Dep't of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd.

• Citation: 71 Cal.App.5th 78,285 Cal.Rptr.3d 578
• Decision Date: 05 October 2021
• Docket Number: E075738
• Parties: DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL, Petitioner, v. ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD, Respondent; IBPOE Elks of the World Arrowhead Lodge 896, Real Party in Interest.
• Court: California Court of Appeals Court of Appeals

71 Cal.App.5th 78

285 Cal.Rptr.3d 578

DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL, Petitioner,

v.ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD, Respondent;

IBPOE Elks of the World Arrowhead Lodge 896, Real Party in Interest.

E075738

Court of Appeal, Fourth District, Division 2, California.

Filed October 5, 2021

Xavier Becerra and Rob Bonta, Attorneys General, Chris A. Knudsen, Assistant Attorney General, Celine M. Cooper and Alice Q. Robertson, Deputy Attorneys General for Petitioner.

No appearance for Respondent.

Law Offices of Lawrence R. Bynum and Lawrence Bynum, Riverside, for Real Party in Interest.

OPINION

RAPHAEL, J.

The Department of Alcoholic Beverage Control (department), the petitioner in this writ proceeding, revoked the liquor license of real party in interest IBPOE Elks of the World Arrowhead Lodge 896 (Arrowhead Elks). The revocation was based on findings that, among other things, Arrowhead Elks had knowingly allowed cannabis sales events to be held on its licensed premises. Respondent Alcoholic Beverage Control Appeals Board (the appeals board) reversed, finding a lack of substantial evidence to support the department's decision.

We agree with the department that there is substantial evidence in the record to support its factual findings regarding the cannabis sales events and that, given those factual findings, it was statutorily required to revoke Arrowhead Elks's license.¹ Accordingly, we annul the appeals board's decision and reinstate the department's decision.

I. FACTS²

Arrowhead Elks was established as a nonprofit organization in 1959. There was a period when Arrowhead Elks was affiliated with the national organization, the Improved Benevolent Protective Order of Elks of the World, Inc., though that is no longer so. Arrowhead Elks is the holder of a type 51 club license, which is a type of retail license issued to a nonprofit club, authorizing sale of beer, wine, and liquor to club members and their guests for on-premises consumption only.³ (See §§ 23320, subd. (b)(41) [schedule of licenses and fees], 23425 [defining "club"]; 23431 [describing privileges and restrictions for club licenses].) The Arrowhead Elks intermittently uses its lodge in San Bernardino for its own purposes, but also regularly rents the premises out for other purposes.

In June 2019, the department issued an accusation seeking, as relevant here, to revoke Arrowhead Elks's license based on unlawful possession and sale of cannabis at the lodge.⁴ More specifically, the department alleged that (1) between August 15, 2018 and April 25, 2019, Arrowhead Elks had knowingly permitted the sale, or negotiations for sale, of controlled substances or dangerous drugs at its premises in violation of section 24200.5, subd. (a) (count 2); (2) Arrowhead Elks had knowingly permitted on its premises the possession of a controlled substance (cannabis) on two specific dates, August 15, 2018 and April 25, 2019 (counts 3 and 5), in violation of Health and Safety Code section 11357 ; and (3) on the same two dates, Arrowhead Elks had knowingly permitted on its premises possession of a controlled substance (cannabis) for purposes of sale (counts 4 and 6), in violation of Health and Safety Code section 11359.

After a contested hearing, an administrative law judge (ALJ) recommended that all counts of the accusation be sustained and that Arrowhead Elks' license be revoked. The ALJ found, as relevant here, that Arrowhead Elks "was fully aware that it was renting out the Licensed Premises to promotors and vendors for cannabis sales events." This conclusion was based on, among other things: (1) the testimony to that effect of two officers of the Arrowhead Elks, its "house chairman" and its "exalted ruler and president"; (2) the circumstance that on two occasions, August 15, 2018 and April 25, 2019, police had served search warrants on the premises and impounded substantial amounts of cannabis products, as well as other evidence indicating that cannabis was being sold on the premises; (3) evidence that another officer of the Arrowhead Elks, its "leading knight and vice president," had hired a security guard for the events and hired another person to put up and take down tables for vendors to use; (4) evidence that Arrowhead Elks had charged cannabis vendors $150 for vending space, plus $100 for "permit purposes" (even though no permits were obtained); and (5) evidence that a particular cannabis event promotor who goes by the name "Lyfe" or "McLyfe" attended a membership meeting of the Arrowhead Elks in August 2017, at which an upcoming "Lyfeevent in January, 2018" was discussed.

