Associated Creditors' Agency v. Davis, S.F. 23118

• Decision Date: 21 January 1975
• Docket Number: S.F. 23118
• Court: California Supreme Court
• Parties: , 530 P.2d 1084 ASSOCIATED CREDITORS' AGENCY, a corporation, Plaintiff and Appellant, v. Richard F. DAVIS et al., Defendants and Respondents. In Bank

Page 772

118 Cal.Rptr. 772

13 Cal.3d 374, 530 P.2d 1084

ASSOCIATED CREDITORS' AGENCY, a corporation, Plaintiff and Appellant, v. Richard F. DAVIS et al., Defendants and Respondents.

S.F. 23118.

Supreme Court of California,

In Bank.

Jan. 21, 1975.

John G. Evans and Robert G. Witser, San Francisco, for plaintiff and appellant.

Fitzsimmons & Hawthorne, Edward R. Fitzsimmons, Ken J. Fishbach, Jr., Anthony W. Hawthorne and William L. Mahaffey, Oakland, for defendants and respondents.

SIMS, ^* Justice (Assigned).

Plaintiff, an assignee of eight creditors who furnished alcoholic beverages and several creditors who furnished provisions and supplies to premises licensed in the name of defendant partners, has appealed from a judgment which denied it any recovery because the concessionaire of the bar and restaurant on the premises, who ordered and received the merchandise, was an independent operator without actual or apparent authority to obligate the licensees. The plaintiff does not seriously question the trial court's finding that there was no actual agency or authority. It contends that the licensed partners were liable as a matter of law under the constitutional and statutory provisions governing the sale, distribution, and consumption of alcoholic beverages, and that the evidence fails to support the findings that the concessionaire did not have ostensible authority to create a liability in the partners for the purchase price of the goods received.

It is concluded that the findings of no actual authority are sustained by the evidence, that there is no liability created by law, that the finding that the partners did not engage in any conduct which by implication represented to suppliers that they were operating the bar and restaurant is not sustained by the evidence because the partners did permit the concessionaire to use and post their liquor license, and that the findings which show that the suppliers did not rely on any such representation are not sustained by the evidence. The judgment must be reversed and the case remanded for reconsideration of the claims of the liquor wholesalers in the light of the principles reviewed below.

On June 10, 1966, the defendants Davis, Viviani, Spaggiari and Fitzsimmons as general partners entered into a limited partnership agreement under the name Willow Park Public Golf Course for the purpose of constructing, operating, maintaining and managing a public golf course, driving range, clubhouse and related facilities on lands which had been leased from East Bay Regional Park District. During the ensuing months, while construction of facilities, consisting of a restaurant and bar, golf shop and locker room, proceeded, arrangements were made for the operation of the restaurant and bar.

Joe Padovan, an experienced bartender, who had a cousin employed by the Department of Alcoholic Beverage Control, ascertained that special licenses were available for facilities on public property. (See Bus. & Prof.Code, § 23824, fn. 10 below.) Padovan assisted the partners in connection with their application for a license and in securing the requisite consent of the governing board of the regional park district to the operation of a bar on the premises. He agreed to and did put up a deposit of $6,340, which was the approximate amount paid for the license.

On September 28, 1966, the general partners recorded the limited partnership agreement with the county clerk, and in their name as general partners doing business as Willow Park Public Golf Course applied for a license for an on-sale general eating place for premises in the process of construction (see Bus. & Prof.Code § 24044). On October 3, 1966, a letter agreement between the partnership, executed on its behalf by the general partners, and Joseph Padovan and Paul Leroy Abowd, was prepared. One copy of the agreement indicates acceptance by the latter parties on November 7, 1966, and another on December 1, 1966. The terms of this agreement, which grants Padovan and Abowd the exclusive beverage and food concession at the golf course premises, are reviewed below. On November 17, 1966, the department's investigator recommended approval of the license and a supervisor and the district administrator endorsed the approval the following day. The report refers to the contract with Padovan and Abowd in particulars set forth below.

