Sperry & Hutchinson Co. v. Hoegh

65 N.W.2d 410, 246 Iowa 9, 1954 Iowa Sup. LEXIS 465

Opinions

Mulroney, J.

The central question presented by this appeal is the constitutionality of the gift enterprise statutes (sections 553.15 to 553.18, Code, 19'50) as applied to plaintiff’s trading stamp business. Section 553.15, Code, 1950, prohibits all “gift enterprises, as hereinafter defined” and section 553.16, Code, 1950, defines the term “gift enterprise” in one of the longest sentences in the Code, filled with abundant legal phraseology, to mean a scheme whereby a seller of merchandise would issue trading stamps to purchasers redeemable by someone other than the seller.

Footnotes

•

* Section 553.17 provides for misdemeanor punishment for participants in or advertisers of the gift enterprise and the next section states the term “person” may be construed to mean “firm or corporation.”

There is a short argument in appellee’s brief that its operation was not a gift enterprise because its operation does not involve a gift, but rather a fixed obligation incurred in advance of tbe delivery of merchandise to the stamp saver. There is no merit in tbe argument. Tbe legislature chose to cast its prohibition in tbe form of a definition statute by calling something a gift which in common understanding would not be a gift, but this is a proper and not uncommon way to legislate a prohibition and tbe statutory definition is controlling. Tbe trial court held plaintiff’s operation was “squarely within the terms of the statutory definition” and we agree with this conclusion. The trial court went on to hold that the statute, section 553.16, Code, 1950, was unconstitutional because it violated sections 6 and 9, Article I of the Iowa Constitution and the Fourteenth Amendment to the Constitution of the United States. The defendants appeal.

A statement of the facts appearing in the evidence is necessary to an understanding of the contentions made. Both parties called a number of witnesses and introduced many exhibits. Officers and employees of the plaintiff-corporation and many of its licensees testified as to the general methods and extent of the company’s operations. Plaintiff, a New Jersey corporation, is authorized to do business in Iowa, and in forty-six other states, and is presently doing business in forty-two states. It has done business in Iowa since 1909' and now has license contracts with more than a thousand retail merchants located in seventy-nine counties in this state.

Mechanically, plaintiff’s plan works as follows: Plaintiff enters into a license agreement with retailers authorizing them to use its “Co-operative Cash Discount System.” Plaintiff furnishes the licensee with S & H Green Trading Stamps at the rate of $14 or $15 for a pad of 5000 stamps and the licensee issues stamps to his customers at the rate of one stamp for each ten cents paid in cash or before the 15th of the next month after a retail purchase. The retail purchaser pastes the stamps in a book provided by plaintiff, and when the book is filled (1200 stamps) he takes it or sends it to one of plaintiff’s redemption stations and exchanges it for merchandise. The evidence shows the merchandise in the redemption station is given an average retail price in terms of stamps, to give an average redemption value of $2.50 to a stamp book. Plaintiff furnishes its licensees with advertising material which they can use to show they use its plan, and catalogs which contain pictures and descriptions of merchandise for which the stamps can be redeemed, to be distri buted without charge to the licensee’s customers. Plaintiff has ten redemption stations in Iowa and three more were in the process of construction at the time of trial.

It was plaintiff’s theory developed by its evidence that its plan was in practice a method of giving the familiar discount of about 2% for cash purchases or payment made within a normal discount period. The arithmetic of this theory is that a filled stamp book represents $120 of purchases and the book has $2.50, redemption value, which is 2.08% of $120. The testimony recites the advantages that accrue to a retail merchant of cash over credit transactions, about which there can be little argument, such as (1) reduction of collection costs and bookkeeping expenses (2) reduction of delivery expenses, as cash is usually a carry business (3) reduction of bad debt losses (4) the saving of interest charges for capital borrowing, and (5) the merchant is able to take advantage of discounts available on wholesale purchases. Since some of plaintiff’s licensees were engaged in a strictly cash business before adopting the system it was part of plaintiff’s theory that the system gave them a promotion device which would reward their customers, in competition with other promotion devices (mostly drawings for prizes) quite prevalent in some industries. However it fairly appears from all of the testimony that one of the principal benefits to be derived by the merchant by adopting plaintiff’s system is the increase in volume of business (ranging from 25 to 40 per cent under plaintiff’s evidence) and the resulting increase in net profits for the increased volume causes little if any increase in fixed expenses.

