City of Denver v. Frueauff

Mr. Justice Goddard

delivered the opinion of the court:

•The question presented by this record has been considered by several of the ablest courts in this country, and has, with few exceptions, been determined adversely to the contention of the plaintiff in error. Not only has the character of legislation embodied in the ordinance in question been generally condemned, but the particular business aimed at therein has been held immune from, interference under the police power of the state or municipality. The proposition announced in these cases is, that legislation which purports to have been enacted to protect the public health, public morals, and public safety, and which has no real or substantial relation to those objects, is a palpable invasion of the rights guaranteed to individuals by the federal and'state constitutions; that the legislature may not arbitrarily interfere with private business and impose unnecessary restrictions upon lawful occupations under the guise of protect ing the public interests; and that its determination as to what is within its police power is subject to the supervision of the courts. — Lawton v. Steele, 152 U. S. 133, 137; Winston v. Beeson, 135 N. C. 271; Madden v. Dycker, 72 Hun. 308, 317; State v. Dodge, 76 Vt. 197; Young v. Commonwealth of Va., 45 S. E. Rep. 327; Long v. State, 74 Md. 565; State v. Dalton, 22 R. I. 77; State v. Shugart, 138 Ala. 86; Commonwealth v. Sisson, 178 Mass. 578; Hewin v. City of Atlanta, 49 S. E. Rep. 765; State v. Ramseyer, 58 Atl. Rep. 958.

In State v. Dalton, the court had under consideration a statute which, like the ordinance before us, prohibited the use of trading stamps, and the violation of the statute upon which the prosecution was predicated was for giving and distributing with certain merchandise sold the same kind of stamps issued and redeemable in the same manner and by the same parties, to wit, The Sperry & Hutchinson Company, named in this case. In that case, after discussing the police power, and citing numerous authorities, the court concluded that the statute before it did not fall within the police power of the legislature, and was clearly an unlawful interference with a private right, because it did not look to, or in any maimer concern, the public health, public safety, or the public morals, and said:

“•In this connection it is pertinent to observe that it is not enough to warrant the state in prohibiting a given business that it is conducted by methods which do not meet with general approval. There must be something’ in the methods employed which renders it injurious to the public in some one of the ways before mentioned in order'to warrant the state in interfering therewith. Nor is it enough to bring a given business within the prohibitory power of the state that it is so conducted as to seriously interfere with or oven destroy the business of others. ’ ’

After discussing the question whether the transaction there under consideration involved any element of lottery, and the method of carrying on the business which the act prohibited, the court concluded : ‘ ‘ The element of chance, which is the basal principle in every scheme in the nature of a lottery, is wholly wanting. ’ ’

And, in speaking of the act there in question, the learned writer of the opinion used this language:

“The act, as we construe it, prohibits a person from selling a given article, and at the same time, and as a part of the transaction, giving to the purchaser a stamp, coupon, or other device which will entitle him to receive from some third person some other well-defined article in addition to the one sold.' This is equivalent to declaring that it is illegal for a man to give away one article as a premium to the buyer for having purchased another. * * * We think it is clear that such a prohibition is an unwarranted interference with the individual liberty which is guaranteed to every citizen, both by our state constitution and also by the fourteenth amendment to the constitution of the United States.”

And, in finally summing up, he says:

“What we do decide is, that the statute in question is so broad as to interfere with the right of an individual to deal with his own property in his own way; that is to say, to make such contracts regarding the sale and disposition thereof as he shall see fit, so long as he observes the rule that each one shall so use and enjoy Ms own property as not to injure that of another person, and also the further rule that his use of it shall not be injurious to the community; and hence is not a valid exercise of the legislative power. ’ ’

In Young v. Commonwealth, a similar statute which inhibited the same transaction complained of here, was considered. Harrison, J., after speaking in detail as to the manner in which the business of The Sperry & Hutchinson Company was conducted, said:

“We can find nothing in the contract between The Sperry & Hutchinson Company and the defendant, nor the transactions with customers in pursuance of such contract, that is not a legitimate exercise of one’s right to> prosecute his business in his own way. As already said, ‘It appears to be simply one of the many devices fallen upon in these days of sharp competition between tradespeople’ to attract customers, or to induce those who have bought once to buy again, and in this respect is as innocent as any other of the many forms of advertising.”

