DR MILES CALIFORNIA CO v. SONTAG CHAIN STORES CO (1935)

Plaintiff below prosecutes this appeal from a judgment of dismissal of the action entered after a general and special demurrer to the amended complaint had been sustained with leave to amend, and plaintiff had elected to stand on the said amended complaint.

The facts material to a discussion of the question involved, to wit, Does the amended complaint state a cause of action, briefly stated, are as follows:

Prior to October 20, 1931, Dr. Miles Medical Company, an Indiana corporation, was sole owner of certain trade-marks used in connection with the manufacture, sale, and distribution of ten certain medicinal preparations and of the business and good will established in the distribution and sale thereof in the state of California. Said owner did sell the same to wholesale druggists in said state. Some of said trademarks, although not specifically designated in the amended complaint, were registered with the secretary of the state of California. On or about said date the owner sold and assigned to plaintiff the business in California, together with the good will pertaining thereto and exclusive rights in said state.

In the amended complaint in paragraphs 6 and 7 many facts and conclusions relating to the practice of “cut rate drug stores” and the resulting enactment of the Fair Trade Act (St. 1931, p. 583) are set forth. It is also alleged that plaintiff for its protection thereunder adopted a system of business contracts between itself and its distributors, correct copies of which are printed as Exhibits A and B in plaintiff's reply brief. The material feature of these contracts is the agreement therein that said preparations shall be sold by the distributors at specified prices. All wholesale druggists in the state of California and over 99 per cent. of the retail druggists therein have executed the said contracts and now observe and conform to the terms thereof. Defendant, prior to plaintiff's inauguration of its contract system, was a retail dealer in plaintiff's goods and did cut prices thereon and refused to execute said retail distributor's contract. Thereafter, plaintiff refused to sell its goods to defendant.

The gist of plaintiff's first cause of action is stated as follows:

“That upon plaintiff declining to sell its commodities to defendant except as aforesaid, defendant * * * conceived a wrongful and unlawful plan and scheme of harming, injuring and destroying plaintiff's said business and good will in the state of California by disrupting said system of lawful contracts existing between said plaintiff on the one hand and its wholesale and retail distributors on the other, and by unlawfully and unduly influencing, inducing, coercing and causing said wholesale and retail distributors to violate and cancel said contracts. That defendant has proceeded and is now proceeding to carry out said unlawful and wrongful scheme and plan in the manner more particularly hereinafter set out and in so doing has been and now is acting maliciously and without legal justification therefor.

“That in pursuance and as a part of said unlawful and wrongful plan and scheme, defendant has procured and now procures commodities bearing plaintiff's trade-marks, brands and names, and has continuously sold and is now selling said commodities at prices less than the minimum resale price prescribed in said contract. * * *

“That in further pursuance and as a part of said unlawful and wrongful scheme and plan * * * defendant has employed and is now employing persons to impersonate consumers and has caused them to visit various retail druggists in the City of Los Angeles who have executed with plaintiff the contracts hereinbefore referred to. That such persons, pursuant to instructions of defendant, call at such drug stores and inquire the price of plaintiff's goods, and when told the price thereof which in each instance has been the minimum price prescribed in said Exhibit B, such persons state in substance, pursuant to defendant's instructions, that such goods are being sold at defendant's stores at a lower price, and thereupon leave the stores of said retail dealers without making any purchases. That such pretended purchasers are not in good faith desirous of buying the plaintiff's goods, but are sent by defendant to the stores of retail distributors under contract with plaintiff for the sole and only purpose of creating dissatisfaction among retailers who have signed plaintiff's contract, and to unlawfully and unduly influence and induce them to cancel or violate such contracts and to obstruct and destroy plaintiff's lawful system and method of doing business.

“That in further pursuance of said unlawful and wrongful plan and scheme defendant has been and now is engaged in informing retail dealers under contract with plaintiff, as well as the public generally, by widespread advertising in newspapers and elsewhere, and by divers other means, of his intention to sell plaintiff's goods at the cut prices aforesaid.

“* * * That a large number of plaintiff's most important distributors are being unlawfully and unduly influenced, induced and coerced by the acts of defendant complained of herein into cancelling their existing contracts with plaintiff, and have informed and now inform plaintiff that because of the acts of defendant complained of herein they will be compelled to cancel said contracts with plaintiff.”

In a second cause of action plaintiff alleges: “That in furtherance and as a part of said unlawful and wrongful plan and scheme defendant has on one or more occasions since October, 1931, represented to a wholesale distributor known by defendant to be under contract with plaintiff, as aforesaid, that defendant was entitled to purchase plaintiff's commodities from such wholesale dealer by virtue of having entered into a retail contract with plaintiff. That said representations when made were untrue and were known by defendant to be untrue, and were made by defendant for the purpose of inducing said wholesale distributor to sell to defendant various of plaintiff's commodities in violation of said wholesale distributor's contract with plaintiff. That said wholesale distributor believed in and relied upon said false representations, and, induced thereby and relying thereon, at various times sold and delivered various of plaintiff's commodities to defendant to the damage of plaintiff as hereinafter shown. That upon another occasion defendant and plaintiff entered into an agreement wherein and whereby certain of plaintiff's commodities theretofore delivered by plaintiff to defendant were to be returned to plaintiff upon defendant's failure to sign a retailer's distributing contract in the form of Exhibit B. That upon the failure of defendant to execute said contract, defendant returned some of plaintiff's commodities, stating to plaintiff that said returned commodities were all that remained of those theretofore delivered by plaintiff remaining unsold and that defendant retained none of said commodities in its possession. That said representations were false at the time they were made and were known by defendant to be false.”

