Summary
In Borden Co. v. McDowell, 8 Wis.2d 246, 99 N.W.2d 146, a statute regulating certain unfair trade practices in the dairy industry was upheld, but the act was apparently not attacked as a special law nor were any constitutional provisions mentioned relating to such a question.
Summary of this case from Borden Company v. ThomasonOpinion
October 6, 1959 —
November 3, 1959.
APPEALS from two judgments of the circuit court for Dane county: RICHARD W. ORTON, Circuit Judge of the Fifth circuit, Presiding. Reversed.
For the appellants the cause was argued by Robert J. Vergeront and Albert O. Harriman, assistant attorneys general, with whom on the brief was John W. Reynolds, attorney general.
For the respondents there was a brief by Shea Hoyt, attorneys, and Ralph M. Hoyt of counsel, all of Milwaukee; Joseph A. Greaves of Chicago, Illinois, of counsel, for the Borden Company; Walter L. Dilger of Chicago, Illinois, of counsel, for the Wright Wagner Dairy Company; and oral argument by Mr. Hoyt and Mr. Greaves.
A brief was filed by Schubring, Petersen, Sutherland Axley and Floyd A. Brynelson, all of Madison, as amici curiae.
The actions are for declaratory judgments, pursuant to sec. 269.56, Stats.
Each plaintiff is a corporation engaged in the wholesale distribution of commodities described by secs. 100.201 and 100.202, Stats., as "selected dairy products." Plaintiffs are among the largest or are affiliated with the largest corporations in the United States engaged in this business. The defendant in each action is the director of the department of agriculture of the state of Wisconsin. These said statutes were originally enacted by the legislature of 1955 and amended by the legislature of 1957 and defendant is charged by law with their enforcement.
Such statutes seriously restrict each plaintiff in conducting its business in the manner and methods which they have long employed. Each plaintiff brought action praying that these statutes be declared void and their enforcement enjoined as violating sec. 1 of the Fourteenth amendment of the constitution of the United States and of sec. 1, art. I of the constitution of Wisconsin, in that the statutes deprive plaintiffs of their liberties and properties without due process of law and of the equal protection of the laws.
The merchandising practices of the two plaintiffs are similar and enforcement of the statutes affects them similarly. The actions were consolidated for trial. Trial was to the court. The court filed a memorandum decision which applied to and governed both actions, and findings of fact, conclusions of law, and judgments rendered separately in each case are similar. The court granted judgments in accord with the demands of the complaints. The defendant in each action has appealed and the appeals from each judgment have been consolidated.
The statutes challenged by the plaintiffs and declared unconstitutional by the trial court are:
"100.201 UNFAIR TRADE PRACTICES IN THE DAIRY INDUSTRY. (1) Definitions. When used in this section unless context otherwise requires:
"(a) `Selected dairy products' includes milk, cream, ice cream, frozen desserts, ice milk, and sherbet.
"(b) `Sell at retail,' `sales at retail,' and `retail sales' mean and include any transfer for a valuable consideration made in ordinary course of trade or the usual conduct of the seller's business, of title to tangible personal property to the purchaser for consumption or use other than resale or further processing or manufacturing. The above terms shall include any transfer of such property where title is retained by the seller as security for the payment of the purchase price.
"(c) `Sell at wholesale,' `sales at wholesale,' and `wholesale sales' mean and include any transfer for a valuable consideration made in ordinary course of trade or the usual conduct of the seller's business, of title to tangible personal property to the purchaser for purposes of resale or further processing or manufacturing. The above terms shall include any transfer of such property where title is retained by the seller as security for the payment of the purchase price.
"(d) `Retailer' means every person engaged in the business of making sales of selected dairy products at retail within this state; provided that in the case of a person engaged in the business of making both sales at retail and sales at wholesale such term shall apply only to the retail portion of such business.
"(e) `Wholesaler' means every person engaged in the business of making sales of selected dairy products at wholesale within this state; provided that, in the case of a person engaged in the business of making both sales at retail and sales at wholesale such term shall apply only to the wholesale portion of such business.
