Ajax Distributors, Inc. v. Springer

• Decision Date: 25 November 1941
• Citation: 22 A.2d 838,26 Del.Ch. 101
• Parties: AJAX DISTRIBUTORS, INC., a corporation of the State of Delaware, v. WILLARD SPRINGER, JR., constituting the "Delaware Liquor Commission.&quot
• Court: Court of Chancery of Delaware

22 A.2d 838

26 Del.Ch. 101

AJAX DISTRIBUTORS, INC., a corporation of the State of Delaware, v. WILLARD SPRINGER, JR., constituting the "Delaware Liquor Commission."

Court of Chancery of Delaware, New Castle

November 25, 1941

BILL IN EQUITY to enjoin Willard Springer, Jr., the defendant constituting the "Delaware Liquor Commission", from enforcing an Act of the Legislature, commonly known as the "Retaliatory Liquor Act", the validity of which was attacked on both constitutional and other grounds.

Case heard on motion of the complainant that a preliminary injunction issue, restraining the collection of the taxes imposed by the Act in controversy.

That Act was approved by the Governor May 21, 1941, and appears in Volume 43 of the Laws of Delaware as Chapter 726. It will also appear in the opinion of the court.

Ajax Distributors, Inc., the complainant, a Delaware corporation was engaged in the wholesale liquor business, and held an importer's license issued by the State Liquor Commission. It annually imported into the State of Delaware large quantities of beer, manufactured in other States particularly in the State of Pennsylvania, and sold it at wholesale to local licensed retail dealers. Pursuant to statutory authority, prior to the enactment of the Act of May 21st, the State of Delaware had imposed a tax on all beer sold by wholesale dealers in the State at the rate of $ 1.00 per barrel. When beer was imported from the State of Pennsylvania by the Ajax Company, stamps representing the Delaware tax were placed on the containers at the brewery and before it was brought into the State. The State of Pennsylvania, however, imposed a wholesaler's tax of $ 1.24 per barrel on all beer sold in bulk in that State, and $ 1.56 per barrel on all beer sold in case lots. That tax applied whether, or not, the beer sold was of foreign or of domestic manufacture; but it did not apply when it was sold at the brewery to Delaware wholesalers. After the enactment of the Act of May 21, 1941, beer manufactured in Delaware was being sold in Pennsylvania; so under its provisions, if valid, the importer of beer manufactured in the latter State was required to pay a much higher tax on it when sold in Delaware than was required to be paid on beer, both manufactured and sold in Delaware.

An Act of the Legislature of the State of Pennsylvania, approved by the Governor July 24, 1941, 47 P. S. § 105, provided:

"In the event that any state, territory or country shall impose upon malt or brewed beverages, which have been manufactured in Pennsylvania, a higher tax or fee than is imposed upon malt or brewed beverages manufactured within such state, territory or country, every person who ships or transports from such state, territory or country malt or brewed beverages manufactured therein into this Commonwealth for sale, delivery or storage in this Commonwealth, shall pay thereon to the Commonwealth before such beverages are transported within this Commonwealth, in addition to the tax imposed by this section, a tax equal to such excess tax or fee which is imposed in such state, territory or country on Pennsylvania-manufactured malt or brewed beverages. Such additional tax shall be levied, assessed, and collected in the same manner as the other taxes imposed by this act."

Other facts will appear in the opinion of the Court.

Complainant's motion for a preliminary injunction refused.

Josiah Marvel, Jr., of Marvel & Morford, and William H. Bennethum, for complainant.

James R. Morford, Atty. Gen. for Delaware, and William S. Potter, of Southerland, Berl, Potter & Leahy, for defendant.

William H. Foulk and Robert C. Barab, as amici curiae, appeared and filed brief in support of validity of statute attacked.

OPINION

THE CHANCELLOR:

The complainant attacks the validity of the Act of the General Assembly, entitled "An Act to Amend Chapter 176 of the Revised Code of Delaware, 1935, in Reference to Retaliatory Taxation and Regulation With Regard to the Importation, Sale and Transportation of Alcoholic Liquors." That Act provides:

"When by the laws of any other State, any other or greater taxes * * * are imposed on alcoholic beverages manufactured in the State of Delaware and being sold and dispensed in such other State, or on the manufacturers of alcoholic beverages located in the State of Delaware doing business in such other State or upon their agents therein, than the law of the State of Delaware imposes on alcoholic beverages imported from such other State being sold and dispensed in this State or on the manufacturer of such alcoholic beverages or their agents doing business in this State, so long as such laws continue in force in such other State, the same taxes, * * * shall be imposed upon all such alcoholic beverages and the manufacturers of such alcoholic beverages of such other State doing business within this State * * *."

