Sun Ray Drive-In Dairy, Inc. v. Oregon Liquor Control Commission

• Decision Date: 24 December 1973
• Docket Number: DRIVE-IN
• Parties: SUN RAYDAIRY, INC., Petitioner, v. OREGON LIQUOR CONTROL COMMISSION, Respondent.
• Court: Oregon Court of Appeals

Page 289

517 P.2d 289

16 Or.App. 63

SUN RAY DRIVE-IN DAIRY, INC., Petitioner, v. OREGON LIQUOR CONTROL COMMISSION, Respondent.

Court of Appeals of Oregon.

Argued and Submitted Nov. 26, 1973.

Decided Dec. 24, 1973.

D. S. Denning, Jr., Vale, argued the cause for petitioner. With him on the brief were Schroeder, Denning & Hutchens, Vale.

John W. Burgess, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Lee Johnson, Atty. Gen., and W. Michael Gillette, Sol. Gen., Salem.

Before SCHWAB, C.J., and FOLEY and TANZER, JJ.

TANZER, Judge.

Petitioner appeals from an order of the Oregon Liquor Control Commission denying its application for a Class B Package Store liquor license ¹ for its store in Ontario, Oregon. The commission based its refusal on ORS 471.295(1) ² which provides that the commission may refuse to license an applicant if it has reasonable ground to believe that there are 'sufficient licensed premises in the locality' or that the granting of the license is 'not demanded by public interest or convenience.' The commission found as ultimate facts that there were sufficient licensed premises in the area, there were local objections to issuance of the license and that the applicant was not a grocery store, and denied the application.

The evidence at the hearing on petitioner's application showed that petitioner is a corporation doing business in Idaho and Oregon. At the time of the hearing petitioner had 12 stores in Idaho and two stores in Oregon. Petitioner's stores specialize in the sale of convenience grocery products and beverages. At the time of the hearing, petitioner's Ontario store had a grocery inventory of $6,000 to $7,000, restocked weekly, and the store's monthly grocery sales were shown to be in the area of $7,000 to $9,000, the major share of which was dairy and bakery products processed or baked by petitioner. In addition to groceries, petitioner's Ontario store sells gasoline under a commission arrangement with the Time Oil Company.

Various persons employed by the licensing division of the commission testified at the hearing on petitioner's application. Mr. William Alexander, a liquor control officer, testified that he had done a background investigation of the applicant and made a survey in the area to determine people's attitudes toward whether petitioner's application should be granted. Mr. Alexander initially testified that he recommended refusal of petitioner's application because of (1) objections of area residents; (2) the large number of existing outlets; and (3) the fact that petitioner's store did not have a broad inventory of groceries. However, he subsequently abandoned the last ground. He testified that even if the petitioner's store had been a Safeway, he would have recommended refusal because of the number of outlets already in the area. Mr. Alexander's 'conservative' estimate was that there were 15 Class B Package Store licensees in Ontario.

Mr. Alexander's recommendation of refusal was passed on to his direct superior, Mr. Charles Miller, who testified that he reviewed Mr. Alexander's report and agreed that the application should be denied. Mr. Miller's reasons, like Mr. Alexander's, were (1) that there were sufficient licensed places in the area (eight outlets in an eight or nine block area), and (2) that there had been objections from area residents. Mr. Miller testified that he had no 'yardstick' to go by, and that his recommendation was based on his 'past experience and judgment.'

Mr. Miller's recommendation was, in turn, passed on to Mr. Don Church, the commission's director of licensing. Mr. Church testified that the number of other licensees in a particular area was not a factor in deciding whether to issue a license; rather, the main factor, in his opinion, was whether the operation in question was a 'legitimate grocery store.' Mr. Church stated that if a store is deemed by the commission to be a 'legitimate grocery store,' the commission's policy is to grant the store a Class B Package Store license, regardless of how many other licensees are in the immediate area. The reason for his recommendation of denial to the commission, Mr. Church said, was that petitioner's store had been represented to him in the reports from his subordinates as a 'gasoline station with dairy products.' Mr. Church concluded from the evidence he heard at the hearing that petitioner's store more closely approximated a 'legitimate grocery store' than he had supposed, but that there would have to be still greater expansion of the scope of petitioner's inventory and the number of items of each type before he would recommend approval. Mr. Church expressed concern, for example, that the store's inventory listed only three packages of Birdseye creamed peas.

