Hacker v. State Liquor Authority — 19 N.Y.2d 177

Majority

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In the Matter of Alexander Hacker, Respondent, v. State Liquor Authority of the State of New York, Appellant.

Argued January 4, 1967;

decided February 23, 1967.

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Emanuel D. Black, Hyman Amsel and Hyman Mark for appel-

lant.

I. This appeal presents only questions of law. The Appellate Division has unanimously found that the evidence supported the findings of fact made by the Authority. II. Because of petitioner’s fraud the license was voidable if not void. Such license was subject to cancellation or annulment at any time. (People v. Davis, 36 N. Y. 77 ; Middlesboro Liq. & Wine Co. v. Berkshire, 133 F. 2d 39 ; People ex rel. Loughran v. Flynn, 110 App. Div. 279 , 184 N. Y. 579 ; Matter of Brenner v. Bruckman, 253 App. Div. 607 , 278 N. Y. 503 ; Matter of Glenram Wine & Liq. Corp. v. O’Connell, 295 N. Y. 336 .) III. The time limitation contained in section 118 of the Alcoholic Beverage Control Law does not apply to a license obtained by fraud. If such time limitation is applicable in such instance, the proceeding to revoke the license was timely begun and the license was cancelled within the time allowed by law, because of the continuing fraud of petitioner and the continued unlawful availing of the license to petitioner’s son. (Matter of Colonial Liq. Distrs. v. O’Connell, 295 N. Y. 129 ; Matter of Benjamin v. State Liq. Auth., 13 N Y 2d 227 ; Matter of Petterson v. Daystrom Corp., 17 N Y 2d 32 ; Essenfeld Bros. v. Hostetter, 14 N Y 2d 47 ; Matter of Grace v. Grace Inst., 25 A D 2d 277 ; Transit Comm. v. Long Is. R. R. Co., 253 N. Y. 345 ; Nasaba Corp. v. Harfred, Realty Corp., 287 N. Y. 290 ; Easley v. New York State Thruway Auth., 1 N Y 2d 374 ; Matter of Breen v. New York Fire Dept. Pension Fund, 299 N. Y. 8 .) IY. The running of the Statute of Limitations (Alcoholic Beverage Control Law, § 118) was tolled by the commencement of the proceeding on

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September 4, 1962. (Matter of Sorrentino v. State Liq. Auth., 10 N Y 2d 143 ; Matter of Marsh [Catherwood], 13 N Y 2d 235 ; Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104 .) V. The renewal of the license for the 1963-1964 license year did not estop the Authority from terminating the license by cancellation. (Matter of Farley v. Miller, 216 N. Y. 449 ; Matter of A. E. F.’s, Inc. v. McKenzie, 269 App. Div. 316 ; Matter of Restaurants & Patisseries Longchamps v. O’Connell, 271 App. Div. 684 , 296 N. Y. 888 ; Trustees of Brookhaven v. Smith, 118 N. Y. 634 ; Bank of Monongahela Val. v. Weston, 172 N. Y. 259 ; Metropolitan Bd. of Excise v. Barrie, 34 N. Y. 657 ; Martin v. State Liq. Auth., 43 Misc 2d 682 , 15 N Y 2d 707 ; Moore v. United States Cremation Co., 158 Misc. 621 , 249 App. Div. 637 , 275 N. Y. 105 ; Wirtz v. Lobello, 1 A D 2d 416 , 2 N Y 2d 721 ; Matter of Regal Wine & Liq. v. State Liq. Auth., 12 A D 2d 920 , 13 A D 2d 491 , 9 N Y 2d 613 ; Matter of Barton Trucking Corp. v. O’Connell, 7 N Y 2d 299 ; Matter of Sales Consultants v. Di Carlo, 46 Misc 2d 402 ; Matter of Yetta’s Rest. v. State Liq. Auth., 47 Misc 2d 436 ; Matter of Mandel v. Board of Regents, 250 N. Y. 173 ; Matter of Harwood v. Cornelius, 21 A D 2d 961 ; Matter of Halls v. Van Buren, 46 Misc 2d 703 , 24 A D 2d 693 ; State of New York v. New York Movers Tariff Bur., 48 Misc 2d 225 .)

No appearance for respondent.

This case involves the scope and applicability of the Statute of Limitations found in section 118 of the Alcoholic Beverage Control Law. That provision reads as follows:

“ Any license or permit issued pursuant to this chapter may be revoked, cancelled or suspended for cause, and must be revoked for the following causes:

“ 1. Conviction of the licensee, permittee or his agent or employee for selling any illegal alcoholic beverages on the premises licensed.

