Of Tax Comm'n v. Borofsky.

• Decision Date: 17 June 1948
• Docket Number: No. 3737.,3737.
• Citation: 59 A.2d 471
• Parties: McINTIRE, Director of Tobacco Products Division, of Tax Commission, v. BOROFSKY.
• Court: New Hampshire Supreme Court

59 A.2d 471

McINTIRE, Director of Tobacco Products Division, of Tax Commission,

v.BOROFSKY.

No. 3737.

Supreme Court of New Hampshire.

June 1, 1948.

Rehearing Denied June 17, 1948.

Reserved and Transferred from Superior Court, Merrimack County; Wheeler, Judge.

Bill in equity by Scott S. McIntire, Director of Tobacco Products Division, State Tax Commission, against Louis Borofsky, doing business as the Army and Navy Store, to enjoin defendant from advertising the sale of cigarettes and selling them in violation of the Unfair Sales Act, wherein defendant moved to dismiss bill. Questions of law raised by defendant's motion were reserved and transferred without a ruling.

Case discharged.

Bill in equity, brought by the director of the tobacco products division of the State Tax Commission by virtue of the authority conferred upon him by section 14 of chapter 133 of the Laws of 1947, to enjoin the defendant from advertising the sale of cigarettes and selling the same in violation of chapter 204 of the Revised Laws entitled ‘The Unfair Sales Act.’

The plaintiff's evidence established the following facts:

The Army and Navy Store of Concord is a trade name duly registered with the Secretary of State and adopted by Lewis and Sons, Inc. (joined herein as a party defendant), a New Hampshire corporation of which Louis Borofsky is the treasurer and a director. The store is engaged in selling at retail general merchandise, clothing, wearing apparel, boots and shoes, household products, and tobacco.

On July 8, 1947, the store advertised, in the usual course of business in the Concord Daily Monitor, that it offered for sale popular brands of cigarettes for $1.62 a carton, and on that date in the normal course of business it in fact sold such a brand, namely, Chesterfields, for that price, as had been its practice for some months prior thereto. These cigarettes were purchased by the Army and Navy Store for $1.58 a carton. This purchase price of $1.58 a carton included all taxes (federal and state) on the cigarettes in question. The selling price of $1.62 did not include the ‘mark-up’ of ‘six per cent of the total cost at the retail outlet,’ as required by section 1 of the Unfair Sales Act.

The defendants moved to dismiss the bill on the ground that chapter 204 of the Revised Laws is arbitrary, unreasonable, and oppressive and contravenes both the State and Federal Constitution.

It was stipulated by the parties hereto that further sales of cigarettes by the defendants would not be below the cost to the retailer as that cost is computed by the plaintiff and that the plaintiff would refrain from pursuing further the remedy of injunction pending a determination of the questions of constitutionality herein raised.

All questions of law raised by the defendants' motion were reserved and transferred without a ruling by Wheeler, J. Ernest R. D'Amours, Atty. Gen., and Gordon M. Tiffany, Asst. Atty. Gen., for plaintiff.

Thomas L. Marble and Morse & Grant (Geo. R. Grant Jr., orally), all of Concord for defendant.

KENISON, Justice.

This case presents the constitutionality of the Unfair Sales Act (R. L., c. 204) as applied to the agreed statement of facts quoted above. In preliminary summary the act makes it a misdemeanor for any retailer or wholesaler, ‘with intent, or effect, of injuring competitors or destroying competition,’ to advertise or sell merchandise at less than cost as defined in the Act, § 2. The advertisement or sale at less than such cost ‘shall be prima facie evidence of a violation of this chapter.’ § 2. The statutory base for determining ‘cost to the retailer’ is invoice cost or replacement cost, whichever is lower, less trade discounts to which is added freight and cartage charges and ‘a mark-up to cover in part the cost of doing business, which mark-up, in the absence of proof of a lesser cost, shall be six percent of the total cost at the retail outlet’ (§ 1(I). Numerous exceptions are made by the act (§ 3) so that it does not apply under stated conditions to isolated transactions, clearance sales, perishable merchandise, imperfect or damaged merchandise, final liquidation sales, sales to relief agencies and for charities, sales to state or municipal agencies, sales in good faith to meet legal competition or sales under court order. The Act also provides that violations may be enjoined by the Superior Court. § 4.

