Opinion
As Modified on Denial of Rehearing Jan. 31. 1962.
Hearing Granted Feb. 28, 1962.
Opinion vacated 22 Cal.Rptr. 14, 371 P.2d 758.
Orr, Heuring & Wendel, David I. Wendel, Victor D. Rosen, Oakland, for appellant.
Stanley Mosk, Atty. Gen., Wiley W. Manuel, Deputy Atty. Gen., for respondent, Department of Alcoholic Beverage Control and the Alcoholic Beverage Control Appeals Board.
Albert G. Evans, San Francisco, for intervenor, California Beer Wholesalers Ass'n., Inc.
TOBRINER, Justice.
This case presents the question whether the doctrine of res judicata applies to a decision of the Board of Equalization. Does its determination that a wholesale liquor license of a retail grocery chain should not be revoked bind the successor Department of Alcoholic Beverage Control in a subsequent case against the grocery chain upon the same facts? Should this holder of a business license be protected against successive attempts to forfeit the license upon the same grounds? For the reasons we hereinafter set forth, we think it should be afforded this protection.
The wholesale beer and wine license which the Department of Alcoholic Beverage Control revoked in this case related to the operation of appellant, Louis Stores, Inc., a chain of retail grocery stores doing business in Alameda and Contra Costa Counties. This organization maintains a warehouse in Emeryville from which it distributes food and beverages to its various retail outlets, and for which it holds a wholesale beer and wine license. Thirty-three of the chain's retail outlets possess separate retail off-sale beer and wine licenses. 'Between March 13, 1953 and August 2, 1956,' however, appellant admits it 'did not sell or attempt to sell beer and wine no any retail licenses other than its own separately licensed retail grocery stores * * *.' At no time did it intend to use the wholesale license for distribution of beer and wine to retail licensees in general; it has not held itself out to the public as a wholesaler.
The Board of Equalization, in 1953, sustained the validity of the wholesale license, and appellant relies upon that ruling to foreclose the department's current revocation. At that time the District Liquor Control Administrator brought against appellant an accusation which charged a violation of the then section 6, subdivision (f), of the Alcoholic Beverage Control Act, the predecessor of section 23779 of the Business and Professions Code. The board found that Louis Stores for a 45-day period failed to engage in the business of wholesaling beer and wine as defined in the named section but determined that this failure did not constitute a violation. The board concluded that the section was 'a 'grandfather clause' intended by the California Legislature to preserve to business organizations such as respondent [appellant] herein the right to continue to hold beer and wine wholesaler's licenses so long as such organizations do not engage in activities in the beer and wine business which are contrary to public welfare and morals, and so long as the board finds in the exercise of its discretion that the continuance of the licenses is not contrary to public welfare and morals.' The board then ruled that the accusation 'be dismissed without prejudice to the filing of an accusation charging a violation of subdivision (f) of section 6 of said act for a period or periods of time hereafter upon an showing that the holding of the beer and wine wholesaler's license by respondent [appellant] does present a situation which is contrary to the public welfare and morals and detrimental to the public interest.'
In 1956 the intervenor, California Beer Wholesalers Association, Inc., brought the proceedings which precipitated the present issue. The association filed an accusation upon the same grounds, now under section 23779 of the Business and Professions Code; the Department of Alcoholic Beverage Control, which superceded the Board of Equalization in this field, ordered the revocation of appellant's wholesale beer and wine license. The evidence adduced at the hearings showed no change in the manner of appellant's operations from the date of the previous proceedings. The record sets out no factual circumstances new or different from those prevailing at the earlier time. The appeals board affirmed the decision; appellant filed a petition for alternative and peremptory writs of mandate. The court granted the alternative writ but, after a hearing, denied the petition. From this decision appellant appeals. We shall explain why we have concluded that the doctrine of res judicata applies to the 1953 decision of the board. That decision collaterally estops the instant proceedings before the Department of Alcoholic Beverage Control under section 23779 of the Business and Professions Code, in the absence of a showing that conditions have changed since the prior ruling or that the current use of the license is contrary to the public welfare and morals and detrimental to the public interest.
