ADOLPH COORS CO v. CORBETT ET AL (1942)

This suit for an injunction and declaratory relief was brought by the appellant, a Colorado corporation, and Albion Brewing Co., Inc., a California corporation, to prevent the enforcement of a rule establishing the size of containers, adopted by the State Board of Equalization under the Alcoholic Beverage Control Act on June 15, 1938, effective July 16, 1938. The litigation was commenced between those dates, and a preliminary injunction was issued. Notwithstanding a judgment in defendants' favor, the injunction was continued in force which stayed the enforcement of the rule pending the appeal.

The challenged rule fixes the size of containers for beer, other than draught beer, at 11, 12, 16, 22, 24, 32 and 64 ounces, and prohibits its wholesale marketing or distribution in containers of other sizes.

The complaint alleged that the appellant, whose product is manufactured in Colorado, was the only distributor and importer selling beer in California in 8 oz. bottles, and that it had invested approximately $50,000 in bottles and equipment to handle such 8 oz. bottles here; that there was a definite demand among the consumers here for beer in bottles of that size; that appellant's sales thereof had increased from approximately 3,000 cases a month in 1937 to approximately 25,000 in 1938, such sales being in excess of $350,000 per annum, and that a good will “of inestimable value” had been established, which the enforcement of the rule would destroy. Appellant alleged further, and now claims, that the rule is arbitrary, without the jurisdiction of the board, discriminatory, an abuse of discretion on the part of the board, and an unwarranted interference with the right of plaintiffs to freely contract.

It was alleged in the complaint, and is urged on appeal, that article XX, section 22, of the state Constitution reserves to the state the exclusive right to regulate the manufacture and sale of intoxicating liquor, and that the board has been granted only the power to license the same, and that any regulation not contained in the act is reserved to the legislature or to the people; that the rule is void because it bears no real or substantial relation to, and does not promote or protect, the public health, morals, safety or welfare.

A general demurrer was overruled and the defendants answered. At the trial the defendants objected to the introduction of any evidence upon the ground that the complaint did not state facts sufficient to constitute a cause of action, which objection was sustained and a judgment of dismissal entered, from which this appeal was taken.

The question presented for decision is, whether the board has the power to prohibit, by rule or regulation, the sale of beer in containers other than those of 11, 12, 16, 22, 24, 32 and 64 ounce sizes, where the legislature itself has gone no further than to fix the maximum size at 64 ounces.

The present Alcoholic Beverage Control Act was adopted in 1935 (Stats.1935, ch. 330, pp. 1123–1153; Deering's Gen.Laws 1937, Act 3796). In 1937 it was amended in many respects (Stats.1937, ch. 681, p. 1934; ch. 758, pp. 2126–2178) and again in 1939 and 1941; but it is with the act as it read in 1938, when the rule was adopted and the suit brought, that we are concerned.

The 1934 amendment of section 22 of article XX of the Constitution provides that the State of California “shall have the exclusive right and power to license and regulate the manufacture, sale, purchase, possession and transportation of intoxicating liquor within the State,” and that “The State Board of Equalization shall have the exclusive power to license the manufacture, importation and sale of intoxicating liquors in this State, and to collect license fees or occupation taxes on account thereof and shall have the power, in its discretion, to deny or revoke any specific liquor license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals.”

Although the act contains many scattered provisions empowering the board to adopt rules and regulations, section 38 seems to be the general authorization for rules and regulations. It provides that: “The board shall administer all of the provisions of this act and to that end shall prescribe all necessary rules and regulations to carry out such provisions * * *.”

It is not, however, under this section that the Board claims the power to make the rule in question; it is under section 38e that such power is claimed, and the notice of hearing so stated.

The rule in question reads in part as follows: “Beer containers for beer other than draught beer shall be of the following sizes: 11, 12, 16, 22, 24, 32 and 64 ounce; containers for draught beer shall be of the following sizes: 1/8, 1/4, 1/2 and full barrels. No other sizes of containers shall be used in the wholesale marketing or wholesale distribution of beer in this State, whether such beer is manufactured in, or imported into, this State * * *.”

