Rust v. Griggs

• Decision Date: 07 March 1938
• Citation: 113 S.W.2d 733,172 Tenn. 565
• Parties: RUST et al. v. GRIGGS.
• Court: Tennessee Supreme Court

113 S.W.2d 733

172 Tenn. 565

RUST et al. v. GRIGGS.

Supreme Court of Tennessee.

March 7, 1938

Appeal from Chancery Court, Davidson County; R. B. C. Howell, Judge.

Suit by C. E. Rust and another against Maurice Griggs to restrain defendant from certain business practices allegedly prohibited by Pub.Acts 1937, c. 69.From a decree granting an injunction, defendant appeals.

Decree modified, and, as modified, affirmed.

Albert A. White, of Nashville, for appellant.

James A. Newman, of Nashville, for appellees.

GREEN Chief Justice.

This bill was filed by the complainants Rust and Lanier, partners engaged in the retail grocery business in Nashville, against defendant Griggs, engaged in a similar business in Nashville to restrain the latter from certain business practices charged to have been within the denunciation of chapter 69 of the Public Acts of 1937.A demurrer was filed by defendant which challenged the construction put upon the act by complainants, and also challenged the validity of the act as a whole.The chancellor overruled the demurrer and granted the injunction as prayed.The defendant, electing to stand on his demurrer, prayed and was granted an appeal to this court.

The bill set out that complainants and defendant were engaged in the same line of business in the same section of the city of Nashville, and that defendant had on a day or days specified advertised and sold sugar and fruit jars at prices below cost, as that term is defined in the Act of 1937, all with the intent of misleading the public, unfairly diverting trade from complainants, and to the impairment of fair competition.The facts stated in the bill, being admitted by demurrer will not be further detailed just here.The demurrer presenting questions as to the proper construction of the act and as to the constitutionality of the act as a whole, these matters may be properly first considered, and the act sustained and construed, then applied to the facts of this case.

Chapter 69 of the Public Acts of 1937 bears this title:

"An Act to promote fair competition in trade and industry, to prohibit unfair competition therein, declaring certain practices unfair and making same illegal, and providing penalties for the violation of this Act and remedies to persons damaged by any such violation."

Section 1 of the Act, in lettered subsections, defines the terms used in the act.Some of these definitions will be particularly examined hereinafter.

We set out section 2, 3, and 4 of the Act:

"Sec. 2.Be it further enacted, That it is hereby declared that advertising, offers to sell or sales by retailers or wholesalers at less than cost as defined in this Act, with the intent or effect of inducing the purchase of other merchandise or of unfairly diverting trade from a competitor or otherwise injuring a competitor, impair and prevent fair competition, injure public welfare, and are unfair competition and contrary to public policy, where the result of such advertising, offers or sales is to tend to deceive or mislead any purchaser or prospective purchaser or to substantially lessen competition or unreasonably restrain trade or tend to create a monopoly in any line of commerce.It is further declared that such advertising, offers or sales by any retailer or wholesaler with such intent or effect or result are in contravention of the policy of this Act.

"Sec. 3.Be it further enacted, That any retailer who shall, in contravention of the policy of this Act, advertise, offer to sell or sell at retail any merchandise at less than cost to the retailer as defined in this Act, shall be guilty of a misdemeanor, punishable upon the first conviction by a fine of not less than $5.00, nor more than $50.00, and upon each subsequent conviction punishable by a fine of not less than $50.00, nor more than $500.00.Any wholesaler, who shall, in contravention of the policy of this Act, advertise, offer to sell, or sell at wholesale any merchandise at less than cost to the wholesaler as defined in this Act, shall be guilty of a misdemeanor punishable as above set forth.Proof of any such advertising, offer to sell or sale by any retailer or wholesaler in contravention of the policy of this Act shall be prima facie evidence of a violation of this Act.

"Sec. 4.Be it further enacted, That in addition to the penalties provided in this Act, the state's attorney of any county or any person damaged, or who is threatened with loss or damage, by reason of a violation of this Act, shall have the right to apply for an injunction, and any court of competent jurisdiction shall have power to restrain sales in violation of this Act."

