Lee B. McTurnan
Evan E. Steger
Attorneys for Olinger
Distributing Co., Inc.
William W. Hurst
Attorneys for Indiana
Wayne C. Turner
Jacqueline B. Ponder
Matthew W. Foster
McTurnan & Turner
Attorneys for National Wine & Spirits Co. and Olinger Distributing Co., Inc.
Edward P. Steegmann
Ice Miller Donadio & Ryan
Michael T. McNelis
Mitchell Hurst Jacobs & Dick
Attorney General of Indiana
Deputy Attorney General
Lee B. McTurnan
Evan E. Steger
Attorneys for Olinger
Distributing Co., Inc.
William W. Hurst
Attorneys for Indiana
INDIANA WHOLESALE WINE &
LIQUOR COMPANY, INC.,
Appellant (Defendant below),
STATE OF INDIANA ex rel. INDIANA
COMMISSION, NATIONAL WINE &
SPIRITS CORPORATION, and OLINGER
DISTRIBUTING CO., INC.,
Appellees (Plaintiff and Defendants below, respectively).
) Supreme Court No.
) Court of Appeals No.
This unusual case involves a dispute over whether an Indiana statute allows a
particular corporation to hold wine and liquor wholesalers' permits. After granting the
permits in 1987, the Indiana Alcoholic Beverage Commission apparently second-guessed its
own decision in 1991 and sought court guidance as to whether it was right. When the case
reached the Indiana Court of Appeals, that court invalidated the statute as violative of the
In brief, we conclude that the Alcoholic Beverage Commission was right in the first
place and that it was unnecessary, and inappropriate, for the Court of Appeals to reach the
constitutional issue. Our analysis follows.
on Indiana Wholesale's shareholders and their adult children. Based on the results of this
investigation, the Commission determined on September 16, 1987, that Indiana Wholesale
satisfied all statutory requirements for corporate wholesaler permittees and issued the
wholesalers' permits. Implicit in this determination was the Commission's conclusion that
Indiana Wholesale's corporate structure conformed to the requirements of Ind. Code § 7.1-3-
21-5 (1993 & Supp. 1997) (the "Residency Statute"),See footnote
the text of which is set forth and
discussed in part II, infra.
National and Olinger, together with Wine & Spirits Wholesalers,See footnote
conclusion and brought suit on September 28, 1987, challenging the validity of Indiana
Wholesale's permits. The trial court dismissed the suit and the Court of Appeals affirmed,
finding that National, Olinger and Wine & Spirits Wholesalers lacked standing to challenge
the award of the permit. See Wine & Spirits Wholesalers of Indiana, Inc. v. Indiana
Alcoholic Beverage Comm'n, 556 N.E.2d 17 (Ind. Ct. App. 1990), trans. denied. As such,
the Commission's 1987 interpretation of the Residency Statute remained intact.
However, apparently doubting its own interpretation, the Commission commenced
on August 7, 1991, the present declaratory judgment action seeking "judicial guidance on the
meaning and application of [the Residency Statute] with respect to [Indiana Wholesale]."
In asking the court's interpretation of the Residency Statute, the Commission did not advance
an interpretation of its own. Named as defendants in the action were Indiana Wholesale and
National and Olinger.See footnote
Indiana Wholesale moved for summary judgment on the construction and constitutionalitySee footnote 4 of the Residency Statute and also moved to dismiss National and Olinger for lack of standing; the trial court denied the latter motion. On March 4, 1994, the trial court ruled on Indiana Wholesale's motion for summary judgment and found that (1) the Residency Statute was ambiguous; (2) both Indiana Wholesale's and National and Olinger's interpretations were reasonable; and (3) the Commission was the proper body to decide
which meaning to apply. The trial court declined to rule on any constitutional issue.
All parties appealed the trial court's ruling and presented for appellate review
arguments substantially similar to those advanced at trial. The Court of Appeals concluded
that (1) the Commission properly named National and Olinger as defendants; (2) both
interpretations of the Residency Statute facially discriminated against interstate commerce
and violated the Commerce Clause; and (3) the Twenty-first Amendment did not save the
Residency Statute from "constitutional infirmity." Indiana Wholesale Wine & Liquor Co.
v. Indiana Alcoholic Beverage Comm'n, 662 N.E.2d 950, 954 (Ind. Ct. App. 1996). Having
resolved the dispute on constitutional grounds, the Court of Appeals did not address any
argument relating to the meaning and application of the Residency Statute. Id.
