Sterner v. U.S., 88-99

• Decision Date: 26 May 1989
• Docket Number: No. 88-99,88-99
• Parties: Dale W. STERNER and E. Arlene Sterner, Appellants (Defendants), v. UNITED STATES of America, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 639

774 P.2d 639

Dale W. STERNER and E. Arlene Sterner, Appellants (Defendants), v. UNITED STATES of America, Appellee (Plaintiff).

No. 88-99.

Supreme Court of Wyoming.

May 26, 1989.

Susan Maher Guthrie, Green River, and Lee E. Karavitis, Casper, for appellants.

William S. Rose, Jr., Asst. Atty. Gen. for U.S., Gary R. Allen, David English Carmack, and Thomas R. Lamons, Tax Division, Dept. of Justice, Washington, D.C.; and Richard Allen Stacy, U.S. Atty., for appellee.

Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY, and GOLDEN, JJ.

THOMAS, Justice.

The question to be resolved in this case is whether Wyoming law limits a perfected lien imposed upon a local liquor license to the period for which the license was issued. The United States District Court ruled that a federal tax lien for unpaid income taxes owed by a license transferor attached to and continued in a liquor license after it was transferred by the taxpayer and after the license had been renewed by the transferee. The transfer was by assignment to a prior owner pursuant to an escrow arrangement made upon the sale of the liquor business, which was the occasion of the initial transfer of the license to the taxpayer. The United States District Court ordered foreclosure and sale of the renewal license subject to the approval of the successful bidder by the appropriate licensing authority. The license transferee appealed to the United States Court of Appeals which then certified to this court questions of law pursuant to Sections 1-13-104 to -107, W.S.1977, the Federal Court State Law Certificate Procedure Act ¹, and Rules 11.01 through 11.07, W.R.A.P. ² We conclude that Wyoming law, in the absence of some different contractual provision, would require that the assertion and implementation of the rights of a lien holder would be limited by the period for which the license was granted. It is our view that the federal tax lien expired with the end of the term of the license issued to the taxpayer.

In its order, the United States Court of Appeals submitted the following certified questions of Wyoming law to this court:

"Under the Wyoming liquor licensing system, does the holder of a license have a right to expect that the license will be renewed from year to year if the licensee continues to meet the statutory requirements for licensure?

"Will a perfected lien upon a liquor license terminate at the end of the license year, or will the lien automatically follow and attach to the ensuing new or renewed license without affirmative action by the lienor?"

Our answer to the first of the above questions is "Yes", as the question is qualified by the United States Court of Appeals. We will expand briefly upon that answer by way of comment. Our answer to the second question, which is in two parts, is "Yes" to the first part and "No" to the second part. It is in this context that we recognize the distinction between contractual features that may result in the reattachment of a lien after the end of the license year and an involuntary lien which cannot encompass such features.

In accordance with Rule 11.03, W.R.A.P., the United States Court of Appeals, in its order submitting the questions of state law, articulated the facts relevant to the questions certified as follows:

"The facts of this case are stated in the district court opinion. See United States v. Skirko, 631 F.Supp. 790 (D.Wyo.1985). Dale W. Sterner and E. Arlene Sterner (Sterners) operated the Hideaway Bar and Package Store in Mills, Wyoming. As part of the business, they were owners and holders of Liquor License Number Two. On November 12, 1980, the Sterners entered into a sale and escrow agreement with Marie Forsberg and Bull Pen Restaurant, Inc., for the sale of the business and the liquor license. The agreement provided that upon default, Sterners could terminate the agreement and retake possession of the property and liquor license. A reassignment of the liquor license to Sterners was executed and placed in escrow with the other agreement documents. In accordance with Wyoming law, the liquor license was transferred to Bull Pen Restaurant, Inc.

"On May 12, 1981, Marie Forsberg and Bull Pen Restaurant, Inc., assigned their interest in the sale and escrow agreement to Deanne F. Berrett, who is also known as Deanne F. Skirko (Skirko). Skirko agreed to comply with all of the provisions in the agreement. Skirko also executed a reassignment of the liquor license to Sterners, which was placed in escrow. Pursuant to Wyoming law, the liquor license was transferred to Skirko.

"Subsequently, Skirko defaulted in her payments to Sterners. Sterners notified Skirko by certified mail dated January 9, 1984, that she was in default. When Skirko did not cure her default, the Sterners terminated the agreement by removing the documents from escrow on May 9, 1984.