Section 23779 of the Business and Professions Code, which an substance replaced subdivision (f) of section 6 of the Alcoholic Beverage Control Act, reads: 'No wholesale license shall be issued to any person who does not in good faith actually carry on or intend to carry on a bona fide wholesale business by sale to retail licenses of the alcoholic beverage designated in the wholesale license, and the department may revoke any wholesale license when the licensee fails for a period of 45 days actively and in good faith to engage in the wholesale business and shall revoke any distilled spirits wholesaler's license held by any person who faiils to compny with applicable person who fails to comply with applicable 23379, 23776, 23777, and 23778. Sale by a wholesale licensee to himself as a retail licensee is not the transaction of a bona fide wholesale business.' We note two points as to the literal wording of the statute. The statute reads 'may revoke' and not 'shall revoke,' thus implying that the department may exercise its discretion in the matter, although the statute does not describe the factors which are to control such discretion. Secondly, the statute does not require any showing that the licensee has violated 'public welfare or morals'; it would appear that failure to use the license for 45 days itself constitutes ground for revocation. Article 20, section 22, of the Constitution, however, provides: 'The department [Department of Alcoholic Beverage Control] shall have the power, in its discretion, to deny, suspend or revoke any specific alcoholic beverages license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals * * *.'
To reach the determinative point of this case we must first clear way the brushwood of situations in which res judicata does not apply to administrative bodies. Statewide administrative bodies fall into two classes: agencies that do, and those that do not, derive their powers from the Constitution. Res judicata applies to the former; not the latter. (Sale v. Railroad Commission (1940) 15 Cal.2d 612, 104 P.2d 38.) The Department of Alcoholic Beverage Control is, of course, a constitutionally created agency.
This classification distinguishes intervenor's cases of Empire Star Mines Co. v. California Employment Comm. (1946) 28 Cal.2d 33, 168 P.2d 686, and Ogier v. Pac. Oil & Gas Development Corp. (1955) 135 Cal.App.2d 776, 288 P.2d 101 which involve agencies created by the Legislature. Nor can intervenor successfully rely upon the language of Altadena Church v. State Board of Equalization (1952) 109 Cal.App.2d 99, 105, 240 P.2d 322, 326, to the effect that 'The doctrine of res judicata as such applies only to the decisions of a judge or a court of competent jurisdiction'; as Hasselbach v. Dept. Alcoholic Bev. Control (1959) 167 Cal.App.2d 662, 334 P.2d 1058, explains, the language of the decision reaches further than the issue resolved: 'While some of the language used by the court in the cases just cited is so broad as to preclude a decision of a constitutionally constituted administrative board operating as a collateral estoppel under the doctrine of res adjudicata, we do not believe that when those cases are read in the light of the question before the court they may be so understood. It is unquestionable that the orders of an administrative body such as the Department have in proper cases the same effect and finality as judgments of a court.' (Fn. 2, pp. 666-667, 334 P.2d p. 1061.)
We must also differentiate between the functions of the administrative body as a rule-making and a quasi-judicial body. Thus Hollywood Circle, Inc. v. Dept. of Alcoholic Beverage Control (1961) 55 Cal.2d Olive Proration Program Committee, etc. v. Agricultural Prorate Comm.,
Olive Proration Program Committee, etc. v. Agricultural Prorate Comm., People v. Lang Transportation Co.These preliminary observations strip away the brushwood; the doctrine of res judicata applies to the agency constitutionally created; it does not apply to the policy-making function of the administrative agency. As the Supreme Court has said in regard to the predecessor of the department, the State Board of Equalization, 'An examination of the Constitution of California shows that the State Board of Equalization, unlike most other agencies of statewide authority (see Laisne v. California State Board of Optometry, 19 Cal.2d 831, 123 P.2d 457), has specifically been given quasi judicial, or adjudicating power, that is, the right to make determinations of fact which are not subject to reexamination in a trial de novo in the superior court.' (Covert v. State Board of Equalization (1946) 29 Cal.2d 125, 131, 173 P.2d 545, 548.) The recent case of Hollywood Circle, Inc. v. Dept. of Alcoholic Beverage Control, supra, 55 Cal.2d 728, 13 Cal.Rptr. 104, 361 P.2d 712, states as to the Alcoholic Beverage Control Appeals Board: 'The function of the administrative agency in the present case, however, is the purely judicial one of reviewing another agency's decision to determine whether that decision conforms to the law and is supported by substantial evidence. * * * The doctrine of res judicata applies to such a decision * * *.' (P. 732, 13 Cal.Rptr. p. 107, 361 P.2d p. 715.) (To the same effect: Koehn v. State Board of Equalization (1958) 166 Cal.App.2d 109, 333 P.2d 125.) The doctrine of res judicata would apply, then, as a general proposition, to the decisions of the department.
