Gabriel Inv. Grp., Inc. v. Tex. Alcoholic Beverage Comm'n (In re Gabriel Inv. Grp., Inc.)

Decision Date03 November 2020
Docket NumberCase No. 19-52298-RBK,Adversary No. 20-05010-rbk
Citation622 B.R. 213
Parties IN RE: GABRIEL INVESTMENT GROUP, INC., et al., Debtors Gabriel Investment Group, Inc., Plaintiff, v. Texas Alcoholic Beverage Commission, Defendant
CourtU.S. Bankruptcy Court — Western District of Texas

Amber L Fly, Randall A. Pulman, Thomas Rice, Pulman Cappuccio & Pullen, LLP, San Antonio, TX, for Debtor

OPINION

Ronald B. King, Chief United States Bankruptcy Judge

This adversary proceeding focuses entirely on a question of statutory interpretation of the provision of the Texas Alcoholic Beverage Code that governs which entities in Texas may and may not operate retail liquor stores, also known as "package stores." In general, the Texas Alcoholic Beverage Code prohibits public corporations from holding permits to own or operate package stores ("package store permits," or "P Permits"). Plaintiff, Gabriel Investment Group, Inc. ("GIG"), a public corporation as defined by the Texas Alcoholic Beverage Code, nevertheless holds a P Permit through a grandfather exemption to the general prohibition on public-corporation ownership of P Permits. GIG filed this chapter 11 case, confirmed a plan, and filed this adversary proceeding seeking a declaratory judgment that this grandfather exemption, and thus its rights as holder of a P Permit, will survive regardless of whether GIG stock is purchased by a separate, non-exempt public corporation. Both GIG and defendant the Texas Alcoholic Beverage Commission ("TABC") filed competing motions for summary judgment on this issue. Because the Court believes that the Texas Alcoholic Beverage Code would not allow a public corporation to hold or benefit from a P Permit simply by purchasing GIG stock, regardless of GIG's grandfather exemption, the Court has granted summary judgment to TABC and denied summary judgment to GIG. This opinion states the reasons for granting TABC's motion and for denying GIG's motion. See FED. R. CIV. P. 56(a) ; FED. R. BANKR. P. 7056.

I. JURISDICTION AND VENUE .

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(c) and 1334(b). This matter is a non-core proceeding related to a case under title 11 referred to the Court by the Standing Order of Reference in the Western District of Texas. Venue is proper pursuant to 28 U.S.C. § 1409.

II. BACKGROUND .

Chapter 22 of the Texas Alcoholic Beverage Code governs the issuance of package store permits, or "P Permits," which are required to purchase liquor from wholesalers and to sell liquor in unbroken original containers for off-premises consumption. See TEX. ALCO. BEV. CODE § 22.01. Section 22.16 of the Texas Alcoholic Beverage Code prohibits a public corporation from directly or indirectly holding a P Permit. See id. § 22.16(a). Specifically, the statute states:

A package store permit may not be owned or held by a public corporation, or by any entity which is directly or indirectly owned or controlled, in whole or in part, by a public corporation, or by any entity which would hold the package store permit for the benefit of a public corporation.

Id. For purposes of section 22.16, a "public corporation" is defined as either "any corporation or other legal entity whose shares or other evidence of ownership are listed on a public stock exchange" or "any corporation or other legal entity in which more than 35 persons hold an ownership interest in the entity." Id. § 22.16(b). GIG falls within this definition of a public corporation.

Despite its general prohibition on public corporations owning or holding P Permits, section 22.16 does provide a "grandfather" clause exempting certain public corporations from the public-corporation prohibition. Section 22.16(f) provides:

This section shall not apply to a corporation:
(1) which was a public corporation as defined by this section on April 28, 1995; and
(2) which holds a package store permit on April 28, 1995, or which has an application pending for a package store permit on April 28, 1995; and
(3) which has provided to the commission on or before December 31, 1995, a sworn affidavit stating that such corporation satisfies the requirements of Subdivisions (1) and (2).

Id. § 22.16(f). Neither party disputes that GIG qualifies for this exemption.

GIG's confirmed plan of reorganization implemented a "divisive merger" whereby GIG separated into two distinct entities:

(1) an operating entity that will continue to operate package stores as a privately held corporation, and (2) a public corporation, i.e., GIG, that will be sold to pay the debts owed to various creditors, including creditors of the operating entity. GIG's value depends in large part on its ability to operate package stores—and thus on the continuing validity of its P Permits and its grandfather exemption from the public-corporation prohibition.

