Morris–schindler Llc v. City

• Decision Date: 02 September 2010
• Docket Number: No. 09CA1997.,09CA1997.
• Citation: 251 P.3d 1076
• Parties: MORRIS–SCHINDLER, LLC, a Colorado limited liability company, d/b/a Roslyn Grill, Plaintiff–Appellant,v.CITY AND COUNTY OF DENVER, a political subdivision of the State of Colorado, by and through The Office of the Director of Excise and Licenses, acting as local licensing authority, Defendant–Appellee.
• Court: Colorado Court of Appeals

251 P.3d 1076

MORRIS–SCHINDLER, LLC, a Colorado limited liability company, d/b/a Roslyn Grill, Plaintiff–Appellant,

v.CITY AND COUNTY OF DENVER, a political subdivision of the State of Colorado, by and through The Office of the Director of Excise and Licenses, acting as local licensing authority, Defendant–Appellee.

No. 09CA1997.

Colorado Court of Appeals, Div. III.

Sept. 2, 2010.

Dill Dill Carr Stonbraker & Hutchings, PC, H. Allen Dill, Adam P. Stapen, Denver, Colorado, for Plaintiff–Appellant.David R. Fine, City Attorney, John D. Poley, Assistant City Attorney, Denver, Colorado, for Defendant–Appellee.Opinion by Judge ROY.

Morris–Schindler, LLC (the licensee), doing business as Roslyn Grill (the establishment), appeals the court order upholding the nonrenewal of its hotel and restaurant liquor license by the City and County of Denver. We affirm in part, reverse in part, and remand for a determination of good cause in accordance with the views expressed in this opinion.

For more than twenty-six years, the licensee operated the establishment in Denver. Following the application for the renewal of the license in 2008, the Director of Excise and Licenses for Denver (director) issued an order directing the licensee to show cause why the renewal of the license should not be denied. See § 12–47–302, C.R.S.2009. The order gave notice of specific violations of the liquor laws during the term of the current license. These alleged violations were: (1) an undercover narcotics transaction occurring in the establishment that resulted in a declaration of a public nuisance being issued to the owner of the premises; (2) two sales of alcohol to a minor; (3) thirteen emergency calls involving fights, assaults, and sales of drugs; and (4) the regular presence of drunken or passed-out customers.

Following a hearing, the hearing officer recommended nonrenewal of the license based upon a finding of good cause and relying on all of the matters noticed. The director adopted the recommendation and issued a final decision.

The licensee commenced an action under C.R.C.P. 106(a)(4), asserting that the director misapplied the law by applying a strict liability standard to the alleged violations, that there was no competent evidence supporting the director's final order, and that the liquor license law was unconstitutional as applied.

The trial court concluded that the director did not abuse her discretion in finding that (1) the two sales to a minor and (2) the regular presence of over-served, intoxicated patrons loitering in front of the bar, a violation of Division of Liquor Enforcement Rule 47–900, 1 Code Colo. Regs. 203–2 (C.C.R.47–900), constituted good cause for nonrenewal. However, the trial court concluded that the director abused her discretion in concluding that an undercover narcotics transaction, which occurred in the establishment, constituted good cause for nonrenewal as there was no evidence that the licensee was aware of, involved with, or permitted the sale.

On appeal, the licensee argues that the director abused her discretion (1) in applying a strict liability standard in connection with violations of the Colorado Liquor Code (Code); (2) in finding that the licensee permitted an undercover narcotics transaction; (3) in finding that the licensee permitted the sale of alcohol to intoxicated customers, and then permitted the intoxicated customers to loiter inside and outside the premises; (4) in not imposing the sanctions criteria for violations of the Code in the renewal hearing for good cause; and (5) in denying renewal as that action was manifestly excessive.

I.

In an appeal of a C.R.C.P. 106(a)(4) proceeding, we review the decision of the administrative body, not that of the trial court. Woods v. City & County of Denver, 122 P.3d 1050, 1053 (Colo.App.2005). C.R.C.P. 106(a)(4) review is limited to a determination of whether the administrative agency exceeded its jurisdiction or abused its discretion. Jayhawk Cafe v. Colo. Springs Liquor & Beer Licensing Bd., 165 P.3d 821, 824 (Colo.App.2006). We may consider whether the agency misconstrued or misapplied the law. Bd. of County Comm'rs v. Conder, 927 P.2d 1339, 1343 (Colo.1996). However, we can reverse a finding of fact made by an administrative agency only if there is no competent evidence to support it. City of Colorado Springs v. Givan, 897 P.2d 753, 756 (Colo.1995). “ ‘No competent evidence’ means that the ultimate decision of the administrative body is so devoid of evidentiary support that it can only be explained as an arbitrary and capricious exercise of authority.” Id.

