Borman's, Inc. v. Michigan Liquor Control Commission

• Decision Date: 20 January 1972
• Docket Number: No. 1,Docket No. 11107,1
• Citation: 37 Mich.App. 738,195 N.W.2d 316
• Parties: BORMAN'S, INC., a Delaware corporation, Plaintiff-Appellee, v. MICHIGAN LIQUOR CONTROL COMMISSION, Defendant-Appellant
• Court: Court of Appeal of Michigan — District of US

Page 316

195 N.W.2d 316

37 Mich.App. 738

BORMAN'S, INC., a Delaware corporation, Plaintiff-Appellee, v. MICHIGAN LIQUOR CONTROL COMMISSION, Defendant-Appellant.

Docket No. 11107.

Court of Appeals of Michigan, Division No. 1.

Jan. 20, 1972.

Released for Publication March 17, 1972.

Leave to Appeal Denied April 11, 1972.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Richard I. Rubin, Asst. Atty. Gen., for defendant-appellant.

Lawrence S. Jackier, Friedman, Meyers & Keys, Detroit, for plaintiff-appellee.

Before LESINSKI, C.J., and V. J. BRENNAN and O'HARA, ^* JJ.

LESINSKI, Chief Judge.

Defendant Michigan Liquor Control Commission appeals from the decision of the trial court granting the motion of plaintiff Borman's, Inc., for summary judgment and permanently enjoining defendant commission from revoking plaintiff Borman's warehouse license.

Borman's, a Delaware corporation, owns a chain of 77 retail grocery outlets which sell beer and wine, in addition to numerous other products. In order to stock and service its chain of stores, Borman's also operates a warehouse, which is a central distribution point for a majority of the goods dispensed by its retail outlets. By maintaining its own warehouse, numerous advantages accure to Borman's. It is able to dispense with the hiring of independent contractors to store, unpack, repack and distribute its goods to its retail outlets. Borman's is able to purchase goods at a quantity discount. Additionally, its warehousing system allows it to achieve central inventory control. Borman's warehouse operation is solely for the benefit of its retail outlets. No sales are made from the warehouse to independent entities.

On May 1, 1969, defendant commission issued Borman's a warehouse license, allowing it to stock beer and wine at its central warehouse. Borman's already possessed numerous specially designated merchant (SDM) licenses ¹ for its outlets that sold beer and wine. The warehouse license was valid until May 1, 1970, unless it was revoked by defendant prior to that date.

The Michigan Liquor Control Act, M.C.L.A. § 436.1 et seq., M.S.A. § 18.971 et seq., was amended subsequent to the issuance of the warehouse license. The terms of that amendment in relevant part provide that 'no specially designated distributor or specially designated merchant or any other holder of a retailer license shall be eligible to hold any wholesale or warehouse license.' M.C.L.A. § 436.19d(2), M.S.A. § 18.990(4)(2). Acting pursuant to the amendment, defendant commission demanded that Borman's return the warehouse license which had been issued it.

In response to the commission's demand, Borman's filed this action, asking that defendant commission be enjoined from revoking the warehouse license which it had issued to Borman's, on the ground that section 19d(2), as amended, of the Michigan Liquor Control Act was unconstitutional. The commission moved for summary judgment, alleging that Borman's had failed to state a claim upon which relief could be granted. Borman's urged in reply that the commission's motion be denied, and moved for judgment on its own behalf. The trial court, in a written opinion, held that section 19d(2) was unconstitutional as applied to Borman's. Accordingly, judgment was granted for plaintiff Borman's.

On appeal, the commission contends that section 19d(2) of the Michigan Liquor Control Act is a valid exercise of the police power of the State of Michigan and that section 19d(2) is likewise constitutional in its application to Borman's. Plaintiff Borman's, on the other hand, argues that section 19d(2) is violative of both the equal protection and due process clauses of the United States Constitution and the Michigan Constitution.

The guarantee of equal protection of the laws is afforded by both U.S.Const., Am. 14, § 1, and Mich.Const.1963, art, 1, § 2. The Michigan Supreme Court has held that the protection provided by the two clauses is coextensive. Naudzius v. Lahr, 253 Mich. 216, 234 N.W. 581 (1931). In determining whether a given provision is violative of equal protection of the laws, courts must keep in view the strong presumption of constitutional validity which attaches to legislation. Gauthier v. Campbell, Wyant & Cannon Foundry Company, 360 Mich. 510, 104 N.W.2d 182 (1960). Thus:

'There is no doubt that State legislatures have a broad range of discretion in establishing classifications in the exercise of their powers of regulation. However, the constitutional guarantees of equal protection are interposed against discriminations that are entirely arbitrary. In determining what is within legislative discretion and what is arbitrary, regard must be had for the particular subject of the State legislation. There must be a relation between the classification and the purposes of the act in which it is found.' Fox v. Employment Security Commission, 379 Mich. 579, 588, 153 N.W.2d 644, 647 (1967).

