Quality Oil Co. v. E. I. Du Pont De Nemours & Co.

• Decision Date: 08 March 1958
• Docket Number: No. 40668,40668
• Citation: 322 P.2d 731,182 Kan. 488
• Parties: QUALITY OIL COMPANY, Inc., Appellant, v. E. I. DU PONT DE NEMOURS AND COMPANY, Inc., Appellee.
• Court: Kansas Supreme Court

Page 731

322 P.2d 731

182 Kan. 488

QUALITY OIL COMPANY, Inc., Appellant, v. E. I. DU PONT DE NEMOURS AND COMPANY, Inc., Appellee.

No. 40668.

Supreme Court of Kansas.

March 8, 1958.

Rehearing Denied April 16, 1958.

Syllabus by the Court

1. The power to fix rates or prices for the sale of services or commodities binding upon all persons whether or not they consent is a legislative power which may not be delegated by the legislature to a governmental agency, official, board, or to a private organization or person.

2. The Kansas Fair Trade Act (G.S.1949, 50-301 to 310) which permits the owner of a trade-mark commodity to enter into a contract with a retailer that he will not sell the commodity at less than the minimum price stipulated by the owner of the trade-mark and condemns as unfair competition a resale at less than the price stipulated by a seller who is not a party to the contract, is a price-fixing statute to insure control of retail price maintenance.

3. The legislature is powerless to clothe a private person with power to fix minimum resale prices binding upon all who acquire and sell his trade-mark commodity with wnom he has no direct contractual relation. An attempt to confer such power is an attempt to delegate legislative power, which is futile.

4. The record in an action for a declaratory judgment examined and held: The Kansas Fair Trade Act (G.S.1949, 50-301 to 310) as applied to nonsigners of contracts entered into pursuant to its provisions is unconstitutional and void, being in violation of Art. 2, § 1 of the Constitution of Kansas.

L. M. Cornish, Jr., Topeka, argued the cause, and Ralph F. Glenn, Topeka, was with him on the briefs for appellant.

Charles S. Fisher, Jr., Topeka, argued the cause, and T. M. Lillard, O. B. Eidson, Philip H. Lewis, James W. Porter, E. Gene McKinney and William R. Stewart, Topeka, and Walter D. Ford, Wilmington, Del., were with him on the briefs for appellee.

David H. Fisher and Donald Patterson, Topeka, were on the briefs amicus curiae for the Kansas Pharmaceutical Ass'n FATZER, Justice.

This was an action for a declaratory judgment that the Kansas Fair Trade Act (G.S.1949, 50-301 to 310) is unconstitutional as applied to nonsigners of contracts entered into pursuant to its provisions. An actual controversy existed between the parties, and the action was filed to obtain an early determination of the question since it is of statewide public interest and importance. As G.S.1949, 50-306 was interpreted by plaintiff, it was entitled to a decree holding the statute unconstitutional for various reasons alleged in the petition; as interpreted by defendant, such a decree was not authorized. The district court agreed with defendant's construction of the statute, and plaintiff has appealed.

The parties stipulated as to the facts, and those here pertinent are summarized: Plaintiff, Quality Oil Company, Inc., a Kansas corporation, is engaged in the retail sale of gasoline, oil and related products, including Zerex antifreeze at Topeka, Kansas, and at various other locations in the state. It purchased a quantity of Zerex antifreeze on the open market and was selling it at retail for $2.25 per gallon. All sales of Zerex at that price were made at a profit.

Defendant is a Delaware corporation authorized to transact business in the state of Kansas. It is engaged in the manufacture and sale of 'Zerex' antifreeze sold at retail by plaintiff, and is the owner of registered trade-marks known as 'du Pont oval' and 'Zerex' which are affixed to containers in which the product is sold and delivered in this state in free and open competition with products of the same general class produced by others. Defendant has expended large sums of money in advertising Zerex and the trade-marks under which it is distributed and sold, and has established a valuable reputation and good will for the product and trade-marks.

Pursuant to G.S.1949, 50-302 defendant entered into a contract with Harold L. Bailey, operator of Bailey's Conoco, a Topeka service station, whereby the defendant stipulate that Zerez should be sold at the minimum retail price of $3.25 per gallon, and Bailey agreed not to advertise or sell Zerex at retail to any buyer in any state or political subdivision of the United States in which a fair-trade act or public policy approving resale price maintenance contracts was in effect at less than the retail price stipulated by the defendant. Bailey was authorized to sell Zerex without reference to the contract in the following instances: (a) in closing out in good faith his stock for the purpose of discontinuing the product, or (b) where the product was damaged or deteriorated in quality and notice given to the public. The contract permitted the defendant at any time, upon written notice to Bailey, to amend or supplement the contract by changing any of the stipulated minimum resale prices, or by eliminating any of the commodities listed therein, or by adding other commodities and stipulating minimum resale prices therefor. Bailey agreed not to indirectly reduce the selling price of Zerex below the minimum retail price stipulated by any refund, rebate, concession, prize, etc., either in cash or merchandise. The defendant had similar written contracts with other retail dealers of Zerex in the state of Kansas. However, plaintiff was not a party to any of such contracts, but it had notice of their existence and of the minimum price established by them.

