State ex rel. Anderson v. Mermis

• Decision Date: 21 January 1961
• Docket Number: No. 42136,42136
• Citation: 358 P.2d 936,187 Kan. 611
• Parties: STATE of Kansas ex rel. John ANDERSON, Jr., Attorney General, Appellant, v. Joseph A. MERMIS, Jr., Chairman, Rex Woods, Member, and Ed Reilly, Member, State Alcoholic Beverage Control Board of Review; and W. E. Murphy, Director, State Alcoholic Beverage Control, Appellees.
• Court: Kansas Supreme Court

Page 936

358 P.2d 936

187 Kan. 611

STATE of Kansas ex rel. John ANDERSON, Jr., Attorney General, Appellant, v. Joseph A. MERMIS, Jr., Chairman, Rex Woods, Member, and Ed Reilly, Member, State Alcoholic Beverage Control Board of Review; and W. E. Murphy Director, State Alcoholic Beverage Control, Appellees.

No. 42136.

Supreme Court of Kansas.

Jan. 21, 1961.

Syllabus by the Court.

1. While a licensee under the Kansas Liquor Control Act is the holder of a mere privilege which is subject to the reasonable control of the legislature under the police power of the state, any regulation thereof by the legislature must be by legislation valid under the state constitution.

2. The decision as to whether a certain course of conduct shall be regulated by the police power of the state is a fundamental matter for the decision of the legislature itself, and the authority to make such decision cannot be delegated under Article 2, section 1 of the Constitution of Kansas to the discretion of an administrative officer.

3. A statute which allows private persons, the vast majority of whom reside outside of the state, to suggest prices for goods to be resold by others, and authorizes an administrative official to declare those suggested prices to be binding minimum prices throughout the state, without setting forth any standards for guidance of the administrative official, amounts to an invalid delegation of legislative power under the state constitution. Robert E. Hoffman, Asst. Atty. Gen., argued the cause, and John Anderson, Jr., Atty. Gen., J. Richard Foth and A. K. Stavely, Asst. Attys. Gen., were with him on the briefs, for appellant.

L. M. Cornish, Jr., Topeka, argued the cause, and Tom Lorson, Jr., Atty. for Alcohol Beverage Control, Topeka, Phillip L. Harris, Atty. for Bd. of Review, Junction City, M. D. Bartlow, George D. Wagstaff, Gary L. Rohrer, and Allen F. Gerye, Topeka, were with him on the briefs, for appellees.

JACKSON, Justice.

This was a suit by the on relation of the attorney general to enjoin the defendants from carrying out and enforcing the provisions of Chap. 217, Laws of 1959, now appearing as G.S.1959 Supp. 41-1108 and 41-1109, which statutes provide for the fixing of minimum prices on intoxicating liquor. The attorney general alleged that the statute was unconstitutional under the state constitution because it contained an unlawful delegation of legislative power. After the joining of issues by the filing of pleadings, the parties filed a stipulation of facts, and the case, together with briefs, was submitted to the district court and that court in due time upheld the constitutionality of the statute attacked. The attorney general has appealed.

Before entering into the discussion of this case, it appears wise to recall briefly certain historical facts. In 1948, after seventy-eight years of absolute prohibition of the sale of intoxicating liquor, the people adopted the present section 10, Article 15 of the state constitution which reads as follows:

'The legislature may provide for the prohibition of intoxicating liquors in certain areas. Subject to the foregoing, the legislature may regulate, license and tax the manufacture and sale of intoxicating liquors, and may regulate the possession and transportation of intoxicating liquors. The open saloon shall be and is hereby forever prohibited.'

The next session of the legislature in 1949, adopted the Kansas Liquor Control Act which now appears as G.S.1949, 41-101 et seq. This statute created the office of director of alcoholic beverage control and board of review. The act has been amended in some particulars which are not now important, but in 1953, the section now appearing as G.S.1959 Supp. 41-1101 was amended. It is there provided that manufacturers or their representatives shall file with the director a written offer to sell their brands to all licensed distributors in the state at the same current price and without discrimination.

It would appear from the statement of agreed facts that, beginning in 1956, the director, by the issuance of certain memoranda, required manufacturers to file suggested prices for distributors to retailers and suggested prices for retailers to customers all in addition to the above prices to distributors required under section 41-1101. After the filing of these 'suggested prices', the director required distributors and retailers to adhere to such prices. It also appears that in 1958, the director refused to renew the license of a retailer in Emporia because of sales at less than the prices so fixed. On an appeal to the Lyon county district court by the retailer, the regulations of the director were declared invalid for want of legislative authority, and a renewal of the retailer's license was decreed. There was no appeal from that decree to this court. In December of the same year, the attorney general filed a suit in the Shawnee county district court seeking to enjoin the present defendants from the above described course of conduct. The suit was dismissed by agreement, no doubt, because of the passage of the statute challenged in this action.