The prayer is for an injunction restraining defendant from selling, offering for sale, or advertising for sale, any of plaintiff's commodities.

Counsel for appellant discuss at some length and cite authorities in support of their contention that appellant's contracts are valid under the provisions of the Fair Trade Act, and arrive at the conclusion that the contracts, such as are involved in the case at bar, were valid even prior to the passage of the Fair Trade Act. We do not deem it necessary to discuss that question, nor do we here decide the constitutionality of said act. Neither do we find it necessary to decide the question whether or not appellant has a monopoly of the described products in the state of California.

The general demurrer presents two questions: First, whether the purposes of the defendant were unlawful; second, if such purposes were lawful, whether they were sought to be accomplished by unlawful means.

In deciding whether the acts and conduct of defendant as alleged are or are not actionable, it is not necessary to discuss or analyze the numerous authorities cited, many of which are from other jurisdictions, for the reason that the rules of law applicable have been carefully considered and established by the decisions of the California courts. In the case of Boyson v. Thorn, 98 Cal. 578, 33 P. 492, 21 L. R. A. 233, the Supreme Court adopted the rule that an act lawful in itself does not become unlawful because of a malicious or wrongful motive. We cannot agree with appellant in its assertion that Boyson v. Thorn, is the only case of the hundreds that have passed upon the doctrine that lends itself to the rule therein stated, or that if it stands as the law of this state it stands alone. In view of the numerous expressions of the courts of this state upon the subject, we cannot hold with the appellant to the effect that the Boyson Case is without support in subsequently decided cases. The doctrine of the Boyson Case is supported by the following: Parkinson Co. v. Building Trades Council, 154 Cal. 581, 98 P. 1027; People v. Schmitz, 7 Cal. App. 330, 94 P. 407, 419, 15 L. R. A. (N. S.) 717; Pierce v. Stablemen's Union, 156 Cal. 70, 103 P. 324; Union Labor Hospital v. Vance Lumber Co., 158 Cal. 551, 112 P. 886, 33 L. R. A. (N. S.) 1034; American Automobile Association v. Automobile Owners' Association, 216 Cal. 125, 13 P.(2d) 707, 83 A. L. R. 699; Katz v. Kapper (Cal. App.) 44 P. (2d) 1060.

It very clearly appears from the allegations of the amended complaint that the purpose of the defendant was to secure trade for itself by selling such commodities at prices lower than those fixed by the plaintiff in its contracts. The means resorted to by defendant to carry out its purpose as alleged consisted of its procuring said commodities and selling at prices less than the price prescribed in said contracts; employing persons to call at drug stores, inquire the price and state that such goods are sold at defendant's store at a lower price; and by widespread advertising in newspapers and elsewhere its intention to sell plaintiff's goods at cut prices. The defendant is not charged in any of these allegations with any effort to deprive plaintiff of its business, except by transferring the same to itself. The defendant did, or threatened to do, nothing other than to gain business advantage in the sale of said products. There is no allegation of any act or threat of defendant which caused the cancellation of any contract made by plaintiff. The allegations of the amended complaint charging the defendant with an unlawful scheme and plan, and maliciously carrying out said plan, are simply statements of conclusions of the pleader. The facts stated wholly fail to show any unlawful acts of defendant.

Plaintiff's second cause of action differs from the first only in the allegations relating to the means by which defendant sought to accomplish its purpose. The means alleged consist of representations to a wholesale distributor that defendant was entitled to purchase plaintiff's commodities by virtue of having entered into a retail contract with plaintiff, which representations were untrue, and defendant's failure to carry out an agreement between plaintiff and defendant whereby certain of plaintiff's commodities in the possession of defendant were to be returned to plaintiff. As to these matters, even if it could be held that defendant's statements constituted fraud as alleged, the matters all occurred before this action was commenced, and there is no allegation of any threat to repeat these acts. An injunction lies only to prevent threatened injury, and has no application to wrongs which have been completed and for which the injured party may obtain redress by an action at law. There is, therefore, no basis for enjoining such acts as alleged in the second cause of action. Parkinson Co. v. Building Trades Council, supra; Blake v. City of Eureka, 201 Cal. 643, 258 P. 945; John D. Park & Sons Co. v. Hartman (C. C. A.) 153 F. 24, 12 L. R. A. (N. S.) 135; Ford Motor Co. v. International Automobile League (D. C.) 209 F. 235.

We therefore conclude that the amended complaint fails to allege any unlawful purpose or act of defendant, and that no facts are alleged sufficient to support the proposition that the purposes of the defendant were sought to be accomplished by any unlawful means, and it is equally clear that no cause of action in support of an injunction is shown by the alleged second cause of action.

The judgment is affirmed.

RANKIN, Justice pro tem., delivered the opinion of the court.

We concur: PLUMMER, Acting P. J.; THOMPSON, J.