Opinion
15146
September 25, 1940.
Before LIDE, J., Florence, November, 1939. Affirmed.
Actions by the State of South Carolina against the Standard Oil Company of New Jersey, a Deleware corporation, by the State against the Shell Oil Company, by the State against the Texas Oil Company, and by the State against the Sinclair Refining Company, to recover statutory penalties for alleged violations of statute directed against discrimination between different purchasers of commodities in general use by sale at a lower rate in one section of a city than in another. From judgment sustaining defendants' demurrers dismissing the complaint, the State appeals.
The order of Judge Lide follows:
This action purports to be instituted under and by virtue of the provisions of Section 6626, Code, 1932, and this section bears the following title in the Code: "Unlawful to Discriminate Unfairly to Destroy Competitor's Business"; but of course this title forms no part of the law. This section, which will be set forth in full hereinafter, may be briefly described as being directed against discrimination between different purchasers of a commodity in general use by the sale of such commodity at a lower rate to a purchaser in one section of a city or town than is charged for such commodity in another section of such city or town, after making due allowance for any difference in grade, or quality, or cost of transportation, if such discrimination is made for the purpose of injuring or destroying the business of a competitor. The section provides that each sale shall be deemed a separate offense, and Section 6627 provides that the offender for each violation shall be liable to a penalty of not less than $500.00 nor more than $5,000.00, to be recovered at the suit of the State. It is also provided in Section 6631 that if any corporation, foreign or domestic, is found guilty of such unfair discrimination, it shall be the duty of the Secretary of the State "to immediately revoke the permit of such corporation to do business in this State."
The amended complaint herein alleges in substance that while the defendant sold, during the period of time mentioned, its gasoline known as "Super Shell" gasoline, a commodity in general use, at a price of 17.05 cents per gallon in other sections of the City of Florence, it sold to seven named business concerns in that city at different dates during such period the same gasoline at the price of 15.55 cents per gallon. And it alleges "All of the different businesses above named being in different sections of the City of Florence." It further alleges that there were numerous other discriminatory sales made by the defendant for which the plaintiff seeks an order of discovery, and judgment is prayed for a penalty of $5,000.00 for each sale made by the defendant "below the top price charged to its consumers and dealers."
The defendant demurred to the amended complaint on numerous grounds, most of these grounds attacking the constitutionality of Section 6626, in that it violates the Fourteenth Amendment to the United States Constitution and Article 1, Section 5, of the State Constitution. And the demurrer has been very fully argued before me both orally and by elaborate written briefs. It should be stated in this connection that there are four companion suits brought by the State of South Carolina against other oil companies on practically the same alleged state of facts, and I have heard oral argument on like demurrers in three of those cases and have had the benefit of very full written briefs therein. Certainly all counsel concerned have performed their duty with much industry and ability. I have endeavored to give full consideration to each point made and each argument suggested, including the examination of a large number of authorities, many of which simply relate to the legislative problem of protecting fair competition in the business world without interference with due freedom of contract. And of course it cannot be doubted that the General Assembly is fully empowered to legislate against unfair discrimination and monopoly, not only by reason of Section 13, Article 9, of our Constitution, but by reason of the police powers of the State. And the fundamental question before the Court in the case at bar is: Assuming that this legislation was designed for the accomplishment of a legitimate purpose within the domain of the police power, are its terms such that it may operate reasonably and justly to that end?
In the consideration of this legislation I believe it would be wise for us briefly to review its history. Section 6626 was originally enacted in 1927 (Acts of 1927, 35 St. at Large, page 115), at which time Section 3536 (Civ. Code, 1922), as it previously stood, was repealed and a new Section 3536 was enacted, being substantially the same as Section 6626 now incorporated in the 1932 Code. The original Section 3536 (Civ. Code, 1922) was practically identical with the Act passed in 1909 (Acts of 1909, 26 St. at Large, page 19), and for convenience in analysis, interpretation and construction, I am adopting the plan of setting forth these two Acts in parallel columns with lettered subdivisions, capitalizing all words and expressions which indicate differences in the two Acts, as contained in the brief of counsel for the defendant in the instant case. They are as follows:
1909 Act 1927 Act
"An Act to Prohibit Unfair "An Act to Amend Article Commercial Discrimination Between XIV, Volume 3, Code of Laws Different Sections, Communities 1922, by Striking out Sections or Localities, or Unfair 3536 and 3544 of Said Article, Competition, and Providing Penalties and Inserting in Lieu Thereof Therefor." New Sections Regarding Unfair Discrimination and Sales for the Purpose of injuring competitors."
