Lake County Beverage Co., Inc. v. 21st Amendment, Inc.

• Decision Date: 24 November 1982
• Docket Number: No. 1-182A5,1-182A5
• Citation: 441 N.E.2d 1008
• Parties: 1982-83 Trade Cases P 65,109 LAKE COUNTY BEVERAGE COMPANY, INC., Appellant (Plaintiff Below), The Stroh Brewery Company, Appellant (Intervenor-Plaintiff Below), Indiana Alcoholic Beverage Commission, Appellant (Defendant Below), v.
• Court: Indiana Appellate Court

Page 1008

441 N.E.2d 1008

1982-83 Trade Cases P 65,109

LAKE COUNTY BEVERAGE COMPANY, INC., Appellant (Plaintiff Below) The Stroh Brewery Company, Appellant (Intervenor-Plaintiff Below) Indiana Alcoholic Beverage Commission, Appellant (Defendant Below) v. No. 1-182A5.

Court of Appeals of Indiana First District.

Nov. 24, 1982.

Daniel P. Byron, Phillip A. Terry, McHale, Cook & Welch, P.C., Indianapolis, for appellant Lake County Beverage Co., Inc.

Linley E. Pearson, Atty. Gen., Frank A. Baldwin, Asst. Atty. Gen., Indianapolis, for appellant Indiana Alcoholic Beverage Com'n.

Daniel F. Evans, Jr., Robert R. Clark, Bayh, Tabbert & Capehart, Indianapolis, for appellant Stroh Brewery Co.

William C. Barnard, James E. Hughes, Sommer & Barnard, Indianapolis, for appellee 21st Amendment, Inc., DeLock's # 1, Inc., DeLock's # 3, Inc., DeLock's # 6, Inc., DeLock's # 11, Inc., and DeLock's # 14, Inc.

ROBERTSON, Judge.

The Lake County Beverage Co. (LCB), the Stroh Brewery Company (Stroh) and the Indiana Alcoholic Beverage Commission (ABC) appeal the judgment rendered in favor of the 21st Amendment Inc. (21st Amendment) and various stores of DeLock's, Inc. LCB, Stroh, and the ABC challenge the legality of quantity discounts in the sale of beer.

We affirm.

This case was initiated by LCB when it filed a complaint against the ABC and another defendant, Kuhn Beer Distributors, Inc. (Kuhn). due to Kuhn's "illegal discounts". LCB also sought a permanent mandatory injunction against the ABC to enforce provisions of Ind.Code Sec. 7.1-5-5-7, which, according to LCB, prohibits quantity discounts. The complaint was amended to include a count to mandate the ABC's Commissioners to enforce IC 7.1-5-5-7. Stroh and 21st Amendment were permitted to intervene in the action.

The case was tried before the trial court on stipulations between LCB and the ABC. (The intervenors were not permitted to introduce evidence.) LCB's claim for damages against Kuhn was severed from the present appeal.

The ABC sought to dismiss the complaint alleging that the trial court lacked jurisdiction because LCB does not have a property right in its liquor license. The ABC also argued that any action by the trial court would violate the separation of powers doctrine. The motion to dismiss was denied. While awaiting the trial court's determination, the ABC attempted to dispose of the controversy by issuing a resolution prohibiting quantity discounts. The resolution was enjoined and in its brief, the ABC concedes the resolution was not in effect.

The ABC alleges the trial court erred in denying its motion to dismiss. It argues that IC 7.1-3-1-2 holds that a liquor permit is not property. This section provides:

A permitee shall have no property right in a wholesaler's, retailer's, or dealer's permit of any type.

The ABC alleges that since LCB has no property right in its permit, LCB had no right to seek a writ of mandate against the ABC or damages from Kuhn.

The trial court concluded it had jurisdiction based upon Midwest Beverage Co. v. Gates, 61 F.Supp. 688 (N.D.Ind.1945). In Gates, the court recognized that a permit holder did not have a vested interest in his permit because no binding limitation can be placed on a state's exercise of its police power through legislative action, but stated:

On the other hand the use of the permit, once granted, has the elements of property irrespective of what the legislature may declare about the permit itself, and except for the omnipresent and unlimited power of the state to revoke or modify the terms of the permit in the interest of the public welfare, the use of such permit, if not the permit itself, is property within the meaning of the due process clause of the Federal Constitution.

61 F.Supp. 688.

The trial court correctly determined that it had jurisdiction. The position that the use of a permit is in the nature of a property right is also supported by the statute's legislative history. The previous statute IC 1945, 7-2-1-14 (Burns Code Ed.), provided:

No person shall be deemed to have any property right in any beer wholesaler's permit, beer retailer's permit, beer dealer's permit, liquor wholesaler's permit, liquor retailer's permit, liquor dealer's permit, wine wholesaler's permit, wine retailer's permit, or wine dealer's permit, nor shall said permit itself or the enjoyment thereof be considered a property right. (Emphasis added.)

