Ivan's Tire Service Store, Inc. v. Goodyear Tire & Rubber Co.

• Decision Date: 10 December 1973
• Docket Number: No. 541--III,541--III
• Citation: 517 P.2d 229,10 Wn.App. 110
• Court: Washington Court of Appeals
• Parties: , 1973-2 Trade Cases P 74,851 IVAN'S TIRE SERVICE STORE, INC., Respondent/Cross-Appellant, v. GOODYEAR TIRE & RUBBER COMPANY, a corporation, Appellant, v. Harry N. IVANS, and Doris R. Ivans, husband and wife, Respondents.

Page 110

10 Wn.App. 110

517 P.2d 229, 1973-2 Trade Cases P 74,851

IVAN'S TIRE SERVICE STORE, INC., Respondent/Cross-Appellant, v. GOODYEAR TIRE & RUBBER COMPANY, a corporation, Appellant, v. Harry N. IVANS, and Doris R. Ivans, husband and wife, Respondents.

No. 541--III.

Court of Appeals of Washington, Division 3.

Dec. 10, 1973.

Rehearing Denied Feb. 20, 1974.

Review Granted April 29, 1974.

Paul F. Schiffner and Henry E. Stiles, II, MacGillivray, Jones, Clarke, Schiffner & Johnson, Spokane, for appellant.

John G. Schultz and Crane Bergdahl, Leavy, Taber, Schultz & Bergdahl, Pasco, for respondent.

MUNSON, Judge.

Ivan's Tire Service Store, Inc., as plaintiff, brought an action against the Goodyear Tire & Rubber Company for damages, alleging that Goodyear interfered with plaintiff's contractual agreements, illegally and improperly solicited plaintiff's customers in an attempt to destroy plaintiff's business, and by unfair pricing, intended to and did destroy plaintiff's business. Plaintiff asserted that defendant violated both the Unfair Practices Act, RCW 19.90, and the Unfair Business Practices-Consumer Protection Act, RCW 19.86. Defendant denied plaintiff's claims and asserted, as a cross claim, that it had furnished goods, wares and merchandise to plaintiff during the year 1970 and payment therefor in the amount of $37,782 was past due and owing. After a jury trial, a verdict was entered for the plaintiff in the amount of $223,682.09 and for the defendant upon its cross claim in the amount of $37,782.09. Both parties appeal.

In capsule form, we hold there is insufficient evidence to justify submitting to the jury the issue relating to violations under the Unfair Practices Act, RCW 19.90; no evidence was introduced of defendant's per unit costs in purchasing tires. There is sufficient evidence to justify submitting the issue of unfair competition under the Consumer Protection Act, RCW 19.86. Other assignments of error are also discussed.

Plaintiff commenced business in Pasco, Washington, in 1965 as a wholesale and retail tire sales store with related services. During plaintiff's period of existence it had a nonexclusive dealership agreement with the defendant under which defendant supplied tires and other products to plaintiff. Under that agreement Goodyear retained the right to sell to other customers in the plaintiff's trade area and elsewhere.

Goodyear supplied to its dealers a dealer net pricing guidebook showing the various suggested selling prices for tires, starting with 'list' price as the highest price and moving down through 'code' price, 'A' price, 'AA' price, and 'AAA' price. As concisely stated in plaintiff's brief, the final sales price was determined as follows:

Depending upon the type of sale, i.e. wholesale, retail or commercial, the ultimate price is derived from a percentage of the 'code' price. 'A' price is the wholesale price which plaintiff utilized with small associate dealers who would pick up only an occasional tire . . . 'AA' price was for a medium sized dealer that would make about $5,000.00 purchases annually. 'AAA' was the established price for larger dealers, those who purchased $5,000.00 to $10,000.00 annually . . . The 'AAA' price schedule was the best and lowest price that plaintiff would ever utilize to any of his accounts, commercial, wholesale or associate dealer . . ., barring any special price discounts given to plaintiff or unusual circumstances. . . . Plaintiff's normal buying price for these tires was 'AAA' less ten percent.

