People ex rel. Wykes v. Sperry & Hutchinson Co.

• Decision Date: 27 September 1917
• Docket Number: No. 139.,139.
• Citation: 197 Mich. 532,164 N.W. 503
• Court: Michigan Supreme Court
• Parties: PEOPLE ex rel. WYKES, Atty. Gen., v. SPERRY & HUTCHINSON CO.

197 Mich. 532

164 N.W. 503

PEOPLE ex rel. WYKES, Atty. Gen.,

v.SPERRY & HUTCHINSON CO.

No. 139.

Supreme Court of Michigan.

Sept. 27, 1917.

Original application by the People of the State of Michigan, on the relation of Roger I. Wykes, Attorney General, for a writ of quo warranto against the Sperry & Hutchinson Company. Judgment of ouster denied.

Argued before STONE, OSTRANDER, BIRD, MOORE, STEERE, and BROOKE, JJ. Grant Fellows, Atty. Gen. (Wykes, Dilley & Averill, of Grand Rapids, of counsel), for relator.

Alex J. Groesbeck, of Detroit (Frank T. Wolcott, of New York City, of counsel), for respondent.

William L. Carpenter and Stevenson, Carpenter, Butzel & Backus, all of Detroit, for Elliott-Taylor-Woolfenden Co. and Wurzburg Dry Goods Co.

STEERE, J.

This quo warranto proceeding was instituted to oust defendant from doing business in this state as a trading stamp company in violation of the provisions of Act 244, Pub. Acts 1911, entitled:

‘An act to restrain and to prohibit gift enterprises, to prevent the issuing, selling or giving away of trading stamps, or of certificates, coupons, or any token or writing redeemable with or exchangeable, in whole or in part, for articles of merchandise or value as prizes, premiums or otherwise, by any firm, corporation or individual except as herein otherwise provided; to define what shall be treated as gift enterprises and trading stamps, and to fix the penalties for the violation of this act.’

Defendant is a corporation organized under the laws of the state of New Jersey. Prior to the passage of this act it had paid the franchise fee and fully complied with all the requirements of Act 206, Pub. Acts 1901, prescribing conditions under which foreign corporations are admitted to do business in Michigan, and received a license, or certificate therefor, from the Secretary of State. It was then and had been for some time prior thereto engaged in the business of furnishing to dealers and redeeming, when issued by them, trading stamps, or coupons, in the state of Michigan, and admittedly continued in that business up to the time of hearing in this case. Its defense is against the validity of the statute, which is claimed to be void because unconstitutional on various grounds, amongst which are, briefly stated, that it violates the due process of law and equal protection provisions of the Fourteenth Amendment of the Federal Constitution, impairs the obligation of contracts, prohibits legitimate advertising, describes defendants' business as a ‘gift enterprise’ and contrary to the public policy of the state, although there is no element of chance or gambling in it, prohibits defendant and others from engaging in an honest business not detrimental to public health, safety, morals, or the public welfare, imposes an excessive and confiscatory punishment for its violation, is discriminatory and unfair class legislation, and violates the provisions of our state Constitution that no law shall embrace more than one object, which shall be expressed in its title.

The not unfamiliar method of defendant's business as a trading stamp company is to act as an intermediary between the buyer and seller, or the merchant and his customers, by what it terms a ‘co-operative discount system,’ under which it contracts to furnish dealers in merchandise, for an agreed compensation, trading stamps redeemable at defendant's place or places of business in articles kept by it for that purpose, the claimed beneficent features of which, to the merchant and his customer, being that the former is enabled to thus advertise his business by offering trading stamps, in the nature of discounts, to the latter, who can then go to defendant's establishment and obtain in exchange without further cost some article of the value, or priced at, the amount represented by the stamp or stamps he produces.

The contract between defendant, called the ‘company,’ and the merchant, called the ‘subscriber,’ provides that the company will furnish the subscriber the use of its ‘S. & H. green trading stamps' at an agreed price and redeem them in specified articles of merchandise when presented by customers of the subscriber, who on his part agrees ‘to offer to customers upon making purchases, and when accepted by them give as an evidence of cash trade, and only for redemption by said company, one of said stamps with each ten cents represented in the retail price of the goods for which cash is paid, and not otherwise to procure, use or dispose of said stamps.’

