ROSEDALE PLAZA LTD. PARTNERSHIP v. LEFTA, INC., 1424

• Decision Date: 06 September 2001
• Docket Number: No. 1424,1424
• Citation: 780 A.2d 387,140 Md. App. 243
• Parties: ROSEDALE PLAZA LIMITED PARTNERSHIP v. LEFTA, INC., et al.
• Court: Court of Special Appeals of Maryland

780 A.2d 387

140 Md. App. 243

ROSEDALE PLAZA LIMITED PARTNERSHIP v. LEFTA, INC., et al.

No. 1424, Sept. Term, 2000.

Court of Special Appeals of Maryland.

September 6, 2001.

William J. Selle (O'Malley, Miles, Nylen & Gilmore, P.A., on the brief), all of Annapolis, for appellant.

Robert Hanley and Stuart Kaplow (Nolan, Plumhoff & Williams, Chtd. on the brief), all of Towson, for appellees. Argued before DEBORAH S. EYLER, LAWRENCE F. RODOWSKY, (Ret'd, Specially Assigned), and RAYMOND G. THIEME, JR. (Ret'd, Specially Assigned), JJ.

THIEME, Judge.

This case presents us with a relatively straight-forward matter of first impression that is complicated by rather byzantine proceedings. Like Theseus, however, we must follow Ariadne's string to extricate ourselves from the labyrinth. We will begin by briefly setting forth the factual background and proceedings in this case that arose prior to the determination by the Circuit Court for Baltimore County that the individual licensees of a liquor license have no property interest in that license when it is issued on behalf of a corporation.

Rosedale Plaza Limited Partnership appeals from that decision and presents us with the following question:

I. Did the circuit court err in holding that the owner of a liquor license was not the named licensees, but rather the corporation for whose use the license was issued?

Facts and Proceedings

On July 23, 1997, Rosedale and Lefta, Inc. entered into a shopping center lease for the property known as 703 Chesaco Avenue, Baltimore, Maryland 21237 to be used by Lefta, Inc. as a restaurant, bar and packaged goods store. Andreas Pitsos, Maria Papadimitriou, and Irene Pitsos signed personal guarantees in connection with the lease agreement. These individuals made application to the Baltimore County Board of Liquor License Commissioners for a Class D beer, wine, and liquor license on behalf of Lefta, Inc.; the liquor license was issued on April 9, 1997. In connection with the purchase of the business to be operated in the newly leased space, Lefta, Inc. granted a security interest in certain property held by the corporation, including the liquor license, to Chesaco Enterprises and J & J Real Estate, pursuant to a Security Agreement and Financing Statement.

The business ceased operating in August 1997, only months after opening. Lefta, Inc. subsequently defaulted on the rent payments on the premises, and therefore Rosedale Plaza Limited Partnership filed an action against Lefta, Inc., Andreas Pitsos, Georgia Pitsos, Maria Papadimitriou, Irene Pitsos, and George Dorn. The circuit court entered judgment against the individuals in the principal amount of $85,430.63 and attorney's fees of $6,742.25.

Lefta, Inc. filed a Bankruptcy Petition with the U.S. Bankruptcy Court for the District of Maryland, and the alcoholic beverages license that is the basis of this appeal was claimed as property of the estate in that bankruptcy case. The trustee in the Lefta, Inc. bankruptcy case filed a Motion to Sell Personal Property of the Estate free and clear of Liens; the personal property that was the subject of the motion was the liquor license. Rosedale thereafter filed a Motion for Relief from the Automatic Stay with the U.S. Bankruptcy Court to gain possession of the liquor license, requesting permission to execute on its judgment entered against the individual licensees' interests in the license. It is undisputed that the liquor license in question is the only substantial asset from which to satisfy the respective claims. The Bankruptcy Court denied the Motion to Lift Stay, indicating that Lefta, Inc. had an interest in the license, and allowed the sale.

The license remained part of the bankruptcy estate upon the failure of the parties to agree on the terms of a Consent Order. Thereafter, Rosedale requested that a Writ of Execution be issued by the circuit court to attach the interest held in the license by the judgment debtor individual licensees. The Writ was issued, and the Sheriff levied on the license. Rosedale then filed a request for sale seeking to have the license sold to satisfy the judgment entered against the judgment debtor individual licensees. Appellees, Chesaco Enterprises, Inc. and J & J Real Estate, the secured creditors of Lefta, Inc., then filed a Motion for Release of Property from Writ of Execution concerning the license. Prior to the hearing on the Motion to Release Property, the trial court ruled that the Motion was stayed "pending resolution of the bankruptcy action in federal court."

