Certified Grocers of California, Ltd. v. State Board of Equalization

DRAPEAU, J.

Certified Grocers of California, Ltd., is a cooperative corporation, organized under provisions of the Corporations Code. It is a wholesale grocer, selling to its members only. Each member is a retail grocer, and each member owns 10 shares of stock of the cooperative. There are

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approximately 1,500 members. Periodically, dividends, called patronage dividends, are paid to stockholders, returning to each his share of surplus-savings and earnings. (Corp. Code, § 12805.)

State Board of Equalization issued to the cooperative an off-sale beer and wine wholesaler’s license. The cooperative sold by the case to its members only.

The board accused the cooperative of selling to retail licensees at a price less than the effective posted price on file with the board; also of giving rebates. This accusation was based upon the practice of paying patronage dividends to stockholder-members. A little over 1% per cent of the wholesale price was returned to the stockholders.

After hearing, the board suspended the license indefinitely.

The superior court ordered a writ of mandate, commanding the board to set aside the suspension, and not to enforce its provisions. Prom this judgment the board appeals.

The board contends that payments of the patronage dividends violate section 38e of the Alcoholic Beverage Control Act. (2 Deering’s Gen. Laws, Act 3796.) This section requires that all posted prices “shall be strictly adhered to” and that" any violation of the law shall be a misdemeanor. The board also contends that these payments violate section 55.7 of the act, prohibiting gifts or free goods in connection with the sale of alcoholic beverages.

An opinion by the attorney general, dated April 20, 1938, states the view of his office as follows:

“The obvious- purpose of Section 38e is to make public the prices charged by the manufacturers and wholesale distribuT tors of beer so that competitors may know the prices being charged and thus be in a position to compete with such prices. The provisions of Section 38e also aid in enforcing the provisions of Section 54 which prohibits manufacturers and wholesalers from being1 interested in the business of retailers and from giving secret rebates and secret concessions.