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Glaser v. Downes

Decided: November 27, 1973.

SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, PLAINTIFF-RESPONDENT,
v.
PATRICK DOWNES, JR., D/B/A ROUTE 3 ESSO, DEFENDANT-APPELLANT. SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, PLAINTIFF-RESPONDENT, V. SHELL OIL COMPANY, INTERVENOR-APPELLANT. SHELL OIL COMPANY, PLAINTIFF-APPELLANT, V. SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, DEFENDANT-RESPONDENT. PATRICK DOWNES, JR., D/B/A ROUTE 3 ESSO, INTERVENOR-APPELLANT, V. SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, DEFENDANT-RESPONDENT. MOBIL OIL CORPORATION, PLAINTIFF-APPELLANT, V. SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, DEFENDANT-RESPONDENT. EXXON CORPORATION, PLAINTIFF-APPELLANT, V. SIDNEY GLASER, DIRECTOR, DIVISION OF TAXATION, DEFENDANT-RESPONDENT



Goldmann, Matthews and Lora. Goldmann, J.A.D.

Goldmann

[126 NJSuper Page 12] Patrick Downes, Jr., d/b/a Route 3 Esso, appeals from a Chancery Division order permanently enjoining him from issuing trading stamps in conjunction with the sale of motor fuel in amounts exceeding one trading stamp for each $.10 of motor fuel purchased. Shell Oil Company, Mobil Oil Corporation and Exxon Corporation seek review of the action taken by Sidney Glaser, Director of the Division of Taxation, Department of the Treasury, on October 2, 1972, giving notice and determining, among other

things, that giveaways, whether or not conditioned on the purchase of motor fuel, are deemed illegal and violative of the provisions of N.J.S.A. 56:6-2(e). Shell has intervened in the Downes appeal, and Downes in the Shell appeal. The Sperry & Hutchinson Co., whose S & H stamps Downes issued in connection with his service station business, has also intervened in the appeals.

The appeals have been consolidated and the permanent injunction order stayed pending our determination.

Director Glaser brought an action against Downes seeking a permanent injunction prohibiting his distribution of more than one S & H or Plaid trading stamp for each $.10 of motor fuel purchased at his Esso Service Station. It is conceded that Downes had been issuing three trading stamps for each $.10 of motor fuel purchased. Following a three-day trial, the Chancery Division judge, in an opinion published in 120 N.J. Super. 476 (1972), held that Downes' practice violated N.J.S.A. 56:6-2(e) in that it constituted an illegal rebate, allowance, concession or benefit, thereby unlawfully permitting motor fuel to be purchased from a retailer below the posted price or at a net price lower than the posted price applicable at the time of sale. He held that the issuance of three trading stamps for each $.10 of motor fuel purchased violated the cash discount standard allowed in Sperry & Hutchinson Co. v. Margetts, 25 N.J. Super. 568 (Ch. Div. 1953), aff'd 15 N.J. 203 (1954). Although the only issue before him for determination was the legality of Downes' trading stamp practice, the trial judge went on to address himself to other trade devices which the evidence indicated were in use in defendant's competitive area and elsewhere, and which he held fell plainly within the prohibition of N.J.S.A. 56:6-2(e). These were: (1) giveaways, whether or not connected with the purchase of motor fuel; (2) the issuance of bonus stamps in connection with the practice of punch cards, and (3) the giving of postage stamps with each purchase of motor fuel. The judge stated that

"the Director must give gasoline retailers throughout the State ample written notice of the illegality of each of these competitive devices," including excessive trading stamps. He went on to say:

The order permanently enjoining Downes, dated September 20, 1972, directed that the injunction was to become effective 15 days after the Director informed each retail motor fuels dealer in New Jersey, by written notice through regular mail, that the issuance of the following items was illegal under N.J.S.A. 56:6-2(e): (1) trading stamps in amounts exceeding one stamp for each $.10 of motor fuel purchased; (2) bonus stamps in connection with the practice of card punching or any substantially similar practice involving the sale of motor fuel; (3) postage stamps, and (4) giveaways, whether or not conditioned on the purchase of motor fuel. This order is the basis for Downes' appeal.

On October 2, 1972 Director Glaser sent written notice to all licensed retail motor fuels dealers in New Jersey that pursuant to the Chancery Division injunctive order of September 20, 1972, the issuance by retail motor fuels dealers of any of the four items mentioned in the order was deemed to be illegal and violative of N.J.S.A. 56:6-2(e). The dealers were advised that effective 15 days from the date of the notice, the issuance of any of the four items might subject the dealer to the penalties enumerated in N.J.S.A. 56:6-3, including the suspension of his license for not less than 5 nor more than 30 days, and a fine for each violation of not less than $50 nor more than $200. It is this action by the Director that forms the basis for the Shell, Mobil and Exxon appeals.

I.

Downes' sole argument is that a retail motor fuels dealer is constitutionally free to give trading stamps with fuel purchases so long as the stamps are offered uniformly and the cost of such offerings does not reduce the sales price of the fuel below the dealer's cost. Translated over into the factual frame of reference of this case, his claim is that he was not in violation of N.J.S.A. 56:6-2(e) in giving his customers three trading stamps for each $.10 of motor fuel purchased -- the same contention projected at the trial. Although the trial judge said that it might very well be, as the State contended, that the theory of Margetts should be reconsidered and the giving of even one trading stamp for each $.10 of motor fuel purchased be deemed illegal under the statutory provision, he properly held that he was bound by the Supreme Court decision in that case. He observed, moreover, that the constitutionality of N.J.S.A. 56:6-2(e) was later upheld in Fried v. Kervick, 34 N.J. 68 (1961), and that the court, in effect, reaffirmed its decision in Margetts. Additionally, the judge pointed out, the Legislature apparently acquiesced in the Margetts holding that trading stamps should not be considered an unlawful rebate under a later statute involving the regulation of pharmacists. See Supermarkets General Corp. v. Sills, 93 N.J. Super. 326 (Ch. Div. 1966), involving L. 1965, c. 120 (N.J.S.A. 45:14-12(f))

In the State's brief filed on behalf of the Director of the Division of Taxation, it is urged that the Margetts holding should be overruled and the issuance of single stamps declared illegal. That issue was not before the trial court; indeed, the pleadings clearly evidence the acceptance of the continued viability of the Margetts holding. The third count of the complaint, and the only count remaining at the time of the pretrial order, sought judgment enjoining Downes from "engaging in the issuance of such an excessive quantity of ...


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