State v. Nuss

114 N.W.2d 633, 79 S.D. 522, 1962 S.D. LEXIS 30

• Court: South Dakota Supreme Court
• Decided: April 11, 1962
• Docket: File 9941
• Status: Published

Opinions

HANSON, J.

This is a criminal action prosecuted by the State against W. P. Nuss, who is a solicitor of students for Gale Institute, Inc., a privately owned vocational training school located in Minneapolis, Minnesota. On October 12, 1960 defendant Nuss collected from Geraldine Helm of Sioux Falls, South Dakota, the sum of $150 as advance tuition for a course of instruction in automation (operation of IBM machines). Defendant was thereafter charged with and convicted in the Municipal Court of Sioux Falls of the offense of collecting tuition in excess of $25 in advance of a pupil’s actual attendance at school in violation of SDC 1960 Supp. 13.1114, which provides as follows:

“No person, firm or corporation or any college or school, which is not supported by a church or religious organization, or a fraternal organization, or by the state or any of its political subdivisions, shall collect tuition or other charges in excess of twenty-five dollars in advance of actual attendance of pupils in such school. Charges for correspondence courses shall not exceed twenty-five dollars in advance of the receipt and approval by the pupil of the first assignment of such courses. No action shall lie to recover on a contract for tuition or other charges from a prospeciive student in advance of such attendance, or receipt and approval , by the pupil of the first assignment of correspondence courses. Any violation of this provision shall be a misdemeanor and upon conviction thereof such violator shall be subject to a fine of not to exceed two hundred dollars or by imprisonment in the county jail for not to exceed thirty days.” (originally enacted as Chapter 89, Laws of 1959)

The complainant, Geraldine Helm, is a resident of Sioux Falls. In September 1960 she saw an ad in the local newspaper concerning a course in automation offered by the Gale Institute. She wrote a letter of inquiry to the Institute which was forwarded by it to the defendant, W. P. Nuss, who was the school’s examiner and solicitor of students in North and South Dakota. Thereafter defendant called on complainant. He interviewed her in the presence of her father. She filled out a questionnaire and defendant determined she was qualified to attend Gale Institute subject to the approval of the school. Geraldine and her father were advised about the course in automation, the amount of tuition required, where the scho> was located, and other pertinent facts. Geraldine agreed to attend. A written contract was signed on October 12, 1960 by both Geraldine and her father, and they paid defendant the sum of $150 as advance tuition. Defendant read the contract in its entirety before it was signed by Geraldine and her father. Thereafter, for some reason not shown in the record, Geraldine failed, or refused, to attend the school and this prosecution followed.

The Gale Institute is a privately owned vocational training school located in Minneapolis. It was organized over twenty years ago and in the course of its history has trained and placed thousands of students in various occupations. It has never refused to admit complainant as a student. There is no issue regarding the reasonableness of the total tuition charged complainant, the worth of the course, or the ability of the school to furnish the training contracted for. I ikewise, there is no issue concerning defendant’s conduct or integrity. There, is no allegation or claim he misrepresented) misled, or deceived complainant' in any manner. The. sole substance of the crime against defendant is that he collected tuition in excess of twenty-five dollars from a prospective student m advance of actual school attendance.

Defendant assails the constitutionality of the statute under which he was convicted on numerous grounds. In view of our conclusion., it is only necessary to consider his contentions that it is an unreasonable and arbitrary exercise of the police power and deprives him of his freedom to contract in violation of Section 2, Árt. VI of the South Dakota Constitution.

In considering these: issues we are aware of the presumption of validity' which attaches to all legislative acts and “no statute should be held unconstitutional by any court unless its infringement of constitutional restrictions is so plain and palpable as to admit of no reasonable doubt.” State ex rel. Botkin v. Welsh, 61 S. D. 593, 251 N.W. 189; Mundell v. Graph, 62 S.D. 631, 256 N.W. 121. We are also aware that- a court does not sit “as a superlegislature to weigh the wisdom of legislation”. Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421, 72 S.Ct. 405, 96 L.Ed. 469.

Ec’onomic freedom is one of the inherent rights guaranteed to all men by Sec. 1, Art. VI of the South Dakota Constitution and protected by the -due process clause. Sec. 2, Art. VI. The term “liberty” used in the Constitution means more than freedom from arrest or restraint. It includes freedom of action; freedom to own, control, and uáé property, and freedom to pursue-. any lawful trade, business, or calling. This freedom to pursue a lawful business and to own and control property also includes freedom to make all proper contracts in relation thereto. 11- AmJur., Constitutional Law, § 339.

. [4]. On the other hand freedom of contract" is not an absolute, right or superior. to the general welfare of the public. It is subject to reasonable restraint and regulation by the state, under the police power, to protect the safety, health, morals, and general welfare of the people. As explained by the United States Supreme Court in Chicago, B. & Quincy R. R. Co. v. McGuire, 219 U.S. 549, 31 S.Ct. 259, 55 L.Ed. 328, “freedom of contract is a qualified, and not an absolute, right. There is no absolute freedom to do as one wills onto contract'as one chooses. The guaranty of liberty does-not Withdraw from legislative supervision that wide department of activity which consists of the making of contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests of the community.”