Section 3536 Section 6626
"[a] Any person, firm, company, "Any person, firm, company, association, or corporation, foreign association or corporation, or domestic, doing business in the foreign or domestic, doing State of South Carolina, and engaged business in the State of South in the production, manufacture Carolina, and engaged in the or distribution of any production, manufacture or commodity in general use, that distribution of any commodity in general use, that
"[b] SHALL INTENTIONALLY, "for the purpose INJURING for the purpose of destroying or destroying the business of a the business of a competitor competitor
"[c] in any locality, "in any town, VILLAGE, CITY OR locality
"[d] discriminate between different "discriminate between different SECTIONS, COMMUNITIES PURCHASERS OF SUCH OR CITIES OF THIS COMMODITY IN GENERAL STATE, USE IN SUCH VILLAGE, TOWN OR CITIES IN THIS STATE, OR DISCRIMINATE BETWEEN SUCH PURCHASERS IN DIFFERENT SECTION, COMMUNITIES, CITIES OR TOWNS OF THIS STATE,
"[e] by selling such commodity "by selling such commodity at a at a lower rate in ONE SECTION, lower rate TO ONE PURCHASER COMMUNITY OR CITY IN THE SAME CITY, TOWN, SECTION, COMMUNITY
1909 Act 1927 Act
"[f] than is charged for said "than is charged for said commodity by SAID PARTY IN commodity by A PERSON, FIRM, ANOTHER SECTION, COMMUNITY, COMPANY, ASSOCIATION OR CITY, OR CORPORATION IN ANOTHER SECTION OF SAID CITY, TOWN, COMMUNITY OR LOCALITY IN THIS STATE,
"[g] after making due allowance "after making due allowance for for the difference, if any, in the the difference, if any, in the grade or quality OR QUANTITY, grade, or quality, and in the and in the actual cost of actual cost of transportation transportation from the point of from the point of production, if production, if a raw product, or a raw product, or from the point from the point of manufacture, if of manufacture, if a a manufactured product, shall be manufactured product, shall be deemed guilty of unfair discrimination, deemed guilty of unfair which is hereby prohibited discrimination, which is hereby and declared unlawful." prohibited and declared TO BE unlawful: PROVIDED, THAT ANY PLAN, SCHEME, DEVICE OR AGREEMENT WICH WOULD TAKE AWAY OR AFFECT TO AN APPRECIABLE EXTENT THE BUSINESS OF A COMPETITOR AND THUS MAKE IT UNREASONABLE FINANCIALLY FOR SUCH COMPETITOR TO COMPETE WITH OR MEET THE PRICES OF SUCH SELLER, SHALL BE DEEMED AND CONSIDERED UNFAIR DISCRIMINATION UNDER THE TERMS OF THIS SECTION, AND EACH SEPARATE SALE OR TRANSACTION AT THE PRICE OR UNDER THE PLAN COMPLAINED OF SHALL BE DEEMED A SEPARATE OFFENSE UNDER THE PROVISIONS OF THIS ARTICLE."
Of course the most casual reading of the two Acts will disclose many striking differences, but for a better understanding of the reasons probably motivating the Legislature in the adoption of the later Act it will be well to consider certain adjudicated cases relating to the original legislation or similar legislation.
The Act of 1909 is very similar to a South Dakota statute enacted in 1907, Laws 1907, c. 131, and there was like legislation enacted in some other states. Indeed, it is altogether probable that our Act of 1909 was modeled on the South Dakota statute and other statutes of that character, although differing in some respects. The South Dakota statute was a criminal statute, while both of our statutes provide for penalties recoverable in a civil suit, but since they are all highly penal statutes I do not regard this as very material.
The South Dakota statute was attacked as being unconstitutional but was sustained by the South Dakota Supreme Court in the cases of State v. Central Lumber Co., 24 S.D., 136, 123 N.W., 504, 511, 42 L.R.A. (N.S.), 804. It will be observed that the South Dakota Act related to discrimination between different cities in the State as expressed by the Court, "discrimination between two points". And the Supreme Court of South Dakota sustained the Act as being within the purview of the constitutional provision that monopolies should not be allowed within the State; the theory being that a seller, particularly a large corporation, doing business at many places, might for the purpose of destroying the business of a competitor lower the price of the commodity handled "so low, at the point where his victim is in business, as to make it impossible to meet such price except at a loss, and, to offset what loss he suffers at that point, he raises prices at one or more other points".
This case was taken to the Supreme Court of the United States, and the judgment of the State Court was affirmed. Central Lumber Co. v. South Dakota, 226 U.S. 157, 33 S.Ct., 66, 67, 57 L.Ed., 164; in which the unanimous opinion was delivered by Mr. Justice Holmes. This opinion is written with the characteristic terseness of that eminent jurist, and sustains the constitutionality of the legislation in question mainly on the theory that it does not deny the equal protection of the laws, although it affects only those selling goods in two or more places in the State. The Court adverts to the fact that the Legislature of South Dakota probably considered that people selling in two places made the prohibited and harmful use of their opportunities, "although the usual efforts of competitors were desired", and that perhaps it might have been argued to the Legislature with more force than to the Court "that recoupment in one place of losses in another is merely an instance of financial ability to compete". The opinion also states that "certainly we should read the law as having in view ultimately the benefit of buyers of the goods".
