Bunn v. Michigan Liquor Control Com'n

• Decision Date: 06 July 1983
• Docket Number: Docket No. 61161
• Citation: 335 N.W.2d 913,125 Mich.App. 84
• Parties: Joe H. BUNN, Plaintiff-Appellee, v. MICHIGAN LIQUOR CONTROL COMMISSION, Defendant-Appellant, and The City of Hartford, a Municipal Corporation, Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 913

335 N.W.2d 913

125 Mich.App. 84

Joe H. BUNN, Plaintiff-Appellee, v. MICHIGAN LIQUOR CONTROL COMMISSION, Defendant-Appellant and The City of Hartford, a Municipal Corporation, Defendant.

Docket No. 61161.

Court of Appeals of Michigan.

Submitted Jan. 4, 1983.

Decided April 20, 1983.

Released for Publication July 6, 1983.

Joe H. Bunn, in pro. per.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Frank J. Pipp and Larry F. Brya, Asst. Attys. Gen., Lansing, for defendant-appellant.

Before MacKENZIE, P.J., and R.B. BURNS and QUINNELL ^*, JJ.

R.B. BURNS, Judge.

Defendant Michigan Liquor Control Commission (MLCC) appeals from the trial court's opinion and order of November 12, 1981, which granted plaintiff's motion for summary judgment pursuant to GCR 1963, 117.2(3). This order required the MLCC to issue plaintiff a Michigan Class C liquor license, along with a Specially Designated Merchant's (SDM) license, and allow him to operate Joe's Bar within the City of Hartford, Michigan.

The parties have stipulated to the following facts. Plaintiff owned and operated Joe's Bar in Hartford, Michigan, from 1972 until June 22, 1978. In 1978, plaintiff sold the bar to David F. Lawson. This sale was by land contract for the premises, while the business and its fixtures were sold on a promissory note and security agreement. These agreements contained a provision which required Lawson to reassign the licenses to plaintiff in the event of default.

Lawson began to experience financial difficulty in the spring of 1979. On May 1 1979, he failed to pay the real estate taxes on the building when they became due. On May 1, 1979, he defaulted in his monthly payments due plaintiff.

On September 5, 1979, after holding a public hearing and taking testimony from Lawson and others, the Hartford City Council voted to request revocation of Lawson's liquor license. Notice of this hearing was served personally upon Lawson and posted on the front door of city hall on August 13, 1979. Further notice by publication was provided in the classified section of the Herald-Palladium newspaper on August 18, 1979. Pursuant to its decision, the council recommended to the MLCC that Lawson's liquor licenses be revoked. The MLCC did so on September 25, 1979, with its order of revocation becoming effective on September 28, 1979.

During the interim, plaintiff commenced foreclosure proceedings against Lawson in Van Buren County Circuit Court on September 12, 1979. Plaintiff also petitioned for intervention in the MLCC's proceedings against Lawson on October 10, 1979. The MLCC had scheduled a show cause hearing because Lawson no longer qualified for the SDM license due to the loss of his Class C license. The hearing concerning both of these petitions was held October 16, 1979. On October 29, 1979, the MLCC found plaintiff was not a licensee of record and therefore denied intervention by him.

On November 15, 1979, Lawson filed suit in Van Buren County Circuit Court seeking judicial review of the revocation actions of both the city and the MLCC.

On March 7, 1980, plaintiff received a favorable judgment from the circuit court in his foreclosure action against Lawson. Pursuant to this judgment, the real estate was sold on May 23, 1980, and the personal property was sold on August 26, 1980.

On April 17, 1980, the circuit court entered an opinion in Lawson's suit against the city and the MLCC. The circuit court upheld the council's recommendation that Lawson's liquor license be revoked and concluded there was no basis for vacating the revocation effected by the MLCC.

Four days after reacquiring the premises, plaintiff appeared before the city council to request a hearing concerning his petition to have the city recommend reinstatement of his liquor licenses. The council refused plaintiff's request for a hearing. On June 30, 1980, plaintiff filed his complaint in the present action.

On April 6, 1981, plaintiff filed a motion for summary judgment, pursuant to GCR 1963, 117.2(3). The circuit court granted this motion on November 12, 1981, based upon this Court's decision of Barr v. Pontiac City Comm., 90 Mich.App. 446, 282 N.W.2d 348 (1979).

The MLCC appealed on November 25, 1981, and moved the circuit court for a stay of proceedings pending this appeal. The trial court denied the motion, but this Court granted a stay of the circuit court order on December 18, 1981.