By this plan of operation it is contended there is a value given to and consideration for the stamps issued to customers, payable in merchandise, not contingent on any hazard or chance, or involving any characteristics of a lottery or gift enterprise. In support of this contention the following cases are citedf State v. Shugart, 138 Ala. 86, 35 South. 28,100 Am. St. Rep. 17;Humes v. City of Little Rock (C. C.) 138 Fed. 929; Ex parte McKenna, 126 Cal. 429, 58 Pac. 916;City and County of Denver v. Frueauff, 39 Colo. 20, 88 Pac. 289,7 L. R. A. (N. S.) 1131,12 Ann. Cas. 521;In re Gregory, 219 U. S. 210, 31 Sup. Ct. 143, 55 L. Ed. 184;Territory of Hawaii v. Gunst, 18 Haw. Rep. 196;Long v. State, 74 Md. 565, 22 Atl. 4,12 L. R. A. 425, 28 Am. St. 268;State v. Caspare, 115 Md. 7, 80 Atl. 606;Commonwealth v. Emerson, 165 Mass. 146, 42 N. E. 559;Commonwealth v. Sisson, 178 Mass. 578,60 N. W. 385;O'Keeffe v. City of Somerville, 190 Mass. 110, 76 N. E. 457,112 Am. St. Rep. 316,5 Ann. Cas. 684;Sperry & Hutchinson Co. v. Temple (C. C.) 137 Fed. 992;State v. Sperry-Hutchinson Co., 110 Minn. 378, 126 N. W. 120,30 L. R. A. (N. S.) 966;People ex rel. Madden v. Dycker, 72 App. Div. 308,76 N. Y. Supp. 111;People v. Gillson, 109 N. Y. 389, 17 N. E. 343,4 Am. St. Rep. 465;People v. Zimmerman, 102 App. Div. 103,92 N. Y. Supp. 497;City of Winston v. Beeson, 135 N. C. 271, 47 S. E. 457;State v. Dalton, 22 R. I. 77, 46 Atl. 234,48 L. R. A. 775, 84 Am. St. Rep. 818;Young v. Commonwealth, 101 Va. 853, 45 S. E. 327.

That the business in which defendant is engaged is lawful in the absence of prohibiting legislation is unquestioned. Whether its characteristics are such in the field of trade and merchandising that it serves no legitimate purpose and is so intrinsically inimical to good morals and public welfare that it may be suppressed by legislation for the common good under the police power of the state, either by direct prohibition or by licensing it to death, has been a fruitful source of protracted litigation in numerous jurisdictions for many years. In times past the courts of last resort in some 15 or 16 states, and several federal courts, have held that ordinances and statutes enacted to prohibit the trading stamp business were void as an invasion of the constitutional rights of those engaged in it, while other authorities less numerous are found to the contrary. Of the latter plaintiff cites and especially relies upon as conclusive the comparatively recent case of Rast v. Van Deman & Lewis Co., 240 U. S. 342, 36 Sup. Ct. 370, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455, followed in the same volume by Tanner v. Little, 240 U. S. 369, 36 Sup. Ct. 379, 60 L. Ed. 691, and Pitney v. Washington, 240 U. S. 387, 36 Sup. Ct. 385, 60 L. Ed. 703.

Conceding, as contended by relator, that in the recent cases above cited the United States Supreme court has held the trading stamp business is of such a character as to be within legislative control and may be suppressed under the police power of the state, the yet serious question remains of whether the statute upon which plaintiff relies is so framed as to be an honest, impartial, and valid exercise of that power in elimination of the condemned practice, to protect public morals, health, and safety for the general good. Its title, above quoted, indicates that purpose to the casual reader, conveying the impression that the use of trading stamps and gift enterprises in merchandising is under condemnation as a demoralizing practice with insidious potentialities inimical to the public welfare, which the act is designed to suppress. Looking to the body of the act to ascertain the method of its enforcement, it is found to be a criminal law of severity providing that:

‘The violation of any provision of this act shall be deemed to be a misdemeanor and is hereby made punishable by imprisonment in the county jail for not to exceed six months or by fine of not to exceed one thousand dollars or both in the discretion of the court.’ Section 6.

Further examination of this drastic law discloses that it is not designed to suppress the use of trading stamps in merchandising by the principals, but to eliminate agents, or middlemen, exempting from its eradicating provisions all manufacturers and dealers in merchandise who alone actually use with customers and deal out to the public in the course of their business the trading stamps, or coupons, in stimulation of their trade. This major exemption is carried through the act, with one exception, in substantially the form found in section 1, which is as follows:

‘Gift enterprises and the...