On December 9, 1966, the license was issued. Prior to this date Padovan and Abowd had ordered and arranged for the delivery of liquors and supplies to the bar and restaurant, the former to be delivered when the license was issued. Under the agreement the concessionaires were tenants, and on Abowd's withdrawal a few months after commencing business, Padovan alone was a tenant on premises leased from the partnership. Under the terms of the agreement he not only deposited the sum paid for the liquor license, but also undertook to and did stock the restaurant and bar and furnish cash registers. He filed and advertised that he was doing business under the fictitious name 'Padovan's on the Green.' (See Civ.Code, former §§ 2466--2477, now Bus. & Prof.Code, §§ 17900--17930.) He obtained his own state sales tax permit, his state employer's permit, his own federal liquor dealer's stamp and his own county dance permit. He hired and fired the from 30 to 60 part-time and full-time employees necessary to run the business, and paid their withholding and social security taxes. He received no compensation from the partners and he made all his own arrangements with respect to which food and beverage wholesalers he would deal with, ordered through himself and his employees, and paid the bills with his checks. The matches and menus bore the name in which he conducted his business, and he did his own advertising and paid a share of joint advertising with the golf course.

On January 6, 1967, an attorney for the department reviewed the agreement dated October 3, 1966, and concluded, 'Such an Agreement, in order to be acceptable to the Department, should be accompanied by an application to transfer the license to the concessionaires.' ¹ He recommended that the supervisor who approved the license outline the policy of the department with the lawyer who was one of the general partners with a view to either amending the agreement or initiating proceedings to transfer the license. Thereafter, the department's attorney met with the partner suggested. The results arrived at are disputed and are reviewed below. In February 1968, an investigation was made and the filing of an accusation was recommended. An accusation charging the licensee with violation of section 23355 of the Business and Professions Code (see fn. 6 below) was filed March 6, 1968.

Meanwhile, Padovan had incurred financial difficulties. Among other things his safe was robbed for an alleged loss of $6,000, of which only $4,000 was covered by insurance. At his request the attorney member of the partnership prepared articles of incorporation for Padovan's on the Green which were filed with the Secretary of State on January 26, 1968. It was planned that some of the partners would advance capital necessary to keep the business afloat in return for stock. Padovan, however, preferred to keep his interest undiluted and secured private backing to stay in business. On March 30, 1968, still unable to make ends meet, he surrendered the restaurant and bar to the licensees who allegedly agreed to pay him $14,217.40, representing the cost of liquor, $10,050.50, and food, $4,166.90, in his inventory. On April 3, 1968, Julliard, Incorporated and Max Sobel, two liquor wholesalers, assigned their accounts to the San Francisco Board of Trade. The rest of the creditors involved apparently followed suit. In May each executed an assignment of its claim against the general partners, naming them and 28 fictitiously named limited partners, 'Individually and dba Willow Park Public Golf Course and/or PADOVAN'S ON THE GREEN.' On May 22, 1968, the Board of Trade assigned all of the claims to the plaintiff. On June 14, 1968, Padovan filed a petition in bankruptcy in which he listed the accounts the subject of this suit as unsecured claims, and the $14,217.40 allegedly due for the inventory as personal property. Notice to creditors was given June 17, 1968, designating July 12, 1968, as the time for the first meeting of creditors. The present action was filed July 17, 1968, on a complaint that had been verified May 24, 1968.

In December 1968, the department wrote the attorneys for the licensees concerning a proposed stipulated settlement of the outstanding accusation, and threatening further action. The matter was finally concluded July 7, 1969, by an order accepting a fine of $500 in lieu of a 30-day suspension which had been proposed in a stipulation executed by the licensee. The department report approving the settlement recites, 'The accusation alleged an ownership interest in the licensed business in persons other than those set forth on the license. The failure to disclose was never intentional, it generally being the typical situation where a food and beverage concession was granted in excess of the authority of the licensees to do so under the Alcoholic Beverage Control Act. . . .'

I

The court received evidence outlining the relationship of the licensees and the concessionaire as outlined above, and evidence concerning the manner in which each of the various wholesalers of liquor and other suppliers ² established and maintained its account with the restaurant and bar. It made findings, reviewed below, that the defendant licensees were not liable to the creditors on the theory of actual or ostensible authority, and gave judgment for the defendants.

If from all the facts only a single inference and conclusion can be drawn to the effect that the concessionaire had the power and authority to create a liability enforceable against the defendants either because the concessionaire was the...