"(2) Each of the practices described in this subsection is declared to be an unfair trade practice. It is unlawful for any person to be engaged in such practices. No wholesaler shall:
"(a) Give or extend discounts or rebates to retailers on selected dairy products, except in accordance with published price lists available for inspection and copying by any retailer or wholesaler, provided always, that a wholesaler may sell selected dairy products at a price lower than said published prices in order to meet a bona fide offer by a competitor to a particular retailer, but such additional discount or rebate shall not be given until the wholesaler shall first have made a written record of the date of such competitive offer, the terms thereof, the name of the retailer to whom made and the name of the competitor by whom made. Such record shall be available for inspection and copying by any retailer or wholesaler upon his written request therefor. It is the duty of every wholesaler under this subsection to prepare and publish as hereinafter provided current price lists giving the prices of all selected dairy products sold by him at wholesale and giving the effective date or dates of such prices. Such price lists shall be available for inspection and copying by any retailer or wholesaler upon his written request therefor. The failure or refusal of any wholesaler to make available for inspection any record or price list required to be made available tinder this subsection within twenty-four hours after a request has been received shall be prima facie evidence of a violation of this section and shall be punished as provided in sec. 100.26 (3). In case of the failure of any wholesaler to make available any record or price list to any wholesaler or retailer, the court, or a judge thereof, shall, upon a showing of such failure or refusal, and upon notice, order said wholesaler to give to the retailer or wholesaler so requesting, within a specified time, an inspection thereof, with permission to make a copy therefrom.
"(b) Furnish, give, lend, sell, or rent any advertising material of any form or matter except matter advertising the wholesaler's own products, providing that not more than one third of the space or cost in advertising matter be used to identify the retailer.
"(c) Make payments of money, credit, gifts, or loans to retailers as rental for the storage or display of selected dairy products on the premises where they are offered for sale by the retailer.
"(d) Make or underwrite loans to a retailer or become bound in any manner for the financial obligation of any retailer except that a wholesaler may lend money to a retailer for the purchase of equipment for the storage and display of selected diary products, provided the loan is for not more than 90 per cent of the purchase price, bears at least a five per cent annual interest rate, is payable in equal monthly instalments over a period of not more than forty-eight months, and is secured by a chattel mortgage specifying all payments by the retailer duly filed by the wholesaler within ten days after the making or underwriting of said loan in the office of the register of deeds of the county in which the retailer is located as provided in sec. 241.10.
"(e) Furnish, sell, give, lend, or rent any equipment to a retailer except:
"1. The wholesaler, under a bill of sale or conditional sales contract describing the property sold and specifying the price and terms of sale duly filed by him in the office of the register of deeds in the county in which the retailer is located within ten days after delivery of the equipment described therein, may sell equipment for the storage and display of selected dairy products to the retailer but the selling price shall be not less than the cost to the wholesaler, less 10 per cent per year depreciation, plus transportation and installation costs, plus at least six per cent, but in no event shall it be less than $50 per unit. In filing bills of sale under this section, the register of deeds shall follow the procedure provided in sec. 122.10 for the filing of conditional sales contracts. If the wholesaler shall make said sale under a conditional sales contract, the terms of sale shall be no more favorable to the retailer than those provided in par. (d).
"2. The wholesaler may provide without restriction coin-vending machines from which the product vended is consumed on the premises.
"3. The wholesaler may furnish storage cabinets to retailers without restriction, provided such storage cabinets are used exclusively for the storage and preservation of selected dairy products distributed or manufactured by the wholesaler, and are not used by the retailer or anyone else to sell or offer for sale at retail any of the products stored therein.
"(f) Maintain or make repairs of any equipment owned by a retailer except those used exclusively for selected dairy products. On such repairs the wholesaler shall make charges for the service and parts at the same prices as are charged by third persons rendering such service in the community where the retailer is located but in no event shall the charges be less than the cost thereof to the wholesaler plus a reasonable margin of profit.
"(g) Extend or give credit to any retailer in excess of thirty days payable fifteen days thereafter.
"(h) Give any other gift of money, merchandise, services, or materials of any value to any retailer to assist him in the conduct of his business.
