# Max Factor & Co. v. Kunsman

> California Supreme Court · February 28, 1936 · 5 Cal. 2d 446

URL: https://www.frixlaw.com/law-library/cases/9545496

## Case

- **Full name:** MAX FACTOR & CO. (A Corporation) Et Al., Appellants, v. CLARENCE G. KUNSMAN, Respondent
- **Court:** California Supreme Court
- **Decided:** February 28, 1936
- **Citations:** 5 Cal. 2d 446; 55 P.2d 177; 1936 Cal. LEXIS 424
- **Precedential status:** Published
- **Opinion:** Dissent by Thompson
- **Judges:** Waste, Thompson, Shenk
- **Cited by:** 118 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9545496

## Opinion text

THOMPSON, J., Dissenting.
I dissent. I cannot bring myself to agree with the majority opinion in this case. The *469 question herein is not whether the court or the legislature is authorized to determine the wisdom of an economic policy. It is, of course,z elementary that it is beyond the function of the court to attempt to define or limit the economic policy or to determine the wisdom of a chosen course by the state. And it is also fundamental that simply because such determination does not fall within the judicial function it does not follow that it belongs in the legislative field. It may be reserved by the state Constitution to the people, or the state may be prevented from acting by the inhibition of the federal Constitution. The question, then, in this ease may be phrased as follows: Has the legislature exceeded its powers as limited by some inhibition of the Constitution in which the people have defined for themselves an economic policy and in which they have set up a safeguard against the infringement by the legislature of some natural right with which they are endowed? If the act in question exceeds the legislative power thus measured, it is likewise beyond the judicial function to sap the inhibition or safeguard of its essential vitality, by construction, in order to accomplish or permit a course of action the court may deem to constitute a wise economic policy. (See opinion of Mr. Justice Burnett in Ex parte Newman, 9 Cal. 502, 510 , for a comprehensive statement of this principle.) The respondent insists that the section brought under our scrutiny in this cause does do violence to sections 1 and 13 of article I and section 25 of article IV' of our state Constitution, as well as the fourteenth amendment to the federal Constitution. It seems to me the argument in this regard is unanswerable. Section 1 of article I reads as follows : “All men are by nature free and independent, and have certain inalienable rights among which are those of enjoying and defending life and liberty, acquiring, possessing and protecting property; and pursuing and obtaining safety and happiness.” Section 13 of the same article provides that no person shall “be deprived of life, liberty or property without due process of law”, which is, of course, in keeping with a portion of the fourteenth amendment to the federal Constitution. Section 25 of article IV forbids the enactment of special laws respecting enumerated subjects or where a general law can be made applicable.
Sections 1 and 13 of the first article have been considered by this court in previous cases, and I believe if the amend *470 ment under attack is to be sustained, they must be directly overruled or the court forced to the extent of saying all trademarked, goods, including the specific item of cosmetics here involved, have been so devoted to a public use that they have become “affected with a public interest”. I can scarcely believe that anyone would adopt the latter alternative. Hence I advert to the construing authorities. It was held in the early case of Ex parte Newman, to which I have already referred, that the declaration of principles contained in article I, and which were intended for the protection of every individual, “can be enforced by judicial determination.” In Ex parte Quarg, 149 Cal. 79 [ 84 Pac. 766 , 117 Am. St. Rep. 115 , 9 Ann. Cas. 747, 5 L. R. A. (N, S.) 183], this court proceeded to enforce the section upon which the respondent relies for his protection. With respect to an enactment which attempted to prohibit the sale of theater tickets at a price in excess of that originally charged, it is there said: “The constitutional guaranty securing to every person the right of ‘acquiring, possessing and protecting property’ refers to the right to acquire and possess the absolute and unqualified title to every species of property recognized by law, with all the