Gipson v. Morley

233 S.W.2d 79, 217 Ark. 560, 1950 Ark. LEXIS 462

• Court: Supreme Court of Arkansas
• Decided: May 22, 1950
• Docket: 4-9209
• Status: Published

Opinions

Leflar, J.

Appellant James A. Gipson, as a citizen and taxpayer, brought this bill in equity for an injunction to restrain the Commissioner of Revenues and the State Treasurer from enforcing or paying out funds for the enforcement of the provisions of Act 282 of the Acts of the General Assembly of Arkansas- for 1949. Act 282 contains three principal groups of provisions: (1) It .fixes prices at which sales of liquor and related items (not including beer) may be made at wholesale or retail— for wholesale sales the price is fixed at the wholesaler’s cost plus 15 percent, and for retail sales at the retailer’s cost plus 33 1/3 percent on liquor, plus 45 percent on cordials, liqueurs and specialties, and plus 50 percent on sparkling and still wines (the various items enumerated are defined in the statute); (2) a tax of 25 cents per casé on liquor and other stated items and 10 cents per case on wine is levied, the proceeds to go into a special fund in the State Treasury; and (3) there is appropriated from the special fund certain amounts to pay the salaries and expenses of 20 employees in the office of the Commissioner of Revenues whose duty it is to enforce this and all other liquor control laws of the State. Plaintiff Gip-son’s contention is that Act 282 is unconstitutional under Article II, §§ 3, 18, 19 and 21 of the Constitution of Arkansas. The contention of unconstitutionality is seriously urged however, only as to the group of provisions numbered (1) in the summary just given — those relating to price-fixing. It is virtually conceded that the taxing provisions, and the appropriation for additional employees to police the liquor business in the State, are valid. The Chancellor held the Act to be constitutional, and plaintiff appeals.

The sections of the Constitution upon which appellant relies are as follows:

Ҥ 3. The equality of all persons before the law is recognized, and shall ever remain inviolate; nor shall any citizen ever be deprived of any right, privilege or immunity, nor exempted from any burden or duty, on account of race, color or previous condition.

“ § 18. The General Assembly shall not grant to any citizen or class of citizens privileges or immunities which upon the same terms shall not equally belong to all citizens.

Ҥ 19. Perpetuities and monopolies are contrary to-the genius of a republic, and shall not be allowed; nor shall any hereditary emoluments, privileges or honors ever be granted or conferred in this State.

“§ 23. No person shall be taken or imprisoned, or disseized of his estate, freehold, liberties or privileges; or outlawed, or in any manner destroyed or deprived of his life, liberty or property, except by the judgment of his peers or the law of the land; nor shall any person, under any circumstances, be exiled from the State. ’ ’

It is apparent that none of these sections contains a specific prohibition against the type of legislation here enacted. If there is a prohibition it will have to be discovered from the general spirit of the sections, or from some inner essence deemed implicit though not explicit in the words. Furthermore, discovery of such a prohibition would negative the State’s regulatory authority under the police power, a constitutional concept which in the past has been held to justify numerous governmental controls exercised over the liquor business.

A practically unlimited right to regulate the liquor traffic has from early times been conceded to the State. “The State has this right, because the authority to sell liquor is a mere privilege, which the State may grant or withhold, as it pleases, or, if it grants this permission at all, it may do so under any conditions which it cares to impose; and this is true . . . even though these conditions are so onerous as to amount to virtual prohibition of that traffic.” Wade v. Horner, 115 Ark. 250, 258, 170 S. W. 1005, 1008, Ann. Cas. 1916E, 167. “The sale of intoxicating liquors is not a matter of right protected by constitutional guarantees. It is only a privilege, to be exercised under the police power. The General Assembly, in legalizing the traffic, may impose such restrictions as it deems appropriate.” Cook, Commr. v. Glaser’s Wholesale Drug Co., 209 Ark. 189, 195, 189 S. W. 2d 897, 900. Accord, Ziffrin, Inc. v. Reeves, 308 U. S. 132, 60 S. Ct. 163, 84 L. Ed. 128.

The only case in which this Court has previously had occasion to pass on the validity of a price-fixing statute is Noble v. Davis, 204 Ark. 156, 161 S. W. 2d 189, holding unconstitutional an enactment which authorized minimum price schedules for barbers. The decision was that the business of the barber ‘‘ is one of common right, ’ ’ and that prices charged for barber services have no such effect upon the public peace, health, safety and welfare as to justify a statute fixing minimum prices in a field of business which is on.e of common right.¹ Noble v. Davis affords us but little aid in passing upon the validity of a statute designed to regulate a type of business which is admittedly not one of common right.

There are several cases from other jurisdictions in which liquor price-fixing plans have been denied enforcement, but they likewise do not give us much aid. They come from the states of Illinois, New York, Louisiana, and Florida.