‘ ‘ 2. For transferring, assigning or hypothecating a license or permit.

“ Notwithstanding the issuance of a license or permit by way of renewal, the liquor authority may revoke, cancel or suspend such license or permit, as prescribed by this section and section one hundred nineteen of this chapter, for causes or violations

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occurring during the license period immediately preceding the issuance of such license or permit, and may recover, as provided in section one hundred twelve of this chapter, the penal sum of the bond on file during said period.” (Emphasis added.) The time limitation question first arose in Matter of Colonial Liq. Distrs. v. O’Connell ( 295 N. Y. 129 [1946]) where it was contended that the State Liquor Authority did not possess the power to institute disciplinary proceedings for violations of the Alcoholic Beverage Control Law which had occurred prior to the current license period. This court ruled that the statute as it read at the commencement of the disciplinary proceedings under review contained no limitation at all, i.e., it authorized revocation of a license for 1 ‘ violation of any provision of the Alcoholic Beverage Control Law ”, and consequently there was no stipulated time period within which the Authority had to institute its disciplinary proceedings. While the case was pending, section 118 was amended by the Legislature to read as quoted above, producing a dual effect. On the one hand, it clearly empowered the Authority to discipline a licensee for violations committed during the immediately preceding license period. On the other hand, it limited the disciplinary power of the Authority by restricting the punishable violations to those which had occurred in the immediately preceding license period. Such was the effect of our decision in Matter of Benjamin v. State Liq. Auth. ( 13 N Y 2d 227 [1963]) where we stated, per Foster, J.: “ We do not ascribe to the theory that the Legislature would pass an act apparently meaningless, and hence we are constrained to the belief that section 118, as amended, should be construed as a statute of limitation on the power of the Authority [the time limitation being the immediately preceding license period]. There is a perfectly rational basis for the action of the Legislature in limiting the power of the Authority to deal with past offenses. Without fixing a point of no return in this respect, it would always be questionable as to how far back the Authority could go in quest of violations ’ ’ (p. 232).

We are now called upon to decide whether this limitation provision is applicable to a fraudulent misrepresentation made in a licensee’s original application for a liquor license (which has been granted and later renewed), whether under certain cir

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cumstances the statute may be tolled, and whether, because of a subsequent renewal, the errant licensee can invoke the doctrine of equitable estoppel against the Authority even when the violations did concededly occur in the immediately preceding license period.

Alexander Hacker was first issued a restaurant liquor license on November 1, 1961, which license was renewed for a normal license period of one year on March 1, 1962. On September 4, 1962, the Authority instituted a proceeding pursuant to sections 118 and 119 to revoke, cancel or suspend this license on the charges that Hacker had violated section 111 by allowing one Irving Hacker, his son and convicted felon, to avail himself of the license, that he falsely represented in his original application that he would terminate and forego all outside employment, and that he failed to keep adequate books and records. On March 1, 1963, Alexander Hacker’s liquor license was renewed by the Authority. On December 10, 1963, after considering the summary and findings of the hearing officer submitted on November 1, 1963, the Authority adopted these findings (sustaining charges one and two) and ordered cancellation of Hacker’s license.

The licensee sought review of this determination and, after his article 78 proceeding was removed from the Supreme Court, Kings County, to the Appellate Division, Second Department, he succeeded in having the determination annulled. (Matter of Hacker v. State Liq. Auth., 21 A D 2d 755 [2d Dept., 1964].)

Considering first the charge against Hacker that he falsely represented in connection with his original application for a liquor license that he would, if his application was approved, leave his outside employment (air conditioner salesman) and take full-time active part in the licensed business, we conclude, as did the Appellate Division, that such a “ fraud ” perpetrated upon the Authority is subject to the one-year time limitation contained in section 118 and that consequently any disciplinary action commenced by the Authority after such time period has elapsed would be time-barred.

However, administrative inquiries, including those of the State Liquor Authority, have been endowed with many of the attributes of a legal proceeding, including notices of hearings,

