State ex rel. Hart v. Parham

• Citation: 412 P.2d 142,1966 OK 9
• Decision Date: 25 January 1966
• Docket Number: 41774,Nos. 41745,s. 41745
• Parties: STATE of Oklahoma, ex rel. and Jack HART, d/b/a Osage Wholesalers, Petitioner, v. Roy P. PARHAM, Director, Oklahoma Alcoholic Beverage Control Board, Respondent. ALL BRANDS SALES COMPANY, a partnership composed of Ernestine Kunc and Frank J. Kunc, et al., Plaintiffs in Error, v. OKLAHOMA ALCOHOLIC BEVERAGE CONTROL BOARD, composed of Archie Stout, Logan Garnett, Charles Johnson, Hewey Rozelle, and M. G. McCool, as members, and Roy P. Parham, as Director of the Oklahoma Alcoholic Beverage Control Board, Defendants in Error.
• Court: Supreme Court of Oklahoma

Page 142

412 P.2d 142

1966 OK 9

STATE of Oklahoma, ex rel. and Jack HART, d/b/a Osage

Wholesalers, Petitioner, v. Roy P. PARHAM, Director, Oklahoma Alcoholic Beverage Control

Board, Respondent.

ALL BRANDS SALES COMPANY, a partnership composed of

Ernestine Kunc and Frank J. Kunc, et al., Plaintiffs in Error, v. OKLAHOMA ALCOHOLIC BEVERAGE CONTROL BOARD, composed of

Archie Stout, Logan Garnett, Charles Johnson, Hewey Rozelle,

and M. G. McCool, as members, and Roy P. Parham, as Director

of the Oklahoma Alcoholic Beverage Control Board, Defendants in Error.

Nos. 41745, 41774.

Supreme Court of Oklahoma.

Jan. 25, 1966.

Rehearing Denied in 41774, Feb. 22, 1966.

Syllabus by the Court

1. The Legislature has delegated broad authority to the Oklahoma Alcoholic Beverage Control Board to regulate all phases of the sale, distribution, and possession of intoxicating liquor in order to carry out the purposes of the Oklahoma Alcoholic Beverage Control Act.

2. The policy of law expressed by the Legislature in the Oklahoma Alcoholic Beverage Control Act is that, within the framework of strict regulation, the commercial aspects of the liquor industry of this State shall be operated under the conditions of free and unrestricted competition.

3. The authority to determine the policy of law is primarily legislative and cannot be delegated, but the power to make rules of a subordinate character to carry out that policy and apply it to varying conditions, although partaking of a legislative character, is in its dominant aspect administrative and can be delegated.

4. A delegation of rule making power to an administrative agency is valid if the policy of law is clearly expressed in the legislative act and a standard is included, where practicable, as a guide for the exercise of the delegated power.

5. The rules and regulations enacted by the Oklahoma Alcoholic Beverage Control Board are presumed to be reasonable and the burden of establishing the contrary rests on the party complaining.

6. The rule enacted by the Oklahoma Alcoholic Beverage Control Board requiring each wholesaler to maintain a fifteen day supply of eighteen leading brands is reasonable and proper where the wholesalers have attempted to restrict competition by the voluntary allocation of the major brands of liquor among themselves in contravention of the legislative purpose as expressed in the Oklahoma Alcoholic Beverage Control Act.

Appeal from the District Court of Oklahoma County; A. P. Van Meter, Trial Judge.

Original action by Jack Hart for writ of mandamus (No. 41745) to compel the Director of the Oklahoma Alcoholic Beverage Control Act to enforce the requirements of the rule of the Oklahoma Alcoholic Beverage Control Board designated Amendment No. 29; consolidated with an appeal (No. 41774) by 15 liquor wholesalers from a judgment of the District Court of Oklahoma County, Hon. A. P. Van Meter, Judge, refusing to grant an injunction against the Board to prevent the enforcement of the same rule. Writ denied in No. 41745; and judgment of Trial Court affirmed in No. 41774.

Walter Dean Hart, Pauls Valley, for petitioner.

George Miskovsky and John Embry, Miskovsky, Sullivan, Embry, Miskovsky & Turner, Oklahoma City, James L. Kincaid, Lupardus, Holliman & Hoffman, Tulsa, for plaintiffs in error.

Charles Nesbitt, Atty. Gen., and Joseph C. Muskrat, Asst. Atty. Gen. for respondent and defendants in error.

HODGES, Justice.

On November 3, 1965, Jack Hart, DBA Osage Wholesalers, a wholesale liquor dealer, filed in this Court a petition for a writ of mandamus to the Oklahoma Alcoholic Beverage Control Board, directing the Board to enforce its rule referred to as Amendment No. 29.

