Spevak v. Dist. of Columbia Alcoholic Beverage

• Decision Date: 13 August 1979
• Docket Number: No. 14038.,14038.
• Citation: 407 A.2d 549
• Parties: Virginia Sager SPEVAK et at., Petitioners, v. DISTRICT OF COLUMBIA ALCOHOLIC BEVERAGE CONTROL BOARD, Respondent, Discount Drugs Wisconsin, Inc., Intervenor.
• Court: D.C. Court of Appeals

Page 549

407 A.2d 549

Virginia Sager SPEVAK et at., Petitioners, v. DISTRICT OF COLUMBIA ALCOHOLIC BEVERAGE CONTROL BOARD, Respondent, Discount Drugs Wisconsin, Inc., Intervenor.

No. 14038.

District of Columbia Court of Appeals.

Argued May 16, 1979.

Decided August 13, 1979.

Jack I. Heller and Charles B. Ruttenberg, Washington, D. C., with whom Richard Levy, Jr., Washington, D. C., was on brief, for petitioners.

Leo N. Gorman, Asst. Corp. Counsel, Washington, D. C., for respondent. Richard W. Barton, Deputy Corp. Counsel, Washington, D. C., also entered an appearance for respondent. Respondent adopted brief of intervenor.

J. E. Bindeman, Washington, D. C., with whom Stuart L Bindeman, Washington, D. C., was on brief, for intervenor. Leonard W. Burka, Washington, D. C., also entered an appearance for intervenor.

Before KELLY, NEBEKER and HARRIS, Associate Judges.

KELLY, Associate Judge:

Discount Drugs Wisconsin, Inc. [Rodman's] sought a Class B (wine and beer) beverage license from the Alcoholic Beverage Control Board [the Board]. After a complicated set of hearings, the license was granted. Petitioners, a coalition of citizen's groups, retail liquor dealers, and commissioners of the local Advisory Neighborhood Commission [ANC], appeal, alleging, inter alia, that the Board made inadequate findings of fact and conclusions of law and those findings it did make were not supported by substantial evidence. Petitioners also argue that the Board failed to give "great weight" to the objections of the local ANC, and erred in permitting Rodman's to reapply for a license within one year of an initial denial of its original application.¹ We affirm.

I

Initially, we consider the claim that the Board violated 3 DCRR § 2.4(a) forbidding for one year reconsideration of a denied application except when "new pertinent evidence is presented."² It is true, as petitioners allege, that this rule is mandatory, giving discretion to the Board only within one specific exception. Cf. Hubbard v. District of Columbia Board of Zoning Adjustment, D.C.App., 366 A.2d 427 (1976). Thus we must decide whether that exception — "new pertinent evidence" — was present here.

The facts underlying this issue are complex but essentially uncontested. Rodman's first applied for a Class B alcoholic beverage license in June of 1977. The application was opposed and hearings were held on two days in July of 1977. After the record was closed, the Board became concerned that default on a loan due Rodman by Triangle Liquors might allow Rodman to take control of Triangle, thus violating D.C. Code 1973, § 25-113(b)'s ban on dual licensing of Class A and Class B retailers.³ It therefore asked the Corporation Counsel's opinion on whether the potential for default control of Triangle was a form of dual control forbidden by § 25-113, supra. The Corporation Counsel's office decided it needed further information and, without notice to opponents of the license application, had an extensive series of ex parte conversations with Rodman's counsel which resulted in an early payment of the loan, thus ending the potential for Rodman to gain control over Triangle. Thereafter, on November 3, 1977, the Board granted Rodman's application, relying, in part, on a final opinion of the Corporation Counsel that there was no further potential for Rodman to assume control of a second liquor license.

Opponents of the issuance of the license immediately petitioned for reconsideration alleging, among other things, that ex parte contacts had tainted the Board's decision. The Board, after considering the petition and holding brief further hearings reversed itself and issued an order on January 31, 1978, denying Rodman's application. The denial relied solely upon the impropriety of the disputed ex parte contacts.

