The opinion
E A-mro ENERAL
TEXAS
December 7, 1950
Hon. Coke R. Stevenson, Jr,
Administrator
Texas Liquor Control Board
Austin, Texas Opinion Ro. V-1126.
Ret Constltutionalltg of
Section 37 of Article
666-17, Vernon's Penal
Code, providing for
restrictions on the
extension of credit
to retail liquor
dealers by whole-
Dear Mr. Stevenson: salers.
Your letter requesting the opinion of this of-
fice is quoted as follows:
"Because the question has been raised
a number of times as to the constitutlonal-
itg of the provisions of Section 17(37) of
Article I of the Texas Liquor Control Act,
I am herewith requesting your honored opin-
ion regarding same as set out below:
"S(37). It shall be unlawful for any
Wholesaler, Class B Wholesaler, Class A
Winery or Wine Bottlerto sell any alcoholic
beverage, nor shall any Package Store Per-
mittee, Wine Only Package Store Permittee, or
other retailer purchase any alcoholic bever-
age, except for cash OP on terms requiring
payment by the purchaser as follows: On pur-
chases made from the first to fifteenth day
Inclusive of each calender month, payment
must be made on or before the twenty-fifth
day of the same calendar month; and, on pur-
chases made from the sixteenth to the last
day inclusive of each calendar month, pay-
ment must be made on or before the tenth day
of the succeeding calendar month. Every de-
livery of alcoholic beverage must be accom-
panied by an Invoice of sale giving the date
of purchase of such alcoholic beverage. In
Hon, Coke R. Stevenson, JP~, page 2 (V-1126)
the event any Package Store PermIttee, Wine
Only Package Store Permfttee or other retail
dealer becomes delinquent in the payment of
any account due for alcoholic beverages pur-
chased, (that is, If he fails to make full
payment on OP before the date hereinbefore
provided] then ft shall be the duty of the
Wholesaler, Class B Wholesaler, Class A
Winery or Wine Bottler to report that fact
immediately to the Board or Administrator
in writing. Any Package Store permittee,
Wine Only Package Store Permittee or other
retail dealer who becomes delinquent shall
not be permitted to purchase alcoholic bev-
erages from any Wholesaler, Class B Whole-
saler, Class A, Winery OP Wine Bottler until
said delinquent account is paid In full,
and the delinquent account shall be cleared
from the records of the Board before any
Wholesaler, Class B Wholesaler, Class A
Winery or Wine Bottler will be permitted
to sell alcoholic beverages to him. Any
Wholesaler, Class B Wholesaler, Class A
Winery OP Wine Bottler who accepts post-
%ated checks, notes OP memoran%a OP who
participates In any scheme, trick, OP de-
vice to assist any Package Store Permlttee,
Wine Only Package Store PeMttee or other
retail dealer in the violation of this Sec-
tion shall llkewfse be guilty of a violation
of this Section, The Board shall have the
power and it shall be Its duty to adopt
rules and regulations giving full force and
effect to this SectionOD*
The liquor business, unlike most private enter-
prises> is regulated by the various States under their
police powers. Article 666-2, Vernonus Penal Code, (Art.
I, Texas Liquor Control Act) provi%es that "This entire
Act shall be deemed an exercise of the police power of
the State for the protection of the welfare, health,
peace, temperance, and safety of the people of the State,
an% all its provisions shall be liberally construed for
the accomplishment of that purposee* A person may not
engage in the liquor business as a matter of right but
only when permIssion to do so Is granted by the State.
Permission when granted, is in the nature of a revocable
personal privilege, As provided in Section 13(b) of Artl-
cle I of the Texas Lfquor Control Act (Art. 666-13, V.P.C.):
. -
Hon. Coke R. Stevenson, Jr., page 3 (V-1126)
'Any permit or license issue% under the
terms of either Article I or Article II of
this Act shall be purely a personal privilege,
revocable in the manner an% for the causes
herein state%, subject to appeal as hereln-
after provided, an% shall not constitute prop-
erty, a D 0n
In Texas Lhuor Control Boar% v. O'Fallon, 189
S.W.2% 885, 887 (Tex.Civ,App. 1945), the court saib:
'A permit, or license, to sell liquor Is
a mere personal privilege, under the terms of
the act Itself; all such permits are revocable
for causes therein state%, subject to appeal
as provided by the act, Such permit, or ll-
cerise,does not constitute property. The ac-
ceptance constitutes an expressed agreement
and consent on the part of the permlttee, 01:
licensee, that the Boar% or any of Its au-
thorized representatives, or agents, may,,per-
form any duty therein Imposed upon them.
In Texas Liquor Control Board v. Warfield, 122
S.W.2% 669, 670 (Tex.Clv.App. 1938), the court said:
"A package store permit to purchase
specified liquor from designated parties and
to sell same under the conditions an% in the
manner prescribed In the Act 1s neither a
contract nor a right of property in the sense
in which those terms are use% in our Constitu-
tion, It Is no more than a temporary license
to do that which would otherwise be unlawful
an% may be revoke% by the authorized agent of
the state whenever It is ascertained that the
law has been violate%."
