Untitled Texas Attorney General Opinion

• Court: Texas Attorney General Reports
• Decided: July 2, 1950
• Docket: V-1126
• Status: Published

Opinion

E A-mro ENERAL TEXAS

December 7, 1950

Hon. Coke R. Stevenson, Jr, Administrator Texas Liquor Control Board Austin, Texas Opinion Ro. V-1126. Ret Constltutionalltg of Section 37 of Article 666-17, Vernon's Penal Code, providing for restrictions on the extension of credit to retail liquor dealers by whole- Dear Mr. Stevenson: salers. Your letter requesting the opinion of this of- fice is quoted as follows: "Because the question has been raised a number of times as to the constitutlonal- itg of the provisions of Section 17(37) of Article I of the Texas Liquor Control Act, I am herewith requesting your honored opin- ion regarding same as set out below:

"S(37). It shall be unlawful for any Wholesaler, Class B Wholesaler, Class A Winery or Wine Bottlerto sell any alcoholic beverage, nor shall any Package Store Per- mittee, Wine Only Package Store Permittee, or other retailer purchase any alcoholic bever- age, except for cash OP on terms requiring payment by the purchaser as follows: On pur- chases made from the first to fifteenth day Inclusive of each calender month, payment must be made on or before the twenty-fifth day of the same calendar month; and, on pur- chases made from the sixteenth to the last day inclusive of each calendar month, pay- ment must be made on or before the tenth day of the succeeding calendar month. Every de- livery of alcoholic beverage must be accom- panied by an Invoice of sale giving the date of purchase of such alcoholic beverage. In Hon, Coke R. Stevenson, JP~, page 2 (V-1126)

the event any Package Store PermIttee, Wine Only Package Store Permfttee or other retail dealer becomes delinquent in the payment of any account due for alcoholic beverages pur- chased, (that is, If he fails to make full payment on OP before the date hereinbefore provided] then ft shall be the duty of the Wholesaler, Class B Wholesaler, Class A Winery or Wine Bottler to report that fact immediately to the Board or Administrator in writing. Any Package Store permittee, Wine Only Package Store Permittee or other retail dealer who becomes delinquent shall not be permitted to purchase alcoholic bev- erages from any Wholesaler, Class B Whole- saler, Class A, Winery OP Wine Bottler until said delinquent account is paid In full, and the delinquent account shall be cleared from the records of the Board before any Wholesaler, Class B Wholesaler, Class A Winery or Wine Bottler will be permitted to sell alcoholic beverages to him. Any Wholesaler, Class B Wholesaler, Class A Winery OP Wine Bottler who accepts post- %ated checks, notes OP memoran%a OP who participates In any scheme, trick, OP de- vice to assist any Package Store Permlttee, Wine Only Package Store PeMttee or other retail dealer in the violation of this Sec- tion shall llkewfse be guilty of a violation of this Section, The Board shall have the power and it shall be Its duty to adopt rules and regulations giving full force and effect to this SectionOD* The liquor business, unlike most private enter- prises> is regulated by the various States under their police powers. Article 666-2, Vernonus Penal Code, (Art. I, Texas Liquor Control Act) provi%es that "This entire Act shall be deemed an exercise of the police power of the State for the protection of the welfare, health, peace, temperance, and safety of the people of the State, an% all its provisions shall be liberally construed for the accomplishment of that purposee* A person may not engage in the liquor business as a matter of right but only when permIssion to do so Is granted by the State. Permission when granted, is in the nature of a revocable personal privilege, As provided in Section 13(b) of Artl- cle I of the Texas Lfquor Control Act (Art. 666-13, V.P.C.): . -

Hon. Coke R. Stevenson, Jr., page 3 (V-1126)

