Bissell Carpet Sweeper Co. v. Shane Co., Inc.

143 N.E.2d 415, 237 Ind. 188, 1957 Ind. LEXIS 260

• Court: Indiana Supreme Court
• Decided: May 22, 1957
• Docket: 29,327
• Status: Published

Opinions

Emmert, J.

Appellant, a Michigan corporation, alleged by its complaint it manufactured carpet sweepers, which had thereon its trade-mark “Bissell Carpet Sweeper Company,” which were sold in open competition in Indiana “with merchandise in the same general class produced by others”; that appellee was engaged in the retail business in the city of Indianapolis; that appellant had entered into voluntary contracts with certain retailers including H. P. Wasson & Co., pursuant to the Indiana Fair Trade Act which established minimum prices for its carpet sweepers throughout the state; that the appellee did not execute any “such contract to establish such minimum resale prices,” but that prior to the filing of the complaint appellant gave written notice to the appellee that such contracts were in existence, but that appellee wilfully and knowingly offered for sale and did sell the carpet sweepers at less than the minimum prices established by appellant’s contract, and that the sale did not come within any of the exceptions provided for in §5 of the Fair Trade Act. The demurrer for want of facts questioned the constitutional powers of the General Assembly to prohibit the appellee from selling Bissell Carpet Sweepers at less than the price established by the appellant with its contract retailers.

The Fair Trade Act, ch. 17 of the 1937 Acts (§66-301 to §66-309, Burns’ 1951 Replacement), is limited to commodities using a trade-mark, brand or name, of a producer or distributor, and sold in free and open competition with commodities of the same general class produced or distributed by others. Section 66-302, Burns’ 1951 Replacement, declares valid contracts between a seller and a buyer, or a series of contracts between successive sellers and buyers for sale at wholesale or retail, requiring the ultimate retailer to contract not to sell the commodities at less than the fair trade price established by the original seller. A could sell to B with B contracting he would not sell at retail below the price fixed by A, or with B contracting that if he sold to retailer C he would require of C a contract not to sell at retail below the price fixed by A, or if C sold to D for resale, he would require of D a similar provision for the benefit of A, who would fix the minimnni retail price. Thus, the fair trade price required of the ultimate retailer could be established by contract, or a series of subsequent contracts for the benefit of the first seller establishing the fair trade price. The ultimate retailer would be bound because of his contract, and not because a statute said he should be bound when he did not consent.

The price fixing authorized by this section is somewhat similar to the factual situation in Dr. Miles Medical Co. v. Park & Sons Co. (1911), 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502. The Court, in an opinion by Mr. Justice Hughes, summarized the contracts by saying they provided “a system of interlocking restrictions by which the complainant seeks to control not merely the prices at which its agents may sell its products, but the prices for all sales by all dealers at wholesale or retail, whether purchasers or sub-purchasers, and thus to fix the amount which the consumer shall pay, eliminating all competition.” (220 U. S. at 399.) The Court held the contracts were an invalid restraint of trade both at common law and under the Sherman Anti-Trust Act of July 2, 1890.

It is within the power of the General Assembly to change the common law rule in Indiana, and to except fair trade price fixing by contracts between buyers and sellers from the various provisions of the restraint of trade acts of this state.

The Miller-Tydings Act of 1937 (15 U. S. C. A. §1) amended the Sherman Anti-Trust Act and the Federal Trade Commission Act to make lawful price fixing contracts in interstate commerce if they were lawful in intrastate commerce. In Schwegmann Bros. v. Calvert Distillers Corp. (1951), 341 U. S. 384, 71 S. Ct. 745, 95 L. Ed. 1035, it was held price fixing by compulsion was not validated by the Act. The Court clearly noted the distinction by the following language:

“. . . If a distributor and one or more retailers want to agree, combine, or conspire to fix a minimum price, they can do so if state law permits. Their contract, combination, or conspiracy — hitherto illegal — is made lawful. They can fix minimum prices pursuant to their contract or agreement with impunity. When they seek, however, to impose price fixing on persons who have not contracted or agreed to the scheme, the situation is vastly different. That is not price fixing by contract or agreement; that is price fixing by compulsion. That is not following the path of consensual agreement; that is resort to coercion.” (341 U. S. at 388, 95 L. Ed. at 1045.)¹

The appellant Bissell bases its cause of action on §6 of the Fair Trade Act, which states:

“Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of this act [§§66-301— 66-309], whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.” Section 66-306, Burns’ 1951 Replacement [Acts 1937, ch. 17, §6, p. 53].