The record shows plaintiff usually licenses merchants within specified areas (about 5 blocks) engaged in different types of businesses but there are four or five other stamp companies doing business similar to, and presumably in competition with, plaintiff iu this state. One such company, the Gold Bond Stamp Company, has filed an amicus curiae brief on the side of the appellee in this case.

The evidence introduced by defendants was mainly directed to show plaintiff’s system was not a “discount for cash” plan. Retailers testified as to the normal net profit in a cash business said to be about 2% in the food business, and the system therefore results in increasing the cost to the consumer, for the licensee who, prior to licensing was doing a strictly cash business in competition with other cash businesses, must increase his sale price to cover the cost of the stamps. In general it can be said defendants’ evidence was designed to show, and did show, beyond a shadow of a doubt, that plaintiff’s system, by whatever name it is called, is a clear violation of the gift enterprise statutes.

I. The trial court held the system was a cash discount plan. There is much support for this holding. In Food and Grocery Bureau, Inc. v. Garfield, 20 Cal.2d 228, 232, 125 P.2d 3, 6 (decided 1942), the opinion states: “It is well settled by the decisions of this court, as well as those in other jurisdictions, that the practice of merchants in issuing trading stamps -with the purchase of articles is merely a method of discounting bills in consideration for the immediate payment of cash. Ex parte Drexel, 147 Cal. 763, 82 P. 429, 2 L.R.A., N.S., 588, 3 Ann. Cas. 878; Ex parte West, 147 Cal. 774, 82 P. 434; Ex parte Hutchinson, C.C., 137 F. 950; Sperry & Hutchinson Co. v. Temple, C.C., 137 F. 992; Lawton v. Stewart Dry Goods Co., 197 Ky. 394, 247 S.W. 14, 26 A. L. R. 686; Hewin v. City of Atlanta, 121 Ga. 723, 49 S.E. 765, 67 L. R. A. 795, 2 Ann. Cas. 296; Sperry & Hutchinson Co. v. McBride, 307 Mass. 408, 30 N.E.2d 269, 131 A. L. R. 1254; Winston v. Beeson, 135 N.C. 271, 47 S.E. 457, 65 L. R. A. 167; State v. Lothrops-Farnham Co., 84 N.H. 322, 150 A. 551; State v. Holtgreve, 58 Utah 563, 200 P. 894, 26 A. L. R. 696.”

In Sperry & Hutchinson Co. v. Hudson, 190 Ore. 458, 465, 226 P.2d 501, 504 (decided 1951), the opinion states: “In the operation of plaintiff’s system, merchandise sold to cash customers is at the regular, established retail prices, the purchaser paying for each article of merchandise the same price required to be paid by those buying on credit. Of course, the primary purpose of this discount system is to encourage cash transactions. It is unnecessary to detail the many advantages accruing to the merchant from cash dealings. To give a discount for cash payments is a long-established mercantile practice. The manufacturer allows such discount to the jobber and wholesaler, and the jobber and wholesaler, to the retailer. To pass this on to the customer of the retailer is but providing a benefit to him who, in the last analysis, pays all bills.”

In Sperry & Hutchinson Co. v. Margetts, 15 N.J. 203, 207, 104 A.2d 310, 311 (No. A-94, decided April 5, 1954), the opinion states: “Plaintiff’s 'cooperative discount system’ is in aid of what has come to be the normal cash discount and the only practical means to that end where there are intermittent purchases in small lots. Sperry & Hutchinson Co. v. McBride, 307 Mass. 408, 30 N.E.2d 269, 131 A. L. R. 1254 (Sup. Jud. Ct. 1940). Not long after the inception of the device, it was judicially assessed as ‘merely one way of discounting bills in consideration for immediate payment in cash, which is a common practice of merchants, and is doubtless a popular method, and advantageous to all concerned, and it is not obnoxious to public policy.’ Ex parte Hutchinson, 137 F. 949 (C. O. D. Wash. 1904). Although the business is now country-wide, there has been no change in mode or method that has materially altered this concept.”