In Winston v. Beeson, the court had under consideration the question as to whether dealers in trading stamps came within the provisions of an ordinance taxing’ gift enterprises, the business there under consideration being that of The Sperry & Hutchinson Company; in other words, whether their business, in the manner in which it was conducted, constituted a gift enterprise in the sense that those words were used in the charter. After an able and elaborate discussion as to what was meant by the term “gift enterprise,” and concluding that, as generally defined and understood, it constituted “a scheme for the division and distribution of certain articles of property to be determined by chance among those who have taken shares in the scheme,” citing Black’s Law Dictionary, p. 539; Bouvier’s Law Dictionary, vol. 1, p. 884; Anderson’s Law Dictionary, p. 488, and Lohman v. State, 81 Ind. 17, as approving that definition, the court, speaking by "Walker, J., said:

“From the definitions we have already given of a lottery or scheme for the disposition or distribution of prizes or property by chance, it appears that three things must concur in order to constitute it: (1) There must be the purchase of a right; (2) the right must be a contingent one, to receive something-greater than that which is purchased; and (3) the contingent right must depend upon a lot or chance. We have not been able to discover any one of these elements in the plan devised by the defendant company for the conduct of its business. The right to have the stamps redeemed depends upon no contingency, chance or lot whatsoever; the person receiving the stamps upon the purchase of goods is not in any degree deprived of his choice or will. Indeed, by the contract, he is given full and free exercise of his choice and will. The right of selection among the articles kept by the stamp company in its store is expressly given, and the stamp collector may choose the best or the most valuable or such a one as may be most useful to him or pleasing to his taste, as he may be minded. The articles are all publicly exhibited, and, before the purchases are made or the stamps collected, any person proposing to buy and to receive the stamps from the merchant has- free access to the store, where he may see and examine the goods from which his selection may be made. There is, therefore, no uncertainty as to the nature, character or value of the premium, if we may so'call it, with which the stamps will be redeemed. The fact that the stamps are redeemed-at a place other than the one where they are issued certainly does not introduce into the scheme any element of chance. We can discern no practical difference between this arrangement of the parties and one by which the merchant agrees to discount his bills where cash is paid by his customer at the time of the purchase, and the giving of stamps redeemable at a store of another in goods to be selected by the holder, instead of an actual discount by the merchant, does not in law vary the case or change the real and substantial character of the transaction. The plan, as outlined in the verdict (being the same as set out in the statement of facts in this case) seems to be one for advertising the merchant’s business and his wares, and enabling him to sell his goods for cash instead of on time. .This, it must be conceded, is an advantage to him. It is also a benefit to the customer, who practically re- ■ ceives a discount, and who will buy more cautiously and judiciously if he pays cash, and will spend only according to his means.”

We quote thus fully from the opinion of the learned judge in that case because it is a fair, lucid .and correct statement of the trading stamp business as conducted by The Sperry & Hutchinson Company, as it is set out in the agreed statement of facts in this case, and gives a clear understanding of the character of the business sought to be inhibited by the ordi-' nance before ns, and shows that the element of chance is wholly lacking.

Counsel for plaintiff in error attempt to distinguish the case before us from the foregoing cases upon the ground that our constitution provides: “The general assembly shall have no power to authorize lotteries or gift enterprises for any purpose, and shall pass laws to prohibit the sale of lottery or gift enterprise tickets in this state. ’ ’ — Const., art. 18, sec. 2. And section 2927, Mills’ Ann. Stats., enacts that: “It shall not be lawful hereafter for any person, persons, association of persons, or corporation,. to engage in or otherwise promote any lottery or gift enterprise of any nature, or for any purpose whatsoever, ’ ’ and making it a misdemeanor to knowingly engage in, or in any wise promote, any lottery or gift enterprise.

