Hi Rise, Inc. v. Ohio Liquor Control Comm.

• Decision Date: 30 August 1995
• Docket Number: No. C-940638,C-940638
• Parties: HI RISE, INC., Appellee, v. OHIO LIQUOR CONTROL COMMISSION, Appellant. *
• Court: Ohio Court of Appeals

Page 151

106 Ohio App.3d 151

665 N.E.2d 707

HI RISE, INC., Appellee, v. OHIO LIQUOR CONTROL COMMISSION, Appellant. ^*

No. C-940638.

Court of Appeals of Ohio,

First District, Hamilton County.

Decided Aug. 30, 1995.

Michael J. Wiethe, Cincinnati, for appellee.

Betty D. Montgomery, Attorney General, and David A. Raber, Assistant Attorney General, Columbus, for appellant.

BETTMAN, Judge.

Following a hearing in which it was found to be in violation of R.C. 4301.69(A), sale of beer to an underage person, Hi Rise, Inc. had its liquor permit revoked by order of the Liquor Control Commission. Hi Rise timely appealed this order to the court of common pleas, which modified the commission's order to a twenty- suspension. The commission now appeals from the trial court's order. ¹ We have sua sponte removed this case from the accelerated calendar.

In its two assignments of error, the commission argues that the lower court erred in modifying its order revoking Hi Rise's permit to sell liquor. With the reservations expressed herein, we are obliged to agree.

On appeal from an administrative agency's order, a court of common pleas must determine whether the order is supported by reliable, probative and substantial evidence and is in accordance with law. R.C. 119.12; Univ. of Cincinnati v. Conrad (1980), 63 Ohio St.2d 108, 17 O.O.3d 65, 407 N.E.2d 1265. Generally, the common pleas court is obliged to defer to the agency's resolution of factual questions; the court is not, however, obliged to accept improperly drawn inferences from the evidence, nor is the court obliged to accept evidence which is neither reliable nor probative. Id. at 110, 17 O.O.3d at 66-67, 407 N.E.2d at 1268; Our Place, Inc. v. Ohio Liquor Control Comm. (1992), 63 Ohio St.3d 570, 589 N.E.2d 1303. On appeal, this court reviews the order of the trial court under an abuse-of-discretion standard. Leo G. Keffalas, Inc. v. Ohio Liquor Control Comm. (1991), 74 Ohio App.3d 650, 600 N.E.2d 275.

The evidence of the violation which was before the commission was undisputed. Hi Rise sold packaged beer to an underaged person. No identification was checked, so Hi Rise cannot rely on R.C. 4301.639 to avoid liability. ² The only evidence before the commission on this point established the violation with which Hi Rise was charged. Thus, the challenge to the commission's order in this case was not to the finding of the violation, but rather to the penalty imposed.

Hi Rise argued to the trial court that in determining the penalty in this case, the commission failed to take into account the volume of business pursuant to R.C. 4301.25(B). That code provision allows, but does not require, the commission to consider this evidence so that the length of the suspension is in proportion to the seriousness of the offense, and serves as a penalty and a deterrent.

There are several problems with Hi Rise's argument under the present state of the law. First, the section on which it relies is permissive, not mandatory. Second, it apparently applies to suspensions, not revocations. Finally, according to the third paragraph of the syllabus of Henry's Cafe, Inc. v. Ohio Bd. of Liquor Control (1959), 170 Ohio St. 233, 10 O.O.2d 177, 163 N.E.2d 678, on appeal from an adjudication by the commission, "the Court of Common Pleas has no authority to modify a penalty that the agency was authorized to and did impose, on the ground that the agency abused its discretion." Nevertheless, the common pleas court was clearly troubled by the penalty in this case, as are we for two reasons. One involves the absence of notice of what specific conduct will cause a revocation, the other revisits the issue of economic loss to the permit holder.

Notice

The General Assembly has clearly delegated rule-making authority to the Liquor Control Commission. R.C. 4301.03. This includes the right to make rules governing suspension, cancellation and revocation of permits. This broad grant of authority has been approved by the Ohio Supreme Court. Salem v. Ohio Liquor Control Comm. (1973), 34 Ohio St.2d 244, 63 O.O.2d 387, 298 N.E.2d 138. The regulations of the commission, promulgated pursuant to R.C. Chapter 119, are codified in Ohio Adm.Code Chapter 4301:1.

