State ex rel. Galanos v. Mapco Petroleum, Inc.

• Decision Date: 18 December 1987
• Citation: 519 So.2d 1275
• Parties: 1988-1 Trade Cases P 68,103 STATE of Alabama, ex rel. Chris N. GALANOS, etc. v. MAPCO PETROLEUM, INC. 85-725.
• Court: Alabama Supreme Court

Page 1275

519 So.2d 1275

1988-1 Trade Cases P 68,103

STATE of Alabama, ex rel. Chris N. GALANOS, etc. v. MAPCO PETROLEUM, INC.

85-725.

Supreme Court of Alabama.

Dec. 18, 1987.

Thomas M. Galloway, Jr., Mobile, and W. Dennis Summers of Summers, Jones & Pendergast, Atlanta, Ga., for appellants.

G. Sage Lyons, J.P. Courtney III, and Charles L. Miller, Jr., of Lyons, Pipes & Cook, Mobile, for appellee.

Charles F. Norton, Jr., of Falkenberry, Whatley & Heidt, Birmingham, for amicus curiae Alabama Service Station Dealers' Ass'n.

ALMON, Justice.

The question presented in this appeal is the constitutionality of the Motor Fuel Marketing Act, Ala.Code 1975, § 8-22-1, et seq. ("the Act"). The State, through the District Attorney for Mobile County, brought this action against Mapco Petroleum, Inc., doing business as "Western" service stations in Mobile County. The complaint sought a civil penalty for Mapco's alleged violations of the Act and an injunction against further violations. The trial court granted Mapco's motion to dismiss the complaint, holding that the Act is unconstitutional.

The Act contains the following "Legislative declaration and intent," § 8-22-3:

"It is hereby declared that marketing of motor fuel in Alabama is affected with the public interest. It is hereby declared to be the legislative intent to encourage fair and honest competition, and to safeguard the public against creation of monopolies or unfair methods of competition, in transactions involving the sale of, or offer to sell, or inducement to sell motor fuel in the wholesale and retail trades in this state. It is further declared that the advertising, offering for sale, or sale of motor fuel below cost or at a cost lower than charged other persons on the same marketing level with the intent of injuring competitors or destroying or substantially lessening competition is an unfair and deceptive trade practice. The policy of the state is to promote the general welfare through the prohibition of such sales. The purpose of the Motor Fuel Marketing Act is to carry out that policy in the public interest, providing for exceptions under stated circumstances, providing for enforcement and providing penalties."

The Act contains further provisions designed to carry out this intent.

Such an undertaking is, on its face, within the powers granted to the legislature under Article IV, § 103, of the Constitution of Alabama of 1901:

"Sec. 103. Regulation, etc., of common carriers, partnerships, associations trusts, monopolies and combinations of capital.

"The legislature shall provide by law for the regulation, prohibition, or reasonable restraint of common carriers, partnerships, associations,trusts, monopolies, and combinations of capital, so as to prevent them or any of them from making scarce articles of necessity, trade, or commerce, or from increasing unreasonably the cost thereof to the consumer, or preventing reasonable competition in any calling, trade or business."

This section has rarely been cited. Instead, this Court has developed a line of cases holding statutes unconstitutional, under the liberty interest protected by §§ 1 and 35 of the Constitution of 1901, as "price fixing" legislation or as excessive restraints upon the right to engage in trade. Of course, if § 103 were to conflict with §§ 1 and 35, then the latter provisions would govern, as noted by Justice Goldthwaite in an early case: "I consider the declaration of rights, as the governing and controlling part of the constitution; and with reference to this, are all its general provisions to be expounded, and their operation extended or restrained." In re Dorsey, 7 Port. 293, 359 (Ala.1838).

These provisions read:

"ARTICLE 1

"Declaration of Rights

"That the great, general, and essential principles of liberty and free government may be recognized and established, we declare:

"Sec. 1. Equality and rights of men.

"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.

"...

"Sec. 35. Objective of government.

"That the sole and only 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."

The line of cases on this point can be traced to City Council of Montgomery v. Kelly, 142 Ala. 552, 38 So. 67 (1904). In that case, the Court held unconstitutional a license tax imposed upon the issuance of trading stamps. After citing §§ 1 and 35 of the Constitution, the Court observed:

"The liberty which is so sedulously guarded by the constitutions of the United States, and of this and other states comprehends more than the mere freedom from personal restraint. It includes the right to pursue any useful and harmless occupation, and to conduct the business in the citizen[']s own way, without being discriminated against either by being prohibited from engaging in it or by being burdened with discriminative taxation....