Upon the petitions of the Commission and National and Olinger, this Court granted
transfer on September 18, 1996.
claims that the Court of Appeals erroneously decided the case on constitutional grounds,See footnote
asks this Court to defer to the Commission's original construction of the Residency Statute
which the Commission implemented by issuing wholesalers' permits to Indiana Wholesale
Ind. Code § 7.1-2-8-3 (1993).
The Court of Appeals found that, although the Commission could not have maintained
a similar action under the Uniform Declaratory Judgment Act,See footnote
the option nonetheless was
available to the Commission due to the unique nature of Ind. Code § 7.1-2-8-3. Indiana
Wholesale Wine & Liquor Co., 662 N.E.2d at 956 n.7. The court also found that, under this
statute, the Commission properly named National and Olinger as co-defendants. Id. at 957.
See Ind. Code § 7.1-2-8-3 ("The action shall be brought . . . against a permittee or other
person.") (emphasis added). We agree with and incorporate by reference this portion of the
Court of Appeals' opinion into our decision today. Ind.Appellate Rule 11(B)(3).
(b) The commission shall not issue an alcoholic
beverage wholesaler's permit of any type to a corporation unless
at least one (1) of the stockholders shall have been a resident,
for at least one (1) year immediately prior to making application
for the permit, of the county in which the licensed premises are
to be situated.
(c) Each officer and stockholder of a corporation shall
possess all other qualifications required of an individual
applicant for that particular type of permit.
Ind. Code § 7.1-3-21-5 (emphasis added).
their plain and ordinary meanings. Cox v. Worker's Compensation Bd., 675 N.E.2d 1053,
1057 (Ind. 1996) (interpreting worker's compensation statute); Clifft v. Ind. Dep't of State
Revenue, 660 N.E.2d 310, 316 (Ind. 1995) (interpreting controlled substance excise tax
statute); Indiana Dep't of Public Welfare v. Couch, 605 N.E.2d 165, 167 (Ind. 1992)
(interpreting comparative fault statute). Here, the parties dispute the meaning of the phrase
"common stock," which the Commission effectively interpreted as meaning a class of stock,
other than preferred, and not necessarily a controlling interest.
Black's Law Dictionary defines "common stock" as the class of corporate stock
representing residual ownership of the corporation, having voting powers, participating in
profits by way of dividends (after payment to preferred stockholders), and sharing lastly in
corporate property upon dissolution. Black's Law Dictionary 278 (6th ed. 1991).See footnote
Traditionally, "common stock" has meant stock that "has a full voting right and unlimited
proportionate right to share in the firm's residual earnings." 11 William Meade Fletcher et
al., Fletcher Cyclopedia of the Law of Private Corporations § 5086 (perm. ed. rev. vol.
According to its Articles of Incorporation, Indiana Wholesale has authority to issue
1,000 shares of stock, with 500 shares denominated common stock and 500 shares
denominated preferred stock. Of those shares issued, Indiana residents own 60% of the
common shares; non-residents own the remaining 40% of common shares and 100% of the
preferred shares. Indiana Wholesale's Articles of Incorporation require a two-thirds vote of
common stockholders for most corporate actions. Preferred stockholders have voting rights
in three circumstances: a plan of merger or share exchange, the sale or lease of substantially
all corporate assets, and a voluntary dissolution. Approval of any one of these courses of
action requires a two-thirds combined vote of common and preferred stockholders. Common
stockholders participate in dividend distribution after preferred stockholders are paid in full,
and share lastly in corporate property upon liquidation. The corporate structure of Indiana
Wholesale therefore comports with the literal language of the Residency Statute as well as
with the "plain and ordinary meaning" of the phrase "common stock."See footnote
Assembly more than 50 years ago purposely removed any control requirement from the
statutory language,See footnote
and further distinguished between common stock ownership and
control of a corporate wholesaler permittee.
Throughout the greater part of this century, Indiana has imposed some sort of
residency requirement on applicants for alcoholic beverage licenses.See footnote
Beverage Act of 1935 provided in part that:
No liquor wholesaler's permit shall be issued or continued in effect, if issued, to any person who is not a bona fide resident of the State of Indiana and continues to be such resident while said wholesaler's permit is in force, or to any co-partnership any of the members of which are not bona fide residents of the State of Indiana.
1935 Ind. Acts 226, § 17.See footnote
In 1939, the legislature amended the Alcoholic Beverage Act of 1935 to allow corporations to hold beer wholesaler's permits, so long as "the stockholders thereof [are] citizens of the State of Indiana[.]" 1939 Ind. Acts 30, § 2. In 1945, the General Assembly
created the Indiana Alcoholic Beverage Commission, consolidated the residency
requirements for beer, wine, and liquor permits, and reduced the resident ownership
requirement for corporations to "eighty (80) per centum of outstanding common stock."
