Merchants Serv. Corp. v. Libby

• Decision Date: 24 March 1942
• Docket Number: Gen. No. 41514.
• Citation: 40 N.E.2d 835,314 Ill.App. 121
• Court: United States Appellate Court of Illinois
• Parties: MERCHANTS SERVICE CORPORATION v. LIBBY, MCNEILL & LIBBY.

314 Ill.App. 121

40 N.E.2d 835

MERCHANTS SERVICE CORPORATION

v.LIBBY, MCNEILL & LIBBY.

Gen. No. 41514.

Appellate Court of Illinois, First District, Second Division.

March 24, 1942.

Appeal from Municipal Court of Chicago, Cook County; John Gutknecht, Judge.

Action by the Merchants Service Corporation against Libby, McNeill & Libby to recover brokerage commissions allegedly due from the defendant. Judgment for the plaintiff, and the defendant appeals.

Judgment reversed and rendered. William H. Long and Lyndle W. Hess, both of Chicago, for appellant.

Hopkins, Sutter, Halls & DeWolfe, of Chicago (Peter L. Wentz and T. Eugene Foster, both of Chicago, of counsel), for appellee.

JOHN J. SULLIVAN, Justice.

This action was brought by plaintiff, Merchants Service Corporation, to recover certain brokerage commissions alleged to be due it from defendant, Libby, McNeill & Libby. The court having sustained plaintiff's motion to strike defendant's defense to plaintiff's statement of claim, defendant elected to abide by its defense and judgment was entered in favor of plaintiff and against defendant for $1,085.10. Defendant appeals.

Plaintiff's statement of claim, after alleging that it was engaged in the general mercantile brokerage business and that “it is now engaged in winding up its affairs,” averred:

“2. Prior to June 16, 1936, defendant agreed from time to time with plaintiff to pay the brokerage commissions to plaintiff on all goods, wares and merchandise of the defendant sold or caused to be sold to purchasers by or through plaintiff as broker, at rates of commission varying from 2% to 5% based on the net sales price of said goods, wares and merchandise after allowance of the usual discount for cash payments, and the plaintiff pursuant thereto at various times from May 28, 1935, to June 15, 1936, both inclusive, sold or caused to be sold by or through it as broker, to divers and sundry purchasers, goods, wares and merchandise of the defendant and thereby there became due and payable from the defendant to the plaintiff brokerage commissions in the amount of $1,058.10, more particularly set forth as follows:” (Here follows a list of alleged contracts of sale negotiated by plaintiff with defendant from May 28, 1935, to June 15, 1936.)

Defendant's statement of defense, after admitting in par. 1 thereof that plaintiff was “engaged in the general mercantile brokerage business,” alleged:

“2. The defendant denies that it at any time employed plaintiff as broker or agreed to pay brokerage or commissions on goods, wares, or merchandise sold or caused to be sold by or through the plaintiff as its broker, denies that the plaintiff ever acted as broker for the defendant or performed any other services for the defendant, and denies that the sales alleged in paragraph numbered 2 of the plaintiff's Statement of Claim were made on the dates therein alleged.

“3. The defendant alleges that it agreed from time to time prior to June 16, 1936, to pay commissions to the plaintiff only on completed sales of goods, wares and merchandise of defendant purchased through the plaintiff by shareholders or licensees of the plaintiff or to others under contract for buying services by the plaintiff.

“4. The defendant alleges that all purchasers listed in paragraph numbered 2 of the plaintiff's Statement of Claim were, at all times mentioned therein and in this Defense, shareholders or licensees of the plaintiff, or under contract for buying services by the plaintiff, and that in all purchases listed in said paragraph the plaintiff was the agent, representative, or intermediary of and acting for and in behalf of the purchasers and not the defendant.

“5. The defendant is informed and believes and therefore alleges that at all times herein mentioned the plaintiff was under agreement with the purchasers listed in paragraph numbered 2 of the plaintiff's Statement of Claim to pay to the respective purchasers any and all commissions paid by the defendant to the plaintiff with respect to the purchases listed in said paragraph.