'Any permit or license issue% under the terms of either Article I or Article II of this Act shall be purely a personal privilege, revocable in the manner an% for the causes herein state%, subject to appeal as hereln- after provided, an% shall not constitute prop- erty, a D 0n In Texas Lhuor Control Boar% v. O'Fallon, 189 S.W.2% 885, 887 (Tex.Civ,App. 1945), the court saib: 'A permit, or license, to sell liquor Is a mere personal privilege, under the terms of the act Itself; all such permits are revocable for causes therein state%, subject to appeal as provided by the act, Such permit, or ll- cerise,does not constitute property. The ac- ceptance constitutes an expressed agreement and consent on the part of the permlttee, 01: licensee, that the Boar% or any of Its au- thorized representatives, or agents, may,,per- form any duty therein Imposed upon them. In Texas Liquor Control Board v. Warfield, 122 S.W.2% 669, 670 (Tex.Clv.App. 1938), the court said: "A package store permit to purchase specified liquor from designated parties and to sell same under the conditions an% in the manner prescribed In the Act 1s neither a contract nor a right of property in the sense in which those terms are use% in our Constitu- tion, It Is no more than a temporary license to do that which would otherwise be unlawful an% may be revoke% by the authorized agent of the state whenever It is ascertained that the law has been violate%." A State has the power to regulate liquor traf- fic and may go so far as to prohibit It. State Boar% of Equalization of California v. Youngus Market Co., 299 U.S. 59 (1936); Mahoney, Liquor Control Commissioner,v. Joseph Trlner Carp,, 304 US, 401 (1938). In the Young's Market case the court held that a provision of the California law imposing a fee of $500 for the privilege of importing beer Into the State was not discriminatory against a wholesaler of Imported beer, The court said at page 63: *It might permit the manufacutre and sale of beer, while prohibiting bard liquors Ron.,Coke R, Steven.son,Jr.,s page 4 (V-11269

absolutely, If It may permit the domestic manufacture of beep an% exclude all made without the State, may It not, Instead of absolute exclusion, subject the foreign article to a heavy importation fee? Mope- over, in the light of history, we cannot say that the exaction of a high license fee for importation may not, like the lm- position of the high license fees exacted for the privilege of selling at retail, serve as an aid in policing the liquor traffic *” In discussing a constitutional question in the Mahoney case, the Supreme Court said at page 403: “The sole contention of Joseph Trlner Corporatfon is that the statute violate% the equal.protection clause. The state of- ficials insist that the provision of the statute is a reasonable regulation of the liquor traffic; an% also, that since the adoption of the Twenty-first Amendment, the equal protection clause is not applicable to imported Intoxicating liquor- As we are of opi,nionthat the latter contention is sound, we shall not discuss whether the stat- utory provision Is 8~reasonable regulation of the Liquor traffic II * In Cartlldge v, Ralneg 168 F-2% 841, 843 (C-C. A, 5th. 19481. the Court %fscuss~% the reasonableness of the-provislon’ln the Texas Liquor Control Act which per- mltsonly licensed common carriers to engage in the ln- terstate transportation of liquor. The court said: ‘The effect of the Texas Liquor Control Act 1s to confine the business of transport- ing intoxicating liquors through the state to those who are licensed as common carriers. The regulation is reasonable, and appropriate to the en% in view, an% we are not authorized to hold it invalid.* It is our opinlon that the provision of the statute in uestion is not unreasonable. The provision (Section 17%37% of Article I of the Liquor Control Act) is one for the purpose of inaintafningthe independence of the wholesale and retail Levels of the liquor industry Ron. Coke R. Stevenson, Jr., Page 5 (V-1126)

in Texas. As said In Texas Liquor Control Boar% v. Con- tinental Distillinn ompa y 1 SW 1 1014 (Tex. Clv.App. 1947, appea? %lS~.c33~g~~~.o~~7,0~'~~7):

"The Legislature, in enacting the Texas Liquor Law (Art. 666 P.C.), expressly deter- mined that the liquor traffic In this State ~0~1% be best controlled by keeping the vari- OUS k?elS Of the 1iCJUOP in%UStPy independent of each other, 0 . . Statutes of other States provide for restrlc- , tlons on the extension of credit by wholesalers to re- tailers, as does Section 37 of Article 666-17, V.P.C. These provisions have been upheld by the courts of such States. In James J. Sullivan. Inc. v. Cann's Cabins, Inc., 371 3 2 W S 1 41 hS St zf"&~~a~huse&s7uphe?~

