*1 al., Petitioners, Harry et THOMPSON CALVERT,
Robert S. Controller of Public Accounts of the State Texas Respondents. al., et
No. B-3093.
Supreme Court of Texas.
Dec. 1972.
Rehearing Denied Feb.
DENTON, Justice. brought by Harry action was and three other tavern and club Thompson operators vending company machine declaratory operator as class action for a against judgment injunctive relief and for Comptroller Public Accounts State Texas, seek- and the declaring judgment certain to obtain a 13.02, provisions Ti- of Articles 122A-Taxation-General, Ann. tle Vernon’s Civ.Stat., p. (Acts Leg., 61st ch. 497) pertaining to unconstitutional, respondents enjoin and to enforcing of the stat- portions The relevant statute. sought read ute to be nullified as construed as follows: person shall No “Art. 13.17 § own, manufacture, engage in business to trade, lend, sell, rent, lease, buy, maintain, another, repair, furnish to store, state, service, transport within import, or a skill or issued under chine without a license Article. un- It shall be 13.17
“Art. § a financial for a who has lawful required to be interest in a business knowingly have by this Article to censed interest in a business a financial serving unless oth- on-premises consumption permitted this Article. erwise owner ... No “Art. a bailee or agree or contract with coin-operated machine to lessee or lessee ex- compensate bailee said gross fifty percent (50%) cess of above after the receipts made. been reimbursement Richards, Richards, David & R. Clinton
Austin, petitioners. unconstitutional declared trial court limits 13.02(2) which Art. Gen., portion of L. Martin, R. Atty. C. Crawford lessee. by the be received Austin, the revenues to re- Gen., Lattimore, Atty. Asst. declared It further spondents. is the primary basis of this lawsuit unconstitutional and void insofar as it interpretation by General and deny be construed to tavern and club own- Comptroller purchase coin-op- the enforcement ers the and own businesses, taxing pertaining erated machines for use statute enjoined permanently Comptroller quoted under the above. Articles *3 provides attempting and to General from Section of Art. 13.17 8(1) any person in to engages enforce the of such subsection. business who etc.,
manufacture, own, sell, coin-op- a buy, appeals The court of civil construed § must licensed. erated machine be Section to mean no 27(1) tavern owner it be 27(1) 13.17declares that shall place licensed a to own machine in his person required be li- unlawful for a to of business so tavern owner a in- censed to have financial under § continues to in the of business sell- in or selling terest business engaged in a beverages. serving and alcoholic beverages on-premises for alcoholic then judg- court reversed the trial court’s consumption. exception of With the ment and held that Art. 13.17is § excluding a minimal “Grandfather Clause” regulation coin-operated a valid ma- persons the license number from chine and its business relation to tavern requirements,1 the were foregoing sections owners; that Art. is reg- a valid to mean construed ulation of contracts between licensees in person op- that “. owned . .a who and coin-operated business and machine in coin-operated erated his machine own lessees; provision and that neither place engaged his in a own of business was rights plain- violates the constitutional business is to be licensed repre- tiffs they and the class or classes Therefore, under . . . one this Act. sent. 472 S.W.2d is in who the business engaged on-premises con- beverages alcoholic for It shown in the in record 1969 owning absolutely from sumption is barred Legislature, response in a trend to in coin-operated machine operating and a increasing illegal violence and other activi- Att’y liquor his ...” [Tex. ty which centered around taverns and p. Op. M-449 Gen. No. 228]. “ clubs, night special created a committee to . to . is purpose of the Act declared study problem. That committee deter- music comprehensive regulation of provide mined that those in engaged some of pleasure and skill or coin-operated gained machine business had in dealing these chines businesses great a deal of control over and financial chines, in these prevent persons to interest in beverage certain alcoholic busi- having certain concurrent businesses from passed nesses. Art. 13.17 in, fi- financial interests or unauthorized provide comprehensive regula- “. .to with, dealings nancial certain coin-op- tion of music skill pleasure or Art. 13.17. businesses.” Sec. dealing erated businesses in imposed through the prevent persons in these licensing process. Section these having businesses con- in shall engage “No states: in, current financial interest or unauthor- sell, manufacture, own, buy, or business to with, dealings certain al- ized financial trade, lend, rent, lease, furnish to anoth- or maintain, service, transport Tex.Tax.- beverage er, repair, coholic businesses.” state, store, import, music a within the (1969). 