          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
