Bisco's, Inc. v. Michigan Liquor Control Commission

• Decision Date: 27 January 1976
• Docket Number: M,No. 9,9
• Citation: 238 N.W.2d 166,395 Mich. 706
• Parties: BISCO'S, INC., Plaintiff-Appellant, v. MICHIGAN LIQUOR CONTROL COMMISSION and the Village of Emmett, Defendants-Appellees.
• Court: Michigan Supreme Court

Page 166

238 N.W.2d 166

395 Mich. 706

BISCO'S, INC., Plaintiff-Appellant, v. MICHIGAN LIQUOR CONTROL COMMISSION and the Village of Emmett, Defendants-Appellees.

No. 9, March Term.

Supreme Court of Michigan.

Jan. 27, 1976.

Durant, Talbot, Grant & McQuarrie, Richard Durant, Detroit, for plaintiff-appellant.

Frank J. Kelley, Atty. Gen. of Mich., Robert A. Derengoski, Sol. Gen., Richard I. Rubin, Asst. Atty. Gen., Lincoln Park, for defendant Michigan Liquor Control Commission.

Dennis O. Clyne, Clyne, Clyne & Mosier, Yale, for Village of Emmett.

WILLIAMS, Justice (to reverse and remand).

The facts of this case ¹ have been adequately outlined by my brother, Justice Levin. The issues raised are essentially the same as those resolved today in Bundo v. City of Walled Lake, 395 Mich. 679, 238 N.W.2d 154 (1975).

In Bundo we held that an individual seeking a renewal of a class C liquor license under § 17 of the Michigan Liquor Control Act (MLCA) ² has an 'interest' in 'property' such that he is entitled to due process protection. For the reasons set forth in Bundo we find the plaintiff, as a liquor licensee, is entitled to due process protection in seeking renewal of a Class B--Hotel Liquor License. ³

The Court of Appeals, in dismissing plaintiff's complaint, held that it was precluded by Hanson v. Romeo Village Council, 339 Mich. 612, 64 N.W.2d 570 (1954) from reviewing 'local legislative body's action with respect to approval of liquor licenses'. In Bundo we held that arbitrary and capricious actions by local legislative bodies in recommending to the Michigan Liquor Control Commission (MLCC) that liquor licenses not be renewed are subject to judicial review and that Hanson v. Romeo Village Council, supra, being inconsistent with this conclusion 'no longer can be followed', Bundo, supra, 395 Mich. 679, 238 N.W.2d 154.

Therefore, we reverse the Court of Appeals and remand for further proceedings in light of our decision in Bundo.

On remand, the Court should determine whether the Village of Emmett was properly joined as a party defendant in an action for writ of mandamus against the MLCC in the Court of Appeals.

If the Court of Appeals finds that the Village of Emmett is a proper party defendant, then a determination should be made whether or not the Village Council has afforded plaintiff proper due process protection as outlined in Bundo, supra, 679, 238 N.W.2d 154. ⁴

Finally, if the case is not disposed of on other grounds, the Court should determine whether the Village Council recommendation to the MLCC not to renew plaintiff's license was arbitrary and capricious.

In its brief and during oral argument the MLCC took great pains to emphasize that independent of any objections the Village of Emmett had to renewal of plaintiff's license, grounds existed which would justify non-renewal.

The Commission alleged its records would reveal that 'Bisco's has, in fact, failed to comply with the terms of its provisional Class B--Hotel license in that it is operating a bar business and has no interest in operating a hotel business'. Appellee's Brief, p. 7.

The pendency of an action challenging the propriety of the Village of Emmett's recommendation not to renew plaintiff's license, should not delay MLCC proceedings to determine whether plaintiff's request for renewal should be denied for failure to comply with the condition attached to his license or with statutory requirements for a Class B--Hotel license. ⁵

The Court of Appeals is reversed and the matter is remanded to the Court of Appeals for further proceedings. No costs, a public question.

COLEMAN and FITZGERALD, JJ., concur.

LINDEMER and RYAN, JJ., not participating.

LEVIN, Justice.

In 1973, Bisco's was issued a B-Hotel liquor license ¹ with dance entertainment permit by the Liquor Control Cimmission with the approval of the Village of Emmett. ²

In January, 1974, topless entertainment began at Bisco's. Two months later, the Village enacted an ordinance banning topless exposure in public places. The ordinance was found unconstitutionally overbroad and its enforcement enjoined by a United States District Court. ³

The village council also filed an objection with the Commission to renewal of Bisco's liquor license. ⁴ Pursuant to the Village's request, the Commission advised Bisco's that its license would not be renewed.