Other pricing procedures were also established for other sales situations. For instance, net state prices were prices set by Goodyear to be charged by dealers when selling to government or municipal agencies such as school districts and PUD's. On such sales plaintiff received a delivery commission of 10 percent. Goodyear also authorized sales at below established selling prices in order to meet prices being offered by competitive dealers. This was known as 'price support.' Plaintiff would submit a request for price support and Goodyear would then authorize a lower price. On these sales plaintiff was paid a delivery commission of 5 percent.

Plaintiff's business had improved yearly until 1970, when it faltered financially and ultimately closed in November of 1970. The gross sales for the first year of operation, 1965, were $95,000. In 1966 gross sales were $123,000 and the 1967 gross sales were $154,711. In the year 1968, plaintiff opened a branch store in Kennewick, Washington, and its gross sales for both stores for that year amounted to $283,238. In 1969 the gross sales were $346,218 and then in its final year, 1970, the gross sales dropped to $184,000.

The defendant opened its own company tire sales store in Richland, Washington, in April, 1970. There had been discussion between plaintiff and defendant about the opening of this store, which at one time had included discussions about the possibility of defendant purchasing plaintiff's business and plaintiff's president, Harry Ivans, then operating the defendant's store. Such a result did not occur.

Plaintiff alleged defendant effectively and illegally destroyed plaintiff's business when defendant established its own retail store, solicited many of plaintiff's established customers and succeeded in obtaining their business by selling tires to these customers at prices equal to or below the cost at which the plaintiff purchased tires from the defendant. It was further alleged that defendant sold tires to parties in plaintiff's trade area at prices which plaintiff could not meet and still receive a reasonable profit.

Defendant asserts 17 assignments of error upon appeal. A majority of the assignments of error involve the applicability of RCW 19.90 (the Unfair Practices Act), RCW 19.86 (the Unfair Business Practices-Consumer Protection Act), and instructions given in the language of those statutes. Since numerous assignments refer to RCW 19.90, and because the trial court emphasized that statute, we will discuss the applicability of that act first. Thereafter, the applicability of RCW 19.86 to the facts in this case and the remaining assignments of error will be reviewed.

RCW 19.90

RCW 19.90.040

The trial court instructed ¹ in the language of RCW 19.90.040, which reads as follows:

It shall be unlawful for any person engaged in business within this state to sell any article or product At less than the cost thereof to such vendor, or give away any article or product, for the purpose of injuring competitors or destroying competition, or to use any article or product as a 'loss leader, ' 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, or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, or to make or enter into any collateral contract or device of any nature, whereby a sale below cost in effected, to the injury of a competitor, and where the same destroys or tends to destroy competition.

(Italics ours.)

Furthermore, the last sentence of instruction No. 8, ² wherein the court said that a manufacturer is not permitted to unfairly compete with a dealer by lowering selling prices below cost, ³ can be read as based upon RCW 19.90.040. The giving of both instructions is assigned as error.

In Martin v. Aleinikoff, 63 Wash.2d 842, 845, 389 P.2d 422, 425 (1964), the court, '(f)or the purposes of clarity and reference,' separated and numbered the several portions of RCW 19.90.040 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 court in Martin stated that Nos. 1--6 were infinitive phrases, whereas (a) and (b) were adverbial clauses, and concluded that clause (a), I.e., 'whereby a sale below cost is effected, to the injury of a competitor' referred not only to phrase No. 6, 'but to each antecedent to which it May refer without impairing the meaning of the sentence.' Martin v. Aleinikoff, Supra at page 850, 389 P.2d at page 428. In that case it was held to be applicable to phrases Nos. 4 and 5.

Based upon that language in Martin, the same reasoning must apply to infinitive phrases Nos. 1, 2, 3 and 6, unless such a reading would impair the meaning of the specific phrase. Phrase No. 1 specifically requires a sale below the cost to the vendor; phrase No. 2 can be read to prohibit the giving away of any article or product when the cost of the article or product given away, plus the cost of any product sold therewith, is less than, or below, the total sale price of the article sold; the loss leader prohibition in phrase No. 3 incorporates the below-cost provision since a loss leader itself is defined as a product sold at less than cost in RCW 19.90.010. As to phrases Nos. 4 and 5, they are covered by the Martin opinion; and phrase No. 6, in and of itself, contains the adverbial clauses which are required to be included in an alleged violation of that phrase....