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adjournments, amendment of charges, taking of testimony, availability of transcripts, filing of briefs, etc. (Alcoholic Beverage Control Law, § 119; Rules of State Liq. Auth., rule 2 [9 NYCRR Part 54].) (See Matter of Sorrentino v. State Liq. Auth., 10 N Y 2d 143 , 148-149 [1961].) In Sorrentino we held that the licensee under investigation was entitled, upon request, to a copy of the report of the hearing officer and to an opportunity to comment thereon. In addition to this quasi-legal nature of an administrative proceeding convened to cancel or revoke a liquor license, one must consider the period of time which perforce elapses during such an inquiry, from the very first suspicion of a violation to the ultimate official action taken by the Authority. Quite obviously, such a determination is not made in a matter of days or even weeks. As a result, keeping in mind the legal attributes of such an inquiry and the not necessarily short period of time which must transpire before such a serious sanction as cancellation of a license is ordered, we conclude that the normal attributes of a Statute of Limitations must be applicable to the limitation contained in section 118, e.g., a tolling provision similar to that contained in CPLB 203 (subd. [a]) (applicable to civil actions). (See Code Crim. Pro., § 144.) Certainly in civil cases and in criminal prosecutions, an action is considered timely commenced (the Statute of Limitations is tolled) when the initiation of the proceedings occurs within the period of time limited by law. This same rationale applies to disciplinary proceedings instituted by the State Liquor Authority. It would be unreasonable to state that the entire inquiry, commencing with an investigation of alleged violations, proceeding through hearings and reports, and culminating in a formal disposition by the Authority, must all be concluded within the short period of limitation.

Accordingly, if the Authority institutes (by formal notice of hearing, etc.) a disciplinary proceeding for a violation which occurred in the immediately preceding license period, such administrative action is timely commenced and will not be rendered void merely by the passage of several days or weeks or months into the next license period. Thus the Appellate Division erred in annulling the Authority’s determination that the licensee had perpetrated a fraud in his original applica

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tion, which at the time of the commencement of the proceedings against him (September, 1962) had occurred in the immediately preceding license period (November, 1961 to March, 1962).

This reasoning likewise applies to the other and more serious charge against Hacker, viz., the allowing of someone not mentioned in the application or license to avail himself of the license. The proceedings were timely commenced as to this violation.

Moreover, this violation constitutes more than a mere misrepresentation; it is an actual substantive violation of the Alcoholic Beverage Control Law which did not occur solely at the time of the licensee’s application, but rather continued throughout the entire duration of the license (§ 111). To state in an application that one will be the sole proprietor of the licensed premises when indeed such is not true is a misrepresentation (§ 110). On being granted the license, however, to then allow someone else to avail himself of the license, someone who because of his criminal record could not have been granted a license in his own name, this is quite different—a far more serious substantive violation of the statute itself and a recognized danger to the public welfare sought to be protected by law (§§ 111, 126). Such a violation continues as long as that other person avails himself of the license. , If the illegal conduct continued in 1961 and 1962, and even into 1967, without question it “ occurred ” in each of those periods. It is inconceivable that, merely because a violation commenced in 1961, it did not “ occur ” in 1962, for such a theory would thwart the very purpose and scheme which our Legislature has manifested in its concern over the control of the State’s liquor industry.

Consequently, the proceedings were timely as to this underlying ' continuing substantive violation which did in fact exist (or “occur”) in the immediately preceding license period. Since Irving Hacker, licensee’s son, did in fact avail himself of the license in the immediately preceding license period (May, 1962), the cancellation of the license by the Authority in December of 1963 would have been timely, even if the Statute .of Limitations had not been tolled.

A separate and independent reason offered by the Appellate Division in support of its annulment of the Authority’s cancellation was the licensee’s ability to estop the Authority from

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sustaining the charges filed against him. In the present case the State neither lured the licensee into falsely stating that he would give up any outside employment if a license was granted him, nor did it entice the licensee into allowing his son, a convicted felon, to avail himself of the license directly contrary to statutory law. (See Matter of Farley v. Miller, 216 N. Y. 449 [1916].) Furthermore, the Authority was not merely aware of the violations (charges); it had already commenced disciplinary proceedings against the licensee within the required time period. The only difficulty here is that the ultimate disposition of the charges against the licensee was not rendered until the following year. This in and of itself does not make out a case for the application of equitable estoppel. (See Matter of Restaurants & Patisseries Longchamps v. O’Connell, 271 App. Div. 684 , 687 [1st Dept., 1947]; cf. Matter of A.E.F.’s, Inc. v. McKenzie, 269 App. Div. 316 [1st Dept., 1945].)

According to Williston, “ The fundamental basis' for the estoppel is the justifiableness of the conduct of the party claiming the estoppel.” (3 Williston, Contracts [Rev. ed., 1936], § 692, p. 1998.) Immediately, the licensee is hard pressed to justify any of his conduct—the fraudulent misrepresentations, the allowing of someone not mentioned in the license to avail himself thereof, the fact that this person, the licensee’s son, is a convicted felon, etc. Furthermore, even were the licensee misled by the renewal of the license, he must still show a change of position to his detriment in reliance thereon. The mere fact of applying for a renewal license and obtaining same does not indicate any change of the status quo — on the contrary, the status quo is retained thereby. Nor is there any indication of reliance upon the renewal to the detriment of the licensee. As a matter of fact, all the benefit of the renewal inured to the licensee, as he was allowed to remain in business pending the final disposition of the charges which, to his full awareness, were at that very time pending against him.

