Walsh v. Kirby

• Court: California Supreme Court
• Writing for the Court: WRIGHT
• Citation: Walsh v. Kirby, 13 Cal.3d 95, 118 Cal.Rptr. 1, 529 P.2d 33 (Cal. 1974)
• Decision Date: 11 December 1974
• Docket Number: S.F. 22991
• Parties: , 529 P.2d 33 Edward M. WALSH, as Trustee in Bankruptcy, etc., et al., Petitioner, v. Edward J. KIRBY, as Director, etc., et al., Respondent. . In Bank

Page 1

118 Cal.Rptr. 1

13 Cal.3d 95, 529 P.2d 33

Edward M. WALSH, as Trustee in Bankruptcy, etc., et al., Petitioner, v. Edward J. KIRBY, as Director, etc., et al., Respondent.

S.F. 22991.

Supreme Court of California.

In Bank.

Dec. 11, 1974.

Robert Edmondson, San Francisco, and Mark C. Peery, Oakland, for petitioner.

Evelle J. Younger, Atty. Gen., and Charlton G. Holland III, Deputy Atty. Gen., for respondent.

WRIGHT, Chief Justice.

We granted a writ to review the decision of the Alcoholic Beverage Control Appeals Board (the board) affirming a decision of the Department of Alcoholic Beverage Control (the department) imposing a penalty of $9,250 on Antonio Duarte doing business as Lawton Liquors, a retail off-sale general liquor licensee, for 10 sales of distilled spirits at less than the minimum retail prices established in accordance with law. (Bus. & Prof.Code, §§ 24749--24757.) ¹

Petitioner complains of a practice whereby the department accumulated evidence of recurring sales of distilled spirits below established minimum retail prices, each sale constituting a different but essentially identical violation, before it filed its accusation charging the licensee with the whole series of violations and assessing concomitant cumulative penalties. Such practice, petitioner contends among other things, constitutes an arbitrary exercise of the statutory grant of authority and offends due process limitations. We agree and annul the imposition of cumulative penalties in the instant circumstances.

On November 4, 1971, without prior notice to the licensee, the department filed an accusation in 11 counts charging that on 10 separate occasions from August 31 to October 5, 1971, the licensee sold 'distilled spirits at retail to an employee of the (department) at a price less than that provided for in the Minimum Retail Price Schedule duly filed with the (department)' and that such sales were in violation of Business and Professions Code section 24755. ² The accusation also charged that on August 13, 1971, the licensee sold wine 'at a price less than that provided for in the effective' price schedules established by law. After alleging that the licensee had no record of prior violations the department urged the existence of grounds for the imposition of monetary penalties and the suspension or revocation of the license, contending that continuance of such license would be contrary to public welfare and morals as set forth in the California Constitution, article XX, section 22, ³ and sections 24755.1 ⁴ and 24200, subdivision (a). ⁵ It was also alleged that additional grounds for suspension or revocation existed under section 24200, subdivision (b), in that the licensee had violated or permitted the violation of section 24862 and department rule 101(a)(2) (Cal.Admin.Code, tit. 4, § 101(a)(2)). ⁶

A hearing on the accusation was conducted on March 27, 1972, in accordance with established procedures. Three days later the hearing officer issued a proposed decision in which he found that the allegations in all 11 counts were true. He recommended that a penalty of $9,250 for the 10 distilled spirits violations be imposed under section 24755.1, and that for the wine violation the license be suspended for 10 days under section 24862. On April 6 the department adopted the proposed decision in its entirety and ordered the licensee to pay a penalty of $9,250 or post a surety bond in like amount; it also ordered a 10-day suspension of the license.

The department denied a petition for reconsideration, the licensee posted a surety bond for the amount of the penalty and appealed the department's decision to the board. On November 22, 1972, the board, after the submission of written briefs and consideration of oral argument, issued its decision affirming the department's decision insofar as it concerned the 10 distilled spirits violations. ⁷ The board rejected the licensee's contention that section 24755.1 does not authorize a procedure by which the department may accumulate evidence of successive sales below minimum retail prices and then, in a single prosecution, impose cumulative penalties each of which is based on the finding of a single sale but measured in severity by the number of prior illegal single sales in the series. The board also rejected the licensee's contention that, if section 24755.1 permits the imposition of such cumulative penalties, it constitutes an improper delegation of legislative authority in that it provides no standards to guide the department in the assessment and cumulation of penalties, and that the imposition of cumulative penalties constitutes arbitrary action in violation of the due process clauses of the federal and state Constitutions. ⁸

The Legislature adopted the Alcoholic Beverage Control Act 'for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages.' (§ 23001.) Specifically, in regard to the retail price maintenance provisions, the Legislature made its purpose clear: 'It is the declared policy of the State that it is necessary to regulate and control the manufacture, sale, and distribution of alcoholic beverages within this State for the purpose of fostering and promoting temperance in their consumption and respect for and obedience to the law. In order to eliminate price wars which unduly stimulate the sale and consumption of alcoholic beverages and disrupt the orderly sale and distribution thereof, it is hereby declared as the policy of this State that the sale of alcoholic beverages should be subjected to certain restrictions and regulations.' (§ 24749.)