The case of Illinois Liquor Control Commission v. Chicago’s Last Liquor Store, 403 Ill. 578, 88 N. E. 2d 15, held the Illinois liquor price control act to be invalid because it violated an Illinois constitutional prohibition against revival or amendment of an earlier act by reference merely. That is a legislative drafting technicality which the Arkansas act completely avoids.

Levine v. O’Connell, 275 App. Div. 217, 88 N. Y. Supp. (2d) 672, invalidated the New York statute on the ground tliat it improperly delegated the price-fixing power to a state board. The New York Court said: “We assume, without deciding, that it would be within the competence of the legislature to determine that mandatory price fixing in the sale of alcoholic beverages would be a proper exercise of the police power. The important point for this case is that the legislature has not done so; on the contrary (it) purports to authorize the State Liquor Authority ‘in its discretion’ ” to establish a price fixing plan. Under the Arkansas act there is no such improper delegation of legislative power to an administrative board; the enactment itself lays down the price fixing-rule.

The Louisiana holding appears in Schwegmann Bros. v. Louisiana Board of Alcoholic Beverage Control, 216 La. 148, 43 So. 2d 248. The statute there was similar to that enacted in Arkansas, and its stated purpose was the regulation and control of the liquor traffic so that it “may not cause injury to the economic, social and moral well-being of the people of the state.” The Louisiana Court held that the fixing of wholesale and retail package liquor prices was insufficient by itself to achieve the end sought, that there were too many liquor sales transactions in which prices were left unregulated, that the act was not comprehensive enough to accomplish what it purported to accomplish. Particular emphasis was laid on the fact that there was no regulation of prices on sales of liquor over the bar by the drink, a type of sale which we do not allow in Arkansas, and therefore have no occasion to regulate. No objection is made that the Arkansas statute is not sufficiently comprehensive; no argument is made that it does not regulate enough, rather it is urged that it regulates too much. The Louisiana Court concluded: “It is to be clearly understood that we are not holding that the legislature cannot under any circumstances adopt legislation, pursuant to the state’s police power, relating to the establishing of prices on intoxicants with the view and purpose of regulating the liquor traffic and protecting the general welfare of the people. That broad question is not presented by this «aso . . Contrariwise, that broad question is specifically the one that now is before tlie Arkansas Court.

The other state in which a liquor price-fixing plan has been invalidated is Florida, where in Liquor Store v. Continental Distilling Corp., (Fla.) 40 So. 2d 371, the Florida Court refused to enforce an act which authorized manufacturers to fix binding retail prices on “brand name” goods sold for resale in the state. The Court pointed out: “It is well to remember also that this act applies to every kind of article including such necessities as food and drugs. ’ ’ Then it was stated: “. . . a law which provides for the fixing of minimum prices should contain a yardstick as a guide for the establishment of such ground level prices. The power to determine those prices should not be left to the unleashed discretion of the trade-name owner but should be confined within impregnable specified boundaries. A definite measuring stick should be set forth in the body of the'act. This statute contains no such rule.” The Arkansas statute does contain such a rule, a very specific one, and besides it sets up a price fixing structure only for the liquor business, as distinguished from all retail businesses.

In contrast with these cases is Reeves v. Simon, 289 Ky. 793, 160 S. W. 2d 149, which sustained Kentucky’s Distilled Spirits and Wine Fair Trade Act, a price fixing measure similar to Arkansas’ Act 282 of 1949. The decision was squarely on the constitutionality of the enactment. In the course of its opinion the Kentucky Court said:

“The proof shows that due to price-cutting and to cut-throat competition by producers,' wholesalers and retailers, chaos existed in the trade which resulted in law violations, excessive use of intoxicants and other conditions detrimental to the commonweal. The evidence is to the effect that the fixing of minimum prices has had a stabilizing effect upon the industry, done away with, ruinous competition, resulted in less consumption of intoxicants by the public and has caused liquor to be sold in more wholesome surroundings . . .

“ (It was urged that) the mark-up in the resale price was for the sole benefit of the dealer and that the. Act ran afoul of section 3 of our Constitution which forbids the granting of exclusive emoluments or privileges except for public service. The natural status that anybody might sell whiskey has long since ceased to exist and its sale under police power for years has been limited to select persons and only at selected places . . .

“The answer to the argument that this statute is more inclined to enrich the dealer than it is to regulate the sale of whiskey for the public benefit, is that courts are not concerned with the wisdom or appropriateness of legislation, but the public benefit to be derived therefrom and the adequacy thereof is primarily for the Legislature. Unless it is clear the statute has no reasonable relation to a proper legislative purpose and is arbitrary and discriminatory and without substantial basis, the courts will.-not interfere.

