City of Oakland v. Superior Court

Opinion

Many California cities must grapple with nuisances associated with alcoholic beverage sale establishments. Some local entities have

More importantly, the issues presented by the proposed legislation and the case at bar are significantly different. In 1982, the city sought a legislative amendment that would have allowed it more authority to limit the number and location of alcoholic beverage licenses issued within certain zones in the city. In the ordinance now before us, the city attempts to create an administrative mechanism to regulate nuisance and criminal activities that occur near alcoholic beverage sales establishments. This ordinance does not affect alcoholic beverage licenses or attempt to limit or restrict them. (See pt. IV. B.-D., post.) The city’s recitation of the text of a statute in the context of a request for legislative clarification that some alcoholic beverage establishments should no longer be entitled to the protection of grandfather status does not shed any light on the issue presented in our case—whether the new administrative mechanism may properly be applied to alcoholic beverage sales establishments that have been in continuous operation since before the ordinance was enacted. Thus, we conclude that the city’s earlier statements on an unrelated issue do not preclude it from making the arguments that it now does in favor of its interpretation of section 23790.

2. Nuisance and Criminal Activities Control

The city contends that the ordinance merely creates an administrative mechanism for enforcing nuisance and criminal laws that are applicable to all alcoholic beverage establishments, even those in operation before the ordinance’s effective date. CBRC couches the issue somewhat differently—it argues that the Oakland ordinance creates a mechanism in the form of a retroactive land use ordinance that may result in the denial of the right to sell alcoholic beverages. As we have already concluded, the purpose of this ordinance is to control and abate nuisances and criminal activities occurring near alcoholic beverage sales establishments. (See Korean American Legal Advocacy Foundation v. City of Los Angeles, supra, 23 Cal.App.4th at p. 389 [no invasion of state power to regulate alcohol sales]; see pt. IV. D., post.) Thus, we begin our legal analysis of the applicability of section 23790 by considering this purpose.

By ordinance, a city council may declare what constitutes a nuisance. (Gov. Code, § 38771.) A city may bring an action to abate a public nuisance.

These cases support the conclusion that a city may properly enact a local ordinance to control and abate nuisance activities, despite the fact that the business that would be regulated by the ordinance possessed grandfather rights that might ordinarily render it immune from compliance with local ordinances. (See Livingston Rock etc. Co. v. County of L. A., supra, 43 Cal.2d at p. 128; Jones v. City of Los Angeles, supra, 211 Cal. at p. 311; see also City of Bakersfield v. Miller, supra, 64 Cal.2d at pp. 96, 100; Suzuki v. City of Los Angeles (1996) 44 Cal.App.4th 263 , 277-281 [ 51 Cal.Rptr.2d 880 ].) If a city may abate a public nuisance despite grandfather rights, then a fortiori a municipality may enforce criminal laws in the face of such a claim of prior existing lawful operation.

CBRC counters that while these cases may support the city’s authority to abate a public nuisance or control criminal activities, they did not arise in a context of a zoning ordinance enacted in violation of section 23790. It contends that section 23790 overrides the city’s police powers. We disagree. Construing section 23790, it appears to us that the Legislature intended that this provision protect the vested rights of the proprietors of premises engaged in the lawful, licensed sale of alcoholic beverages. Such a business has acquired by the passage of time a vested right to continue in operation to lawfully dispense alcoholic beverages. However, for CBRC’s challenge to the ordinance to succeed, we must also read this provision to mean that the Legislature intended that a licensed alcoholic beverage establishment retains a vested right to conduct its operation in a manner that encourages nuisance or criminal activities to occur on or near its premises.

Nevertheless, CBRC urges us to find that section 23790 invalidates the ordinance because its enforcement may ultimately lead to a loss of a state-issued license to sell alcoholic beverages. However, the city ordinance does not halt operation of a licensed alcoholic beverage establishment. If an alcoholic beverage sales establishment fails to comply with the requirements of the ordinance after numerous administrative attempts to obtain compliance, the ordinance authorizes the city to seek a court order to abate a nuisance or to ask the Department of Alcohol Beverage Control to revoke the license. The city already has this authority—independent of this ordinance—which it may use in appropriate cases in the proper exercise of its police power. The ordinance does not create any new authority empowering the city to halt operation of an alcoholic beverage sales establishment premises. It merely creates an administrative mechanism that may result in a third party taking action against the alcoholic beverage seller—abatement by a court or license revocation by the Department of Alcoholic Beverage Control.

