Simonetti, Inc. v. State ex rel. Gallion, 6 Div. 415

• Decision Date: 29 June 1961
• Docket Number: 6 Div. 415
• Citation: 132 So.2d 252,272 Ala. 398
• Parties: SIMONETTI, INC. v. STATE of Alabama ex rel. MacDonald GALLION, Atty. Gen.
• Court: Alabama Supreme Court

Page 252

132 So.2d 252

272 Ala. 398

SIMONETTI, INC. v. STATE of Alabama ex rel. MacDonald GALLION, Atty. Gen.

6 Div. 415.

Supreme Court of Alabama.

June 29, 1961.

The cases cited in the amicus curiae brief, referred to in the opinion, are as follows: State v. Walgreen Drug Co., 57 Ariz. 308, 113 P.2d 650; Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486; Dikeou v. Food Distribution Ass'n, 107 Colo. 38, 108 P.2d 529; Carroll v. Schwartz, 127 Conn. 126, 14 A.2d 754; May's Drug Stores v. State Tax Comm., 242 Iowa 319, 45 N.W.2d 245; State of Kansas v. Consumer Warehouse Market, 183 Kan. 502, 329 P.2d 638; Moore v. Northern Ky. Independent Food Dealers Ass'n, 286 Ky. 24, 149 S.W.2d 755; Louisiana Wholesale Distributors Ass'n v. Rosenzweig, 214 La. 1, 36 So.2d 403; Fournier v. Troianello, 332 Mass. 636, 127 N.E.2d 167; McElhone v. Geror, 207 Minn. 580, 292 N.W. 414; Associated Merchants of Montana v. Ormesher, 107 Mont. 530, 86 P.2d 1031; Hill v. Kusy, 150 Neb. 653, 35 N.W.2d 594; McIntire v. Borofsky, 95 N.H. 174, 59 A.2d 471; Lane Distributors v. Tilton, 7 N.J. 349, 81 A.2d 786; Adwon v. Oklahoma Retail Grocers Ass'n, 204 Okl. 199, 228 P.2d 376; Rust v. Griggs, 172 Tenn. 565, 113 S.W.2d 733; State v. Sears, 4 Wash.2d 200, 103 P.2d 337; State v. Ross, 259 Wis. 379, 48 N.W.2d 460; State v. Langley, 53 Wyo. 332, 84 P.2d 767. Pritchard, McCall & Jones and Victor H. Smith, Birmingham, for appellant.

MacDonald Gallion, Atty. Gen., Guy Sparks, Sp. Asst. Atty. Gen., and Wm. H. Burton, Asst. Atty. Gen., for appellee.

John J. Smith, Birmingham, for Alabama Wholesale Tobacco Association, amicus curiae.

LIVINGSTON, Chief Justice.

The State of Alabama ex rel. its Attorney General, filed in the Circuit Court of the Tenth Judicial Circuit of Alabama, in Equity, its bill of complaint to enjoin Simonetti, Inc., a corporation, from violating the so-called Unfair Cigarette Sales Act (Act No. 805, Acts of Alabama 1951, effective September 11, 1951), by advertising, offering for sale and selling cigarettes at wholesale in the State of Alabama below cost (as defined in Sec. IV(k) 1 of said Act) of such cigarettes to the appellant, and with the intent of injuring its competitors and destroying, or substantially lessening, competition.

The appellant, Simonetti, Inc., interposed its demurrers attacking the constitutionality of said Act as a whole, but not the constitutionality of any specific section or sections thereof.

Appellant's demurrers were overruled and the constitutionality of said Act was sustained by the trial court. Simonetti, Inc., a corporation, appealed.

The grounds of demurrer assigned, and the briefs, are properly concentrated in the main upon the very serious question of the constitutional validity of Act No. 805, Reg.Sess.1951, Legislature of Alabama, and it now appears in the Pocket Part of the Code of Alabama 1940 as Secs. 83(1) through 83(14) of Title 57.

The bill of complaint is bottomed solely and squarely upon, and seeks to enforce, the so-called Unfair Cigarette Sales Act. Sec. 3(a) of the aforesaid Act contains the following provision:

'It shall be unlawful for any wholesaler or retailer, with intent to injure competitors, destroy or substantially lessen competition, to advertise, offer to sell, or sell at wholesale or retail, cigarettes at less than cost to such wholesaler or retailer as the case may be.'

It is clear that if the act is constitutional, the bill of complaint sufficiently alleges its violation by the appellant. It is equally clear that the demurrers interposed by the appellant raise the question of the equal protection of the law and the due process of law under the 14th Amendment of the Constitution of the United States, and also the question of whether the Act is violative of the 1901 Constitution of the State of Alabama. In our opinion, the Act is constitutional and we so hold and sustain the decree of the lower court overruling appellant's demurrers.