We set out the specific requisites for the application of the doctrine to decide if they are met here. Eistrat v. J. C. Wattenbarger & Sons (1960) 181 Cal.App.2d 57, 5 Cal.Rptr. 77 succinctly states these requirements: 'The application of the principle in a given case depends upon affirmative answers to these questions: Was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits? Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? [Citations.]' (P. 61, 5 Cal.Rptr. p. 80.) (To the same effect: Poochigian v. Layne (1953) 120 Cal.App.2d 757, 763, 261 P.2d 738.) We turn to an analysis of the instant case with respect to these essentials of res judicata.
1. The question of identity of issues. While the prior case obviously covered a different 45-day period of nonuser than the later one, the violation of both pertained to substantially the same statute and involved the same issue. The difference in the calendar days of violation did not effectuate a difference in the violation.
Since the 1953 ruling preserved the possibility of a future showing of violation of public morals and detriment to the public, the license could likewise have been attacked upon those grounds in the 1957 proceedings. Intervenor made no such showing. '[T]he prior determination of an issue is conclusive in a subsequent suit between the same parties as to that issue and every matter which might have been urged to sustain or defeat its determination.' (Pacific Mutual Life Ins. Co. of California v. McConnell
Sutphin v. SpeikEven though the later charge presented a different basis for revocation in that it related to a different chronological period, the decisions have held that successive causes of action, otherwise identical, do not escape res judicata because the earlier covered a different time period than the later. Thus in Sutphin v. Speik, supra, 15 Cal.2d 195, 99 P.2d 652, 101 P.2d 497 plaintiff obtained judgment for royalties under a disputed oil and gas lease for a particular period; two years later he sued for royalties for a subsequent period. Defendant's objection that res judicata did not apply met this answer of Chief Justice Gibson, speaking for the court: '[W]here the causes of action are different but the parties are the same, the doctrine applies so as to render conclusive matters which were decided by the first judgment. As this court said in Todhunter v. Smith, 219 Cal. 690, 695, 28 P.2d 916, 918: 'A former judgment operates as a bar against a second action upon the same cause, but, in a later action upon a different claim or cause of action, it operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.' In the instant case, for example, the severable installments of royalties due gave rise to separate cases of action; but a determination of a particular issue in the prior action is res judicata in the second action.' (Pp. 201-202, 99 P.2d p. 655, 101 P.2d 497.) (To the same effect: Zaragosa v. Craven (1949) 33 Cal.2d 315, 321, 302 P.2d 73, 6 A.L.R.2d 461; Goodspeed v. Great Western Power Co. (1939) 33 Cal.App.2d 245, 265, 91 P.2d 623, 92 P.2d 410; Tait v. Western Md. Ry. Co. (1933) 289 U.S. 620, 53 S.Ct. 706, 77 L.Ed. 1405.)
2. The question of a final determination on the merits. We believe that the prior adjudication of the issue constituted a determination of the merits. The various findings of fact of the board in the 1953 proceedings demonstrate that the board investigated the merits of the controversy. It is true that the board ordered the accusation dismissed without prejudice to a future filing based 'upon a showing that the holding of the beer and wine wholesaler's license by respondent does present a situation which is contrary to the public welfare and morals and detrimental to the public interest.' The order necessarily implies, however, that in the absence of the future showing of 'a situation which is contrary to the public welfare and morals and detrimental to the public interest' the instant dismissal stands. The determination constituted a final ruling, with prejudice, as to the matters before the board.
The words 'without prejudice' set up no rigid proclamation that the order or judgment to which they append cannot be final. The examination of the pleadings, findings and judgment will disclose the nature, the finality or lack of finality, of the ruling. (Olwell v. Hopkins (1946) 28 Cal.2d 147, 168 P.2d 972; McMickens v. McMickens (1934) 220 Cal. 731, 32 P.2d 597.) Thus the United States Supreme Court in Arkadelphia Co. v. St. Louis S.W. Ry. Co. (1919) 249 U.S. 134, 147, 39 S.Ct. 237, 242, 63 L.Ed. 517, held 'That the reversal was 'without prejudice' did not deprive the decrees of conclusiveness as to past transactions, but only prevented them from being a bar to future suits for injunction upon a showing of changed conditions.' (Emphasis added.) The converse follows: if an Goddard v. Security Title Ins. & Guar. Co.
