Sperry & Hutchinson Co. v. McBride

Citation30 N.E.2d 269,307 Mass. 408
PartiesSPERRY & HUTCHINSON CO. et al. v. McBRIDE, Director of Division of Necessaries of Life of the Commonwealth.
Decision Date27 November 1940
CourtUnited States State Supreme Judicial Court of Massachusetts

OPINION TEXT STARTS HERE

Reservation from Superior Court, Suffolk County; Donnelly, Judge.

Suit by the Sperry & Hutchinson Company and another against John P. McBride, Director of the Division of the Necessaries of Life of the Commonwealth, to enjoin enforcement of statute regulating location and size of signs used by retail dealers in gasoline, designating price of motor fuel, in so far as statute prohibits issuance of trading stamps, and in so far as it restricts right of retail dealers in motor fuel to fix or change the price of motor fuel for any period of time. The case was submitted to the superior court upon the pleadings and statement of agreed facts. On reservation from superior court.

Order in accordance with opinion.

Argued before FIELD, C. J., and LUMMUS, DOLAN, COX, and RONAN, JJ.

C. G. Smith, of New York City, and R. Wait, of Boston, for plaintiff.

R. Clapp, Asst. Atty. Gen., for defendant.

COX, Justice.

This is a bill in equity and comes to this court upon the reservation of a judge of the Superior Court, ‘upon the pleadings and statement of agreed facts,’ it appearing that the parties ‘have agreed on all material facts not admitted in the pleadings and that the case is ripe for the entry of final decree thereon.’ G.L.(Ter.Ed.) c. 214, § 31. The constitutionality of § 295E, inserted in G.L.(Ter.Ed.) c. 94, by St.1939, c. 459, § 1, is involved, as well as the applicability to the plaintiffs of said § 295E, and of § 295C of said c. 94, in the amended form appearing in said c. 459.

The plaintiff Ouellette, hereinafter referred to as Ouellette, is a ‘retail dealer’ in ‘motor fuel,’ as defined in § 295A of said c. 94. The Sperry & Hutchinson Company, hereinafter referred to as the corporation, is a foreign corporation authorized to do business in this Commonwealth since 1901. For many years it has been engaged in the business of issuing and redeeming trading stamps, and in November, 1937, Ouellette and the corporation entered into a written agreement in accordance with which the corporation has been furnishing some of its trading stamps to him at the price of $2.50 per thousand, and Ouellette, in accordance with the agreement, has been issuing these trading stamps to his customers who purchase motor fuel sold at retail from his pumps or other dispensing devices, for cash. ‘After application by customers to whom the said Ouellette extends credit he has followed the practice of issuing such stamps when such customers paid for motor fuel so obtained from him before the fifteenth proximo.’ Ouellette also issues these stamps upon like terms to his customers who purchase other commodities sold by him at his place of business. These trading stamps, when issued to customers, may be collected by them in books to the number of twelve hundred stamps per book, and are then redeemable in merchandise which the customer is entitled to receive from the corporation, the value of such merchandise being approximately $2.50 for each twelve hundred stamps, which amounts to approximately two and eight hundredths per cent of the amounts paid in making the purchases in which the stamps were issued.