That part of section 38e upon which the board relies as the basis for this rule, reads as follows: “The board may adopt such other rules and regulations as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer; provided, that no such action shall be taken by the board except after public hearing and ten (10) days notice to all licensed manufacturers of beer in California of the time and place of such hearing and of the character of the action intended to be taken by the board.”

Is the rule merely a regulation designed to administer and carry out the provisions of the act, or is it, in reality, a piece of legislation?

At the time the rule was promulgated section 53.6 of the act provided (and still provides) that no beer intended for sale in California (except for export) “shall be contained in bottles, jugs or cans having a capacity of more than 64 ounces.” It expressly permitted the possession and sale of “draft or unpasteurized beer * * * in metal or wood kegs of a capacity of three and one–half (3 1/2) gallons or more.” For bottled beer, then, the legislature prescribed no minimum container capacity at all; for draught beer, however, it saw fit to prescribe a minimum container capacity but prescribed no maximum.

The same section prescribed that “wine shall not be packaged or bottled in any flask containers of less than one–half gallon which are of the same or similar type used for the packaging or bottling of distilled spirits.”

The fixing of the 64–ounce maximum was, of course, the exercise of a legislative function. That being true, it follows that the fixing, by rule 35a, of the 11–ounce minimum was likewise the exercise of a legislative function. As the amici curiae brief puts it: “This shows quite clearly that Rule 35A adds a restriction to the Act because, giving validity both to the Act and to the rule, the law would be, beer must not be sold in containers larger than 64 ounces, and shall only be sold in containers of 11, 12, 16, 22, 24, 32 and 64 ounces.” (The emphasis is counsel's.)

The rule does not speak upon an administrative subject or upon a question of procedure. It is just as positive with respect to minimum and intermediate sizes of containers as is the act itself with respect to the maximum size. Lewis' Second Edition of Sutherland on Statutory Construction, volume I, section 89, has this to say with respect to legislative power: “The constitution vests this power in the legislature; it must there remain by force of the constitution. It is exclusively vested in the legislature. The legislature cannot divest itself of the power, nor impart it to others, except in accordance with this distinction, though there are some recognized exceptions which will presently be considered. Legislative power is delegated contrary to the maxim stated when the legislature attempts to confer on others a power of substantive legislation, to be exercised independently or in conjunction with the legislature * * *.” (Emphasis ours.) The minimum and intermediate provisions found in the rule are, in our opinion, just as certainly “substantive legislation” as the maximum provision found in the act. In Boone v. Kingsbury, 206 Cal. 148, 161, 273 P. 797, 804, the Supreme Court said, “That a ministerial officer may not, under the guise of a rule and regulation, thought to be necessary to carry out and accomplish the purpose of an act, vary or enlarge the terms or conditions of a legislative enactment, has often been the subject of judicial decision.” This was said with respect to a regulation promulgated by the surveyor–general under a rule–making power in which he “attempted to impose burdens upon the applicant not imposed by statute by requiring personal service of notice, and, under certain circumstances, publication of notice of the filing of an application for a permit.” This, it will be observed, was a matter of procedure as distinguished from the drawing of a line, or the fixing of a limit, as was attempted by rule 35a. In that case the court on this point (206 Cal. at pages 162, 163, 273 P. at page 804) quoted from United States v. George, 228 U.S. 14, 21, 33 S.Ct. 412, 57 L.Ed. 712; Williamson v. United States, 207 U.S. 425, 462, 28 S.Ct. 163, 52 L.Ed. 278; United States v. United Verde Copper Co., 196 U.S. 207, 215, 25 S.Ct. 222, 49 L.Ed. 449; and Morrill v. Jones, 106 U.S. 466, 467, 1 S.Ct. 423, 27 L.Ed. 267; and cited Waite v. Macy, 246 U.S. 606, 609, 610, 38 S.Ct. 395, 62 L.Ed. 892.