The legislative history of the Act begins in 1939 when an unsucessful attempt was made to obtain an advisory opinion as to its constitutionality. Opinion of the Justices, 90 N.H. 567, 6 A.2d 763. At the next session the Act was enacted into law (Laws 1941, c. 92) and was reenacted in the Revised Laws without substantial change in its present form.

It is urged specifically that section 2 which prohibits the sale of merchandise below cost with the ‘effect, of injuring competitors or destroying competition’ is unconstitutional because it is unduly oppressive and contrary to accepted economic and social standards. Loughran Co. v. Lord Baltimore Candy & Tobacco Co., 178 Md. 38, 12 A.2d 201. Similar phraseology is found in several of the Unfair Sales Acts of the other states. I Callmann, Unfair Competition & Trade Marks (1945) § 27, 2(a). It is well settled in this jurisdiction that the Legislature may declare an act criminal without requiring that it be done with intent. State v. Cornish, 66 N.H. 329, 21 A. 180, 11 L.R.A. 191; State v. Ryan, 70 N.H. 196, 46 A. 49, 85 Am.St.Rep. 629; State v. Goonan, 89 N.H. 528, 3 A.2d 105; State v. Yosua, 91 N.H. 181, 16 A.2d 370. In case of doubt the statute has frequently been construed to require intent (Coutremarsh v. Metcalf, 87 N.H. 127, 175 A. 173), but it is clear that the present statute by its express terms requires either the intent or the effect of injuring or destroying competition. The Legislature deemed it necessary to do more than condemn a state of mind and provided that sales below cost, except as provided in § 3, are an economic evil whether they are intended or have the effect of injuring competition. Such a statute is valid. McElhone v. Geror, 207 Minn. 580, 292 N.W. 414; Rust v. Griggs, 172 Tenn. 565, 113 S.W.2d 733. Cf. Corn Products Refining Co. v. Federal Trade Commission, 324 U.S. 726, 65 S.Ct. 961, 89 L.Ed. 1320; State v. Tankar Gas, Inc., 250 Wis. 218, 26 N.W.2d 647.

That part of section 2 providing that advertisements or sales below cost are prima facie evidence of a violation of the Act is also attacked. Since no conclusive presumption of guilt is created, Wigmore sees no constitutional problem. 4 Wig. Ev., 2d Ed., § 1356. So long as there is a rational connection between the fact to be proved and the fact presumed, the statute is valid. State v. Bozek, 81 N.H. 277, 124 A. 666; 162 A.L.R. 495, 532. This is particularly so in this jurisdiction since ‘prima facie evidence, as here used, means evidence to be considered by the jury’ (State v. Lapointe, 81 N.H. 227, 239, 123 A. 692, 698, 31 A.L.R. 1212), and in the absence of other evidence does not compel a verdict of guilty. State v. Langley, 92 N.H. 136, 26 A.2d 368. The constituent elements that make up ‘cost to the retailer’ are peculiarly within the knowledge of the retailer as are the facts which bring him within the exceptions to the Act in section 3. In view of the limited effect given to prima facie evidence in this jurisdiction, we cannot say that its application to unfair competition is unreasonable. Competition may be destroyed or injured by deceptive trade practices, discrimination, and unfair competition as well as by combinations and monoplies. They are closely interrelated and we have been informed recently that the Legislative branch of the government has a wide latitude in establishing effective and even duplicating methods of preventing these asserted economic evils. See, Federal Trade Commission v....