of the State of Rhode Island. We quote the following from the opinion of the courts "The pertinent portions of Pules 53 and 54 as set out in the statement of facts are as follows2 O53* No alcoholic beverages shall be sold by any manufacturer OF whole- saleP to any retailer, nap shall any retail- er purchase any alcoholic beverages except fop cash OP on terms reqtiplng payment by the puPchaser within tl-$Ptydays from date of dellvePy. * * * Ho manufacturer or whole- sales shall sell, except for cash, any alco- holic beverages to any retailer with knowledge that such retailer Is in appears for the pay- ment of alcoholic beverages, as provided by this Pule; O D o 54. Written notice shall be given by the manufacturer or wholesaler by reglsteped mall to each licensee in default of payment within five (5) days after the default OCCUPS9 containing the date of delivery, the amount of Indebtedness in default, and the following statements Rule Ho. 53 of the Llq- uor ContrPolAdmInIstratIon prohibits you from accepting dellvePy of any alcoholic beverages from any manufacturer OP wholesaler except for cash, until you have paid in full, the amount of the default shown in the notice. Rachman- ufacturer and wholesaler shall notify the Liquor Control Administration of each,default within five days, and shall file with him a copy of each written notIce required to be mailed to the licensee within five days after default OCCUPS.~ O e o "In support of his principal contentions on the issue of the constitutionality and in- validity of the rules the complainant relies on the law as set out in cases, both federal and state, of which Lawton v. Steele, 152 U.S. 133, 14 s. ct. 499, 38 L, Ed, 385, is an ex- ample. In so doing he has overlooked or his- regarded the natme of the business in which he himself is engaged. The cases above re- ferred to, in theiP general references to the public interest and to arbitpary and unPeason- able interference by way of unnecessary re- strictions on private business, will be found on examination to apply to the oPdinapy pPi- vate enterpplses not requiring a license. Hon. Coke R. Stevenson, Jr., page 7 (V-1126)

"The complainant, however, is engaged in the business of selling at petal1 alcoholic beverages under a duly granted license. That license he holds subject to the laws of this state and to the rules and regulations of the liquor control admlniatratlon. It has been decided that, generally speaking, a licensee takes his license subject to such conditions as the legislature sees fit to impose. Child v, Bemus, 17 R-1. 230, 21 A. 539, 12 L.R.A. Further in Tisdall Co. v. Board of Alder- % 57 R,I. 96 at page 103 188 A. 648 at pagi 652, this gourt state&' 'But it is'well settled in this State and elsewhere that the business of the sale of lntoxicatin liquor is so clearly and completely subjec& to exer- cise of the police power of the State that it may even be entirely prohibited by the State * * * OP It may be permitted subject to such restrictions and burdens, however great, as. the State Legislature may deem it advisable to lmpose,D e 0 D sit has been universally held that such regulation is especially with- in the province of such police power, which even extends to the prohibition of such sale; and the courts have always been particularly liberal in sustaining the constitutionality of such regulation." It also is settled in this state that a liquor license is not a property right. Casala v. MO, 65 R.I. 96, 13 A.28 693. . a 0 . 0 Keeping in mind the nature of the business in which the complainant is en- gaged and the llmitatlons imposed thereon by established law we find that his contention is not sound. It appears to be his position in substance that rules 53 and 54 are not in the public interest generally and that they constitute an arbitrary deprivation of his property rights contrary to the due process clause of section 1 of Article XIV of the amendments to the constitution of the United States. "However, it Is well settled that the privileges or immunities PePerred to in that section do not include the business of selling intoxicating liquor. In Crowleg v. Christen- sen, 137 U.S. 86, at page 91, 11 S.Ct. 13, at Hon. !TokeR. .Stevenson,JP,, pa&e 8 (V-112,6)

page 15, '34L,Ed, 520, the cou??t,in discussing the nature of that business, said: 'The manner and extent of regulation rest in the discretion of the SovezninS authority. 0 e m It is a mat- ter of 1eSfslative wPl1 onl.y.D See also Fdarte- meyer ‘v.Iowa, 18 Wall* 129, 85 U,S. 129, 21 L. Ed, 929; State v, Almy, 32 R.I. 415, 79 A. 952. The amendment though broad and comprehensive was not.designed to interfere with the proper ex- excise of the police power by the State. Bar- bier v. Connolly, 113 U.S, 27, 5 Sect. 357, 28 L,Ed. 9230 We have hereinbefore Feferred to the fact that there Is no property right in a license 0 Fu&hep the Fules in question liqu~ozp apply alike to all zetai licensees and are not discriminatory. In view of the above it is our opinion that Sec.';ion 37 of Article .%s-17, V.P,C., providing for Fe- zt;;ict:ions on the extension of credit to retail liquor dealer? by wholesalers, is constitutional.

Section 37 of Article 555-17, V,P.C. (Sec.17(37),9Art. I, Texas Liquor Control Act), providing for restrictions on the ex- tenston of cmdft to Petail liquor des.lers by whol~esalers,is constitutional. i! PPROVED: Yours very truly,

Net McDaniel PRICE DANIEL State ."rff'airs Division Attorney General fvepett Hutchinson Executive AssIstant Charles D. Mathews First Assistant