The attainment of the goal of promoting temperance proceeds on the assumption that 'the elimination at the retail level of price cutting, bargain sales, and advertising of low prices tends to reduce excessive purchases of alcoholic beverages.' (Allied Properties v. Dept. of Alcoholic Beverage Control (1959) 53 Cal.2d 141, 148, 346 P.2d 737, 741.) Retail price wars 'among liquor distributors may encourage retailers, struggling to withstand the pressure of ruinous competition, to sell liquor below cost in violation of Business and Professions Code section 17043 or to transgress the regulatory laws governing retail liquor distribution (Bus. & Prof.Code, §§ 25600--25666).' (Wilke & Holzheiser, Inc. v. Dept. of Alcoholic Bev. Control (1966) 65 Cal.2d 349, 362, 55 Cal.Rptr. 23, 32, 420 P.2d 735, 744.) A further goal to be achieved by the promotion of the orderly sale and distribution of alcoholic beverages is 'the continued vitality of one method of marketing: the corner grocery store.' (Id., at p. 362, at p. 32 of 55 Cal.Rptr., at p. 744 of 420 P.2d.) The Legislature, when it first enacted section 24755.1 in 1965, sought to promote these broad purposes of the retail price maintenance provisions of the Alcoholic Beverage Control Act.

Prior to the enactment of the Alcoholic Beverage Control Act the department could punish fair trade violations by bringing criminal prosecutions (§ 25617) and by filing for the suspension or revocation of the license of the alleged violator pursuant to section 24200. (See Wilke & Holzheiser, supra, 65 Cal.2d 349, 358, 370, 55 Cal,.rptr. 23, 420 P.2d 735.) These remedies proved impractical because of the delay and great expense involved in lengthy litigation on appeals from the department's orders (Id., at pp. 372--373, 55 Cal.Rptr. 23, 420 P.2d 735; Review of Selected 1965 Code Legislation (Cont.Ed.Bar 1965) p. 24) and because the department's orders were automatically stayed when appealed (see 23082). In enacting section 24755.1. the 'Legislature determined that the imposition of mandatory fines, which become immediately payable despite appeal or mandate, would prove more effective in enforcing the statute than criminal prosecution, or discretionary suspension and revocation of licenses . . ..' (Wilke & Holzheiser, supra, 65 Cal.2d 349, 372, 55 Cal.Rptr. 23, 39, 420 P.2d 735, 751.) The mandatory monetary fines with the elimination of the practice of suspending or revoking licenses as penalties for violations of section 24755 were expected to provide greater deterrence and to achieve better administrative efficiency in compelling compliance with the statutory scheme of controlling sales of alcoholic beverages. (Id.) ⁹ The foregoing discloses that section 24755.1 is not intended merely to exact tribute for the general fund or, by the imposition of insurmountable financial burdens, to punish or eliminate a licensee who is in default. (See Cornell v. Reilly (1954) 127 Cal.App.2d 178, 184, 273 P.2d 572, 577.) Rather the purpose of the statute is to compel, through the duress of monetary penalties compliance by all licensees with the fair trade provisions enacted by the Legislature. The statute thus requires administrative practices which induce conformance with rather than avoidance of the retail price maintenance provisions. The statute is, moreover, in character intended to serve as a notice or warning as it provides a relatively light penalty for the initial violation with the threat of more severe penalties should the licensee thereafter fail to conform.

The administration of the Alcoholic Beverage Control Act, within the scope of the purposes of that act, is initially vested in the department. Its decisions, however, are subject to administrative review by the board and a final order of the board is, in turn, subject to judicial review. The scope of judicial review has been limited since 1967 (Stats.1967, ch. 1525, p. 3635, § 4) to determinations whether: '(a) The department has proceeded without or in excess of its jurisdiction. (b) The department has proceeded in a manner required by law. (c) The decision of the department is supported by the findings. (d) The...