Martin v. Aleinikoff, 36657

• Decision Date: 20 February 1964
• Docket Number: No. 36657,36657
• Parties: Mary E. MARTIN and Merrill E. Rutledge, d/b/a Martin Fuel Company, a partnership, Appellants, v. Sergei ALEINIKOFF, Michael Farafontoff, George Grant, Alex Shane and Cascade Fuel Oil Distributing Company, a Washington corporation, Respondents.
• Court: Washington Supreme Court

Page 842

63 Wn.2d 842

389 P.2d 422

Mary E. MARTIN and Merrill E. Rutledge, d/b/a Martin Fuel

Company, a partnership, Appellants, v. Sergei ALEINIKOFF, Michael Farafontoff, George Grant, Alex

Shane and Cascade Fuel Oil Distributing Company, a

Washington corporation, Respondents.

No. 36657.

Supreme Court of Washington, En Banc.

Feb. 20, 1964.

Short & Cressman, William L. Hintze, Seattle, for appellants.

Lycette, Diamond & Sylvester, Herman Howe, Seattle, for respondents.

WEAVER, Judge.

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 offerproof 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 competitiors 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 Wash.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 Wash.2d 802, 806, 145 P.2d 265 (1944); Hatzenbuhler v. Harrison, 49 Wash.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 16.90.020$ 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 penalties ² as well as civil relief. ³ .

In State v. Sears, 4 Wash.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, 118 A.L.R. 486 (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 (RCW 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

' 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, [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 and 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 Wash.2d 481, 483, 236 P.2d 545, 546 (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 Wash.2d 292, 295, 318 P.2d 327 (1957); In re Andy, 49 Wash.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 * * * 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, * * *.'

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 and its two adverbial clauses [a] and [b] also refer to infinitive phrases and . 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 that 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 payment or allowance 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 (Nebr.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...