“6. The defendant alleges that all the goods, wares and merchandise involved in the purchases listed in paragraph numbered 2 of the plaintiff's Statement of Claim were sold and delivered in interstate commerce subsequent to June 19, 1936, to-wit, on the dates more particularly set forth as follows:” (Here follows list showing dates on which the merchandise was actually sold and delivered by defendant to the various purchasers, said dates being from June 22, 1936, to September 30, 1936) “and that the dates specified by the plaintiff in its Statement of Claim are dates on which contracts to sell were entered into with the respective purchasers, and not dates on which completed sales were made.

“7. The defendant alleges that by virtue of an Act of Congress entitled ‘An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,’ commonly known as the Robinson-Patman Price Discrimination Act, 15 U.S.C.A. § 13, effective June 19, 1936, the payment of commissions on the purchases listed in paragraph numbered 2 of the plaintiff's Statement of Claim, either to the plaintiff or to the purchasers, is unlawful, illegal, and prohibited by law.”

That portion of the Robinson-Patman Price Discrimination Act applicable to this proceeding is subsection c of section 13, 15 U.S.C.A. This act became effective June 19, 1936, and the pertinent paragraph thereof reads as follows:

“(c) It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.”

Defendant's theory as stated in its brief is that “in this case we are dealing with price discounts or commissions in lieu of brokerage and not with true brokerage; that whenever commissions are paid to an agent to be turned over to the buyers we are dealing with price discounts and not brokerage; that the Robinson-Patman Price Discrimination Act clearly by its terms prohibits payment of commissions of this type on sales completed after the effective date of the Act; that so applying the Act does not give it a forbidden, retroactive effect merely because the executory contracts to sell happen to have been made before the effective date; and that Congress under the Constitution has the power to prohibit the giving of such allowances in sales in interstate commerce completed after the effective date of the Act, as Congress obviously intended to do, notwithstanding that such prohibition thereby affects the validity or enforcibility of executory contracts made before the enactment and valid when made.”

Plaintiff's theory is that “the agreement to pay the brokerage commissions here involved was legal and valid when made, and plaintiff had earned brokerage commissions under said agreement prior to the effective date of the Robinson-Patman Act”; that “it will be presumed that the parties do not intend to violate the Robinson-Patman Act;” that “the Robinson-Patman Act does not by its terms apply under the circumstances of the instant case”; that “the Robinson-Patman Act will not be construed to operate retroactively to deprive the plaintiff of commissions earned prior to the effective date of that Act”; that “the Robinson-Patman Act will be construed so as to avoid the question as to whether the Act is constitutional as applied to the facts in the instant case”; and that “to construe the Robinson-Patman Act to deprive the plaintiff of the rights of commissions earned prior to the effective date of that Act would be to deprive the plaintiff of property without due process of law, in violation of the Fifth Amendment to the Constitution of the United States.”

Plaintiff's motion to strike admitted the truth of all the well-pleaded allegations of fact in the verified statement of defense. Therefore we have admitted of record the allegations of defendant's statement of defense that it had not agreed to pay plaintiff brokerage; that it had agreed to pay commissions only on completed transactions; and that these commissions were in fact mere price discounts to be paid plaintiff as the agent for the purchasers and in their behalf.

Just what is the situation presented? Plaintiff is not an independent broker since, having rendered no services to defendant, it does not come within that category. Plaintiff negotiated the contracts with defendant whereby the latter agreed to sell merchandise to purchasers for whom plaintiff was acting as the agent or intermediary and to whom any commissions payable to plaintiff as the result of the completed sales would accrue as price discounts. All of the contracts to sell in question were to be consummated by the delivery of the merchandise to the purchasers and payment therefor. Commissions were payable to plaintiff only after the merchandise was delivered and paid for. All of said contracts to sell were valid when made and they were all made prior to June 19, 1936, the effective date of the Robinson-Patman Act. However, none of the sales were completed until after the effective date of said act. The commissions claimed herein were not “earned” until the sales were completed, which was, as already stated, after the effective date of the Robinson-Patman Act.

The principal question presented for determination is whether the prohibition contained in the Robinson-Patman Act applies to purchasers' price discounts where the sales contracts were...