State v. Wender

• Decision Date: 13 April 1965
• Docket Number: No. 12347,12347
• Citation: State v. Wender, 149 W.Va. 413, 141 S.E.2d 359 (W. Va. 1965)
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia v. Morris S. WENDER.

Page 359

141 S.E.2d 359

149 W.Va. 413

STATE of West Virginia v.Morris S. WENDER.

No. 12347.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 19, 1965.

Decided April 13, 1965.

Syllabus by the Court.

1.The legislature is vested with a wide discretion in determining what the public interest requires, the wisdom of which may not be inquired into by the courts; however, to satisfy the requirements of due process of law, legislative acts must bear a reasonable relationship to a proper legislative purpose and be neither arbitrary nor discriminatory.

2.Legislation authorizing price-fixing must, among other requirements, concern an item or commodity affected with a public interest to avoid contravening the due process clause of the Constitution of this State.

3.Code, 47-13, as amended, 'The Cigarette Sales Act', violates Artield III, Section 10, of the Constitution of this State, the due process clause, and is unconstitutional.

4.In construing our state constitution, the Supreme Court of Appeals is not bound by rulings of courts of other states or of the United States Supreme Court.

C. Donald Robertson, Atty. Gen., William F. Carroll, Asst. Atty. Gen., Charleston, for plaintiff in error.

Pat R. Hamilton, Oak Hill, for defendant in error.

BROWNING, President:

Morris S. Wender, the defendant, was arrested on five several warrants issued by a justice of the peace of Fayette County, West Virginia, on April 22, 1963, charging him with the sale and delivery of cigarettes at retail for a price below the minimum established by Regulation CSA-2 promulgated by the Tax Commissioner of the State of West Virginia.The defendant entered pleas of not guilty to each complaint but was found guilty by the justice and fined one hundred dollars and costs on each offense.An appeal was taken to the Circuit Court of Fayette County and, on appeal, the defendant demurred to the charges against him on the ground that Code, 47-13-13 as amended, 'The Cigarette Sales Act', on which the charges were based, is unconstitutional.The demurrer was sustained by the Circuit Court of Fayette County and, on application of the state, this Court granted a writ of error and supersedeas on June 22, 1964.

Chapter 10, Acts of the Legislature, Regular Session, 1961(Code, 47-13, as amended), created what is known as 'The Cigarette Sales Act'.Section 3 thereof provides:

'It shall be unlawful and a violation of this article:

'(a) For any retailer or wholesaler with intent to injure competitors of destroy or substantially lessen competition:

'(1) To advertise, offer to sell, or sell, at retail or wholesale, cigarettes at less than cost to such a retailer or wholesaler, as the case may be.

'* * *'

The section then provides that any violation of the above is a misdemeanor punishable by a fine of not more than five hundred dollars for each such offense.Section 2, subsection (11)(a) provides:

'The term 'cost to the retailer' shall mean the 'basic cost of cigarettes' to the retailer plus the 'cost of doing business by the retailer', as evidenced by the standards and methods of accounting regularly employed by him in his allocation of overhead costs and expenses, paid or incurred, and must include, without limitation, labor (including salaries of executives and officers), rent, depreciation, selling costs, maintenance of equipment, delivery costs, all types of licenses, taxes, insurance and advertising:

Provided, That any retailer who, in connection with the retailer's purchase, receives not only the discounts ordinarily allowed upon purchases by a wholesaler but also shall, in determining 'costs to the retailer', pursuant to this subsection, add the 'cost of doing business by the wholesaler', as defined in section two, subparagraph ten of this section, to the 'basic cost of cigarettes' to said retailer, as well as the 'cost of doing business by the retailer'.

'(b) In the absence of the filing with the commissioner of satisfactory proof of a lesser or higher cost of doing business by the retailer making the sale, the 'cost of doing business by the retailer' shall be presumed to be eight per centum of the 'basic cost of cigarettes' to the retailer.