In sum, we find that the conduct that is regulated by the ordinance—the control and abatement of nuisances and criminal activities—does not fall within the ambit of section 23790. A municipality retains the right to abate nuisances and enforce its criminal laws even in the face of grandfather rights. No business—not even an alcoholic beverage sales establishment regulated by state law—has a vested right to conduct its business in a

B. License Tax

The trial court concluded that the state Constitution precluded all city taxation applying solely to alcoholic beverage licensees. Specifically, it found that “there is no precedent in the area of alcoholic beverage law to allow for a municipality to impose a fee solely on sellers of alcoholic beverages because of the nature of their business.” On the petition for mandamus relief, the city first contends that the fees imposed by its ordinance do not constitute a license tax. It argues that the ordinance’s fees are not imposed as a condition to the issuance of a license, but are required to pay for the costs of regulating nuisance and criminal activities associated with alcoholic beverage sales establishments.

The California Constitution grants the state Department of Alcoholic Beverage Control the exclusive power to collect license fees or occupation taxes related to alcoholic beverage sales. (Cal. Const., art. XX, § 22.) Liquor licenses are not subject to local license or occupation taxes. (Roehm v. County of Orange (1948) 32 Cal.2d 280 , 290-291 [ 196 P.2d 550 ].) The Oakland ordinance does not require the payment of a fee on the issuance of a license. It grants deemed approved status to existing alcoholic beverage retailers and requires them to pay a fee to administer the enforcement of the ordinance’s requirements. (Oakland Planning Code, §§ 15400, 15510(f).)

Courts distinguish between municipal revenue taxes that may be preempted by state law and fees properly imposed by a city pursuant to its regulatory authority to control and supervise a business that imposes an unusual burden on the local entity for services. For example, in one case, a city imposed a permit fee on house movers. State law specifically prohibits any municipal license fee to be imposed on intercity transportation. Despite this statute, the appellate court upheld the ordinance requiring the fee. The court found that purpose of the fee was to pay city inspection and administrative costs associated with house moving. The amount of the fee was based on reasonably anticipated costs of inspection and administration of the permitted house moving activities. Thus, the court concluded that the ordinance was a regulatory one and that the fee imposed was not preempted by

We find this precedent persuasive in our own case. CBRC’s criticism of this case on the ground that the license tax prohibition in Housemoving Contractors Assn. v. City of Glendale, supra, 123 Cal.App.3d 673 was statutory rather than constitutional strikes us as a distinction without a difference. A state statute, like a state constitutional provision, would prevail over a local ordinance if a conflict occurred. (See Cohen v. Board of Supervisors (1985) 40 Cal.3d 277 , 290 [ 219 Cal.Rptr. 467 , 707 P.2d 840 ] [local legislation in conflict with general law is void]; Korean American Legal Advocacy Foundation v. City of Los Angeles, supra, 23 Cal.App.4th at p. 384.) Both state laws specifically prohibit municipal license taxes. If the house moving fee does not constitute a license tax, neither does the fee imposed pursuant to Oakland’s ordinance.

Nevertheless, CBRC and its amici curiae urge us to conclude that because the failure to pay the required fee may result in summary abatement and loss of the privilege of engaging in business, the fee constitutes a license tax. Neither abatement nor loss of the privilege of doing business will occur unless a court orders abatement or the Department of Alcoholic Beverage Control revokes the business’s state-issued liquor license. (See §§ 24200-24211; Civ. Code, §§ 3490-3496; Oakland Planning Code, § 15510(c).) That the ultimate result of a failure to pay the city’s required fee might be abatement or revocation of the state liquor license does not transform a regulatory fee to a license tax. Thus, we find that the ordinance’s fees do not constitute an impermissible license tax.

C. Tax or Fee

The trial court impliedly concluded that the ordinance’s fees constituted a tax on alcoholic beverage retailers. In its next claim in support of its petition for mandate, the city contends that the fees imposed pursuant to the ordinance are not taxes at all, but proper regulatory fees imposed without violating article XX, section 22 of the California Constitution. CBRC counters by arguing that the fee is a impermissible revenue-generating measure—that is, a tax disguised as a fee.

The state Constitution grants the state Department of Alcoholic Beverage Control the exclusive power to tax alcoholic beverage sales. (Cal. Const., art. XX, § 22; see Board of Trustees v. Munro, supra, 163 Cal.App.2d at p. 445.) A local tax on alcoholic beverage sales is preempted by state law.

The determination of whether the actual purpose of an ordinance is regulatory or revenue raising is a question of fact. (United Business Com. v. City of San Diego, supra, 91 Cal.App.3d at p. 165.) In the trial court, the parties posed no factual issues to be resolved, only legal questions. In its order granting summary adjudication, the trial court recited that the parties did not dispute that the fees generated revenue to fund the ordinance’s programs. As the meaning of this recitation is somewhat ambiguous on this issue, we will consider how courts factually distinguish a fee from a tax.