A case which bears upon this question rather directly is In re McLain, 190 Cal. 376, 212 P. 620, where the legislature in the 1919 Motor Vehicle Act fixed the maximum rate of speed at 35 miles per hour. However, section 22a of the act provided that the Highway Commission could fix the maximum rate of speed at less than the rate established by law over certain parts of a highway. The commission established the maximum rate at 15 miles at the point in question; McLain drove at 28, and was prosecuted under the act for a violation of the commission's rule. On a writ of habeas corpus the court held that this was an unconstitutional delegation of legislative power, saying (190 Cal. at page 379, 212 P. at page 621): “It is settled, of course, beyond controversy, that the power conferred upon the Legislature to make laws cannot be delegated by it to any subordinate body.” It must be borne in mind, in comparing the McLain case with the case at bar, that in the 1919 Motor Vehicle Act the legislature by the use of unequivocal language made the delegation, while here, as will be presently developed, it is more than questionable if the act, either in section 38e or elsewhere, pretends to make any such delegation. But if it does, the reasoning of the McLain case applies. See, also, In re Peppers, 189 Cal. 682, 688, 209 P. 896.

In the Alcoholic Beverage Control Act there is not to be found in or around the place where ordinarily it would be looked for, any indication by the legislature that the board should have any rule–making power with respect to the size of containers. Nowhere in section 53.6 where the 64–ounce maximum is prescribed, is there a word as to rules or regulations with respect to other sizes, or vesting the Board with any discretion, in this or any other respect. At the same time, throughout the act there are numerous instances where the legislature, in dealing with a specific subject, has then and there empowered the board to make rules in connection with such subject; for example, in section 4 (sale of a stock of liquor after revocation or surrender of license); in section 5 (proportionate license fee for a fractional year); in section 6(r) (sales to non–licensees within government reservations or parks); in section 6.5 (giving away of samples); in section 21 (notice of hearing of protests); in section 22a (annual report of wine manufacturers); in section 23b (claims for exemption of tax); in section 38a (additional and supplemental reports). There are other places where the legislature authorizes the board to prescribe forms; for example, in section 21 (notices of intention to engage in business, and of application for on–sale licenses); in section 24.4 (the keeping of records); in section 24.7 (bonds); in section 26 (statement of quantity of wine and beer sold); in section 67.5 (reports by boats and railroads). Sections 23b and 24.2 expressly leave it to the board to fix the tolerance in accounting for beverages lost. Section 25 prescribes the exact form of bond to be furnished, but leaves it to the board to fix its amount. We are mindful of the fact that in seeking to discover legislative intent proximity of language to the subject under discussion is not essential, but when it is borne in mind that in the large number of instances in this act where the legislature has taken the trouble to immediately tie in the authorization for rules and regulations with individual subjects––many of them comparatively unimportant––the absence of similar language in section 53.6 is conspicuous. Under the rule quoted from Sutherland even if the section contained express authorization for rules and regulations with respect to sizes smaller than the 64–ounce maximum, that would be an improper delegation of the power to enact “substantive legislation.” The fact remains, however, that no such authorization is found in section 53.6 at all.

In addition to section 53.6 prescribing a minimum with respect to draught beer, and a minimum with respect to certain wine containers, it is interesting to note that the legislature in 1937 (before rule 35a was promulgated) amended section 34 of the act dealing with distilled spirits licensees. The 1935 act (p. 1141) made it unlawful to sell distilled spirits in packages containing more than one gallon, thus providing, as it does with respect to beer, simply a maximum. In 1937, however, Stats.1937, p. 2155, section 34e, the legislature saw fit to add a minimum provision. It permitted the one–gallon maximum provision to stand and added that after December 31, 1937, it should be unlawful for any rectifier of wholesaler to deliver, or for any on or off–sale distilled spirits licensee to sell or have in his possession, distilled spirits in packages containing less than one–half pint.

