Englebrecht v. Day

• Decision Date: 05 July 1949
• Docket Number: Case Number: 33869
• Citation: 1949 OK 154,201 Okla. 585,208 P.2d 538
• Parties: ENGLEBRECHT v. DAY
• Court: Oklahoma Supreme Court

1949 OK 154

208 P.2d 538

201 Okla. 585

ENGLEBRECHT v. DAY

Case Number: 33869

Supreme Court of Oklahoma

Decided: July 5, 1949

¶0 1. CONSTITUTIONAL LAW - TRADE-MARKS AND TRADE-NAMES AND UNFAIR COMPETITION - Unconstitutionality of act preventing retail or wholesale merchants from advertising products for sale at a loss in order to attract business.

An act of the Legislature which makes it a crime, or declares it to be contrary to public policy so as to call for injunctive relief for a retail or wholesale merchant to advertise, offer to sell or sell any item of merchandise at less than cost thereof to the seller, with intent or effect of inducing the purchase of other merchandise or of unfairly diverting trade from a competitor or otherwise injuring a competitor, impair and prevent fair competition or injure public welfare, is unconstitutional and void as violative of the due process clauses of the Fifth and Fourteenth Amendments to the Constitution of the United States and violative of the due process clause, section 7, article II, of the Constitution of the State of Oklahoma.

2. STATUTES - Entire Act not necessarily invalidated by unconstitutionality of part.

The unconstitutionality of a portion of an Act of the Legislature does not defeat or affect the validity of the remaining provisions unless it is evident that the Legislature would not have enacted the valid provisions with the invalid provisions removed, if with the invalid provisions removed the rest of the Act is plain and fully operative as law.

2. SAME - Effect of provision in Act that invalidity of part of Act shall not affect remainder.

The effect of a provision in an Act of the Legislature that the invalidity of any sentence, clause or provision in the Act shall not affect the remaining portions, is to create a presumption that, omitting the unconstitutional portions, the remaining portions would have been enacted by the Legislature.

4. SAME - Striking out of material part of section of Act, working change of public policy.

Where an Act in contravention of public policy of the State as declared by one section of an Act is made a crime by another section of the same Act, the striking out of any material part of the section which declares the public policy, works a change of that policy so as to defeat the basis for declaring the Act a crime and renders the Act unconstitutional.

5. TRADE-MARKS AND TRADE-NAMES AND UNFAIR COMPETITION - Part of Unfair Sales Act held invalid and unconstitutional as too indefinite to establish rule of conduct.

That part of subdivision (e), 15 O. S. 1941 § 592, which reads: ". . . and purchases made by retailers and wholesalers at prices which cannot be justified by prevailing market conditions within this State shall not be used in determining the cost to the retailer and cost to the wholesaler" is invalid and unconstitutional as too indefinite and uncertain to establish or prescribe a rule of conduct.

Appeal from District Court, Muskogee County; E.G. Carroll, Judge.

Action in equity by Warren O. Englebrecht, doing business as Warren's Grocery, against Ernest Day and others for injunction restraining the alleged violation by defendants of the Unfair Sales Act. From judgment for the defendants, plaintiff appeals. Judgment affirmed.

R.M. Mountcastle, of Muskogee, and George Miskovsky, of Oklahoma City, for plaintiff in error.

Kelly Brown, of Muskogee, for defendants in error.

Hal F. Rambo, of Tulsa, amicus curiae.

O'NEAL, J.

¶1 This is a proceeding in equity by Warren O. Englebrecht, doing business as Warren's Grocery, hereinafter referred to as plaintiff, against Ernest Day and others, hereinafter referred to as defendants, for an injunction restraining alleged violation by defendants of the Oklahoma "Unfair Sales Act", 15 O.S. 1941 §§ 591-597, inc.

¶2 Plaintiff is engaged in the retail grocery business in Muskogee, Okla. Defendants Ernest Day and Mrs. Ernest Day are husband and wife and are also engaged in the retail grocery business in Muskogee, Okla. Defendant "John Doe" Day is a brother of defendant Ernest Day and was acting as manager of the retail grocery store owned and operated by defendants Ernest Day and Mrs. Ernest Day.

