Martin v. Aleinikoff

389 P.2d 422, 63 Wash. 2d 842, 1964 Wash. LEXIS 553

• Court: Washington Supreme Court
• Decided: February 20, 1964
• Docket: 36657
• Status: Published

Opinions

Weaver, J.

Plaintiffs, who compete with defendants in the sale and delivery of fuel oil, commenced this action for $500 damages and for an injunction to prevent defendants from engaging in alleged unfair business practices in violation of the Washington Unfair Practices Act. RCW 19.90.

Plaintiffs’ complaint alleges:

“That in connection with certain sales, and with an intent to destroy competition, defendants have made and given, and offered to make or give, special and secret rebates, allowances and unearned discounts and have secretly extended to certain purchasers special services and privileges not extended to all purchasers purchasing upon like terms and conditions.” (Italics ours.)

We translate this to mean that defendants offered to sell, and did sell, fuel oil to some customers at prices less than they sold to other customers.¹ The complaint did not allege that defendants had sold a product “ . . . at less than the cost thereof . . . ”

Defendants answered, denying the material allegations of the complaint, and pleading that the Unfair Practices Act is unconstitutional and void.

In his opening statement, plaintiffs’ counsel said that he “had not planned” to offer proof that defendants had made sales below cost, but would stand upon the allegations of the complaint. Whereupon, the trial court granted defense counsel’s motion to dismiss, stating:

“ . . . In my opinion, the only time there is any sense to the fact that it [a sale] might destroy or tend to destroy competition or injure competitors wrongfully, is where it is below cost. For that reason I will grant the motion.”

Our basic problem is to interpret the Unfair Practices Act (Laws of 1939, chapter 221; RCW 19.90) and apply it to the factual situation alleged in plaintiffs’ complaint, quoted supra, as enlarged by counsel’s opening statement.

This court has said on many occasions that the fundamental object of judicial construction or statutory interpretation is. to ascertain, if possible, and to give effect to, the intention of the legislature in enacting a particular statute (Graffell v. Honeysuckle, 30 Wn. (2d) 390, 399, 191 P. (2d) 858 (1948)); and in doing so, our first resort is to the context and subject matter of the legislation “. . . because the intention of the lawmaker is to be deduced, if possible, from what it said.” (Italics ours.) Lynch v. Department of Labor & Industries, 19 Wn. (2d) 802, 806, 145 P. (2d) 265 (1944); Hatzenbuhler v. Harrison, 49 Wn. (2d) 691, 697, 306 P. (2d) 745 (1957).

Woven into the fabric of the Unfair Practices Act, and running as a thread throughout, is the thought that the proscribed business conduct must result in the injury of a competitor or destroy, or tend to destroy, competition.

For example: § 1 of the act (RCW 19.90.010) defines “loss leader” as “. . . any article . . . sold at less than cost . . . which diverts trade from or otherwise injures competitors” (italics ours); Section 2 of the act (RCW 19.90.020) provides: “It shall be unlawful for any person . . . with the intent to destroy the competition of any regular established dealer ... to discriminate between different sections of the same community [subject to certain exceptions]” (italics ours); Section 4 of the act (RCW 19.90.040) provides: “It shall be unlawful for any person engaged in business . . . to . . . give away any article . . . for the purpose of injuring competitors or destroying competition . . . ”. (Italics ours.)

Intent to injure or destroy competition is, in truth, the touchstone, for the Unfair Practices Act provides criminal penalties² as well as civil relief.³

In State v. Sears, 4 Wn. (2d) 200, 219, 103 P. (2d) 337 (1940), in which it was held that the Unfair Practices Act is constitutional because it is within the ambit of the state’s police power, this court quoted with approval from Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal. (2d) 634, 82 P. (2d) 3, (1938), as follows:

“ . . it is the predatory trade practice of selling below cost with intent to injure competitors which the legislature on reasonable grounds has determined is vicious and unfair that is prohibited. Such determination is clearly within the legislative power. . . .