"Previously, on July 19, 1982, the Internal Revenue Service (I.R.S.) had assessed Skirko for unpaid 1980 federal income taxes. On March 2, 1983, the I.R.S. filed with the Clerk and Recorder of Natrona County, Wyoming, a notice of federal tax lien against Skirko for the assessment of unpaid federal income taxes. The I.R.S. served a levy on Skirko to collect her tax liabilities and any statutory additions. On May 9, 1984, the same day the Sterners terminated the sales agreement by removing documents from escrow, the I.R.S. seized the liquor license, which was to expire on September 6, 1984.

"On May 11, 1984, Sterners filed an application for transfer of the liquor license from Skirko to themselves. Sterners filed Skirko's reassignment of the liquor license with the Mills Town Clerk on May 14, 1984. On July 3, 1984, Sterners filed an application for renewal of the liquor license. The Mills Town Council approved renewal of the liquor license to the Sterners on September 5, 1984. The Sterners paid the license fee of $1,500 to the Mills Town Clerk on September 6, 1984.

"On December 11, 1984, the United States (Government) commenced this action seeking, among other things, judgment against the Sterners to quiet title to and to foreclose the federal tax lien on the liquor license. One issue before the district court was whether the Government forfeited its interest in the liquor license by failing to take action before expiration of the one-year term of the liquor license. The district court concluded the tax lien did not expire when the one-year term for the liquor license expired, because the Sterners merely renewed the liquor license and did not receive a new liquor license."

Our affirmative response to the first question posed by the United States Court of Appeals rests upon a Wyoming statute and this court's interpretation of its effect. Section 12-4-104, W.S.1977, provides in pertinent part:

"(c) The owner and holder of an expired liquor license or permit or one due for expiration has a preference right to a new license for the same location. After the required notice and a public hearing, each application claiming renewal preference shall be promptly considered and acted upon by the licensing authority."

In subsection (e), the same statute authorizes judicial review of an adverse decision by the licensing authority on an application for a renewal license. The statute specifically forecloses an applicant for a new license from judicial review. The legitimacy of the expectation of renewal on the part of the holder of the license is perhaps most definitively captured in City of Evanston v. Whirl Inn, Inc., 647 P.2d 1378 (Wyo.1982). In that case, this court held, in substance, that the action of the licensing authority in denying a renewal was limited to determining, by virtue of a trial de novo, whether the decision of the licensing authority was supported by substantial evidence, was arbitrary or capricious, was beyond the power of the licensing authority to make, or violated some constitutional right of the license holder. Consequently, interpreting the question posed by the court of appeals to mean that the licensee who meets the statutory requirements for licensure could attack the determination of the licensing authority on the foregoing grounds, the licensee would have the right to expect that the license would be renewed. We do note, however, that the licensing authority "may refuse to renew, in the presence of proper facts and proceedings, because the license holder's privilege is not irrevocably vested but it is only a privilege." Whirl Inn, 647 P.2d at 1387.

Turning then to the second question certified by the United States Court of Appeals, we confess that it is difficult to address under state law. The Wyoming legislature specifically has foreclosed involuntary liens in § 12-4-604, W.S.1977, which provides:

"No license or permit shall be transferred or sold except as provided by W.S. 12-4-601 through 12-4-603, used for any place not described in the license or permit at the time of issuance or subject to attachment, garnishment or execution."

This court has had no occasion to consider, for that reason, whether a perfected involuntary lien upon a liquor license would terminate at the end of the license year. We acknowledge the proposition that federal law controls whether the federal tax lien will attach to a Wyoming liquor license, despite the state statute protecting such licenses from attachment, garnishment, or execution. United States v. National Bank of Commerce, 472 U.S. 713, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985); United States v. Rodgers, 461 U.S. 677, 103 S.Ct. 2132, 76 L.Ed.2d 236 (1983); United States v. Bess, 357 U.S. 51, 78 S.Ct. 1054, 2 L.Ed.2d 1135 (1958); United States v. Mitchell, 403 U.S. 190, 91 S.Ct. 1763, 29 L.Ed.2d 406 (1971). We understand that the role of this court is to define the nature of any interest a taxpayer may have in a Wyoming liquor license. Commerce. See Aquilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960); United States v. Durham Lumber Co., 363 U.S. 522, 80 S.Ct. 1282,...