With the prior Motion To Lift Stay unresolved, the Bankruptcy Judge ruled that the automatic stay would be lifted and the parties could seek State Court determination as to the ownership of the license. The sale of the license was stayed by the Bankruptcy Court in order to protect the license during the pendency of any State Court action. Thereafter the case came to a hearing and the trial court ruled that the license was the property of and owned by the individual licensee judgment debtors and not by Lefta, Inc., the corporation for whose benefit the license had been issued. The trial court declined to quash the Writ of Execution. The Baltimore County License Beverage Association filed a Motion to Intervene that was granted. Chesaco Enterprises, Inc. and J & J Real Estate filed a Motion to Alter or Amend the Judgment. Once again, the matter was set for hearing, whereupon the trial court reversed its prior ruling. This time, the trial court ruled that the license was held for the benefit of the corporation, Lefta, Inc., and that the individual licensees had no ownership interest in it. Rosedale thereupon noted this appeal.

Discussion

Appellant argues that the circuit court erred in holding that the owner of the liquor license is the corporation for whose use the license was issued. Appellant contends instead that it is the named licensees that own the license, and that the applicable law precludes a corporation from owning a liquor license.

The face of the license at issue here reads, in pertinent part:

THIS IS TO CERTIFY, that Andreas Pitsos, Maria Papadimitriou, Irene A. Pitsos, Lefta, Inc., t/a Hillbrook Station Raw Bar & Grill/Chesaco Liquors, XXXX-XX-XX Chesaco Avenue, Baltimore, MD 21237 is licensed by the State of Maryland to keep for sale, and to sell all alcoholic beverages at retail at the place herein described, for consumption on the premises or elsewhere.

Md.Code (1957, 1998 Repl.Vol.) § 9-101 of Article 2B, which covers the general provisions regarding the issuance of liquor licenses in Maryland, provides in pertinent part:¹

(a) License issued to individuals; application for partnership.—A license may not be issued to a partnership, to a corporation, or to a limited liability company, but only to individuals authorized to act for a partnership, corporation, or limited liability company who shall assume all responsibilities as individuals, and be subject to all of the penalties, conditions and restrictions imposed upon licensees....

* * *

(b) Application for corporation or club.—If the application is made for a corporation, or a club, whether incorporated or unincorporated, the license shall be applied for by and be issued to three of the officers of that corporation or club, as individuals, for the use of the corporation or club, at least one of whom shall be a registered voter and taxpayer of the county or city, or State of Maryland when the application is filed with the Comptroller, and shall also have resided therein, at least two years prior to the application....

The language is clear that a liquor license may not be issued to a corporation. We do not think, however, that it necessarily follows that a corporation cannot own a liquor license. On the contrary, we think that a corporation can own a liquor license, and the determination in a case such as this as to whether the license is owned by the individual applicant(s) or by the corporation depends on the circumstances of the particular case. Here, an examination of the face of the license itself does not aid in this determination, as it indicates that the license was issued to the three individuals and to the corporation. Although the name of the corporation appears on the license, it nonetheless seems clear, pursuant to § 9-101, that the license was issued to the individual applicants. The relevant issue in this matter, however, is the determination of the ownership of the license. Therefore, it is imperative not to confuse the issuance of the license with its ownership. Our focus shall be on the intent of the legislature in drafting the applicable provisions, along with the intent of the individual applicants in this case in applying for the license.

We hold that the Circuit Court for Baltimore County did not err in holding that the liquor license was owned by Lefta, Inc. and therefore not subject to levy by a judgment creditor of the individual licensees. The license was issued to the licensees in their capacities as officers and stockholders of Lefta, Inc. Thus, the liquor license in this case was owned by Lefta, Inc., and the licensees obtained no individual ownership interest in the liquor license.

The Alcoholic Beverages License Application completed by the individuals contained a part entitled "For Clubs, Corporations, Partnerships and Associations," in accordance with the provisions of § 9-101(b), which is entitled "Application for corporation or club." The information requested in this part of the application includes the name and address of the corporation and the name and official capacity of all officers or partners. A note following that request states: "If application is made on behalf of a corporation or club at least one of the individuals applying must be a registered voter and taxpayer of Baltimore County." It then requests the name of that qualifying individual, a voting address, and an address for the property on which the tax is...