rights incidental thereto, and, in connection with the right of personal liberty, it indudes the right to dispose of such property in such innocent manner as he please, and to sell it for such price as he can obtain in fair barter” (italics added). To the same practical effect is Ex parte Dickey, 144 Cal. 234 [ 77 Pac. 924 , 103 Am. St. Rep. 82 , 1 Ann. Cas. 428, 66 L. R. A. 928], in which we find this expression: “This right of contract common to the followers of all legitimate vocations is an asset of the petitioner in his chosen occupation, and, as has been said, is a part of the property in the enjoyment of which he is guaranteed protection by the Constitution. By the act in question he is arbitrarily stripped of this right of contract, and deprived of his property, and left, in following his vocation and in pursuit of his livelihood, circumscribed and hampered by a law not applicable to his fellow men in other occupations.” (See, also, In re Smith, 193 Cal. 337 [ 223 Pac. 971 ].) Again, in People v. Pace, 73 Cal. App. 548 [ 238 Pac. 1089 ], after approving the language which we have quoted from Ex parte Quarg, supra, it was held that the legislature could not require a person to secure a permit as a condition precedent to the *471 sale of his own stock, although in repeated and successive transactions. The court said: “In these days when the urge is strong upon legislative bodies to extend the paternal arm of government into the realm of economic activities, it is particularly important that courts in the exercise of the particular functions imposed upon them by the Constitution, should scrutinize with care legislation which tends to encroach upon the constitutional guaranties, to the end that the right of the individual to liberty and possession of property shall become, not a mere theory, but shall be maintained as a practical reality. And while it is true that the increasing conflict between the rights of the individual and the general welfare of society presents ofttimes difficult and perplexing problems, nevertheless courts should not and will not permit the violation of those most fundamental rights that underlie our very existence as a nation. (Dobbins v. Los Angeles, 195 U. S. 223 [ 49 L. Ed. 169 , 25 Sup. Ct. 18], see, also, Rose’s U. S. Notes; Pacific Palisades Assn. v. City of Huntington Beach et al., 196 Cal. 211 [40 A. L. R. 782, 237 Pac. 538 ].) ”
There are a host of authorities from other jurisdictions which might be cited to the same effect, but for my purposes it will be sufficient to refer to but two. First we find comparable language in the case of Tyson & Bro.-United Theatre Offices v. Banton, 273 U. S. 418 [47 Sup. Ct. 426, 71 L. Ed. 718 , 58 A. L. R. 1236], as follows: “In the endeavor to reach a correct conclusion in respect of this inquiry it will be helpful by way of preface to state certain pertinent considerations. The first of these is that the right of the owner to fix a price at which his property shall be sold or. used is an inherent attribute of the property itself, ease of the State Freight Tax, 15 Wall. 232, 278 [ 21 L. Ed. 146 ]; and as such, within the protection of the due process of law clauses of the fifth and fourteenth amendments. See City of Carrollton v. Bazzette, 159 Ill. 284, 294 [31 L. R. A. 522, 42 N. E. 837 ].” Second, I refer to Doubleday, Doran & Co., Inc., v. R. H. Macy & Co., Inc., 269 N. Y. 272 [ 199 N. E. 409 ], which ease involved a practically verbatim copy of the section here involved, adopted by the legislature of New York. Bearing in mind that the New York Court of Appeals was the same court which first sustained the New York Milk Control Act (People v. Nebbia, 262 N. Y. 259 [ 186 N. E. 694 ]), which was the subject of judicial inquiry in the case of Nebbia v. *472 New York, from which the majority opinion has quoted so extensively, the expressions we find in the case are especially illuminating. It is there said: “That the States cannot fix the selling price of any and all commodities has been settled. (Williams v. Standard Oil Co., 278 U. S. 235 [49 Sup. Ct. 115, 73 L. Ed. 287 , 60 A. L. R. 596] ; Tyson & Bro.-United Theatre Ticket Offices v. Banton, 273 U. S. 418 [47 Sup. Ct. 426, 71 L. Ed. 718 , 58 A. L. R. 1236]; Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522 [43 Sup. Ct. 630, 67 L. Ed. 1103 , 27 A. L. R. 1280]; Straus v. Victor Talking Machine Co., 243 U. S. 490 [37 Sup. Ct. 412, 61 L. Ed. 866 , Ann. Cas. 1918A, 955, L. R. A. 1917E, 1196].)