Many more cases could be cited but the above are typical of the statements contained in numerous opinions. Perhaps the question of whether the system is or is not a discount for cash plan is a little academic. We recognize the legislature could prohibit any plan inimical to public welfare no matter what the plan is called. The argument, that it is in effect a cash discount plan is an argument against the law’s constitutionality because it prohibits a common practice among merchants advantageous to all concerned. Sperry & Hutchinson Co. v. Margetts, supra.

The defendants argue it is not a cash discount plan because many licensees did an all-cash business, and therefore it could not be said the plan induced customers to pay cash rather than buy on credit. If the plan is a cash discount plan to merchants who did a cash and credit business it would not lose its character because the licensee did an all-cash business. As stated in Food and Grocery Bureau, Inc. v. Garfield, supra, where this same argument was advanced: “* * * the fact that the appellant conducts his business on an all-cash basis does not preclude him from giving a cash discount.” (20 Cal.2d at page 233, page 7 of 125 P.2d.)

II. It is admitted here, and universally held, that the legislature’s authority to enact antitrading stamp laws is to be referred to what is commonly called the police power: the power of the legislature to enact regulations essential to the public safety, health and welfare. Courts do not attempt to define the limits of police power but the inquiry is whether the legislation bears some substantial relation to the object of public or general welfare. If it does not then it is a clear infringement of rights secured by fundamental law, but there is a presumption that the statute is constitutional and the burden is on the one asserting it is not to establish the allegation.

During the past half century many states have enacted laws similar to our gift enterprise statutes. We will not discuss all of the eases where plaintiff, or other stamp companies doing a similar business, have assailed the gift enterprise statutes as unconstitutional, but our study of the cases convinces us that the overwhelming weight of authority is that such statutes as ours are unconstitutional as not being within the sphere of police power.

Our gift enterprise statutes were passed in 1909 and plaintiff was doing business here then. In October 1910 one of plaintiff’s licensees was prosecuted under the gift enterprise statute in Wapello County District Court. In granting a directed verdict to the defendant at the close of the state’s ease, District Judge Eichelberger filed a written opinion holding the gift enterprise statutes unconstitutional. In this opinion Judge Eichelberger stated: “I base my decision largely on the well considered case of State v. Sperry & Hutchinson Co., 110 Minn. 378, 126 N.W. 120, 30 L. R. A., N.S., 966 (decided April, 1910) * * * I am compelled to follow the great weight of authority and hold that the statute under consideration [identical with the Iowa statute] is in violation of the Constitution * *

The state did not appeal this case and plaintiff and its several competitors continued to do business in this state until 1938 when prosecutions under the gift enterprise statutes were commenced against plaintiff’s licensees .in Webster County. Plaintiff sought, in the District Court of Webster County, and obtained, an injunction against the prosecutions of its licensees and again the decision was not appealed. So the case is one of first impression in this court but we deem it somewhat significant that for more than 45 years plaintiff has violated this statute and the officials charged with its enforcement have not interfered, except on the occasions mentioned. There is little doubt the officials accepted the district court decisions as correct and this is not surprising in view of the flood of authority in the decisions of other appellate courts to support such holdings.

III. The courts have quite generally held that antitrading stamp legislation is unconstitutional as not a proper exercise of police power. Among tbe later cases so holding are: State ex rel. Simpson v. Sperry & Hutchinson Co., 110 Minn. 378, 126 N.W. 120, 30 L. R. A., N.S., 966; In re Opinion of the Justices, 226 Mass. 613, 115 N.E. 978 (1917); City of Denver v. United Cigar Stores Co., 68 Colo. 363, 189 P. 848 (1920); State v. Holtgreve, 58 Utah 563, 200 P. 894, 26 A. L. R. 696 (1921); Lawton v. Stewart Dry Goods Co., 197 Ky. 394, 247 S.W. 14, 26 A. L. R. 686, 687 (1923); State v. Lothrops-Farnham Co., 84 N.H. 322, 150 A. 551 (1930); Sperry & Hutchinson Co. v. Kent Prosecuting Attorney, 287 Mich. 506, 283 N.W. 666, 124 A. L. R. (1939); People v. Victor, 287 Mich. 506, 283 N.W. 666, 124 A. L. R. 316 (1939); Sperry & Hutchinson Co. v. McBride, 307 Mass. 408, 30 N.E.2d 269, 131 A. L. R. 1254 (1940); Food and Grocery Bureau, Inc. v. Garfield, 20 Cal.2d 228, 125 P.2d 3 (1942); Sperry & Hutchinson Co. v. Hudson, 190 Ore. 458, 226 P.2d 501 (1951); Sperry & Hutchinson Co. v. Margetts, supra (1954).

