Primo's Bar, Inc. v. Com., Pennsylvania Liquor Control Bd.
| Citation | 48 Pa.Cmwlth. 188,409 A.2d 1369 |
| Parties | In the Matter of PRIMO'S BAR, INC. v. COMMONWEALTH of Pennsylvania, PENNSYLVANIA LIQUOR CONTROL BOARD, Appellant. |
| Decision Date | 28 December 1979 |
| Court | Commonwealth Court of Pennsylvania |
J. Leonard Langan, Kenneth W. Makowski, Pennsylvania Liquor Control Board, Harrisburg, Pa., for appellant.
Michael D. Fioretti, Peruto, Ryan & Vitullo, Philadelphia, for appellee.
Before MENCER, BLATT and CRAIG, JJ.
The third degree murder conviction of Alberto Santa, formerly the sole shareholder of Primo's Bar, Inc. (the corporation) spawned the case now before us on appeal.
The Pennsylvania Liquor Control Board (PLCB) asks us to reverse the court below, which reversed the board's revocation of the liquor license held by the corporate entity.
After the murder conviction of Santa on October 19, 1977, the PLCB "pierced the corporate veil" finding Santa to have been the sole shareholder, president, secretary, treasurer, manager, and one of three members on the board of directors and revoked the corporation's license on that basis, pursuant to a hearing in December of 1977.
Well before the homicide occurred, however, Financing by Superior, Inc. (Superior), owned by Jack Kulla, had loaned Santa the money to acquire the bar, including its liquor license, and had entered into an agreement with Santa and the corporation to secure that loan. Pursuant to that agreement, Kulla and his wife held the other two directorships, Superior thereby retaining ultimate potential control of the corporation, which right it could exercise in the event of Santa's default on loan repayments.
To further secure its financial interest, Superior had required that all the shares of stock in Santa's name be endorsed in blank and held by Superior, 1 and thereby retained powers to transfer those shares to itself or anyone else, upon any default by Santa.
The corporation was further prohibited from in any way encumbering or transferring its license or its shares of stock, and Superior retained possession of all the corporation's indicia of its separate legal identity (charter, seal, minute book, stock book and lease). Superior also required the corporation to notify it within 48 hours should the PLCB issue a citation against the premises. 2
Spurred by 26 consecutive weekly defaults by Santa, Superior, learning of Santa's conviction and the pending PLCB action, promptly called a board of directors meeting. At that meeting, held on February 22, 1978, it ousted Santa from the corporation, assigned all his shares to Kulla, and elected Kulla and his wife to all the corporate offices. From that point on, neither Santa nor any member of his family retained any official connection with Primo's Bar, Inc.
The PLCB officially revoked the license on March 6, 1978. On March 13, 1978, Superior filed the appropriate notices with the PLCB indicating that Santa was no longer with the corporation. 3
Section 471 of the Liquor Code, Act of April 12, 1951, P.L. 90, As amended, 47 P.S. § 4-471, allows the PLCB to revoke a liquor license under catch-all "other sufficient cause" language. Violations of the criminal laws of the Commonwealth, as distinguished from violations of the Liquor Code itself, can constitute sufficient cause for revocation. Quaker City Development Co. Appeal, 27 Pa.Cmwlth. 13, 365 A.2d 683 (1976); Commonwealth v. Lyons, 142 Pa.Super. 54, 15 A.2d 851 (1940).
Upon appeal to the court of common pleas, the court must make findings on the material issues, different from those found by the PLCB, if the court is to change or modify a penalty. Carver House, Inc. Liquor License Case, 454 Pa. 38, 310 A.2d 81 (1973). Here, the court below had the benefit of the testimony of Jack Kulla and made findings as to his interest in, and innocence of, the relevant affairs of Santa and the corporation. Therefore the court had statutory authority to reverse the PLCB.
The issue here is whether the PLCB was warranted in disregarding the corporate entity, Primo's Bar, Inc., by revoking its license because of the criminal conviction of its sole shareholder, president, treasurer, secretary and manager.
Resolution of that issue depends upon whether the lender-shareholders here are to be afforded the status of "innocent parties" as to the corporation under Price Bar, Inc. Liquor License Case, 203 Pa.Super. 481, 201 A.2d 221 (1964), in order to preclude desiccation of the corporate vitality.
In Price Bar, Inc. Liquor License Case, the court reversed a PLCB revocation against a corporate licensee where a 50% Stockholder had been convicted of a crime, in no way connected with the licensed business not violative of the Liquor Code, and not committed on the licensed premises.
The court there refused to pierce the corporate veil, stating that:
"(W)e have not done so (pierced the corporate veil) where the rights of innocent parties are involved and the corporation is used for a legal purpose, as otherwise the entire theory of the corporate entity would be made useless." 203 Pa.Super. at 484, 201 A.2d at 222.
The court went on to say:
203 Pa.Super. at 485, 201 A.2d at 223.
What is it, if anything, about the interest of Superior in Primo's Bar, Inc. that would place Superior's shareholders in a status like that of the 50% Shareholder in Price's Bar ?
The PLCB argues that we must focus on the interest held by Superior at the time of the occurrence of the act that ordinarily would have constituted the "sufficient cause" for revocation Santa's conviction and ignore the subsequent takeover of the corporation by the lender.
We agree that such should be the primary focus. However, to render a decision in this difficult case, we must remain mindful of the underlying purpose of the PLCB's power to revoke a liquor license for the...
To continue reading
Request your trial