Appellate arguments bring into sharp focus conflicting interpretations of the 151-word sentence found in Laws of 1939, chapter 221, § 4 (ROW 19.90.040). For the purposes of clarity and reference, we separate and number the several portions of the statute as follows:

“It shall be unlawful for any person engaged in business within this state

“[1] to sell any article or product at less than the cost thereof to such vendor,

“[2] or give away any article or product, for the purpose of injuring competitors or destroying competition,

“[3] or to use any article or product as a ‘loss leader,’

“[4] or in connection with any sale to make or give, or to offer to make or give, any special or secret rebate, payment, allowance, refund, commission or unearned discount, whether in the form of money or otherwise,

“[5] or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions,

“[6] or to make or enter into any collateral contract or device of any nature, [a] whereby a sale below cost is effected, to the injury of a competitor, and [b] where the same destroys or tends to destroy competition.” RCW 19.90.040.

The statute is a single, complex sentence with six infinitive phrases used as a compound delayed subject. It is complex because the sixth infinitive phrase contains two subordinate adverbial clauses, [a] . . . whereby a sale below cost is effected, to the injury of a competitor, and [b] where the same destroys or tends to destroy competition.” The statute is not a model of legislative draftsmanship.

Plaintiffs contend that the adverbial clause — [a] “whereby a sale below cost is effected, to the injury of a competitor” —refers only to the last antecedent — ” “ . . . to make or enter into any collateral contract or device of any nature.” Defendants, on the other hand, contend that the adverbial clause identified.as “[a]” supra, refers also to infinitive phrases [4] and [5] of the statute so that “any special or secret rebate” or the extension of special services becomes unlawful only if they result in a sale below cost “to the injury of a competitor, and where the same destroys or tends to destroy competition.” The trial court based its decision on the latter construction.

In Davis v. Gibbs, 39 Wn. (2d) 481, 483, 236 P. (2d) 545 (1951), the rule was announced:

“Where no contrary intention appears in a statute, relative and qualifying words and phrases, both grammatically and legally, refer to the last antecedent, [authorities cited] ” (Italics ours.) Accord: Parkhurst v. Everett, 51 Wn. (2d) 292, 295, 318 P. (2d) 327 (1957); In re Andy, 49 Wn. (2d) 449, 451, 302 P. (2d) 963 (1956).

This rule supports plaintiffs’ interpretation of the statute unless it can be said that a contrary intention appears in the statute.

Plaintiffs contend they are entitled to relief under § 4 of the act (RCW 19.90.040) as though it reads in its entirety as follows:

“It shall be unlawful for any person engaged in business within this state ... [4] in connection with any sale to make or give, or to offer to make or give, any special or secret rebate, payment, allowance, refund, commission or unearned discount, whether in the form of money or otherwise, [5] or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, ...” Plaintiffs would have us ignore the remainder of the section.

Plaintiffs buttress their argument by directing our attention to the Unfair Practices Acts of nine jurisdictions,⁴ wherein the statutes prohibit both sales below cost and rebates as separate and distinct unfair practices. In each, the prohibition of rebates and discounts is inseparably linked with injury to a competitor or destruction of competition, a link that is absent from our statute unless the infinitive phrase [6] and its two adverbial clauses [a] and [b] also refer to infinitive phrases [4] and [5]. By combining into one section that which in most jurisdictions appears in two, our legislature has placed a restriction upon the scope of the act.⁵

Plaintiffs argue that the decision in Jefferson Ice & Fuel Co. v. Grocers Ice & Cold Storage Co., 286 S.W. (2d) 80, 54 A.L.R. (2d) 1181 (Ky. 1955) is illustrative of their contention thát secret rebates and special privileges not extended to all purchasers are unfair trade practices and may be enjoined. The decision is not apposite for the Kentucky statute requires that these practices must result in “ . . . the injury of a competitor, and where such payments or allowances tend to destroy competition . . . ”, requirements not present in our statute under plaintiffs’ interpretation of it.

