State ex rel. Edmisten v. J. C. Penney Co., Inc.

Decision Date14 April 1977
Docket NumberNo. 75,75
Citation292 N.C. 311,233 S.E.2d 895
CourtNorth Carolina Supreme Court
PartiesSTATE of North Carolina ex rel. Rufus L. EDMISTEN, Attorney General v. J. C. PENNEY COMPANY, INC.

Rufus L. Edmisten, Atty. Gen. by Alan S. Hirsch, Associate Atty., Raleigh, for the State.

Smith, Anderson, Blount & Mitchell by John H. Anderson and Henry A. Mitchell, Jr., Raleigh and Alston, Miller & Gaines by Sidney O. Smith, Jr., Atlanta, for defendant-appellant.

David M. Fitzgerald, Washington, D.C., for the Federal Trade Commission as amicus curiae.

Jordan, Morris & Hoke by John R. Jordan, Jr. and R. W. Newsom, III, Raleigh, for the North Carolina Bankers Association, Inc. as amicus curiae

Johnson, Gamble & Shearon by Samuel H. Johnson, Raleigh, for the North Carolina Merchants Association, Inc. as amicus curiae.

COPELAND, Justice.

The question before the court on this appeal is whether the activities of merchants attempting to collect funds allegedly owed them were intended to be, and constitutionally can be, subject to G.S. 75-1.1. * The burden of proof on this issue falls upon the defendant who seeks to exempt himself from the statute's embrace. G.S. 75-1.1(d).

The statute, enacted by the legislature in 1969, provides in relevant part:

"Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." G.S. 75-1.1(a) (Emphasis supplied.)

Initially, the most striking aspect of the statutory language is its resemblance to Section 5(a)(1) of the Federal Trade Commission Act (hereinafter FTC Act) which provides as follows "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful." 15 U.S.C. § 45(a)(1) (Emphasis supplied.)

The similarity in language was apparently not accidental. See, Aycock, Antitrust and Unfair Trade Practice Law in North Carolina Federal Law Compared, 50 N.C.L.Rev. 199, 246 (1972) (hereinafter cited as Aycock); Morgan, The People's Advocate in the Marketplace The Role of the North Carolina Attorney General in the Field of Consumer Protection, 6 Wake Forest Intra.L.Rev. 1, 18 (1969) (hereinafter cited as Morgan); Comment, Consumer Protection and Unfair Competition in North Carolina The 1969 Legislation, 48 N.C.L.Rev. 896 (1970) (hereinafter cited as Comment). Consequently, we have said that the federal decisions construing the FTC Act, may furnish some guidance to the meaning of G.S. 75-1.1. Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 (1975).

No protracted analysis of dictionary and judicial definitions is needed to arrive at the conclusion that at least one definition of the word "commerce," which appears in both acts, is expansive enough to encompass all business activities, including the collection of debts. Indeed, the Federal Trade Commission (hereinafter FTC) and the federal courts construing the FTC Act have so held. See, e.g., Spiegel, Inc. v. FTC, 540 F.2d 287 (7th Cir. 1976); Floersheim v. FTC, 411 F.2d 874 (9th Cir. 1969), cert. denied, 396 U.S. 1002, 90 S.Ct. 551, 24 L.Ed.2d 494; Slough v. FTC, 396 F.2d 870 (5th Cir. 1968), cert. denied, 393 U.S. 980, 89 S.Ct. 448, 21 L.Ed.2d 440; In re Floersheim, 316 F.2d 423 (9th Cir. 1963); Mohr v. FTC, 272 F.2d 401 (9th Cir. 1959), cert. denied, 362 U.S. 920, 80 S.Ct. 672, 4 L.Ed.2d 739; William H. Wise Co. v. FTC, 101 U.S.App.D.C. 15, 246 F.2d 702 (1957), cert. denied, 355 U.S. 856, 78 S.Ct. 84, 2 L.Ed.2d 64; Dejay Stores v. FTC, 200 F.2d 865 (2d Cir. 1952); Bernstein v. FTC, 200 F.2d 404 (9th Cir. 1952); Bennett v. FTC, 91 U.S.App.D.C. 336, 200 F.2d 362 (1952); Rothschild v. FTC, 200 F.2d 39 (7th Cir. 1952), cert. denied, 345 U.S. 941, 73 S.Ct. 832, 97 L.Ed. 1367; Silverman v. FTC, 145 F.2d 751 (9th Cir. 1944) (all of the cases cited involved abuses in the collection of credit accounts by creditors, collection agencies, or companies selling "skip tracing" forms to creditors or collection agents).

"Commerce" under federal decisions "is a term of the largest import. It comprehends intercourse for the purposes of trade in any and all its forms. . . ." Welton v. Missouri, 91 U.S. 275, 280, 23 L.Ed. 347, 349 (1876); accord, Adair v. United States, 208 U.S. 161, 177, 28 S.Ct. 277, 281, 52 L.Ed. 436, 443 (1908); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189-90, 6 L.Ed. 23, 68 (1824). The federal courts have properly assigned the broadest possible definition to the word "commerce," since in defining the word, they define the limits of federal power to regulate activities under the commerce clause. U.S.Const. art. 1, § 8, cl. 3.