Petitioner gave evidence that several similar businesses in the Ontario area and neighboring cities, some with significantly smaller grocery inventories and one that appears to be an ordinary gas station, had package licenses.

The commission then made the following findings of fact and ultimate facts upon which the denial of license is based:

'FINDINGS OF FACT

'Sun Ray Drive-In Dairy, Inc., an Idaho corporation, authorized to do business in Oregon, applicant for Package Store Class B license in trade name 'Sun Ray Dairy', 425 S.W.4th, Ontario, Oregon, through its representatives D. S. Denning, Jr., Attorney at Law, Vale, Oregon, and its President Ray Ayers of Boise, Idaho, factually demonstrated that the organization has been in business in Idaho since 1961, starting with the sale of dairy and bakery products; that they now have fourteen stores in operation and that their Sun Ray Dairy store in Ontario during the month of January, 1973, made gross sales of $15,797.25 plus sales of dairy and food litems of $8,909.18; that theirs is a 'convenient convenience' store with inventory running about 6 to $7,000.00 which inventories are refilled weekly. There were local objectors to the issuance of PB license to the applicants. There are fifteen licensed outlets for beer sales in Ontario, with five outlets within four blocks of the applicant. The listed inventory was not sufficient for a grocery store. The Commission particularly noted applicant's inventory listed one can of beef stew, three--twelve ounce packages of weiners, two cans of chili, three cans of pork and beans and one Quaker Oats together with other groceries and dairy products.

'ULTIMATE FACTS

'There are sufficient licensed premises in the locality of the application. There were local objections to the issuance of Package Store Class B license to the applicant. The applicant's inventory is not sufficient for a grocery store.'

Petition asks that we reverse the findings of fact, contending that the proof of each ultimate fact was otherwise. We are unable to review for substantial evidence because we are unable to ascertain the issues or the standards against which the evidence is to be measured. How many licensed premises are 'sufficient' in the 'locality'? ³ Is sufficiency to be measured by population density, supply and demand, geographical area to be covered, other factors, or a combination of factors? How are public objections to be weighed? ⁴ What ratio of acceptability should be required? Within what area of the license applicant? Finally, are all grocery stores entitled to a package license? If so, how is 'grocery store' defined?

The legislature has not answered these questions by statute. ORS ch. 471 dealing with the issuance of liquor licenses does not purport to articulate the circumstances under which a license must be granted. Rather, ORS 471.295 is phrased in the negative, providing that the commission may refuse to license any applicant if it has reasonable ground to believe any of a number of specific or general conditions exist. While a liquor license is a 'purely personal privilege,' ORS 471.301(1)(a), it is also a thing of substantial value to the applicant. The negative context of the statute implies that an applicant is entitled to a license so long as certain circumstances set out in the statute or in implemental regulations are not shown to be true.

The commission has not published rules or regulations establishing standards by which the statutory grounds for refusal for 'sufficient licensed premises in the locality' or that the license 'is not demanded by public interest or convenience,' ORS 471.295(1), are to be applied. Instead, the licensing personnel of the commission testified at the hearing as to the 'policy' of the commission. Those policies, the testimony indicates, are informal and unwritten, drawn by the witnesses from their understanding of historical patterns of individual commission rulings. As such, they have the quality of folklore in that unwritten rules are passed on orally by culture carriers from one generation of employes to another, from one level of employes to another, without the stabilizing effect of the written word.

A legislative delegation of power in broad statutory language such as the phrase 'demanded by public interest or convenience' places upon the administrative agency a responsibility to establish standards by which that law is to be applied. See Bergford v. Clack. Co./Trans. Serv., Or.App., 97 Adv.Sh. 2319, 515 P.2d 1345 (decided November 19, 1973), and Warren v. Marion County, 222 Or. 307, 353 P.2d 257 (1960). The legislature has provided for such rule making in the Administrative Procedures Act, ORS 183.355 et seq.

Compliance with the Administrative Procedures Act is much more than an act of technical legal ritual. Unwritten standards and policies are no better than no standards and policies at all. Without written, published standards, the entire system of administrative law loses its keystone. The ramifications affect every party and every procedure involved in the fulfillment of the agency's responsibility under the law, e.g., the public, the applicant, agency...