Palm Gardens, Inc. v. Oregon Liquor Control Commission

• Decision Date: 03 January 1974
• Parties: PALM GARDENS, INC., an Oregon corporation, et al., Petitioners, v. OREGON LIQUOR CONTROL COMMISSION, Respondent.
• Court: Oregon Court of Appeals

Page 888

514 P.2d 888

15 Or.App. 20

PALM GARDENS, INC., an Oregon corporation, et al., Petitioners, v. OREGON LIQUOR CONTROL COMMISSION, Respondent.

Court of Appeals of Oregon.

Argued and Submitted Aug. 23, 1973.

Decided Oct. 8, 1973.

Rehearing Denied Nov. 1, 1973.

Review Denied Jan. 3, 1974.

John R. Sidman, Portland, argued the cause and filed the briefs for petitioners.

John W. Burgess, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Lee Johnson, Atty. Gen., and John W. Osburn, Sol. Gen., Salem.

Before LANGTRY, P.J., and FORT and THORNTON, JJ.

LANGTRY, Judge.

Petitioners appeal from a revocation of the dispenser Class B license of Palm Gardens, Inc. and the notice of warning issued to the permittee Michael Maklin. Palm Gardens, Inc. was issued the dispenser Class B license on October 18, 1972 as a result of an application filed with the Oregon Liquor Control Commission (referred to as OLCC) on August 18, 1972. The license replaced a previous license issued to Albert Parker, doing business as Palm Gardens; Mr. Parker is listed as the sole stockholder of Palm Gardens, Inc. on the application for the license.

The events forming the basis for this revocation occurred on October 10, 1972. On the evening of that date, two undercover inspectors for the OLCC observed a dancer, wearing only 'pasties' and G-string, on the petitioners' stage approach at the edge of the stage bar a male patron who had placed a piece of folded paper between his teeth. The dancer pulled down her G-string with her thumbs, placed her crotch in the patron's face, and, with her hips gyrating, removed the folded paper from his mouth. This 'performance' was repeated several times during the course of the inspection. A notice of violation was served on both petitioners as a consequence of this inspection.

The dancers engaged in this 'performance' were hired from an independent booking agent by the petitioners, but the petitioners had control of their activities on the stage at all times.

The record also indicates that on two occasions during the three weeks prior to October 10, 1972 inspectors for the OLCC had contacted the petitioners about improper bodily contact between the dancers and the customers.

Based on its findings of fact and on the record presented to it, the OLCC made the following conclusions of law and ruling:

'CONCLUSIONS OF LAW

'Licensee Palm Gardens, Inc., through its employee, for whose acts it is held responsible pursuant to OAR Chapter 845 10--075, maintained a lewd or disorderly establishment and permitted or suffered disorderly conduct upon the licensed premises, in violation of ORS 472.180(5) and OAR Chapter 845 10--065(2).

'Permittee Michael Makin, maintained a lewd or disorderly establishment and permitted or suffered disorderly conduct upon the licensed premises, in violation of ORS 472.180(5) and OAR Chapter 845 10--065(2).

'Wherefore, it is considered and ordered:

'That the Dispenser Class B license of Palm Gardens, Inc., be cancelled for violation of ORS 472.180(5) and OAR Chapter 845 10--065(2), further;

'That a warning be issued Permittee Michael Makin for violation of ORS 472.180(5) and OAR Chapter 845 10--065(2); * * *

'* * *.'

Our review of the order of the OLCC is governed by ORS 183.480(7)(d) which states:

'(7) The court may affirm, reverse or remand the order. The court shall reverse or remand the order only if it finds:

'(d) On review of a contested case, the order is not supported by reliable, probative and substantial evidence on the whole record;

'* * *.'

The statutes and regulations under which responsibility was founded and violations charged are as follows:

Oregon Administrative Rules ch. 845, § 10--075 (OAR 845--10--075):

'Each licensee shall be held responsible for any violation of any regulation of the Commission pertaining to his licensed premises and for any act or omission of any servant, agent, employee, or representative of such licensee in violation of any law, municipal ordinance or regulation affecting his license privileges.'

ORS 472.180(5):

'The commission may cancel or suspend any license granted if it finds:

'(5) That the license maintains a noisy, lewd, disorderly or insanitary establishment or has been supplying impure or otherwise deleterious beverages or food.'

OAR 845--10--065(2):

'No licensee shall permit or suffer any loud, noisy, disorderly or boisterous conduct, or any profane or abusive language, in or upon his licensed premises, or permit any visibly intoxicated person to enter or remain upon his licensed premises.'

Under the substantial evidence rule, we may decide questions of law, but must limit ourselves to the test of reasonableness in reviewing findings of fact. 4 Davis, Administrative Law Treatise 114, § 29.01 (1958); ORS 183.480(7). See Bay v. State Board of Education, 233 Or. 601, 605, 378 P.2d 558, 96 A.L.R.2d 529 (1963).