The federal court decisions, however, are not controlling in construing the North Carolina Act. See Horton v. Gulledge, 277 N.C. 353, 177 S.E.2d 885 (1970). Unlike other state trade regulation statutes, G.S. 75-1.1 does not require or direct reference to the FTC Act for its interpretation. See Ariz.Rev.Stat.Ann. § 44-1522 B (West 1967); Conn.Gen.Stat.Ann. § 42-110b(b) and (c) (West Cum. § 44-1522 B Supp.1977); Fla.Stat.Ann. § 501.204(2) (West Cum.Supp.1977); Idaho Code § 48-604, -618 (Cum.Supp.1976); Ill.Ann.Stat. ch. 121 1/2, § 262 (Smith-Hurd Cum.Supp.1977); Me.Rev.Stat.Ann. tit. 5, § 207 (West Supp.1973); Mass.Gen.Laws Ann. ch. 93A, § 2(b) and (c) (West 1972); Mont.Rev.Codes Ann. § 85-403 (Cum.Supp.1975); N.M.Stat.Ann. § 49-15-3 (Supp.1975): S.C.Code § 66-71.1(b) (Cum.Supp.1975); Tex.Bus. & Com.Code Ann. tit. 2, §§ 17.46(c), 17.49(b) (Vernon Cum.Supp.1976-77); Vt.Stat.Ann. tit. 9, § 2453(b) and (c) (1970). Moreover, by modifying the language borrowed from the federal act, the North Carolina legislature must have intended to alter its meaning to some extent.

"( W)ords used in the statute must be given their natural or ordinary meaning." Seminary, Inc. v. Wake County, 251 N.C. 775, 782, 112 S.E.2d 528, 533 (1960). By inserting the word "trade" in G.S. 75-1.1, which has a narrower meaning than the word "commerce," we believe the legislature signaled its intent to limit the otherwise broad definition of "commerce" obtained under federal decisions. Debt collection activities are "not trade in the ordinary sense" although they could be considered "a species of commerce." Bernstein v. FTC, supra, 200 F.2d at 405. The use of the work "trade" interchangeably with the work "commerce" indicates that a narrower definition of commerce which comprehends an exchange of some type was intended.

Just as in one sense the word "trade" has a limiting effect on the word "commerce," in another sense the work "commerce" enlarges the meaning of the word "trade." The two words, when used in conjunction, "include practically every business occupation carried on for subsistence or profit, and into which the elements of bargain and sale, barter, exchange, or traffic, enter." Black's Law Dictionary (4th Ed. 1968). Thus, a host of occupations would be covered by G.S. 75-1.1 that would not be subject to a statute which relied exclusively on the word "trade." See Comment, supra, 48 N.C.L.Rev. at 905-6.

We believe the unfair and deceptive acts and practices forbidden by G.S. 75-1.1(a) are those involved in the bargain, sale, barter, exchange or traffic. We are reinforced in this view by G.S. 75-1.1(b), a declaration of legislative intent having no counterpart in the federal act. G.S. 75-1.1(b) states:

"The purpose of this section is to declare, and to provide civil legal means to maintain, ethical standards of dealings between persons engaged in business, and between persons engaged in business and the consuming public within this State, to the end that good faith and fair dealings between buyers and sellers at all levels of commerce be had in this State." (Emphasis supplied.)

The General Assembly thus, is concerned with openness and fairness in those activities which characterize a party as a "seller." Debt collection is not an activity necessarily typical of nor unique to sellers. It is rather an activity descriptive of creditors. An individual or a company may conduct the activities of both seller and creditor, as does J. C. Penney Co., but it is only those activities surrounding the "sale" that are regulated by G.S. 75-1.1.

Also, bolstering our view of the legislature's intent is G.S. 75-15.1, a companion enforcement provision to G.S. 75-1.1. G.S. 75-15.1 provides that:

"In any suit instituted by the Attorney General to enjoin a practice alleged to violate G.S. 75-1.1, the presiding judge may, upon a final determination of the cause, order the restoration of any moneys or property and the cancellation of any contract obtained by any defendant as a result of such violation." (Emphasis added.)

Inherent in this remedy is the intent to prohibit only unfair and deceptive practices affecting sales. If the legislature had intended to cover the acts alleged in this suit, we believe it would have provided for the recission of contracts not only where the contract is obtained as a result of a violation, but also where a violation occurs which is unrelated to the contract's formation.

Another factor bearing on our decision in this case is contemporary literature on the subject. Strictly speaking, North Carolina has no documented legislative history. However, the then Attorney General, Robert Morgan, was instrumental in the enactment of G.S. 75-1.1, Aycock, supra, 50 N.C.L.Rev. at 207, and his views on the effect of the statute were expressed in a contemporaneous article. Morgan, supra, 6 Wake Forest Intra.L.Rev. at 18. The entire tone of the article suggests that the Attorney General was concerned about "consumer fraud" in securing passage of the new legislation. We catalogued those practices which he envisioned would be covered by G.S. 75-1.1 as follows:

"Cases involving unfair or deceptive practices include false advertising, misnaming and misrepresentation, misleading trade or products names, simulation of well known products or trade names, 'free' goods; deceptive...

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    ...that federal decisions construing that Act are instructive upon the meaning of G.S. 75-1.1. State of North Carolina ex rel. Rufus L. Edmisten v. J.C. Penney Co., 292 N.C. 311, 233 S.E.2d 895 (1977); Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 In Penney, our Supreme Court stated as follows:......
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