Gulf Oil Corporation v. Mays, Appellant.
Supreme Court of Pennsylvania
October 10, 1960
reargument refused November 22, 1960.
401 Pa. 413 | 164 A.2d 656
Before JONES, C. J., BELL, MUSMANNO, JONES, COHEN and EAGEN, JJ.
John T. Clary, with him Richard A. Bausher, George B. Clothier, Roy D. Jackson, Jr., and Stevens & Lee, and Obermayer, Rebmann, Maxwell & Hippel, for appellee.
OPINION BY MR. JUSTICE COHEN, October 10, 1960:
On September 15, 1955, Claude E. Mays purchased a gasoline service station in Berks County and began trading as Mays Gulf Service (Mays). On the same date Mays and Gulf Oil Corporation (Gulf) entered into a sales agreement whereby Mays agreed to purchase from Gulf all his requirements of “Gulf motor fuels” for resale at his gasoline station but not “less than 90,000 gallons of such motor fuels per annum.” The contract was to extend fifteen years.
From the time the sales agreement was entered into until the time of hearing in the court below, Mays purchased more than the minimum required gallonage of Gulf motor fuels each year.
When Mays and Gulf entered into the sales agreement, Gulf had no Fair Trade agreements with any of its retail dealers. On January 12, 1959, Gulf, act
Despite warnings by Gulf, Mays continued to sell such fuels at prices one cent less than the stipulated prices.
On March 26, 1959 Gulf filed an equity action against Mays in the Court of Common Pleas of Berks County seeking to enjoin him from continuing to sell Gulf motor fuels at less than the stipulated prices. After a hearing, a preliminary injunction was denied. The matter then went to final hearing and, on December 30, 1959, a final injunction decree was entered by a divided court. This decree permanently enjoined Mays from selling Gulf motor fuels at less than the stipulated prices and is the basis of this appeal.
Mays’ contentions are three-fold: (1) by reason of the sales agreement of 1955, etc., Mays became a dealer in a “captive” status and hence not within the Fair Trade Act provision; (2) in the absence of proof of any specific damage caused by Mays’ sales of Gulf motor fuels at less than the stipulated prices, Gulf is not entitled to injunctive relief; (3) the chancellor erred in his refusal to permit Mays to show that in
The accepted purpose of a fair trade act “is to prevent predatory price-cutting and cutthroat competition, and to protect owners and public alike against unfair practices in the distribution of articles of standard quality under a distinguished brand or mark.” Sinclair Refining Company v. Schwartz, 398 Pa. 60, 63, 157 A. 2d 63 (1959). Such legislation has withstood the challenge of transgressing the “due process” and “equal protection” clauses of the 14th Amendment on the ground that it is an appropriate exercise of the state police power reasonably calculated to prevent price-cutting and “loss-leader” practices which debase the good-will of a product known by its brand or trademark, injuring both the distributor and public in general. Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U. S. 183, 57 S. Ct. 139, 81 L. ed. 109 (1936).
Under the Pennsylvania Fair Trade Act, both “signers” and “non-signers”3 alike are bound to observe the minimum resale price set by a fair-trade distributor when a valid fair-trade contract has been entered into within the Commonwealth. Legitimization of such contracts, however, is completely dependent upon strict compliance with the Pennsylvania Fair Trade Act, and, where interstate commerce is affected, there must also be compliance with the federal fair-trade legislation, since both at common law and under the Sherman Anti-Trust Act minimum resale price maintenance contracts were held to be illegal per se as unreasonable restraints of trade. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 31 S. Ct. 376, 55 L. ed. 502 (1911); Schwegmann Bros. v.
Since the appellee is engaged in interstate commerce its fair trade program must first be exempted from federal condemnation by the Miller-Tydings Amendment of §1 of the Sherman Act4 and the McGuire Amendment of §5(a) of the Federal Trade Commission Act,5 in order that the Pennsylvania Fair Trade Act may validly apply, United States v. McKesson & Robbins, Inc., 351 U. S. 305, 310-311, 76 S. Ct. 937, 100 L. ed. 1209 (1956); Schwegmann Bros. v. Calvert Distillers Corp., supra; Esso Standard Oil Company v. Secatore‘s, Inc., 246 F. 2d 17 (1st Cir.) cert. denied, 355 U. S. 834, 78 S. Ct. 54, 2 L. ed. 2nd 46 (1957), as well as comply with the Pennsylvania statute. Cf. Burche Co. v. General Electric Company, 382 Pa. 370, 115 A. 2d 361 (1955).
