State ex rel. Simpson v. Sperry-Hutchinson Co.

• Decision Date: 15 April 1910
• Citation: 126 N.W. 120,110 Minn. 378
• Parties: STATE ex rel. SIMPSON, Atty. Gen., v. SPERRY-HUTCHINSON CO.
• Court: Minnesota Supreme Court

110 Minn. 378

126 N.W. 120

STATE ex rel. SIMPSON, Atty. Gen.,

v.SPERRY-HUTCHINSON CO.

Supreme Court of Minnesota.

April 15, 1910.

Quo warranto by the State, on relation of George T. Simpson, Attorney General, against the Sperry-Hutchinson Company. Writ discharged.

Syllabus by the Court

Chapter 142, Laws 1909 (Rev. Laws Supp. 1909, ss 5170-5 to 5170-8), declares that any contract or arrangement between two parties, by which one of them shall issue and redeem trading stamps, or tickets, which are given in connection with the sale of merchandise by the other, shall constitute a gift enterprise, unless the articles promised to be given as such gift or premium shall be definitely described on the stamp, or ticket, and the character and value of the articles are made known to the purchaser of the merchandise at the time of the purchase, and unless the right of the holder of such stamp, or ticket, to the gift or article so promised for its redemption, becomes absolute upon the completion of the delivery thereof, without the holder being required to collect any specific number of similar stamps or tickets and present them collectively for redemption, and unless the right of the holder of such stamp or ticket to the prize or gift so offered is absolute, and does not depend on any chance, uncertainty, or contingency whatever. Held, the act is a constitutional exercise of the police power, in so far as it prohibits the issuing of trading stamps or tickets to be redeemed in articles of merchandise in any manner which depends upon any chance, uncertainty, or contingency.

The issuing and redemption of trading stamps, as carried on by respondent company, is not attended with such elements of chance, uncertainty, and contingency as to justify the restrictions imposed by the act. The enforcement of those conditions against the company would operate, not as a reasonable regulation of its business, but practically as an absolute prohibition thereof. George T. Simpson and Young & Stone, for relator.

Morton Barrows and John Hall Jones, for respondent.

LEWIS, J.

On the petition of the Attorney General a writ of quo warranto issued from this court directing respondent to show cause by what warrant it claimed the right to continue the enjoyment of its corporate rights, franchises, and privileges in the state of Minnesota. Respondent demurred to the petition upon the ground that the facts stated therein did not constitute a cause of action, for the reason that chapter 142, Laws 1909 (Rev. Laws Supp. 1909, §§ 5170-5 to 5170-8), upon which the petition is based, violates article 1, § 7, of the Constitution of Minnesota, and the fourteenth amendment of the Constitution of the United States. That portion of chapter 142, necessary to set out in detail, reads:

‘Sec. 2. Whenever two or more persons enter into any contract, arrangement or scheme, whereby for the purpose of inducing the public to purchase merchandise or other property of one of the parties to said scheme, any other party thereto, for a valuable consideration and as a part of such scheme, advertises and induces or attempts to induce the public to believe that he will give gifts, premiums or prizes to persons purchasing such merchandise or other property of such other party to said scheme, and that stamps or tickets will be given by the seller in connection with such sales entitling the purchaser of such property to receive such prizes or gifts from any other party to such scheme, the parties so undertaking and carrying out such scheme shall be deemed to be engaged in a ‘gift enterprise,’ unless the articles or things so promised to be given as gifts or premiums with or on account of such purchases, shall be definitely described on such stamp or ticket and the character and value of such promised prize or gift fully made known to the purchaser of such merchandise or other property at the time of the sale thereof, and unless the right of the holder of such stamp or ticket to the gift or premium so promised, becomes absolute upon the completion upon the delivery thereof without the holder being required to collect any specified number of other similar stamps or tickets and to present them for redemption together, and the right of the holder of such stamp or ticket to the prize or gift so offered is absolute, and does not depend on any chance, uncertainty or contingency whatever.

