United States v. Investors Diversified Services

• Court: U.S. District Court — District of Minnesota
• Writing for the Court: NORDBYE
• Citation: United States v. Investors Diversified Services, 102 F.Supp. 645 (D. Minn. 1951)
• Decision Date: 18 December 1951
• Docket Number: Civ. No. 3713.
• Parties: UNITED STATES v. INVESTORS DIVERSIFIED SERVICES, Inc. et al.

102 F. Supp. 645

UNITED STATES v. INVESTORS DIVERSIFIED SERVICES, Inc. et al.

Civ. No. 3713.

United States District Court D. Minnesota, Fourth Division.

December 18, 1951.

G. A. Youngquist and C. E. Phillips, Minneapolis, Minn. (Fowler, Youngquist, Furber, Taney & Johnson and John R. Goetz, Minneapolis, Minn., of counsel), for defendants in support of said motion.

Willis L. Hotchkiss, Ralph M. McCareins and Charles W. Houchins, of the Anti-trust Division, Dept. of Justice, Chicago, Ill., for plaintiff in opposition thereto.

NORDBYE, Chief Judge.

Plaintiff's complaint charges that defendants are engaged in the business of making loans secured by mortgages on real estate, and that as a condition for obtaining the loans the mortgagor must agree that only defendants shall write, place, or sell to the mortgagor the hazard insurance which the mortgage requires the mortgagor to carry upon the mortgaged property. Plaintiff contends that the effect of such conditions and agreements excludes all but defendants from writing insurance on the mortgaged property and ties in the selling of insurance to the making of mortgage loans. Such activities, plaintiff alleges, violate Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2, and Section 3 of the Clayton Act, 15 U.S.C.A. § 14, and require the injunctive and other relief sought in the complaint against defendants.

Defendants move to strike the allegations charging a violation of Section 3 of the Clayton Act upon the premise that the facts stated by the complaint fail to charge a violation of that statute. The validity of the motion's premises becomes the broad issue here.

Section 3 of the Clayton Act provides, "It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia * * * on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce."

The provision prohibits two types of situations: (1) the so-called "tying in" contracts, and (2) the so-called requirements contract. Standard Oil of California v. United States, 337 U.S. 293, 297, 300, 69 S.Ct. 1051, 93 L.Ed. 1371. See also United Shoe Machinery Corp. v. United States, 258 U.S. 451, 42 S.Ct. 363, 66 L.Ed. 708; I. B. M. Corp. v. United States, 298 U.S. 131, 56 S.Ct. 701, 80 L.Ed. 1085; International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20, and Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 42 S.Ct. 360, 66 L.Ed. 653; Fashion Originators Guild v. F. T. C., 312 U.S. 457, 668, 61 S.Ct. 703, 85 L.Ed. 949. Analysis of this complaint shows that the so-called tying-in contract is involved here. The complaint is based upon the premise that defendants have loaned or agreed to loan money upon the condition that the mortgagor would allow the defendants to procure and write the hazard insurance on the property.

The initial question presented, therefore, on this motion is whether a loan of money secured by a real estate mortgage constitutes a lease or a sale or a contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities within the scope of Section 3 of the Clayton Act. Obviously, only a transaction of the particular kind and type referred to in the Act constitutes a violation thereof.

It is difficult to conceive of a transaction for a loan of money as being a lease, sale, or contract for sale of a commodity. Certainly, the loan is not a sale in the usual business sense. A sale is an absolute transfer of property or something of value for a consideration from the seller to the buyer. Alworth-Washburn Co. v. Helvering, Commissioner, 1933, 62 App. D.C. 322, 67 F.2d 694, 696. A loan of money, on the other hand, is an advance of money or credit upon an understanding that an equivalent is to be returned to the lender by the borrower on demand or within a specified time. In the United States money is merely a medium of exchange, not something which is bought and sold in exchange for something else. One does not "sell" money in the usual business sense. Money is used to "purchase" other articles or things. That is, other articles or things are sold in exchange for money. Money is not sold in exchange for other articles or things. Nor is money "leased" in the usual sense of that term. When money is loaned, only its equivalent, not the article or thing loaned, is to be returned.

In considering whether the contract between the Curtis Publishing Company and certain distributors of its publications violated Section 3 of the Clayton Act, the Court of Appeals for the Third Circuit held, in Curtis Publishing Company v. Federal Trade Comm., 270 F. 881, at pages 904, 905, that "The words `lease,' `sale,' `contract for sale,' `lessee,' and `purchaser,' being the words used, and no other relation than lease and sale being mentioned, there is no express purpose in the clause quoted to make it cover any other subject than leases, sales, or contracts for sale, and to embrace no other persons than lessees and purchasers. The words are so clear they require no construction * * *."

And in affirming this decision the Supreme Court said, 260 U.S. 568, at page 581, 43 S.Ct. 210, at page 213, 67 L.Ed. 408, "Judged by its terms, we think this contract is one of agency, not of sale upon condition, and the record reveals no surrounding circumstances sufficient to give it a different character. This, of course, disposes of the charges under the Clayton Act."

In these decisions the court determined the meaning of the term "sale" according to the usual business sense, not under any specialized definition which the Act fails to provide. That such an approach must be taken and such a meaning assigned to the term "lease" also, would follow from these decisions. For the two terms are...