1945 Ind. Acts 357, § 10 (emphasis added). By 1965, the General Assembly had reduced
further the resident ownership requirement to 60% of common stock. 1965 Ind. Acts 256,
§ 1. A similar version of the Residency Statute remains in effect today.See footnote
See Ind. Code §
The evolution of the Residency Statute arguably evinces a legislative intent not to
mandate resident control of corporate wine and liquor wholesaler permittees. Had the
General Assembly intended to impose a control requirement, as National and Olinger
suggest, it could have retained the broader language of the Alcoholic Beverage Act of 1939,
i.e., requiring 100% resident ownership corporate wholesaler permittees; instead, in 1945,
it inserted the adjective "common" before the word "stock" and reduced the resident
ownership quota to 80%, which it further reduced to 60% in 1965.
The corporate structure of Indiana Wholesale tracks the literal language of the
Residency Statute, and the statute's legislative history suggests that the General Assembly
intended to eliminate any control requirement from the statutory language. For these
reasons, we agree with Indiana Wholesale and the trial court that the Commission's 1987
interpretation of the Residency Statute is reasonable.
We conclude that the Commission's actions do not rise to the level of rescission of
its 1987 interpretation. The Commission has never revoked Indiana Wholesale's permits.
Nor has it published any additional interpretive materials on the subject of the Residency
Statute since issuing wine and liquor wholesalers' permits to Indiana Wholesale in 1987. For
these reasons, we find that the Commission's 1987 interpretation of the Residency Statute
is still effective.
On petition to transfer to this Court, the parties reiterate the arguments made in the courts below on the other-than-constitutional issues. As to the constitutional analysis of the Court of Appeals, the Commission and National and Olinger argue that the Residency Statute is per se constitutional or, while facially discriminatory, is saved by the Twenty-first Amendment; Indiana Wholesale invites this Court to adopt the Commission's 1987 interpretation of the Residency Statute and avoid the constitutional issue. For the reasons set forth below, we accept Indiana Wholesale's invitation.
The doctrine of judicial restraint in deciding the constitutionality of statutes traces its genesis to Chief Justice Marshall,See footnote 18 but it was Justice Brandeis's concurring opinion in Ashwander v. Tennessee Valley Auth., 297 U.S. 288 (1936), "that gave the principle so much of its enduring importance."See footnote 19 In Ashwander, Justice Brandeis set forth "a series of [seven] rules under which [the Court] ha[d] avoided passing upon a large part of all the constitutional questions pressed upon it for decision." 297 U.S. at 346 (Brandeis, J., concurring). Two of the rules present themselves for invocation in the case at hand. First, "[t]he [Supreme] Court will not pass upon a constitutional question although properly presented by the record, if there is also present some other ground upon which the case may be disposed of. . . . Thus, if a case can be decided on either of two grounds, one involving a constitutional question, the other a question of statutory construction . . ., the Court will decide only the latter." Id. at 347 (Brandeis, J., concurring) (citing Siler v. Louisville & N.R. Co., 213 U.S. 175, 191 (1909)). Second, "'[w]hen the validity of [a statute] is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that [the Supreme Court] will first ascertain whether a construction of the statute is fairly
possible by which the question may be avoided.'" Id. at 348 (Brandeis, J., concurring)
(quoting Crowell v. Benson, 285 U.S. 22, 62 (1932)).
This doctrine is well established in U.S. Supreme Court jurisprudence. See, e.g.,
Edward J. DeBartolo Corp v. Florida Gulf Coast Bldg. and Constr. Trades Council, 485 U.S.
568, 575 (1988) (construing statute to avoid constitutional problems and tracing principle's
origins to Murray v. The Charming Betsy, 6 U.S. 64, 118 (1804) (Marshall, C.J.)); Rescue
Army v. Los Angeles Mun. Ct., 331 U.S. 549 (1947) (discussing several Ashwander
principles and declining to decide imprecisely presented constitutional issue).
And we recently discussed its application in Indiana jurisprudence. Citizens Nat'l Bank of Evansville v. Foster, 668 N.E.2d 1236, 1241 (Ind. 1996) ("Both state and federal courts traditionally foreswear deciding a constitutional question unless no non-constitutional grounds present themselves for resolving the case under consideration."). See also Bayh v. Sonnenburg, 573 N.E.2d 398, 402 (Ind. 1991) (discussing Court of Appeal's failure to address four viable non-constitutional theories in favor of deciding a constitutional issue), cert. denied, 502 U.S. 1094 (1992); State v. Darlington, 153 Ind. 1, 4, 53 N.E. 925, 296 (1899) ("[C]ourts will not pass upon a constitutional question, and decide a statute to be invalid, unless a decision upon that very point becomes necessary to the determination of the cause. This court has repeatedly held that questions of this character will not be decided unless such state decision is absolutely necessary to a disposition of the cause on its
We have before us today parties who raise questions of both statutory construction
and (primarily as a result of the approach taken by the Court of Appeals) constitutionality.