Revocation, the penalty imposed in this case, is discussed in R.C. 4301.25(A) and 4301.27. R.C. 4301.27 provides for procedural due process to permit holders. R.C. 4301.25 allows the commission to revoke a permit for the violation of any of the applicable restrictions of R.C. Chapters 4301 and 4303, or any lawful rule of the commission, or for other sufficient causes, of which five are enumerated in R.C. 4301.25(A). Problematically, however, the same five specific causes enumerated in R.C. 4301.25 can also be grounds for suspension.

It is axiomatic that to constitute a proper delegation of rule-making authority, there must be clear standards spelled out to provide direction to the administrative agencies. Belden v. Union Cent. Life Ins. Co. (1944), 143 Ohio St. 329, 28 O.O. 295, 55 N.E.2d 629, paragraph three of the syllabus; Matz v. J.L. Curtis Cartage Co. (1937), 132 Ohio St. 271, 8 O.O. 41, 7 N.E.2d 220; Princeton City School Dist. Bd. of Edn. v. Ohio State Bd. of Edn. (1994), 96 Ohio App.3d 558, 645 N.E.2d 773. As stated by then Judge Clifford Brown in his concurring opinion in A.B. Jac, Inc. v. Ohio Liquor Control Comm. (1972), 31 Ohio App.2d 9, 60 O.O.2d 60, 285 N.E.2d 763, an administrative agency may not act arbitrarily or capriciously in the enactment of rules and regulations in the exercise of its delegated powers.

The problem here, as we see it, is that other than the requirement that the commission's regulations should further public decency, sobriety, and good order all unarguably commendable goals, we find no regulation which puts permit holders on notice of what specific conduct will result in a revocation as opposed to a suspension. Compare Salem, supra (violation of regulation against improper conduct warrants suspension) with Solomon v. Ohio Liquor Control Comm. (1965), 4 Ohio St.2d 31, 33 O.O.2d 339, 212 N.E.2d 595 (violation of regulation against possession of diluted or refilled liquor in original container warrants revocation); DDDJ, Inc. v. Ohio Liquor Control Comm. (1990), 64 Ohio App.3d 828, 582 N.E.2d 1152 (violation of regulation against the sale of liquor at reduced, happy-hour prices after 9:00 p.m. warrants suspension); Zonnie Enterprises, Inc. v. Ohio Liquor Control Comm. (Sept. 25, 1980), Cuyahoga App. No. 41468, unreported (violation of regulation against improper conduct warrants revocation); Tubby Enterprises, Inc. v. Ohio Liquor Control Comm. (Feb. 19, 1974), Franklin App. No. 73AP-367, unreported (violation of regulation against improper conduct warrants suspension); and Angola Corp. v. Ohio Liquor Control Comm. (1972), 33 Ohio App.2d 87, 62 O.O.2d 142, 292 N.E.2d 886 (violation of regulation against improper conduct warrants suspension). Cf. R.C. 4507.021 and 4507.16, erecting detailed statutory framework with point system providing precise standards and notice of grounds for driver's license suspensions by Ohio Bureau of Motor Vehicles, and leaving license revocations to be imposed in a judicial forum under specifically articulated standards.

As noted in Dobbins, The Ohio Liquor Control Commission's Right To Regulate (1976), 4 Akron L.Rev. 695:

"The liquor licensee's complaint is not that the state has no power to regulate the sale of liquor, but that there are no prescribed standards on which they can rely. Although the power granted by the twenty first amendment to the state is broad, the requirement that regulations be specific, so as to provide notice and establish ascertainable standards, would not impair the state's reasonable exercise of that power. Specificity of standards would result in adjudication based on merit, rather than the whim of the LCC."

Economic Loss

It has long been the rule in this state that a liquor permit is not a vested property right, but a privilege to be enjoyed only so long as conditions and restrictions governing its continuance are complied with. Salem, supra, 34 Ohio St.2d at 245, 63 O.O.2d at 388, 298 N.E.2d at 140; Solomon v. Ohio Liquor Control Comm. (1965), 4 Ohio St.2d 31, 33 O.O.2d 339, 212 N.E.2d 595; Stouffer Corp. v. Bd. of Liquor Control (1956), 165 Ohio St. 96, 59 O.O. 100, 133 N.E.2d 325; Frankenstein v. Leonard (1938), 134 Ohio St. 251, 12 O.O. 54, 16 N.E.2d 424; DDDJ, Inc. v. Ohio Liquor Control Comm. (1990), 64 Ohio App.3d 828, 582 N.E.2d 1152; Rickard v. Ohio Dept. of Liquor Control (1986), 29 Ohio App.3d 133, 29 OBR 149, 504 N.E.2d 724. However, this rule has been criticized, both in the past and recently.

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