Knudsen v. Iowa Liquor Control Commission

• Decision Date: 14 October 1969
• Docket Number: No. 53682,A-L,53682
• Citation: 171 N.W.2d 538
• Parties: Virginia M. KNUDSEN, d/b/a Mac's Bung-u, Appellee, v. State of IOWA LIQUOR CONTROL COMMISSION, Appellant.
• Court: Iowa Supreme Court

Page 538

171 N.W.2d 538

Virginia M. KNUDSEN, d/b/a Mac's Bung-A-Lu, Appellee, v. State of IOWA LIQUOR CONTROL COMMISSION, Appellant.

No. 53682.

Supreme Court of Iowa.

Oct. 14, 1969.

Richard C. Turner, Atty. Gen., and William A. Claerhout, Asst. Atty. Gen., for appellant.

Hanrahan & Wasker, Des Moines, for appellee.

RAWLINGS, Justice.

Defendant liquor commission appeals from trial court's decree holding the commission acted illegally in imposing upon plaintiff-licensee an occupational tax based on other than gross receipts, in addition to that paid, plus penalty, and suspending her license pending payment of the assessment. We affirm.

The law enforcement division, Iowa Liquor Control Commission, filed a hearing complaint January 4, 1968, asserting Mrs. Virginia M. Knudsen, owner and operator of Mac's Bung-A-Lu, had violated section 123.102, Code, 1966, in failing to report or remit all taxes due.

Plaintiff appeared January 30, 1968, with counsel, and participated in the hearing without objection.

A commission accountant, Thomas E. Anderson, testified Mrs. Knudsen had remitted $8,605.31 (sic) during the period July 1963 through July 1967, when in fact there was owing by her a total of $12,899.25.

The statutory tax for the four years here concerned was ten percent of licensee's monthly gross receipts.

Mr. Anderson's computation was based on an average of 59 cents for each ounce, being a calculated guess, based upon licensee's filed price lists, and the accountant's experience, coupled with industry reports. This witness testified there are 25 6/10 ounces of liquor in a four-fifths bottle, but his calculations were premised on 23 ounces per bottle. He resultantly arrived at a tax of $1.35 due on each such container, using this mathematical formula: 23 .59cents = $13.57, and $13.57 .10cents = $1.35. As explained by him the licensee purchased 9647 bottles during the subject four years, and had 92 on hand August 1, 1967, revealing 9555 bottles of liquor had been sold. This figure he multiplied by $1.35, the computed tax per bottle, and thus arrived at the $12,899.25 found to be owing.

In effecting this computation Mr. Anderson employed a one ounce of liquor per drink standard referred to in the commission rule 26, as best we can determine now rule 27, adopted pursuant to Code section 123.17(2). That rule states: 'Every licensee shall have on his licensed premises, a printed list or menu showing the various types of alcoholic drinks which he offers for sale and the prices of such drinks shall be indicated thereon. Each licensee shall establish prices based on serving one (1) ounce of intoxicating liquor per sale.' (Emphasis supplied)

Five witnesses, appearing on behalf of licensee, testified the drinks served in her establishment always contained one and one-half ounces of liquor. This is supported by licensee's monthly reports to the commission. She also frequently conducted a 'happy hour' during which sales were at half price.

Mrs. Knudsen's testimony reveals she always poured one and a half ounces rather than an ounce of liquor in each drink.

The commission ultimately found a tax balance of $4,294.94 owing by licensee, plus $5,365.50 penalty, and assessed a total of $9,660.44. Simultaneously Mrs. Knudsen's liquor license was suspended indefinitely until both tax and penalty were paid in full.

Plaintiff-licensee appealed to the district court from defendant-commission's order. Code section 123.27(7)(d).

Trial court held the commission's decision 'was arbitrary and capricious and not based on evidence of gross receipts from the sale of alcoholic beverages by the licensee and constituted an abuse of discretion which is illegal and contrary to law.'

On this appeal defendant-commission contends its method of determining the tax owing by licensee is supported by then existing statutory authority.

I. At the outset we are confronted with a problem involving statutory construction.

On that subject rule 344(f)(13), Rules of Civil Procedure says: 'In construing statutes the courts search for the legislative intent as shown by what the legislature said, rather than what it should or might have said.'

Also, this court said in General Expressways, Inc. v. Iowa Reciprocity Board, Iowa, 163 N.W.2d 413, 423: 'Although it is true that courts give weight to administrative interpretation of statutes where the meaning admits of doubt and the rule is of long standing (Authority cited) it is well settled in this state that in the interpretation of taxing statutes doubtful language is to be resolved in favor of the taxpayer and against the taxing body.' See also In re Estate of Schnepp, 258 Iowa 333, 335, 138 N.W.2d 886; Randolph Foods v. State Tax Commission, 258 Iowa 13, 17, 137 N.W.2d 307; Farnsworth v. Iowa State Tax Commission, 257 Iowa 280, 281, 132 N.W.2d 477; and 82 C.J.S. Statutes § 396, page 946. And we have repeatedly held the legislature may be its own lexicographer. See Graham v. Worthington, 259 Iowa 845, 853, 146 N.W.2d 626, and citations.

II. An attendant question is presented relative to the rule making power of an administrative body.

This court was called upon to consider that matter in Holland v. State of Iowa, 253 Iowa 1006, 115 N.W.2d 161, and there said, loc. cit., 253 Iowa 1010, 115 N.W.2d 163: '* * * administrative rules cannot go further than the law permits. An administrative body may not use the device of promulgating rules to change or add to the law; they are not to be taken as law in themselves, but must be reasonable and used for the purpose of carrying out the legislative enactments. An administrative body may not make law or change the legal meaning of the common law or the statutes. City of Ames v. Iowa State Tax Commission, 246 Iowa 1016, 1022, 71 N.W.2d 15, 19; Kistner v. Iowa State Board of Assessment and Review, 225 Iowa 404, 415, 280 N.W. 587, 593.'

Additionally, it is the general rule that an administrative agency action which is contrary to or beyond the power granted it by law is arbitrary, capricious, unreasonable or an abuse of...