Applicable to plaintiffs’ interpretation is the decision in Nelsen v. Tilley, 137 Neb. 327, 289 N.W. 388, 126 A.L.R. 729 (1939).

The Nebraska statute, although treating with the issuance and revocation of motor vehicle dealers’ licenses (Neb. C.S. Supp., 1937, Ch. 60, Art. 9, § 60-901, et seq.) followed generally the format of the unfair practices acts.

Section 60-912, provided in part:

“The administrator . . . shall have power to deny any license or revoke any license . . . when the dealer or salesman has been found guilty of any of the following:

“(i) Wilfully discriminating ... in price between different purchasers of a commodity of like grade or quality where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly or to injure or destroy the business of a competitor.

“(j) Wilfully discriminating in favor of one purchaser against another purchaser of a motor vehicle by contracting to furnish or furnishing services or facilities or allowing such discounts or rebates in connection with the sale or offering for sale of such motor vehicle so purchased upon terms not accorded to all purchasers on proportionally equal terms.

“(k) Wilfully and habitually making excessive trade-in allowances on used motor vehicles for the purpose of lessening competition or destroying a competitor’s business.” (Italics ours.)

We point out that paragraph (j) of the Nebraska statute is a definitive statement of the generalities of phrases [4] and [5] of RCW 19.90.040, supra.

In its discussion of the constitutionality of the three quoted sections of the Nebraska statute, the court said:

“This court is committed to the doctrine that constitutional guaranties ‘contemplate that every person legally possesses the right of acquiring the absolute and unqualified title to every species of property recognized by law, with all rights incidental thereto, and, in connection with the right of personal liberty, it includes the right to dispose of such property in such innocent manner as he pleases, and to sell it at such price as he can obtain in fair barter.’

U

“It will be noted therefore that in subdivisions (i) and (k) the prohibited acts are unlawful only where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly or to injure or destroy the business of a competitor. The act itself is not prohibited; it is the act accompanied by an intent to accomplish a result made unlawful by the statute which the legislature attempted to correct. Injuries sustained as a result of fair competition are not protected against by either the state or federal Constitutions. . . .

“As to subdivision (j), the element of intent is lacking. The prohibition is against wilful discrimination in favor of one purchaser against another in the respects noted therein, without reference to the intent or motive of the person so doing. It is in effect a price fixing statute. It is violative of the holdings heretofore cited and of the constitutional prohibitions hereinbefore referred to. Certainly, a person may sell his property for any price he cares to sell it for, unless it be accompanied by an intent to accomplish a purpose that is unlawful. If the statute purports to prohibit every wilful discrimination in price, every agreement to furnish services, every allowance of a discount or rebate, and every sale of a motor vehicle at other than a fixed standard price, it conflicts with constitutional restraints imposed on the legislature with reference to the acquisition, ownership and enjoyment of property, and the guaranty that no person shall be deprived of life, liberty or property without due process of law. . . . We are therefore obliged to hold that subdivision (j) of section 60-912 of the act is invalid and of no force and effect.” (Italics ours.)

It is not necessary for us to resolve whether infinitive phrases [4] and [5] of RCW 19.90.040, supra, are unconstitutional — a conclusion to which plaintiffs’ interpretation of them might lead us — for, if a statute is subject to two interpretations, one rendering it constitutional and the other unconstitutional, the legislature will be presumed to have intended a meaning consistent with the constitutionality of its enactment. State ex rel. Dawes v. Washington State Highway Comm., ante p. 34, 385 P. (2d) 376 (1963).

By alleging in their complaint that defendants acted “with intent to destroy competition,” plaintiffs seek to avoid the reasoning of Nelsen v. Tilley, supra. In doing so, they have reached into the last phrase of § 4 of the act (RCW 19.90-.040) for a portion of their allegation, but argue that they are not bound by all of it; thus they try to escape the adverbial clause— “. . . whereby a sale below cost is effected . . . ”.

