LICENSES ‑- INTOXICATING LIQUOR ‑- ISSUANCE OF RETAIL LIQUOR LICENSE TO SPOUSE OF EMPLOYEE OF LIQUOR DISTRIBUTOR

LICENSES ‑- INTOXICATING LIQUOR ‑- ISSUANCE OF RETAIL LIQUOR LICENSE TO SPOUSE OF EMPLOYEE OF LIQUOR DISTRIBUTOR

Consideration of the applicability of RCW 66.28.010 to a certain factual situation involving a married couple of which the wife is the owner of a small grocery store in connection with which she holds retail beer and wine licenses while the husband, in turn, is a salaried truck driver for a beer distributor which holds various wholesale liquor licenses.

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                                                                   April 24, 1979

Honorable L. H. Pedersen
Chairman
Liquor Control Board
Capitol Plaza Building
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1979 No. 19

Dear Sir:

            By recent letter you directed our attention to the following provisions of RCW 66.28.010, a part of the state liquor code:

            "No manufacturer, importer, or wholesaler, or person financially interested, directly or indirectly, in such business, whether resident or nonresident, shall have any financial interest, direct or indirect, in any licensed retail business, . . . nor shall any manufacturer, importer, or wholesaler advance moneys or moneys' worth to any such licensed person under any arrangement whatsoever, . . . ."1/

             [[Orig. Op. Page 2]]

            You then requested our opinion regarding the applicability of this statute to a certain factual situation involving a recently married couple.  Prior to the marriage the wife (according to your letter) owned, and still owns, a small grocery store in connection with which she holds retail beer and wine licenses issued pursuant to the pertinent provisions of the state liquor code.  The husband, in turn, is a salaried truck driver for a beer distributor which holds various wholesale liquor licenses and was likewise so employed before the marriage.  Specifically, your question is:

            "Does RCW 66.28.010 preclude the continued retail liquor licensure of a person [the wife] who, subsequent to receiving a license, marries a person [the husband] who is employed by a beer wholesaler as a truck driver?"

            Additionally, you have asked the following further question:

            "If the answer to the above question is in the affirmative, would the fact that the parties to the marriage entered into a bona fide separate property agreement, providing in substance that the earnings of one spouse as such employee of a beer wholesaler on the one hand, and the profits, if any, of the other spouse from the operation of the retail liquor establishment on the other hand, would be treated as their separate property, call for a different conclusion?"

            Based upon the facts stated in your letter and above outlined, we answer your first question in the negative for the reasons set forth in our analysis, thereby rendering full consideration of your second question unnecessary.

                                                                     ANALYSIS

            Question (1):

            Three issues are raised by your first question.  They are:

            (1) Does the fact that the husband in this case is a salaried employee (truck driver) of a licensed beer wholesaler mean that he has a "financial interest," direct or indirect, in the business of that wholesaler by whom he is employed?

             [[Orig. Op. Page 3]]

            (2) Does the fact that the husband is married to the holder of a retail liquor license mean that he has a "financial interest," direct or indirect, in the licensed retail business of his wife?

            (3) Without regard to either of the foregoing issues, does the payment of a salary or wages to the husband by his employer constitute an "advancement of moneys' worth" by the employer to the wife who holds a retail liquor license?

                                                                            (1)

            The key term "financial interest" is expressly defined in RCW 66.28.010,supra, as follows:

            ". . .

            "Financial interest, direct or indirect, as used in this section, shall include any interest, whether by stock ownership, mortgage, lien, or through interlocking directors, or otherwise. . . ."

            In another statutory context it was, however, held by our state supreme court inMumma v. Brewster, 174 Wash. 112, 24 P.2d 438 (1933)2/ that a mere salaried employee was not "financially interested" in the business of his employer, a power company, so as to bar him from serving as mayor of a town which purchased supplies from that company.  In so concluding the court reasoned as follows:

            "Downing as an employee to the public service corporation is paid a stated salary and no commissions based on receipts or earnings.  His position and his salary, no doubt, depend upon the prosperity of his employer, and perhaps, in a remote degree, that prosperity in some small part depends upon the profitable furnishing of supplies to the town, but to hold that this constitutes an indirect interest in Downing would be to base a presumption upon a presumption, which may not legally be done.

