Lawrence Silver and Allen C. Warshaw, Deputy Attys. Gen., for appellant.
Lee C. Swartz, Hepford, Zimmerman & Swartz, Patricia F. Kemp, Harrisburg, Milton S. Lazaroff, Samuel Lander, Philadelphia, Joseph A. Klein, Harrisburg, Joseph A. Damico, Jr., Fronefield, duFuria & Petrikin, Media, Thomas M. Kittredge, Philadelphia, Myron B. Markel, Pittsburgh, John P. McKelligott, Obermayer, Rebmann, Maxwell & Hippel, Sigmund H. Steinberg, Philadelphia, Patrick M. O'Donnell, Pittsburgh, Samuel P. Kamin, Pittsburgh, John Havas, Harrisburg, Leonard M. Mendelson, Hollinshead & Mendelson, Pittsburgh, for appellees.
Calvin J. Collier, Gen. Counsel, Lee H. Simowitz, Washington, D. C., for Federal Trade Commission as amicus curiae.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Pomeroy, J., filed a dissenting opinion in which Jones, C. J., joins.
This appeal presents questions of statutory interpretation concerning the applicability of the Unfair Trade Practices and Consumer Protection Law, Act of December 17, 1968, P.L. 1224, §§ 1-9, 73 P.S. §§ 201-1 to 201-9 (1971).
The Commonwealth, pursuant to the Consumer Protection Law, initiated an original action in the Commonwealth Court against twenty-five landlords who use printed form leases allegedly in violation of the Law, and four companies which print and sell these form leases. Three violations of the Consumer Protection Law are asserted. First, because the leases employ, according to the complaint, "archaic and technical language beyond the easy comprehension of the consumer of average intelligence,"
it is maintained that the use of such leases constitutes an unfair or deceptive act or practice. The complaint next alleges that the inclusion of certain provisions in the printed form leases is unfair and deceptive. The provisions, the use of which is challenged by the Commonwealth, are "(a) lessor's 'right' to distrain for rent, (b) lessee's unconditional warrant of attorney, (c) lessor's unconditional 'right' to confess judgment, (d) lessee's unconditional waiver of unexplained rights including statutory rights, (e) lessor's unlimited discretion to accellerate [sic] lessee's rent, (f) lessee's waiver of claim for lessor's negligence, for himself and for third parties, (g) lessor affidavit of default is conclusive evidence of default, (h) lessee's waiver to oppose 'amicable' action in ejectment, (i) lessee's waiver of demand, notice, right of appeal, to a stay and standing to open or strike judgments." Finally, the failure to include in the form leases notice to the tenant of his statutory rights*fn1 -- some of which are non-waivable*fn2 -- is, according to the Commonwealth, misleading and confusing.
Preliminary objections were filed by sixteen defendants, answers by five, and no responsive pleading by two. The preliminary objections raised the lack of jurisdiction under the Consumer Protection Law, failure to state a cause of action, the existence of an adequate remedy at law, and certain procedural challenges. The Commonwealth Court found it convenient, useful, and desirable to treat the pleadings as if there were a single preliminary objection. Commonwealth v. Monumental Properties, Inc., 10 Pa. Commw. 596, 602, 314 A.2d 333, 335 (1973).
Without ruling on any of the procedural objections of appellees,*fn3 the Commonwealth Court held that the leasing of housing did not fall within the purview of the Consumer Protection Law. It then proceeded, apparently on the assumption that leasing is covered by the Law, to consider whether the Commonwealth otherwise stated a cause of action; it held that the Commonwealth had not. Next, the court concluded that the printing of form leases by the four "form sellers" could be a violation of the Consumer Protection Law, but that in the instant case there were "not sufficient allegations of clear violation to support the complaint and that it [with respect to the form sellers], therefore, must be dismissed." 10 Pa. Commw. at 617, 314 A.2d at 343. Continuing, the Commonwealth Court stated that it was not empowered to grant the relief requested by the Commonwealth. It then sustained the preliminary objections and dismissed
the Commonwealth's complaint with respect to all defendants.
The Commonwealth appealed.*fn4 For reasons which follow, we affirm in part and vacate and remand in part.
The dominating question is whether the Consumer Protection Law covers allegedly unfair or deceptive practices in connection with the leasing of housing. We hold it does. Our review must begin at the beginning, with the language of the statute.
Section 3 states the legislative direction in clear and expansive language.
"Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful."
Despite this embracive mandate, appellees contend that their use of printed form leases is not covered by the Consumer Protection Law. The argument advanced, and accepted by the Commonwealth Court, is that the business of leasing housing is excluded from the Law's scope because it is not "the conduct of any trade or commerce." We cannot agree.