The complaint specifically alleges the appellee Shane was not a party to any contract to fix the retail price. It fails to allege from whom Shane purchased the sweepers or when they were purchased. For all that was alleged, Shane could have purchased them in Michigan where fair trade price fixing is illegal. Shakespeare Co. v. Lippman’s Tool Shop Sporting Goods Co. (1952), 334 Mich. 109, 54 N. W. 2d 268; Argus Cameras v. Distributors (1955), 343 Mich. 54, 72 N. W. 2d 152. Appellant’s position is that wilfully and knowingly selling and offering for sale Bissell’s sweepers at prices less than fixed by Bissell after notice of the contracts to which Shane was not a party entitled Bissell to relief.²

We are not at liberty to substitute our judgment for that of the General Assembly as to whether price fixing is good or bad for the economic life of the state. Conceivably, in a time of depression the benefits might outweigh the disadvantages, while the converse may be true in a time of prosperity or inflation. But the Indiana Constitution on separation of powers and the vesting of the right to enact laws in the General Assembly have the same meaning whatever may be the business or economic conditions of the State.

The right to fix a utility rate, which is price fixing for the service, is a legislative act. State ex rel. Evansville etc. Lines v. Rawlings (1951), 229 Ind. 552, 99 N. E. 2d 597, and authorities therein cited. After the Legislature has enacted that the rates be just and reasonable, it can delegate to an administrative commission the duty of finding as a fact what charge would be just and reasonable, but the commission does not make a law. The law operates on the facts found by the commission under proper standards and after a hearing. The rate is legislative in character because it makes a rule for the future, and binds both the utility and the users of its services whether they consent or not. Prentis v. Atlantic Coast Line Co. (1908), 211 U. S. 210, 29 S. Ct. 67, 53 L. Ed. 150; Chicago, etc. R. Co. v. Railroad Comm. (1911), 175 Ind. 630, 643, 95 N. E. 364; In re Northwestern Indiana Tel. Co. (1930), 201 Ind. 667, 684, 171 N. E. 65. Both the Legislature and the commission exercise a sovereign power of government.

A fortiori, §66-306, Burns’ 1951 Replacement, is broad enough to vest a legislative power to fix prices in private persons. But the Constitution says “The Legislative authority of the State shall be vested in the General Assembly ...” Article 4, Section 1. The power to legislate or to exercise a legislative function cannot be delegated to a nongovernmental agency or person. Tucker v. State (1941), 218 Ind. 614, 697, 698, 35 N. E. 2d 270.³ Nor can the Legislature delegate its law-making power to a governmental officer, board, bureau or commission. Langenberg v. Decker (1892), 131 Ind. 471, 479, 31 N. E. 190, 16 L. R. A. 108; Blue v. Beach (1900), 155 Ind. 121, 133, 56 N. E. 89, 50 L. R. A. 64; Sarlls, Clerk v. State ex rel. Trimble (1929), 201 Ind. 88, 110, 166 N. E. 270, 67 A. L. R. 718; Edwards v. Housing Authority of City of Muncie (1939), 215 Ind. 330, 339, 19 N. E. 2d 741; Financial Aid Cory. v. Wallace (1939), 216 Ind. 114, 120, 23 N. E. 2d 472; Hollingsworth v. State Board of Barber Examiners (1940), 217 Ind. 373, 377, 28 N. E. 2d 64; Town of Kirklin v. Everman (1940), 217 Ind. 683, 693, 29 N. E. 2d 206. We are not concerned with a statute which places upon an official a duty to execute a law made by the Legislature, or where the law fixes a reasonable and fair rate, price or charge and delegates to a governmental agency the power to find as a fact what is reasonable and fair under proper standards. See Albert v. Milk Control Board of Ind. (1936), 210 Ind. 283, 300, 200 N. E. 688.

Section 66-306, Burns’ 1951 Replacement, goes far beyond the codes of fair competition authorized by the National Industrial Act of 1933 (15 U. S. C. 703). In Schechter Corp. v. United States (1935), 295 U. S. 495, 55 S. Ct. 837, 79 L. Ed. 1570, 97 A. L. R. 947, a Code of Fair Competition for the Live Poultry Industry in the Metropolitan Area of New York was held unconstitutional because Congress could not abdicate its lawmaking power to a trade association or to the President. No standards were prescribed for any trade, industry or activity. It laid down no rules for administrative fact finding. Mr. Justice Cardozo noted this was “delegation running riot.” Section 6 of the Fair Trade Act has no requirement for any governmental action by any public officer to establish a coercive price binding on any seller covered by the act.

