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 wholeDear Mr. Stevenson: salers. 

Your letter requesting the opinion of this office is quoted as follows: 

"Because the question has been raised 

a number of times as to the constitutlonalitg of the provisions of Section 17(37) of 

Article I of the Texas Liquor Control Act, 

I am herewith requesting your honored opinion 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 Permittee, Wine Only Package Store Permittee, or 

other retailer purchase any alcoholic beverage, except for cash OP on terms requiring 

payment by the purchaser as follows: On purchases 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 purchases made from the sixteenth to the last 

day inclusive of each calendar month, payment must be made on or before the tenth day 

of the succeeding calendar month. Every delivery of alcoholic beverage must be accompanied 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 purchased, (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 beverages from any Wholesaler, Class B Wholesaler, 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 device to assist any Package Store Permlttee, 

Wine Only Package Store PeMttee or other 

retail dealer in the violation of this Section 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 enterprises> 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 Artlcle 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 herelnafter provided, an% shall not constitute property, 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 llcerise, does not constitute property. The acceptance constitutes an expressed agreement 

and consent on the part of the permlttee, 01: 

licensee, that the Boar% or any of Its authorized representatives, or agents, may,,perform 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 Constitution, 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 traffic 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? Mopeover, in the light of history, we cannot 

say that the exaction of a high license 

fee for importation may not, like the lmposition 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 

Mahoney case, the Supreme Court said at page 403: 

in the 

“The sole contention of Joseph Trlner 

Corporatfon is that the statute violate% 

the equal. protection clause. The state officials 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,nion that the latter contention is 

sound, we shall not discuss whether the statutory 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 permltsonly licensed common carriers to engage in the lnterstate transportation of liquor. The court said: 

‘The effect of the Texas Liquor Control 

Act 1s to confine the business of transporting 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 inaintafning the 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. Continental 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 determined that the liquor traffic In this State 

~0~1% be best controlled by keeping the variOUS 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 retailers, 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, 

St zf" &~~a~huse&s7uphe?~<h~p~on&&~o&l~~?~ 

Inc., 371 3 2 W S 1 41 hS 

provisions of a Massachusetts statute which made It unlawful for any licensee to lend or borrow money or receive credit, directly or Indirectly, to or from any 

manufacturer, wholesaler or importer of alcoholic beverages, and for any such manufacturer, wholesaler or importer to lend money OP otherwise extend credit, except 

In the usual course of business an% for a periodnot exceeding ninety days, directly or indirectly, to any such 

licensee or to acquire, retain or own, directly or lndirectly, any interest in the business of any licnesee. 

The court said: 

"The prohibition of the statute is not 

limited by the nature of the thing for which 

payment Is to be made. It is not llmite% to 

cre%lt for liquors sol%. Its purpose appears 

to have been to avoid the evils believe% to 

result from the control of retail liquor dealers by manufacturers, wholesalers, OP importers 

through the power of credit. Those evils do 

not as a rule depen% upon the nature of the 

consi%eration out of which the cre%it arose. 

They deeend upon the power of creditor over 

debtor. 

In Sepe v. Daneker, 68 A.2% 101, 102-105 (R.I. 

Sup. 1949), the Supreme Court of Rhode Island ha% before 

it practically the same question that we are now discussing* The court upbel% the constitutionality of the provlons of the rules of the Liquor Control Adminlstratlon 
HOG. Coke R, Stevenson, Jr,, page 6 (y-1126) 

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 wholesaleP to any retailer, nap shall any retailer purchase any alcoholic beverages except 

fop cash OP on terms reqtiplng payment by 

the puPchaser within tl-$Pty days from date 

of dellvePy. * * * Ho manufacturer or wholesales shall sell, except for cash, any alcoholic beverages to any retailer with knowledge 

that such retailer Is in appears for the payment 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 

OCCUPS 9 containing the date of delivery, the 

amount of Indebtedness in default, and the 

following statements Rule Ho. 53 of the Llquor ContrPol AdmInIstratIon 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. Rachmanufacturer 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 invalidity 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 example. In so doing he has overlooked or hisregarded the natme of the business in which 

he himself is engaged. The cases above referred to, in theiP general references to the 

public interest and to arbitpary and unPeasonable interference by way of unnecessary restrictions on private business, will be found 

on examination to apply to the oPdinapy pPivate 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 exercise 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 within 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 engaged 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. Christensen, 137 U.S. 86, at page 91, 11 S.Ct. 13, at 
Hon. !Toke R. .Stevenson, JP,, pa&e 8 (V-112,6) 

page 15, '34 L,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 matter of 1eSfslative wPl1 onl.y.D See also Fdartemeyer ‘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 exexcise of the police power by the State. Barbier 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 

liqu~ozp license 0 Fu&hep the Fules in question 

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 Fezt;;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),9 Art. I, Texas Liquor Control 

Act), providing for restrictions on the extenston of cmdft to Petail liquor des.lers 

by whol~esalers, is constitutional. 

i! PPROVED: Yours very truly, 

Net McDaniel 

State ."rff'airs Division 

fvepett Hutchinson 

Executive AssIstant 

PRICE DANIEL 

Attorney General 

Charles D. Mathews 

First Assistant