This case was decided by the Supreme Court of the United States on December 2, 1912. Many years later similar legislation came before the United States Supreme Court on a writ of error to the Supreme Court of the State of Minnesota in the case of Fairmont Creamery Co. v. Minn., 274 U.S. 1, 47 S.Ct., 506, 71 L.Ed., 893, 52 A.L.R., 163; opinion by Mr. Justice McReynolds, decided on April 11, 1927. The Minnesota Act made it criminal offense punishable by fine or imprisonment for any person, firm, co-partnership or corporation engaged in the business of buying milk, cream or butter fat for manufacture or sale to discriminate between different sections, localities, communities or cities by purchasing such commodities at a higher price or rate in one locality than is paid for the same commodity by said person, firm, co-partnership or corporation in another locality, after making due allowance for any difference in the actual cost of transportation. It appears that previous similar Acts had contained provisions relating to the intention or purpose of creating a monopoly or destroying the business of a competitor, but the Act in question had "eliminated purpose as an element of the offense". The Supreme Court of Minnesota sustained the constitutionality of the Act, but the judgment of the Court below was reversed by the Supreme Court of the United States, the holding being that the Act in question was unconstitutional as impairing the private right of freedom of contract guaranteed by the Fourteenth Amendment to the Federal Constitution, although the high bidding of strong buyers tends toward monopoly, since the statute has no reasonable relation to such bidding, previously regarded as beneficial to the public. After a thorough and intensive study of this case and the previous case of Central Lumber Co., supra, it is my considered judgment that the two cases are fundamentally irreconcilable, and definitely indicate a change of opinion on the part of a majority of the federal Supreme Court as to the validity of legislation of this character, directed toward what might be termed territorial discrimination or discrimination between two places within a State. In making this statement I am of course not unmindful of the distinction which may be drawn between the two cases, to wit, that the Minnesota statute had eliminated purpose or intent to destroy the business of a competitor, and Mr. Justice McReynolds in delivering the opinion in the Fairmont Creamery Company case does allude to the fact that "the inhibition of the statute applies irrespective of motive". But he clearly states that the anticipated evil was "high bidding by some with purpose to monopolize or destroy competition". (Italics added.) And he makes it very clear that in the opinion of the Court the unconstitutionality of the statute results from the fact that it has no reasonable relation to the anticipated evil. The following quotation from the opinion gives the true rationale of the judgment of the Supreme Court:
"Buyers in competitive markets must accommodate their bids to prices offered by others, and the payment of different prices at different places is the ordinary consequent. Enforcement of the statute would amount to fixing the price at which plaintiff in error may buy, since one purchase would establish this for all points, without regard to ordinary trade conditions.
"The real question comes to this: May the State, in order to prevent some strong buyers of cream from doing things which may tend to monopoly, inhibit plaintiff in error from carrying on its business in the usual way heretofore regarded as both moral and beneficial to the public and not shown now to be accompanied by evil results as ordinary incidents? Former decisions here require a negative answer. We think the inhibition of the statute has no reasonable relation to the anticipated evil — high bidding by some with purpose to monopolize or destroy competition. Looking through form to substance, it clearly and unmistakable infringes private rights, whose exercise does not ordinarily produce evil consequences, but the reverse." (Italics added.)
It is, therefore, not surprising that Mr. Justice Holmes dissented; and Mr. Justice Brandeis and Mr. Justice Stone joined in the dissent, but no dissenting opinion was filed, and no reference is made in the opinion of Mr. Justice McReynolds to the Central Lumber Company case, supra, although it was cited by counsel on each side of the case. Hence it is more or less a matter of conjecture as to what view the Supreme Court of the United States would now take of legislation of this kind, although the Central Lumber Company case was not overruled and so might be considered as binding authority on the lower Courts considering statutes identical with or quite similar to the South Dakota Act. Of course, the fact that the earlier case involved a selling statute and the later a buying statute is of no significance.
There is, however, another judicial decision more directly involved here, and that is the well-considered opinion of our own Supreme Court in the case of State v. Texas Company, 136 S.C. 200, 134 S.E., 211, 213, relating to the original Sections 3536 and 3537, Civ. Code, 1922, Section 3536 being as above stated substantially identical with the Act of 1909. This case was decided August 9, 1926, the opinion being delivered by Judge Stabler. It appears that the complaint there alleged in substance that the defendant for the purpose of destroying the business of a competitor in the City of Columbia sold and delivered gasoline to one of its customers at 19 cents per gallon when the prevailing market price at that time in the City of Columbia was 20 cents per gallon. The case came on for trial before Judge Memminger, who directed a verdict for the defendant on the ground that the case was not one within the terms of the statute, "because it is alleged that the prices were lowered only at different points within the same city". He also held that a verdict should be directed because there was failure of testimony on which a reasonable jury could find that the alleged conduct of the defendant was done with the intention of destroying a competitor's business, and further that the evidence showed that the reduction or rebate in price by the defendant was a legitimate competitive reduction. Our Supreme Court affirmed the judgment of the Circuit Court, holding that Judge Memminger was correct in his direction of a verdict for the defendant on all the grounds considered, except that if no other point had been raised the case might have been one proper for submission to the jury on the question of intent "to injure or destroy a competitor's business", in that, "There was testimony tending to show the natural and actual results of the defendant's course in reducing the price to be indicative of such intent." I quote the following clear statement from the opinion of the Supreme Court: "The cases cited by the appellant in support of its contention do not appear to be in point, as they discuss the merits of legislation designed to prevent the undue restriction of competition rather than present aids for the construction of the language of the statute. Authorities in point appear to be meager. This Court, however, can only construe the statute according to its language, giving to the language a plain, common-sense interpretation and to the words used their ordinary meaning. It is clear to the Court that, by its terms, the statute does not prohibit discrimination in prices as between different points in the same city, but does prohibit discrimination in prices as between different cities. The wisdom or unwisdom of the statute is not a matter for this Court to determine. It is the province of the Legislature to enact laws and of the Courts to construe them. In the present case we feel that we would be going far beyond the bounds of judicial duty or right to hold that the language used by the Legislature in this statute could be construed to include discrimination in prices between different points in the same city." (Italics added.)
At the very next session of the General Assembly, to wit, the 1927 session, the Act now before the Court was adopted, and it cannot be doubted that this Act was intended to correct and enlarge the previous Act of 1909 so as to meet the decision in the Texas Company case, supra, and yet the 1927 Act, probably through inadvertence, eliminates discrimination between different cities, and directs its shafts only against such discrimination "in the same city, town, section, community".