             [[Orig. Op. Page 4]]

"To come within the statutory prohibition, it must appear that Downing directly or indirectly profited from the relation between his employer and the town of which he is an officer.  The facts found utterly fail to show any such situation.  It cannot be presumed, without any proof on the subject, that Downing owes his employment to the fact that he is the mayor, or that, if the town should cease to deal with his employer, he would lose his position or receive less compensation for his services.  This situation, coupled with the finding,

            "'That said Downing exercises no judgment, discretion, power or option in furnishing said electric power to said town, nor the rates charged or paid therefor,' makes very plain the fact that the evils which the statute is designed to prevent are not here shown to be present."  174 Wash. at 116-117.

            Some years later, in a letter opinion dated September 22, 1964, to then State Representative Ed Morrissey (copy enclosed) we cited this decision in concluding that RCW 66.28.010,supra, does not ". . . prohibit employment of the spouse of a wholesale liquor licensee's employee by a retail liquor licensee."  In our opinion the same reasoning is equally applicable in the instant case.  To begin with, the definition of "financial interest" in RCW 66.28.010, supra, denotes to us some form of ownership, equity or security interest in the business or property of a manufacturer, importer, wholesaler or licensed retail liquor operation.  A mere salaried beer truck driver, however, has no such interest.  Nor is he, by reason of his employment, in a position which entitles him to share in the profits of his employer or to participate in significant policy or management decisions.  Therefore, in our opinion, he (i.e., the husband in this case) simply is not a ". . . person financially interested, directly or indirectly. . ." in the business of his employer for the purposes of the statute.3/

             [[Orig. Op. Page 5]]                               (2)                                                                       

            Having so resolved this first issue we need not here concern ourselves with the question of whether, by reason of his marriage, the husband in this case has a "financial interest," direct or indirect, in the licensed retail liquor business being conducted by his wife.  Moreover, we further note that this issue is currently pending in litigation before the Thurston County superior court in another case involving a somewhat different factual situation.  We have reference toJunt v. Washington State Liquor Control Board, Thurston County Cause No. 79-2-00277-9 wherein the husband is (or was) a shareholder in a certain liquor distributing company and the wife is employed by a retail grocery store which holds state retail liquor licenses.  Accordingly, in any event, it would not be appropriate for us to express any further opinion on that question here.

                                                                            (3)

            This leaves us, then, with the third issue above stated; i.e., does the beer distributor's payment of a salary or wages to the husband constitute an advancement of "moneys' worth" to a retail liquor licensee (i.e., the wife) so as to invoke the further prohibition of RCW 66.28.010,supra, relative to such transactions?

            Again, we answer in the negative.  In so concluding we are aware of AGO 1935-36, page 100, an opinion dated January 18, 1936, to the Liquor Control Board in which the same statutory prohibition was deemed to be violated as a result of the employment, by a brewer, of a salesman who was, at the time, financially interested in a certain retail liquor establishment.  It will be noted, however, that in the factual situation there involved the salesman already had the pertinent interest in the subject retail establishment at the time he was apparently offered employment by the brewer.  Here, on the other hand, the order of things is precisely the reverse;i.e., the husband was already employed by the beer distributor at the time he married the woman who is now his wife and, thereby, arguably obtained a "financial interest" in her business.  Furthermore, as recently explained in AGLO 1973 No. 28, copy enclosed (also written to the Liquor Control Board), the phrase "advance moneys or moneys' worth" generally refers to such matters as loans or other extensions of credit and thus would not encompass the mere payment of a salary or wages by an employer to its employee‑-even though that employee might be married to a holder of a retail liquor license, as here.

             [[Orig. Op. Page 6]]

                                                                      Summary

            For the foregoing reasons, we therefore answer your first question, as above stated, in the negative. RCW 66.28.010, supra, does not preclude the continued retail liquor licensure of a person who, subsequent to receiving a license, marries a person who is employed by a beer wholesaler as a truck driver.

            Question (2):

            This answer to your first question, of course, renders consideration of your second question unnecessary.  In theory, however, it most certainly would appear to us that a bona fide separate property agreement could be of some legal significance in a case which might otherwise fall under the statutory prohibition here involved.  Assuming, arguendo, that a husband must be deemed to be "financially interested" in the income of his wife under ordinary Washington community property law principles (see RCW 26.16.030),4/ the formulation and execution of a valid separate property agreement would seemingly have the effect of "breaking the chain" by terminating each spouse's interest in the income and/or property under the other.  Cf.,State v. Miller, 32 Wn.2d 149, 201 P.2d 136 (1948) in which the court, while holding that the interest of one spouse in the earnings of the other under community property law principles was such as to constitute a "beneficial interest" under a statute relating to municipal contracts,5/ nevertheless inferred that its decision might well have been different had a bona fide separate property agreement been established.