George v. Department of Alcoholic Beverage Control

• Decision Date: 03 April 1957
• Citation: 149 Cal.App.2d 702,308 P.2d 773
• Court: California Court of Appeals Court of Appeals
• Parties: Joseph GEORGE, Distributor, a corporation, Petitioner and Appellant, v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL of the State of California, Russell S. Munro, Director of Alcoholic Beverage Control, and Norman W. Finney, Respondents. Civ. 17188.

Page 773

308 P.2d 773

149 Cal.App.2d 702

Joseph GEORGE, Distributor, a corporation, Petitioner and Appellant, v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL of the State of California, Russell S. Munro, Director of Alcoholic Beverage Control, and Norman W. Finney, Respondents.

Civ. 17188.

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

April 3, 1957.

Gallagher, Ruffo & Rainville, Charles R. Wayland, San Jose, for appellant.

Edmund G. Brown, Atty.Gen., Charles A. Barrett, Deputy Atty. Gen., for respondents.

COMSTOCK, Justice pro tem.

This is an appeal from a judgment denying to appellant a peremptory writ of mandate directed to the Department of Alcoholic Beverage Control of California and the Director of Alcoholic Beverage Control.

The proceedings were instituted for the purpose of vacating and annuling an order of respondent department and its director revoking a distilled spirits wholesaler's license standing in the name of appellant and originally acquired by it in 1953.

For convenience in this decision the appellant, petitioner below, may be referred to as the 'petitioner,' the Department of Alcoholic Beverage Control of California as the 'Department,' the Director of Alcoholic Beverage Control, Russell S. Munro, as the 'Director' and the State Board of Equalization of California as the 'Board.'

All the pertinent questions presented by the appeal arise from the petition and attached exhibits, the return filed by way of answer, the findings of fact and conclusions of law and the judgment. No testimony was taken at the trial. Attached to the petition was a transcript of proceedings, including testimony taken at the hearing before the Department conducted by the Hon. Ivores R. Dains, hearing officer.

As stated in appellant's opening brief, the case does not present a factual dispute. The grounds urged for reversal are designated as appellant's 'position' on this appeal and are as follows: '(1) The State Board of Equalization was empowered and authorized to promulgate Rule 65. The Board was likewise legally authorized to reasonably construe said rule. (2) The construction placed upon Rule 65 permitting the hdlding of 'frozen', or 'inactive' or surrendered distilled spirits wholesaler's licenses was reasonable and within the power and authority of the Board. (3) Said construction had been accepted and had been unchallenged for many years prior to January 1, 1955, the date upon which the Department of Alcoholic Beverage Control succeeded to the powers and authority of the State Board of Equalization pursuant to Constitutional amendment. (4) Petitioner was never issued an effective license covering the premises in question for the reason that no license certificate was ever delivered to it. The physical custody and possession of the several certificates at all times remained with the Board and the Department without petitioner having access to them. (5) As an administrative agency the Department was without power to change or repudiate the long standing interpretation placed by its predecessor agency upon Rule 65 particularly where petitioner relied upon such interpretation to its detriment. The power and authority of the Department to abolish, change or otherwise interpret this rule as to present or future applications for licenses is not questioned. (6) Because of the manifest injustice inherent in the action of the Department the doctrine of equitable estoppel is applicable and should be invoked. (7) The interests of justice at least required reasonable notice to petitioner of the contemplated action of the Department to the end that petitioner might have been given an opportunity to dispose of the license or to utilize it in connection with premises outside of the City of Salinas.'

We find no error in the proceedings or judgment.

Rule 65 of the Rules of the State Board of Equalization (Title 4, California Administrative Code) in effect in July, 1953, reads as follows: '65. Surrender of License on Closing Business. Every licensee who surrenders, abandons or quits his licensed premises, or who closes his licensed business for a period exceeding two weeks, shall, within ten days after surrendering, quitting, or abandoning the licensed premises, or closing his business, surrender his license or licenses to the Board.'

