Rochester Colony, Inc. v. Hostetter

• Decision Date: 01 July 1963
• Citation: 241 N.Y.S.2d 210,19 A.D.2d 250
• Parties: Application of ROCHESTER COLONY, INC., Respondent, v. Donald S. HOSTETTER, Chairman, William A. Morgan, Robert C. Doyle, John C. Hart and Benjamin H. Balcom, as Commissioners, presently constituting the Members of the State Liquor Authority of the State of New York, Appellants.
• Court: New York Supreme Court — Appellate Division

Page 210

241 N.Y.S.2d 210

19 A.D.2d 250

Application of ROCHESTER COLONY, INC., Respondent, v. Donald S. HOSTETTER, Chairman, William A. Morgan, Robert C Doyle, John C. Hart and Benjamin H. Balcom, as Commissioners, presently constituting the Members of the State Liquor Authority of the State of New York, Appellants.

Supreme Court, Appellate Division, Fourth Department.

July 1, 1963.

Hyman Amsel, New York City, and John J. O'Hare, Buffalo, for appellants; Richard R. Jenczka, Buffalo, of counsel.

Salzman, Salzman & Pheterson, Rochester, for respondent; Sidney J. Salzman, Rochester, of counsel.

Before WILLIAMS, P. J., and GOLDMAN, HALPERN, McCLUSKY and HENRY, JJ.

HALPERN, Justice.

This is an appeal by the State Liquor Authority from an order of the Special Term, annulling a determination of the Authority which had disapproved the petitioner's application for a restaurant liquor license, and directing the Authority to issue the license.

On April 6, 1962 the petitioner filed an application for a license to sell liquor for consumption on the premises of a restaurant proposed to be opened by the petitioner at 375-377 Main Street East in Rochester. As originally filed, the application indicated the petitioner sought to transfer an existing liquor license from another location but during the course of the proceeding before the Authority the application was amended to make it an application for a new license.

Originally, the petitioner had proposed to install a bar 93 feet in length. The Monroe County Alcoholic Beverage Control Board recommended disapproval of the application on the ground that the proposed bar would predominate over the restaurant facilities. The petitioner sought a review of the disapproval by the local Board by the State Liquor Authority. On June 26, 1962 a review hearing was held by a Deputy Commissioner who announced at the beginning of the hearing that 'final action by the Authority will be taken on the basis not only of such facts as may be discussed or developed here, but also of such other pertinent facts as now are or may hereafter become available to the Authority as a result of its own investigation or otherwise'. At that time, it was agreed that the application should be deemed amended so as to state that the length of the bar would be 30 feet, in addition to a ten foot service bar. The Authority also conducted an investigative interview on August 24, 1962, at which it heard various objectors. Various witnesses were also produced by the petitioner in support of the application.

The burden of the objectors' argument, supported by a petition signed by 60% of the businessmen located in the area of the proposed location, was that the area was already amply supplied with both licensed and unlicensed restaurants. The YMCA of Rochester objected on the ground of the proximity of the proposed restaurant to its building. It was also brought out that an application by another applicant for a transfer of a license to the area had been made in December, 1959, and had been denied by the Authority. On the other hand, it was shown on behalf of the applicant that the plans for the premises called for a restaurant of substantial size, that the corporation's president had had considerable experience in the restaurant business and that there was an additional need for a restaurant to replace restaurants which had gone out of business because of the tearing down of the buildings occupied by them.

On August 29, 1962 the Deputy Commissioner who conducted the investigative interview of August 24th, recommended approval of the application, but the Authority, meeting on September 25, 1962, disapproved the application. The Authority had before it not only the evidence presented at the hearing but also the report of the investigative interview and the reports by its employees of surveys and investigations concerning the number and facilities of the restaurants in the area, the character of the neighborhood and other related matters.

The grounds of the disapproval by the Authority were the following:

(1) Area sufficiently licensed.

(2) No assurance a bona fide restaurant will be operated.

(3) Public convenience and advantage would not be served by the issuance of this license.

The third ground may be regarded as a generalized conclusion based upon the two specific grounds first given.

This proceeding was then brought by the petitioner under Article 78 of the Civil Practice Act to review the State Liquor Authority's determination. The Special Term properly retained the proceeding in that court for disposition and declined to transfer it to the Appellate Division. The determination was not 'made as the result of a hearing held, and at which evidence was taken, pursuant to statutory direction' within the meaning of subdivisions 6 and 7 of section 1296 of the Civil Practice Act. The use of the term 'statutory hearing' by the attorney for the Authority, in describing the Authority's hearing in this case is somewhat misleading. The statute (Alcoholic Beverage Control Law, § 54(3) as made applicable to this case by § 64) merely provides that the petitioner has a statutory right to be heard by the Authority upon a review of a disapproval by the local Board. But this does not make the proceeding before the Authority a quasi-judicial proceeding of the type contemplated by subdivisions 6 and 7 of section 1296 of the Civil Practice Act, the determination of which must be based on the evidence received at the hearing (Matter of Stachura v. O'Connell, 271 App.Div. 162, 63 N.Y.S.2d 611). As indicated by the statement by the Deputy Commissioner quoted above, the Authority made its determination in this case, not only upon the basis of evidence taken at the hearing but upon the basis of facts disclosed by its ex parte investigation.

The petition must therefore be regarded as one in the nature of mandamus to review administrative action which was not based solely upon evidence received at a hearing but was based on all the facts known to the administrative officer. The test to be applied by the court in such a proceeding is whether the action is arbitrary or capricious. If there is a triable issue as to underlying facts, upon which the determination of arbitrariness may depend, the petitioner is entitled to have a trial of the issue at Special Term. (Matter of Canada Dry Bottling Co. v. O'Connell, 284 App.Div. 370, 133 N.Y.S.2d 81, aff'd. 308 N.Y. 778, 125 N.E.2d 164; Matter of Arcuri v. MacDuff, 286 App.Div. 17, 141 N.Y.S.2d 1; see also 1 Benjamin, Administrative Adjudication in the State of New York, 354-356; Jaffe on Administrative Law, 502-503; but see, as to the nature of the showing which must be made by the petitioner to entitle him to a trial, Matter of O'Brien v. Commissioner of Education, 3 A.D.2d 321, 160 N.Y.S.2d 754, appeal dismissed 4 N.Y.2d 140, 173 N.Y.S.2d 265, 149 N.E.2d 705, leave to appeal denied 5 N.Y.2d 707, 179 N.Y.S.2d 1028, 153 N.E.2d 799). However in this case no request for a trial or a hearing before the court was made by the petitioner.

The Special Term found that the action of the Authority was arbitrary and capricious, upon the basis of the facts alleged in the petition and not disputed in the answer. We agree with the Special Term that, of the grounds given by the Authority, the second ground was completely destroyed by the undenied allegations of the petition showing, among other things, that the principal stockholder of the petitioner was an experienced restaurant operator who was in fact currently engaged in the operation of restaurants which had been licensed by the Authority and that the petitioner had prepared elaborate plans for a large restaurant operation at the premises sought to be licensed. The assertion by the Authority that it lacked assurance that a bona fide restaurant would be operated by the petitioner had no rational...