The petitioners raise nine assignments of error which will be considered in order.

(1). IS PALM GARDENS, INC. RESPONSIBLE FOR VIOLATIONS OCCURRING PRIOR TO THE ISSUANCE OF ITS LICENSE?

The basic argument of the petitioners here is that there is insufficient evidence to disregard the corporate entity and to make the corporation liable. It is true, as the petitioners contend, that the mere ownership of all the stock of the corporation, or management control, by Mr. Parker is not sufficient to justify disregard of the corporate entity. Wakeman v. Paulson, 257 Or. 542, 544, 547, 480 P.2d 434 (1971). However, if the legal entity is being used to defeat public convenience, justify wrong, protect fraud or defend crime, 'courts will disregard the corporation or its entity and look at the substance and reality of the matter.' 1 Fletcher, Cyclopedia of Private Corporations 240--42, § 45 (rev. 1963). Wakeman v. Paulson, supra, 257 Or. at 544, 480 P.2d 434. Looking at the substance and reality of the matters here, it becomes quite clear that to permit Palm Gardens, Inc. to be held blameless for the acts of Albert Parker, dba Palm Gardens, would be to permit the petitioners to evade the authority of the OLCC under the statute. Palm Gardens, Inc. was clearly designed to be a successor to the business operated in an unincorporated form by Albert Parker and the application for a license filed by Palm Gardens, Inc. so indicates.

(2). WERE THE DANCERS EMPLOYES, OFFICERS, AGENTS OR REPRESENTATIVES OF PALM GARDENS, INC.?

The test for determining whether a person is a servant or an independent contractor is based not on the actual exercise of control by the employer, but on the right to control. Where the employer has no right to control the other's actions, the actor is usually deemed to be an independent contractor. But the test of the right to control does not refer to the right to control the results of the work, but rather to the right to control the manner and means of accomplishing the result. Great American Ins. v. General Ins., 257 Or. 62, 66--67, 475 P.2d 415 (1970).

The evidence indicates that Mr. Parker told the dancers the 'rules' and, if they did not follow these rules, they would either be corrected or removed from the stage. Further, nothing in the evidence indicates that Mr. Parker was in anything but complete control of the operation of the establishment and the manner of performance by the dancers. This is sufficient to establish a right to control. The manner of obtaining the services of dancers or other personnel employed here did not erase petitioners' responsibility for the operation of the facility. Freud v. Davis, 64 N.J.Super. 242, 165 A.2d 850 (1960); Jacques, Inc. v. State Bd. of Equalization, 155 Cal.App.2d 448, 318 P.2d 6 (1957).

(3). IS THE WORD 'LEWD' AS IT APPEARS IN ORS 472.180(5) UNCONSTITUTIONALLY VAGUE?

The Oregon approach to vagueness in statutes was stated in State v. Hodges, 254 Or. 21, 27, 457 P.2d 491, 494 (1969), wherein the court stated:

'A law that is too vague for reasonable adjudication is bad on two grounds. A vague statute lends itself to an unconstitutional delegation of legislative power to the judge and jury, and, by permitting the jury to decide what the law will be, it offends the principle, if not the rule, against Ex post facto laws * * *.'

This principle applies alike to license revocation cases, Board of Medical Examiners v. Mintz, 233 Or. 441, 378 P.2d 945 (1963), and Ward v. Ore. State Bd. of Nursing, 11 Or.App. 353, 502 P.2d 265 (1972), reversed on other grounds 97 Or.Adv.Sh. 260, 510 P.2d 554 (1973).

However, the statute need not set out in precise terms every possible violation:

'* * * It may be advisable for the legislature or the administrative agency to set out specific adjudicatory standards in some instances. But this does not mean that a statute must always set out the precise instances under which it is to be operative. No matter how specific the standard or standards are stated, there is almost always a penumbra which requires the administrative agency to exercise a judgment as to whether the facts before it fall within or outside the legislative design * * *.' 233 Or. at 447, 378 P.2d at 748.

This court has previously considered the question of the meaning of the term 'lewd' in a penal statute and we found that it was not unconstitutionally vague. State v. Stich, 5 Or.App. 511, 484 P.2d 861, Sup. Ct. review denied (1971). We noted in affirming a conviction for lewdly fondling and manipulating the private parts of a child (former ORS 167.227):

'Defendant claims that the word 'lewd' is generally coupled with other terms to give it meaning. This is so in ORS 167.227, for the word is coupled with 'fondles and manipulates the private parts' of the child victim. Any person not married to the victim, other than parents or medical persons discharging their duties, who fondles or manipulates the private parts of a child of tender years is doing something Which any mature person of common understanding knows is vile, lustful and...