'(c) In the absence of the filing with the commissioner of satisfactory proof of a lesser or higher cost of doing business, the 'cost of doing business by the retailer', who, in connection with the retailer's purchase, receives not only the discounts ordinarily allowed upon purchases by a retailer but also, in whole or in part, the discounts ordinarily allowed upon purchases by a wholesaler, shall be presumed to be ten per centum of the sum of the 'basic cost of cigarettes' and the 'cost of doing business by the wholesaler'.'

Section 2, subsection (9) defines 'Basic cost of cigarettes' as the invoice cost of the cigarettes to the retailer or the replacement cost whichever is lower, less all trade discounts except the customary discounts for cash plus the value of any tax stamps if not included by the manufacturer in his list price.

Statutes such as the one under consideration have been enacted in a majority of the states, beginning in South Carolina in 1902.The bulk of them, however, apparently stemmed from the depression of the early 1930's, were given impetus by the Robinson-Patman Act of 1936, 15 U.S.C.A., § 13, et seq., and were intended to alleviate the situation existing in many fields of competition by eliminating the tendency of certain individuals and corporations to sell below cost in order to force their competitors out of business.The constitutionality of these statutes has been tested many times, the majority of the courts upholding their validity under the police power of the state and, concomitantly, that such statutes are not violative of the due process and equal protection clauses of the federal and of their respective state constitutions.Borden Co. v. Thomason, 353 S.W.2d 735(Mo., 1962);Rocky Mountain Wholesale Co. v. Ponca Wholesale Mercantile Co., 68 N.M. 228, 360 P.2d 6431961);Simonetti, Inc. v. State ex rel. Gallion, 272 Ala. 398, 132 So.2d 252(1961);State v. Consumers Warehouse Mkt., 183 Kan. 502, 329 P.2d 638(1958);Louisiana Wholesale Dist. Ass'n v. Rosenzweig, 214 La. 1, 36 So.2d 403(1948);Moore v. Northern Ky. Independent Food Dealers Ass'n, 286 Ky. 24, 149 S.E.2d 755(1941);State v. Sears, 4 Wash.2d 200, 103 P.2d 337(1940);Wholesale Tobacco Dealers Bureau of So. Cal. v. Nat'l Candy & Tobacco Co., 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486(1938);Nebbia v. People of State of New York(1933), 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940, 89 A.L.R. 1469.Other decisions are collected and analyzed in 128 A.L.R. 1126;118 A.L.R. 506;57 YaleL.J. 391 and 21 Va.L.R. 336.The general principle derived from these cases is that the prohibition of sales below cost lies within the police power of the state and the legislature is vested with a wide discretion in determining whatever economic policy may be deemed to promote the public welfare, which policy the courts are powerless to override provided the laws passed bear a reasonable relationship to the legislative purpose and are neither arbitrary nor discriminatory.

While conceding the soundness of the general rule, the courts in the following cases have struck down similar statutes on the ground that the act under consideration was discriminatory, vague, bore no reasonable relationship to the legislative purpose or concerned an item or commodity not 'affected with a public interest'.Williams v. Hirsch(1955), 211 Ga. 534, 87 S.E.2d 70;Gambone v. Commonwealth(1954), 375 Pa. 547, 101 A.2d 634;Harris v. Duncan(1951), 208 Ga. 561, 67 S.E.2d 692;Lane Distributors v. Tilton(1951), 7 N.J. 349, 81 A.2d 786;Serrer v. Cigarette Service Co.(Ohio Com.Pl.1946), 74 N.E.2d 841;Commonwealth v. Zasloff(1940), 338 Pa. 457, 13 A.2d 67, 128 A.L.R. 1120;Great A. & P. Tea Co. v. Ervin(D.C.1938), 23 F.Supp. 70.

In the instant case it will be noted that the warrants obtained against the defendant do not charge the defendant with having sold cigarettes at less than cost as defined by the statute but only with having sold cigarettes below the minimum price prescribed by the Regulation CSA-2 promulgated by the tax commissioner and do not allege the intent with which such sales were made, but in view of our ultimate holding that the act is unconstitutional we...