As part of its policy to control alcoholic liquor traffic within the State, the Legislature has deemed it necessary to separate retailers (specially designated distributors (SDD's) ² SDM's, and other holders of retailer licenses) from warehousers and wholesalers, by prohibiting retailers from holding a warehouse or wholesale license. The position of Borman's is that, even if such a classification is generally valid, it is overinclusive. Borman's argues that it should not be placed within the proscribed class because it stores beer and wine only for its own retail outlets, unlike most warehouses. Relevant to the inquiry of whether such a distinction is arbitrary and invidious, both generally and as to Borman's, is the prupsoe of both the Michigan Liquor Control Act and the 1969 amendment thereto.

The title of the Michigan Liquor Control Act reads, in part, as follows:

'An act to create a liquor control commission for the control of alcoholic beverage traffic within the state of Michigan, and to prescribe its powers, duties, and limitations; to provide for the control of the alcoholic liquor traffic within the state of Michigan and the establishment of state liquor stores; * * * to provide for the incorporation of farmer cooperative wineries and the granting of certain rights and privileges thereto; to provide for the licensing and taxation thereof, and the disposition of monies received under this act; to provide for the enforcement and to prescribe penalties for violations of this act.'

Thus, the purpose of the act itself is broad--to control 'alcoholic liquor traffic' within the State. Likewise, the power vested in the states to legislate concerning intoxicating liquors is great. Pursuant to U.S.Const., Am. 21, § 2, such power is unfettered by even the commence clause. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138; 60 S.Ct. 163, 167; 84 L.Ed. 128, 135 (1939). As the United State Supreme Court there stated:

'Without doubt a state may absolutely prohibit the manufacture of intoxicants, their transportation, sale, or possession, irrespective of when or where produced or obtained, or the use to which they are to be put. Further, she may adopt measures reasonably appropriate to effectuate these inhibitions and exercise full police authority in respect of them.'

Similarly, the Michigan Supreme Court has recognized the wide latitude given the State to regulate alcoholic beverages. The Court stated in Fitzpatrick v. Liquor Control Commission, 316 Mich. 83, 96--97, 25 N.W.2d 118, 123 (1946), that:

'The Legislature has seen fit to impose restraints and limitations upon the liquor traffic more drastic than might appear to be necessary if applied to traffic in such ordinary commodities as corn, wheat, shoes, groceries, and similar articles of commerce and trade. The danger inherent in the excessive use of intoxicating liquor and its effect on health, morals and pulic safety is recognized by many laws seeking to regulate and control its use, for example, drunk driving, intoxication in public places, sale of intoxicating liquor to minors.'

Fitzpatrick upheld against due process and equal protection attacks an amendment to the Michigan Liquor Control Act which provided that all applicants for a bartender's license shall be male, with the exception of wives or daughters of male owners of establishments licensed to sell alcoholic liquor. 1945 P.A. 133, § 19a, repealed by 1955 P.A. 206. Subsequently, the United States Supreme Court upheld the constitutional validity of the Michigan provision in Goesaert v. Cleary, 335 U.S. 464, 465; 69 S.Ct. 198, 199; 93 L.Ed. 163, 165 (1948), referring to the regulation of liquor traffic as 'one of the oldest and most untrammeled of legislative powers.'

In Beacon Club v. Kalamazoo County Sheriff, 332 Mich. 412, 52 N.W.2d 165 (1952), appeal dismissed sub nom. Eight O'Clock Club v. Buder, 343 U.S. 971, 72 S.Ct. 1077, 96 L.Ed. 1366 (1952); reh. den. 344 U.S. 848, 73 S.Ct. 6, 97 L.Ed. 659 (1952), it was held that another amendment to the act, prohibiting so-called bottle clubs, was not a denial of equal protection or due process. The Court stated that the act had only one object, the regulation and control of the liquor traffic. 332 Mich. 412, 425, 52 N.W.2d 165.

Thus, strong authority supports the great latitude given the State in controlling liquor traffic. However, the State is still bound by constitutional limitations in the exercise of its broad power. Although the State, in the proper exercise of its police power, can regulate or prohibit businesses which are injurious to the public, 'it is equally well settled that such regulation is not unlimited in scope, but is subject to the limitations imposed by that (the 14th) amendment.' Glicker v. Michigan Liquor Control Commission, 160 F.2d 96, 100 (CA 6, 1947). In Goesaert, supra, 335 U.S. 466, 69 S.Ct. 199, 93 L.Ed. 165, the United States Supreme Court said that 'The Constitution in enjoining the equal protection of the laws upon States precludes irrational discrimination as between...