The Miller-Tydings Amendment, and in almost identical language the McGuire Amendment, provides, in relevant part, that the federal antitrust legislation shall not “render illegal, contracts or agreements prescribing minimum prices for the resale of a commodity which bears, or the label or container of which bears, the trade mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, when contracts or agreements of that description are lawful as applied to intrastate transactions, under” the applicable state law. But both amendatory acts provide that the grant of immunity from federal proscription “shall not make lawful any contract or agreement, providing for the establishment or maintenance of minimum resale prices on any commodity herein involved . . . be-
In the instant case, the sole consideration given to the aspect of competition between the parties or competition of the product with others in its class is the assertion by the appellee in its complaint that “Gulf brand gasoline is sold to the consuming public by retailers, including defendant, from vending equipment which bears Gulf‘s trade marks and brands, and is in fair and open competition throughout Pennsylvania with gasolines of the same general class produced by others” and the admission thereto by the appellant in his answer. The record is otherwise devoid, undoubtedly because of the admission, of any evidence which shows the assertion to be the fact. Even though the admission here is made in an adversary proceeding, still the state‘s interest in seeing that unlawful price fixing is not indulged in is of such importance that the mere admission by the adversary is not sufficient to provide the essential prerequisites necessary to invoke the statutory rights and exemptions provided by the act.
It is important to bear in mind that absent the protective federal and state legislation minimum resale price maintenance contracts will be unenforceable as contrary to our basic anti-monopoly philosophy of unfettered competition in the market of goods and serv-
So far as gasoline distributors are concerned, such proof is not without difficulties. In Esso Standard Oil Company v. Secatore‘s, Inc., supra, the gasoline company not only supplied its gasoline to retail dealers but also sold direct to some ultimate consumers consisting mostly of operators of fleets of trucks. The court concluded that the gasoline company was in competition with the “non-signer” retailer defendant who also did substantial business with operators of fleets of motor vehicles, and held that retail price maintenance agreements between the gasoline company and third parties were illegal under the federal legislation and could not therefore be enforced under the “non-signer” provision of the State Fair Trade Act against the defendant.
Since the record must be remanded for further proceedings, some other matters deserve comment. By its very nature, the gasoline industry does not clearly appear to be appropriately suitable for fair-trade usages. Virtually all retail service stations sell but one brand of gasoline, which, for all practical purposes, is their major product. There is little possibility of “loss-leader” selling by single product retailers. Apparently, gasoline companies buy and sell each other‘s gasoline when temporary shortage conditions prevail, or to shortcut transportation costs, or to remove “wildcat” surpluses from the market, or for sundry other reasons. If the gasoline sold is other than that of the company‘s whose name appears on the pump, little argument can be made that the prestige of the trade mark or brand is being protected. When these two basic reasons for fair trade are removed from consid-
It is quite true that this Court has decided that “gasoline” as a commodity is within the protection of our Fair Trade Act under a literal reading of its provisions: Sinclair Refining Company v. Schwartz, supra. Indeed, the addition to our act of the phrase “or the vending equipment from which that commodity is sold to the consumer bears,” by separate amendment in 1941,
The decree of the court below is reversed, and the case is remanded for further proceedings consistent with this opinion.
On September 15, 1955, Claude E. Mays, trading as Mays Gulf Service (Mays), with the financial assistance of Gulf Oil Corporation (Gulf), purchased a gasoline service station in Reiffton, Berks County. To finance this transaction Mays borrowed $25,000 from the Mellon National Bank and Trust Company. This loan was evidenced by two notes signed by Mays: one note for $6928.75 payable in five years and another note for $18,071.25 payable in fifteen years, both notes bearing interest at three and one-half (3 1/2%) percent annually. Mays’ obligation to the Mellon Bank was unconditionally guaranteed by Gulf.
