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Sam Fried v. Kervick

Decided: January 23, 1961.


For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Francis, J. Hall, J., concurring in result.


Plaintiff Sam Fried, a retail gasoline dealer, sought a Superior Court injunction restraining the enforcement of N.J.S.A. 56:6-2(a), (c), (d), (e), which regulates certain aspects of the retail sale of gasoline. The relief sought was predicated upon a claim that the statute is unconstitutional. The Chancery Division found otherwise and granted summary judgment for the defendant. Plaintiff's subsequent appeal to the Appellate Division was certified on our motion prior to argument there.

N.J.S.A. 56:6-2(a) requires retail dealers to post certain signs on their pumps or other dispensing equipment stating the price per gallon of the gasoline sold, which price is to include all State and Federal taxes. The sign, however, must state, either the amount of the taxes included or, without specifying the amount thereof, that the taxes

are included in the price. The subsection further provides that sales shall not be made at any price other than that posted, and that the price when displayed shall remain posted and in effect for not less than 24 hours. Subsections (c) and (d) impose further restrictions with respect to the signs or other advertising. Subsection (e), which presents the crux of the controversy, says:

"(e) No rebates, allowances, concessions or benefits shall be given, directly or indirectly, so as to permit any person to obtain motor fuels from a retail dealer below the posted price or at a net price lower than the posted price applicable at the time of the sale."

Plaintiff maintains that the sale of gasoline at retail is a private business, not one affected with a public interest, and for the Legislature to single it out for such price control is arbitrary and discriminatory and deprives it of its property in violation of the due process and equal protection clauses of the Fourteenth Amendment of the United States Constitution. Although the complaint seeks a determination that subsections (a), (c) and (d), as well as (e), are invalid, no argument is made that the mandate for the posting of the signs or with respect to their form or size or location as such is unconstitutional. For a discussion of the constitutionality of subsection (c), see Regal Oil Co. v. State, 123 N.J.L. 456 (Sup. Ct. 1939). The attack in the brief and on oral argument was directed at subsection (e) alone.

The record presented on the motion for summary judgment showed that plaintiff was knowingly engaged in selling gasoline which was within the terms of the Fair Trade Act, R.S. 56:4-1 to 6, as amended L. 1938, c. 165 and L. 1940, c. 230, at less than his posted (and fair trade) price. It appeared also that 94.44% of all the gasoline sold in New Jersey by distributors to retailers is subject to fair trade price agreements.

The statute being assailed, N.J.S.A. 56:6-2(e), was adopted by the Legislature on the same day as the

amendment to the Fair Trade Act, L. 1938, c. 165. 1938 Senate Journal 679; 1938 Minutes of Assembly 943. The similarity of their subject matter, even though the latter is general in scope while the former is special, renders inescapable the conclusion that they are in pari materia, at least to the extent that both are reflective of the same type of legislative philosophy. Cf. Lane Distributors, Inc. v. Tilton, 7 N.J. 349, 357 (1951). It is reasonable to believe that N.J.S.A. 56:6-2(e) was intended to complement fair trade legislation. Almost conclusive proof of this fact comes from the simultaneous 1938 amendment of the fair trade act above described which made the act applicable to products sold from vending equipment bearing the brand or name of the producer. N.J.S.A. 56:4-5(1). Also, the statement on the bill specifies that the purpose of the amendment is to include within the jurisdiction of the act commodities sold from vending equipment bearing the trademark, brand or name of the producer or distributor of such commodities. And if (as will be discussed hereafter) the police power may be exercised as a price control measure in some areas, it might with greater reason be used to fortify the policy of a validly enacted fair trade law. See Ed. Schuster & Co. v. Steffes, 237 Wis. 41, 295 N.W. 737 (Sup. Ct. 1941).

Plaintiff insists that control of the price at which he may sell gasoline cannot be imposed constitutionally because his business is not vested with a public interest. The argument finds support in the Superior Court, Chancery Division, opinion in Sperry & Hutchinson v. Margetts, 25 N.J. Super. 568 (1953), involving this statute. On appeal, however, although this court affirmed the judgment, decision on the constitutional issue was expressly withheld. Sperry and Hutchinson Co. v. Margetts, 15 N.J. 203, 209 (1954). The notion that the authority of a state to regulate prices of commodities or services is strictly limited to those businesses which are said to be vested with a public interest stems from the traditional public utility concept. Such enterprises are those which are so operated as to justify the

conclusion that they have been devoted to a public use and the use thereby in effect granted to the public. That is the sense in which the United States Supreme Court in Williams v. Standard Oil Co., 278 U.S. 235, 49 S. Ct. 115, 73 L. Ed. 287 (1929), approached and condemned the attempt by Tennessee to fix the prices at which gasoline could be sold within the State. After noting the only factual support for the enactment to be the widespread use of the product and the allegation that such use made it necessary to the carrying on of commercial and other activities, Justice Sutherland, writing for the majority, said that gasoline is simply an ordinary commodity of trade, "differing, so far as the question here is affected, in no essential respect from a great variety of other articles commonly bought and sold by merchants and private dealers [throughout] the country." Id., 278 U.S., at p. 240, 49 S. Ct., at p. 116. And he ruled for the court that extensive use of the product did not bring the business which sold it within the phrase "affected with a public interest," the standard by which the validity of price fixing legislation, in respect to such a business, must be tested. Ibid, and see Ribnik v. McBride, 277 U.S. 350, 48 S. Ct. 545, 72 L. Ed. 913 (1928). The opinion in Williams does not suggest in the slightest that there were any evils or unfair trade practices or conditions associated with retail sale thereof which so adversely affected the public welfare as to warrant the criticized legislative action as an exercise of police power.

The ensuing years, as pointed out by Justice Douglas in Olsen v. State of Nebraska, 313 U.S. 236, 61 S. Ct. 862, 85 L. Ed. 1305 (1941), saw a great drift away from the restricted viewpoint of the Williams case and Tyson & Bro., etc. v. Banton, 273 U.S. 418, 47 S. Ct. 426, 71 L. Ed. 718 (1927), Ribnik v. McBride, supra, and the like, on which it was based. Perhaps the clearest example of the trend is found in Nebbia v. People of State of New York, 291 U.S. 502, 54 S. Ct. 505, 78 L. Ed. 940 (1934), which sustained regulation by New York of the resale prices of

milk. There the court redefined the phrase "affected with a public interest" in the context of such a case to mean "in the nature of things * * * no more than that an industry, for adequate reason, is subject to control for the public good." Id., 291 U.S., at p. 536, 54 S. Ct., at p. 514. It declared with respect to the requirement of due process that a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to effectuate that policy by legislation reasonably adapted to that purpose; also that "if the legislative policy be to curb unrestrained and harmful competition by measures which are not arbitrary or discriminatory it does ...

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