McCanless v. Klein

• Decision Date: 30 June 1945
• Parties: McCANLESS, Commissioner of Finance and Taxation, v. KLEIN.
• Court: Tennessee Supreme Court

188 S.W.2d 745

182 Tenn. 631

McCANLESS, Commissioner of Finance and Taxation, v. KLEIN.

Supreme Court of Tennessee.

June 30, 1945

As Modified on Rehearing August 2, 1945.

Error to Circuit Court, Davidson County; E. F. Langford, Judge.

Certiorari and supersedeas by King Klein against George F. McCanless Commissioner of Finance and Taxation, to reverse an order of the commissioner suspending petitioner's wholesale liquor license. To review a decision reversing the order, the Commissioner brings error.

Reversed and remanded.

Levine & Levine, of Nashville, and Harry U Scruggs, of Memphis, for petitioner.

Roy H Beeler, Atty. Gen., and Ernest F. Smith, Asst. Atty. Gen., for respondent Commissioner.

CHAMBLISS Justice.

Klein is a wholesale liquor dealer in Memphis. His license was suspended for a period of six months by the Commissioner of Finance and Taxation for violation of a regulation promulgated by the commissioner, the pertinent part of which reads as follows:

'From and after the effective date of this regulation no wholesale liquor distributor shall add an additional brand to his stock without first securing the written approval of the Commissioner.'

On the hearing before the commissioner, in response to an inquiry, counsel for Klein stated that no question was made that this regulation (Number 36) had been duly promulgated prior to the date of the alleged violation and was at that date in effect, and counsel added: 'For the purpose of the record, we are not raising any question as to the validity of this regulation.'

It was shown beyond dispute that Klein had received in stock and distributed to retailers a large number of cases of whiskey of a brand known as Silver Flash 'without first securing the written approval of the commissioner'; and there was evidence that he continued to receive and distribute cases of this brand after notice had been served on him that he was violating this regulation.

The defense offered and attempted to be made before the commissioner was that Klein had acted in good faith, under a misunderstanding. After a full hearing, including argument, the commissioner, on October 20th, 1944, issued the order, as aforesaid, suspending for six months the license as of November 4th, 1944.

Thereupon Klein filed his petition for certiorari and supersedeas in the Third Circuit Court of Davidson County praying that the order of the commissioner be held null and void and reversed and, after a hearing upon the record of the proceedings before the commissioner, the circuit court so adjudged. The commissioner appealed.

In his petition to the circuit court Klein, for the first time and in spite of his admissions before the commissioner, sitting as a trial court, as hereinabove recited, challenged the validity of this regulation as unauthorized by law and in violation of the state and federal Constitutions, in that (1) the statute delegating to the commissioner authority to promulgate the regulation was an attempt to delegate power to legislate, and (2) the regulation in effect created a monopoly in permitting a dealer in a county to handle exclusively a certain brand. It was also asserted that the record showed petitioner to have been acting in good faith, and it was further alleged that the commissioner erred in permitting an amendment to be introduced and giving consideration to allegations therein made of an independent violation with respect to another brand, of which charge adequate notice had not been given petitioner. And complaint was also made that the order, effective as of November 4th, 1944, for six months extended the suspension beyond the date of expiration of the license held by petitioner for the year 1944.

The learned trial judge, as appears from his opinion and judgment in the record, found that petitioner Klein had added to his stock and offered to the trade this brand without having first secured the permission of the Commissioner. He found that the amendment charging another violation was 'ill advised because the time between the notice and the hearing was insufficient,' but that 'the commissioner very properly dismissed said charge.'

However, he held that, while the commissioner was authorized by Chapter 49 of the Pub. Acts of 1939 to promulgate 'all reasonable rules and regulations for the carrying out of the liquor industry by those engaged therein, as far as they are reasonable and conducive to the public health, welfare or morals * * * that a rule is unreasonable and void that is issued and promulgated for the avowed purpose, as stated by the commissioner, for stabilizing the liquor industry.' The court thereupon held and adjudged that the regulation in question 'is not such a regulation as would be conducive to the public health, welfare and morals, but on the contrary, is such a regulation as would tend to create monopolies in violation of the Constitution and statutes of the State of Tennessee relating to monopolies, and is arbitrary and unreasonable, and is so found by the court to be void.'

The motion of the commissioner for a new trial challenged specifically as erroneous this holding that the regulation was invalid and that it would tend to create monopolies in violation of the Constitution; that the court erred in not holding the petitioner estopped by his admission made for the record on the hearing before the commissioner of the validity of this regulation; and, generally, that the Court erred in sustaining the petition and superseding the order of suspension of the commissioner. Assignments of error in this Court are to the same effect.

On the brief and argument of petitioner in this Court the preliminary question is made that the case has now become moot and that the appeal of the commissioner should be on this ground dismissed.

In the case of State ex rel. v. Bush, 141 Tenn. 229, 208 S.W. 607, this Court approved the rule laid down by the Supreme Court of the United States and text book authorities therein cited, that when pending appeal the case has become moot, that is, when the rights in contest have expired by lapse of term or time, the appeal will be dismissed, but in State ex rel. v. Trotter, 153 Tenn. 30, 281 S.W 925, while recognizing this general rule, an exception was noted where the constitutionality of a statute was involved. After referring to State ex rel. v. Bush, wherein 2 R.C.L. 169, and 3 C.J. 360, were quoted, it was said (153 Tenn. at page 34, 281 S.W. at page 926): 'However, as before stated, the constitutionality of the act was challenged * * * and in this situation it is proper that this court should pass upon the constitutionality of the act in this case.' In a note in 3 C.J. on p. 359, it is said that there are...