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General Elec. Co. v. Telco Supply, Inc.

Supreme Court of Arizona

May 7, 1958

TELCO SUPPLY, Inc., Appellee.

[84 Ariz. 133] Kramer, Roche & Perry, and Raymond Huffsteter, for appellant, D. E. Bamford, Bridgeport, Conn., of counsel.

Page 395

George Welch, Jr., Phoenix, amicus curiae.

PHELPS, Justice.

This is an appeal from a judgment of the trial court declaring unconstitutional the Arizona Fair Trade Act of 1936, being A.R.S. §§ 44-1421 to 44-1424 inclusive.

The facts are that General Electric Company, a corporation, hereinafter designated as plaintiff, brought an action against Telco Supply, Inc., a corporation, hereinafter designated as defendant, seeking to enjoin it from selling commodities produced by plaintiff at prices less than those stipulated in contracts plaintiff had with other Arizona retail dealers which plaintiff claimed was in violation of the Arizona Fair Trade Act. Plaintiff had contracts with a number of retail merchants in Arizona who handled its products fixing a minimum price at which such products bearing its trade-mark or brand name, 'General (GE) Electric', were permitted to be sold. Defendant is a 'non-signer' or, in other words, it had not entered into such an agreement with plaintiff.

Defendant raised in its pleadings the constitutionality of the Fair Trade Act and specifically alleged that said act violates numerous provisions of the federal and state constitutions as hereinafter enumerated. The court denied defendant's motion to dismiss the complaint based upon the [84 Ariz. 134] ground that the Fair Trade Act was unconstitutional. The cause was tried to the court without a jury. At the close of all of the evidence on June 18, plaintiff moved for an interlocutory injunction and for judgment. After argument the matter was taken under advisement. On October 19 further argument was had, and on October 30 judgment was entered in favor of defendant declaring the Arizona Fair Trade Act unconstitutional.

On appeal plaintiff has assigned but one error: that the court erred in awarding defendant judgment based upon the ground that the Fair Trade Act is unconstitutional. It asserts that the act is constitutional and that all of the allegations in the complaint were admitted by the defendant or proved by uncontradicted evidence. Defendant filed no brief on appeal but we have the benefit of a brief of amicus curiae in support of the ruling of the trial court.

The legislatures of forty-five states have adopted fair trade acts which differ but slightly from their Arizona counterpart, and the courts of some thirty odd states are almost equally divided on the question of their constitutionality. We will quote only the pertinent portions of the Arizona act. A.R.S. § 44-1422, subsection A, provides that:

'No contract relating to the sale or resale of a commodity which bears the trade-mark, brand or name of the producer or owner of the commodity, or the label or container of which bears such trade-mark, brand or name, and which is in fair and open competition with commodities of the same general class produced by others shall be deemed to violate any law of the state by reason of any of the following provisions which may be contained in the contract:

'1. That the buyer will not resell such commodity except at the price stipulated by the vendor.

'2. That the vendee or producer require in delivery to whom he may resell such commodity to agree that he will not, in turn, resell except at the price stipulated by such vendor or by such vendee.'

There are certain transactions exempted from the above provisions not material in the instant case. A.R.S. § 44-1423 provides that:

'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of § 44-1422, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition upon which an action may be brought by any person damaged thereby.'

Page 396

There are no factual issues presented. We will therefore proceed to a consideration[84 Ariz. 135] of the constitutional questions raised. It is first urged that the act violates the provisions of art. 14, § 15 of the Arizona Constitution which provides that:

'Monopolies and trusts shall never be allowed in this State and no incorporated company, co-partnership or association of persons in this State shall directly or indirectly combine or make any contract, with any incorporated company, foreign or domestic, through their stockholders or the trustees or assigns of such stockholders or with any co-partnership or association of persons, or, in any manner whatever, to fix the prices, limit the production, or regulate the transportation of any product or commodity. The Legislature shall enact laws for the enforcement of this Section by adequate penalties, and in the case of incorporated compenies, if necessary for that purpose, may, as a penalty declare a forfeiture of their franchises.'

We have frequently held that every intendment is in favor of the constitutionality of a statute, and that before it may be stricken down, the court must be satisfied beyond a reasonable doubt that it is unconstitutional. Roberts v. Spray,71 Ariz. 60, 223 P.2d 808; Black & White Taxicab Co. v. Standard Oil Co.,25 Ariz. 381, 218 P. 139. With this principle in mind let us place the Fair Trade Act beside the above constitutional provisions and determine whether the act contravenes said constitutional provision. The constitutional provision must be interpreted by ...

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