“Books, at least these books, are not ‘affected with the public interest’ any more than theater tickets. No emergency has yet arisen in literary publications and the business is not such as comes within the class which must submit to rate fixing. Circumstances which cannot be foreseen from one generation to another may arise which will require certain articles to submit to regulatory prices in order that the public may get them at all or get them in a pure and beneficial state. We cannot always express legislative power in exact formulas nor decide a case before it happens. Experience is the mother of teachers. Under the Nebbia case, for instance (Nebbia v. New York, 291 U. S. 502 [54 Sup. Ct. 505, 78 L. Ed. 940 , 89 A. L. R. 1469]), no one would doubt now that New York state would have the power to get milk to the public somehow if any combination of forces threatened to shut off all supply or to deteriorate that which was supplied. The price might be .an element to be considered with other things in such a case. So we thought in People v. Nebbia, 262 N. Y. 259 [ 186 N. E. 694 ], but to fix arbitrarily the price of books by legislation and not by agreement comes within the condemnation of the decisions which have heretofore dealt with like legislation. What the Legislature cannot do directly, it cannot do indirectly, nor does it cease to be a price fixed by the Legislature because that body has clothed the publisher with the power or authority to establish it.” I think it so fundamental and so well established that the right to sell at any price obtainable by the owner is a part of the property itself and within the protection of the constitutional guaranties that I shall not devote more space to that thought.
*473 However, it must be conceded that there is a factor which takes some kinds of businesses outside of the strict protection of the inhibition, and to an ascertainment or rather statement (because it has heretofore been well explained and adhered to) of that element I now turn. What is it? For the purposes of a ready statement we say that where a business is “affected with a public interest” it is subject to regulatory measures: Just what is meant by the expression is well stated in Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522, 535 [43 Sup. Ct. 630, 67 L. Ed. 1103 , 27 A. L. R. 1280], as follows: “Businesses said to be clothed with a public interest justifying some public regulation may be divided into three classes:
“(1) Those which are carried on under the authority of a public grant of privileges which either expressly or impliedly imposes the affirmative duty of rendering a public service demanded by any member of the public. Such are railroads, other common carriers and public utilities.
“(2) Certain occupations, regarded as exceptional, the public interest attaching to which, recognized from earliest times, has survived the period of arbitrary laws by Parliament or Colonial legislatures for regulating all trades and callings. Such are those of the keepers of inns, cabs and grist mills. (State v. Edwards, 86 Me. 102 [ 29 Atl. 947 , 41 Am. St. Rep. 528 , 25 L. R. A. 504] ; Terminal Taxicab Co. v. District of Columbia, 241 U. S. 252, 254 [36 Sup. Ct. 583, 60 L. Ed. 984 , Ann. Cas. 1916D, 765].)
“(3) Businesses which though not public at their inception may be fairly said to have risen to be such and have become subject in consequence to some government regulation. They have come to hold such a peculiar relation to the public that this is superimposed upon them. In the language of the cases, the owner by devoting his business to the public use, in effect grants the public an interest in that use and subjects himself to public regulation to the extent of that interest although the property continues to belong to its private owner and to be entitled to protection accordingly.”
Again it is said therein (p. 536) : “In a sense, the public is concerned about all lawful business because it contributes to the prosperity and well being of the people. The public may suffer from high prices or strikes in many trades, but the expression ‘clothed with a public interest’ as applied to *474 a business, means more than that the public welfare is affected by continuity or by the price at which a commodity is sold or a service rendered. The circumstances which clothe a particular kind of business with a public interest, in the sense of Munn v. Illinois and the other cases, must be such as to create a peculiarly close relation between the public and those engaged in it, and raise implications of an affirmative obligation on their part to be reasonable in dealing with the public.”