To sum up: In 1937 the legislature saw fit to prescribe a minimum provision for wine, maximum and minimum provisions with respect to distilled spirits, and a maximum provision only with respect to bottled beer (it provided a minimum of 3 1/2 gallons for beer in metal or wooden kegs). The board, however, within a year thereafter, by rule 35a, wrote into the law a minimum provision respecting beer containers thereby “legislating” upon a subject with respect to which the law–making body in its wisdom had seen fit to remain silent, and at the same time “legislating” with respect to intermediate sizes of bottled beer containers.

In Adolph Coors Co. v. Liquor Control Commission, 99 Utah, 246, 105 P.2d 181, a divided court held that the liquor board of that state had no power to legislate as to the minimum size of beer containers where the statute, as in the instant case, provided nothing but a maximum. This case is relied upon by appellant. Although we are in accord with the reasoning of the majority opinion, no reliance need be placed thereon for the reason that the statutory and constitutional provisions were dissimilar from those here involved.

For other reasons we are satisfied from the language and structure of the act, and particularly from a consideration of the company in which section 38e is found, that that section was not designed to cover such a subject as is found in rule 35a. In the brief of amici curiae in support of the appellant this point is presented and the ejusdem generis and noscitur a sociis rules are invoked. We think they apply in this case. As already pointed out, the respondents rely upon section 38e of the act. That being so, an examination of that section is in order. Section 38e was added to the act in 1937 (pp. 2159–2161). It is lengthy and is broken up into six paragraphs. By this section each manufacturer, importer and wholesaler of beer is required to file and thereafter maintain on file with the board a written schedule of his sale prices for beer sold in this state; such schedules may be changed from time to time by filing new ones. The first schedule becomes effective immediately; the amendatory ones become effective ten days after being filed. Then there is a proviso with respect to the filing of schedules “to meet lower posted and filed competing prices in a trade area” and provision, in such cases, as to effective dates. Such price schedules, the section says, are subject to public inspection and are in no sense confidential. Upon the filing of these schedules––original or amendatory––“all prices therein stated shall be strictly adhered to by the filing licensee and any departure or variance therefrom * * * shall constitute and be a misdemeanor.” There are two provisions vesting the board with power to prescribe the form of the schedules. The section then goes on to provide that “Any director, officer, agent or employee of any licensee who knowingly assists or aids in the violation of this section or any effective posted price or any rule or regulation of the board passed to carry out the provisions of this section shall be guilty of such violation equally with the licensee.” Then follows the paragraph authorizing “other rules and regulations” quoted above, which is followed by another paragraph, again dealing with prices and marketing, reading as follows: “No manufacturer, importer or wholesaler mentioned in this section shall be prohibited the right of choice of customers, nor shall any such licensee be prohibited from dividing his customers into functional classes and establish different prices for the same articles for such different functional classes, such different functional classes being based upon the manner in which such classes sell beer, as wholesaler or retailer.” The succeeding paragraph sets up the machinery for court action by any trade association to enjoin violations “of this section,” with damages as well. The last paragraph provides safeguards for the licensee against the revocation of his license for “a violation of the provisions of this section.”

From the foregoing review of section 38e it will be seen that what the legislature dealt with therein was the wholesale selling price of beer; the publication of prices; the maintenance of such prices and strict adherence to them. Immediately following a penal provision designed to prevent the “violation” of effective posted prices is found the language relied upon to support rule 35a, viz., “The board may adopt such other rules and regulations as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer * * *.” A reading of section 38e shows that the preceding and succeeding parts of that section do, in fact, deal with “the orderly wholesale marketing and wholesale distribution of beer.” On behalf of the appellant it is argued that when, in the middle of this section, the legislature speaks of “other rules and regulations” the word “other” must be limited to wholesale marketing and distributing practices of the same kind, to wit, relating to prices, price cutting, meeting competitive prices and adequate disclosure of prices. Rules and regulations were mentioned in the earlier part of the section in connection with a specific subject––the filing of price schedules, therefore, it is not at all surprising to find provision for “other rules and regulations” later on in the same section. The interpretation for which appellant contends finds support in the fact that that part of the section next following the rules and regulations provision continues to deal with the subject of prices, price discrimination and different prices for customers in different functional classes. In short, that part of section 38e upon which the respondents rely to support a rule dealing with the size of containers finds itself sandwiched in between two provisions dealing with price stabilization, a subject utterly foreign to that of the size of containers. As already noted, the general grant of the rule–making power is found in section 38, yet the respondents do not rely upon that section, and section 53.6 which does deal with the size of containers is utterly silent with respect to rules and regulations. “The doctrine of ‘ejusdem generis' simply means that where general and specific words, relating to the same things are associated together, they take color from each other, and the general words are restricted to a sense analogous to that of those less general.” 23 Cal.Jur., 755, section 130. We are satisfied that that doctrine applies in this case and that the language found in section 38e was not designed to authorize such a rule as 35a, but must be confined to such rules for “the orderly wholesale marketing and wholesale distribution of beer” as have to do with the stabilization of the wholesale prices of that beverage.