On October 17, 1955, defendant informed plaintiff that it had executed fair-trade contracts with customer purchasers of Zerex stipulating that from whomsoever purchased they could not sell Zerex at retail at less than $3.25 per gallon, and that it would constitute actionable unfair competition for it to advertise and sell Zerex at less than the stipulated minimum retail price. The notice was given plaintiff pursuant to G.S.1949, 50-306, the so-called 'nonsigner' clause of the act, which makes the stipulated minimum retail price fixed by the defendant in its contracts with Bailey and other retailers in Kansas binding upon all other persons selling Zerex whether or not they are parties to those contracts.

On October 31, 1955, defendant filed an action against plaintiff in the United States District Court for the District of Kansas to enjoin it from selling Zerex at retail for less than the stipulated minimum retail price of $3.25 per gallon, and for damages. Plaintiff, defendant in that action, defendant on the ground that the act was unconstitutional. The federal district court issued a temporary restraining order against defendant, plaintiff in this action, and on January 3, 1956, advised counsel for the parties that the proceedings would be stayed pending a determination in a proper state court of the validity of the act.

On January 26, 1956, plaintiff filed this action in the district court of Shawnee County. Issues were formed, and judgment was rendered in favor of the defendant sustaining the act against plaintiff's claim that it violated the Constitution of Kansas for the reasons that (1) it unlawfully delegated legislative power to private persons in violation of Art. 2, § 1; (2) its title was insufficient and violation Art. 2, § 16; (3) it deprived a 'nonsigner' of an inalienable natural right and of liberty, property, and equal rights without due process of law; denied equal protection of the law; granted special privileges and immunities in violation of §§ 1, 2 and 18 of the Bill of Rights, and (4) when enacted on March 4, 1937, it was 'stillborn' and void ab initio and is still invalid because it was not re-enacted.

As preliminary we note that the Miller-Tydings Act ([1937], 15 U.S.C.A. § 1), and the later McGuire Act ([1952], 15 U.S.C.A. § 45) immunized against the effect of the Sherman Act (26 Stat. 209, Ch. 647, 15 U.S.C.A. §§ 1-7, 15 note) banning price-fixing contracts or agreements as restraints of trade in interstate commerce (Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502), and empowered the states to enact fair-trade laws containing nonsigner clauses. We deem it unnecessary to review in detail the history of those congressional acts but suffice it to say those acts, as well as the decisions construing them (Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035, 19 A.L.R.2d 1119; Schwegmann Bros. Giant Super Mkts. v. Eli Lilly & Co., 5 Cir., 205 F.2d 788, 792, 793, certiorari denied 346 U.S. 856, 74 S.Ct. 71, 98 L.Ed. 369, petition for rehearing denied 346 U.S. 905, 74 S.Ct. 217, 98 L.Ed. 404, clearly demonstrate that the provisions of the Kansas act, including the nonsigner clause, do not conflict with the Sherman Act in any respect, and we conclude the Kansas act was not, as is here urged, invalid and void ab initio when enacted in 1937, and it was not necessary to re-enact it after the passage of the McGuire Act, supra (Schwegmann Bros. Giant Super Mkts. v. Eli Lilly & Co., supra; Sutherland, Statutory Construction. 3d Ed. § 2027, p. 501).

We also note it is conceded by both parties that no federal constitutional question is presented. Indeed, it has been uniformly held that fair-trade acts similar to our own do not violate the due process or the equal protection clause of the Fourteenth Amendment (Old Dearborn Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109; Schwegmann Bros. Giant Super Mkts. v. Eli Lilly & Co., supra; Seagram-Distillers Corp. v. New Cut Rate Liquors, 7 Cir., 221 F.2d 815, certiorari denied sub nomine New Cut Rate Liquors, Inc., v. Seagram Distillers Corp., 350 U.S. 828, 76 S.Ct. 59, 100 L.Ed. 740; Lee-Wilson, Inc., v. General Electric Company, 1 Cir., 222 F.2d 850, 854; Sunbeam Corporation v. Masters of Miami, 5 Cir., 225 F.2d 191, 194). See, generally, General Electric Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 132 N.E.2d 652. In view of the foregoing, no question can be...