The corporation has about forty licensees, including Ouellette, in Massachusetts who are retail dealers in motor fuel and associated products and who have been issuing this type of stamp ‘in the manner and redeemable as aforesaid, to cash, and after request, to customers paying on or before the fifteenth proximo for motor fuel.’ The corporation has about eighty licensees in Massachusetts who are retail dealers in motor fuel and associated products and who have been issuing another type of trading stamp in accordance with agreements with the corporation, ‘to cash and prompt paying customers.’ A book of twelve hundred of these stamps may be redeemed by the licensee for $2 in cash or $2 in merchandise of the customer's own selection from the stock of merchandise of such licensee. Thereafter, the licensee who has thus redeemed the book of these stamps sends it to the corporation, which pays him $2. The redemption value, thus realized, of this type of stamp amounts approximately to one and sixty-six hundredths per cent of the amount paid in making the purchases in connection with which the stamps were issued. Ouellette and other licensees of the corporation use these stamps as an advertising medium to attract customers to purchase motor fuel and to induce prompt payment. Upon the enactment of the Motor Fuel Sales Act (evidently referring to § 295C of said c. 94 as inserted by St.1938, c. 411 [see now St.1939, c. 459, § 1]), Ouellette and the other licensees of the corporation who are retail dealers in motor fuel, posted upon their respective pumps a proper sign, as required by said act, showing the price of the motor fuel, including the tax thereon, and also posted in connection with said sign a notice saying that the cash payment of the posted price entitled a purchaser to one trading stamp on each ten cents paid. Samples of these notices relating to the trading stamps, annexed to the bill and referred to as such in the agreed statement of facts, do not reach the dimensions to which price signs are limited by said § 295C. The dealers were notified by the defendant that ‘in view of the provisions of the Motor Fuel Sales Act, sections 295C and 295E (evidently referring to St.1939, c. 459, § 1), they could not lawfully post notices relative to the giving of trading stamps, and could not lawfully give them to customers in connection with the sale of motor fuel from the pumps, and they were ordered by the defendant to take the notices down and to refrain from further issuance of the trading stamps in connection with the sale of motor fuel. As the result of further warning to Ouellette from the defendant that it would be necessary for the latter to take further action under the statute, Ouellette, and other licensees of the corporation who operated filling stations, took down the notices referring to the issuance of trading stamps and discontinued giving them to purchasers of motor fuel. As a result ‘of the enactment of the said Motor Fuel Sales Act and the threatened enforcement thereof against the * * * [corporation] and its licensees as aforesaid, compelling the discontinuance of the use of said notices and stamps in connection with the sale of motor fuel, the business of * * * [Ouellette] in the sale of motor fuels and also in associated products has fallen off, and the business of the * * * [corporation] with its licensees who operate filling stations for the sale of motor fuel has likewise fallen off.’

At the hearing before the legislative committees that considered the provisions of ‘said statute,’ it appeared that the following conditions within the retail motor fuel industry existed in Massachusetts, and that these are among the conditions that brought about the enactment of this legislation. There had developed a practice of using misleading signs on various pumps maintained by retail gasoline dealers, and of having different prices on different pumps by which purchasers buying gasoline for their motor vehicles were deceived and misled as to the grade, quality and price of the gasoline that was being sold to them. Many dealers, in trying to obtain customers by selling motor fuel at a reduced price, had been adulterating their gasoline with kerosene, which was cheaper, and the ‘prohibition of a reduction from the net price of motor fuel from that posted’ led to such adulteration and similar fraudulent schemes which in turn led to widespread practices of fraud upon customers of motor fuel retail sales establishments, but it is agreed that none of the conditions described before the legislative committees existed at the premises maintained by Ouellette.

The defendant is the Director of the Division on the Necessaries of Life of the Department of Labor and Industries, and is vested and charged with the duties of administering and enforcing the provisions of the Motor Fuel Sales Act, § 295H, added to G.L.(Ter.Ed.) c. 94 by St.1939, c. 459, § 1.

The bill sets out the business relation of the plaintiffs, the practice of Ouellette in issuing trading stamps furnished by the corporation, substantially as set forth in the agreed facts, the interest of both plaintiffs in the subject matter of the suit, and the injury to their businesses. They pray for an injunction against the enforcement of the statute in question, that, in so far as it prohibits the issuance of trading stamps in the circumstances described, it be delared unconstitutional, and that, in so far as it may restrict Ouellette's right, or the right of other retail dealers in motor fuel, to fix or change the price of motor fuel for any period of time, it be declared unconstitutional.

It seems that a brief reference to the statute and its chronological history is of importance. Kneeland v. Emerton, 280 Mass. 371, 375, 376, 183 N.E. 155, 87 A.L.R. 1. G.L.(Ter.Ed.) c. 94, entitled ‘Inspection And Sale Of Food, Drugs And Various Articles,’ covers a wide field and embraces many varied articles. It contained no provisions relative to the sale of motor fuel until by St.1933, c. 228, introducing a new section 295A, entitled ‘An Act to prevent fraud and misrepresentation in the sale of gasoline, lubricating oils and other motor fuels, and to prevent adulteration thereof,’ provision was made, subject to penalty, against sales from containers of motor fuel of products other than those indicated by some mark of the manufacturer or distributor of the product, if any, appearing on the container, against the adulteration of any of said products offered for sale under such distinguishing marks, and against the substitution therefor of any other motor fuel or petroleum product. The next addition to...

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