The department adopted the ALJ's proposed decision in full. The appeals board, however, reversed the department's decision (except with respect to one of the counts not at issue here). As relevant here, the appeals board found that the decision as to the cannabis related counts was not supported by substantial evidence.

II. DISCUSSION

The department contends that its decision to revoke Arrowhead Elks's license was supported by substantial evidence, so the appeals board's finding to the contrary should be annulled. We agree.

Both the department and the board are "constitutional agencies upon which limited judicial powers have been conferred." ( Walker v. Munro (1960) 178 Cal.App.2d 67, 73, 2 Cal.Rptr. 737 ; see Cal. Const., art. XX, § 22 [describing department's authority].) " ‘The administration of the Alcoholic Beverage Control Act ... is initially vested in the department. Its decisions, however, are subject to administrative review by the board and a final order of the board is, in turn, subject to judicial review.’ " ( Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Bd. (2002) 99 Cal.App.4th 1094, 1099, 121 Cal.Rptr.2d 758.) The scope of the review of the department's decisions is the same in the appeals board and this court. ( Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (Deleuze) (2002) 100 Cal.App.4th 1066, 1071, 123 Cal.Rptr.2d 278.) By statute, the review "shall not extend further than to determine, based on the whole record of the department as certified by the board, whether: [¶] (a) The department has proceeded without or in excess of its jurisdiction. [¶] (b) The department has proceeded in the manner required by law. [¶] (c) The decision of the department is supported by the findings. [¶] (d) The findings in the department's decision are supported by substantial evidence in the light of the whole record. [¶] (e) There is relevant evidence which, in the exercise of reasonable diligence, could not have been produced or which was improperly excluded at the hearing before the department." ( § 23090.2 ; see also ibid. ["Nothing in this article shall permit the court to hold a trial de novo, to take evidence, or to exercise its independent judgment on the evidence"].)

Arrowhead Elks has not argued that the evidence was insufficient to support the ALJ's finding that cannabis sales events were held at Arrowhead Elks's premises on August 15, 2018 and April 25, 2019. To the contrary, it has affirmatively conceded in briefing that its "agents allowed the promotors to use the licensed premises and those individuals used it to engage in unlawful activity." Among other things, on the dates above, police executed search warrants at the property, impounding substantial amounts of cannabis, as well as gathering other evidence that left no doubt about the nature of the events.

There is also no reasonable dispute that Arrowhead Elks knew that the cannabis sales events were being held at its premises. In testimony at the hearing before the ALJ, Arrowhead Elks's "house chairman" testified that he, under the "guidance" of the organization's "exalted ruler," was responsible for leasing out the organization's premises for various events, including cannabis events organized by promotors. The "exalted ruler" also conceded that he knew "cannabis events" were being held at Arrowhead Elks' lodge. He also testified that he personally ensured that during cannabis events, including on August 15, 2018 and April 25, 2019, all alcohol was removed from the lodge's bar and put into a locked "alcohol closet," to which he had the only key. There was evidence that another Arrowhead Elks officer, its "leading knight," hired a security guard for the cannabis events and hired another person to put up and take down tables for vendors. There was also evidence that Arrowhead Elks collected money directly from cannabis vendors, both for space to sell their wares on the premises and for "permit purposes." The several officers' knowledge of the events taking place on Arrowhead Elks' premises is imputed to the organization. ( Yu v. Alcoholic Beverage Control Appeals Bd. (1992) 3 Cal.App.4th 286, 295, 4 Cal.Rptr.2d 280.)

Additionally, there is no question that the cannabis sales events that took place at Arrowhead Elks's premises were unlawful. Cannabis remains a controlled substance under California law, despite the passage of Proposition 64, which legalized its recreational use. ( Health & Saf. Code, §§ 11007, 11054, subd. (d)(13).) The commercial sale of cannabis is regulated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) ( § 26000 et seq. ). It is not possible to be licensed to sell cannabis at a premises also licensed for the sale of alcohol. ( Cal. Code Regs., tit. 16, § 5601, subd. (g) ["a temporary cannabis event license shall not be issued for a premises that is licensed for the sale of alcohol or tobacco"]; see also id. § 5026, subds. (c) [premises licensed under MAUCRSA "shall not be in a location that requires persons to pass through a business that sells alcohol ... to access the licensed premises"] & (d) [premises licensed under MAUCRSA "shall not be in a location that requires persons to pass through the licensed premises to access a business that sells alcohol...]; Bus. & Prof. Code, § 25621.5 ["A licensee [under the Alcoholic...