The Legislature sought by the Consumer Protection Law to benefit the public at large by eradicating, among other things, "unfair or deceptive" business practices.*fn5 Just as earlier legislation was designed to
equalize the position of employer and employee*fn6 and the position of insurer and insured,*fn7 this Law attempts to place on more equal terms seller and consumer. These remedial statutes are all predicated on a legislative recognition of the unequal bargaining power of opposing forces in the marketplace.*fn8 Instantly, the Legislature strove, by making certain modest adjustments, to ensure the fairness of market transactions. No sweeping changes in legal relationships were occasioned by the Consumer Protection Law, since prevention of deception and the exploitation of unfair advantage has always been an object of remedial legislation.*fn9
Although the Consumer Protection Law did articulate the evils desired to be remedied, the statute's underlying foundation is fraud prevention. This Court emphatically stated in Verona v. Schenley Farms Co., 312 Pa. 57, 64, 167 A. 317, 320 (1933), "[a]s a statute for the prevention of fraud, it must be liberally construed to effect the purpose. . . ." Accord, Commercial Banking Corp. v. Freeman, 353 Pa. 563, 567, 46 A.2d 233, 235 (1946); Alford v. Raschiatore, 163 Pa. Super. 635, 63 A.2d 366 (1949); Nolan v. Jones, 67 Pa. Super. 430 (1917), aff'd, 263 Pa. 124, 106 A. 235 (1919); Rudy v. Friedman, 54 Pa.D. & C.2d 628 (C.P. Delaware County 1971).*fn10 See generally 3 J. Sutherland, Statutes and
Statutory Construction § 70.01 (C. Sands ed. 1974); 1 W. Blackstone, Commentaries 88-89.
Since the Consumer Protection Law was in relevant part designed to thwart fraud in the statutory sense, it is to be construed liberally to effect its object of preventing unfair or deceptive practices.
Necessarily, we reject the Commonwealth Court's conclusion that the Consumer Protection Law must be strictly construed. The Commonwealth Court held that the statute was penal in nature and therefore required a strict construction. This characterization ignores settled case law, e. g., Commercial Banking Corp. v. Freeman, supra; Verona v. Schenley Farms Co., supra; Commonwealth v. Shaleen, 215 Pa. 595, 64 A. 797 (1906), and the clear language of the Statutory Construction Act, 1 Pa.S. § 1928 (Special Pamphlet, 1973).
To reach its result the hearing court focused on section 8 of the Consumer Protection Law. That section limits to $5000 the amount of fine payable upon violation of an injunction issued under section 4.
"[B]ecause the Act in question permits the Commonwealth to petition for civil penalties up to $5,000 (if an injunction is issued by this Court as a result of the present action) . . . the Act contains a penal provision, and therefore must be strictly construed."
Commonwealth v. Monumental Properties, Inc., 10 Pa. Commw, 596, 607, 314 A.2d 333, 337-338 (1974).
We, however, need not address the question whether section 8 is truly a penal provision,*fn11 for even assuming arguendo that it is, the Commonwealth Court's conclusion cannot stand. The logical flaw in the reasoning of the hearing court is that, if a statute "contains" a penal provision, the entire statute must be strictly construed.
This notion is strikingly at odds with 1 Pa. S. § 1928 (Special Pamphlet, 1973). Section 1928 directs that although penal provisions are to be strictly construed, all others "shall be liberally construed to effect their objects and to promote justice." Id. § 1928(c). The legislative emphasis is on provisions, not statutes in their entirety. Our cases are in accord. See Commercial Banking Corp. v. Freeman, 353 Pa. at 567, 46 A.2d at 235-236; Verona v. Schenley Farms Co., 312 Pa. at 65, 167 A. at 320; Commonwealth v. Shaleen, 215 Pa. at 597, 64 A. at 798; Koch's Estate, 5 Rawle 338, 340 (Pa. 1835); Commonwealth v. Yaste, 166 Pa. Super., 275, 70 A.2d 685 (1950); Commonwealth v. Hagy, 58 Lancaster L.Rev. 47, 49 (Pa.Q.S.Lancaster County 1962).
Here, we are concerned with the effect of provisions which are in no sense penal. Section 3 in sweeping language declares the concerns of the Legislature, and section 2 further and more fully defines those concerns. These expansive provisions reflect the legislative judgment that unfairness and deception in all consumer transactions must be halted. These sections of the Consumer Protection Law, in accordance with the legislative intent, are to be liberally construed to effectuate that intent.
