In re Nejberger

• Decision Date: 13 April 1990
• Docket Number: Bankruptcy No. 89-13013F,Adv. No. 89-0783F.
• Citation: 112 BR 714
• Parties: In re Daniel NEJBERGER d/b/a Piccolo's Famous Pizzas and Il Pastaio, Debtor. Daniel NEJBERGER d/b/a Piccolo's Famous Pizzas and Il Pastaio, Plaintiff, v. PENNSYLVANIA LIQUOR CONTROL BOARD, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

112 B.R. 714 (1990)

In re Daniel NEJBERGER d/b/a Piccolo's Famous Pizzas and Il Pastaio, Debtor.

Daniel NEJBERGER d/b/a Piccolo's Famous Pizzas and Il Pastaio, Plaintiff, v. PENNSYLVANIA LIQUOR CONTROL BOARD, Defendant.

Bankruptcy No. 89-13013F, Adv. No. 89-0783F.

United States Bankruptcy Court, E.D. Pennsylvania.

April 13, 1990.

Ernest D. Preate, Jr., Pennsylvania Atty. Gen., Price Altee Thomas, Sr. Deputy Atty. Gen., Philadelphia, Pa., for defendant, Pennsylvania Liquor Control Bd.

Douglas H. Weiss, Astor, Weiss & Newman, Philadelphia, Pa., for debtor, Daniel Nejberger.

James J. O'Connell, Asst. U.S. Trustee, Philadelphia, Pa.

MEMORANDUM OPINION

BRUCE I. FOX, Bankruptcy Judge:

Before me is the debtor's complaint against the Pennsylvania Liquor Control Board, which asks me to "Compel and Direct" the Board to renew the debtor's liquor license, utilizing the equitable powers granted by 11 U.S.C. § 105(a).¹ The parties by agreement have submitted a stipulation of facts, which they assert contains all the evidence relevant to my resolution of this dispute. These facts are brief, and may be summarized as follows.

I.

The debtor in this chapter 11 case is an individual who operates two restaurants in the Philadelphia area. The Liquor Control Board issued the debtor a restaurant liquor license for a term beginning October 31, 1987 and ending October 31, 1988. On, approximately, August 20, 1988, the debtor filed an application to renew this license for another year (that is, from October 31, 1988 through October 31, 1989). See 47 P.S. § 4-470. The debtor tendered the requisite filing fees and bond for this renewal.²

By letter dated September 2, 1988, the Board informed the debtor that "if the Board does not receive clearance from the Department of Labor and Industry, your renewal application will be rejected." Ex. 3. Indeed, page 2 of Exhibit 3 is a letter to the debtor from that Department, which states that because there was a balance due from the debtor to the Pennsylvania Unemployment Compensation Fund in the amount of $72,808.41, the Department would be unable to provide the Board with a favorable clearance for processing the license renewal application.

Similarly, by letter dated September 8, 1988 the Board informed the debtor that its renewal application would be rejected unless the Board received tax clearance from the Department of Revenue. Ex. 4 at 1. By letters dated August 31, 1988 (Ex. 4 at 2 and 3) the Department of Revenue notified the debtor that because of its "delinquent conditions" its license application could not be processed. The delinquent conditions addressed in these letters included a liability for sales tax in the amount of $352,896.63, the non-filing of certain returns or registrations, Ex. 4 at 2, and a liability of $1,551.62 for an "annual" tax, Ex. 4 at 3.

The next correspondence of record between the Board and the debtor is dated December 21, 1988 (approximately two months after the "expiration" of the 1987-1988 license). This letter is a "formal notice of objection to the renewal" of the debtor's liquor license for the license period effective November 1, 1988, because of the debtor's failure "to verify that all State tax reports have been filed and all State taxes have been paid, timely appealed or approved for deferred payment as required by Section 477 of the Liquor Code. . . ." Ex. 5.

The last prebankruptcy communication from the Board to the debtor is dated March 8, 1989. This letter states that the application for renewal is "refused" because of the delinquent tax conditions described above, and because of the "non-filed return/registration." Ex. 6. The letter continues, however, to state that "you will be given a reasonable period of time to rectify this matter during which time we will hold the renewal application, bond, fees, etc. in abeyance, but in no event beyond the expiration date of the license term October 31, 1989."

The debtor filed a chapter 11 petition in bankruptcy on August 17, 1989. Subsequently, by letter dated September 15, 1989, the Board informed the debtor that

on March 8, 1989 the application for renewal of Restaurant Liquor License R-15538 was refused for tax deficiency and/or other application deficiency. In view of the fact the 10-month period has now expired we are terminating the application and closing the file.