Section 5 of the Act excepts from its provisions (a) isolated transactions; (b) bona fide clearance sales; (c) sales of highly perishable merchandise; (d) damaged merchandise sold as such; (e) merchandise sold in liquidation; (f) merchandise sold for charitable purposes; (g) merchandise sold to government institutions or departments; (h) merchandise sold in meeting the legal price of a competitor; (i) sales by any officer under court orders.

In consideration of this statutewe may first observe that it is not a price-fixing law.It is not therefore necessary to consider decisions of this court and the Supreme Court of the United States respecting statutes of that sort.As appears from section 2 of the statute, its object is to prevent deception of the public and to prevent practices which tend to injure competitors unfairly and thereby lessen competition or unreasonably restrain trade or create a monopoly.Section 2 declares that "advertising, offers or sales by any retailer or wholesaler with such intent or effect or result are in contravention of the policy of this Act."

Section 3 of the Act provides that a retailer who shall, "in contravention of the policy of this Act," advertise, offer to sell, or sell at retail any merchandise at less than cost shall be guilty of a misdemeanor, and section 4 of the Act provides for the restraint by injunction of such practices.

Sales at less than cost therefore are not denounced by the Act of 1937 unless such sales are made with the intent or effect to deceive the public, to injure creditors, or to destroy competition.

Legislation for the prevention of fraud and deception, especially in sales of food and other essentials of life, has always been recognized as well within the police power of the state.State v. W. M. Ausmus Mill Co.,123 Tenn. 399, 131 S.W. 867, Ann.Cas.1912C, 248.See, also, Samuelson v. State,116 Tenn. 470, 95 S.W. 1012, 115 Am.St.Rep. 805;State v. Legora,162 Tenn. 122, 34 S.W.2d 1056.

So legislation to foster free competition and to prevent monopolies is quite uniformly sustained.Standard Oil Co. v. State,117 Tenn. 618, 100 S.W. 705, 10 L.R.A.,N.S., 1015;State v. Witherspoon,115 Tenn. 138, 90 S.W. 852;State v. Schlitz Brewing Co.,104 Tenn. 715, 59 S.W. 1033, 78 Am.St.Rep. 941;Bailey v. Master Plumbers,103 Tenn. 99, 52 S.W. 853, 46 L.R.A. 561.

Construed as above, the statute is freed from many of the constitutional objections urged against it.

Before considering the assignments of error in detail, it will be necessary to quote (a) of section 1 of the statute, which is as follows:

"The term 'Cost to the retailer' shall mean whichever is lower of the following: (1) the purchase price of the product or commodity to the retailer at the retail outlet when invoice is dated not more than 60 days prior to the sale of such product or commodity by the retailer, or (2) the replacement cost of such product or commodity to the retailer at the time of sale in the quantity last purchased by the retailer; less any legitimate trade discounts but exclusive of cash discounts for prompt payment, and plus a mark-up amounting to [not] less than the minimum cost of distribution by the most efficient retailer, which mark-up, in the absence of proof to the contrary, shall be six per cent (6%).In all retail sales involving more than one item or commodity, the retailer's price on individual items or commodities shall be computed on the 'cost to the retailer' as herein defined."

The first assignment of error is based on the idea that under this definition of cost to the retailer the statute does not require a markup on merchandise purchased not more than sixty days prior to the sale by the retailer.The contention is that the markup is only required when "cost to the retailer" is determined by the replacement cost instead of the purchase price.It is said that the bill herein does not aver that the invoice for the sugar in question was dated more than sixty days prior to the sale of the sugar by the defendant.

This assignment of error rests upon a misinterpretation of (a) of section 1.Cost to the retailer is "whichever is lower" purchase price within sixty days or replacement cost."(1)" and "(2)" are separated by a comma only.They are connected clauses, both explanatory of "whichever is lower.""(2)" is followed by a semicolon, and the markup provision following the semicolon is applicable both to "(1)" and "(2)."

The complainants demonstrate the foregoing construction by the application of somewhat esoteric rules of grammar and punctuation, and that such construction is correct is made more apparent by the application of an accepted rule of statutory interpretation, namely, "when several words are followed by a clause which is applicable as much to the first and other words as to the last, the natural construction of the language demands that the clause be read as applicable to all."Porto Rico Ry., etc., Co. v. Mor,253 U.S. 345, 40 S.Ct. 516, 518, 64 L.Ed. 944.

The second assignment of error makes the point that the bill shows defendant sold the sugar for a price...