"(3) Nothing in this section shall be interpreted to prohibit the operation of a retail outlet by a wholesaler for retail sales or to prohibit the use by him in such retail outlet any equipment or advertising or miscellaneous matter owned by him provided that such retail outlet is under direct control and management of the wholesaler.
"(4) Nothing in this section shall be interpreted to prohibit the giving away of merchandise to be consumed on the premises.
"(5) For the purpose of this section any subsidiary or affiliate corporation, co-operative, officer, director, or partner of a corporation, co-operative, or partnership which is a wholesaler of selected dairy products is deemed to be a wholesaler of selected dairy products.
"(6) (a) Violators of this section shall be subject to the penalties prescribed in sec. 100.26 (3).
"(b) Participation by a retailer in any of the prohibited trade practices shall be fined $100.
"(c) Violators of this section shall be subject to a suit for damages by the injured person, corporation, partnership, or business as prescribed under sec. 100.20 (5).
"(d) Any retailer or wholesaler may file a written complaint with the department alleging that a person named therein is engaging in unfair trade practices as defined in this section. Whenever such a complaint is filed it is the duty of the department to proceed to hearing and adjudication as provided in sec. 100.20.
"(7) (a) `Broker' means any person engaged in negotiating sales or purchases of selected dairy products for or on behalf of a retailer or wholesaler, or both.
"(b) It is unlawful for a broker to offer for sale or purchase or participate in the offering for sale or purchase of selected dairy products if such sale or purchase, if engaged in by a wholesaler, violates this section.
"100.202 CONTRACTS IN VIOLATION VOID. All contracts and agreements made in violation of sec. 100.201 are void."
The trial court made findings of fact that these plaintiffs and other wholesalers of selected dairy products for many years assisted retailers of such products:
"By lending to retailers, free of charge, refrigerating and dispensing equipment for selected dairy products.
"By selling such equipment to retailers upon such terms as to credit, security, and period of instalment payments as were deemed appropriate in each particular case.
"By selling to retailers small items of equipment essential for the dispensing of selected dairy products, such as malted-milk mixers, cone dispensers, ice-cream scoops, etc.
"By furnishing repair service, without charge except for replacement parts, upon retailer-owned equipment for the refrigeration and dispensing of selected dairy products, together with incidental minor repair service on other equipment owned by the retailer.
"By making loans of money to retailers, principally to enable them to acquire, improve, or remodel their retail establishments, on such terms as to credit, security, and period of instalment repayment as were deemed appropriate in each particular case.
"By furnishing to retailers of selected dairy products advertising signs and other advertising material, in which the space devoted respectively to the identification of the retailer and to the advertising of the wholesaler's selected dairy products was determined according to what was deemed appropriate for each particular case without regard to any fixed percentage.
"By extending credit to retailers in such amounts and for such periods as were deemed warranted in each particular case.
"By furnishing advice and assistance to retailers with reference to such matters as store arrangement, preparation of sodas, sundaes, and other dishes using selected dairy products, and the organization and conduct of special sales.
"By furnishing personnel for the holding of demonstrations in the stores of retailers in order to stimulate the sale of selected dairy products."
The court also found that the aid so given to retailers was solely for the purpose of stimulating the sale of such products to the public, and the result was to increase very greatly the sale of selected dairy products in Wisconsin, while none of such practices had a tendency to promote monopoly on the part of larger wholesalers or unfairly to divert trade from smaller wholesalers to larger ones.
The court also found that the enforcement of the statutes prohibiting such practices would restrict the growth of the industry and cause irreparable damage to the plaintiffs and other wholesalers, and these statutes were not enacted in the interest of public health, morals, or welfare but their only purpose, as disclosed by the evidence, was to relieve certain wholesalers of fair and legitimate competition involved in the employment of such practices, which the statutes now prohibit or restrict.
The trial court also found these restrictions and prohibitions are arbitrary, unreasonable, and oppressive and have no relation to the accomplishment of any purpose for which the police power of the state may constitutionally be exercised, or any public purpose whatever.
Therefore the trial court concluded that the statutes in question violate constitutional guaranties by taking plaintiffs' properties without due process of law and depriving them of the equal protection of the laws.
For convenience we will speak as though there is only one action and one appeal before us.