In the above eases the decisions are generally based upon the broad ground that antitrading stamp laws constitute unnecessary restrictions on the right of contract; unwarranted interference with a natural right to attract custom; prohibit contractual relations which do not affect the public health or morals or welfare; and are not the proper exercise of police powers. The opinions in the cases cited above contain the citations to earlier cases on the same subject.

The defendants rely upon Rast v. Van Deman & Lewis Co., 240 U. S. 342, 36 S. Ct. 370, 60 L. Ed. 679, L. R. A. 1917A 421, Ann. Cas. 1917B 455, Tanner v. Little, 240 U. S. 369, 36 S. Ct. 379, 60 L. Ed. 691, and Pitney v. State of Washington, 240 U. S. 387, 36 S. Ct. 385, 60 L. Ed. 703, all decided in 1916. In general these cases hold legislation relative to coupons and stamps is not unconstitutional under the Fourteenth Amendment to the United States Constitution. In the Rast case the opinion states the trading stamp plan may be thought of as “an appeal to cupidity [and] a lure to improvidence.” The above opinions have been much criticized, but the federal courts have followed them and a few state courts have followed them. State v. Wilson, 101 Kan. 789, 168 P. 679, L. R. A. 1918B 374; State v. Crosby Bros. Mercantile Co., 103 Kan. 733, 176 P. 321; In re Trading Stamp Cases, 166 Wis. 613, 166 N.W. 54, Ann. Cas. 1918D 707; Sperry & Hutchinson Co. v. Weigle, 169 Wis. 562, 173 N.W. 315; State v. J. M. Seney Co., 134 Md. 437, 107 A. 189.

A reading of the cases first cited in this division will show that the majority of state court opinions since the East case refuse to follow the reasoning of the federal cases. See particularly People v. Victor and Sperry & Hutchinson Co. v. McBride, both supra.

In Lawton v. Stewart Dry Goods Co., 197 Ky. 394, 397, 247 S.W. 14, 16, 26 A. L. E. 686, 694, Justice Clay speaking for the court answered the “appeal to cupidity [and] a lure to improvidence” argument in this forceful language: “In the first place it is said that the trading stamp or premium system encourages profligate and wasteful buying and operates as a lure to improvidence. As a matter of fact it is simply a convenient method of allowing a discount for cash. Therefore it encourages cash buying and operates as an incentive to prudence and economy. But let us assume that it is a lure to improvidence. Have we reached the point where the prohibition of every business that leads to improvidence may be regarded as a proper governmental function? Nothing is more alluring' to the purchaser than an attractive advertisement or a beautiful show window, but can it be said that the merchant who employs such means to increase his profits may be put out of business because, perchance, someone may see the advertisement or look in the window and be induced to buy when he cannot afford to do so ? If so, how far may the doctrine be carried? Why not prohibit all forms of advertising and the sale of all articles of luxury on the ground that they lead to extravagance? Why not require every merchant to restrict his stock to overalls or cotton dresses so as to reduce the ‘lure’ to a minimum ?”

In our judgment the great weight of authority and the better reasoning supports the view that legislation which practically prohibits the use of trading stamps is not a constitutional exercise of the police power. But, for the purpose of this case we need not decide whether the legislature is without power constitutionally to prohibit the issuance and use of trading stamps.