The cases cited by respondents (Parke, Austin & Lipscomb v. Federal Trade Comm. (1944) 2 Cir., 142 F.2d 437; Hastings Mfg. Co. v. Federal Trade Commission (1946) 6 Cir., 153 F.2d 253; G. C. Connecticut, Limited v. National Labor Relations Board (1939) 7 Cir., 108 F.2d 390; Fleishbein v. Western Auto Supply Agency (1937) 19 Cal.App.2d 424, 65 P.2d 928) do not answer the proposition stated above. In the three cited cases which involve administrative proceedings, the tribunal did not decide the case on the merits; in the fourth cited case, the court's statement does not apply here.
Thus, in Parke, Austin & Lipscomb the prior 'proceeding' consisted of the commission's 'letters' (142 F.2d p. 441) which do not suggest even the scintilla of a decision; in Hastings Mfg. Co. the court expressly refuses to 'pursue the inquiry' into the effect of res judicata because 'the hearing upon the first complaint did not proceed to a decision upon the merits' (153 F.2d p. 254); in G. C. Connecticut, Limited the N.L.R.B., permitting the union to withdraw its charge, dismissed the complaint without prejudice, awaiting the decision of the United States Supreme Court in National Labor Relations Board v. Jones & Laughlin (1937) 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 to determine the applicability of the Act to the involved situation. Fleishbein states that 'Dismissals of actions without prejudice ordinarily indicate that such judgments of dismissal affect no right or remedy of the parties and that there has been no decision of the case upon the merits.' (P. 427 of 19 Cal.App.2d, p. 929 of 65 P.2d; emphasis added.) In the instant matter, there was, of course, a decision upon the merits.
3. The question of the identity of the parties. We cannot sustain intervenor's contention that a lack of identity of the involved agencies as well as of the accusers destroys one prerequisite for the application of res judicata.
While it is true, as intervenor states, that the 'Department of Alcoholic Beverage Control was created in 1955 by Constitutional Amendment for the express purpose of changing the administration of the Alcoholic Beverage Control Act by the State Board of Equalization' the department is the successor to, and in privity with, the Board of Equalization. Whatever its title, the administrative agency represents the people of the state and it is the identity and continuity of that representation which controls.
The seeming difference in accusers succumbs to the same observation. While the District Liquor Control Administrator brought the accusation in the prior proceeding and the intervenor did so in the instant case, each accuser avowedly represented the public interest. In both proceedings the moving parties brought charges to determine the same matter of public interest before the identical board which had been altered only as a nomenclature.
Smith v. City of Los Angeles (1961) 190 A.C.A. 141, 11 Cal.Rptr. 898, states the relevant principle: 'Identity of parties in the successive actions is a requirement in the application of the doctrine of res judicata. Where the plaintiff in the prior action commenced the action, as a citizen and taxpayer on behalf of himself and others similarly situated, to determine a matter of general public interest, and where a different plaintiff in the succeeding action commenced that action as a citizen and taxpayer to determine the same matter of public interest, there is identity of parties within the requirement under the doctrine of res judicata.' (P. 159, 11 Cal.Rptr. 898, 907.) (See also French v. Rishell (1953) 40 Cal.2d 477, 254 P.2d 26; Price v. Sixth District Agricultural Assn. (1927) 201 Cal. 502, 258 P. 387; Coachella Valley County Water District v. Stevens (1929) 206 Cal. 400, 410, 274 P. 538.)
We conclude that the 1953 decision met the prerequisites for the application of res As to the first argument, the presence of error cannot in itself defeat the application of res judicata. If an alleged error in a decision could destroy its future binding effect the doctrine would be practically obliterated. The pertinent question must be, not whether the questioned decision was correct, but whether it issued from a board which had jurisdiction of the subject matter and the parties. (Baltimore S. S. Co. v. Phillips (1927) 274 U.S. 316, 47 S.Ct. 600, 71 L.Ed. 1069; Hollywood Circle, Inc. v. Dept. of Alcoholic Beverage Control, supra, 55 Cal.2d 728, 13 Cal.Rptr. 104, 361 P.2d 712.