Making the meaning of the unanimous court still more clear, the author of the opinion says (p. 537) : “An ordinary producer, manufacturer, or shopkeeper may sell or not sell, as he likes United States v. Trans-Missouri Freight Association, 166 U. S. 290, 320 [17 Sup. Ct. 540, 41 L. Ed. 1007 ] ; Terminal Taxicab Co. v. District of Columbia, 241 U. S. 252, 256 [36 Sup. Ct. 583, 60 L. Ed. 984 , Ann. Cas. 1916D, 765], and while this feature does not necessarily exclude businesses from the class clothed with a public interest, German Alliance Ins. Co. v. Lewis, 233 U. S. 389 [34 Sup. Ct. 612, 58 L. Ed. 1011 , L. R. A. 1915C, 1189], it usually distinguishes private from gwcm-public corporations.
“In nearly all the business included under the third head above, the thing which gave the public interest was the indispensable nature of the service and the exorbitant charges and the arbitrary control to which the public might be subjected without regulation.” (Italics added.)
To revert to the case of Tyson & Bro.-United Theatre Ticket Offices v. Bant on, supra, for a moment we find apt language describing the expression as follows (p. 430) : “The authority to regulate the conduct of a business or to require license, comes from a branch of the police power which may be quite distinct from the power to fix prices. The latter, ordinarily, does not exist in respect of merely private property or business, Chesapeake & Potomac Tel. Co. v. Manning, 186 U. S. 238, 246 [22 Sup. Ct. 881, 46 L. Ed. 1144 ], but exists only where the business or the property involved has become ‘affected with a public interest ’. . . .
“A business is not affected with a public interest merely because it is large or because the public are warranted in having a feeling of concern in respect of its maintenance. Nor is the interest meant such as arises from the mere fact that the public derives benefit, accommodation, ease or enjoyment from the existence or operation of the business; and *475 while the word has not always been limited narrowly as strictly denoting ‘a right’, that synonym more nearly than any other expresses the sense in which it is to be understood.”
It can hardly be denied that the public is interested in the maintenance and continuity of the oil business, particularly as the same relates to the sale of gasoline and lubricating oils. And yet the Supreme Court of the United States denied the power of the legislature to regulate the price in the case of Williams v. Standard Oil Co., 278 U. S. 235, 239 [49 Sup. Ct. 115, 73 L. Ed. 287 , 60 A. L. R. 596], saying in part as follows: “It is settled by recent decisions of this court that a state legislature is without constitutional power to fix prices at which commodities may be sold, services rendered, or property used, unless the business or property involved is ‘affected with a public interest’ . . . By repeated decisions of this court, beginning with Munn v. Illinois, 94 U. S. 113 [ 24 L. Ed. 77 ], that phrase, however it may be characterized, has become the established test by which the legislative power to fix prices of commodities, use of property or services must be measured. As applied in particular instances, its meaning may be considered both from an affirmative and a negative point of view. Affirmatively, it means that a business or property, in order to be affected with a public interest, must be such or be so employed as to justify the conclusion that it has been devoted to a public use and its use thereby in effect granted to the public . . . Negatively, it does not mean that a business is affected with a public interest merely because it is large or because the public are warranted in having a feeling of concern in respect of its maintenance . . .