Ten days later Rodman's requested permission to reapply for the same license. That request was granted in an order of March 30, 1978, which was amended on April 5, 1978. Rodman's then formally reapplied for a Class B alcoholic beverage license on April 18, 1978. Opponents of the license, thus first made aware of the reapplication, immediately petitioned the Board to reconsider its grant of leave to reapply within the one-year period. Their request was denied on May 12, 1978. Hearings on the reapplication were held on May 24 and May 25, 1978, and on October 6, 1978, the Board issued a new order granting Rodman's a Class B license.⁴

The essential question here is whether the Board's grant of leave to expedited reapplication was valid, a question that turns on whether there was "new and pertinent evidence" presented to the Board. Petitioners contend that Rodman's relationship with Triangle was raised at the initial (1977) hearings and thus the end of that relationship was not "new", leaving the Board no discretion to consider a reapplication. Rodman's and the Board take the position that the retirement of the loans, dispelling the potential for dual licenses, was new and pertinent evidence. We agree that the fact of the termination of the loans was pertinent evidence not considered at the original hearing, but are troubled by the fact that the evidence was considered by the Board before issuing either its original grant of or its later denial of the license application. In that sense it was hardly "new" evidence discovered after a denial of a license.

We are persuaded, however, that the Board's final resolution of this problem was correct. The supposedly new evidence (of the removal of an impediment to licensing) had never been considered in an adversarial setting. It was relevant to a significant and contested issue. The effect of allowing reconsideration of the licensing application was to hold a new set of hearings with full opportunities for opponents and advocates of the license to speak. This solution, while perhaps not as satisfactory as reopening the earlier hearings, certainly protected any due process concerns of all participants in the case. The fact that the Board had seen an ex parte presentation of pertinent facts did not make these facts "evidence" in the record. The Board's decision to reverse its position and deny the requested license was in fact an explicit recognition that the payment of the loan was not proper evidence before it. Accordingly, the loan payment was properly regarded as new evidence within the meaning of 3 DCRR § 2.4(a) which allowed the Board to exercise its discretion to consider the renewed license request.

II

Petitioners next claim that the Board's findings of fact and conclusions of law were either inadequate or nonexistent. The legal requirements for factual findings in contested administrative cases are set out in general in the District of Columbia Administrative Procedure Act [DCAPA] at D.C.Code 1978 Supp., § 1-1509, and in particular in subsection 1-1509(e).⁵ Repeated judicial consideration of these requirements has provided us with a fairly coherent three-fold adequacy test. First, the agency (in this case the Board) must make findings on all contested issues material to the underlying substantive statute or rule. Secondly, its findings must be supported by substantial evidence apparent from the record as a whole.⁶ Finally, the agency's conclusions of law must be derived rationally from findings that are in accord with the underlying statute. Cf. Citizens Association of Georgetown, Inc. v. D. C. Zoning Commission (Safeway Stores], D.C.App., 402 A.2d 36 at 40-42 (1979).

Two substantive statutes underlay the issue at the 1978 hearings in this case. Opponents of the license again asserted a violation of § 25-113(b), supra, this time claiming that Rodman retained de facto control of McReynolds Liquors, Inc. and was therefore ineligible for a "second" retail liquor license. They also advanced the provisions of D.C.Code 1973, § 25-115(a)(6),⁷ which requires that the Board issue a license only if it has found that the proposed location is an appropriate one for a license.

The Board dealt with the § 25-113(b) issues in its findings of fact Nos. 14-16 and Nos. 33-34. A review of these findings discloses that they cover all the contested facts relevant to the statute; findings Nos. 14-16 established that no outside parties had any control over Rodman's Discount Drugs; finding No. 34 said that there was no further danger of control over sales by Triangle; and finding No. 33 established that Rodman and his wife had transferred to their sons all of their interests in McReynolds Liquors between November 1976 and March 1977. Petitioners dispute this latter finding, pointing to 1977 testimony that Rodman's employees had handled transactions for McReynolds and that Rodman himself, in the summer of 1977, had personally signed four or five checks on behalf of McReynolds Liquors. Even if we view the record as a whole, as including the 1977 testimony, however, there is substantial evidence, both testimonial and documentary (including copies of income tax returns) to support the Board's finding that Rodman no longer had any interest in McReynolds. Finally, the third test is met. The Board's conclusion of law No. 6, that there was no § 25-113(b) violation, was rationally derived from the factual findings and is based on an appropriate reading of the statute.

Petitioners have contested the adequacy and even the existence of necessary findings of fact by the Board, specifically questioning the findings on parking and traffic, trash collection, neighborhood opinions, impact on the area, and adequacy of existing retail liquor services. Such issues are, arguably, all made relevant by § 25-115(a)(6) requiring the Board to satisfy itself:

That the place for which the license is to be issued is an appropriate one considering the character of the premises, its surroundings, and the wishes of the persons residing or owning property in the neighborhood of the premises for which the license is desired.

The Board considered parking and traffic directly...