Other points are urged by appellant. One is that in rule 35a certain beverages defined in the act as “beer” were excluded from the operation of the rule, the argument being Tux Ginger Ale Co., Ltd., v. Davis, 12 Cal.App.2d 73, 54 P.2d 1122 that where the act has defined a beverage the board cannot by rule supply a different definition. Another, that rule 35a is an improper exercise of the police power in that it does not tend to promote or protect the public health, safety, morals or welfare. It is not necessary to discuss these and other points, in view of the conclusion at which we have arrived.

In our opinion, the judgment appealed from should be, and it is, reversed.

I am unable to concur in the conclusion reached in the majority opinion that the matter of fixing the size of containers in which beer shall be marketed and distributed at wholesale in this state constitutes a legislative function that can be accomplished only by the passage of an act of the legislature. In so holding the majority opinion not only reverses the judgment of the trial court, but the effect of the decision, as I construe it, is to strike from the Alcoholic Beverage Control Act that paragraph of section 38e whereby the legislature has expressly authorized the Board of Equalization to adopt such “rules and regulations as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer,” and to throw into a state of uncertainty the question of the validity of other rules and regulations adopted by the board pursuant to section 38 of said act, wherein the legislature has declared that “The board shall administer all of the provisions of this act and to that end shall prescribe all necessary rules and regulations to carry out such provisions.” It is my conviction that the authority to fix the size of beer containers does not constitute a purely legislative act, but is a matter the legislature, under well–settled principles of constitutional law, may properly delegate in whole or in part to the Board of Equalization, and that by appropriate legislation it has so delegated such authority, with certain limitations by the enactment of that portion of section 38e above quoted.

In considering the question of delegation of power, it should be kept in mind that the state Constitution, unlike the federal Constitution, is not a grant of power, but is a limitation of power; consequently the legislature is not restricted as to its legislative powers nor the mode of their exercise unless restrained by express words of the Constitution or by necessary implication therefrom. Sheehan v. Scott, 145 Cal. 684, 79 P. 350; Mendenhall v. Gray, 167 Cal. 233, 139 P. 67; Mitchell v. Winnek, 117 Cal. 520, 49 P. 579; Beals v. Board of Sup'rs of Amador County, 35 Cal. 624. It is a fundamental principle of constitutional law, therefore, that while the legislature may not delegate to a state board or officer its power to enact laws, it may nevertheless, and in many situations must necessarily, authorize things to be done by others which it may properly do itself. To quote from California Jurisprudence (vol. 5, p. 678): “This rule that the legislature cannot delegate its powers, is, however, only true in its most general sense. It has been said that to establish a principle that whatever the legislature may do, it shall do, or else it shall go undone, would be almost to destroy the government. While the legislature cannot delegate its general legislative authority, still it may authorize many things to be done by others which it might properly do itself. Necessarily regarding many things, especially affecting local or individual interests, the legislature may act either mediately or immediately. The object to be accomplished, or the thing permitted, may be specified, and the rest left to the agency of others, with better opportunities of accomplishing the object, or doing the thing understandingly.” And again on page 681 it is said: “It is an equally well–recognized principle that the legislature, notwithstanding it may do things itself, may nevertheless authorize them to be done by ministerial officers or boards when it believes that they can do them more effectively than it can itself.” In fact it is expressly noted in the quotation from Sutherland on Statutory Construction, set forth in the majority opinion, that to the general rule prohibiting delegation of power “* * * there are some recognized exceptions. * * *” Where authority is thus delegated, the commission or board upon which it is conferred is, of course, accountable to the courts for any abuse or unjust exercise of the discretion with which it is vested. 5 Cal.Jur. 681.