IV. Section 6, Article I, of the Constitution of the State of Iowa provides: “All laws of a general nature shall have a uniform operation; the General Assembly shall not grant to any citizen, or class of citizens, privileges or immunities, which, upon the same terms shall not equally belong to all citizens.” The gift enterprise statute is a prohibitory law with a criminal penalty for its violation. It is elementary that it is a law of general nature and unless it has uniform operation it violates the fundamental law. This constitutional provision is often called the “equality” provision and, under our system of free constitutional government, the courts have a high duty to see to it that legislation does not violate the equality of rights guaranteed by the Constitution. Uniformity of operation does not mean that the law must operate alike upon every citizen. A law is uniform if it operates alike upon all within a reasonable classification. If the classification is not reasonable, but instead is arbitrary, then there are others, who are outside the arbitrary classification, upon whom the law does not operate, and the law is unconstitutional as not uniform in operation. So under the equality clause the inquiry is whether the classification embraced in the gift enterprise law is uniform or arbitrary.

We said in State ex rel. Welsh v. Darling, 216 Iowa 553, 555, 246 N.W. 390, 391, 88 A. L. R. 218, 222: “Classification, to meet the requirements of the Constitution, must be based upon something substantial — something which distinguishes one class from another in such a way as to suggest the reasonable necessity for legislation based upon such classification.”

Our gift enterprise statutes do not prohibit or interfere with the use of trading stamps generally. They only attempt to do so with such as are not furnished and redeemed by the merchant issuing them. Even if we assume antitrading stamp legislation can be sustained under police powers, to protect public morals and promote general welfare, how can it be said there is any basis at all for classification in the use of trading stamps between merchants who furnish and redeem their own and those who obtain their stamps from another who agrees to redeem them? One of the merchants in this case testified he furnished and redeemed his own trading stamps for about ten years and then changed to plaintiff’s stamps as he “was looking for something that would be * * * cheaper and easier to handle.” After the change to a licensee of plaintiff he noticed it was more “at tractive” to his customers as they had “a wider selection of merchandise.” How can it be argued the public welfare and morals did not suffer when he issued his own stamps, but were impaired when he made arrangement for plaintiff to redeem the stamps he furnished? The classification must have a reasonable relation to the purposes and objects of the law. Here a study of the many cases previously cited where the issue was decided under police powers generally will present the composite picture of the general purpose and objects of the law. The arguments that seek to sustain the law list the general evils that trading stamp systems foster. They are: the lure to improvidence and wasteful buying, and the opportunity for fraud. Obviously these general evils, if they do exist, would not be stamped out by prohibiting stamp redemption by other than the issuing merchant. Two other so-called evils are sometimes argued as peculiar to the stamp company system. They are: the system introduces a middleman who receives a profit, and the system gives opportunity for coercion in that merchants are compelled to enter the system in order to compete with their rivals. The avowed purpose, to protect the public morals and general welfare by prohibiting the so-called “trade stamp” evil, will not support legislation based on who redeems the stamps. If it be bad for the public for a merchant to give stamps with retail purchases which can be redeemed for goods, it is just as deleterious to the public, no matter who is the redemptioner. The legislature has no general power to pass laws dispensing with a “middleman.” If this were so it could pass laws dispensing with agents, factors, brokers, commission merchants, wholesale merchants, and jobbers.

The opportunity for coercion that the stamp company system is able to exert is about the same form of coercion followed by business houses generally. It is not unlike the coercion exercised by a wholesaler seeking to get a retailer to handle his line on the ground that a competitor of his is handling the same line. This record shows no one stamp company enjoys a monopoly. Plaintiff may be the largest and most publicized today but it has competitors. One of the merchants here testified his decision to adopt the S & H plan “may be compared to a decision to purchase a line of canned goods, or a line of frozen foods, or other identifiable brands of other merchandise or sendee, that the S & H plan was a well-known plan, it had acceptance in other parts of the country.”

A bare inspection of the gift enterprise statutes shows the classification that singles out the stamp company plan for prohibition has only arbitrary relation to any conceivable purpose of the legislation. Indeed it would seem the public welfare would be better served by a company plan with wide acceptance in many states — especially in the filling station business where there is much tourist trade — over an issuing and redeeming merchant plan.

The great weight of authority is against the validity of such statutes, under the equality provisions of Constitutions. The general rule stated in 16 C. J. S., Constitutional Law, section 511h, page 1027, is: “Equal protection of the laws is denied by statutes forbidding the use of trading stamps or the issuance thereof except by manufacturers or merchants redeeming them * * *.”