The 1927 Act illustrates what frequently happens where a previous statute is amended or repealed and another statute on the same subject substituted, and that is, errors and inaccuracies creep in. Here there are not only many verbal inaccuracies, but the Act may truly be said to abound in ambiguities, uncertainties and obscurities. Some of these may indeed be disregarded as merely grammatical or rhetorical, while others may be eliminated by the application of the recognized canons of construction. But there are still others which seem to me to be fatal to the validity and constitutionality of the section.
The demurrer to the amended complaint states in great detail the objections made to the constitutionality of the statute in question, but in the argument of counsel for the defendant these objections are reduced to five points, each of which will be considered and discussed by me as briefly as practicable.
The first point is that the provisions of the statute are indefinite and uncertain, and fail to define with reasonable certainty what Acts are unlawful, but leave to speculation and surmise what actually comes within its prohibition; and hence that the statute is unconstitutional. I am of the opinion for the reasons hereinafter stated that this point is well taken.
It will be observed that while the Act refers to discrimination between different purchasers of a commodity in general use (and gasoline is certainly such a commodity) the only method of discrimination condemned by the statute is stated in subdivisions (e) and (f) to be the sale of "such commodity at a lower rate to one purchaser in the same city * * * than is charged for said commodity * * * in another section of said city * * *." It, therefore, cannot be questioned that the statute does not condemn such discrimination between purchasers in the same section of a city, and the term "section" is nowhere defined in the statute. The word section, as used geographically, is a relative expression, and its definite meaning depends upon the explanatory context. The Century Dictionary says that it is: "A part cut or separated, or regarded as separated from the rest; a division, a portion." It is also further defined as "a distinct part of a country, or nation, community, class, or the like; a part of territory separated by geographical lines * * *." McMillan's Modern Dictionary, a very recent work, defines the term "section" as a "part cut off, division; distinct part or portion", and as "portion of territory rendered distinct by geographical, racial, or linguistic characteristics or the like".
Obviously a city might be deemed as divided into few or many sections, according to the plan on which the subdivision is made. For example, as applied to the City of Florence, the Atlantic Coast Line Railroad running to Charleston divides the city into what might be termed two sections, the smaller area on the east side of the track being sometimes referred to as "East Florence". Then of course the wards of the city are sections for political or governmental purposes. But this by no means exhausts the application of the term section, for there are residential sections and business sections, colored sections, northern and southern sections, eastern and western sections, etc. And sections of one kind overlap on sections of another kind.
As stated in one of the briefs of counsel for defendants, perhaps two purchasers having places of business side by side in the same block might be definitely regarded as being within the same section, but if they were separated even by a street this would be rendered uncertain. There being nothing in the statute to show what would constitute a section of a city it would be impossible for one to say with any degree of certainty whether the act of a defendant in a particular case was lawful or unlawful. This is not a matter that could be submitted to a jury because the Court would be unable to lay down any standards for its guidance.
Counsel for the plaintiff in the instant case must have been confronted with the same difficulty in construing the term "section", for they state in the amended complaint that the seven purchasers to whom gasoline was alleged to have been sold at the discriminatory price were all in different sections of the City of Florence, although they do not allege the location of these places of business or give any reason for the conclusion that they were in different sections. Surely it could not be contended that every place of business ipso facto constituted a section. Such a conclusion would not only read the term "section" out of the statute, but it would also disregard the underlying purpose of the statute to prevent discrimination between different territorial areas, because of the opportunity thus afforded to recoup losses made on account of lowering prices in one place by raising them in another place.
It may be suggested that the term "section" as applied to a State was used in the act involved in the Central Lumber Company case, supra, but aside from the fact that the point was not raised there, it should be observed that this statute also used the very definite word, as did our 1909 Act, to wit, "city", or "cities", and did not deal with sections of a city.
The case of Connally v. General Construction Company, 269 U.S. 385, 46 S.Ct., 126, 127, 70 L.Ed., 322, seems to me to be practically directly in point on the question under consideration. The following statement from this opinion as to the general governing principles commends itself as being highly just and reasonable: "That the terms of a penal statute creating a new offense must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties is a well-recognized requirement, consonant alike with ordinary notions of fair play and the settled rules of law and a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law."
The Act under consideration in the Connally case created an eight-hour day for all persons employed by or on behalf of the State, and further provided, subject to a penalty of fine or imprisonment, that not less than the current rate of per diem wages "in the locality where the work is performed" should be paid to certain laborers, etc. 61 Okla. St. Ann., § 3. The Act was held unconstitutional in two respects, one being that it violates the first essential of due process of law by the use of the vague and indefinite term "locality". The Court says "In the second place, additional obscurity is imparted to the statute by the use of the qualifying word `locality.' Who can say, with any degree of accuracy, what areas constitute the locality where a given piece of work is being done? Two men, moving in any direction from the place of operations, would not be at all likely to agree upon the point where they had passed the boundary which separated the locality of that work from the next locality. * * * In other connections or under other conditions the term `locality' might be definite enough, but not so in a statute such as that under review imposing criminal penalties. Certainly, the expression `near the place' leaves much to be desired in the way of a delimitation of boundaries; for it at once provokes the inquiry `how near?' And this element of uncertainty cannot here be put aside as of no consequence, for, as the rate of wages may vary — as in the present case it is alleged it does vary — among different employers and according to the relative efficiency of the workmen, so it may vary in different sections. The result is that the application of the law depends, not upon a word of fixed meaning in itself, or one made definite by statutory or judicial definition, or by the context or other legitimate aid to its construction, but upon the probably varying impressions of juries as to whether given areas are or are not to be included within particular localities. The constitutional guaranty of due process cannot be allowed to rest upon a support so equivocal."