Ex. 7. The "10-month period" referred to in this letter is understood to refer to the provision of 47 P.S. § 4-470(a) which allows the Board in its discretion to accept a renewal application filed within ten months after the expiration date of the license. Thus, the debtor filed its petition in bankruptcy before the statutory ten month period of abeyance had expired, and also before the end of the Board's stated abeyance period. (See Ex. 6.)

II.

At the outset, the Liquor Control Board asserts that the debtor has no property interest in any liquor license and so contends that this court has no subject matter jurisdiction over this dispute.

This jurisdictional argument may be dispatched as it confuses the concept of failing to state a cause of action with the concept of jurisdiction. See In re Monroe Well Service, Inc., 67 B.R. 746, 754 (Bankr. E.D.Pa.1986). A federal court always has the jurisdiction to determine whether jurisdiction properly lies. E.g., United States v. United Mine Workers, 330 U.S. 258, 67 S.Ct. 677, 91 L.Ed. 884 (1947); Ilan-Gat Engineers, Ltd. v. Antiqua Internat'l Bank, 659 F.2d 234, 239 (D.C.Cir.1981). Accord, Bator, Meltzer, Mishkin and Shapiro, Hart and Wechsler's The Federal Courts and the Federal System at 1704 (3d ed. 1988). Specifically, a bankruptcy court has jurisdiction to determine any dispute which conceivably may affect the administration of the bankruptcy case; this includes disputes affecting the nature of the debtor's estate, and the distribution of such property to creditors or to debtors (if exempt). See Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.1984); In re M. Paolella & Sons, Inc., 85 B.R. 965 (Bankr.E.D.Pa. 1988). This court clearly has the power to determine whether the debtor has a property interest in a liquor license under 11 U.S.C. § 541(a), and, if so, whether the defendant is wrongfully violating any bankruptcy code provisions in denying a license to the debtor. See In re Morris, 45 B.R. 350 (E.D.Pa.1984). If it is determined that the debtor possesses such an interest, this court then has the power to decide whether such interest should be "turned over" to the estate. Cf. 11 U.S.C. §§ 542, 543; United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). If the debtor holds no such property right, the Liquor Control Board correctly states that the debtor should be denied relief, but that decision will not be based upon a finding of lack of jurisdiction. See Nestor v. Hershey, 425 F.2d 504 (D.C.Cir. 1969). Thus, I must decide whether the debtor has any property interest in the liquor license. Id.

Similarly confused is the contention by the Liquor Control Board that this court cannot adjudicate the dispute because of sovereign immunity. To the extent such immunity exists, it protects state agencies against certain monetary awards and not from injunctive or declaratory determinations. See, e.g., Missouri v. Jenkins, ___ U.S. ___, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989); Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908); In re James, 112 B.R. 687 (Bankr.E.D.Pa.1990); In re Colon, 102 B.R. 421, 430 (Bankr.E.D.Pa. 1989). Since the debtor here does not seek monetary relief, only injunctive relief, sovereign immunity is not affected.

III.

A.

As an additional preliminary matter, I note that the debtor presents this case as one where the failure of the Liquor Control Board to grant a license renewal is based solely on its nonpayment of prepetition taxes. The Board does not disagree, as it raises arguments involving the extent of the debtor's interest in the license, but does not suggest that the Board had any basis other than the nonpayment of taxes for disallowing the renewal. At the trial I pointed out to the parties that their exhibits made reference to the fact that the license was denied on the additional basis of the debtor's failure to file certain monthly tax reports. Neither party chose to pursue this factor or discuss its impact, if any, on the question before me, by way of posttrial submissions.

The state Liquor Code requires, at 47 P.S. § 4-477(a), that an applicant for license renewal provide to the Board the following:

(1) the applicant\'s State personal income tax identification number;

(2) the applicant\'s State sales tax number;

(3) the applicant\'s State corporation tax number;

(4) the applicant\'s State employer withholding tax number;

(5) the applicant\'s unemployment compensation account number; and

(6) a statement that:

(i) all State tax reports have been filed and all State taxes paid;

(ii) all State taxes are subject to a timely administrative or judicial appeal; or

(iii) all State taxes are subject to a duly approved deferred payment plan.

At subpart (d) of this section, the Board is directed to not approve any application for renewal where the applicant has failed to meet any one of the following three criteria:

(1) provide any of the information required by subsection (a);

(2) file required State tax reports; or

(3) pay any State taxes not subject to a timely administrative or judicial appeal or subject to a duly authorized deferred payment plan.

Here, it is acknowledged that the debtor did not pay certain state taxes prepetition, but did provide all of the information required by subsection (a) except for a statement that all tax reports had been filed, § 4-477(a)(6)(i). Thus, it appears that the debtor failed to satisfy the provisions of subsection (d)(1), which apparently subsumes the requirements of (d)(2).

The parties declined to discuss the mandatory state tax reports and their potential effect...