State v. J. M. Seney Co.

• Citation: 107 A. 189,134 Md. 437
• Decision Date: 14 May 1919
• Docket Number: 5.
• Parties: STATE v. J. M. SENEY CO.
• Court: Maryland Court of Appeals

107 A. 189

134 Md. 437

STATE v. J. M. SENEY CO.

No. 5.

Court of Appeals of Maryland

May 14, 1919

Appeal from Criminal Court of Baltimore City; John J. Dobler, Judge.

The J M. Seney Company, a corporation, was indicted for selling and delivering certain stamps of the kind and for the use mentioned in Acts 1916, c. 704, without paying the license fee thereby imposed. Judgment discharging defendant, and the State appeals. Reversed and remanded.

Philip B. Perlman, Asst. Atty. Gen. (Albert C. Ritchie, Atty. Gen and Lindsay C. Spencer, Asst. State's Atty., of Baltimore, on the brief), for the State.

Wm. M Ballou, of Baltimore (J. Straith Briscoe, of Baltimore, on the brief), for appellee.

URNER J.

By chapter 704 of the Acts of 1916, an annual license fee of $1,500 is required to be paid before any person, firm, association, or corporation can lawfully "sell or deliver any stamps, coupons, tickets, certificates or other similar devices which are or may be redeemable for merchandise" "to any other person, firm, association or corporation, in connection with any sale by such other person, firm, association or corporation, of any goods, wares or merchandise." The defendant corporation was indicted for selling and delivering certain stamps of the kind and for the use mentioned in the act without paying the license fee thereby imposed. Special pleas to the indictment were filed describing the nature and processes of the defendant's business, asserting that it is a legitimate undertaking, and charging that the requirement of the license fee in question is prohibitive in effect and unreasonable in its discriminations, and is therefore unconstitutional and void. A demurrer to the pleas was overruled, and, from the judgment thereupon entered discharging the defendant, the state has appealed.

The business in which the defendant is engaged, as shown by its pleas, is exclusively a trading stamp enterprise. Its operations consist solely of the sale of trading stamps to merchants for issue by them to purchasers for cash in the course of their retail trade and redeemable by the defendant when presented in books containing 990 stamps in cash or in merchandise, at the customer's option. The cash redemption value of a full book of stamps is $2, but when redeemed in merchandise it represents a higher valuation. Consequently, about 80 per cent. of the redemptions are in merchandise. The license fee referred to is not required from merchants issuing and redeeming their own stamps, or from those engaged in the business of providing others with stamps which are redeemable simply in cash. It is exacted only when the stamps are issued to merchants by a trading stamp dealer and "are or may be redeemable for merchandise," and that is the kind of business with which we are now concerned. The question to be decided is whether a business of that nature can be suppressed by the Legislature, such being the effect of the trading stamp license provision of the act of 1916, according to the allegation of the pleas and the admission of the demurrer.

In three recent cases the Supreme Court of the United States has decided that the use of trading stamps, redeemable in articles of merchandise, is subject to regulation, restriction, or prohibition by a state in the exercise of its police power, and hence is not within the protection of the federal Constitution. Rast v. Van Deman & Lewis Co., 240 U.S. 342, 36 S.Ct. 370, 60 L.Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455; Tanner v. Little, 240 U.S. 369, 36 S.Ct. 379, 60 L.Ed. 691; Pitney v. Washington, 240 U.S. 387, 36 S.Ct. 385, 60 L.Ed. 703. These decisions were based on the theory that such a business is not so clearly devoid of any injurious effect upon the public welfare as to justify a judicial declaration that the effort of the Legislature to apply the police power to the subject is manifestly arbitrary and unreasonable and therefore ineffective. The considerations supporting this view were stated, in part, as follows:

"There are many lawful restrictions upon liberty of contract and business. It would be an endless task to cite cases in demonstration, and that the supplementing of the sale of one article by a token given and to be redeemed in some other article has accompaniments and effects beyond mere advertising the allegations of the bill and the argument of counsel establish. Advertising is merely identification and description, apprising of quality and place. It has no other object than to draw attention to the article to be sold, and the acquisition of the article to be sold constitutes the only inducement to its purchase. ***