To determine whether the purpose of the ordinance is regulatory or revenue generating, the court looks to the substantive provisions of the ordinance, not merely its title and form. If revenue is the primary purpose of the ordinance and regulation is merely incidental, then the imposition is a tax. If regulation is the primary purpose, the mere fact that incidental revenue is also obtained does not make the imposition a tax. Generally, when a fee is imposed for a regulatory purpose and the ordinance requires compliance with conditions in addition to the payment of the prescribed sum, the imposed sum is a not a tax, but is a fee properly imposed pursuant to the local entity’s police power. When the sum is exacted solely for a revenue purpose and its payment gives the right to carry on the business without any further condition, it is a tax. (See United Business Com. v. City of San Diego, supra, 91 Cal.App.3d at p. 165; see also Ainsworth v. Bryant (1949) 34 Cal.2d 465 , 473 [ 211 P.2d 564 ] [regardless of formal title, character of tax determined by its incidents and from natural and legal effect of zoning ordinance language].)

Fees charged in connection with regulatory activities that do not exceed the reasonable costs of providing services necessary to the activity for which

The trial court concluded that there was no precedent to allow a city to impose a fee on alcoholic beverage retailers because of the nature of their business. It impliedly agreed with CBRC’s argument that the ordinance improperly singled out alcoholic beverage retailers. It its petition for writ of mandate, the city argues that the trial court erroneously concluded that the state Constitution prohibits a municipality from imposing a fee on alcoholic beverage establishments. CBRC counters that the trial court’s ruling was correct because the fee was levied only against alcoholic beverage licensees. The city argues that a regulatory fee may be lawfully imposed on alcoholic beverage sales establishments.

As CBRC contends in its opposition to the petition for writ of mandate, a tax that singles out alcoholic beverage retailers is suspect. (A.B.C. Distributing Co. v. City and County of San Francisco, supra, 15 Cal.3d at p. 575.) However, we have already concluded that the ordinance requires the payment of a regulatory fee, not a tax of any kind. (See pt. III. B., C., ante.) To the extent that this suspect character also applies to regulatory fees, we note that to label a fee as “suspect” does not compel the finding that the fee is prohibited. As with other businesses, alcoholic beverage establishments may properly be required to pay their fair share of the cost of government. (See Century Plaza Hotel Co. v. City of Los Angeles, supra, 7 Cal.App.3d at p. 626.) That the fee will probably be paid from revenue derived at least in part from the sale of alcoholic beverages creates only an indirect burden on an alcoholic beverage retailer—one that is insufficient to nullify the otherwise proper imposition of a regulatory fee. (See A.B.C. Distributing Co. v. City and County of San Francisco, supra, at p. 575 [tax case].)

CBRC does not dispute that the city may properly regulate nuisance and criminal activities through its exercise of its police power, but it argues that these police powers are overridden by article XX, section 22 of the California Constitution, when the regulation involves alcoholic beverages. Thus, the issue is whether a local entity’s authority to regulate alcoholic beverage sellers properly derives from the city’s police power under article XI, section 7 of the California Constitution. (See City of Rancho Cucamonga v. Warner Consulting Services, Ltd., supra, 213 Cal.App.3d 1338 , 1345.) A local entity’s authority to regulate state-licensed alcoholic beverage retailers derives solely from its general police powers. (Id. at pp. 1343, 1345.) A city’s police powers are as broad as the police power that may be exercised by the Legislature itself. However, in its proper exercise of its police powers, the city may not also violate article XX, section 22. (213 Cal.App.3d at pp. 1344-1345.)

Courts have recognized that local regulation of alcoholic beverage retailers may be properly within the local entity’s police powers without violating section 22 of article XX of the California Constitution. Generally, this constitutional provision will not preempt a local ordinance when the ordinance does not directly affect the licensee’s ability to sell alcoholic beverage to a willing purchaser. (California Restaurant Assn. v. City of Los Angeles (1987) 192 Cal.App.3d 405 , 411 [ 237 Cal.Rptr. 415 ] [local ordinance requiring posting of notice warning of alcohol effects on pregnant women was not preempted by Constitution]; see Daniel v. Board of Police Commissioners (1961) 190 Cal.App.2d 566 , 570-571 [ 12 Cal.Rptr. 226 ], overruled on other grounds in Burton v. Municipal Court (1968) 68 Cal.2d 684 , 693 [ 68 Cal.Rptr. 721 , 441 P.2d 281 ] [prohibition of live entertainment at alcoholic beverage establishment does not interfere with licensee’s right to sell alcoholic beverages].) The Legislature did not intend that a person licensed to sell alcoholic beverages should be immune from local supervision of any activity that the licensee may pursue in conjunction with the sale of alcoholic beverages. (Id. at p. 570.)

