City of Chattanooga v. Tennessee Alcoholic Beverage Commission

• Citation: 525 S.W.2d 470
• Parties: CITY OF CHATTANOOGA, Tennessee, et al., Petitioners, v. The TENNESSEE ALCOHOLIC BEVERAGE COMMISSION et al., Respondents.
• Decision Date: 09 June 1975
• Court: Tennessee Supreme Court

Page 470

525 S.W.2d 470

CITY OF CHATTANOOGA, Tennessee, et al., Petitioners, v. The TENNESSEE ALCOHOLIC BEVERAGE COMMISSION et al., Respondents.

Supreme Court of Tennessee.

June 9, 1975.

Eugene N. Collins, City Atty., Gary D. Lander, Sp. Counsel, Chattanooga, for petitioners.

R. A. Ashley, Jr., Atty. Gen. & Reporter, William C. Koch, Jr., Asst. Atty. Gen., Nashville, Leroy Phillips, Jr., Douglas Meyer, Chattanooga, for respondents.

HENRY, Justice.

This suit involves the issuance of a certificate of good moral character to operate a retail liquor store. The City of Chattanooga declined to grant the certificate. The Alcoholic Beverage Commission (ABC) overruled the City and granted the certificate. On review by the Circuit Court of Davidson County, the action of the ABC was upheld. The City of Chattanooga has appealed.

There are two controlling questions, viz.:

a. The respective powers of Tennessee municipalities and The State Alcoholic Beverage Board in connection with the issuance of certificates of good moral character as a condition precedent to the issuance of a license to sell intoxicating liquors in package stores.

b. Whether the ABC exceeded its jurisdiction, or acted illegally, arbitrarily or fraudulently in granting the certificate of good moral character to the applicant.

We discuss these questions seriatim.

I.

A determination of the basic and principal question of the respective powers of the municipalities of Tennessee and the ABC can only be made after giving consideration to the history of liquor control legislation and judicial decisions relating thereto. In our extensive investigation into the matter, we have found no reported decision of this Court wherein this vital, historical consideration has been given.

Prior to the adoption of the Eighteenth Amendment to the Constitution of the United States, the right to sell intoxicating liquor in Tennessee was a taxable privilege, with licenses being issued by the clerks of the county courts of the various counties. ¹ State regulation was yet to come. The prohibition amendment was ratified and became effective on 29 January 1919. ² After the dismal failure of 'the great experiment', and the era of lawlessness and official corruption it produced, the Eighteenth Amendment was repealed by the Twenty-first Amendment, which became effective on 5 December 1933. ³ The various states, after this Amendment, had full right to regulate traffic in intoxicating liquors, to include the right to enforce outright prohibition. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 60 S.Ct. 163, 84 L.Ed. 128 (1939).

The sale of intoxicating liquors continued to be unlawful in Tennessee. ⁴ By Chapter 49 of the Public Acts of 1939, the sale of intoxicating liquors became legal in Tennessee, on a local option basis. This enactment was carried forward into the Code as Section 6648.4 et seq.; however, it was not a local option law in the sense of being passed for the benefit of a particular county only. It was a general, state-wide law applicable to the entire state, but effective for its general purposes only in such counties as adopted it. Vickers v. State, 176 Tenn. 415, 142 S.W.2d 188, 145 S.W.2d 768 (1940). The 'bone dry law' continued in effect in counties not electing to come under the provisions of the local option law. Renfro v. State, 176 Tenn. 638, 144 S.W.2d 793 (1940).

At this time, and for the first time, state regulation came into being.

The Commissioner of Finance and Taxation (now Commissioner of Revenue) was given broad powers, including the right to enforce and administer the provisions of the Act, to make and enforce rules and regulations, and to Issue all licenses, and revoke the same. (See Sec. 6648.7, Michie's Code of 1934, 1941 Replacement Volume). Sec. 6648.11 (Sec. 8, Ch. 49, Acts of 1939) related to retailer's licenses and provided that as a condition precedent to the right to issue a license, the applicant must first:

. . . obtain and file with said application a certificate from the Mayor, or a majority of the Commission, City Council, or the legislative council of said municipality by whatever named designated . . ..