Bisco's sought relief in circuit court which concluded it did not have jurisdiction to issue an order to the Commission.

Bisco's then filed this complaint for mandamus in the Court of Appeals. ⁵ That Court declined ⁶ to order the Village to withdraw its objection or the Commission to renew the license. ⁷

We conclude that a liquor licensee has a property interest within the meaning of the Due Process Clause ⁸ and, accordingly, an application for renewal of a liquor license cannot be denied without providing the licensee notice and an opportunity for an evidentiary hearing.

We would remand this case to the Commission for consideration of the merits of any objections to the renewal of Bisco's liquor license and, if the Commission determines there may be cause for non-renewal, for an evidentiary hearing consistent with the procedures provided for 'contested cases' in the Administrative Procedures Act of 1969. ⁹

I

The statute provides that the Commission shall not grant a license without the approval of the local legislative body; it may, however, renew a license without such approval if the local legislative body has not objected; the Commission shall revoke a license upon request of the local legislative body. ¹⁰

This Court has held that because a liquor license is a privilege, a licensee does not have a property interest in a liquor license and, accordingly, a local legislative body may exercise the powers vested in it by the statute without according the licensee procedural due process. ¹¹

In City of Kenosha v. Bruno, 412 U.S. 507, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973), where a three-judge court had held that an adversary hearing must be held before a local legislative body could deny renewal of a liquor license, ¹² the United States Supreme Court remanded for reconsideration in light of Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), and Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), issued after the three-judge court rendered its decision.

Both Roth and Sindermann were college professors who were critical of their institutions. Both were employed under one-year contracts and neither was afforded a hearing before being informed that he would not be rehired.

Roth was employed for one year at a university with a formal tenure system. Tenure accrued after four years of teaching.

Sindermann taught for ten years in a state college system with no formal tenure. He had been employed for the last four years at the same college under a succession of one-year contracts.

The Supreme Court concluded that because Roth had no 'legitimate claim of entitlement' to reemployment under his contract, he had no property interest. His contract was for one year and it had no provision for renewal.

Sindermann, however, was viewed as having acquired a sufficient property interest in the expectation of continued employment under an informal 'quasi-tenure' system to require notice and a due process hearing before his employment could be terminated.

'We have made it clear, in Roth, supra, (408 U.S.) at 571--572, 92 S.Ct. (2701), at 2709, that 'property' interests subject to procedural due process protection are not limited by a few rigid, technical forms. Rather, 'property' denotes a broad range of Interests that are Secured by 'existing rules or understandings.' Id., at 577, 92 S.Ct. at 2709.' Perry v. Sindermann, 408 U.S. 601, 92 S.Ct. 2699. (Emphasis supplied).

The label attached to the interest at stake--whether it be called a mere 'privilege' or a 'right'--is not determinative. The United States Supreme Court in Roth reiterated its rejection of 'the wooden distinction between 'rights' and 'privileges' that once seemed to govern the applicability of procedural due process rights.' Board of Regents v. Roth, 408 U.S. 571, 92 S.Ct. 2706. ¹³

A liquor license is a franchise bestowed by the sovereign and just as the state may choose not to issue a license, it may place reasonable conditions on it.

But once a liquor license has been issued and expenditures have been made in reliance on it, the licensee has acquired an interest 'secured by existing rules or understandings.'

Without a reasonable expectancy of renewal upon compliance with the pertinent ordinances, statutes, Commission rules and regulations and specific conditions placed on a particular license, the risk of investing in or extending credit to a new bar would be inordinate. Bisco's was issued a one year license. It alleges that it invested a 'considerable sum of money' in preparing the facilities for operation; the initial investment cannot be expected to be recouped in one year. A liquor licensee necessarily relies on the 'understanding' implicit in the statute and evidenced by the apparent practice that it can in most instances expect its license to be automatically renewed. That reasonable expectation of continued enjoyment of the 'benefit' conferred is similar to the interest of Sindermann in continued employment under a quasi-tenure system and is, in our view, a property interest within the meaning of the Due Process Clause. ¹⁴ Earlier precedent to the contrary, see Fn. 11 and accompanying text, will no longer be followed.

II

Having concluded that a liquor licensee has a property interest in its license ¹⁵ which entitles it to procedural due process, we find the statute (M.C.L.A. § 436.17; M.S.A. § 18.988) unconstitutional insofar as it fails to provide for notice and an evidentiary hearing before denial of an application for renewal.

The Attorney General, representing the Commission, concedes that the statute does...