Clinton v. General Motors Corp. , 229 Ark. 805 ( 1958 )

Leon B. Catlett, Special Associate Justice.

Act 530, which became effective on July 1, 1957, created the Arkansas Motor Vehicle Commission, composed of a Chairman and six members, and provided for the regulation by such Commission of the sale and distribution of new motor vehicles in Arkansas. On June 27, 1957, six automobile dealers, including franchised new car dealers and non-franchised new car dealers, filed suit in the Pulaski Chancery Court seeking a declaratory judgment that Act 530 was unconstitutional in multiple respects under the State and Federal Constitutions and for an injunction against its enforcement. On August 27, 1957, General Motors Corporation, a nonresident automobile manufacturer, filed suit in the same Court praying the same relief as asked in the case of the six automobile dealers for substantially the same reasons. The two cases were consolidated for trial, and on January 14, 1958, the Court below held the Act “unconstitutional in its entirety because it contravenes the Constitution of Arkansas and the Constitution of the United States in several respects, particularly: 1. The Act contains arbitrary classifications among persons following the same calling and trade. 2. The Act is not a valid exercise of the police power. 3. The Act fails to provide for an impartial tribunal. 4. The standards set out in the Act are not sufficiently definite. 5. The Act constitutes a prohibited delegation of legislative powers. 6. The Act imposes unreasonable burdens and restrictions on interstate commerce.”

Excellent briefs have been submitted by the parties and by Ford Motor Company and Chrysler Motor Corporation as amici curiae.

The legislation and ensuing litigation are a sequel to a similar Act, No. 182 of 1955, reviewed and declared unconstitutional in Rebsamen Motor Company v. Phillips, 226 Ark. 146, 289 S. W. (2d) 170. In the Bebsamen case the Court found that Act 182 contravened Section 18, Article 2 of the Arkansas Constitution by arbitrarily classifying dealers in new and unused cars' as subject to the required license, while exempting dealers engaged in the sale of new and used cars. The question presented is whether Act 530 of 1957 is sufficiently different from Act 182 of 1955 to eliminate unconstitutional features.

Section 2(a)'of Act 530 of 1957 defines-a “New Motor Vehicle” as “any motor vehicle transferred for the first time from a manufacturer, distributor or wholesaler, factory branch or distributor’s branch, and which motor vehicle has theretofore not been used.” The remainder of Section 2 is devoted to defining, among other terms, “Motor Vehicle Dealer,” “Commission,” “Manufacturer,” “Distributor,” “Wholesaler,” “Factory Bránch” and “Distributor Branch.” Section 3 creates the Arkansas Motor Vehicle Commission and empowers it to “make and enforce all reasonable rules and regulations” necessary to accomplish the purposes of the Act. Section 4(a) specifies that on or after July 1, 1957, engaging in business as a motor vehicle dealer, or manufacturer, distributor or wholesaler of motor vehicles without first obtaining the license required by the Act, constitutes a misdemeanor with each day of violation a separate offense, and Section 4(b) requires an applicant to execute a form prescribed by the Commission containing information relating to the applicant’s financial standing, business integrity, whether applicant has an established place of business and is primarily engaged in the pursuit of the business for which a license is sought, and whether the applicant is able to conduct properly such business and such other pertinent information consistent with the safeguarding of the general economy, public interest and public welfare. Section 4(c) sets forth a schedule of license fees and Section 4(d) provides that a change of location must be sanctioned by a new license. Section 5 enumerates the grounds for denying, revoking, suspending or delaying the issuance of a license, and specifies that such action may be taken by the Commission if a “Motor Vehicle Dealer” (a) has required a purchaser of a new motor vehicle, as a condition of delivery thereof, to also purchase special features, appliances, accessories or equipment not desired by the purchaser; (b) has represented and sold as a new and unused motor vehicle any motor vehicle which has been used and operated for demonstration purposes, or which is otherwise a used motor vehicle; or (c) resorts to or uses any false or misleading advertising in connection with his business as a “Motor Vehicle Dealer.”

Customarily, manufacturers of automobiles sell new motor vehicles, through their distribution systems, only to dealers with whom they have a franchise or contract.

A careful and painstaking comparison of the provisions of Act 530 of 1957 with those of Act 182 of 1955 fails to disclose any real difference in the basic requirements imposed by Act 530 in connection with “any motor vehicle transferred for the first time from a manufacturer, distributor or wholesaler, factory branch or distributor branch, and which motor vehicle has theretofore not been used,” and the requirements imposed by Act 182 in connection with “the sale of new and unused motor vehicles” by a dealer holding a bona fide contract with or franchise from a manufacturer of such vehicles. Nor has any difference been discerned between the sale of a “motor vehicle transferred for the first time” and the sale of “a new and unused motor vehicle.” Both Acts regulate and require the payment of license fees by identical classes, while the competitors of such classes engaged in the same business are not regulated or required to pay such fees. There is no reasonable basis for placing the franchised dealers under regulation and requiring them to pay license fees, while not making the same requirements of the non-franchised or independent dealers.

In the case of Rebsamen Motor Company v. Phillips, supra, this Court pointed out that while the manufacture and sale of motor vehicles constitutes an area by no means exempt from regulation under the police power of the State, such regulation may not extend to a point where competition is circumscribed in an unreasonable manner. Act 530 and Act 182 reach an identical result in this respect.

In reaching this decision we do not desire to create an impression that the wisdom of legislation has or will become a factor in judicial appraisal where attack is made on constitutional bases. However, as we have often held, the police power may not be applied to a class without equal application to all members of such class.

While additional grounds of unconstitutionality are urged, some of which are meritorious, in view of our conclusion, a discussion of these points is unnecessary. Act 530 of 1957 is unconstitutional in its entirety.

A ffirmed.

The Chief Justice and Mr. Justice Ward dissent. George Rose Smith and William J. Smith, JJ., not participating.