The decision in Old Dearborn Co. v. Seagram Corp. (1936), 299 U. S. 183, 57 S. Ct. 139, 81 L. Ed. 109, 106 A. L. R. 1476, has been cited in other states for the proposition that fair trade acts do not attempt legislative price fixing by private persons. Section 1 of the Illinois Act was similar to §2 of the Indiana Act and authorized parties to contract for vertical price fixing from the original seller to the ultimate retailer. Concerning this part of the Illinois Act the court said:

“ . . . It is clear that this section does not attempt to fix prices, nor does it delegate such power to private persons. It permits the designated private persons to contract with respect thereto. It contains no element of compulsion but simply legalizes their acts, leaving them free to enter into the authorized contract or not as they may see fit. Thus far, the act plainly is not open to objection; and none seems to be made.” (299 U. S. at 192.)4

In the Dearborn Case, supra, the court carefully excluded any determination of the validity of the Illinois statute under the Fourteenth Amendment in a case where the retailer purchased the goods in ignorance of the fair trade contract.⁵ From an examination of the facts as stated in this opinion, and the opinion by the Supreme Court of Illinois in Seagram Corp. v. Old Dearborn Co. (1936), 363 Ill. 610, 2 N. E. 2d 940, the retailer, the Old Dearborn Co., purchased the whiskey from a wholesaler knowing the wholesaler was required to obtain fair trade contracts for its sales to retailers.⁶ The Supreme Court said, “Here, the restriction, already imposed with the knowledge of appellants, ran with the acquisition and conditioned it.” (299 U. S. at 194.) Although the opinion did not take note of it, the Old Dearborn Co. in fact was committing a tort by inducing a breach of a distributor’s contract to Seagram Corp.⁷ 4 Restatement, Torts §766. See also Prosser, Handbook of the Law of Torts (1941), Ch. 20, §104.

It is within the power of the Legislature to declare such inducement to breach a contract unfair competition and actionable. In so far as §66-806, Burns’ 1951 Replacement, authorizes this, it is constitutional. The duty breached was not one created by the legislative act of two parties to a contract fixing a price binding upon every retailer of the goods whether or not he knew he was inducing a breach of the contract, or whether or not he purchased the goods from one under no contract obligation to require a fair trade contract from the retailer. Under the particular facts in the Old Dearborn Co. case the court held the Old Dearborn Co. could not complain that the Fourteenth Amendment prohibited the injunction against it.

But in the appeal at bar the complaint and the contracts fail to show anything more than attempted legislative price fixing by a contract between the manufacturer and various retailers in the State of Indiana, with no allegation that the appellee Shane ever entered into a contract to sell the sweepers at fair trade prices, or that it induced the breach of contract between Bissell and another party, or that Shane did not acquire the goods in some state, such as Michigan, where such fair trade contracts are held in restraint of trade and void. The complaint rests upon the naked proposition that private parties by contract can make a law binding upon everyone who retails the goods manufactured by Bissell. It is urged that the Fair Trade Act does no more than give an additional property right in a trade-mark. But if this is to be done, it must be accomplished pursuant to the Indiana Constitution. The General Assembly has no right to abdicate its legislative power to private persons, nor could it even delegate to a governmental agency the power to find what might be a reasonable price without proper safeguards and procedural due process.⁸

It is not necessary here to decide what might be proper subjects for legislative price fixing under the Indiana Constitution. And in view of the reasoning of this opinion, it becomes unnecessary to determine whether the construction of §6 of the Fair Trade Act (§66-306, Burns’ 1951 Replacement) urged by Bissell would be without the title of the Act,⁹ and therefore void under §19 of Article 4 of the Indiana Constituton.¹⁰

By the Fair Trade Act, the General Assembly has removed the ban of the common law, as well as the acts concerning restraints of trade and monopolies which prohibited vertical price fixing by agreements or contract between buyers and sellers, but he who seeks to take advantage of the Fair Trade Act will have to base his action on a breach of his contract, or a breach of contract made for his benefit, or on a tortious inducement of a breach of such a contract. This the complaint did not do, and the demurrer was properly sustained.

Judgment affirmed.

Bobbitt, J., concurs specially with separate opinion in which Achor, C. J., and Arterburn, J., concur.

Landis, J., dissents with opinion.