Although freedom of contract has traditionally been considered to be the general rule and economic restraint the exception, which could be justified only under exceptional circumstances, there is no longer much question concerning the broad discretion possessed by the legislature to regulate any and all business for the protection of the health, safety, morals, and general welfare of the people. This trend toward economic regulation is particularly evident in the area of price control. See “Our Constitutional Heritage” 45 ABAJ 1027. Formerly the legislature was considered to be without power to fix prices at which commodities could be sold, services rendered, or property used, unless the business or property was “affected with a public interest” such as a public utility operating under a franchise or a business monopolistic in nature. Now the term affected With a public' interest means “no more than that an industry, for adequate reason, is subject to control for the public good.” Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940; Olsen v. Nebraska, 313 U.S. 236, 61 S.Ct. 862, 85 L.Ed. 1305. Consequently, the authority of the legislature, under the police power, to reasonably regulate private schools and their agents and solicitors must be conceded. State v. Williams, 253 N.C. 337, 117 S.E.2d 444.

Nevertheless, due process still requires that any exercise of the police power be reasonable, City of Sioux Falls v. Kadinger, 74 S.D. 217, 50 N.W.2d 797, and the regulatory means adopted by the legislature must bear a real and substantial relation to some actual or manifest evil, Defiance Milk Products Company v. Du Mond, 309 N.Y. 537, 132 N.E.2d 829, and cannot be unreasonable, -arbitrary, or capricious. The determination of such issues is a judicial function and when a measure is found to be in violation of our fundamental law it is void. Consequently, it not only is the right, but the duty of this Court to so declare it. Ex parte Hawley, 22 S.D. 23, 115 N.W. 93, 15 L.R.A.,N.S., 138; Hertz Drivurself Stations v. Siggins, 359 Pa. 25, 58 A.2d 464, 7 A.L.R.2d 438.

The statute does not contain a declaration of its purpose or the evils it seeks to curb. Its object, we are told, is to safeguard youthful high school graduates against the fraud and deception of high pressure solicitors employed by privately owned vocational schools. The shot pattern of the act is not so limited. The mantle of its protection extends to adults as well as minors. The only educational institutions clearly exempt from the restrictions and penal provisions of the act are schools supported by (1) a church, (2) a religious or fraternal organization, and (3) the State of South Dakota, and its political subdivisions. All other schools and educational institutions, public and private, apparently fall within its ambit. This includes (1) all privately owned trade, vocational, and correspondence schools operated for profit wherever located, (2) all privately endowed educational institutions not operated for private gain and not having any church or fraternal affiliations which include some of the oldest and most honored and respected institutions of higher learning in America, and (3) all schools, colleges, and universities supported and maintained by states other than South Dakota. Although the constitutionality of such classification is not before us, it patently reflects the unreasonable nature of the act as a whole.

The main stem of the act is the prohibition against collecting tuition or other charges in excess of twenty-five dollars in advance of actual attendance of pupils in school. It is this restriction which defendant contends violates his constitutional freedom of contract, is unreasonable and arbitrary, and bears no reasonable relationship to any declared or manifest evil. On the other hand, we are informed, this limitation on advance tuition strikes at the heart of the evils sought to be curbed by the act, i. e., the substandard privately owned business or vocational school which (1) employs high pressure solicitors; (2) requires unreasonably large payments in advance of instruction; (3) enters into binding contracts with prospective students with “no refund” provisions; (4) guarantees placement upon completion of a course; (5) offers bogus scholarships; (6) gives meaningless aptitude tests; (7) engages in false advertising and misrepresentation; (8) offers worthless subjects; (9) has inadequate facilities; (10) employs inferior and unqualified instructors; and (11) charges exorbitant tuition.

The police power of the state may properly be used to prevent fraud and deception wherever found and private schools are not exempt from such reasonable remedial legislation. Other states have recognized the same evils enumerated above and have enacted comprehensive regulatory measures designed to suppress them. See Chapter 739 of the 1961 Minnesota Session Laws, and Chapter 32, Article 77 of the 1961 Cum.Supp. to the Anno. Code of Maryland. By way of illustration, the Maryland law requires every solicitor for a non-public school,, as defined in the act, to obtain an annual permit from the State Superintendent of Schools. Each applicant must submit to the State Superintendent “a copy of each type of contract offered by the solicitor to prospective students and used by the solicitor’s school, together with such advertising material and other representations as are made by the school to its students or prospective students, and such instructional material as may be requested by the State Superintendent to enable him to evaluate the instructional program, as well as the sales methods of the school * * If the application is approved each solicitor must furnish a surety bond in the amount of $1,000 conditioned on the faithful performance of all agreements and contracts with students. The State Superintendent may revoke the permit issued to any solicitor for a violation of any student contract, or for other good cause. The regulatory provisions of the Maryland law are directly related to the evils sought to be curbed. We fail, however, to see more than a casual relationship to the same- evils in the act under consideration.

