Houbigant Sales Corp. v. Woods Cut Rate Store

• Decision Date: 29 December 1937
• Citation: 123 N.J.Eq. 40,196 A. 683
• Parties: HOUBIGANT SALES CORPORATION v. WOODS CUT RATE STORE.
• Court: New Jersey Court of Chancery

196 A. 683

123 N.J.Eq. 40

HOUBIGANT SALES CORPORATION

v. WOODS CUT RATE STORE.

Court of Chancery of New Jersey.

Dec. 29, 1937.

Syllabus by the Court.

1. The essential characteristic of the "contract" mentioned in section 56:4-6 of' the Revised Statutes (1937), a section of the statute commonly known as the "Fair Trade Act," N.J.St.Annual 1935, § 217 —14, is that of being a price-fixing device. It is the vehicle to accomplish the aims of the statute in bringing notice of the designation of the manufacturer's price schedule to the attention of the classes affected by the statute.

2. In such contract no special or particular type or kind of consideration for the retailer's promise to maintain such price is requisite. Anything which is sufficient at law to constitute valid consideration to support such promise, is all that is required.

3. Contract examined and found to be enforceable.

Action by the Houbigant Sales Corporation against Woods Cut Rate Store, to restrain the defendant from selling the complainant's trade-marked products at a price less than the minimum price established by contract as provided by the New Jersey Fair Trade Act.

Preliminary injunction issued.

Bilder, Bilder & Kaufman, of Newark (Samuel Kaufman, of Newark, of counsel), for complainant. Mellinger & Rudenstein, of Orange, for defendant.

STEIN, Vice Chancellor.

The complainant, Houbigant Sales Corporation, is the sole exclusive distributor of the products manufactured by Houbigant, Inc., which are in fair and open competition with commodities of the same general class produced by others. It has expended large sums of money in widely advertising these products in this state and elsewhere, as a result of which it has established therein a valuable good will.

On or about October 30, 1937, complainant, in order to avail itself of the protection afforded by the statute, P.L.1935, chap. 58, p. 140, now R.S. section 56:4-3 et seq., N.J.St. Annual 1935, § § 217 —13 to 217 —17, established minimum prices for the resale of its commodities within this state and entered into divers contracts with retailers in this state fixing minimum prices for the same, which prices became effective thereafter. At the same time complainant announced to the retail trade, including the defendant herein, that it intended at all times to maintain such prices, and that its products were not to be resold by retailers in the State of New Jersey including the defendant at less than the prices established.

The defendant, Woods Cut Rate Store, is engaged in selling various cosmetic preparations, including those produced by the complainant. The defendant admittedly violated the provisions of the statute in that, after notice, it advertised, offered for sale, and sold complainant's branded and trade-marked commodities at prices less than the prices specified in the contracts made by complainant with such retailers.

The matter is before the court on the return of an order to show cause why injunction should not issue.

The allegations of the bill of complaint are not denied. The facts are not in issue. The sole issue raised is one of law. Substantially it is argued that there exists here no legal contract which is made the basis of the action since there is no legal or valid consideration shown therein.

The contract in the instant case was between complainant as the sole distributor of Houbigant and Cheramy products, advertised, distributed, and sold under the trade-mark, brand, or name of Houbigant or Cheramy, and a retailer. It provided that in consideration of the promises and the mutual obligations therein assumed, and for the purpose of obtaining for the parties and other retailers the benefits of state and federal laws in respect to resale price maintenance, the distributor will supply or cause to be supplied to the retailer his requirements of such products for retail sales; that the retailer will not (except as permitted by the statute), directly or indirectly, advertise, offer for sale, or sell any of distributor's products at less than the minimum resale price then in effect under the agreement and as established thereunder from time to time by the distributor; that the distributor may, upon ten days' written notice to the retailer, amend the schedule of resale prices and products and change the same. The retailer in said agreement expressly acknowledged that the distributor's good will in such product and the good will of competing retailers will be irreparably injured by any violation of the agreement and consented therein to the entry of a decree of injunction in the event of violation of such agreement, and the complainant also agreed to police the industry in its interest and that of the retailer against violation of the minimum sales prices established by the agreement.

Section 56:4-5 of the New Jersey Fair Trade Act, as revised, N.J.St, Annual 1935, § 217 —13, validates contracts relating to trade-marked or branded articles which contain the following provisions:

"(a) That the buyer will not resell such commodity except at the price stipulated by the vendor.

"(b) That the producer or vendee of a commodity require upon the sale of such commodity to another, that such purchaser agree that he will not, in turn, resell except at the price stipulated by such producer or vendee." Source P.L.1935, c. 58, § 1, p. 140.

Section 56:4-6, N.J.St. Annual 1935, § 217 —14, provides that: "Willfully 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 section 56:4 —5 of this title, 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." Source P.L. 1935, c. 58, § 2, p. 141.

The questions presented are all dependent upon the construction to be given to the word "contract." The statute itself does not supply a definition of this word. Its proper construction must be gathered from an analysis of the statute as a whole and a consideration of the circumstances and objectives which led to its enactment.

Mr. Justice Sutherland, speaking of the similar fair trade statute of the State of Illinois, Smith-Hurd Ill.Stats. c. 121 1/2, § 188 et seq., said in Old Dearborn Distributing Co. v. Seagram-Distillers Corporation, 299 U.S. 183, 57 S.Ct. 139, 144, 81 L.Ed. 109, 106 A.L.R. 1476: "The primary aim of the law is to protect the property —namely, the good will —of the producer, which he still owns. * * * It proceeds upon the theory that the sale of identified goods at less than the price fixed by the owner of the mark or brand is an assault upon the good will, and constitutes what the statute denominates 'unfair competition.'"

See, also, Johnson & Johnson v. Weissbard, 121 N.J.Eq. 585, 191 A. 873; Bristol-Myers Co. v. L. Bamberger & Co., 122 N. J.Eq. 559, 195 A. 625, 626.

This primary aim the statute seeks to accomplish by making it lawful for the owner to make contracts establishing the fixed price, and by making it unlawful for any retailer, with knowledge of such fixed price, to sell below that price. With regard to this latter object and purpose, it was of course necessary that there be some instrument, vehicle, or medium, by which that fixed price is specified and established.

It would seem that from the standpoint of accomplishing the aims and purposes which the Legislature had in mind in the provisions of section 56:4-6, it might equally as well have specified a mere notice or other purely unilateral instrument or act by the manufacturer or producer, as and for the vehicle and evidence of the establishment of the standard price; but whether for reasons of convenience or some other reason, it did not do so; it is not necessary here to ascertain or determine why it did not do so.

The fact is that the statute does use the word "contract." The thing which the statute, in section 56:4-6, designates as unfair competition and makes actionable, is the selling below the price fixed in any "contract" entered into pursuant to the provisions of section 56:4 —5. Obviously, therefore, in order to call the statute into operation, there must have been a price or schedule of prices fixed by, or incorporated in, a contract —something which can reasonably be deemed to come within the meaning and scope of that name. But it is equally obvious that the Legislature did not deem that the particular...