It is contended that these provisions are broad enough to include “gift enterprises” of any nature, whether they involve the element of chance or not, and, therefore, justify the adoption of the ordinance in dispute. We do not think the term “gift enterprise,” as used in the foregoing provisions, is susceptible of this construction. Associated as these words are in both constitution and statute with the word “lottery,” they involve, as that term does, the element of chance or hazard, and necessarily mean that character of “enterprises” which appeals to the gambling instinct, and tends to debauch public morals. This being so, there is no warrant for saying that the transaction sought to be prohibited by the ordinance under consideration comes within the category of ‘ ‘ gift enterprises ’ ’ contemplated by the constitution or statute; and it is equally clear that the city council cannot, by arbitrarily defining the business of the trading stamp company as such, bring it within the class of inhibited enterprises, and under the guise of the exercise of its police power, prohibit the carrying on of that which we have seen is a legitimate business.

The case of Lansburgh v. Dist. of Columbia, 11 Appeal Cases 512, is relied on by plaintiff in error as authorizing the legislation in question. While it is true that the decision in that case is ostensibly predicated upon the fact that the statute' there considered furnished a definition of a “gift enterprise,” and that it was, therefore, unnecessary to declare that the acts proved in the case constituted a lottery or gift enterprise, as those words were commonly used, or that the element of chance operated intentionally or directly in the scheme of the trading stamp company, which was the same as that herein set forth, yet it will be seen that, in his reasoning, the writer of the opinion laid great stress upon the fact that the scheme there involved, according to his notion, was “the exploitation of nothing more or less than a cunning device, ’ ’ and ‘ ‘ one of the most shrewdly planned of the many devices to obtain something for nothing”; that they (the trading company) had “intervened in the legitimate business carried on in the District of Columbia between seller and buyer, not for the advantage of either, but to prey upon both, ’ ’ evidently regarding the scheme in itself as inimical to public morals and detrimental to the public welfare; and, while disclaiming the necessity of undertaking to specify the particular conditions in which the act under consideration might or might not apply to actual merchants in the ordinary course of competitive business, or to determine just what character of inducements by way of gift or premium may or may not be held out to purchasers at the time and as a part of their purchase, used this significant language :

“That it was not intended to apply to ordinary discounts for cash, or in proportion to amounts of purchases when made by the merchant himself to his customers, may be regarded as certain; and the exercise of such power would doubtless be denied if expressly attempted. Nor can it, with reason, be said to apply to bona fide co-operative associations and the like. It is possible, also, that it might not be operative in a case where the sale of a lawful article is accompanied by a gift of something specific and certain, not attended with any . element of chance, and where the gift is not the real object of the sale.”

It is apparent that the learned judge was of the opinion that the statute would be inoperative if it intended to apply to, and include within its definition of “gift enterprises” a transaction involving the sale of a lawful article accompanied by a gift of something specific and certain, not accompanied by the •element of chance. In other words, it is very probable that, if he had’taken the same view of the business carried on by the trading stamp company as was adopted in all of the cases above cited, wherein the same transaction was investigated, his conclusion would have been in accord with that reached in those cases.

If the decision in that case is to- be construed as announcing the doctrine that a legislative declaration that a business, lawful in itself, is a “gift enterprise,” and is thereby rendered unlawful, regardless of the fact that it wholly lacks the essential element of chance, it is at variance with the uniform current of authority; and if, as we understand it, the conclusion therein reached was because the scheme under consideration was, in the opinion of the court, obnoxious to public morals ór detrimental to the public welfare, we decline to follow it, because it is directly opposed to the conclusion reached as to its character in all the cases in which the business of the trading stamp company has been under investigation.

Humes v. City of Ft. Smith, 93 Fed. Rep. 857, is similar to, and follows, the Lcmsburgh case. We find no other case which, when carefully considered, supports the position assumed by plaintiff in error in this case. In the view we take of the scheme of the trading stamp company, as described in the agreed statement of facts, we are clearly of the opinion that the ordinance prohibiting it cannot be sustained, and the court below properly discharged the defendant, and its judgment will be affirmed. Affirmed.

Decision en banc, all the justices concurring.