‘Sec. 3. Any person who engages in a gift enterprise such as is defined in this act or who advertises the same in any manner, or who in furtherance of such scheme, as an inducement to purchasers issues in connection with the sale of any merchandise or other property any such ticket or stamp purportingtobe redeemable in some indefinite article not described thereon, only when presented with a collection of other stamps or tickets of like kind, by some other party to such scheme, and which, unless presented in the manner aforesaid is not redeemable at all, shall each and all be guilty of a misdemeanor.’

According to the petition, respondent is a corporation organized and existing under and by virtue of the laws of the state of New Jersey, and, having complied with the provisions of chapter 69, Gen. Laws 1899, is authorized to do business within the state of Minnesota. Its only business consists in the sale, issue, and redemption of what are commonly known as ‘trading stamps.’ It issues and sells its trading stamps pursuant to contracts entered into with retail merchants in the state, by the terms of which the company agrees to deliver its stamps to the merchant at a stated price, and the merchant agrees to offer these stamps to his customers as an inducement for cash trade. The stamps are redeemed by the company with merchandise only and when presented by the merchant's customers in trading stamp books containing 990 stamps. The company agrees to advertise the name and business of the merchant in its S. & H. green trading stamp books; distribute them among the people of the city, or town, where the merchant resides, and to furnish the merchant signs advertising the fact that be distributes S. & H. green trading stamps. The merchant agrees that he will not use or give away any other coupons or stamps issued by either himself or any other firm while under contract with the company. The title to the stamps remains in the company until redeemed, and the contract for their use covers the period of one year. The petition does not disclose whether the stamps are universally sold to merchants upon the same basis, but there is a provision which reads as follows: ‘Unless spot cash is paid upon delivery, the subscriber agrees to pay the Sperry-Hutchinson Company fifty cents per hundred for the use of all stamps disposed of by him, making weekly settlements for the same.’ From this provision we shall assume that the general price charged merchants for the use of the stamps was $5 per thousand. The petition alleges that the company has entered into a great many contracts with various merchants throughout the state; that none of the trading stamps are redeemed singly, but only in numbers of 990, when that number has been collected and pasted into the book furnished for that purpose. The petition also states that the company advertises in its trading stamp books that it will receive in exchange for stamps the wrappers, trade-marks, coupons, tags, labels, etc., collected from articles in the trade, such as coffee, condensed milk, tobacco, etc.; and that the trading stamp book also contains the statements that customers could only appreciate the variety and value of the merchandise given as premiums by visiting the company's premium parlor, where they would find practically everything, and the best of everything, required in any home. The petition states that the company never redeems any of its trading stamps in cash, or by exchanging a pen or pens therefor, although, since the act in question went into effect, respondent has caused to be printed across the face of its stamps the words: ‘One pen value one mill.’ It is also stated that respondent pursues a regular system of advertising its trading stamps books, through the newspapers, and otherwise, for the purpose of inducing the public to deal with the merchants who are under contract to furnish stamps, and that such inducement consists in the promise to redeem the same in valuable articles of household goods and other merchandise.

The legal status of trading stamp companies has been under consideration by many of the courts of this country, involving statutes varying more or less in the details and scope of the regulation. The question being new in this court, it seems advisable to review, as briefly as possible, the more important cases on the subject.

A case frequently cited as authority on the principles involved in all such cases is that of People v. Gillson, 109 N. Y. 389, 17 N. E. 343,4 Am. St. Rep. 465. The New York statute prohibited the giving of any gift or prize in connection with the sale of any article of food, and made a person violating it guilty of a misdemeanor. Gillson was arrested for giving away a cup and saucer in connection with the sale of two pounds of coffee, and the court held that the statute violated the fourteenth amendment of the federal Constitution. In a very able opinion, Judge Peckham defined the term ‘liberty,’ as used in the Constitution, and the court held that there was no basis for legislative interference, for the reason that the act of giving away the article in connection with the purchase of any food contained none of the elements of chance or lottery, did not involve the question of public health, contained none of the elements of fraud or crime, and that the statute was an unwarranted interference with the natural right of the defendant to attract custom in the manner stated. This case was made the basis of People ex rel. Madden v. Dycker, 72 App. Div. 308,76 N. Y. Supp. 111, wherein the Supreme Court...