See, also, Cline v. Frink Dairy Company, 274 U.S. 445, 47 S.Ct., 681, 71 L.Ed., 1146; United States v. Cohen Grocery Company, 255 U.S. 81, 41 S.Ct., 298, 65 L.Ed., 516, 14 A.L.R., 1045, and State, on Complaint of Lief v. Packard-Bamberger Company, Inc., 123 N.J.L., 180, 8 A.2d 291, decided by the New Jersey Supreme Court September 16, 1939.
There are many other vague and indefinite terms used in Section 6626, one of them being the very word "locality" which is found in subdivisions (c) and (f), and another being the word "community". Referring to the latter subdivision, what possible definite meaning can be given to a section of a locality, or a section of a community, in the absence of any explanatory language?
Among the cases cited by counsel for the plaintiff is that of Omaechevarria v. Idaho, 246 U.S. 343, 38 S.Ct., 323, 325, 62 L.Ed., 763, which involved a statute prohibiting the grazing of sheep on the federal public domain upon a range previously occupied by cattle. The point was there raised that the statute was too indefinite since it fails to provide for the ascertainment of the boundaries of a "range". But the Court, speaking through Mr. Justice Brandeis, said: "Men familiar with range conditions and desirous of observing the law will have little difficulty in determining what is prohibited by it." I think this case well illustrates the true governing principles. The Legislature does, and should, frequently use the language of the people, and the ordinary meaning of the word "range" was well understood by those engaged in the cattle business. But in the case at bar the word "section" can have no such well-understood meaning to those engaged in the oil business, or indeed any other class of people, in the absence of some explanatory or descriptive terms.
Moreover, it seems to me that the term "section" would not only require defining and delimitation, but that a city or town could not be arbitrarily sectionalized, for obviously the sections would have to be created upon some basis which would constitute a reasonable relationship to the evil sought to be corrected.
The second point raised is that the statute is unreasonable, arbitrary and capricious in its effects, in that, the means selected for accomplishing the purposes referred to have no real and substantial relationship to the object to be obtained; and specifically that the Act is unreasonable and arbitrary because it does not permit a vendor to charge different prices based upon the quantity sold or upon savings in costs of sales, other than cost of transportation.
As will be seen by reference to subdivision (g) of the 1909 Act, it was provided that due allowance should be made for the difference, if any, in the grade or quality, or quantity, and in the actual cost of transportation, while in the 1927 Act (Section 6626) the words "or quantity" are omitted. These words were contained in the Bill as first introduced, but upon the third reading in the House of Representatives the author asked and obtained unanimous consent to amend it by striking out the words "or quantity", and this amendment was duly adopted. Hence there can be no doubt whatever of the Legislature's purpose to eliminate the consideration of quantity. It will, therefore, be of interest to refer to the opinion in the case of State v. Texas Co., supra, wherein the Supreme Court sustained the Circuit Judge in directing a verdict for defendant "on the ground that the reductions or rebates in price were legitimate competitive reductions based on the quantity sold and to meet inducements and reductions given by other companies." (Italics added.)
It might perhaps be argued that since the statute uses the phrase "at a lower rate", and not at a lower price, it was contemplated that some proportionate reduction would be made, based on such matters as grade, quality, quantity, etc. and this argument, if made, might have some force if the statute were entirely silent as to the elements to be considered in "making due allowance". But manifestly where the statute states the elements all others are excluded. Expression unius est exclusio alterius. Besides, the amendment of the Bill by striking out the words "or quantity", as above stated, demonstrates the legislative intent.
It seems obvious that the abrogation of the right to make an allowance based on the quantity sold is clearly unreasonable, capricious and arbitrary; nor would it be in the public interest. The distinction between a wholesale price and a retail price is universally recognized as a proper basis for a price differential. And manifestly a quantity sale, whether wholesale in the ordinary sense or not, would justify a lower price because of the lowered cost of handling, the increased volume of business, and other obvious considerations. Yet if the Act be construed according to its terms it would apply in cases where the smallest quantity is sold as well as the largest, and thus result in the fixing of a price without regard to one of the most important elements involved, to wit, the quantity sold. It seems clear to me that this alone is sufficient to invalidate the Act as lacking in due process of law. As the Court said in the case of Howle v. Mountain Ice Co., 167 S.C. 41, 54, 165 S.E., 724, "it is a matter of common knowledge that prices to different classes of customers" (referring to manufacturers and retailers) "vary according to varying conditions." See, also, Great A. P. Tea Co. v. Ervin, D.C., 1938, 23 F. Supp. 70, and Mennen Co. v. Trade Commission, 288 F., 774, 30 A.L.R., 1120.