For example, the California Supreme Court has held that local ordinances may properly regulate live entertainment in taverns while leaving intact the state’s jurisdiction to license the sale of alcoholic beverages. The two types of regulations were held to be independent and distinct. Thus, ordinances relating to live entertainment do not conflict with the state’s powers over the

CBRC characterizes the Oakland ordinance as a regulation of alcoholic beverage retailer sellers. However, the purpose of the ordinance determines the issue before us. (See Daniel v. Board of Police Commissioners, supra, 190 Cal.App.2d at p. 571 [purpose of ordinance was to regulate live entertainment furnished in restaurants and cocktail lounges; local ordinance did not violate Cal. Const., art. XX, § 22].) To paraphrase one of these cases, the city may regulate nuisances and criminal activity pursuant to its police power. An ordinance prohibiting nuisance and criminal activities from being conducted on or near the premises of liquor licensees falls within the legitimate scope of the city’s police power. The regulation is not intended to control the sale of alcoholic beverages, but to eliminate nuisances and criminal activities. (See Cristmat, Inc. v. County of Los Angeles, supra, 15 Cal.App.3d at pp. 595-596 [under art. XX, § 22, ordinance may regulate floor shows in places of public entertainment where alcoholic beverages are served]; see also Mussalli v. City of Glendale, supra, 205 Cal.App.3d at p. 528.) We are satisfied that the ordinance’s purpose is the regulation of nuisance and criminal activity—a subject independent and distinct from the regulation of alcoholic beverage sales. Thus, the ordinance does not conflict with the state’s authority to regulate alcoholic beverage sal'es. (See

Our conclusion is consistent with a recent decision of the Second Appellate District holding that the revocation requirements of a similar ordinance did not invade the state’s exclusive power to regulate alcohol sales pursuant to article XX, section 22 of the California Constitution. In Korean American Legal Advocacy Foundation v. City of Los Angeles, supra, 23 Cal.App.4th 376 , the city required a conditional use permit for all establishments selling alcoholic beverages. Uses in existence before the operative date of the specific plan requiring a conditional use permit were deemed to be approved conditional use permits. (Id. at p. 382.) After fire destroyed businesses in South Central Los Angeles, alcoholic beverage establishments seeking to rebuild were required to comply with the specific plan. Typically, the conditions imposed before rebuilding would be permitted were for the owner to agree to remove graffiti promptly, provide adequate lighting, remove trash, provide a security guard and limit hours of operation. (Id. at pp. 382-383.) In addition, the city instituted revocation hearings to revoke or condition an owner’s deemed approved status or use permit if the business threatened to become, or became, a nuisance or a law enforcement problem. (Id. at p. 383.)

The appellate court found that the Los Angeles ordinance at issue in that case constituted a valid exercise of the city’s police powers to control and abate nuisances under article XI, section 7 of the state Constitution. (Korean American Legal Advocacy Foundation v. City of Los Angeles, supra, 23 Cal.App.4th at p. 389.) It ruled that the city was not preempted by article XX, section 22 from exercising land use control over businesses licensed to sell alcoholic beverages. (23 Cal.App.4th at pp. 384, 389-390.) Although it acknowledged the state’s exclusive jurisdiction to regulate alcoholic beverage sales, the court concluded that the ordinance did not directly regulate alcoholic beverage licensees. (Id. at p. 388.) It found that the ordinance was not expressly preempted by the state Constitution, that it did not duplicate or contradict state law, and that the statutory scheme codified in the Alcoholic Beverage Control Act did not evidence an intent to occupy the field by implication. (Id. at pp. 390-394; see §§ 23000-25762.) Korean American's preemption analysis differs somewhat from ours, but our conclusion is the same—that a city in the exercise of its police powers may undertake to control nuisances occurring near alcoholic beverage sales establishments, without violating the state’s exclusive power to regulate the sale of alcoholic beverages. (See 23 Cal.App.4th at pp. 384-394.)

F. Conclusion

The trial court erred in concluding that CBRC was entitled to a summary adjudication on the third cause of action for declaratory and injunctive relief, based on its claim of unlawful taxation in violation of section 22 of article XX of the California Constitution. As the ordinance does not violate this provision of the state Constitution, the city is entitled to summary adjudication on the third cause of action.

V. Remittitur

Let a peremptory writ of mandate issue directing the Superior Court of Alameda County to vacate its order of January 5, 1995, granting CBRC summary adjudication on the second and third causes of action, and to enter a new order denying CBRC’s motion and granting summary adjudication on these two causes of action in favor of the city.

Anderson, P. J., and Poché, J., concurred.

A petition for a rehearing was denied June 17, 1996, and the petition of real parties in interest for review by the Supreme Court was denied August 14, 1996.