1 Gen.Ann. Art. 13.17 § a “Notwithstanding owns date of effective of Art. 13.17 1. § single place and owns any language of business the con herein contained coin-operated pleasure trary, con or skill or herein place general of business.” busi fee for a strued who, on the ness license for an individual pleas- business, e., occupation tinctive coin-operated or a skill i. an employment habitually a li- engaged ure machine without improvement. profit Article.” under this See cense issued p. 765, a Noun —Nar types of licenses “Business As provides IS two C.J.S. engage in certain rower Sense.” person who wishes dealings with music legislative in think the clear skill or machines or regulate tent of the those en Act was machines; wit, coin-op gaged dealing the business of two These import cense and license. machines; erated those who are meaning material purposes types of licenses manufacturing, owning, buying, virtually here identical. lending, selling, renting, leasing, trading, *4 27(1), in “It provides The Act then Sec. etc., occupation such machines as an person has a a who shall be unlawful for clearly li employment. requires The Act a to required financial in a business interest in dis engaged for those cense thus knowingly be licensed Article to the Petitioner, business, the tinctive such as en- have financial interest in a business a Corporation, Vending, A’s a Texas which in bever- gaged selling serving alcoholic admittedly in business of engaged the ages (Em- on-premises consumption.” for coin-operated machines. On the selling has phasis added.) hand, applies do not think it to we since interpreted provide that this Act and others simi the individual Petitioners a requires Sec. a to obtain 8(1) business, larly situated whose distinctive machine, coin-operated cense if he owns a employment of sell occupation and is that permitted a coin- he can not to “own” ing beverages and for on- serving alcoholic operated time and at the same premises consumption, only own and who sell- have a interest in a business financial coin-operated display machines for use and beverages. We using alcoholic premises on their own as an ad intent contrary think this is to the clear junct regulation thereto. or incidental Legislature. the beverages long and control of alcoholic recognized the been as an exercise of The stated the Act was police power. Liquor The Texas state’s regulate “busi- coin-operated machines and 666-1, Texas Control Vernon’s dealing nesses” these Code, provides comprehensive Penal a prevent persons in these businesses scheme for the of the alcoholic alco- having a financial interest beverage industry. IS sets beverage businesses. Section holic out to obtain either those who are clear intent think it was the We import li- or an business license this Act not that does cense; wit, engages one who in a certain permit the owner of coin-operated dealing” “business with alcoholic chines. li on-premises consumption to obtain a Trailers, cense under of Article 13.17 McCauley In Sec. v. Hobbs 357 S.W. merely 2d ma (Tex.Civ.App.1962, 494 because he owns writ), chines, 6165a, ownership and use of court 2 so as the construed Section of Article purely to that as such machines are incidental which a loan broker V.A.C.S. defines * ** person, firm, interpreted, “a As the Act effec corporation pursues money, tively intent to free the lending who carries out the business of operator from the hold of the taking security small tavern payment operators assign industry and make those of such loans ... * * more wages beverage ment court held establishments independent. that the term a dis are therefore “business” connoted passed are sells,” “if that the laws we it view that relation to to have a reasonable it, seen interpret is not in violation Con- nei- are purpose, and proper legislative stitution. discriminatory, re- arbitrary nor ther clearly prohibits any licen- This Act also satisfied. process due quirements of engages in busi- see under Art. 13.17 who York, ,” 291 U.S. v. New Nebbia seller, in such ness as a lessor or dealer 505, 516, L.Ed. 940 502, 537, 54 S.Ct. any hold machines to have or went on in Nebbia (1933). The financial interest a business leg- that if the equally clear say “it is beverages for serving alcoholic selling or curb unrestrained policy be to islative on-premises consumption. which by measures competition harmful discriminatory it does arbitrary or are not 13.- further contend that Art. Petitioners to determine the courts not lie with gross 02(2), limits the division of rule is unwise.” receipts machines between an owner and a bailee or lessee constitutes upon petition-
an unconstitutional restraint conclude We therefore er’s freedom of contract. It is fundamen- Art. 13.- established limitation as 50% tal that to enter into a contract on restraint unreasonable is not an *5 constitutionally guaranteed. That this of in that the to contract freedom right may in- be or in certain com regulated, unrestrained provision is to curb the denied, by locations, stances in a the reasonable petition for machine proper police power, equally Further, use of the is power. the exercise of clear question here is settled. The in its arbitrary, oppressive nor is neither power may when and what manner this owner and application, as both be depriving citi- proceeds. exercised to the extent of in the We equally lessee share zens of enjoyment appeals the full of their that court of civil agree with the contract, and whether the Art. 13.02(2) un- is not violation Art. 13.02(2) expression der consideration is a of valid Constitution. power. that Thompson, Petitioners hold that Flores, Zulaica, simi- and others Harrison Wylie Hays, In 114 Tex. 263 S.W. distinctive larly situated whose it was held: bever- selling and that of “ . if a law regulating contracts consumption, and on-premises ages future as its be executed the has