A State has the power to regulate liquor traf-
fic and may go so far as to prohibit It. State Boar% of
Equalization of California v. Youngus Market Co., 299 U.S.
59 (1936); Mahoney, Liquor Control Commissioner,v. Joseph
Trlner Carp,, 304 US, 401 (1938). In the Young's Market
case the court held that a provision of the California law
imposing a fee of $500 for the privilege of importing beer
Into the State was not discriminatory against a wholesaler
of Imported beer, The court said at page 63:
*It might permit the manufacutre and
sale of beer, while prohibiting bard liquors
Ron.,Coke R, Steven.son,Jr.,s page 4 (V-11269
absolutely, If It may permit the domestic
manufacture of beep an% exclude all made
without the State, may It not, Instead of
absolute exclusion, subject the foreign
article to a heavy importation fee? Mope-
over, in the light of history, we cannot
say that the exaction of a high license
fee for importation may not, like the lm-
position of the high license fees exacted
for the privilege of selling at retail,
serve as an aid in policing the liquor
traffic *”
In discussing a constitutional question in the
Mahoney case, the Supreme Court said at page 403:
“The sole contention of Joseph Trlner
Corporatfon is that the statute violate%
the equal.protection clause. The state of-
ficials insist that the provision of the
statute is a reasonable regulation of the
liquor traffic; an% also, that since the
adoption of the Twenty-first Amendment, the
equal protection clause is not applicable
to imported Intoxicating liquor- As we are
of opi,nionthat the latter contention is
sound, we shall not discuss whether the stat-
utory provision Is 8~reasonable regulation of
the Liquor traffic II
*
In Cartlldge v, Ralneg 168 F-2% 841, 843 (C-C.
A, 5th. 19481. the Court %fscuss~% the reasonableness of
the-provislon’ln the Texas Liquor Control Act which per-
mltsonly licensed common carriers to engage in the ln-
terstate transportation of liquor. The court said:
‘The effect of the Texas Liquor Control
Act 1s to confine the business of transport-
ing intoxicating liquors through the state
to those who are licensed as common carriers.
The regulation is reasonable, and appropriate
to the en% in view, an% we are not authorized
to hold it invalid.*
It is our opinlon that the provision of the
statute in uestion is not unreasonable. The provision
(Section 17%37% of Article I of the Liquor Control Act)
is one for the purpose of inaintafningthe independence
of the wholesale and retail Levels of the liquor industry
Ron. Coke R. Stevenson, Jr., Page 5 (V-1126)
in Texas. As said In Texas Liquor Control Boar% v. Con-
tinental Distillinn ompa y 1 SW 1 1014 (Tex.
Clv.App. 1947, appea? %lS~.c33~g~~~.o~~7,0~'~~7):
"The Legislature, in enacting the Texas
Liquor Law (Art. 666 P.C.), expressly deter-
mined that the liquor traffic In this State
~0~1% be best controlled by keeping the vari-
OUS k?elS Of the 1iCJUOP in%UStPy independent
of each other, 0 . .
Statutes of other States provide for restrlc- ,
tlons on the extension of credit by wholesalers to re-
tailers, as does Section 37 of Article 666-17, V.P.C.
These provisions have been upheld by the courts of such
States.
In James J. Sullivan. Inc. v. Cann's Cabins,
Inc., 371 3 2 W S 1 41 hS
St zf"&~~a~huse&s7uphe?~<h~p~on&&~o&l~~?~
provisions of a Massachusetts statute which made It un-
lawful for any licensee to lend or borrow money or re-
ceive credit, directly or Indirectly, to or from any
manufacturer, wholesaler or importer of alcoholic bever-
ages, and for any such manufacturer, wholesaler or im-
porter to lend money OP otherwise extend credit, except
In the usual course of business an% for a periodnot ex-
ceeding ninety days, directly or indirectly, to any such
licensee or to acquire, retain or own, directly or ln-
directly, any interest in the business of any licnesee.
The court said:
"The prohibition of the statute is not
limited by the nature of the thing for which
payment Is to be made. It is not llmite% to
cre%lt for liquors sol%. Its purpose appears
to have been to avoid the evils believe% to
result from the control of retail liquor deal-
ers by manufacturers, wholesalers, OP importers
through the power of credit. Those evils do
not as a rule depen% upon the nature of the
consi%eration out of which the cre%it arose.
They deeend upon the power of creditor over
debtor.
In Sepe v. Daneker, 68 A.2% 101, 102-105 (R.I.
