectionable feature of the law. The ..court further calls attention U. the vital difference between an unprof itable and a fraudulent enterprise, which difference is not recognized, it holds, in the Michigan act. From the opinion handed down by the District Court In the Iowa case it is plain that the court tried hard to find grounds upon which the validity of HI Through the co-operation 6f the great wholesale houses and the enterprising- retail grocers of Portland we are able to supply the con stantly increasing- demand for Towle's Log Cabin Syrup. Wherever you see a grocer who displays and sells Towle's Log Cabin Syrup you know he is one of the factors in the growth of Portland. He is giving to his customers the same product which has a continually increasing popularity the. world over. Towle's Log Cabin Syrup has been a favorite in the market of Portland for thirty years. There must be, and there is, a mighty good reason for this. - Towle's Log Cabin Syrup tempts the appetite and delights the taste because of its perfect flavor and unfailing high quality. This is secured by the exclusive Towle method of blending sugar cane syrup with maple syrup. 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REMEMBER THE CAN Jack Towle the statute could be upheld but was forced to the conclusion that the ob-1 jections to the legality of the statute could not be passed over. The court expressed Itself as "firmly and abid ingly satisfied that the object of the law is to prevent fraud," and an nounced itself in sympathy and accord with this object, but found in substance that the law was so inherently defec tive and objectionable that no part of it coujd be sustained. Fourteenth Amendment Violated." As in the Michigan case, the greatest emphasis was placed on the provisions of the measure that deprived persons of their liberty and property without due process of law and in such a man ner that it could not be upheld under the theory that it was done under the police power of the state. These pro visions the court held are clearly In violation Of the fourteenth amendment, for they take "from the owner of prop erty the right to sell and dispose of the same and from the Individual co partnership or corporation the right and liberty to engage, in the business of buying and selling stocks, bonds and other securities without due pro cess of law." This prohibition easily resolves itself into a violation of the interstate com merce rights' of the plaintiffs, the court held, and It asserts emphatically that "there can be no question but that this business is legitimate Inter state commerce wtien transacted be tween citizens of two different states, and It Is Impossible for any rational man to say that the statute of - our state, which by express provisions re quires a license and a payment of a fee from a non-resident investment I company before it transacts busin. within this state can possibly be oth erwise than a direct infraction ,ot the constitutional provision." Objection is found by the Iowa court to the provision that grants to the Sec retary of State the power to censor all concerns and determine for himself whether their articles of Incorpora tion, association, constitution, by-laws, plans of business and proposed con tracts are fair, just and equitable. Referring to this provision, the court sava: "Crime Cannot Depend on Opinion." "Can it be that we have reached the point in the jurisprudence of our state where an act may be a crime punish able by a fine of $5000 and imprison ment because in the opinion of the Sec retary of State the sale of a mortgage or a bond is inequitable and unjust? In this law not only the sale is for bidden, not only a license fee is re quired, but the punishment of a fine of $5000 and imprisonment is visited upon the violator of this law depend ing upon the opinion of, tne Secretary of State as to whether a proposed plan of business is Just and equitable or to the contrary. I do not believe it is within the power of the Legislature to delegate to the Secretary of State such authority as this." While final decisions have been ren dered in only a few states there Is a general agitation against the drastic measures in a large majority of the 18 states In which such laws have been put on the statute books. Suit has been brought In West Virginia and now is before the Supreme Court of that state. In California many of the large in vestment companies have organized an -elation which intends to refer the measure in the state to the voters at an election this year. The act, like the one in Oregon, is patterned after the more drastic style of law originally passed in Kansas. The Kansas law has been attacked In the courts and is be fore the Supreme Court of that state. The Michigan law, which has been de clared unconstitutional, is similar in most of Its features to the Kansas law, from which the Oregon law was taken. The blue sky law of Idaho probably will be taken into the courts at any early date, a meeting of those affected by the measure having been held last month to resist it. TIMBER ON RESERVE TAXED Cliehalis County Expects to Take Toll When lagging Begins. ABERDEEN. Wash.. March 7. (Spe cial.) Property on the Indian reserva tions, not owned by the Government or Its wards, will be subject to taxation by the county, according to instruc tions received this morning by the Assessor from the State Tax Commis sion. No large sum Is just now made available by the decision of the Tax Commissioners, but a valuable prece dent has been established, since there will be extensive logging operations on the reservation in the near future. Ten! no Shingle Mill Opens. CENTRALIA, Wash.. March'7. (Spe cial.) The new shingle mill erected at Tenirto, by E. J. Bordeaux, of Olympia, started operations yesterday with a force of 16 men. The plant has a daily capacity of 123,000 shingles. It is located on the main line of the Northern Pacific Y0UCAIAFF0RD To Pay $6 Monthly. You can, therefore, afford to buy a piano now see Graves Music Co. re moval adv. Last page, section 3. Adv. P'J" JH r AM ANvSGSSOPS Don't be Temnted with cheap scissors. To do fine work every woman needs a pair of Win Scjors or Shun. Not the soft edge easily dulled bargain counter kind. The guaranteed Wiss cut clean true and stay sharp. 50c and up. Remember the Wiss Tot when buying shears or seniors. S7M ATM RD i WISS TEST A clean, true cut from heel to point through 32 thicknesses of cheese doth. If yon don't see this it isn't a WISS 3 Blustering March Weather is a menace' to health when the ef fects of a busy Winter have begun to tell in lessened vitality. The raw, cold winds and uncertain weather of March encourages disease germs which a weakened system cannot always resist. 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