The Michigan Supreme Court has interpreted M.C.L. Sec. 436.17; M.S.A. Sec. 18.988 to require the MLCC to revoke or deny renewal of a liquor license when the local legislative body requests such action and has given proper notice and hearing to the licensee. Bundo v. Walled Lake, 395 Mich. 679, 238 N.W.2d 154 (1976). Thus, local governments are given broad power to control liquor licenses within their jurisdictions. The Bundo Court noted, however, that the local government's exercise of power is reviewable by the courts. Id., 700-701, 238 N.W.2d 154.

The Court in Bundo also found that the holder of a liquor license has a property interest in that license and is entitled to due process protection. 395 Mich. 695, 238 N.W.2d 154; see also, Bisco's, Inc. v. Liquor Control Comm., 395 Mich. 706, 238 N.W.2d 166 (1976). The due process a liquor license holder was entitled to consisted of "rudimentary due process". Such due process consists of notice of the proposed action and the reasons given for this action, a hearing in which the licensee may present evidence and testimony and confront adverse witnesses, and a written statement of findings on the part of the body taking the action. 395 Mich. 696-697, 238 N.W.2d 154.

To the procedural safeguards mandated by the Supreme Court, this Court has also found that due process requires the licensee be given notice of what criteria would result in a local body's initiation of nonrenewal or revocation proceedings. Roseland Inn, Inc. v. McClain, 118 Mich.App. 724, 325 N.W.2d 551 (1982).

This Court has also found that a party who has reversionary interest in a liquor license is entitled to rudimentary due process protection when he seeks to have that license transferred back to himself. In Barr, supra, the plaintiff or his family had operated a bar business within the city for 30 years. The plaintiff sold the business, including the licenses, while retaining a security interest in the business. Thirteen years later, the purchaser of the business defaulted. The plaintiff foreclosed and sought to have the licenses transferred back to his possession. When the MLCC requested a recommendation from the defendant city, it adopted a resolution of disapproval. There was no hearing on the petition nor any reason given for rejecting the transfer. Following the resolution of disapproval, a complaint for superintending control was filed in the circuit court. The circuit court ordered the city to hold a formal hearing with written notice to the plaintiff and to submit its recommendations in writing, together with the reasons therefor, to that court.

Following its compliance with the required procedure, the city issued another resolution of disapproval. The trial court directed the city to recommend approval to the MLCC. The city appealed to this Court which considered whether the plaintiff had a property interest requiring rudimentary due process protections and, if so, whether the city's actions following the hearing mandated by the trial court were arbitrary and capricious.

This Court noted that there is no protected interest in a mere expectation that a new license applicant or transferee might possess. Barr, supra, p. 451, 282 N.W.2d 348; see also Bisco's, supra, p. 718 fn. 15, 238 N.W.2d 166. The Barr Court, however, distinguished its case from that of one petitioning for a new or transferred license.

The Court found, 90 Mich.App. 453, 282 N.W.2d 348:

"Heeding the foregoing, we look to the nature of the transaction and the agreements involved to classify the plaintiff's status. Plaintiff sold to Epps as his transferee. The sale was conditioned on the license transfer. Once transferred, the grantee sought and was granted regular renewals. Had he not defaulted on his obligation to plaintiff, he would have continued to have a property right in renewals under Bisco's and Bundo.

"Similarly, the plaintiff sold something of value to his grantee. Without the liquor license, the value of the property diminishes greatly. While plaintiff's interest in the license is not 'title' per se, it is a much stronger interest than that of a new applicant or proposed transferee.

"We conclude that plaintiff has a reversionary interest, which is a property right, entitling him to the minimum due process hearing described in Bundo."

In the Barr case, as well as in the present case, the property interest created was created by two private parties within the context of a private transaction.

Bundo, supra, and the United States Supreme Court cases 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), dealt with property interests created by either contract or license between the individual and the government, i.e., a benefit conferred by the government. Since the state's action in the present case is regarding the benefit, plaintiff must have an interest in the benefit in order to be entitled to rudimentary due process. The Court noted in Roth that a person must have a "legitimate claim of entitlement" to have a property interest in a benefit. 408 U.S. 577, 92 S.Ct. 2709, quoted in Bundo, supra, p. 692, 238 N.W.2d 154.

In the present case, at the time of Lawson's revocation hearing, plaintiff had no legitimate claim of entitlement to Lawson's license. Plaintiff's claim to the license was contingent upon Lawson's forfeiture on the related security agreement and plaintiff's foreclosure on this agreement. Because the hearings took place six months before...