GIG thus seeks a declaration that: (1) GIG is and will remain exempt from the public-corporation ban set forth in section 22.16(a) regardless of whether any future direct or indirect owner(s) of all or any portion of the issued and outstanding stock of GIG is itself a public corporation; and (2) the rights and privileges associated with GIG's section 22.16(f) exemption from the public-corporation ban will continue unimpaired following any acquisition of all or any portion of GIG's issued and outstanding stock.

TABC filed a motion for summary judgment arguing that the Court should deny GIG's requested relief. GIG subsequently filed its own motion for summary judgment arguing that it is entitled to its requested declaratory judgment. The facts are not in dispute.

III. DISCUSSION .
A. Summary Judgment Standard.

"Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Malacara v. Garber , 353 F.3d 393, 398 (5th Cir. 2003) (citing Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). The Court must grant summary judgment "only when, viewing the evidence in the light most favorable to the nonmoving party, the record indicates that there is ‘no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ " Lifecare Hosps., Inc. v. Health Plus of La., Inc. , 418 F.3d 436, 439 (5th Cir. 2005) (quoting FED. R. CIV. P. 56(c) ); see also Lowe v. King (In re King) , Bankruptcy No. 05-56485-C, Adversary No. 06-5122-C, 2006 WL 3861097, at *2 (Bankr. W.D. Tex. Dec. 29, 2006) (applying the same standard). Where, as here, the parties file cross-motions for summary judgment, the Court may "assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts." Atl. Richfield Co. v. Farm Credit Bank of Wichita , 226 F.3d 1138, 1148 (10th Cir. 2000) (quoting James Barlow Family Ltd. P'ship v. David M. Munson, Inc. , 132 F.3d 1316, 1319 (10th Cir. 1997) ); accord Petro Harvester Operating Co. v. Keith , 954 F.3d 686 (5th Cir. 2020).

B. Statutory Interpretation.

This case revolves entirely around the interpretation of a Texas statute. Federal courts interpreting Texas statutes must "follow the same rules of construction that a Texas court would apply." Wright v. Ford Motor Co. , 508 F.3d 263, 269 (5th Cir. 2007). When construing a statute, Texas courts' "primary objective is to give effect to the Legislature's intent." Colorado County v. Staff , 510 S.W.3d 435, 444 (Tex. 2017) (citing Greater Hous. P'ship v. Paxton , 468 S.W.3d 51, 58 (Tex. 2015) ). To determine that intent, Texas courts look first to the statutory text. Id. (citing Greater Hous. P'ship , 468 S.W.3d at 58 ). When Texas courts interpret statutes, they "presume lawmakers chose statutory language ‘with care and that every word or phrase was used with a purpose in mind.’ " Brazos Elec. Power Coop., Inc. v. Tex. Comm'n on Envtl. Quality , 576 S.W.3d 374, 384 (Tex. 2019) (quoting Tex. Lottery Comm'n v. First State Bank of DeQueen , 325 S.W.3d 628, 635 (Tex. 2010) ). Texas courts do not consider words and phrases in isolation, but rather read statutes to give effect to every word. See El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 531–32 (Tex. 2020) (citing Brazos , 576 S.W.3d at 384 ).

Where the text is clear, the text is determinative of intent. Brazos , 576 S.W.3d at 384 (citing Entergy Gulf States, Inc. v. Summers , 282 S.W.3d 433, 437 (Tex. 2009) ). " ‘The plain meaning of the text is the best expression of legislative intent unless a different meaning is apparent from the context or the plain meaning leads to absurd or nonsensical results.’ " Staff , 510 S.W.3d at 444 (quoting Molinet v. Kimbrell , 356 S.W.3d 407, 411 (Tex. 2011) ). A court may only look "beyond [a statute's] language for assistance in determining legislative intent [if] the statutory text is susceptible to more than one reasonable interpretation." Id. (citing Tex. Mut. Ins. Co. v. Ruttiger , 381 S.W.3d 430, 452 (Tex. 2012) ).

Even when a statute is not ambiguous on its face, however, Texas courts "can consider other factors to determine the Legislature's intent, including: the object sought to be obtained; the circumstances of the statute's enactment; the legislative history; the common law or former statutory provisions, including laws on the same or similar subjects; the consequences of a particular construction; administrative construction of the statute; and the title, preamble, and emergency provision." Helena Chem. Co. v. Wilkins , 47 S.W.3d 486, 493 (Tex. 2001) (citing TEX. GOV'T. CODE § 311.023 ; Ken Petroleum Corp. v. Questor Drilling Corp. , 24 S.W.3d 344, 350 (Tex. 2000) ).

C. Analysis of Section 22.16.
a. The Parties' Arguments

GIG's primary argument in favor of its position is that the grandfather exemption contained in section 22.16(f) negates the application of the entirety of section 22.16 for a corporation that meets subsection (f)'s three...

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