Request By:
Mr. Leon J. Shaikun
Attorney at Law
504 Kentucky Home Life Building
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Suzanne Guss, Assistant Attorney General
This is in response to your request for an opinion of this Office as to whether malt beverages may be distributed in the Commonwealth of Kentucky without prior written approval of both the brewer and supplier, pursuant to House Dill 161, paragraph 3 (hereinafter KRS 244.585(3) eff. 7-15-82). Stated otherwise, you have requested an opinion as to whether the territorial agreement between distributor and brewer or supplier will satisfy the requirement set forth in KRS 244.585(3).
Your request presents the following factual situation. Your client, Metropolitan Distributors, Inc., is a non-resident distributor licensed to do business in the State of Louisiana and licensed to sell malt beverages to distributors in Kentucky in compliance with KRS 243.040(10) and Regulation 804 KAR 4:190. Metropolitan is currently distributing Coors Beer in Kentucky through six different licensed malt beverage distributors.
The statute in question, KRS 244.585, was recently enacted by the 1982 General Assembly and is effective July 15, 1982. A review of pertinent provisions of the statute will assist in resolution of the question presented. KRS 244.585(1) provides that it shall be unlawful for any distributor to sell any brand of malt beverage in the Commonwealth of Kentucky except in the territory described in a written agreement between the supplier or brewer and distributor. Subsection (1) also provides that no supplier or brewer shall provide by the written agreement for the distribution of a brand of malt beverages to more than one distributor for all or any part of the designated territory. Such territorial agreements shall be filed with the Department of Alcoholic Beverage Control.
Subsection (3) provides that a distributor may sell only to those licensed retailers, religious, charitable or fraternal organizations located within the designated territory and to employees and other distributors of the same brand. No brand of malt beverage may be sold in Kentucky without prior written approval of the brewer and supplier filed with the department.
Subsection (4) provides that a territorial designation in any agreement between a distributor and brewer or supplier shall be modified only in accordance with the rights and duties of the distributor and brewer or supplier contained in any written agreement between them or by such other action of the brewer, supplier or distributor and such modification shall be filed. When a distributor is prevented from selling or servicing retailers in his territory due to certain causes beyond his control another distributor of the same brand may be allowed to service that territory upon approval of the brewer or supplier.
From the foregoing provisions it is apparent that the Legislature intended by this Act to establish territorial exclusiveness for distributors manifested in a written agreement between the distributor and brewer or supplier. Legislative intent may also be gleaned from the title of an act. First Bank and Trust Company of Princeton, Kentucky v. Feuquay, 405 F.2d 990 (6th Cir. 1969). In the instant case the act is entitled "244.585 Distributor of malt beverages not to sell outside his designated territory; contract between distributor and supplier. " The paragraph preceding the enactment describes the legislation as "An ACT relating to territorial exclusivity in the distribution of malt beverages. " In all portions of the statute, the phrase "brewer or supplier" is repeatedly used with the exception of the last sentence of subsection (3) which requires prior written approval of the "brewer and supplier" for the sale of a particular brand. Inasmuch as the thrust or gist of the legislation is to establish territorial exclusivity vis-a-vis an agreement between distributor and supplier or brewer, the last sentence appears to be inconsistent with the purpose or intent behind the other portions of the statute. Interrelated sections enacted as parts of a single integrated statute must be construed in harmony with each other. Daviess County v. Snyder, Ky., 556 S.W.2d 688 (1977); Bischoff v. Hennessy, Ky., 251 S.W.2d 582 (1953). Conjunctive words may be replaced with disjunctive words where failure to make such conversion would thwart the intent of the legislature. Boron Oil Company v. Cathedral Foundation, Inc., Ky., 434 S.W.2d 640 (1968). A literal construction of subsection (3) does not, in the instant case, conform to the legislative intent. As stated in Duncan v. Wiseman Baking Company, Ky., 357 S.W.2d 694, 698 (1961):
True, the Legislature used the connective word 'and.' But since the popular use of the words 'or' and 'and' is loose and frequently inaccurate, the courts may and should change 'and' to 'or,' and vice versa, whenever such conversion is required, inter alia, to effectuate the obvious intention of the Legislature and to accomplish the purpose or object of the statute (cite omitted).
The propriety of substituting "or" for "and" is also discussed in Asher v. Stacy, Ky., 185 S.W.2d 958, 959 (1945):
Not the literal language but the true intention or will of the Legislature is the law. That is what the courts endeavor to ascertain and declare and what the executive departments must obey. All rules of statutory construction have that in view. Since words are used to express an idea, if that idea is manifest, although inaptly or obscurely expressed, no usurpation is committed by declaring the legislative intent and no violence done by supplying, deleting or changing words or their arrangement in clarification. The general intent is the key to each part of an act. Often its purpose and its entire tenor disclose the inadvertent or careless misuse or omission of a word or phrase, and the courts are justified in correcting or supplying the proper language (cites omitted) . . . . [While and' and 'or'] are not treated as interchangeable, and should be followed when their accurate reading does not render the sense dubious, their strict meaning is more readily departed from than that of other words, and one read in place of the other in deference to the meaning of the context. (Emphasis added).
In order to effectuate the intent of KRS 244.585 and to construe subsection (3) in harmony with the others, the phrase "brewer and supplier" must be interpreted as "brewer or supplier. " A literal construction of the statute would lead to an absurd result, which is to be avoided. Chilton v. Gividen, Ky., 246 S.W.2d 133 (1952). For example, KRS 243.180(1) permits a distributor to purchase malt beverages from Kentucky breweries or from out-of-state breweries or distributors licensed to do business by the state in which they are located or to import a non-U.S. brand malt beverage from an importer or wholesaler. A distributor which purchases a brand of malt beverage directly from an out-of-state brewer, as KRS 243.180(1) permits, would be required by a literal construction of KRS 244.585(3) to obtain prior written approval of the out-of-state distributor even though such out-of-state distributor was not a party to the transaction. By the same token, a distributor which purchases a non-U.S. brand malt beverage from an importer would be required to obtain prior written approval of the foreign brewer and importer, if subsection (3) were literally construed. Clearly, a literal construction leads to an unwise and unsound result. The new legislation must be construed in connection and in harmony with existing statutes. Brown v. Hoblitzell, Ky., 307 S.W.2d 739 (1957). Accordingly, KRS 244.585(3) must be interpreted to require the prior written approval of the supplier or brewer for the sale of a particular brand of malt beverage.
We trust this information has been helpful. If you have any additional questions, please contact us.