The third point made by the demurrer is that the Act deprives sellers of commodities in general use of the right to meet competition, and the effect thereof is to fix prices below which commodities may not be sold. This point appears to be based mainly upon an apparent ambiguity in the Act which will be found in subdivision (f), and it will readily appear, by comparison with that subdivision in the 1909 Act, that the indefinite article "a" is used instead of some such expression as said or said party, and it is argued that the phrase "a person, firm, company, association or corporation", must be literally construed to mean any person, firm, company, association or corporation, and that hence the effect of the Act is to provide that any person, artificial or natural, who sells such a commodity in one section of a city at a lower price than is charged by any other person, artificial or natural, in another section of the city, violates the Act. If this be true, then any price made by anyone in any section of a city, however high, would be the fixed price in all sections of the city, regardless of who made the sale — a result so absurd that it certainly cannot be assumed it was intended by the General Assembly. Counsel, however, argue that the statute is thus shown to be a price-fixing statute and is invalid on the principles land down in certain cases cited by them. It is also argued that the statute being a penal one the Court cannot vary its language, and I am, of course, mindful of the salutary general principles requiring penal statutes to be strictly construed, but the canons of construction certainly allow the Court to consider the statute as a whole and to interpret its words in the light of the context. The statute being directed against discrimination between purchasers in different sections, a seller obviously cannot discriminate between two purchasers unless he sells to both purchasers. To my mind, the context plainly indicates that the person, firm, company, association or corporation mentioned in subdivision (f) is the same person, firm, company, association or corporation mentioned in subdivision (a). This conclusion, in my judgment, does no violence to the language of the statute. Of course, the cumulative effect of all these inaccuracies is adverse to the validity of the statute, but I do not think this particular ground is well taken.
The fourth point is to the effect that the statute in question establishes a conclusive presumption of unfair discrimination upon the mere sale of commodities at lower prices in one section of a city or town than in another. This point is based mainly on the proviso contained in Section 6626 and found in subdivision (g) thereof. Counsel for the defendant argued with much emphasis that the effect of this subdivision is to eliminate intent or purpose to injure or destroy the business of a competitor and also to create an arbitrary and conclusive presumption as to what would constitute unfair discrimination. It is true, that the proviso uses some rather general expressions which do not tend to aid the Court in giving some reasonable meaning to the statute as a whole, but I am unable to agree with counsel for the defendant that it the Act were otherwise valid the proviso would be fatal.
Indeed, it seems to me that one of the controlling principles in the construction of a proviso is that it shall be construed in the light of the provisions of the body of the Act. This particular proviso appears to be strictly a proviso, and not merely an addition to the Act. As stated in the case of Shealy v. S.A.L. Ry., 131 S.C. 144, 126 S.E., 622, 626, quoting from 25 R.C.L., 984, "The office of a proviso is either to except something from the enacting clause or to qualify or restrain its generality, or to exclude some ground of misinterpretation." I think the instant proviso was intended to come under the last clause, to wit, to exclude some ground of misinterpretation, so as to show that the Act covers indirect price discrimination by way of rebates and the like as well as direct. And as suggested in one of the briefs, the proviso probably was inserted because of the position taken in the Texas Company case, supra, that there was no evidence tending to show that the effect of the alleged reduction in price was to injure or destroy to any appreciable extent the business of a competitor; and particularly because reference is made in Judge Memminger's ruling "to a secret matter or rebate." The use of the terms "plan, scheme, device or agreement", appears to accord with this idea. At any rate it seems clear to me that the proviso must be read in the light of, and considered as controlled by, the words contained in subdivision (b), to wit, "for the purpose of injuring or destroying the business of a competitor". Hence any plan, scheme, device or agreement (and these words, as so used, themselves indicate a sinister purpose), made for the purpose of injuring or destroying the business of a competitor, and having that effect would come within the terms of the Act, according to the true intent and meaning of the proviso.
Much argument is based on the fact that the Act of 1909, subdivision (b) related to the intentional purpose of destroying the business of a competitor, while the words "shall intentionally" were omitted in the 1927 Act and the word "injuring" was inserted. But I do not think the omission of the word "intentionally" really changes the meaning, for the word "purpose" conveys the same idea. (Of course, the omission of the word "shall" is grammatically bad but has no legal significance). And I cannot agree that the validity of the Act depends upon the purpose of totally destroying the business of a competitor, for it seems to me that injuring or partially destroying such business would be sufficient.
Does the proviso create an arbitrary presumption? I do not think so, because it seems to me that a fair construction of the language used is that if such a plan, scheme, device, or agreement actually affected to an appreciable extent the business of a competitor so that he could not meet the competition. this would certainly be a partial destruction of his business, and would come within the evil intended to be inhibited, provided, such plan, scheme, device or agreement was made for the purpose of injuring or destroying the business of such competitor. As has already been stated, there are expressions used in the proviso which could well be more definite and certain; but I do not think this particular objection to the statute should be sustained.
Furthermore, I do not think that even if the proviso here were unconstitutional it would necessarily vitiate the remainder of the Act, if it were otherwise valid. And I do not construe the amended complaint as really involving the proviso. It is true, it is alleged that the defendant entered into plans, schemes, devices or agreements, resulting in discriminatory sales, but this manifestly is a mere legal conclusion of the pleader not based on any statement of facts, for there is no allegation showing the terms of, or any other information concerning any such plans, schemes, devices or agreements.