“Innumerable methods have been devised by the legislatures of the several states, and some by the national congress, in an attempt to properly regulate the liquor traffic — none of which have met with great success — and we cannot say that the instant law calling for strict price control and the elimination of ruinous competition has no relation to the subject or that it is arbitrary and discriminatory and not based upon substantial grounds.”

Many other states have enforced price-fixing laws of one kind or another, but most of these are irrelevant here, nor do we now approve them either by inference or otherwise. It is established that such enactments do not. violate the due process, equal protection, privileges and immunities, or other possibly relevant clauses in the Federal Constitution. Nebbia v. New York, 291 U. S. 502, 54 S. Ct. 505, 79 L. Ed. 940, 89 A. L. R 1469; Olsen v. Nebraska, 313 U. S. 236, 61 S. Ct. 862, 85 L. Ed. 1305, 133 A. L. R. 1500, therefore it is clear that the Arkansas liquor price control act is not violative of the Federal Constitution. Decisions enforcing price controls over liquor and beer sales in still other states do not deal with the constitutional questions which we have before us here—see Grant Lunch Corp. v. Driscoll, 129 N. J. L. 408, 29 Atl. 2d 888; Fowler v. Harris, 174 Md. 398, 200 Atl. 825—though they do, of course, imply an absence of the constitutional doubts which invoked the present litigation.

The principal argument in Arkansas, as in Kentucky, against the constitutionality of the liquor price control act is that it confers a “special privilege” of profit making upon liquor dealers, a privilege not conferred upon the rest of the population. This is of course true in one sense only — the statute does assure a gross profit, per item sold, but it does not assure a net profit in the operation of any particular store. That however is beside the point; there can be no doubt that the statute substantially increases the likelihood of net profit to the dealer.

The fact remains that from the earliest days of liquor regulation our laws, now admittedly valid, have granted a special privilege to liquor dealers much more farreaching, more monopolistic, than anything contained in Act 282. This is the license to engage in the liquor business to the exclusion of unlicensed sellers. This is a “special privilege” of which bootleggers have traditionally complained, and one which gives to liquor dealers a substantial assurance of the profit that is not given to' other law-abiding citizens. Yet the courts of Arkansas, like those of all American states, have sustained these monopolistic grants of special privilege on the ground that it is within the competency of the legislature to determine under the police power what regulatory rules are needful in controlling a type of business fraught with perils to public peace, health and safety as is the liquor business.

The recital of legislative policy in section 1 of Act 282 asserts the purpose “of avoiding price wars which would materially affect the revenues of the State, attempts at monopolies, and the demoralization of the legally controlled sale of liquors in this State which grows out of unfair price manipulation.” The effect upon State revenues is one of the least of the harms which would flow from an unregulated liquor traffic. Unlawful sales to minors and drunkards, the offering of free samples, the effort to increase sales by cut-rate prices and other competitive practices freely allowed and commonly encouraged in other and more harmless fields of commerce, are among the evils against which our legislation seeks to guard.

For a century or more we have sought to deal with such dangers by the grant of special privileges to liquor sellers as a class, on the assumption that the limited number of grantees of the special privilege could be more easily regulated than could unlicensed sellers generally. In the course of the century our legislatures have devised many regulations for the liquor trade. Some of them have been abandoned, others are retained today. Some of our regulations have been opposed by a majority of liquor dealers because the rules were onerous and burdensome, other regulations have pleased the dealers because they served to do away with costly competitive practices, to eliminate untaxed bootleg sales, to forbid business methods which aroused public antagonism, or to impose other limitations or procedures which proved financially profitable to law-abiding dealers. The validity of these legislative regulations is not to be tested by whether they produce more or less profit to the liquor dealers, or by whether the regulations are pleasing or displeasing to the regulated dealers. Rather, the legislative judgment is the test.

There is much room for difference of opinion as to whether the fixing of minimum prices is a sound or wise method for achieving the legitimate police power ends of liquor traffic regulation. The writer of this opinion and a majority of his colleagues on this Court feel personally that such minimum price fixing is unsound and unwise, but our views on that point are irrelevant here. Others believe that price regulation does tend to remove some of the dangers that inhere in the liquor traffic, and that it gives to the state a firmer control than could otherwise be maintained over the traffic and its incidental evils. That is an understandable point of view, and one that apparently appealed to the intelligent judgment of members of the legislature. The legislature was seeking a remedy for ills that it is authorized to remedy, or seek to remedy, and its choice of remedy was not one that is prohibited to it by our Constitution.

The decree of the Chancery Court is affirmed.

The Chief Justice and McFaddin, J., dissent in part. Dunaway, J., not participating.

1 The concept of common right, or of “natural and fundamental rights,” is analyzed in a Comment in (1948) 2 Ark. L. Rev. 203.