The solicitors for the Delaware brewers, who were permitted to appear as amici curiae, contend that in order to ascertain the real intended meaning of this Act it should be read:

"When by the laws of any other State, any other or greater taxes * * * are imposed on alcoholic beverages manufactured in the State of Delaware and being sold and dispensed in such other State, * * * than the law of the State of Delaware imposes on alcoholic beverages imported from such other State being sold and dispensed in this State * * * so long as such law continues in force in such other State, the same taxes * * * shall be imposed upon all such alcoholic beverages * * *."

They further contend that this is merely another way of saying "whenever any other state imposes on sales therein of alcoholic beverages manufactured in Delaware greater taxes than Delaware imposes on sales herein on alcoholic beverages manufactured in that State," the same taxes shall be imposed, etc. In other words, they claim that the Act applies to the alcoholic products of all other states sold here which have other or greater taxes than are imposed by the State of Delaware. Under this construction, the application of the Act would not depend upon whether Delaware brewers are actually "doing business", that is--selling their products in such other states. When so construed, perhaps the Act would be of a reciprocal rather than of a retaliatory nature. But if that question be important, the omitted portions cannot be disregarded, and when read in its entirety the language used will not permit of that construction. Its application to alcoholic beverages manufactured in another state but sold here, and the consequent increase in taxes ordinarily imposed, apparently depends upon whether alcoholic beverages manufactured in Delaware are "being sold and dispensed in such other state"; and also upon whether the Delaware manufacturers "doing business" in that state are being compelled to pay higher taxes on sales there than their manufacturers would have been compelled to pay on their products sold here. Perhaps the Act is not very skillfully drawn, but from the language used it seems difficult to escape the conclusion that it is of a retaliatory nature. That the words "being sold and dispensed in such other state" in the first phrase are used in their usual and ordinary sense seems to be shown by the subsequent words "doing business", which appear in the same phrase. Other and later provisions of the Act of substantially the same nature seem to corroborate this conclusion. Nor does the fact that the application of the Act is in a sense conditional, affect its validity. 1 Cooley's Constitutional Limitations, (8th Ed.) 227. Both the Ajax Company, the complainant, and Willard Springer, Jr., constituting the State Liquor Commission, concede that this is the proper construction of that Act. But, when so construed, there is a difference of opinion as to its validity. The Ajax Company contends that it imposes wholly arbitrary, oppressive and unreasonable burdens and restrictions on the right of that company to conduct its business of selling alcoholic liquors, largely imported from another state, and therefore violates property rights guaranteed by Section 7 of Article I of the Delaware Constitution of 1897. See State v. Danberg, 40 Del. 136, 1 Terry (40 Del.) 136, 6 A.2d 596; Becker v. State, 37 Del. 454, 7 W. W. Harr. (37 Del.) 454, 185 A. 92; Liggett Co. v. Baldridge, 278 U.S. 105, 49 S.Ct. 57, 73 L.Ed. 204. That section provides that no person "shall be deprived of life, liberty or property, unless by the judgment of his peers or by the law of the land." While this provision of our Constitution is couched in somewhat different language, it has substantially the same meaning as the due process clauses of the Federal Constitution (Arts. 5, 14). State v. Rose, 33 Del. 168, 3 W. W. Harr. (33 Del.) 168, 132 A. 864, 45 A. L. R. 85; 16 C. J. S., Constitutional Law, § 567, p. 1142; 24 Harv. Law Rev. 366.

Perhaps one of the fundamental reasons for the adoption of the Federal Constitution was the necessity for national economic unity, unaffected by state lines, and unburdened by discriminatory and retaliatory local legislation, restricting commerce between the various states. Appropriate provisions to remedy that evil were, therefore, inserted in that instrument (Article 1, Section 8, clause 3). Prior to the Twenty-First Amendment, it is quite probable that the statute in question would have violated the interstate commerce clause of the Federal Constitution. State Board of Equalization v. Young's Market Co., 299 U.S. 59, 57 S.Ct. 77, 81 L.Ed. 38; see also Ziffrin, Inc., v. Reeves, 308 U.S. 132, 60 S.Ct. 163, 84 L.Ed. 128. But that question is not involved in this case.

Section 2 of the Twenty-first Amendment to the Constitution of the United States provides:

"The...