“In support of the act under review it is urged that gasoline is of widespread use; that enormous quantities of it are sold in the State of Tennessee; and that it has become necessary and'indispensable in carrying on commercial and other activities within the State. But we are here concerned with the character of the business, not with its size or the extent to which the commodity is used. Gasoline is one of the ordinary commodities 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 in the country. The decisions referred to above make it perfectly clear that the business of dealing in *476 such articles, irrespective of its extent, does not come within the phrase ‘affected with a public interest’.” I might add other authorities in which the legislative power has been denied, but there has never been a departure from the announced principle. Even in the case of Nebbia v. New York, supra, to which reference has been made, the court justifies its conclusion by the fact that milk was indispensable and that it was easily contaminable; that in order to secure pure and wholesome milk for the public during the emergency which the legislature declared to exist it was necessary for the state to take control. The facts of the case when studied reveal that the comfort claimed to be found by appellant in the opinion does not in truth exist. And here I desire to point out a fallacy involved in the major opinion. The language quoted is taken from cases involving businesses “affected with a public interest” as hereinbefore defined, or from authorities dealing with the health or public safety. The result is that the language, lifted from its context and placed in a different setting, takes on a meaning altogether foreign to that which it originally possessed.
Nor can it be seriously contended that the amendment is not a price-fixing statute. It fixes the price indirectly and it has this additional vice, that it leaves the fixed price to the dictates of the producer—in other words, the legislature has, as said in the Doubleday-Doran case, attempted to delegate authority to the producer of a trade-marked article to set the retail price. No one can object to the contract which he may enter into, but to make this contract binding by legislative fiat as to retail price upon persons who are not privy thereto violates every principle guaranteed the individual by the constitutional guaranties. The element of knowledge on the part of the seller is a minor factor, provided very simply by notice on the goods or label. It is manifest that the act here in question was not based upon the public interest, or that the consumer was considered. Its effect is to grant to the producer a privilege and preference unwarranted by the basic law. Not only that—but seeking to justify its enactment upon the theory that it is designed to prevent price-cutting which injures a competitor, it reaches all merchants who,though they may be satisfied with a smaller profit than others engaged in the business, or who by reason of a greater effi *477 ciency are able to sell at lower prices and yet make the same profit, are still compelled to exact from the consumer a fixed retail price. It strikes at every merchant alike, regardless of intention, who desires to manage and control his own business. It is thus made perfectly clear that the object of the act is not to prevent unfair competition but to fix prices. Such being its purpose and operation, it falls under the condemnation of cases involving similar efforts, such as Fairmont Creamery Co. v. Minnesota, 274 U. S. 1 [47 Sup. Ct. 506, 71 L. Ed. 893 , 52 A. L. R 163], and other cases already cited.
But the amendment has other fatal defects. A. study of the authorities which deal with the regulation of businesses, both those which sustain and those which reject the claim of legislative power, reveals that the question of whether all the surrounding circumstances have operated to change the status of a private business free from legislative regulation into one in which the public has an interest is one for judicial inquiry and determination (Wolff Packing Co. v. Court of Industrial Relations, supra). But the act here in question attempts to lump all businesses into a common regulatory basket, provided only that the product is trade-marked and is originally in competition.
" I have already mentioned the fact that the legislature has attempted to delegate the price-fixing power to the producer or manufacturer. Before concluding, I wish to direct attention to the almost obvious and inescapable fact that there is no authority in the law for such action. A person may not be bound with respect to his property by the action, whim or caprice of another, particularly where the latter is not vested with any official responsibility or duty. The delegation of such power is contrary to the fourteenth amendment to the federal Constitution. (Washington v. Roberge, 278 U. S. 116 [49 Sup. Ct. 50, 73 L. Ed. 210 , 86 A. L. R 654] ; Panama Refining Co. v. Ryan, 293 U. S. 388 [55 Sup. Ct. 241 [ 79 L. Ed. 446 ].) Of course, I concede the producer’s right to sell or not to sell at his own price, but when his property has been sold and passed into hands not hampered by contractual covenants the producer’s control and right therein has altogether ceased. It takes no great amount of imagination to visualize the discriminatory practices and abuses which might be indulged were the power of the producer to establish a fixed retail price upheld.
*478 Since the preparation of the foregoing opinion I have read the dissenting opinion by Mr. Justice Shenk and desire to express my concurrence therein.
The judgment should be affirmed.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9545496. Public record. Not legal advice.