Harris v. Alcoholic Beverage Control Appeals Bd.

• Decision Date: 19 May 1964
• Docket Number: No. 7525,7525
• Citation: 392 P.2d 1,38 Cal.Rptr. 409,61 Cal.2d 305
• Parties: , 392 P.2d 1 Malcolm E. HARRIS, as Director of the Department of Alcoholic Beverage Control, Plaintiff and Appellant, v. ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD, Defendant and Respondent; SCHENLEY INDUSTRIES, INC., et al., Real Parties in Interest and Respondents.
• Court: California Supreme Court

Page 409

38 Cal.Rptr. 409

61 Cal.2d 305, 392 P.2d 1

Malcolm E. HARRIS, as Director of the Department of Alcoholic Beverage Control, Plaintiff and Appellant, v. ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD, Defendant and Respondent SCHENLEY INDUSTRIES, INC., et al., Real Parties in Interest and Respondents.

No. 7525.

Supreme Court of California.

May 19, 1964.

Rehearing Denied June 16, 1964.

Stanley Mosk, Atty. Gen., and Wiley W. Manuel, Deputy Atty., for plaintiff and appellant.

Charles P. Just, Sacramento, for defendant and respondent.

Bronson, Bronson & McKinnon, San Francisco, Anthony J. Kennedy, Sacramento, and George K. Hartwick, San Francisco, for real parties in interest and respondents.

PEEK, Justice.

Malcolm E. Harris, Director of the Department of Alcoholic Beverage Control, appeals from an order denying the department's petition for a writ of mandate to compel the Alcoholic Beverage Control Appeals Board to set aside its decision reversing certain orders of the department denying petitions for the transfer and reissuance of distilled spirits wholesaler's and importer's licenses and ordering the revocation of those licenses.

It is stipulated that prior to 1955 Park & Tilford Distillers Corporation, a licensed manufacturer of distilled spirits, also held both a distilled spirits wholesale and a distilled spirits import license. Section 23771 of the Business and Professions Code ¹ provided then, as it does now, that a manufacturer of distilled spirits may hold only a distilled spirits manufacturer's license, and section 23772 ² prohibited then, as it does now, a manufacturer from holding any interest, directly or indirectly, in a wholesaler's license. However, those sections were avoided by Park & Tilford Distillers Corporation pursuant to an exception in section 23774, which likewise provided then as it does now: 'The provisions of Sections 23771 and 23772 do not prevent the issuance of a distilled spirits wholesale license to any person who, on July 1, 1937, owned or operated a business which for five years immediately preceding that date had maintained and operated in this State a bona fide jobbing and distributing establishment for the sale to retail dealers of goods, wares, and merchandise, the major portion of which business * * * was * * * other than alcoholic beverages.' Park & Tilford Distillers Corporation did not itself qualify under section 23774, but because a wholly-owned subsidiary corporation, Park & Tilford, did qualify under section 23774, the wholesale license could properly issue to and be held by the parent corporation. It further appears that because Park & Tilford Distillers Corporation held that wholesale license, an import license could also issue to and be held by it. (Bus. & Prof.Code, § 23775.)

In 1955 Schenley Industries, Inc., also a manufacturer of distilled spirits, purchased all the stock of Park & Tilford Distillers Corporation. In 1958 Park & Tilford Distillers Corporation was merged with Schenley, the subsidiary Park & Tilford continuing to have separate identity as a subsidiary of the merged corporations. At this time both Schenley and Park & Tilford applied to the Department of Alcoholic Beverage Control for transfers of the wholesale and import licenses of Park & Tilford Distillers Corporation. Both applications were rejected and thereafter both Schenley and Park & Tilford petitioned the department for the licenses pursuant to section 24011 of the Business and Professions Code.

On August 18, 1959, the department filed an accusation against Park & Tilford Distillers Corporation, charging that it was not the sole and true owner of its wholesale and import licenses; that in fact Schenley had been permitted to hold the ownership and to exercise the privileges of those licenses without being authorized to do so by the department; that Schenley had been allowed through its stockholder's interests to exercise rights in the licenses, and that Schenley had been allowed to hold such interest in violation of sections 23771 and 23772 of the Business and Professions Code. The department further charged the licensee with having quit and abandoned its premises and thereafter failing to surrender its licenses within the time required by rule 65 of the department. (Cal.Admin. Code, tit. 4, § 65.) This matter and the two pending petitions were consolidated for hearing before the department, after which the licenses were revoked, and the petitions denied.

Upon appeal, the respondent Alcoholic Beverage Control Appeals Board ordered the department to dismiss the accusations, deny the application of Schenley and grant the application for transfer of the licenses to Park & Tilford.

The department then sought the instant writ of mandate, charging that the board's action was arbitrary and capricious; that the granting of a wholesale license to Park & Tilford would be contrary to the public welfare and morals within the meaning of section 22 of Article XX of the Constitution, ³ and in violation of sections 23771 and 23772 of the Business and Professions Code. The department sought by the writ to compel the board to affirm the department's orders denying the applications for transfer and revoking the licenses. An alternative writ issued but, following a hearing, was discharged and the peremptory writ denied.

The basic problem relates to the application of sections 23771, 23772 and 23774 of the Business and Professions Code to the instant circumstances, that is: can Schenley, as a corporation acquiring the assets of another by merger therewith, also acquire the right, directly or indirectly, to possess those licenses of the merged corporation which, pursuant to an expression of public policy by the Legislature, it would not otherwise be able to possess? The answer would seem to lie in the fundamental reasons which dictated the legislative policy, and whether the holding or transfer of the licenses would infringe on that policy.

In prohibiting the holding of multiple licenses the Legislature has inferentially declared that the public policy is best served if all persons engaged in the handling of alcoholic beverages, whether manufacturing, wholesaling, importing or retailing be kept distinct and apart. Such a policy is not peculiar to California Alone. Federal law prohibits the making of exclusive outlet and 'tied house' agreements (27 U.S.C.A., § 205, subds. (a), (b)) and interlocking directorates (§ 208). Among the purposes of such prohibitions is the prevention of integration of wholesale and retail outlets, and the imposition of quotas on retailers. (Levers v. Berkshire, 10 Cir., 151 F.2d 935; Black v....