Metropolitan Package Store Ass'n, Inc. v. Koch

• Decision Date: 04 November 1982
• Citation: 89 A.D.2d 317,457 N.Y.S.2d 481
• Court: New York Supreme Court — Appellate Division
• Parties: , 1982-83 Trade Cases P 65,108 METROPOLITAN PACKAGE STORE ASSOCIATION, INC., et al., Appellants, and Ace Wines & Liquors, Inc., et al., Intervenors-Appellants, v. Edward I. KOCH, as Mayor of the City of New York, et al., Respondents.

Page 481

457 N.Y.S.2d 481

89 A.D.2d 317, 1982-83 Trade Cases P 65,108

METROPOLITAN PACKAGE STORE ASSOCIATION, INC., et al., Appellants and Ace Wines & Liquors, Inc., et al., Intervenors-Appellants, v. Edward I. KOCH, as Mayor of the City of New York, et al., Respondents.

Supreme Court, Appellate Division Third Department.

Nov. 4, 1982.

Gerard A. Navagh, New York City, for appellants.

Seymour S. Howard, Jericho, for Ace Wines & Liquors and others, intervenors-appellants.

Mehler & Buscemi, New York City (Francis R. Buscemi, New York City, of counsel), for Retailers Alliance, Inc., and others, intervenors-appellants.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Isaac C. Donner, Asst. Corp. Counsel, New York City, of counsel), for Edward I. Koch and another, respondents.

Robert Abrams, Atty. Gen., Albany (Francis V. Dow, Asst. Atty. Gen., Albany, of counsel), for James H. Tully, Jr., and others, respondents.

Before MAHONEY, P.J., and KANE, CASEY and LEVINE, JJ.

WEISS, Justice.

Plaintiffs and plaintiffs-intervenors are either retailers, wholesalers, or a trade association of liquor retailers, who seek a judgment declaring that the provisions of Local Law No. 30 of 1980 of the City of New York are unconstitutional and void, and enjoining defendants from administering and collecting excise taxes pursuant thereto or from imposing sanctions or penalties for noncompliance. Said local law was enacted by defendant City of New York pursuant to enabling legislation enacted by the Legislature as section 445 of the Tax Law in 1971 (L.1971, ch. 406, § 1), and imposes a New York City excise tax in the sum of 12 cents per gallon upon beer and 26.4 cents per liter on liquor, upon distributors and noncommercial importers of alcohol which is sold or used in New York City (Administrative Code of the City of New York, § Y46-2.0). The local law also included a one-time floor tax "upon persons owning or possessing specified amounts of alcoholic beverages on August 1, 1980", the effective date of the local law (id.). In order to implement collection of the excise taxes, defendant State Liquor Authority issued Bulletin 529 which required that wholesalers of liquor "collect" the taxes established plus the additional sum of 20% of such taxes. The Bulletin had the effect of mandating that wholesalers pass the tax plus a 20% markup thereon along to retailers who then included the increases in their minimum retail consumer prices. The complaint alleged, inter alia, that the provisions of the local law, as implemented by Bulletin 529, are unconstitutional as violative of the Supremacy Clause (U.S. Const., art. VI, cl. 2), the Commerce Clause (U.S. Const., art. I, § 8, cl. 3), the Import-Export Clause (U.S. Const., art. I, § 10, cl. 2), and the 14th Amendment (U.S. Const., 14th Amdt., § 1). The complaint also alleges violations of the New York State Constitution's prohibitions against incorporation by reference to other statutes (N.Y. Const., art. III, § 22, cl. 1; art. III, § 16), and of the due process clause (N.Y. Const., art. I, § 6). Additionally, the complaint alleges that the Local Law, as implemented by Bulletin 529, violates State (General Business Law, § 340) and Federal law (U.S.Code, tit. 15, §§ 1, 13a) prohibiting price fixing and restraint of trade. On March 19, 1981, this court reversed an earlier order at Special Term which granted plaintiffs' motion for a preliminary injunction, but affirmed the denial of defendants' motion for summary judgment dismissing the complaint (Metropolitan Package Store Assn. v. Koch, 80 A.D.2d 940, 941, 437 N.Y.S.2d 760). On October 31, 1981, the Court of Appeals held Bulletin 529 invalid and enjoined its enforcement by the State Liquor Authority on the ground that the Authority exceeded its statutory power to adopt regulations by directing that the excise tax and a 20% markup thereof be included in the retail price of alcoholic beverages (Mancini v. McLaughlin, 54 N.Y.2d 860, 444 N.Y.S.2d 901, 429 N.E.2d 408, remittitur amd. 54 N.Y.2d 863). Here, Special Term denied plaintiffs' motion to strike the answer and for summary judgment, and Plaintiffs contend that our decision in Metropolitan Package Store Assn. v. Koch, 80 A.D.2d 940, 437 N.Y.S.2d 760 constitutes the law of this case, ¹ and that plaintiffs should be entitled to summary judgment on their constitutional attacks upon Local Law No. 30. This argument is without merit. The law of the case doctrine requires that once an issue is judicially determined, it is deemed to be conclusive as to courts of co-ordinate jurisdiction (Martin v. City of Cohoes, 37 N.Y.2d 162, 165, 371 N.Y.S.2d 687, 332 N.E.2d 867; 7 Weinstein-Korn-Miller, N.Y.Civ.Prac., par. 5501.11, p. 55-30). The rule is not inflexible (People v. Leone, 44 N.Y.2d 315, 320, 405 N.Y.S.2d 642, 376 N.E.2d 1287), and applies only to issues decided, directly or by implication, at an earlier stage of the action (Siegel, New York Practice, § 448, p. 593). Upon a motion to dismiss a complaint for legal insufficiency in an action for a declaratory judgment, the test "is not whether the complaint shows plaintiff will succeed in getting a declaration of rights in accordance with his theory and contentions, but whether he is entitled to a declaration of rights at all. If the complaint states the substance of a bona fide justiciable controversy which should be settled, a cause of action for a declaratory judgment is stated" (Baldwin v. City of Buffalo, 7 A.D.2d 386, 387, 183 N.Y.S.2d 576, citing 1 Anderson, Actions for Declaratory Judgments, p. 600). Having made no determination on the merits in plaintiffs' favor, Special Term was not obligated by this court's prior decision to render judgment in plaintiffs' favor.

