### 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 Constltutionalltgof Section 37 ofArticle 666-17,Vernon's Penal Code, providing for restrictions on the extension of credit to retail liquor dealersby wholeDearMr. Stevenson: salers.

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

"Because the questionhas been raised
a number of times as to the constitutlonalitg of the provisions of Section 17(37) of Article I of the Texas Liquor ControlAct, I amherewith requestingyour honored opinion regarding same as set out below:

"S(37). It shall be unlawful for any Wholesaler, Class B Wholesaler, ClassA Winery orWine Bottlerto sell any alcoholic beverage,nor shall any Package Store Permittee, Wine Only Package Store Permittee, or other retailerpurchase any alcoholic beverage, except for cash OP on terms requiring payment by the purchaser as follows: On purchasesmade from the first to fifteenth day Inclusive of each calendermonth, payment must be made on or before the twenty-fifth day of the same calendarmonth; and, on purchasesmade from the sixteenth to the last day inclusive of each calendarmonth, payment must be made on or before the tenth day of the succeeding calendarmonth. Every delivery of alcoholic beverage must be accompanied by an Invoice of sale giving the date of purchase of such alcoholicbeverage. InHon, Coke R. Stevenson,JP~, page 2 (V-1126)

the event any Package Store PermIttee,Wine Only Package Store Permfttee or otherretail dealer becomes delinquent in the payment of any account due for alcoholic beveragespurchased, (that is, If he fails tomake full payment on OP before the date hereinbefore provided] then ft shall be the duty of the Wholesaler, Class B Wholesaler, Class A Winery orWine Bottler to report that fact immediately to the Board orAdministrator in writing. Any Package Store permittee, Wine Only Package Store Permittee or other retail dealerwho becomes delinquent shall not be permitted to purchase alcoholic beverages from any Wholesaler, Class B Wholesaler, ClassA, Winery OP Wine Bottler until said delinquent account is paid In full, and the delinquentaccount shallbe cleared from the records of the Board before any Wholesaler, Class B Wholesaler, Class A Winery orWine Bottlerwill be permitted to sell alcoholic beverages tohim. Any Wholesaler, Class B Wholesaler, Class A Winery OPWine Bottlerwho 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 shallbe Its duty to adopt rules and regulationsgiving full force and effect to this SectionOD*

The liquorbusiness, unlikemost private enterprises> is regulated by the various States under their police powers. Article 666-2,Vernonus Penal Code, (Art. I, Texas Liquor ControlAct) 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 personmay not engage in the liquor business as a matter of right but onlywhen permIssion to do so Is granted by the State. Permissionwhen granted, is in the nature of a revocable personal privilege, As provided in Section 13(b) ofArtlcle I of the Texas Lfquor ControlAct (Art. 666-13, V.P.C.):. -

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

'Anypermit or license issue% under the terms of eitherArticle I orArticle II of thisAct shallbe purely a personalprivilege, revocable in themanner an% for the causes herein state%, subject to appeal as herelnafter provided, an% shall not constituteproperty, 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 suchpermits are revocable for causes therein state%, subject to appeal
as providedby the act, Such permit, or llcerise, does not constituteproperty. The acceptance constitutesan expressedagreement 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 storepermit to purchase specified liquor from designatedparties and to sell same under the conditionsan% in the
manner prescribed In theAct 1s neither a contractnor 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 thatwhich would otherwisebe unlawful an% may be revoke% by the authorized agent of the statewhenever It is ascertained that the law has been violate%."

A State has the power to regulate liquor traffic andmay 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 theYoung's Market
case the courtheld that a provision of the California law imposing a fee of $500 for the privilege of importing beer Into the State was not discriminatoryagainst a wholesaler of Importedbeer, The court said at page 63:

*Itmight permit themanufacutre and sale of beer,while prohibitingbard liquorsRon., Coke R, Steven.son, Jr., spage 4 (V-11269

absolutely, If It may permit the domestic manufacture of beep an% exclude allmade 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 importationmay 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 discussinga constitutionalquestion Mahoney case, the Supreme Court said at page 403: in the

“The sole contention ofJoseph 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-firstAmendment, the equal protection clause is not applicable to imported Intoxicating liquor- As we are of opi,nion

that the latter contention is sound,we shallnot discusswhether the statutory provision Is 8~reasonable regulation of the Liquor trafficII *

In Cartlldge v, Ralneg 168 F-2% 841, 843 (C-C. A, 5th. 19481. the Court %fscuss~% the reasonableness of the-provislon’lnthe Texas Liquor ControlAct which permltsonly licensed common carriers to engage in the lnterstate transportationof liquor. The court said:

‘The effect of the Texas Liquor Control Act 1s to confine the business of transporting intoxicatingliquors through the state to thosewho are licensedas 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 ControlAct) is one for the purpose of inaintafning the independence of the wholesale and retail Levels of the liquor industryRon. 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 controlledby 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 creditby wholesalers to retailers, as does Section 37 ofArticle 666-17,V.P.C. These provisionshave 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 statutewhich made It unlawful for any licensee to lend or borrowmoney or receive credit, directly or Indirectly,to or from any manufacturer,wholesaler or importer of alcoholic beverages, and for any suchmanufacturer,wholesaler or importer to lendmoney OP otherwise extend credit, except In the usual course of business an% for a periodnot exceedingninety 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:

"Theprohibition of the statute is not limitedby 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 evilsbelieve% 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%erationout ofwhich 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 thatwe are now discussing* The courtupbel% the constitutionalityof the provlons of the rules of the Liquor ControlAdminlstratlonHOG. 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 pertinentportions of Pules 53 and 54 as set out in the statement of facts are as follows2 O53* No alcoholicbeverages 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 reqtiplngpaymentby the puPchaserwithin tl-$Pty days from date of dellvePy.* * * Ho manufacturer orwholesales shall sell, except for cash, any alcoholic beverages to any retailerwith knowledge that suchretailer Is in appears for the payment of alcoholicbeverages,as providedby this Pule; O D o 54. Written notice shallbe given by themanufacturer orwholesaler by reglstepedmall to each licensee in default of paymentwithin five (5)days after the default OCCUPS9 containingthe date of delivery, the amount of Indebtedness in default,and the following statements Rule Ho. 53 of the Llquor ContrPol

AdmInIstratIonprohibitsyou from accepting dellvePy of any alcoholicbeverages from any manufacturer OP wholesaler except for cash, untilyou have paid in full, the amount of the default shown in the notice. Rachmanufacturer and wholesaler shallnotify the Liquor ControlAdministration of each,default within five days, and shall filewith him a copy of eachwritten notIce required to be mailed to the licenseewithin five days after default OCCUPS.~ O e o

"In support of his principal contentions
on the issue of the constitutionalityand invalidity of the rules the complainantrelies
on the law as set out in cases,both federal and state, ofwhich Lawton v. Steele, 152 U.S. 133, 14 s. ct. 499, 38 L, Ed, 385, is an example. In so doinghe has overlookedor 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 arbitparyand unPeasonable interferencebyway of unnecessaryrestrictions on private business,will be found
on examinationto apply to the oPdinapypPivate enterpplsesnot 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 beveragesunder a duly granted license. That licensehe holds subject to the laws of this state and to the rules and regulations of the liquor controladmlniatratlon. It has been decided that, generally speaking,a licensee takeshis 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 ofAlder- % 57 R,I. 96 at page 103 188 A. 648 at pagi 652, this gourt state&' 'Butit 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 entirelyprohibitedby the State * * * OP It may be permitted subject to such restrictionsand burdens,however great, as. the State Legislaturemay deem it advisable to lmpose,D e 0 D sithas been universally held that such regulation is especiallywithin the province of such policepower, 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 Keeping inmind the nature of 0

. 0 the business in which the complainantis engaged and the llmitatlons imposed thereonby established lawwe find thathis contention is not sound. It appears to be his position in substance that rules 53 and 54 are not in the public interest generallyand that they constitutean arbitrary deprivation ofhis property rights contrary to the due process clause of section 1 ofArticle XIV of the amendments to the constitutionof the United States.

"However,it Is well settled that the privileges or immunitiesPePerred 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, atHon. !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: 'Themanner and extent of regulationrest in thediscretion of the SovezninS authority. 0 e m It is a matter of 1eSfslativewPl1 onl.y.DSee 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 thoughbroad and comprehensivewas not.designed to interferewith the proper exexcise of thepolice power by the State. Barbier v. Connolly, 113 U.S, 27, 5 Sect. 357, 28 L,Ed. 9230 We have hereinbeforeFeferred to the fact that there Is no property right in a liqu~ozp

license0 Fu&hep the Fules in question apply alike to all zetai licenseesand are not discriminatory.

In view of the above it is our opinion that Sec.';ion

37 ofArticle .%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 ofArticle 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 bywhol~esalers,

is constitutional.

i! PPROVED: Yours very truly,

Net McDaniel State ."rff'airs

Division
fvepett Hutchinson ExecutiveAssIstant PRICE DANIEL Attorney General

Charles D. Mathews First Assistant