"So long as his manner of conducting his business does not offend public morals and work an injury to the public, it is his constitutional right to pursue [his business], on terms equal to that allowed to others in like business, even though his methods may have a tendency to draw trade to him, to the detriment of competitors."

142 Ala. at 558-59, 38 So. at 69. Of course, Kelly involved no question of monopolies or § 103, being concerned only with license or privilege taxes.

The Court in State v. Goldstein, 207 Ala. 569, 93 So. 308 (1922), relied on the constitutional protection of liberty and struck down a "profiteering" law penalizing the sale of goods at a "fraudulent or grossly excessive price." The Court noted that the law was "operative without regard to any conditions of scarcity or monopoly," and that there was no contention that "the business of selling useful and harmless commodities ... is or can be affected with a public interest, so long as trade is free and unaffected by monopolistic combinations, or artificial restraints, or emergency conditions which involve temporarily the health or safety of the public." Id., 207 Ala. at 570, 93 So. at 311.

With Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934), there came a shift in the analysis of such cases under federal law, with the United States Supreme Court holding that economic regulations would withstand a challenge under the due process clause ¹ of the Fourteenth Amendment to the Constitution of the United States unless "arbitrary, discriminatory, or demonstrably irrelevant to the policy the Legislature is free to adopt, and hence an unnecessary and unwarranted interference with individual liberty." Id., 291 U.S. at 539, 54 S.Ct. at 517. See the discussion of Nebbia in Mount Royal Towers v. Alabama Bd. of Health, 388 So.2d 1209 (Ala.1980).

This Court came to a result similar to that in Nebbia when it decided Franklin v. State ex rel. Alabama State Milk Control Bd., 232 Ala. 637, 169 So. 295 (1936). The Court analyzed the Milk Control Board Act in terms of whether it was a reasonable exercise of the police power; observed that the question of whether that act offended the Fifth and Fourteenth Amendments to the Constitution of the United States was foreclosed by Nebbia, which involved a substantially identical New York statute; and expressed the state constitutional question as, "Was it within legislative competence, where a business or industry is affected with a public interest, to regulate that industry to the extent of fixing prices?" Id., 232 Ala. at 642, 169 So. at 299. The Court noted that the business of producing and selling milk "is a business affected with a public interest, which is tantamount to saying 'subject to the exercise of the police power,' and to regulation and control, even to the extent of fixing prices." Id., citing Nebbia.

Franklin addressed several subsidiary constitutional questions not pertinent here. No mention was made of §§ 1 and 35, or of § 103 beyond including it in a list of sections raised by the appellant as violated by the Milk Control Board Act. The Franklin Court distinguished State v. Goldstein, supra, without much discussion, other than to point out the language, quoted above, stating that the act at issue in Goldstein was not predicated on any questions of monopoly or scarcity.

After Franklin came a series of cases making points pertinent to the present appeal. In both City of Mobile v. Rouse, 233 Ala. 622, 173 So. 266 (1937), and Lisenba v. Griffin, 242 Ala. 679, 8 So.2d 175 (1942), the Court struck down legislation setting minimum prices that barbers could charge for their services. Rouse relied largely upon Goldstein in striking the law as an infringement upon the liberty to set prices for one's own services. It distinguished Franklin by observing that personal services are not affected with a public interest unless rendered in a business so affected or in an official capacity. Lisenba held that the ordinance was void because it was in conflict with a general law on the same subject. Further, it cited Rouse, supra, and McDowell, infra, in observing, obiter dictum, that the ordinance violated § 1 of the Constitution.

In a pair of cases, the Court struck down a law requiring the posting of prices at gasoline service stations and penalizing the sale of gasoline below the posted price. Alabama Independent Service Station Ass'n v. McDowell, 242 Ala. 424, 6 So.2d 502 (1942); Alabama Independent Service Stations Ass'n v. Hunter, 249 Ala. 403, 31 So.2d 571 (1947). In McDowell, the Court held that the law violated §§ 1 and 35, citing Kelly, Goldstein, and Rouse, supra. The Court stated that "The operation of filling stations for the retail sale and delivery into motor vehicles of motor fuels for the generation of power, is not a business affected with 'a public interest.' McDowell, 242 Ala. at...