Said certificate must state that the applicant is of good moral character and is personally known to the official signing the certificate, or that such official has made a careful investigation of the applicant's general character and from such investigation it is found to be good, and that in his opinion the applicant will refrain from a violation of this Act and is entitled to the license applied for. Provided further, that no such officer shall arbitrarily refuse to issue such certificate to an applicant, and in the event of such arbitrary refusal the remedy is hereby given to the applicant to compel said official by writ of mandamus to issue said certificate. In the event the commissioner shall arbitrarily refuse to issue said license, he may likewise by mandamus be compelled to do so. ⁵ (emphasis supplied)

Thus it will be seen that the sole power of the city was to issue a certificate of good moral character, or to withhold the same, acting in good faith.

There the law stood when there came before this Court the case of State ex rel. Saperstein v. Bass, 177 Tenn. 609, 152 S.W.2d 236 (1941). This, the first pertinent case to be decided under the 1939 law, was a mandamus action seeking to compel the Mayor of Chattanooga to issue a certificate of good moral character. Relator was granted a permit to sell intoxicating liquors and issued a license after having obtained a certificate. On the same day his license was issued, the city amended its liquor ordinance with the result that relator's business location was one block outside the permissible retail zone. Notwithstanding the amendment he operated for the remainder of the year, but when he applied for a renewal of his certificate of good character it was denied him on the ground that his place of business was in an impermissible location.

The Court did not discuss the issues in the context of the exclusivity of the State's power to control the issuance of liquor licenses. It held that as a general rule a municipality has the right to limit the number of 'saloons' (the case dealt with a package store); that under its charter, the City of Chattanooga might create areas in which liquor might be sold and that the manner and extent of the regulation rested within the judgment and discretion of the City. The Court did not construe the 1939 Act; in fact, it was only mentioned in passing and generally was ignored. For these reasons and others hereinafter pointed out, the holding of Saperstein has no bearing on the issues presented in the instant suit.

In State ex rel. Major v. Cummings, 178 Tenn. 378, 158 S.W.2d 713 (1942), a case wherein an applicant had been denied a certificate of good moral character because his business was located in a prohibited area, the Court followed Saperstein, supra. The Court held that 'the fact that a license has been granted by the State does not preclude the municipal authorities from making reasonable regulations pertaining to the sale of liquor,' and 'a license does not protect the holder from such police regulations affecting the trade as are not unreasonable or oppressive.' Again the Court does not construe the 1939 act or analyze the respective powers of the City and the Commission.

The next case of relevance and significance, and the most comprehensive of all pre-1949 cases is State ex rel. Veal v. Mayor and Aldermen of Dyersburg, 184 Tenn. 1, 195 S.W.2d 11 (1946). Dyersburg, by ordinance, had limited the number of retail liquor stores. Relator applied for a certificate of good moral character as a condition precedent to obtaining a license and was refused solely because the result would have been an excessive number of liquor stores under the ordinance. A mandamus action ensued.

The Court's holding is unmistakably clear:

The officials of a municipality have the right to refuse to grant a certificate of good moral character, notwithstanding the absence of moral turpitude, if the issuance of such certificate would make it legally possible to violate a legally authorized ordinance regulating the sale of intoxicating liquor within the boundaries of the municipality.

The Court upheld the general right of municipalities, under their police power to adopt stringent regulations governing the retail sale of intoxicating liquors, to include a limitation on the number of retail liquor stores.

I reiterate that Saperstein, Major and Veal were all decided before 1949.

In 1949 liquor control in Tennessee 'crossed the Rubicon'. Municipalities lost all vestige of their rights--if they ever had any--to do anything except grant or refuse to grant certificates of good moral character.

In 1949, there came before the Legislature an act (H.B.1371; S.B.1036), designed to amend the 1939 local option act. Specifically, it was proposed to strike from Sec. 6648.11, Supra, the provision (underscored in prior quotation) relating to the remedy of mandamus, and, more importantly to add to the section, inter alia, the following language:

The commissioner shall consider this certificate together with all other evidence which he may obtain by investigation or otherwise in determining whether said license shall be issued.

Additionally, there was added to the same section an elaborate procedure for a hearing before the commissioner in any case where a certifying official had acted 'wrongfully, illegally or arbitrarily', and providing that:

The commissioner shall make such order granting or refusing said license as, In his discretion, the entire record at such hearing shall justify . . . Any party to said hearing may review said order by common law writ of certiorari in the manner provided for review of all other orders . . . (emphasis supplied)

Reference to page 1637 of the Senate Journal for 1949, will reveal that immediately following its passage, Senator Charles...