Here as pointed out in the majority opinion the legislature fixed the maximum size of beer containers, but manifestly it does not follow as a matter of law necessarily or at all from the fact that it has done so, that the function of fixing the size of beer containers constitutes a purely legislative act; and it seems clear that by authorizing the Board of Equalization to adopt such rules as will foster and encourage the orderly wholesale marketing and distribution of beer, the legislature fully intended to delegate to the board the right of standardizing containers in any size within the maximum fixed by the legislature, if in the judgment of the board such action was deemed necessary. The general object of most regulations for the standardization of weights and measures is the prevention of fraud, and to provide a method by which purchasers of commodities may protect themselves from short weights and measures and be able to obtain the quantity of the property purchased. Such was evidently one of the purposes in the adoption of rule 35a here assailed.

In support of the conclusion that there has been an illegal delegation of power, the majority opinion cites and to a large extent relies upon the cases of In re McLain, 190 Cal. 376, 212 P. 620, and In re Peppers, 189 Cal. 682, 209 P. 896. But an examination of the decisions therein clearly demonstrates that neither case is in point for the reason that there the legislature attempted to delegate to a state board the power to declare by rule what acts would constitute a crime; and it is well settled that the legislature may not delegate any such power. That is not the situation here. Violations of rule 35a at most subject the violator to a revocation of his license to market and distribute beer at wholesale.

Nor in my opinion can it be said that there is anything in Boone v. Kingsbury, 206 Cal. 148, 273 P. 797, that is here controlling. The question of delegation of power was not discussed, and apparently was not a determining factor. It was a case where a state officer under the guise of general rule–making authority attempted to enlarge upon a legislative act by promulgating a rule prescribing a certain requirement inconsistent with and repugnant to the law itself. In the Utah case (Adolph Coors Co. v. Liquor Control Commission, 99 Utah 246, 105 P.2d 181), which as will be noted was instituted by the appellant herein, the same question here involved was there presented, but as stated in the majority opinion herein the statutory and constitutional provisions there under consideration were dissimilar to those here involved. However, I do not understand that the majority members of the court there held that because the legislature fixed the maximum, the liquor board did not have the power to fix the minimum size of beer containers. As I read the case, three of the five members of the court expressly dissented from that view.

Furthermore, in the present case, more or less significance is attached to the wording of the constitutional provision itself wherein it declares that “the State of California * * * shall have the exclusive right and power to license and regulate the manufacture, sale, purchase, possession and transportation of intoxicating liquor within the State * * *.” (Italics ours.) But when the provision is considered in the light of its historical background, the real purpose in so wording it becomes apparent. That is to say, prior to the adoption of the Eighteenth Amendment to the federal Constitution, the power to license and regulate the sale of liquor in this state was vested in cities and counties, and not in the state; and following the repeal of the Eighteenth Amendment by Congress but before the repeal was ratified by a sufficient number of states, California, in 1932, in anticipation of such ratification, amended the state Constitution by adding section 22 to article XX whereby the licensing and regulating of the sale of liquor was not returned to cities and counties, but was made a state affair; and the present 1934 amendment merely enlarged upon the provisions of the 1932 enactment. It would seem unreasonable to hold, therefore, that because the new state constitutional provision was so worded it was the intention to prohibit the legislature from delegating any of its powers of regulation to the Board of Equalization.

The judgment of the trial court, in my opinion, should be affirmed.

GOODELL, Justice pro tem.

PETERS, P. J., concurred.