McGraw Elec. Co. v. Lewis & Smith Drug Co.

• Decision Date: 11 February 1955
• Docket Number: No. 33593,33593
• Citation: 159 Neb. 703,68 N.W.2d 608
• Court: Nebraska Supreme Court
• Parties: , 160 Neb. 319 McGRAW ELECTRIC COMPANY, a Corporation, Appellant, v. LEWIS & SMITH DRUG CO., Inc., a Corporation, Appellee.

Page 608

68 N.W.2d 608

159 Neb. 703, 160 Neb. 319

McGRAW ELECTRIC COMPANY, a Corporation, Appellant, v. LEWIS & SMITH DRUG CO., Inc., a Corporation, Appellee.

No. 33593.

Supreme Court of Nebraska.

Feb. 11, 1955.

As Modified on Denial of Rehearing May 6, 1955.

Syllabus by the Court.

1. In an equity case this court will consider the evidence de novo and arrive at an independent conclusion.

2. The Fair Trade Act is not violative of the Constitution of the United States but is violative of the Sherman Anti-Trust Act.

3. Section 59-1105, R.R.S.1943, of the Fair Trade Act is unconstitutional for the reason that it grants special privileges and immunities to such persons and parties as are described in section 59-1102, R.R.S.1943, of the act.

4. Section 59-1105, R.R.S.1943, of the Fair Trade Act is unconstitutional for the reason that, within constitutional meaning, it deprives of liberty and property without due process of law.

5. Section 59-1105, R.R.S.1943, of the Fair Trade Act is unconstitutional for the reason that it confers upon persons the power to fix and enforce prices of merchandise without impositions of standards therefor.

6. Section 59-1105, R.R.S.1943, of the Fair Trade Act is unconstitutional for the reason that there is an absence of anything apparent in the act or its title indicating that the purpose of the section is in the public interest.

7. The question of whether or not legislation is in the public interest is ordinarily one for legislative determination, but the Legislature may not, under the guise of regulation in the public interest, impose conditions which are on their face unreasonable, arbitrary, discriminatory, or confiscatory.

8. The Legislature may not constitutionally, under the guise of public interest, grant power without control or check, which may be exercised at will, with or without reason, arbitrarily or capriciously.

9. If an unconstitutional section of an act was an inducement to the passage of an entire act the entire act is unconstitutional.

10. If an act as originally passed was unconstitutional because it contained matter different from that expressed in the title, or referred to more than one subject matter, it becomes valid law, if otherwise constitutional, on adoption by the Legislature and incorporation into a general revision without reference to title as originally enacted.

11. An act invalid before inclusion in a revision by reason of the fact that it was induced by an unconstitutional section of the act remains invalid and is not aided or revived by incorporation into an authorized revision.

Jack W. Marer, Samuel V. Cooper, Omaha, Herman T. Van Mell, Chicago, Ill., Amicus Curiae, Sunbeam Corp.

Shotwell, Vance & Marchetti, Omaha, Lynn A. Williams, Chicago, Ill., for appellant.

Swarr, May, Royce, Smith & Storey, Omaha, for appellee.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ.

YEAGER, Justice.

This is an action in equity by McGraw Electric Company, a corporation, plaintiff and appellant, against Lewis & Smith Drug Co., Inc., a corporation, defendant and appellee, instituted and tried in the district court for Douglas County, Nebraska. The case was tried to the court at the conclusion of which a decree was rendered in favor of the defendant and against the plaintiff. Following the rendition of decree a motion for new trial was duly made and regularly overruled. From the decree and the order overruling the motion for new trial the plaintiff has appealed.

In order that a comprehensive understanding may be had of the issues and the matters involved in this appeal a rather lengthy exposition of the issues made by the pleadings and of the subject matter of the controversy appears to be necessary.