1 . The McGuire Act of 1952 (15 U. S. C. A., §45, 1956 Supp.) made lawful in interstate commerce state fair trade price fixing imposed by state law on persons not parties to a contract if the restriction be valid under state law. See Resale Price Maintenance by Carl H. Fulda (1954), 21 U. of Chicago Law Rev. 175-211. For review of state decisions see Bates, Constitutionality of State Fair Trade Acts (1957), 32 Ind. L. J. 1, 127-149.

2 . The contract signed by H. P. Wasson & Co. provided: “We will not sell sweepers bearing Bissell’s trade-marked model names at less than the applicable Pair Trade minimum retail prices at the time of such sales. (See other side for present price list. Such Pair Trade minimum retail prices are subject to change by Bissell at its election.) (This paragraph does not apply any place where Pair Trade agreements are not permitted by law.)

3 . “ . . . but it is unthinkable that the Legislature may have discretion to vest a part of the sovereign power in some agency outside the government, as set up and established by the Constitution.” Tucker v. State (1941), 218 Ind. 614, 697, 35 N. E. 2d 270.

4 . The court recognized the general rule the owner oí property has the right to sell it at a price he will accept.

“First. In respect of the due process of law clause, it is contended that the-statute is a price-fixing law, which has the effect of denying to the owner of property the right to determine for himself the price at which he will sell. Appellants invoke the well-settled general principle that the right of the owner of property to fix the price at which he will sell it is an inherent attribute of the property itself, and as such is within the protection of the Fifth and Fourteenth Amendments. Tyson & Brother v. Banton, 273 U. S. 418, 429; Wolff Co. v. Industrial Court, 262 U. S. 522, 537; Ribnik v. McBride, 277 U. S. 350; Williams v. Standard Oil Co., 278 U. S. 235; New State Ice Co. v. Liebmann, 285 U. S. 262. These cases hold that, with certain exceptions, which need not now be set forth, this right of the owner cannot be denied by legislative enactment fixing prices and compelling such owner to adhere to them. But the decisions referred to deal only with legislative price fixing. They constitute no authority for holding that prices in respect of ‘identified’ goods may not be fixed under legislative leave by contract between the parties. The Illinois Fair Trade Act does not infringe the doctrine of these cases.” Old Dearborn Co. v. Seagram Corp. (1936), 299 U. S. 183, 191, 192, 57 S. Ct. 139, 81 L. Ed. 109, 106 A. L. R. 1476.

5 . “We are not called upon to determine the case of one who has made his purchase in ignorance of the contractual restriction upon the selling price. . . .” Old Dearborn Co. v. Seagram Corp. (1936), 299 U. S. 183, 193, 57 S. Ct. 139, 81 L. Ed. 109, 106 A. L. R. 1476.

6 . The contracts between Seagram and its distributors provided: “Third. Distributor will require from each Retailer to whom he may sell any such beverages a written agreement, upon forms furnished by the Owner [Seagram], that such Retailer in turn will not resell, advertise, or offer for sale the said beverages below minimum prices stipulated from time to time by Owner for resale thereof to Consumers.” Printed Record, Sup. Ct. of U. S., pp. 18-19.

7 . “Appellant was also a party to breaches of other fair trade contracts between appellee and certain distributors. . . .” Ibid, 299 U. S. 187.

8 . “The vast expansion of this field of administrative regulation in response to the pressure of social needs is made possible under our system by adherence to the basic principles that the legislature shall appropriately determine the standards of administrative action and that in administrative proceedings of a quasi-judicial character the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play. These demand ‘a fair and open hearing,’ — essential alike to the legal validity of the administrative regulation and to the maintenance of public confidence in the value and soundness of this important governmental process. Such a hearing has been described as an ‘inexorable safeguard.’ ” Chief Justice Hughes in Morgan v. United States (1938), 304 U. S. 1, 14, 15, 58 S. Ct. 773, 775, 82 L. Ed. 1129, 1130, 1131.

9 . The title is: “An act to protect trade-mark owners, producers, distributors and the general public against injurious and uneconomic practices in the distribution of competitive commodities bearing a distinguishing trade-mark, brand or name, through the use of voluntary contracts establishing minimum resale prices and providing for refusal to sell unless such minimum resale prices are observed.”

10 . “. . . But if any subject shall be embraced in an act, which shall not be expressed in the title, such act shall be void only as to so much thereof as shall not be expressed in the title.” Section 19, Art. 4, Constitution of Indiana.