In State v. Dalton, 22 R. I. 77, 85, 46 A. 234, 237, 48 L. R. A. 775, 84 Am. St. Rep. 818, the statute was somewhat like ours in that it recognized the right of the merchant to give away an article as an inducement to a sale but provided the merchant must give the article himself and not through a third person. In holding the statute unconstitutional the court stated: “This is equivalent to declaring that it is illegal for a man to give away one article as a premium to the buyer for having purchased another. For * * * it can make no possible difference that the article given away with the sale is delivered to the purchaser by a third person instead of the seller himself.”

In People ex rel. Madden v. Dyeker, 72 App. Div. 308, 314, 76 N. Y. S. 111, 115, the statute was like ours and in holding it unconstitutional and the conviction of a violator void the court cited earlier New York decisions and quoted from State v. Dalton, supra, and stated: “The prohibitive part of section 384p [335a] aims at the practice of issuing trading stamps that are to be redeemed by any person other than the merchant who distributes them * * Just what there is in the thing prohibited, differing from the thing expressly authorized, that makes it inimical to the public welfare and general safety does not appeal'.”

A later New York decision, People ex rel. Appel v. Zimmer man, 102 App. Div. 103, 111, 92 N. Y. S. 497, 502, struck down a similar law, stating: “There is another infirmity in the statute which we apprehend renders it invalid.* * * The vice it seems is not. in alluring one to buy by promise of a gift, but in permitting the promise to be fulfilled by another than the seller. It is a narrow ledge for the distinction to rest upon when .in one instance the transaction is subject to legislative control to the extent of confiscation, while in the other it goes without let or hindrance. If the seller, by arrangement with a responsible company, secures the performance of the agreement and the arrangement is satisfactory to the buyer, it would seem that such a plan ought not to be made a crime, while redemption by the merchant or manufacturer is deemed an honest transaction. The statute is not founded on the moral plane pretended, but belongs to that class of legislation designed to drive out of business a successful competitor.”

In State v. Dodge, 76 Vt. 197, 203, 56 A. 983, 984, 1 Ann. Cas. 47, a conviction under an antitrading stamp law was reversed on the ground the statute was unconstitutional. The opinion points out the statute only prohibits the retailer from giving stamps entitling the purchaser to receive property from a third person, while the seller was at liberty to give stamps redeemable by himself, and the opinion holds: “In principle, there is no substantial difference in the two methods. They both accomplish the same results * * *.”

In In re Opinion of the Justices, 226 Mass. 613, 616, 115 N.E. 978, the opinion of the Justices was asked on the constitutionality of laws which “declare trading stamps redeemable by the vendor alone, to be legal, and those redeemable by anyone other than the vendor to be illegal.” The answer was in the negative, the opinion stating: “We are of the opinion that no such distinction can be made under the Constitution.”

In People ex rel. Attorney General v. Sperry & Hutchinson Co., 197 Mich. 532, 540, 164 N.W. 503, 505, L. R. A. 1918A 797, the court declared unconstitutional .an Act of the same character as ours, the opinion stating: “So long as the use of trading-stamps by dealers to draw custom is countenanced and sustained as a lawful practice, it is difficult to discern any difference, in principle, whether in consummation of the transaction the mer chant who negotiates it, and issues to his customers such lure to improvidence’ under a guaranty of redeemable value, redeems the stamp himself or has someone redeem it for him.”

In State v. Holtgreve, 58 Utah 563, 575, 200 P. 894, 898, 26 A. L. R. 696, 705, the law imposed a tax upon the use of trading stamps purchased from others, while permitting him to issue them without tax when he furnished them himself. In holding the law unconstitutional on the ground it was discriminatory and an improper classification, the opinion cites and quotes extensively from a number of opinions, and holds: “If, now, we apply the doctrine of classification to the stipulated facts in this case, how can it reasonably be contended that there is a basis for classification in the use of trading stamps between a merchant who furnishes, uses, and redeems his own stamps and the merchant engaged in the same business who obtains his trading stamps from another who has agreed to redeem them upon the order of the latter merchant? The only difference between the transactions is that the merchant first named redeems the stamps issued by him by delivering to his customers the agreed value thereof as a discount for cash purchases, while the merchant last, named enters into an agreement with another that such other shall redeem the stamps upon his order by paying the customer the agreed cash value thereof or by delivering to him some article or articles of merchandise of his own choosing which are of the value represented by the stamps. In either ease the legal and moral effect of the transaction is precisely the same. In both cases the customer receives the discount that the merchant agreed to allow him for cash purchases, nothing more, nothing less. There is, therefore, no basis for a distinction or classification, but the classification, if one be made, is purely fanciful, capricious, and artificial.”

