Midwest Beverage Co. v. Gates

• Decision Date: 18 July 1945
• Docket Number: No. 569.,569.
• Citation: 61 F. Supp. 688
• Parties: MIDWEST BEVERAGE CO., Inc., v. GATES, Governor, et al.
• Court: U.S. District Court — Northern District of Indiana

61 F. Supp. 688

MIDWEST BEVERAGE CO., Inc., v. GATES, Governor, et al.

No. 569.

District Court, N. D. Indiana, South Bend Division.

July 18, 1945.

Thomas V. Happer, of Elkhart, Ind., Earl R. Cox, Thomas E. Garvin, C. Gale Graber, and Philip Lutz, all of Indianapolis, Ind., and Ben Scifres, of Lebanon, Ind., for plaintiff.

W. O. Hughes, of Fort Wayne, Ind., and White, Wright & Boleman and McHale, Arthur, Myers & Patrick, all of Indianapolis, Ind., and James A. Emmert, Atty. Gen., for defendants.

Before EVANS and MAJOR, Circuit Judges, and SWYGERT, District Judge.

SWYGERT, District Judge.

This is an action which seeks an interlocutory and permanent injunction to enjoin the defendants from enforcing certain provisions of an Act of the 1945 General Assembly of the State of Indiana. The particular sections about which the plaintiff complains are found in the footnote.¹

The plaintiff is the holder of a beer wholesaler permit issued pursuant to the provisions of a 1941 statute enacted by the Indiana Legislature concerning the sale of alcoholic beverages. Indiana Acts 1941, Chapter 237, Section 3. This section provides in substance that any person desiring to sell alcoholic beverages at wholesale shall apply to the Alcoholic Beverage Commission of Indiana (this agency was abolished by the 1945 law and a new one, the Indiana Alcoholic Beverage Commission, created); that no wholesaler's permit shall be granted unless the applicant shall have been a continuous resident of the state for at least five years; that he shall have available for investment in his wholesale business at least $3,500; that he shall not have been convicted of a felony within two years preceding the application; that he shall have no interest in any manufacturer's or retailer's or any other wholesaler's permit, and that if the applicant is a partnership, an unincorporated association or a corporation, that the members or stockholders thereof shall have the same qualifications as an individual applicant, excepting that at least one of the stockholders shall be a resident of the county where the warehouse is located at least one year immediately preceding the application.

The section further provides that the permits shall be renewed annually upon the payment of an annual fee and the giving of bond for as long as the permittee shall be qualified, and that the commission shall not deny or renew a permit on arbitrary, capricious or political grounds; further, that an applicant has the right to appeal from a refusal to renew a permit to the Superior Court of Marion County in the same manner as provided for appeals covering the suspension or revocation of permits.

The plaintiff's permit was issued for one year and would expire November 16, 1945, except for the statute under attack. The plaintiff alleges in its complaint that by virtue of its permit it has made a large financial investment, employed labor, purchased trucks and other equipment, and has on hand a large stock of beer.

At the time plaintiff's permit was issued, there were certain provisions in the Indiana law covering the revocation of beer wholesaler permits. The pertinent parts of these provisions read as follows, to-wit:

"If the commission shall determine not to grant or renew a permit of any applicant for a manufacturer's or wholesaler's permit, or shall determine to take action to revoke any such permit after it has been issued, notice of its proposed action shall be given to the applicant or permittee, as provided in Sec. 6, Chapter 226, Acts of the Indiana General Assembly, 1935, as amended by Sec. 2, Chapter 197, of the Acts of the Indiana General Assembly, 1937, and such applicant or permittee shall be granted a public hearing at the time and place fixed in the notice, and shall be permitted to be heard and to offer evidence. * * *

"Within ten (10) days after such hearing, the commission shall take final action and enter such order as it shall determine in said proceedings and shall notify the applicant or permittee. * * * Such applicant or permittee, may, within ten (10) days of the receipt of such notice, appeal to the circuit or superior court of Marion county, from an order of the commission denying or revoking such permit * * *." Acts 1939 c. 30, § 7.

Although the plaintiff in its complaint charges that both Sections 11 and 11½ of Chapter 237 of the Acts of the General Assembly of 1945 are unconstitutional, it limits this charge in its brief to Section 11½ and contends that it is unconstitutional for the reason that it is "an act of the legislature which is arbitrary, capricious and has no discernible relation to the police powers vested in the legislature by the constitution of the State of Indiana." The underlying basis for this contention is that this statute deprives the plaintiff of its property rights without due process of law in violation of the Fourteenth Amendment to the Constitution of the United States.

Upon application to the District Court at the time the complaint was filed, a temporary restraining order was granted enjoining the defendant, Indiana Alcoholic Beverage Commission, from enforcing this provision of the law as applied to the plaintiff. Thereafter and pursuant to Section 380 of Title 28 United States Code Annotated, a three-judge court was constituted to hear the application for an interlocutory and permanent injunction. At that time the temporary restraining order was continued until the matter could be disposed of by the court.

At the hearing for the interlocutory and permanent injunction, the officials of the State of Indiana who are named defendants filed a motion to dismiss, which attacks the jurisdiction of the court to hear this cause on the grounds that (1) no property rights of the plaintiff are involved and therefore the court has no equitable jurisdiction to grant an injunction and (2) the plaintiff's cause of action, if any, is against the State of Indiana, rather than its officials, hence forbidden by the Eleventh Amendment to the Federal Constitution.

It long has been settled and is now firmly established that the state has the absolute right to regulate or prohibit traffic in intoxicating liquor and that this right stems from the power of the state to regulate the health, morals and safety of its inhabitants. Mugler v. Kansas, 123 U.S. 623, 8 S.Ct. 273, 31 L.Ed. 205; Crane v. Campbell, 245 U.S. 304, 38 S.Ct. 98, 62 L.Ed. 304; Fry et al. v. Rosen, 207 Ind. 409, 189 N.E. 375. One who sells alcoholic beverages under a permit or license issued by the state or a subdivision thereof does so by virtue of an exercise of the state's power in that field. Moore v. Indianapolis, 120 Ind. 483, 22 N.E. 424.

While a permit or license as such may not be property, the use and enjoyment of it may give to its possessor something that is valuable and which has all the qualities of property. State v. Corron, 73 N.H. 434, 62 A. 1044, 6 Ann.Cas. 486. While it is true that the law under which the plaintiff's license was issued provides (section 2), "that no person shall be deemed to have a property right in any permit issued hereunder, nor shall said permit itself or the enjoinment (sic) thereof be considered a property right" — the Indiana law also provides that an administrator or executor of an estate of a deceased permit holder may continue the business conducted by the deceased under the permit, that likewise any receiver or trustee in bankruptcy of a permit holder may continue the business conducted by the permittee, and that transfers of permits from one holder to another may be made under terms and regulations prescribed by the commission. The source of the permit is the police power. It is a part of the police system of the state and there can be no vested right in the permit because no binding limitation can be placed on the exercise of the police power through ...