In its decree overruling appellant's demurrer, Honorable Robert C. Giles states as follows:

'* * * The able brief and argument of the present respondent has not persuaded the undersigned to depart from the views expressed in the opinion in the prior case [Dominic Simonetti, Complainant, v. Joe M. Edwards, as Commissioner of the State Department of Revenue, et al., Respondents], a copy of which is attached to and by reference made part of this decree, and constitutes an appendix thereto.'

As to certain features of the case, the opinion of the learned Chancellor so well expresses the views of this Court that we adopt the following portions of his decree:

'The present bill directly alleges a dual or cumulative specific intent to 'injure competitioners and destroy or substantially lessen competition' and that respondent's advertising, offers to sell, and sale of cigarettes at wholesale have been 'at less than cost to said respondent.' These are considered to be allegations of ultimate, issuable facts, sufficient for the purpose of pleading, since the respondent's actual intent in fact, its costs, and its selling prices are presumably matters within its knowledge, and greater particularity would not seem to be required either to frame the issue or inform respondent of the charge against which it is required to defend. By these allegations, the State as complainant assumes a heavy burden of proof, since it must be proof of far more than mere intent of injury to competitors or 'unfairness' of competition. It must also prove, under the construction placed upon the Act, a selling below cost with the specific intent of destroying or substantially lessening competition, since the Act, if valid at all, can only be held so as an exercise of the police power of the state over intrastate commerce to the end of inhibiting practices tending toward monopolization.

'As to the grounds of demurrer asserting that Section III(a) deprives complainant of equal protection of the law and denies him due process of law contrary to the Fourteenth Amendment of the Constitution of the United States, the Court is of the opinion that the demurrer is not well taken. Such probably would have been the conclusion even prior to the 'new departures' in federal constitutional law of the last two decades. Rast vs. Van Deman [& Lewis Co.], 240 U.S. 342, 36 S.Ct. 37, 60 L.Ed. 679.

'There is little room for doubt, indeed, since Nebbia vs. [People of State of ] New York, 291 U.S. 502, 78 L.Ed. 940, 54 S.Ct. 505, 89 A.L.R. 1469. And see Great Atlantic & Pacific Tea Co. vs. Ervin [D.C.], 23 Fed. S[upp]. 70; Olsen vs. [State of] Nebraska, 313 U.S. 236 , 85 L.Ed. 1305 , and Mora vs. Mejias [1 Cir.], 223 F.2d 814. In the Mora case, the First Circuit said that, insofar as the Fourteenth Amendment of the Federal Constitution is concerned, it is now undeniable that a state in the exercise of its police power may regulate the prices to be charged by an industry if its legislature determines that the public interest requires such regulation.

'The Robinson-Patman Act [15 U.S.C.A. §§ 13, 13a, 13b, 21a] prohibits sales at unreasonably low prices for the purpose of injuring and destroying competition. It would be unlikely that it would be held that the states, which have a general police power, could not similarly legislate upon a subject which Congress has so dealt with, under a police power merely concomitant with its delegated authority to regulate interstate commerce.

'It is noted that the demurrer raises no question as to a possible collision between this Act and federal anti-trust legislation such as the Sherman Act [15 U.S.C.A. §§ 1-7, 15 note], under the Commerce and Supremacy clauses of the Federal Constitution.

'The question of the validity of the basic section of this legislation under the Constitution of Alabama, however, is a different and much more difficult matter. Many states have enacted legislation similar in principle. Varied and diverse conclusions have been reached by the courts of other states upon the validity of some of the auxiliary sections of these 'Below Cost Sales' Acts, and certain applications of the Acts have been held unconstitutional. See (e. g.) Cohen vs. Frey & Son (Md. 51) , 80 Atl.2d 267.

'The only decision which the Court has been able to find which strikes down the Act fundamentally and entirely is Williams vs. Hirsch (March 15, 1955--Georgia) , 87 S.W.2d 70 , which was made to turn upon a finding that the merchandising of cigarettes was not a business affected with the public interest. The opinion cites a decision wherein the Supreme Court of Georgia had previously held unconstitutional the Milk Control Board law of that state [Laws 1937, p. 247 as amended]. Harris vs. Duncan , 67 S.E.2d 692. The essential validity of this sort of legislation seems to have been otherwise upheld without exception, where the sales below cost are only made unlawful when coupled with a specific intent to destroy competition. See the numerous cases cited in [Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal.2d 634, 82 P.2d 3] 118 A.L.R. 486, 506; [Commonwealth v. Zasloff, 338 Pa. 457, 13 A.2d 67] 128 A.L.R. 1120, 1126; 87 C.J.S. [Trade-Marks, Trade-Names, and Unfair Competition § 244 and § 245] p. 716, Sections 244 and 245.

'Article I of the Alabama Constitution of 1901 sets forth the Bill of Rights, and Section 1 declares:

"That all men are equally free and independent; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness.'

'The last two sections of the Bill of Rights are as follow: Section 35 provides:

'That the sole object and legitimate end of government is to protect the citizen in the enjoyment of life, liberty, and property, and when the government assumes other functions it is usurpation and oppression.'

'Section 36 provides:

"That this enumeration of certain rights shall not impair...