The Legislature of Nebraska at its regular session in the year 1937 enacted what was designated as the Fair Trade Act. The act was otherwise designated as chapter 136 of the Laws of 1937. It contained 13 sections, only 9 of which are of concern here. Eight sections now appear as sections 59-1101 to 59-1108, R.R.S.1943, and the other appears in the revision of 1943 as section 59-801, R.R.S.1943. The reason for this 9th section being placed as it is in the revision is that the act, except this one section, was new, whereas this section was amendatory of section 59-801, Comp.St.1929, which was a part of the statutory article relating to acts and practices in unlawful restraint of trade. There have been no amendments to the act since its original passage. Statutory references hereinafter will be to the sections as they appear in the 1943 revision. Reference to the 1943 revision and the reissue thereof will not be repeated.

The title to the act as it was originally passed is as follows: 'An Act to protect trade-mark owners, producers, wholesalers and the general public against injurious and uneconomic practices in the distribution of competitive commodities bearing a distinguishing trade-mark, brand or name through the use of voluntary contracts establishing minimum re-sale prices and providing for refusal to sell such commodities unless such minimum re-sale prices are observed; to amend Section 59-801, Compiled Statutes of Nebraska, 1929; to repeal said original section; and to declare an emergency.'

Section 59-1101 is a definition of terms but otherwise it is not significant herein.

Stated positively and plainly, instead of negatively as in the statute, section 59-1102 provides that contracts establishing a minimum price of commodities by the producer or wholesaler of commodities themselves or the labels or containers of commodities which bear the trade-mark, brand, or name of the producer or wholesaler, which commodities are in free and open competition with commodities of the same general class produced and distributed by others, shall be lawful. There are other provisions in the section but they are not of immediate concern.

Section 59-1103 provides that no contract contemplated by section 59-1102 shall be entered into by anyone other than the owner of the trade-mark, brand, or name used in connection with such commodity or by a wholesaler specifically authorized so to do by the owner of the trade-mark, brand, or name.

Section 59-1104 contains conditional escape provisions from the obligations imposed by a contract entered into pursuant to the terms of section 59-1102. Nothing further need be said here about it since neither the cause of action nor the defense thereto depends upon any of these provisions.

The text of section 59-1105 is as follows: '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 sections 59-1101 to 59-1108, 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.'

The purport and effect of the two sections together in the connection of concern in this case is to say that in the event of the entry into an agreement between the owner or wholesaler of a trade-mark, brand, or name used in connection with a commodity and a retailer or reseller of such commodity agreeable to the provisions of section 59-1102, no other retailer or reseller of such commodity, whether he be a party to the agreement or not, having notice of the agreement, shall sell, advertise, or offer for sale any such commodity at less than the price stipulated in the agreement. The action is the outgrowth of claimed violations of section 59-1105 in its relation to sections 59-1102 and 59-1103.

Section 59-1106 grants a producer or wholesaler the right to refuse to sell commodities contemplated by the act to anyone refusing to enter into an agreement pursuant to the terms of section 59-1102.

The two remaining sections in the revision, they being sections 59-1107 and 59-1108, have no bearing on the controversy herein.

Prior to 1937, section 59-801, Compt.St.1929, was a prohibitory provision embracing a criminal penalty as follows: 'Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce, within this state, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both.'

By the amendment of 1937 contained in the act under examination, which by revision has become section 59-801, R.R.S.1943, the matters authorized by the provisions hereinbefore referred to were excepted from the former prohibition and the former penalty. The amended section is as follows: 'Except as to any contract executed pursuant to or under the authority of the provisions of the Fair Trade Act, every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce, within this state, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both.'

By petition and amendment thereto, for its cause of action, the plaintiff alleged substantially among other allegations not necessary to be repeated here, that it was a corporation organized under the laws of the State of Delaware with a place of business at Elgin, Illinois, known as Toastmaster Products Division; that the principal business of the Toastmaster Products Division is the manufacture and sale of Model 1-B14 Automatic Pop-up Toasters which have for many years been manufactured and sold under the trade-mark 'Toastmaster'; that these toasters were...