The Commonwealth Court was also persuaded by its conclusion that there exists no precedent under the federal models of the Consumer Protection Law to support a holding that the Law covers the leasing of apartment housing. The Consumer Protection Law has regularly been interpreted by the Commonwealth Court as being based on the Federal Trade Commission Act*fn12 and the Lanham Trademark Act.*fn13 Commonwealth v. Monumental Page 462} Properties, Inc., 10 Pa. Commw. 596, 608, 314 A.2d 333, 338 (1974); Commonwealth v. Hush-Tone Industries, Inc., 4 Pa. Commw. 1, 20-21 (1971). Accord, Commonwealth v. Foster, 57 Pa.D. & C.2d 203, (C.J. Allegheny County 1972); cf. Commonwealth v. Pennsylvania APSCO System, Inc., 10 Pa. Commw. 138, 140, 309 A.2d 184, 185 (1973). Indeed, in all relevant respects the language of section 3 of the Consumer Protection Law and section 5 of the FTC Act*fn14 is identical.*fn15 The Lanham Act's similarity to the Consumer Protection Law is likewise strong.*fn16 We thus agree with the Commonwealth Court that "'we may look to the decisions under those Acts for guidance and interpretation.'" Commonwealth v. Monumental Properties, Inc., 10 Pa. Commw. at 608, 314 A.2d at 338 (quoting Commonwealth v. Hush-Tone Industries, Inc., 4 Pa. Commw. at 21).
The Commonwealth Court in large part based its result that the leasing of residential apartments is not covered by the Consumer Protection Law on this proposition.
"We have studied both of these Federal statutes and find no mention of the rental of real property. Furthermore, we have found no case wherein the leasing of property has been brought within the purview of those Federal statutes."
Pa. Commw. at 608-609, 314 A.2d at 338. It is enough to show that this reasoning does not withstand analysis with respect to one of these federal statutes -- the FTC Act.
The Federal Trade Commission, in an amicus curiae brief filed in this case, correctly points out that section 5 of the FTC Act, in its application to both antitrust enforcement and consumer protection, has been given a broad and flexible interpretation. This was certainly the intent of Congress. The House Conference Report that accompanied the original passage of the FTC Act states:
"It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field. Even if all known unfair practices were specifically defined and prohibited, it would be at once necessary to begin over again. If Congress were to adopt the method of definition, it would undertake an endless task."
H.R.Conf.Rep.No.1142, 63d Cong., 2d Sess. 19 (1914). See also S.Rep.No.597, 63d Cong., 2d Sess. 13 (1914). The United States Supreme Court has consistently followed the congressional mandate that section 5 be applied broadly to whatever business conduct injured either competitor or consumer. E. g., FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972); FTC v. Brown Shoe Co., 384 U.S. 316, 320-321, 86 S.Ct. 1501, 1504, 16 L.Ed.2d 587 (1966); FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 394, 73 S.Ct. 361, 363, 97 L.Ed. 426 (1953); FTC v. Cement Institute, 333 U.S. 683, 693, 68 S.Ct. 793, 799-800, 92 L.Ed. 1010 (1948); FTC v. R. F. Keppel & Brothers, Inc., 291 U.S. 304, 310, 54 S.Ct. 423, 425, 78 L.Ed. 814 (1934).
In FTC v. Sperry & Hutchinson Co., the Supreme Court was recently pressed to decide, inter alia, whether section 5 of the FTC Act empowered "the Commission to proscribe practices as unfair or deceptive in their effect upon consumers regardless of their nature or quality as
competitive practices or their effect upon competition?" 405 U.S. at 239, 92 S.Ct. at 903. After a detailed review of legislative history and earlier decisions, that Court squarely held:
"Thus, legislative and judicial authorities alike convince us that the Federal Trade Commission does not arrogate excessive power to itself if, in measuring a practice against the elusive, but congressionally mandated standard of fairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws."
Id. at 244, 92 S.Ct. at 905 (footnote omitted). That section 5 of the FTC Act was meant as an adaptable tool for protection of the public interest cannot be denied.
Despite the remedial nature of and expansive interpretation given to section 5, the Commonwealth Court implied an exception from the coverage of section 5 because it could find "no mention of the rental of real property." This conclusion led the Commonwealth Court ineluctably to its holding that the Consumer Protection Law did not cover leasing.
We have seen, however, that Congress chose not to delineate precisely the type of unfair and deceptive practices outlawed; rather, it gave the Commission a deliberately flexible standard. FTC v. Sperry & Hutchinson Co., 405 U.S. at 239-240, 92 S.Ct. at 903. It is altogether inconsistent with the congressional intent that section 5 be a broad, all-inclusive trade regulation statute, to imply an exception for leases. Moreover, the argument that no specific mention is made of leasing really cuts the other way, in view of ...