Appellant's first argument is that the action is not a proper one for declaratory judgment because the respondents have not yet been prosecuted for violation of the statute nor has appellant threatened them with prosecution. The appellant is duty-bound to enforce these statutes. That enforcement would greatly interfere with respondents' marketing practices of long standing. In Petition of State ex rel. Attorney General (1936), 220 Wis. 25, 28, 264 N.W. 633, in taking jurisdiction, we said:
"The whole philosophy underlying the Uniform Declaratory judgments Act is that it enables controversies of a justiciable nature to be brought before the courts for settlement and determination prior to the time that a wrong has been committed or threatened. (Borchard, Declaratory judgments, p. 3.) No court takes jurisdiction under the Uniform Declaratory judgments Act of a subject matter of which it would not have jurisdiction in a remedial action. The Uniform Declaratory judgments Act merely authorizes the court to take jurisdiction at a point earlier in time than it would do under ordinary remedial rules and procedure."
Appellant's statutory duty of enforcement presents the threat to respondents' business even though appellant has not yet moved against them. We consider that the allegations of the complaint warrant relief by declaratory judgment. In this we agree with the learned trial court.
We pass then to the merits. All acts of the legislature are presumed to be constitutional until established otherwise by a competent tribunal. State ex rel. Broughton v. Zimmerman (1952), 261 Wis. 398, 411, 52 N.W.2d 903; State v. Stehlek (1953), 262 Wis. 642, 645, 56 N.W.2d 514. The party attacking the statute has the burden of overcoming the presumption and showing that the statute is unconstitutional. State v. Stehlek, supra. Respondents have presented evidence that for many years past they and wholesalers of selected dairy products in general (including wholesalers who now appear by amici curiae in defense of the statutes) have pursued the practices which the statute now condemns. Respondents contend that these practices, by assisting the retailer, have promoted the healthy growth of the dairy industry with great benefit to each intermediate participant in the industry and to the public, and that these practices have had neither intention nor tendency to monopolize the wholesale commerce in selected dairy products nor to reduce competition in that or other fields. They may be right. Respondents produced testimony which would warrant such conclusions. The trial judge agreed with respondents, as the findings of fact, supra, show. It would be difficult, indeed, for us to say that the findings are contrary to the great weight and clear preponderance of the evidence. Probably we would feel unable to reverse the learned trial court if this appeal could be decided by the preponderance-of-the-evidence principle which governs us in findings of ordinary questions of fact.
But we have here something quite different. The enactment of these statutes is an attempt by the legislature to exercise the police power of the state to promote the public welfare. The weight of the evidence pro and con does not conclude the legislative judgment as it may conclude the appellate court in the usual case.
"The reasons for a given statute are for the legislature, if there are any which can fairly have weight. They are not for the courts. The latter have no control over the validity of a law unless they can say with substantial certainty that no argument or consideration of public policy exists which could have weight with any reasonable and honest man. If any such argument or reason can be suggested, its weight or sufficiency is not debatable in the courts. The existence of legitimate and adequate reasons for any law should not lightly be denied. Human minds differ, and what may seem inadequate or irrelevant to one may seem cogent to another. One is not justified, therefore, in assuming that all who differ from him are unreasonable or are not acting in good faith. It is from such considerations as these that the courts have laid down for themselves the rule that only in a clear case — clear beyond reasonable doubt — will they venture to assert that a law is without reason to support either its purpose or the classifications it may make." State ex rel. Kellogg v. Currens (1901), 111 Wis. 431, 438, 87 N.W. 561.
"If there is any reasonable basis upon which the legislature may constitutionally rest, the court must assume that the legislature had such fact in mind and passed the act pursuant thereto. The court cannot try the legislature and reverse its decision as to the facts. All facts necessary to sustain the act must be taken as conclusively found by the legislature, if any such facts may be reasonably conceived in the mind of the court." State ex rel. Carnation M. P. Co. v. Emery (1922), 178 Wis. 147, 160, 189 N.W. 564.
The challenged statutes forbid a variety of aids formerly given by all wholesalers to retailers whose trade the wholesaler desired. While the respondents asserted and the trial court found that the purpose of such aids was solely to stimulate the sale of selected dairy products to the consumer and that none of the practices tended to promote monopoly or unfairly to divert trade from smaller wholesalers to larger ones, there is substantial evidence to the contrary.