The rationale of the Unfair Practices Act, and especially of § 4 as drafted by our legislature, is to prohibit, in general terms, a seller from making or entering

“. . . into any collateral contract or device of any nature, whereby a sale below cost is effected to the injury of a competitor, and where the same destroys or tends to destroy competition.” (Italics ours.)

This generalization (which is phrase [6] of § 4) is sufficiently broad to include the specifics spelled out in the remainder of the section.

We conclude, therefore, that a “contrary intention appears in the statute”; that “whereby a sale below cost is effected to the injury of a competitor” refers not only to the last antecedent, but to each antecedent to which it may refer without impairing the meaning of the sentence.

The remainder of plaintiffs’ appellate argument is answered in State v. Sears, 4 Wn. (2d) 200, 103 P. (2d) 337 (1940).

The judgment is affirmed.

Ott, C. J., Donworth, Rosellini, and Hale, JJ., concur.

1 In his opening statement to the court, plaintiffs’ counsel said:

“The evidence will show that the defendants in this case, in order to attract new customers, offered to sell fuel oil at prices less than those regularly established prices at which they are selling to the great bulk of their customers. These are discounts given in order to get a new customer. They are special discounts, and they are not made known to all the other customers of the defendants.

“Nor is the lower price offered to all of the customers of the defendants. The defendants have offered these lower prices to certain consumers who, at the time the prices were offered, were customers of the plaintiffs, and the plaintiffs have lost certain customers by reason of this practice.”

2 RCW 19.90.100. “Violation of the provisions of this chapter shall constitute a misdemeanor; and any person, whether as principal, agent, officer or director, for himself, or for another person, or for any firm or corporation, or any corporation, who or which shall violate any of the provisions of this chapter shall be guilty of a misdemeanor for each single violation and upon conviction thereof, shall be punished by a fine of not less than one hundred dollars nor more than one thousand dollars, or by imprisonment in the county jail not exceeding six months or by both said fine and imprisonment in the discretion of the court; and any criminal action shall not affect the right of any person to bring a civil action under RCW 19.90.090.”

3 RCW 19.90.090. “Any person may maintain an action to enjoin a continuance of any act or acts in violation of any of the provisions of this chapter and, if injured thereby, for the recovery of damages. If, in such action, the court shall find that the defendant is violating or has violated any of the provisions of this chapter, it shall enjoin the defendant from a continuance thereof. It shall not be necessary that actual damages to the plaintiff be alleged or proved. In addition to such injunctive relief, the plaintiff in said action shall be entitled to recover from the defendant the amount of the actual damages, if any, sustained by him. Commencement, pendency or conclusion of a civil action for injunction and/or damages shall not affect criminal liability.”

4 Arkansas Statutes 1947 Annotated, 1957 Replacement, Official Edition, Vol. 6A, Title 70, Ch. 3, § 70-307; Deering’s California Codes Annotated, Business and Professions, Div. 7, Part 2, Ch. 4, Art. 3, § 17045; Colorado Revised Statutes Annotated, 1953, Vol. 3, Ch. 55, Art. 2, § 55-2-7; Revised Laws of Hawaii 1955, Vol. 2, Title 24, Ch. 205, Part 1, § 205-8; Kentucky Revised Statutes, 1962, § 365.050, 4748h-7; Revised Codes of Montana 1947 Annotated, Replacement 3, Part 2, Title 51, Ch. 1, § 51-108; West Virginia Code of 1961 Annotated, Vol. 2, Ch. 47, § 4678(8e); Wisconsin Statutes, § 133.185, p. 2216; Wyoming Statutes 1957 Annotated, p. 385, Title 40, § 40-28.

5 Others have apparently reached the same conclusion. House Bill 141, 37th Regular Session of the Legislature (1961), reads in part as follows:

“It shall be unlawful for any person, engaged in the . . . sale of any article . . ., with the intent to destroy the competition of any regular established dealer ... to discriminate between different purchasers in this state, by selling . . . such article ... at a lower price to one such purchaser than to another: Provided [not applicable to the instant case] ...”

The bill did not become law.