granted instead defendants' cross motion for summary judgment dismissing the complaint. After reargument, Special Term rendered final judgment declaring Local Law No. 30 of 1980 to be valid and constitutional, and dismissed the complaint insofar as it sought injunctive relief, giving rise to this appeal.

IMPORT-EXPORT CLAUSE

Local Law No. 30 does not violate the Import-Export Clause ² which bans only imposts or duties on imports or exports. The subject tax is imposed in a non-discriminatory fashion upon importers and persons acquiring alcoholic beverages or producing them and is effective only upon the sale or use of such beverages in New York City after they have come to rest in the city--a purely local event. Consequently, the tax does not offend any of the policy considerations protective of Federal interests underlying the Import-Export Clause (see Michelin Tire Corp. v. Wages, 423 U.S. 276, 285-286, 96 S.Ct. 535, 540-541, 46 L.Ed.2d 495; see, also, Dept. of Rev. of Washington v. Assoc. of Washington Stevedoring Comps., 435 U.S. 734, 98 S.Ct. 1388, 55 L.Ed.2d 682). Moreover, the tax is not on the act of transporting or shipping beer and liquor into this State (Dept. of Revenue v. James Beam Co., 377 U.S. 341, 343, 84 S.Ct. 1247, 1248, 12 L.Ed.2d 362), but upon the sale or distribution after they have come to rest in New York City. Thus, the Import-Export Clause is not violated (see House of York, Ltd. v. Ring, 322 F.Supp. 530).

COMMERCE CLAUSE

We further hold Local Law No. 30 is not violative of the Commerce Clause. ³

                Tax laws have been sustained so long as they have a substantial nexus with the taxing State, are fairly apportioned, do not discriminate against interstate commerce, and are fairly related to services provided by the State (Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326, see, also, Dept. of Rev. of Washington v. Assoc. of Washington Stevedoring Comps., supra; General Motors Corp. v. Washington, 377 U.S. 436, 84 S.Ct. 1564, 12 L.Ed.2d 430;  Northwestern Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421).   To be remembered is the fact that the Commerce Clause does not state a prohibition;  it merely grants specific power to Congress (Dept. of Rev. of Washington v. Assoc. of Washington Stevedoring Comps., 435 U.S. 734, 749, 98 S.Ct. 1388, 1398, 55 L.Ed.2d 682, supra ), and that interstate commerce must bear its fair share of the tax burden (id. at 750, 98 S.Ct. at 1399).   The excise tax imposed by Local Law No. 30 being levied only upon goods sold or used in New York City, has virtually an exclusive nexus with that city, and does not unfairly discriminate against plaintiffs.  Nor can it be said that the free flow of goods between States is seriously affected, because the tax applies only after the goods come to rest in New York City.  Nothing in the record suggests that the tax is not fairly related to services and protection provided by the City of New York and there is no factual basis to declare the tax violative of the Commerce Clause
                

DUE PROCESS

Plaintiffs contend Local Law No. 30 violates the 14th Amendment to the U.S. Constitution and section 6 of article I of the New York Constitution, because it is too indefinite, vague and unclear, and, as implemented, constitutes a taking of property without due process. Plaintiff-intervenor Ace Wines and Liquors, Inc., contends that the law denies retailers classification as "a distributor" which denies them the use of tax money and interest thereon from the time of their payment to the wholesalers until it is paid over to the State Tax Commission, and further that they are denied "distributor" status even though they frequently function as "importers" by causing beer and liquor to be brought into New York City. Initially, we note that a strong presumption of validity attaches to legislative enactments, imposing upon a party who challenges the constitutionality of a statute a heavy burden of establishing unconstitutionality beyond a reasonable doubt (Nettleton Co. v. Diamond, 27 N.Y.2d 182, 315 N.Y.S.2d 625, 264 N.E.2d 118, app. dsmd. sub nom. Reptile Prods. Assn. v. Diamond, 401 U.S. 969, 91 S.Ct. 1201, 28 L.Ed.2d 319; see, also, ...