The cases cited by intervenor and respondents do not sustain their proposition. Although intervenor cites Blatz Brewing Co. v. Collins (1945) 69 Cal.App.2d 639, 160 P.2d 37 for the principle that the action of the Board of Equalization beyond its authority must be void, there, the board, acting in its rule-making capacity, issued a regulation which in effect usurped the power of the Legislature by creating a new kind of liquor license. We have pointed out the distinction between the rule-making and the adjudicatory functions of administrative tribunals, and the applicability of res judicata solely to the latter. Since Joseph George, Distr. v. Dept. of Alcoholic Beverage Control (1957) 149 Cal.App.2d 702, 308 P.2d 773; Tux Ginger Ale Co., Ltd. v. Davis (1936) 12 Cal.App.2d 73, 54 P.2d 1122, and Board of Trustees etc. v. State Board of Equalization (1934) 1 Cal.2d 784, 37 P.2d 84, 96 A.L.R. 775 fail to meet the requirement that the primal proceeding consist of an adjudication on the merits, they are not pertinent to the present question. In none of these cases had there been prior hearings and decisions upon the merits. Instead, licensees there had contended that the doctrine of equitable estoppel prevented the agency from interpreting or applying rules and regulations, applicable to licensees, in a manner different than the agency had previously declared. Obviously such situations do not at all affect the question before us.
The second argument, directed against the prolongation of an alleged erroneous decision of the board, must be reconciled with the jarring facts that the board analyzed the evidence, construed the statute, and decided not to revoke the license. Does the accused win no protection by such a decision? Is he the subject of future accusations ad infinitum based upon the same facts at 45-day intervals? While the department is not bound by the decision as to the different situations or the changed circumstances of the future, its complaint that it should not be bound by its own interpretation of the unaltered facts of the past suggests a doubtful retreat from its own action.
The third contention that prior erroneous administrative interpretation does not control the department, citing the George case, does not meet the question of the res judicata effect of a prior adjudication. It relates, again, to the recognized proposition that an administrative body is not imprisoned in a strait jacket as to its rule-making powers and the application of such rules.
The final argument as to the absence of legal damage by the revocation of the license is not supported by the record; in any event, we know of no rule that holds that the applicability of res judicata depends upon a showing of legal damage.
Since we have concluded that res judicata operates as a collateral estoppel as to the Finally, we believe our resolution of this case calls for some analysis of its broader social aspects. Our ruling that res judicata applies to the decision of the Board of Equalization, a body created by the Constitution, exemplifies the current development of the cases in insisting upon the administrative responsibility of licensing agencies. Such a requirement is part of the second step in the evolution of the legal treatment of such administrative tribunals. The first step consisted in the acceptance of such a body as an integral part of the legal system. There were those 'who, a generation ago condemned the growth of the administrative process as an intolerable encroachment on separation of functions and the rule of law.' (Friedman, Law in a Changing Society (1959) p. 358.) That opposition having now been largely overcome, and the administrative tribunal having won its place in the law, we have entered the present legal phase of defining its role and its limitations.
Parker, Administrative Res Judicata (1945) 40 Ill.L.Rev., pages 56, 83, summarizes a plea for the treatment of administrative agencies in the same manner as judicial bodies in these words: 'And why should court decisions, whose resjudicata nature has never been doubted, be less important for the public welfare than administrative orders, particularly in a system of law where every court opinion serves as a binding precedent? The doctrine of res-judicata itself is an important rule of public policy that deserves every protection.'
The need for the application of due process to the administrative tribunal becomes deeper as the use of the licensing power becomes greater. The counterbalance to the control which a complex society thus imposes upon its members lies in the protection of the fundamental rights of those regulated. One such right consists in protection against successive charges upon the same facts for forfeiture of a business license. The cases have properly held that such a protection at least inures to the individual who is regulated by the constitutionally created board. This protection is essentially one part of the province of res judicata; it was wrongfully invaded here.
The tremendous growth and sweep of modern licensing boards, affecting the individual's right to earn a living in multitudinous aspects, is described in Gellhorn, Individual Freedom and Governmental Restraints (1958) ch. 3, p. 105. See Hale, Freedom Through Law (1952) pp. 335-336.
Gellhorn calls attention to one court's comment upon the need for legal scrutiny of licensing boards in situations in which there is a 'transfer of governmental power into the hands of a private group.' (P. 142). The court in State v. Harris (1940) 216 N.C. 746, 6 S.E.2d 854, 128 A.L.R. 658, declared that licensing boards are 'legislatively launched and put on their own. * * * Without the aid of the statute these groups would be mere trade guilds, or voluntary business associations; with it they become State agencies, retaining, however, as far as possible, distinctive guild features. An exclusive self-governing status is achieved by the device of securing a majority membership on the administrative boards or commissions, and in aid of this the power of the State is heavily invoked by way of prosecution in the criminal courts of those who are unable to secure the approval of the Board and obtain license to engage in the occupation.' (Pp. 858-859 of 6 S.E.2d.)
We reverse the judgment.
BRAY, P.J., and SULLIVAN, J., concur.