The fifth and last point raised by the demurrer is that the drastic penalties provided in Sections 6627 and 6631 for a violation of Section 6626 are repugnant to the Federal and State Constitutions in imposing enormous and excessive penalties and punishment out of just proportion to the nature of the Acts forbidden. As was stated in the outset, Section 6627 provides for a penalty of not less than $500.00 nor more than $5,000.00 for each offense or sale under Section 6626. And Section 6631 imposes upon the Secretary of State the duty to revoke the permit of a corporation for even one violation of Section 6626. It is argued that these penalties are so enormous and excessive as to bring the case within the decision of Exparte Young, 209 U.S. 123, 28 S.Ct., 441, 52 L.Ed., 714, 13 L.R.A. (N.S.), 932, 14 Ann. Cas., 764; while on the other hand, counsel for the plaintiff contend that the principles controlling are laid down in Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 29 S.Ct., 220, 53 L.Ed., 417. It occurs to me, however, that this matter cannot properly be considered in the light of the views heretofore expressed by me to the effect that Section 6626 must be declared unconstitutional upon points one and two above discussed. Where the Court is dealing with an Act definite and certain in its terms and so framed as to have a real and substantial relationship to the public purpose sought to be accomplished penalties might well be sustained which would be deemed enormous and excessive under a statute of different character. I am, therefore, of opinion that the fifth point cannot now be determined.
Many cases cited by counsel for the respective parties have not been discussed by me, although I have tried to give due consideration to all of them. Nor have I discussed some merely collateral matters which perhaps might throw more or less light on the main questions, but have confined myself to the discussion of what seemed to me to be matters of outstanding importance, realizing that even then this order would be quite long.
If any legislation is required in the public interest for the prevention of unfair price discrimination in the sale of commodities in general use, this is, of course, a matter for the legislative department. And I have not overlooked the salutary principle that every presumption is in favor of a legislative enactment; and that to declare an Act unconstitutional may not lightly be done, but that its invalidity must appear beyond a reasonable doubt. Yet even if the General Assembly endeavors to provide a method for the purpose of preventing some real or supposed evil its action cannot be sustained by the Courts unless it conforms to the fundamental law of the land.
It is, therefore ordered that the demurrer be, and it is hereby, sustained as the statute in question violates both the State and Federal Constitutions in the particulars set forth herein.
It is further ordered that the amended complaint be, and it is hereby, dismissed.
Messrs. John M. Daniel, Attorney General, Hubert E. Yarborough, Jr., and William H. Smith, for appellant, cite: As to unlawful discrimination: 123 N.W., 504; 42 L.R.A. (N.S.), 804; 226 U.S. 157; 57 L.Ed., 164; 291 U.S. 304; 78 L.Ed., 814; 291 U.S. 67; 78 L.Ed., 655; 291 U.S. 502; 78 L.Ed., 941; 212 U.S. 86; 53 L.Ed., 417. Right of State to legislate against combines in restraint of trade: 197 U.S. 115; 49 L.Ed., 689; 196 U.S. 447; 49 L.Ed., 546; 52 F., 917; 1 L.R.A., 744; 35 F., 866; 33 L.R.A., 209; 59 A.S.R., 457; 35 S.W. 129; 156 U.S. 1; 39 L.Ed., 325; 174 U.S. 237; 44 L.Ed., 146; 193 U.S. 197; 48 L.Ed., 679; 196 U.S. 375; 49 L.Ed., 518; 59 N.E., 55; 229 U.S. 373; 57 L.Ed., 1232; 221 U.S. 1; 55 L.Ed., 619; 34 L.R.A. (N.S.), 834; Ann. Cas., 1912-D, 734; 221 U.S. 106; 55 L.Ed., 663; 75 A.S.R., 306; 54 N.E., 551; 196 U.S. 589; 49 L.Ed., 610; 212 U.S. 86; 53 L.Ed., 417; 280 U.S. 396; 226 U.S. 157; 57 L.Ed., 164; 274 U.S. 1; 71 L.Ed., 893; 52 A.L.R., 163; 42 L.R.A. (N.S.), 804; 123 N.W., 504; 220 U.S. 81; 55 L.Ed., 369; Ann. Cas., 1912-C, 160; 127 U.S. 205; 32 L.Ed., 107; 216 U.S. 400; 54 L.Ed., 536; 19 Ann. Cas., 1247; 170 U.S. 283; 42 L.Ed., 1037; 172 U.S. 557; 43 L.Ed., 552; 223 U.S. 59; 56 L.Ed., 350; 199 U.S. 401; 50 L.Ed., 246; 23 L.R.A. (N.S.), 1287; 130 A.S.R., 671; 117 N.W., 768; 126 N.W., 527; 133 N.W., 895; 134 N.W., 496; 219 U.S. 549; 55 L.Ed., 328; 217 U.S. 433; 54 L.Ed., 826; 211 U.S. 489; 53 L.Ed., 295; 187 U.S. 609; 47 L.Ed., 323; 121 N.W., 395; 23 L.R.A. (N.S.), 1260; 71 S.C. 544; 51 S.E., 455; 193 U.S. 197; 48 L.Ed., 679; 69 S.C. 434; 48 S.E., 460; 67 L.R.A., 111; 75 S.C. 378; 55 S.E., 973; 9 Ann. Cas., 902; 234 U.S. 199; 58 L.Ed., 1276; 52 L.R.A. (N.S.), 525; 141 S.W., 672. Construction of statutes: 187 U.S. 606; 47 L.Ed., 323; 67 S.C. 312; 45 S.E., 211; 169 S.C. 198; 168 S.E., 554; 294 U.S. 87; 79 L.Ed., 780; 292 U.S. 44.