ob- use of ownership and whose ject may clearly that which be and rea- busi- purely incidental to machines are Legislature to sonably considered a license ness, required to obtain are not welfare, public prescribes be the means fur- of Article 13.17. We under Sec. necessary reasonably calculated and is a valid that Article ther hold op- accomplishing object, aid in between owners regulation of contracts arbi- erates in a reasonable and not an or lessees of and bailees manner, trary, capricious, oppressive chines. police power, it is within the constitutes holding trial court judgment The law, and, process consequently, is due of Flores, Zulaica Thompson, that Petitioners superior liberty to the contract.” of be licensed and Harrison 13.17, pay and to under the terms Supreme held The U. S. holding required; and the fee upon the license be no doubt that “there can contrary to declaring 13.02 to be mea- by appropriate proper occasion is re- of Texas of State Constitution regulate a business may sures the State perma- versed; the trial court the order of prices to aspects, including any of its Comptroller Public nently enjoining commodities charged products Notwithstanding any language Accounts attempting pro- contrary, herein contained to the their successors in office from vision (1) of subsection herein be construed to re- enforce the 13.17, interpret- quire a fee for a business license section 27 of Article who, General, individual on the effective ed is affirmed. place date appeals single of this Act owns a judgment of the court of civil part ren- business and a music or skill or affirmed and reversed and owns pleasure coin-operated in such part. dered in
place of business. POPE, J., dissenting. quoted section reveals Leg- that the recognized
islature exemp- the need for an tion from taxation of the limited or inci- POPE, (dissenting). Justice single coin-operated dental use of a 13.01, respectfully dissent. Article I chine. any Neither that section nor coin-ma- (1959), of the Tex.Tax.-Gen.Ann. section, however, exemption affords an statute, the word “owner.” defines chine the owner of one machine from the licens- It states: ing requirements. Legislature recog- nized that one’s of a coin machine use any per- The term “owner” means (1) slight incidental, and it has said that son, individual, firm, company, associa- ownership place means the one corporation owning having tion or and machine. It care, control, management possession exempts such owner from the tax but any “coin-operated machine” in this not a license. State. legislation arose out Legislative of Article Tex.Tax.- *6 provides: investigations Gen.Ann. of the “No control of businesses by persons phases business to in some . . . own of the . coin-machine Legislature The machine or business. skill determined that permit- this control over liquor without tees in the a license issued business should be broken under this Article.” by requiring corpora- licensing The same of all owners of excepts section - by prohibiting coin one’s organized exclusively tions or associations machines and charitable, educational, possessing and a religious, liquor both a license or be- purposes; majority The deci- nevolent those coin-machine license. who own such a personal machine for sion of the court has held that a coin-ma- use and amusement private residence; if his chine owner need not be*licensed any person operation subject merely incidental by the coin-machine Railroad Com- alco- mission of to his other business of retail sales of transports Texas who or stores intent beverages. holic This was not the not owned and in him Legislature the due rather Legislature. course of spelled exemptions all from carefully out Subsequent orig- to the enactment of the licensing the uncertain but it did not draw inal coin-machine statutes, the principal distinction between and incidental exempt enacted an own- businesses. who, er on the effective date of the single owned a this court has drawn machine which The line which was owned licensing vague to purposes. exemption exempt one from is too Does an requirement permit from the tax but law’s enforcement. not from the business arise exemp- the owner be “incidental” coin-machine licensed. This in each of twenty tion found in taverns when one owns Article about of the taxation coin machine? What statutes: which is one and six an who has three taverns owner “incidental” nature
machines? theWill operation be determined coin-machine comparative
by the revenue derived large and very
each? In the case tavern, line each
active the business from great, or the may
of endeavor but one greater. In the case machine, single
the small tavern with a profit,
when each a small one shows
is incidental when the revenue from both
is essential continuance ? rule announced
court will books audit of the establishment, every and records of
which even one coin is located. construction,
As a matter statutory I problems reading
have into the statute therefore, exception. would,
the court’s I
approve the construction of the statute and holding appeals. the court of civil JETT, Appellant,
Buford Alton *7 Texas, Appellee.
The STATE of
No. 45388. Appeals Criminal of Texas.
Nov. 1972.
Rehearing Denied Jan. Dallas, Wilson, Thomas, M. Bill G.
Don appellant. T. Wade, Atty., and W. Henry Dist. Dallas, Westmoreland, Atty., Asst. Jr., Dist. A. Atty., Vollers, Robert State’s D. Jim Huttash, Atty., Austin, Asst. State’s State.