Sup. 1949), the Supreme Court of Rhode Island ha% before
it practically the same question that we are now discuss-
ing* The court upbel% the constitutionality of the pro-
vlons of the rules of the Liquor Control Adminlstratlon
HOG. Coke R, Stevenson, Jr,, page 6 (y-1126)
of the State of Rhode Island. We quote the following
from the opinion of the courts
"The pertinent portions of Pules 53 and
54 as set out in the statement of facts are
as follows2 O53* No alcoholic beverages
shall be sold by any manufacturer OF whole-
saleP to any retailer, nap shall any retail-
er purchase any alcoholic beverages except
fop cash OP on terms reqtiplng payment by
the puPchaser within tl-$Ptydays from date
of dellvePy. * * * Ho manufacturer or whole-
sales shall sell, except for cash, any alco-
holic beverages to any retailer with knowledge
that such retailer Is in appears for the pay-
ment of alcoholic beverages, as provided by
this Pule; O D o 54. Written notice shall be
given by the manufacturer or wholesaler by
reglsteped mall to each licensee in default of
payment within five (5) days after the default
OCCUPS9 containing the date of delivery, the
amount of Indebtedness in default, and the
following statements Rule Ho. 53 of the Llq-
uor ContrPolAdmInIstratIon prohibits you from
accepting dellvePy of any alcoholic beverages
from any manufacturer OP wholesaler except for
cash, until you have paid in full, the amount
of the default shown in the notice. Rachman-
ufacturer and wholesaler shall notify the
Liquor Control Administration of each,default
within five days, and shall file with him a
copy of each written notIce required to be
mailed to the licensee within five days after
default OCCUPS.~ O e o
"In support of his principal contentions
on the issue of the constitutionality and in-
validity of the rules the complainant relies
on the law as set out in cases, both federal
and state, of which Lawton v. Steele, 152 U.S.
133, 14 s. ct. 499, 38 L, Ed, 385, is an ex-
ample. In so doing he has overlooked or his-
regarded the natme of the business in which
he himself is engaged. The cases above re-
ferred to, in theiP general references to the
public interest and to arbitpary and unPeason-
able interference by way of unnecessary re-
strictions on private business, will be found
on examination to apply to the oPdinapy pPi-
vate enterpplses not requiring a license.
Hon. Coke R. Stevenson, Jr., page 7 (V-1126)
"The complainant, however, is engaged
in the business of selling at petal1 alcoholic
beverages under a duly granted license. That
license he holds subject to the laws of this
state and to the rules and regulations of the
liquor control admlniatratlon. It has been
decided that, generally speaking, a licensee
takes his license subject to such conditions
as the legislature sees fit to impose. Child
v, Bemus, 17 R-1. 230, 21 A. 539, 12 L.R.A.
Further in Tisdall Co. v. Board of Alder-
% 57 R,I. 96 at page 103 188 A. 648 at
pagi 652, this gourt state&' 'But it is'well
settled in this State and elsewhere that the
business of the sale of lntoxicatin liquor
is so clearly and completely subjec& to exer-
cise of the police power of the State that it
may even be entirely prohibited by the State
* * * OP It may be permitted subject to such
restrictions and burdens, however great, as.
the State Legislature may deem it advisable
to lmpose,D e 0 D sit has been universally
held that such regulation is especially with-
in the province of such police power, which
even extends to the prohibition of such sale;
and the courts have always been particularly
liberal in sustaining the constitutionality
of such regulation." It also is settled in
this state that a liquor license is not a
property right. Casala v. MO, 65 R.I. 96,
13 A.28 693.
. a 0 . 0 Keeping in mind the nature of
the business in which the complainant is en-
gaged and the llmitatlons imposed thereon by
established law we find that his contention
is not sound. It appears to be his position
in substance that rules 53 and 54 are not in
the public interest generally and that they
constitute an arbitrary deprivation of his
property rights contrary to the due process
clause of section 1 of Article XIV of the
amendments to the constitution of the United
States.
"However, it Is well settled that the
privileges or immunities PePerred to in that
section do not include the business of selling
intoxicating liquor. In Crowleg v. Christen-
sen, 137 U.S. 86, at page 91, 11 S.Ct. 13, at
Hon. !TokeR. .Stevenson,JP,, pa&e 8 (V-112,6)
page 15, '34L,Ed, 520, the cou??t,in discussing
the nature of that business, said: 'The manner
and extent of regulation rest in the discretion
of the SovezninS authority. 0 e m It is a mat-
ter of 1eSfslative wPl1 onl.y.D See also Fdarte-
meyer ‘v.Iowa, 18 Wall* 129, 85 U,S. 129, 21 L.
Ed, 929; State v, Almy, 32 R.I. 415, 79 A. 952.
The amendment though broad and comprehensive was
not.designed to interfere with the proper ex-
excise of the police power by the State. Bar-
bier v. Connolly, 113 U.S, 27, 5 Sect. 357, 28
L,Ed. 9230 We have hereinbefore Feferred to
the fact that there Is no property right in a
license 0 Fu&hep the Fules in question
liqu~ozp
apply alike to all zetai licensees and are
not discriminatory.
In view of the above it is our opinion that
Sec.';ion
37 of Article .%s-17, V.P,C., providing for Fe-
zt;;ict:ions
on the extension of credit to retail liquor
dealer? by wholesalers, is constitutional.
Section 37 of Article 555-17, V,P.C.
(Sec.17(37),9Art. I, Texas Liquor Control
Act), providing for restrictions on the ex-
tenston of cmdft to Petail liquor des.lers
by whol~esalers,is constitutional.
i!
PPROVED: Yours very truly,
Net McDaniel PRICE DANIEL
State ."rff'airs
Division Attorney General
fvepett Hutchinson
Executive AssIstant
Charles D. Mathews
First Assistant