"The schemes of complainants have no such directness and effect. They rely upon something else than the article sold. They tempt by a promise of a value greater than that article and apparently not represented in its price, and it hence may be thought that thus by an appeal to cupidity, lure to improvidence. This may not be called in an exact sense a 'lottery,' may not be called 'gaming'; it may, however, be considered as having the seduction and evil of such, and whether it has may be a matter of inquiry, a matter of inquiry and judgment that it is finally within the power of the Legislature to make. Certainly in the first instance, and, as we have seen, its judgment is not impeached by urging against it a difference of opinion. Chicago, B. & Q. R. Co. v. McGuire, 219 U.S. 549 [31 S.Ct. 259, 55 L.Ed. 328]; and German Alliance Ins. Co. v. Lewis, 233 U.S. 389 [34 S.Ct. 612, 58 L.Ed. 1011, L. R. A. 1915C, 1189]. And it is not required that we should be sure as to the precise reasons for such judgment, or that we should certainly know them or be convinced of the wisdom of the legislation. Southwestern Oil Co. v. Texas, 217 U.S. 114, 126, 127 [30 S.Ct. 496, 54 L.Ed. 688]. See, also, Munn v. Illinois, 94 U.S. 113, 132 ."

"But it may be said that judicial opinion cannot be controlled by legislative opinion of what are fundamental rights. This is freely conceded; it is the very essence of constitutional law, but its recognition does not determine supremacy in any given instance. 'While the courts must exercise a judgment of their own, it by no means is true that every law is void which may seem to the judges who pass upon it excessive, unsuited to its ostensible end, or based upon conceptions of morality with which they disagree. Considerable latitude must be allowed for differences of view as well as for possible peculiar conditions which this court can know but imperfectly, if at all. ***' Otis v. Parker, 187 U.S. 606, 608, 609 [23 S.Ct. 168, 47 L.Ed. 323]." Rast v. Van Deman & Lewis Co., supra, 240 U.S. 365, 366, 36 S.Ct. 377, 378 (60 L.Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455).

In Tanner v. Little, supra, at page 384 of 240 U.S., at page 384 of 36 S.Ct. (60 L.Ed. 691), the court repeats that-

The so-called "'premium system' is not one of advertising merely. It has other, and, it may be, deleterious, consequences. It does not terminate with the bringing together of seller and buyer, the profit of one and the desire of the other satisfied, the article bought, and its price being equivalents. It is not so limited in purpose or effect. It has ulterior purpose, and how it has developed, complainants vividly represent by their averments. It appears that companies are formed, called trading stamp companies, which extend and facilitate the schemes, making a seller of merchandise their agent for the distribution of stamps to be redeemed by them or other merchants; the profit of all being secured through the retail purchaser who has been brought under the attraction of the system. There must therefore be something more in it than the giving of discounts, something more than the mere laudation of wares. If companies-evolved from the system, as counsel say in justification of them-are able to reap a profit from it, it may well be thought there is something in it which is masked from the common eye, and that the purchaser at retail is made to believe that he can get more out of the fund than he has put into it, something of value which is not offset in the prices or quality of the articles which he buys. It is certain that the prices he pays make the efficiency of the system and the fund, if we may individualize it, out of which the cost of the instruments and agents of the system must be defrayed and the profit to all concerned paid. The system, therefore, has features different from the ordinary transactions of trade which have their impulse, as we have said, in immediate and definite desires having definite and measurable results. There may be in them at times reckless buying, but it is not provoked or systematized by the seller."

"Complainants charge that the tax of the statute is not upon the business, but upon its incidents. The separation is artificial. It is the incidents which give character to the business, affecting it with evil, it was thought, provoking therefore against it the power of the state and taking away from it the immunity it else might have."

"It is unimportant what the incidents may be called, whether a method of advertising, discount giving, or profit sharing. Their significance is not in their designations, but in their influence upon the public welfare. And of this the judgment of the Legislature must prevail, though it be controverted and opposed by arguments of strength. Nor is there support of the system or obstruction to the statute in declamation against sumptuary laws, nor in the assertion that there is evil lesson in the statute, nor in the prophecies which are ventured of more serious intermeddling with the conduct of business. Neither the declamation, the assertion, nor the prophecies can influence a present judgment. As to what extent legis

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