Allied Properties v. Dept. of Alcoholic Beverage Control

Decision Date30 November 1959
Citation53 Cal.2d 141,346 P.2d 737
PartiesALLIED PROPERTIES (a Corporation), Respondent, v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL of the State of California, Appellant. S. F. 20236.
CourtCalifornia Supreme Court

Edmund G. Brown and Stanley Mosk, Attys. Gen., and Charles A. Barrett, Deputy Atty. Gen., for appellant.

Brobeck, Phleger & Harrison, Hart H. Spiegel, Robert J. Drewes, Pillsbury, Madison & Sutro, John A. Sutro, Noble K. Gregory, Allan N. Littman, Heller, Ehrman, White & McAuliffe, George A. Blackstone, J. Albert Hutchinson, San Francisco, Emmett E. Doherty, Los Angeles, Arden & Arden, Beverly Hills, Athearn, Chandler & Hoffman, Walter Hoffman and Clark W. Maser, San Francisco, amici curiae on behalf of appellant.

Steinhart, Goldberg, Feigenbaum & Ladar, John H. Steinhart and Marc M. Monheimer, San Francisco, for respondent.

M. Mitchell Bourquin, George Olshausen, Samuels, Jacobs & Sills and William K. Coblentz, San Francisco, amici curiae on behalf of respondent.

GIBSON, Chief Justice.

Allied Properties was accused of violating sections 55.5, 55.6 and 55.65 of the Alcoholic Beverage Control Act and rule 99 of the State Board of Equalization by advertising and offering to sell at retail distilled spirits and wines at prices less than the minimum resale prices provided for by fair trade contracts filed with the board. 1 (Subsequently the Department of Alcoholic Beverage Control became the constitutional successor of the board with regard to liquor control (Const., art. XX, § 22, as amended in 1954), and it has been substituted as the defendant herein. For convenience we shall refer to the statutes as they appeared before codification, and we shall use the word 'department' in referring to the administrative body in charge of liquor control.) Allied's off-sale general license was suspended for 15 days, and in mandamus proceedings to review the suspension order the superior court determined that the provisions of the act and the rule cited above were invalid. This appeal followed. The facts are not disputed, and the sole question raised is whether the provisions are constitutional.

Section 55.5 (Stats.1937, ch. 758, p. 2173, now Bus. & Prof.Code, §§ 24750- 24753) authorizes fair trade contracts prohibiting the buyer from reselling, except at the price stipulated by the seller, alcoholic beverages which bear the trade-mark or name of the producer and are in open competition with others of the same general class. The section further provides that wilfully advertising, offering to sell, or selling, at less than the price stipulated in such contracts, whether or not the actor is a party to the contract, is unfair competition and actionable at the suit of any person damaged thereby. The statute expressly excludes from its operation any agreement between producers, between wholesalers, or between retailers as to sale or resale prices. 2

Section 55.6 (Stats.1947, ch. 657, p. 1698, now Bus. & Prof.Code, §§ 24754-24757) provides that all retail sales of distilled spirits shall be made pursuant to fair trade contracts entered into under section 55.5 and prohibits the violation of such contracts. The section also provides that all manufacturers and wholesalers of distilled spirits shall file and maintain with the department a list of the prices at which their product will be sold to retailers and that all their sales to retailers shall be in compliance with those lists.

Section 55.65 (Stats.1949, ch. 574, p. 1064, now Bus. & Prof.Code, §§ 24850-24881), sets forth numerous provisions applicable to the sales of wine. It includes provisions like those governing the sales of distilled spirits except that the prices at which retailers are required to sell to consumers are to be determined either by fair trade contracts or by resale price lists filed by the manufacturer or wholesaler with the department. 3

Rule 99 provides in part that no manufacturer or wholesaler shall sell distilled spirits except pursuant to a fair trade contract as provided for by section 55.5 of the act, that copies of such fair trade contracts shall be filed with the department, and that no licensee shall advertise or offer for sale alcoholic beverages at retail at a price less than the minimum resale price provided for by a fair trade contract filed with the department pursuant to this rule. Cal.Admin.Code, tit. 4, § 99, subds. (a), (b), (f).