Neither privately owned schools nor the collection of advance tuition are evils in themselves or harmful to' the public. They seemingly are, however, the only subjects the act in question purports to curb or suppress. It is lawful to collect $25 advance tuition thereunder. By c'on-forming to this single limitation any school may solicit students in South Dakota at will regardless of the character or quality of the institution, its faculty, facilities, or instruction. It may, with impunity thereunder, employ high pressure solicitors, offer bogus scholarships, give meaningless aptitude tests, guarantee placement of graduates, and exact exorbitant tuition fees. This statute, in effect, clothes a substandard school and its operations with apparent legality if it collects no more than $25 tuition in advance of actual attendance.

Protection is afforded only to the prospective student who, for any or no reason, changes his mind about going to a particular school after having agreed to do so. His loss is limited to $25. Otherwise, the statute offers absolutely no protection to the public against fraud and deceit. It requires no license and provides no sanctions against repeated offenses. There is no bar against the assignment of contract before a course of instruction is furnished. It establishes no standards and requires no inspections and furnishes no supervision. In short, there is a total absence of any means or method of controlling, regulating, or suppressing any asserted evil in the field of private education. As a remedy against fraud, therefore, the challenged statute bears no reasonable relationship to the evils at which it is purportedly aimed. State v. Wood, 51 S.D. 485, 215 N.W. 487, 54 A.L.R. 719; City of Rapid City v. Schmitt, 75 S.D. 636, 71 N.W.2d 297; State v. Memorial Gardens Development Corp., 143 W.Va. 182, 101 S.E.2d 425, 68 A.L.R.2d 1233; Gambone v. Commonwealth, 375 Pa. 547, 101 A.2d 634; City and County of Denver v. Thrailkill, 125 Colo. 488, 244 P.2d 1074; Defiance Milk Co. v. Du Mond, 309 N.Y. 537, 132 N.E.2d 829; and State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436, 254 P.2d 29. The statute fails, in other words, to “contribute in some real and substantial measure to the object sought to be accomplished.” City of Huron v. Munson, 67 S.D. 88, 289 N.W. 416.

We are of the further opinion that the limitation on advance tuition is an unreasonable, unnecessary, and unwarranted invasion of defendant’s freedom of contract. In Grow System School v. Board of Regents, 277 App.Div. 122, 98 N.Y.S.2d 834, it was held that the cost of attending a private or parochial school was not a matter of sufficient public concern to justify its regulation by the state. The court said: “It may well be that the power to regulate certain phases of private schoo] operation such as the nature of curriculum, the qualifications of teachers and the like, is a necessary and indispensable corrollary to the State’s supervisory jurisdiction over education in general. In such fields general interest is obvious lest untrained and improperly prepared technicians be foisted upon an unsuspecting public. What that embryo technician, be he hair stylist or masseur, dentist or doctor, may have paid for his education is purely a personal matter between himself and the school of his choice, in which the public has no proper concern. If. the State may fix the fees .which, a trade school may charge for its services, then" it can do the same •regarding every private school and for that matter every profession or calling where a license is required. Although we may feel that our feet are on the path leading to that point, we have not reached it yet. In the absence of any showing. whatsoever that tuition in' trade schools is a matter of great public concern or affected with a public interest, any attempt on .the part of the legislature to fix the rates thereof is an unnecessary and unwarranted interference with individual liberty, and hence unconstitutional.” Similarly, the method or manner of paying for the cost of private education is primarily a matter of private concern and private contract.

Privately owned trade schools are filling an increasingly important educational need in this age of automation with its consequent and insatiable demand for trained and skilled workers. Such schools are not monopolistic in nature. Attendance is entirely voluntary. Their ownership or operation constitutes a useful, law-full, private enterprise. In the absence of adequate reason then, the cost of attending private schools and their collection methods are not subject to control by the state. We fail to find any adequate reason for the offense of collecting advance tuition in excess, of $25 by private schools. The collection of advance tuition is not inherently evil or harmful to the public unless accomplished by fraud, deception, or intent to injure. The failure of the act to so limit its application makes it an unwarranted and unjustifiable invasion of personal and private rights. Commonwealth v. Zasloff, 137 Pa.Super. 96, 8 A.2d 801. If the method and manner of paying tuition at a private school is subject to criminal penalty in the absence of intent to injure or in the absence of fraud, misrepresentation or other proper limitation for the indirect purpose of protecting the public against fraud in the solicitation of students, then the same indirect method of oppressive regulation may be extended to control and regulate the sale terms of any other useful and lawful commodity, product, or service. As the North Carolina Court so pungently pointed out, “fraud has been practiced on occasion in all relations of life since the serpent invaded Eden and misrepresented the qualities of the forbidden fruit to the woman.” State v. Ballance, 229 N.C. 764, 51 S.E.2d 731, 7 A.L.R.2d 407.

As the limitation on the amount of advance tuition appears to be the heart and soul of the challenged statute, we are convinced the legislature would not have enacted the other related and interdependent portions of the act without this inseparable restrictive proviso which we have concluded to be an unreasonable and unwarranted exercise of the police power. Consequently, as the statute does not contain a severability clause we deem it necessary to declare the entire act void.

Reversed.

ROBERTS and BIEGELMEIER, JJ., concur. RENTTO, P.J., and SMITH, J., dissent.