Appellant contends that the Board and the Department, as administrative agencies of the state deriving their powers from the legislature under constitutional authority, had power to promulgate rules such as Rule 65 and to interpret them. With this broad premise, we think there can be no quarrel. California Drive-In Restaurant Ass'n v. Clark, 22 Cal.2d 287, 140 P.2d 657, 147 A.L.R. 1028. We do not agree, however, that such rules or interpretations may contravene clear provisions of law or that arbitrary, inconsistent, contradictory or unreasonable interpretations of rules may lawfully be adopted. Blatz Brewing Co. v. Collins, 69 Cal.App.2d 639, 160 P.2d 37; American Distilling Co. v. State Board of Equalization, 55 Cal.App.2d 799, 131 P.2d 609. The point here is whether the Board, in preparing a license certificate for appellant (it already having one license for premises in the same city and not intending to do business at the premises covered by the second license) and keeping it in its possession, but nevertheless made out as issued and recorded in appellant's name, with license fee fully paid by it, and charging it against the quota of licenses authorized for Monterey County, under all circumstances present, acted unlawfully and in excess of authority. Respondents do not here question the validity of Rule 65. They challenge the right of the Board to have applied said rule as it did and claim that it contains no authority for the questioned acts done purportedly under it in this case. They further urge that the action taken by the Department in revoking the license was proper and fully supported by the record and, hence, that there is no duty to vacate or annul the order or reinstate appellant's license.

The essential facts are as follows:

Petitioner corporation for a period of years had owned a distilled spirits wholesaler's license for premises at 310 Monterey Street, Salinas, California. This license may for convenience be referred to as 'License No. 1.' On or about July 14, 1953, petitioner applied to the Board for the transfer to it of another license of the same type covering the premises at 124 Monterey Street, Salinas, which had theretofore been issued to and was then held by Andrew K. Thanos Co., Inc. and paid the Board the prescribed fee of $250. Petitioner paid the Thanos Co. $25,000 for said license. After investigation, a report was filed with the Board by Mr. Jerry M. O'Brien, District Liquor Administrator for District Seven, recommending such transfer and stating that the license certificate when issued was to be held by the Board under the provisions of Rule 65. The report and recommendation were approved by the Board and on or about August 25, 1953, a distilled spirits wholesaler's license, Certificate No. G-254A, for the period July 1, 1953, to June 30, 1954, was issued and recorded in the name of petitioner by the Board, but not physically delivered to petitioner. Contemporaneously with the application for said license a letter was written by the attorney for petitioner to the Board stating that the license was to be issued for record only and to be held by the Board under Rule 65. It was held by the Board purportedly as surrendered under Rule 65. We may refer to this license as 'License No. 2.'

When petitioner purchased said license from the Thanos Co. and at all times when said proceedings in connection with it were being taken, petitioner did not intend to keep any stock of liquor at 124 Monterey Street, or to conduct business there, or to lease or otherwise possess or acquire said premises or actively use said license in connection therewith.

A quota of six distilled spirits wholesaler's licenses had been established by the Board for Monterey County and License No. 2 was counted in calculating the number issued therein and was charged against said quota.

In petitioner's verified application for the license, Mr. Joseph George, petitioner's president, stated petitioner intended to conduct business at 124 Monterey Street, though this was not true. He offered as an explanation of this statement that 'If our attorney thought it was procedural, I believed he didn't believe it should be left blank.'

For the year July 1, 1954 to June 30, 1955, petitioner applied and paid for, and the Board issued and held a renewed license, in like manner as before, and for the year July 1, 1955 to June 30, 1956, petitioner applied to the Department for a further renewal and paid the required fee, but, though the Department held the fee, petitioner was not notified of its action on this application.

On or about January 3, 1955, Norman W. Finney filed with the Department the accusation initiating the proceedings which resulted in the revocation of petitioner's license.

On July 28, 1953, Baruh Liquors also applied for a distilled spirits wholesaler's license for the premises at 124 Monterey Street, this being a transfer of a license previously held by Baruh Liquors for 6 Central Ave., Salinas. This transfer was duly approved and the license issued and continuously since said issue a license covering said 124 Monterey Street has been held by Baruh Liquors, which has actually conducted its business there, the license being one of the quota of six established for Monterey County.

Mr. Joseph George never personally consulted with anyone representing the Board on the specific question whether petitioner would be allowed to purchase and hold a second license in the City of Salinas or whether, in view of the fact that petitioner did not intend to keep a stock of liquor or conduct business at 124 Monterey Street, it would be lawful for it to own said License ...