Messrs. Royall Wright, Cyrus S. Gentry and Charles L. Harding, for respondent, Shell Oil Co., and Willcox, Hardee Wallace, George W. Ray, Jr., and Albert E. Van Dusen, for respondent, The Texas Co., and Henry E. Davis, for respondent, Sinclair Refining Co., cite: Right of Legislature to regulate commerce and trade: 71 S.C. 544; 51 S.E., 455; 212 U.S. 86; 53 L.Ed., 417; 285 U.S. 262; 76 L.Ed., 747; 229 U.S. 26; 57 L.Ed., 1050; 262 U.S. 522; 67 L.Ed., 1103. Constitutionality of penal statute repugnant to due process clause: 269 U.S. 385; 70 L.Ed., 323; 19 Ann. Cas., 68; 83 L.Ed., 590; 92 U.S. 214; 23 L.Ed., 563; 283 U.S. 359; 75 L.Ed., 1117; 73 A.L.R., 1484; 303 U.S. 444; 82 L.Ed., 949; 269 U.S. 385; 70 L.Ed., 322; 274 U.S. 445; 71 L.Ed., 1146; 210 P., 841; 213 P., 331; 234 U.S. 232; 58 L.Ed., 1284; 255 U.S. 81; 65 L.Ed., 516. Language of statute: 234 U.S. 26; 267 U.S. 233; 283 U.S. 553; 286 U.S. 210; 52 F., 917; 23 Fed. Supp., 70; 4 P.2d 117; 237 N.W., 711; 209 P., 896; 218 S.W. 493; 46 F.2d 354; 13 S.C. 56; 99 S.C. 218; 5 L.Ed., 37; 8 L.Ed., 745; 10 L.Ed., 543; 18 L.Ed., 830. Demurrer: 71 S.C. 544; 51 S.E., 455; 255 U.S. 81; 65 L.Ed., 516; 303 U.S. 444; 82 L.Ed., 949; 11 A.J., 774; 71 A.L. R., 1190; 181 N.W., 106; 127 N.W., 397; 140 A.S.R., 460; 72 Am. Dec., 97; 74 N.E., 1035; 1 L.R.A. (N.S.), 215; 108 A.S.R., 196; 3 Ann. Cas., 487; 55 N.E., 550; 77 S.E., 264; 80 S.E., 367; 18 R.C.L., 108; 304 U.S. 144; 293 U.S. 194; 164 U.S. 543; 295 U.S. 330; 274 U.S. 357; 71 L.Ed., 1095; 298 U.S. 407; 80 L.Ed., 1245; 301 U.S. 495; 81 L.Ed., 1245; 109 A.L.R., 1327; 238 U.S. 446; 59 L.Ed., 1400; 248 U.S. 303; 279 U.S. 582.
Messrs. McEachin Townsend, Benet, Shand McGowan, Luke W. Finlay, Clarence J. Shearn and Charles C. Smith, for respondent, Standard Oil Company of New Jersey, cite: As to construction of penal statute creating new offense: 269 U.S. 385; 70 L.Ed., 322; 274 U.S. 445; 71 L.Ed., 1146; 210 P., 843; 234 U.S. 216; 255 U.S. 81; 236 U.S. 660. Where statute indefinite and uncertain: 234 U.S. 639; 83 L.Ed., 590; 19 Ann. Cas., 68; 267 U.S. 233; 69 L.Ed., 589; 283 U.S. 553; 75 L.Ed., 1264; 286 U.S. 210; 76 L.Ed., 1062; 22 F. Supp. 249; 23 F. Supp. 70; 209 P., 896; 109 S.W.2d 106; 193 S.W., 675; 46 F.2d 354; 99 S.C. 218; 5 L.Ed., 37; 287 U.S. 86; 77 L.Ed., 180; 279 U.S. 639; 73 L.Ed., 884. Due process clause: 291 U.S. 502; 23 F. Supp. 70; 50 F., 749; 152 U.S. 436; 295 F., 84; 82 P.2d 1; 102 S.W. 710; 77 P.2d 464; 131 N.W., 836; 25 R. C.L., 1050; 84 A., 567; 207 N.W., 210; 185 S.W. 487; 199 S.W. 811; 55 S.W. 117; 219 U.S. 467; 55 L.Ed., 297; 176 S.C. 41; 165 S.E., 724; 288 F., 774. Demurrer: 71 A.L.R., 1190; 181 N.W., 106; 127 N.W., 379; 140 A.S.R., 460; 74 N.E., 1035; 1 L.R.A. (N.S.), 215; 108 A.S.R., 196; 3 Ann. Cas., 487; 46 N.E., 720; 55 N.E., 550; 77 S.E., 264; 80 S.E., 367; 44 L.R.A. (N.S.), 83; 18 R.C.L., 108; 11 A.J., 825; 82 L.Ed., 1235; 304 U.S. 144; 293 U.S. 194; 79 L.Ed., 281; 264 U.S. 543; 68 L.Ed., 841; 295 U.S. 330; 274 U.S. 357; 298 U.S. 407; 301 U.S. 495; 81 L.Ed., 1245; 109 A.L.R., 1327; 238 U.S. 446; 59 L.Ed., 1400; 302 U.S. 392.
September 25, 1940. The opinion of the Court was delivered by
The decree of Judge Lide, from which this appeal is taken, includes a thorough discussion of the issues raised by the exceptions. We think that the questions before us have been soundly decided by the lower Court, and that the exceptions are without merit. Let the decree of the Circuit Court be reported as the judgment of this Court.
Judgment affirmed.
MR. CHIEF JUSTICE BONHAM, MR. JUSTICE CARTER and MESSRS. ACTING ASSOCIATE JUSTICES J. HENRY JOHNSON and E.H. HENDERSON concur.