For instance: When plaintiff Wright Wagner Dairy Company bought from Piggly Wiggly all the latter's ice-cream cabinets and agreed to furnish all the necessary refrigeration in the Piggly Wiggly stores, Piggly Wiggly shifted its ice-cream business to Wright Wagner. When the Borden Company supplied the Kroger chain stores with ice-cream cabinets to be used only for Borden products, Borden obtained the Kroger ice-cream account. Wright Wagner made a loan of $2,050 to one Ruffalo, a retailer. Before that Ruffalo had bought his ice cream elsewhere. After Wright Wagner made him the loan, Ruffalo got his ice cream from Wright Wagner.
The various aids by wholesalers to retailers of the sort referred to in the statute, if unrestricted, may be and in fact sometimes are actual subsidies. It is perfectly apparent that at the retail level an unsubsidized dealer having only a comparable article cannot compete with one who is subsidized. In the same way, to retain the competitive advantage of the subsidy the retailer will give his business to the wholesaler which can or will furnish the aid. At least it is conceivable that a legislature may think so, and not without reason; and the legislature may conclude that the tendency is to monopolize the wholesale commerce in selected dairy products and eventually eliminate the wholesalers who have good merchandise but who are unable to meet subsidized competition. This, we think, the legislature may reasonably consider incompatible with the public welfare.
We conclude that the unregulated practices referred to in these statutes, such as the extension of unlimited credit, the making of loans, the wholesaler's advertisement of the retailer's business, the gift or loan of essential retailing fixtures and equipment, the gift of secret rebates and discounts given to favored retailers by wholesalers in consideration of the retailer's business may, in the judgment of the legislature, be considered unfair trade practices, and regulated in the promotion of the public welfare.
The legislature may honestly and reasonably conceive that the prohibition of such practices or the regulation of them as the statute provides will enable smaller or less-wealthy wholesalers to compete for the retailer's trade and therefore to continue to function in the economy of the transfer of the product of the dairy farmer to its ultimate conversion and sale in the form of selected dairy products. Respondents make the objection that those regulatory provisions are enacted for the benefit of a class, the "small wholesalers," and not for the general public welfare. We held this objection was not valid when we said in Kuhl Motor Co. v. Ford Motor Co. (1955), 270 Wis. 488, 502, 71 N.W.2d 420:
"The fact that the persons to be benefited by this regulatory measure are confined to one class of our citizens, auto dealers, does not militate against the same being a legitimate exercise of the police power. As the Connecticut court recently stated in Amsel v. Brooks (1954), 141 Conn. 288, 297, 106 A.2d 152, 157, 45 A.L.R.2d 1234, 1241:
"`A statute which is otherwise within the police power or serves a public purpose is not unconstitutional merely because it incidentally benefits a limited number of persons.'
"While all the citizens of the state are entitled to be protected against unfair dealing by others, this does not mean that the legislature must by one sweep prohibit all unfair dealing and cannot proceed piecemeal to remedy particular types of unfair dealing which manifest themselves in particular occupations or industries."
Whether the statutory prohibitions and regulations are the most-effective ways of avoiding the evil or whether worse evils may flow from such regulation the court cannot be concerned.
"With the wisdom of the policy adopted, with the adequacy or practicability of the law enacted to forward it, the courts are both incompetent and unauthorized to deal. The course of decision in this court exhibits a firm adherence to these principles. Times without number we have said that the legislature is primarily the judge of the necessity of such an enactment, that every possible presumption is in favor of its validity, and that though the court may hold views inconsistent with the wisdom of the law, it may not be annulled unless palpably in excess of legislative power." Nebbia v. New York (1934), 291 U.S. 502, 537, 54 Sup. Ct. 505, 78 L.Ed. 940.
We can, of course, examine into the constitutionality of the methods chosen by the legislature. In the Nebbia Case, supra, the United States supreme court, in sustaining the regulation of milk prices, said (pp. 538, 539):
"The constitution does not secure to anyone liberty to conduct his business in such fashion as to inflict injury upon the public at large, or upon any substantial group of the people. Price control, like any other form of regulation, is unconstitutional only if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt, and hence an unnecessary and unwarranted interference with individual liberty."