¶3 Plaintiff filed his petition in the district court of Muskogee county April 7, 1948, and therein alleges that defendants did, on April 5, 1948, advertise for sale, offer for sale and sell at retail certain articles of merchandise (nine in number) separately named, at less than cost to the retailer as defined in said Act. Plaintiff further alleges that defendants had stated that they would continue to advertise for sale, offer for sale and sell at retail the foregoing items of merchandise and other items in their store in violation of the terms, restrictions and provisions of said Act. He further alleges that the items referred to were advertised for sale, offered for sale and sold at prices which cannot be justified by prevailing market conditions within the State of Oklahoma, and that said items of merchandise were advertised for sale, offered for sale and sold to the general public as "bait" with the intent or effect of inducing the purchase of other merchandise; that defendants specifically intended to violate said Act in resorting to what is commonly known as "bait" or "loss leader" merchandise with the hope of deceiving the public by luring them with this "bait" or "loss leader" merchandise into their store, hoping thereby that unsuspecting customers thus lured into the store would purchase other merchandise at unreasonably high mark-up, and that said advertising for sale, offering for sale and selling was made with the intent or effect of inducing the purchase of other merchandise and with the intent of unfairly diverting trade or otherwise injuring the plaintiff who is a competitor, and with the intent or effect to impair and prevent fair competition and injure public welfare and with the intent to substantially lessen competition and unreasonably restrain trade.

¶4 A temporary restraining order and later a temporary injunction was issued.

¶5 Defendants filed a general and special demurrer to the petition. The special demurrer attacked the constitutionality of the Unfair Sales Act as a violation of the Federal and State Constitutions. The demurrer came on to be heard and, pending the hearing on the demurrer, plaintiff asked and was granted leave to amend his petition by striking out the words "or effect" wherever they were used in the petition in connection with or following the words "with the intent", so as to make the petition charge that the alleged advertising for sale, offering for sale and selling said items of merchandise was with the intent of inducing the purchase of other merchandise and with the intent to impair and prevent fair competition and injure public welfare.

¶6 After the petition was so amended, defendants refiled their demurrer thereto. After further hearing the court sustained the demurrer on the ground that the Act (15 O.S. 1941 §§ 591-597, inc.) under which the cause was instituted and prosecuted, is unconstitutional and void for the reason that section 593 contains language rendering the same unconstitutional by setting out the clause "or effect" after the clause "with the intent". Plaintiff excepted and elected to stand upon the petition as amended, whereupon the cause was dismissed, and plaintiff appeals.

¶7 Four assignments of error are presented under two propositions. The first is that the Oklahoma Unfair Sales Act, 15 O.S. 1941 §§ 591-597, inc., is constitutional.

¶8 Plaintiff, conceding that although the general policy of an Act of the nature of the one herein involved is for the Legislature to pass upon and not a proper subject for consideration by this court, goes quite at length into the question of the desirability of such legislation and its beneficial effects and evils of the practice of selling merchandise at less than cost to the seller and "loss leader" practices. In this connection plaintiff quotes from an article by the late Justice Brandeis, published in 1913, entitled "Cut-Throat Prices, the Competition That Kills."

¶9 In reply thereto defendants go somewhat at length into the alleged history and general purpose of such legislation and assert in substance that such legislation, now adopted in some 32 states, and its enforcement, has in a general way been promoted by groups such as Retail Merchants Associations for their protection and that such legislation generally tends to prevent competition and protects merchants already in business and especially members of such associations against newcomers who enter the field as their competitors. Defendants further assert that such legislation has all the earmarks of monopoly or intended monopoly. In reply to the argument of plaintiff, including the quotation from the article by Justice Brandeis, defendants quote from the Yale Law Journal, January, 1948, issue, to the effect that several years' experience under such statutes, reveal them as particularly undesirable and that while the courts have generally agreed that they were intended "to prevent monopoly" or "to prevent anarchy in commerce," the record has not shown their sanction to protect small sellers from large scale campaigns of underselling, but, to the contrary, the laws have been used primarily by trade associations and larger units in order to prevent local price cutting and to enforce a diciplinary system of price leadership which these units desire to establish; and "Moreover, there is some evidence that the acts have been utilized as a means of raising prices."

¶10 But in this case we are not concerned with the question of policy or the exigency of such acts generally. Some of the earlier acts in some of the states were held to be unconstitutional as restrictive of the right of the individual to sell his property at whatever price he could agree upon with his purchaser. Other acts were declared unconstitutional because the business...