As pertinent here, section 12–47–302(1), C.R.S.2009, authorizes the local licensing authority to refuse to renew a liquor license “for good cause shown, subject to judicial review.” In Squire Restaurant & Lounge, Inc. v. City & County of Denver, 890 P.2d 164 (Colo.App.1994), a division of this court held that the term “good cause” was overbroad, and, therefore, unconstitutional. In apparent response, the General Assembly defined the term. Section 12–47–103(9)(a), C.R.S.2009, now provides:

“Good Cause,” for the purpose of refusing or denying a license renewal or initial license issuance, means:

(a) The licensee or applicant has violated, does not meet, or has failed to comply with any of the terms, conditions, or provisions of this article or any rules and regulations promulgated pursuant to this article.

II. Strict Liability

The licensee first argues that the director abused her discretion by applying a strict liability standard for violations of the Code. More specifically, the licensee argues that each provision of the Code cited by the director as a violation by the licensee, which formed the basis for good cause not to renew, contains the word “permit,” which requires some level of knowledge, rather than strict liability and, therefore, the director misconstrued the law. We agree.

Statutory interpretation is a question of law, which we review de novo. Klinger v. Adams County Sch. Dist. No. 50, 130 P.3d 1027, 1031 (Colo.2006). When construing a statute, we must determine the intent of the legislature. State v. Nieto, 993 P.2d 493, 500 (Colo.2000). Under the basic principles of statutory interpretation, we first determine whether the statutory language has a plain and unambiguous meaning. People v. Yascavage, 101 P.3d 1090, 1093 (Colo.2004).

In her final decision, the director made the following findings of fact and conclusion of law:

6. [Licensee,] itself or through its witness, did not refute or deny the evidence presented at the hearing regarding the sales of alcohol to minors—a violation of Section 12–47–901(1)(a.5) of the Code and failure to comply with the Code, the sale of drugs inside the premises—a violation of Colorado Code of Regulations 47–900, and the regular presence of over-served, drunk patrons coming out of and standing in front of [the establishment]—a violation of Section 12–47–901(5)(a) of the Code and Colorado Code of Regulations 47–900. The incidents demonstrate that the record of [licensee] is such that a potential violation of the Code may occur if [the] license is renewed.

The statutes or regulations defining these violations contain the word “permit,” and previous decisions by divisions of this court have held that the word “permit” in the Code requires a showing of actual or constructive knowledge. See Full Moon Saloon, Inc. v. City of Loveland, 111 P.3d 568, 569–70 (Colo.App.2005) (stating “that a licensee is not held to a strict liability standard and that some level of knowledge by the licensee must be established by the evidence”); see also Costiphx Enterprises, Inc. v. City of Lakewood, 728 P.2d 358, 360 (Colo.App.1986) (stating that even though undercover police officers met at a pub to place and pay off bets, there was no evidence that the owners or employees were aware of these activities and, therefore, “it cannot be said that plaintiff or its agents ‘permitted’ or ‘authorized’ the professional gambling as prohibited by the regulation”); 400 Club, Inc. v. Canjar, 523 P.2d 141, 142 (Colo.App.1974) (not published pursuant to C.A.R. 35(f)); Clown's Den, Inc. v. Canjar, 33 Colo.App. 212, 215, 518 P.2d 957, 959 (1973).

Therefore, in our view, the director misconstrued and misapplied the law when she applied a strict liability standard to violations of the Code and regulations.

III. Violations

The director concluded that permitting the sale of narcotics in the establishment was a violation of C.C.R. 47–900; that the regular presence of over-served, drunken patrons inside and outside the establishment violated both section 12–47–901(5)(a), C.R.S.2009, and C.C.R. 47–900; and that serving underage customers violated section 12–47–901(1)(a.5), C.R.S.2009. Further, the director concluded that these cumulative violations could be considered in denying renewal of the license. We disagree with the director as to the narcotics sale only.

Again, an issue of statutory interpretation is reviewed de novo. Klinger, 130 P.3d at 1031; Cendant Corp. & Subsidiaries v. Department of Revenue, 226 P.3d 1102, 1106 (Colo.App.2009) (applying de novo review to the Colorado Code of Regulations). Also, under C.R.C.P. 106(a)(4), judicial review of an administrative body's decision is limited to a determination of whether the body has exceeded its jurisdiction or abused its discretion. Jayhawk Cafe, 165 P.3d at 824.

We may only determine if the record supports the decision, not whether we would arrive at a different decision. City of Manitou Springs v. Walk, 149 Colo. 43, 46, 367 P.2d 744, 746 (1961). “All reasonable doubt must be resolved in favor of the action of the licensing authority.” Id. (citing Bd. of County Comm'rs v. Salardino, 138 Colo. 66, 329 P.2d 629 (1958)). A decision may be overturned for lack of competent evidence, meaning that the ultimate decision of the administrative body is so devoid of evidentiary support that it can only be explained as an...