We cannot find here that the presumptions in favor of adequate reasons and choice of methods which attach to legislative acts have been overcome by respondents and these statutes are arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt.
The respondents and the trial court point out that these aids to retailers by wholesalers are of long standing. But —
It is to be remembered that we are dealing with one of the most essential powers of government, one that is the least limitable. It may, indeed, seem harsh in its exercise, usually is on some individual, but the imperative necessity for its existence precludes any limitation upon it when not exerted arbitrarily. A vested interest cannot be asserted against it because of conditions once obtaining." La Crosse Rendering Works v. La Crosse (1939), 231 Wis. 438, 448, 285 N.W. 393.
Respondents contend that these statutes deprive them of freedom of contract — property right. We have often upheld statutes which restrict long-continued freedoms to make contracts in the course of their business where the legislature has determined that the public welfare requires restriction. Statutes prohibiting contracts for interest in excess of certain rates for the use of money are well-nigh universal. In State ex rel. Finnegan, v. Lincoln Dairy Co. (1936), 221 Wis. 1, 265 N.W. 197, 265 N.W. 851, citing the Nebbia Case, supra, we sustained statutory restrictions on the prices to be paid for milk. In State v. Ross (1951), 259 Wis. 379, 48 N.W.2d 460, we sustained sec. 100.30, Stats., restricting sales of merchandise at prices less than cost, the loss-leader statute. And see Kuhl Motor Co. v. Ford Motor Co., supra, pages 502, 503.
The learned trial court was influenced by the decision of Fairmont Foods Co. v. Burgum (N. D. 1957), 81 N.W.2d 639. There the North Dakota court declared unconstitutional a statute very similar to the ones which are now before us. In spite of the respect which we pay to the court of our sister state we think their decision does not accord with our established precedents in recognizing facts and purposes which Wisconsin courts must assume that the legislature had in mind. The references to State ex rel. Kellogg v. Currens, supra, and State ex rel. Carnation M. P. Co. v. Emery, supra, show our adoption of those principles when the court examines the constitutionality of legislation and the Nebbia Case, supra, shows their adoption by the supreme court of the United States. They are inconsistent, we think, with the North Dakota decision to which our learned trial court gave so much weight and we feel bound by our own precedents.
Governed by such precedents, we conclude that the dairy industry is subject to regulation and has been regulated so by the legislature for the public welfare for many years. The present statutes seem to us to be of the nature of those which we have previously sustained as constitutional.
The monopolistic tendencies in merchandising practices which the legislature perceived and believed to be inconsistent with the public welfare were not mere bogies under the bed but were beliefs based on facts which reasonable and honest men could entertain even if other men equally honest and reasonable might see the facts differently and reach different conclusions. The prohibitory and regulatory methods chosen by the legislature are not inappropriate to the public purpose sought by the legislature to be accomplished.
Respondents find uncertainties in the application of the law. We do not find that there are necessarily the alleged uncertainties. That may or may not appear when attempts are made in enforcement. In the meantime we should wait until there are concrete facts rising from the application of the statute. If unconstitutional applications are attempted, the courts must deal with them at that time.
"In the construction of statutes it is generally held that they should not be held to be too indefinite to be operative because they contain terms not susceptible of exact meaning, or are imperfect in their details, or where they employ words commonly understood. 50 Am. Jur., Statutes, p. 489, sec. 473. A statute should not be pronounced void for uncertainty if it is susceptible of any reasonable construction. Wentworth v. Racine County (1898), 99 Wis. 26, 74 N.W. 551. No reason appears why these rules should not be applied to orders of an administrative agency. They should be given effect if by any reasonable rule of construction they are capable of administration and enforcement." Madison Bus Co. v. Public Service Comm. (1953), 264 Wis. 12, 14, 58 N.W.2d 463.
We consider that the statutes now before us are capable of constitutional administration and enforcement. We sustain the constitutionality of secs. 100.201, 100.202, Stats.
By the Court. — Judgments reversed.