The act presently under discussion passed the legislature as Senate Bill No. 296, was approved March 17, 1959, and became effective March 21, 1959. We believe it will be helpful to set out the entire act as it appears in the Laws of 1959. It reads as follows 'Section 1. In addition to the price lists required to be filed with the director by subsection (1) of section 41-1101 of the General Statutes Supplement of 1957, or any acts amendatory thereto, any manufacturer, corporate subsidiary of any manufacturer who markets his products solely through a subsidiary or subsidiaries, rectifier, distiller, fermenter or distributor of alcoholic liquor bottled in a foreign country, shall also file with the director, concurrently with the filing of such price lists, suggested case prices for sales by distributors to retailers and suggested consumer bottle and case prices for resale by retailers to consumers.

'Sec. 2. The director is authorized to adopt and promulgate, subject to the approval of the board of review, regulations prohibiting sales by licensed distributors and retailers below the suggested prices filed pursuant to section 1 of this act: Provided, however, That no such regulation shall be adopted and promulgated except after a public hearing held by the director and a determination by the director that such a regulation is in the public interest and reasonably necessary for the proper and orderly administration of the Kansas liquor control act: And provided further, That notice of any such public hearing shall be given by one publication in the official state paper and mailed to every licensed distributor and retailer in this state at least ten (10) days prior to such hearing.

'Sec. 3. This act shall be construed as supplemental to and as part of the Kansas liquor control act.

'Sec. 4. This act shall take effect and be in force from and after its publication in the official state paper.' (Italics supplied.)

In considering the above statute, it must be remembered that the position of the dealer in intoxicating liquor is rather unique. He does not have the usual rights of the ordinary business man; he can claim little, if any, protection from the Constitution of the United States. He holds only a privilege granted under and subject to the police power of the state and regulated by the legislature. Attention is directed to the discussion of this subject and the citation of abundant authority in State v. Payne, 183 Kan. 396, at page 403, 327 P.2d 1071, at page 1078.

On the other hand, it must be true that in passing acts to govern the regulation of the liquor traffic under the police power of the state, the legislative acts must be valid legislation and conform to the state constitution (Levine v. O'Connell, 275 App.Div. 217, 88 N.Y.S.2d 672, affirmed without opinion 300 N.Y. 658, 91 N.E.2d 322; Ill. Liquor Control Comm. v. Chicago's Last Liquor Store, 403 Ill. 578, 88 N.E.2d 45; Lombardo Wine Co. v. Taylor, 407 Ill. 454, 95 N.E.2d 607; Scarborough v. Webb's Cut Rate Drug Company, Inc. (on rehearing), 150 Fla. 772, 8 So.2d 920; Schwegmann Bros. v. Louisiana Bd. of A.B.C., 216 La. 148, 43 So.2d 248, 14 A.L.R.2d 680; and annotation 14 A.L.R.2d 699, 709).

The statute now under consideration is somewhat novel. Section 1 (41-1108) only makes it mandatory that manufacturers and their agents file 'suggested prices' for distributors to retailers and by retailers to the public. In section 2(41-1109), the statute provides 'the director is authorized' to put these 'suggested' price schedules in effect as minimum prices if he himself finds in fact the regulation of the liquor industry and the proper and orderly administration of the Kansas Liquor Control Act require it, and provided further the board of review also approves. To state the matter another way, the legislature has nowhere in this act found that the public welfare will be enhanced if the police power be used to establish minimum prices for intoxicating liquor sold in Kansas. It has plainly delegated to the director and to the board of review, the authority and discretion to make such a decision.

This is the delegation of a fundamental duty of the legislature. Whether there should be minimum prices set upon liquor is at least debatable, and it is for the legislature to determine whether such prices are to be imposed under the police power of the state. We are of the opinion, that the police power of the state is for the legislature to apply, and we believe this delegation of the ultimate use of the police power is sufficient to render the statute unconstitutional.

A very similar case is found in Levine v. O'Connell, supra. The courts of New York had no hesitancy in holding the New York statute void under the constitution of that state. In the O'Connell case, opinion beginning on page 220 of 275 Appellate...