To secure Gulf‘s guaranty, Mays and his wife gave Gulf a mortgage, with accompanying bond, for $25,000 covering the gasoline station. On the same date, Mays and Gulf entered into two other separate agreements: a sales agreement and a lease option agreement. Under the sales agreement Mays agreed to purchase over a period of fifteen years all his requirements of “Gulf motor fuels” for resale at his gasoline station but not “less than 90,000 gallons of such motor fuels per annum“. Under the lease option agreement1 Mays and his wife gave to Gulf “an irrevocable option” to lease the gasoline station for $200 per month, the option being for a fifteen year period and to be exercised upon the happening of any one or more certain specified conditions.2
At the time Mays and Gulf entered into the sales agreement, Gulf had no Fair Trade agreements with any of its retail dealers. On January 12, 1959, Gulf, acting pursuant to the Pennsylvania Fair Trade Act,4 entered into Fair Trade agreements with its retail dealers establishing minimum retail prices for the sale of Gulf motor fuels.5 Mays did not sign an agreement with Gulf. Each non-signing retail dealer, including Mays, was duly notified that Gulf had entered into these agreements with other dealers and advised of the terms thereof.6 All Gulf‘s retail dealers, including those who had not signed agreements, with the exception of Mays, observed and complied with the stipulated prices.
Despite warnings by Gulf, Mays continued to sell such fuels at prices one cent less than the stipulated prices.7
The majority of this Court would now reverse this decree and remand the record to the court below for further testimony upon the ground that Gulf has not shown its right to obtain equitable relief against a “non-signer” price cutter under the Fair Trade Act. The rationale of the majority opinion is that Gulf failed to prove that its gasoline was “in free and open competition with commodities of the same general class produced or distributed by others“.
In its complaint Gulf alleged that “Gulf brand gasoline is sold to the consuming public by retailers, including defendant, from vending equipment which bears Gulf‘s trade marks and brands, and is in fair and open competition throughout Pennsylvania with gasolines of the same general class produced by others“. Mays in his pleading admitted this averment. The majority opinion takes the unique position that the Commonwealth9 has an interest “in seeing that unlawful price fixing is not indulged in” and that, by reason
The chancellor found: “5. Gulf brand gasoline is in fair and open competition with commodities of the same general class“. The fact was averred in the complaint, admitted by the answer thereto and such portion of the pleading was admitted, with propriety and without objection, into the record of this case. No principle of law has been more frequently reiterated or more constantly adhered to by this Court than the rule that findings of fact by a chancellor, approved by the court en banc, will not be reversed by an appellate court if there is adequate evidence to sustain them: Whitehall Laboratories v. Wilbar, 397 Pa. 223, 235, 236, 154 A. 2d 596; Masciantonio Will, 392 Pa. 362, 367, 141 A. 2d 362; McRobert v. Phelps, 391 Pa. 591, 597, 138 A. 2d 439; DeLuca v. DeLuca, 388 Pa. 167, 168, 130 A. 2d 179. The present majority opinion completely ignores this well-established and salutary principle of law.
The majority opinion takes the position that there must be evidence upon this record, aside from the admission in the pleadings, to sustain the chancellor‘s finding of fact, a position novel, unique and without precedent in our law. While there was no oral testimony to establish the fact of “fair and open competition” there was no necessity for any such testimony inasmuch as that fact had been expressly conceded:
The chancellor‘s finding of fact that Gulf gasoline was “in fair and open competition with commodities of the same general class” was fully justified by the record. The record further supports a finding that Gulf has by proper pleading and proof established its rights to the privileges of the Fair Trade Act (
Furthermore, the majority opinion states that it has “serious misgivings” concerning other matters in connection with this litigation and proceeds to render doubtful the authority of certain aspects of Sinclair Refining Co. v. Schwartz, 398 Pa. 60, 63, 157 A. 2d 63 (decided within the last nine months). In my opinion,
I disagree with the opinion of the majority of the Court in this case. In my opinion, the majority‘s determination is without precedent and completely ignores principles of law adhered to for many years by this Court, and, therefore, I dissent.
Mr. Justice BELL joins in this opinion.