Many more cases to the same effect could be cited and most all of the opinions we quote from above contain the citations to many other opinions of similar import. As against all of the authorities cited the defendants cite two cases, State v. J. M. Seney Co., 134 Md. 437, 107 A. 189, and State v. Wilson, 101 Kan. 789, 168 P. 679, L. R. A. 1918B 374. From our study of these two cases it would appear that they would sustain plaintiff’s position. But they definitely set forth a minority rule. Of the Wilson case it was said in State v. Holtgreve, supra, at page 577 of 58 Utah, page 899 of 200 P., page 706 of 26 A. L. R.:

“It must be conceded, however, that in the decision of State v. Wilson, supra, the Bupreme Court of Kansas holds that the Legislature is authorized to classify the use of trading stamps so as to prohibit the use of the company’s trading stamps while permitting the use of all stamps that are issued and redeemed by the merchants issuing them. The decision is, however, contrary to practically every other decision upon the subject, and does not commend itself to our judgment. If that decision be followed to its logical conclusion, then there would be, there could be, no difference or distinction, however trivial, that would not be a sufficient basis for legislative classification. Under such a holding the constitutional provision requiring that all laws shall be given uniform operation whenever possible would be completely ignored by the courts, and the Legislature might disregard it with impunity.”

Of course it is always presumed that all Acts of the legislature are passed in utmost good faith and also that they are conformable to the Constitution. And it is not until the unconstitutionality of a given Act is plainly made to appear that the Court is called upon to declare it void. But after indulging every possible presumption and intendment in favor of the validity of a statute, and being unable to find that it can be sustained as a constitutional exercise of legislative power, it becomes the duty of the court to declare it void. Our obligation not to interfere with the legislature’s right to pass laws is no higher than our obligation to protect the citizens from discriminatory class legislation violative of the constitutional guaranty of equality of all before the law. If the use of trading stamps is inimical to public welfare, and it is proper to regulate or prohibit their use, then there should be no exceptions if the constitutional command of “uniform operation” is to be observed.

We are constrained to agree with the learned trial court, as well as with the majority of the courts of the' country, and hold the classification made in the gift enterprise statutes is clearly arbitrary and not sanctioned by our Constitution. The judgment of the trial court is affirmed. — Affirmed.

Bliss, Oliver, Smith, Wennerstrum, and Hays, JJ., concur. Garfield, C.J., and Thompson and Larson, JJ., dissent.

553.16 “ ‘Gift enterprise’ defined. Whenever two or more persons enter into any contract arrangement or scheme, whereby for the purpose of inducing the public to purchase merchandise or other property of one of the parties to said scheme, any other party thereto, for a valuable consideration and as a part of such scheme, advertises and induces or attempts to induce the public to believe that he will give gifts, premiums, or prizes to persons purchasing such merchandise or other property of such party to said scheme, and that stamps or tickets will be given by the seller in connection with such sales entitling the purchaser of such property to receive such prizes or gifts from any other party to such scheme, the parties so undertaking and carrying out such scheme shall be deemed to be engaged in a ‘gift enterprise’, unless the articles or things so promised to be given as gifts or premiums with or on account of such purchases, shall be definitely described on such stamp or ticket and the character and value of such promised prize or gift fully made known to the purchaser of such merchandise or other property at the time of the sale thereof, and unless the right of the holder of such stamp or ticket to the gift or premium so promised becomes absolute upon the completion upon the delivery thereof without the holder being required to collect any specified number of other similar stamps or tickets and to present them for redemption together, and the right of the holder of such stamp or ticket to the prize or gift so offered is absolute, and does not depend on any chance, uncertainty, or contingency whatever.”