Under section 22 of article XX of the Constitution the department has power in its discretion to revoke any liquor license if it determines for good cause that the continuance of such license will be contrary to public welfare or morals. The power to revoke includes the lesser power to suspend. Reynolds v. State Board of Equalization, 29 Cal.2d 137, 140, 173 P.2d 551, 174 P.2d 4. In the exercise of its discretion the department can properly consider substantial violations of statutory provisions concerning alcoholic beverages or of rules of the department as good cause for suspension of licenses, and in the present case there is no contention that, if the statutes and rules violated are valid, the suspension constitutes an abuse of discretion. Moreover, with respect to wine, it is provided by statute that the department can suspend licenses in the event of a prohibited sale and can, upon a third violation, revoke them. Alcoholic Beverage Control Act, § 55.65, subd. (n), now Bus. & Prof.Code, § 24880. 4 Further, a rule of the department provides that a violation of its rules and regulations by a licensee will be deemed contrary to public welfare and morals and grounds for suspension or revocation of a license. Cal.Admin.Code, tit. 4, § 1. Although no criminal prosecution is involved here, it should be noted that the act contains a general provision, applicable to prohibited sales of alcoholic beverages, that violations for which another penalty is not specifically provided in the act constitute misdemeanors punishable by a fine, a jail term, or both. Alcoholic Beverage Control Act, § 65, now Bus. & Prof.Code, § 25617.

In passing upon the fair trade provisions we must be guided by the well-settled principles that the presumption is in favor of constitutionality and that the invalidity of an act of the Legislature must be clear before the statute can be declared unconstitutional. It is not our province to weigh the desirability of the social or economic policy underlying the statute or to question its wisdom; they are purely legislative matters.

Where, as here, it is urged that a statute does not constitute a proper exercise of the police power, the inquiry of court is limited to determining whether the object of the statute is one for which that power may legitimately be invoked and, if so, whether the statute bears a reasonable and substantial relation to the object sought to be attained. Wholesale Tobacco Dealers etc. v. National Candy & Tobacco Co., 11 Cal.2d 634, 643, 82 P.2d 3, 118 A.L.R. 486. Acting under this rule, the courts have upheld statutes regulating prices and restricting the freedom to bargain. Wholesale Tobacco Dealers v. National Candy & Tobacco Co., 11 Cal.2d 634, 651-656, 82 P.2d 3; Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 459-462, 55 P.2d 177; Nebbia v. New York, 291 U.S. 502, 529 et seq., 54 S.Ct. 505, 78 L.Ed. 940. A state has particularly wide powers with respect to the manufacture of and traffic in alcoholic beverages and may provide for their prohibition or impose such conditions and regulations as it may deem proper. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138-139, 60 S.Ct. 163, 84 L.Ed. 128; Crowley v. Christensen, 137 U.S. 86, 91, 11 S.Ct. 13, 34 L.Ed. 620. The same broad powers are recognized in section 22 of article XX of the California Constitution. 5 Sandelin v. Collins, 1 Cal.2d 147, 153, 33 P.2d 1009, 93 A.L.R. 956.

Many states have adopted price regulating measures intended to prevent retail price cutting and bargain sales of alcoholic beverages and the evils considered to follow from those practices, namely, excessive purchase and use of liquor and disruption of orderly marketing conditions. Where the constitutionality of such measures has been challenged, most courts have upheld them. Gipson v. Morley, 217 Ark. 560, 233 S.W.2d 79, 83; Schwartz v. Kelly, 140 Conn. 176, 99 A.2d 89, 91; Reeves v. Simons, 289 Ky. 793, 160 S.W.2d 149, 151; Supreme Malt Prod. Co. v. Alcoholic Beverages C. Comm., 334 Mass. 59, 133 N.E.2d 775, 778; Dundalk Liquor Co. v. Tawes, 201 Md. 58, 92 A.2d 560, 561; Butler Oak Tavern v. Division of Alcoholic Bev. Con., 20 N.J. 373, 120 A.2d 24, 30; Gaine v. Burnett, 122 N.J.L. 39, 4 A.2d 37, 39; Pompei Winery v. Board of Liquor Control, Ohio App., 149 N.E.2d 733, 748. But cf. Scarborough v. Webb's Cut Rate Drug Co., 150 Fla. 754, 8 So.2d 913, 921; Schwegmann Bros. v. Louisiana Board, etc., 216 La. 148, 43 So.2d 248, 259, 14 A.L.R.2d 680.

The Alcoholic Beverage Control Act states that it was enacted 'for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages.' Alcoholic Beverage Control Act, § 1, now Bus. & Prof.Code, § 23001. The fact that the act provides for fair trade contracts indicates that its purposes include those of the general Fair Trade Act (Stats.1931, ch. 278, p. 583, now Bus. & Prof.Code, §§ 16900-16905), particularly the prevention of price cutting in retail sales. Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 455, 55 P.2d 177; see Wholesale T. Dealers v. National, etc., Co., 11 Cal.2d 634, 655, 82 P.2d 3. The Max Factor and Wholesale T. Dealers cases held that the Legislature may take measures against price cutting, and there can be no doubt that the prevention of intemperance is a proper legislative objective.

The means provided in a statute must be accepted as being...

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