At that time there was in force a temporary restraining order issued by the District Court of Oklahoma County, restraining the Board from enforcing Amendment No. 29. It had been issued in an action filed in that Court on October 15, 1965 by 15 of the 18 liquor wholesalers in Oklahoma. On November 19, 1965, after having taken extensive testimony, the District Court of Oklahoma County vacated the restraining order and refused to issue an injunction to prevent the enforcement of the rule. Plaintiffs in that case then appealed to this Court and at the same time intervened in the original action for mandamus previously filed in this Court by Jack Hart. All parties to both actions are now before this Court, and all seek the answer to the same question of law: does the Board have the power to promulgate and enforce its rule called Amendment No. 29?

The purpose of Amendment No. 29, hereinafter referred to simply as 'the rule', is stated as follows in its preamble:

'* * * to prevent the circumvention of any law by means of the so-called 'Franchise System' in Oklahoma and in order to prevent any discrimination, conspiracy, or agreement which would have as its purpose and be designed to create a monopoly, or create an exclusive privilege, or provide an advantage for one licensee over another licensee in the making of sales of alcoholic beverages, or permit the fixing of prices or the destroying of competition among wholesalers * * *.'

The body of the rule is as follows:

'SECTION 1: (a) Wholesalers shall register prices, purchase and keep on hand, or have on order, a fifteen (15) day supply of all brands constituting the top eighteen (18) brands in total sales during the past twelve (12) month period immediately prior to June 1, 1965, which were made by Non-Resident Sellers to Oklahoma wholesalers of spirits and wines according to the records of the Board and as revised by the Board quarterly from time to time, PROVIDED, However, If the records of the Board indicate that a Non-Resident Seller has more than one brand in the top eighteen (18) brand classification only the brand representing the greatest total in sales of such Non-Resident Seller shall be included in the top brand classification.

(1) No transfers of any one or more of said top eighteen (18) brands shall be made from one wholesaler to another, except with written permission of the Board or the Directer, and then only in quantities not to exceed three (3) cases on a one time basis for each brand.

(b) All wholesalers are hereby specifically prohibited from engaging in any type of discrimination, conspiracy, collusion, agreement or understanding, orally or in writing, which would have as its purpose and be designed to create a monopoly, destroy competition, or give advantage to one or more wholesaler over other wholesalers or fix prices of alcoholic beverages.

(c) The foregoing section shall also apply to all manufacturers, distillers, non-resident sellers, and retail dealers, and their representatives, agents and employees.

(d) All wholesalers after the adoption of this rule shall, in placing an order for alcoholic beverages with a Non-Resident Seller, on the same date provide the Board with a copy of each Purchase Order so placed. Each Purchase Order shall be numbered in sequence, shall bear the date the order was placed, the type, brand, container size and full description of all alcoholic beverages ordered, showing the name of the Non-Resident Seller with whom such order was placed. All Non-Resident Sellers shall fill orders from all licensed wholesalers in sequence and without discrimination in price, promptness of making shipments, or other service.

(e) Non-Resident Sellers shall extend uniform credit to all licensed wholesalers without discrimination. Exceptions to this provision may only be granted by the Board or the Director upon written request setting out the reasons, if any, for any non-uniformity in credit.

(f) All rules or parts of rules in conflict herewith are hereby repealed.

(g) The violation of this rule, or any provision thereof, by one or more licensees shall constitute grounds for the suspension or revocation of license by the Board or the Director.

(h) The provisions of this rule are severable and if any provision thereof shall be void the decision of the court so holding shall not affect or impair the remaining parts or provisions of this rule.

This Board finds that imminent peril to the public health, safety and welfare requires the adoption of this rule as an emergency rule without prior Notice or further hearing for the reasons set out above.'

The arguments and objections of the fifteen wholesalers in their appeal are directed almost entirely against subsection (a) of the rule which provides that each wholesaler shall have in stock or on order a 15 day supply of each of the 18 best selling brands of liquor. The only other portion of the rule to which the wholesalers have directed argument is subsection (a)(1) which limits transfers among wholesalers to three cases for each of the 18 brands. Our opinion will therefore deal primarily with the 'minimum inventory requirement' of the rule.

We will hereinafter refer to the parties to the appeal from the District Court proceeding as 'the wholesalers' and as 'the Board.' The resolution of the issues presented by the wholesalers in their appeal will likewise be determinative of the petition of Jack Hart for the writ of mandamus.

The rule was adopted on October 13, 1965, after an investigation and study by the Board, and a report to it by the Director to the effect that the liquor wholesalers of Oklahoma had entered into an agreement creating a voluntary franchise system whereby each wholesaler would carry in stock only a limited number of major brands, which would not be offered for sale by any other wholesaler. Information compiled from Board records showed that during each of the four months preceding September, 1965, the average number of cases of liquor transferred among wholesalers was about 992; but for September, the month in which the voluntary franchise system was allegedly placed in effect, the number of cases transferred was 22,098.

At the hearing in the trial court proceeding, several retail liquor dealers testified that they had been personally...