A fundamental rule of statutory construction is that an amendment changing a prior statute indicates a legislative intention that the meaning of the prior statute has been changed. It raises a presumption that the legislature intended to change the law unless it clearly appears that the amendment was passed in order to express the original intention more clearly. Ind. Alcoholic Beverage Comm. v. Osco Drug, Inc., (1982) Ind.App., 431 N.E.2d 823. We can only conclude that the legislature, by deleting the language regarding the enjoyment of a permit as a property right, intended that a permit holder has a recognizable interest in the use of his liquor permit.

Another point supports the trial court's jurisdiction because although the ABC has argued that a permit holder has no property interest in his permit, IC 7.1-5-5-7 is a criminal section. Pursuant to IC 7.1-5-1-8, a violation constitutes a class B misdemeanor and is punishable by a fine of not more than $1000 and by imprisonment of not more than 180 days. Due to the nature of these penalties, it cannot be argued that the parties are merely seeking a determination of a property interest. Moreover, an interpretation of IC 7.1-5-5-7 is necessary to determine if Kuhn is liable for LCB's alleged loss of business.

The ABC alleges that the trial court's decision violates the separation of powers doctrine. ¹ The doctrine recognizes that our state government, as well as our federal government, is divided into three independent and integral branches: executive, legislative, and judicial. Each branch is limited from acting outside the sphere of its authority. Carlson v. State ex rel. Stodola, (1966) 247 Ind. 631, 220 N.E.2d 532. The ABC argues that Ind. Alcoholic Beverage Comm. v. McShane, (1976) 170 Ind.App. 586, 354 N.E.2d 259, is controlling.

In McShane, the permit holders sought to prohibit the ABC from exercising its discretion to revoke or amend its rules and regulations regarding advertising and quantity discounts. In the present case, LCB sought to compel the ABC to enforce a statute. It cannot be disputed that it is the duty of the ABC to enforce IC 7.1-5-5-7.

The ABC stipulated that prior to July 12, 1973, it prohibited quantity discounts, but after that date, disagreement existed among the Commissioners about whether this practice was illegal. The stipulations also revealed that the ABC had not investigated any complaints regarding quantity discounts since 1973 nor had it examined the practice of quantity discounts to determine whether the discounts were justified by lower courts. Unlike McShane, where the permit holders sought to bypass an administrative function, this case involves the interpretation of a statute, a function which is clearly within the sphere of the judiciary. The ABC is not arguing that the trial court prohibited it from conducting its statutory duties, but instead it is merely attempting to rationalize its failure to fulfill its duty.

The second issue is whether the trial court erred by holding that IC 7.1-5-5-7 allows quantity discounts. This section provides:

It is unlawful for a permitee in a sale contract to sell alcoholic beverages to discriminate between purchasers by granting a price, discount, allowance, or service charge which is not available to all purchasers at the same time. However, this section does not authorize or require a permitee to sell to a person to whom he is not authorized to sell under this title.

The trial court held that the word "available" must mean the discount was offered to all buyers. ²

Stroh, LCB, and the ABC argue that IC 7.1-5-5-7 is analogous to the Robinson-Patman Act, 15 U.S.C. Sec. 13, and that the word "available" as contained in IC 7.1-5-5-7 must be construed to mean "functionally available". Stroh, LCB and the ABC also allege that the legislature has acquiesced to the ABC's interpretation and that the trial court's ruling violates IND.CODE Secs. 7.1-5-5-10 and 7.1-5-5-11.

The parties stipulated that not all retailers can purchase beer in sufficient quantities to obtain the best discount. LCB argues that the larger discounts are not functionally available to all retailers because not all retailers have sufficient sales volume, storage space or cash flow to buy the larger quantity. Stroh and LCB assert that the holding of Federal Trade Commission v. Morton Salt Co., (1948) 334 U.S. 37, 68 S.Ct. 822, 92 L.Ed. 1196 is controlling in the present case.

In Morton, the Supreme Court ruled that Morton offered a discount system which was theoretically available to all purchasers, but violated Sec. 2 of the Robinson-Patman Act because the discounts were not "functionally available" to all. Stroh and LCB argue that the trial court erred in rejecting this construction for IC 7.1-5-5-7 and urge us to adopt it.

The trial court correctly determined that IC 7.1-5-5-7 is not analogous to Sec. 2 of the Robinson-Patman Act. ³ IC 7.1-5-5-7 is distinguishable because it does not require elements of proof needed for a Sec. 2 claim. To establish a prima facie case pursuant to Sec. 2, the plaintiff must demonstrate: (1) "the alleged price discrimination meets the 'in commerce' requirement that 'either or any' of the purchases involved are in [interstate] commerce"; (2) that the price discrimination existed between purchasers of products of like grade and quality; and (3) that the effects of the discrimination "may be substantially to lessen competition or tend to create a monopoly". William Inglis & Sons Baking Co. v. ITT Continental Baking Company, Inc., 461 F.Supp....