The case thus provides a paradigmatic opportunity for application of the Ashwander
principles enunciated above. As this Court has stated previously, "[w]hile a reviewing court
can freely choose any apparent statutory or common law basis upon which a judgment can
be sustained, constitutional issues are to be avoided as long as there are potentially
dispositive statutory or common law issues still alive." Sonnenburg, 573 N.E.2d at 402.
Here, the Court of Appeals chose not to adhere to the doctrine of judicial restraint,
and instead put forth a well-reasoned constitutional analysis of the Residency Statute,
ultimately concluding that the statute is unconstitutional. The court justified this resolution
by saying that because the Residency Statute _ however interpreted _ is unconstitutional,
the issue of statutory construction need not be reached. We reject this justification.
The judiciary is but one of three co-equal branches of government, each with its own powers and functions. The constitution empowers the legislative branch to make law; the judicial branch to decide cases.See footnote 20 On occasion, to perform properly its constitutional
function, a court must address and resolve the constitutionality of a legislative enactment.
But when it does so, it is an exercise of the power to decide the case before it. To do so
when not required to decide the case can impinge upon the law-making function which
separation of powers reserves for the legislature. The policy of judicial restraint is not
"merely procedural" but rather is "one of substance, grounded in considerations which
transcend . . . limitations. . . . The policy's ultimate foundations . . . lie in all that goes to
make up the unique place and character, in our scheme, of judicial review of governmental
action for constitutionality. They are found in the delicacy of that function[;] the necessity
. . . for each [branch of government] to keep within its power; [and] the inherent limitations
of the judicial process . . . ." Rescue Army, 331 U.S. at 570-71.
Here, the Court of Appeals failed to recognize the inherent limitations of the judicial process and instead violated the reviewing court's duty "first [to] ascertain whether a construction of the statute is fairly possible by which the question may be avoided." Ashwander, 297 U.S. at 348 (Brandeis, J., concurring). Rather than confronting the constitutional question ab initio, the Court of Appeals had several avenues available to it. It could have remanded the issue to the Commission for a definitive interpretation of the Residency Statute. Or it could have found the Commission's 1987 interpretation to be reasonable. This would have avoided the constitutional question because none of the parties
directly challenged at that time the constitutionality of the Commission's interpretation.
Only by adopting National and Olinger's interpretation would it have needed to address the
constitutionality of the Residency Statute;See footnote
then the court would have addressed the issues
in the proper order. Because the underlying issue in this case was one of statutory
construction, separation of powers among the branches demanded that the Court of Appeals
not decide the constitutionality of the Residency Statute unless resolution of the issue was
necessary to decide the dispute before it.
Our statutes are clothed with a presumption of constitutionality. See Boehm v. Town of St. John, 675 N.E.2d 318, 321 (Ind. 1996); Indiana Dep't of Envtl. Mgmt. v. Chemical Waste Mgmt., Inc., 643 N.E.2d 331, 336 n.2 (Ind. 1994). In the absence of a direct challenge to the constitutionality of the Commission's interpretation of the Residency Statute, the Court of Appeals rendered a judgment exceeding the scope of the issues before it and unnecessary to the disposition of the case. See Ashwander, 297 U.S. at 347 (Brandeis, J., concurring) ("The Court will not formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied." (citations and internal quotation
This Court repeatedly has refused to adjudicate constitutional questions when
presented with other dispositive issues. See, e.g., Pence v. State, 652 N.E.2d 486 (Ind. 1995)
(statutory challenge by citizens and taxpayers dismissed for lack of standing); Chemical
Waste Mgmt., 643 N.E.2d 331 (challenge to good character statute dismissed for unripeness,
although Court did comment on constitutional issues as guidance for agency's future
application of statute). Here, we face a dispute over statutory construction which we can
resolve by deferring to the reasonable interpretation of the administrative agency charged
with enforcing the statute. Consistent with the demands of separation of powers, we decline
to address the constitutionality of the Residency Statute and find that the Court of Appeals
erred in doing so.
SHEPARD, C.J., and DICKSON, SELBY, and BOEHM, JJ., concur.
an analogous function. Indiana Dep't of Envtl. Mgt. v. Chemical Waste Mgt., Inc., 643 N.E.2d 331, 336 (Ind. 1994).
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