Pursuant to section 118, the Authority is empowered to discipline a licensee “ Notwithstanding the issuance ” of a renewal license, exactly the situation here. The time provision assumes such a renewal, since it allows cancellation for violations committed in the immediately preceding license period. In light of

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this language, it cannot be implied that knowledge of a violation at the time of renewal estops the Authority from continuing the disciplinary proceedings to their ultimate conclusion.

In accordance with this rationale, there is no burden placed upon the Authority to exact a stipulation from the licensee prior to granting him a renewal license. While such a practice was approved in Matter of Benjamin v. State Liq. Auth. (supra [the same case which held the amendment of § 118 to be one of limitation]), the court in no way mandated the use of such stipulations.

The order should be reversed, and the determination of the State Liquor Authority confirmed, without costs (College Point Wine & Liqs. v. O’Cornell, 296 N. Y. 752 [1946]).

Chief Judge Ftjld and Judges Van Voorhis, Scileppi, Bergan, Keating and Brbitel concur.

Order reversed, etc.

Cases cited

People v. Davis 36 N. Y. 77 N.Y. p. 179
People ex rel. Loughran v. Flynn 110 App. Div. 279 N.Y. App. Div. 1905-12-30 p. 179
Brenner v. Bruckman 278 N. Y. 503 N.Y. 1938-05-17 p. 179
Glenram Wine & Liquor Corp. v. O'Connell 295 N. Y. 336 N.Y. 1946-05-29 p. 179
Colonial Liquor Distributors, Inc. v. O'Connell 295 N. Y. 129 N.Y. 1946-01-17 p. 179, p. 181
Benjamin v. State Liquor Authority 13 N Y 2d 227 N.Y. 1963-11-27 p. 179, p. 181
Claim of Petterson v. Daystrom Corp. 17 N Y 2d 32 N.Y. 1966-02-17 p. 179
Essenfeld Bros. v. Hostetter 14 N Y 2d 47 N.Y. 1964-02-27 p. 179
Grace v. Grace Institute 25 A D 2d 277 N.Y. App. Div. 1966-04-14 p. 179
Transit Commission v. Long Island Railroad 253 N. Y. 345 N.Y. 1930-05-06 p. 179
Nasaba Corp. v. Harfred Realty Corp. 287 N. Y. 290 N.Y. 1942-01-15 p. 179
Easley v. New York State Thruway Authority 1 N Y 2d 374 N.Y. 1956-06-07 p. 179
Breen v. Board of Trustees of New York Fire Department Pension Fund 299 N. Y. 8 N.Y. 1949-03-03 p. 179
Sorrentino v. State Liquor Authority 10 N Y 2d 143 N.Y. 1961-07-07 at 148-149 p. 180, p. 183
In re the Claim of Marsh 13 N Y 2d 235 N.Y. 1963-12-30 p. 180
Mounting & Finishing Co. v. McGoldrick 294 N. Y. 104 N.Y. 1945-03-08 p. 180
In re Farley 216 N. Y. 449 N.Y. 1916-01-04 p. 180, p. 185
Restaurants & Patisseries Longchamps, Inc. v. O'Connell 296 N. Y. 888 N.Y. 1947-02-28 p. 180
Trustees of the Freeholders & Commonalty v. Smith 118 N. Y. 634 N.Y. 1890-03-11 p. 180
Bank of Monongahela Valley v. Weston 172 N. Y. 259 N.Y. 1902-10-07 p. 180
Metropolitan Board of Excise v. Barrie 34 N. Y. 657 N.Y. p. 180
Martin v. State Liquor Authority 43 Misc 2d 682 N.Y. Sup. Ct. 1964-07-31 p. 180
Martin v. State Liquor Authority 15 N Y 2d 707 N.Y. 1965-01-07 p. 180
Moore v. United States Cremation Co. 158 Misc. 621 N.Y. Sup. Ct. 1936-03-11 p. 180
Moore v. United States Cremation Co. 275 N. Y. 105 N.Y. 1937-07-13 p. 180
Wirtz v. Lobello 2 N Y 2d 721 N.Y. 1956-10-11 p. 180
Barton Trucking Corp. v. O'Connell 7 N Y 2d 299 N.Y. 1959-12-30 p. 180
Sales Consultants, Inc. v. Carlo 46 Misc 2d 402 N.Y. Sup. Ct. 1965-04-12 p. 180
Yetta's Rest. Inc. v. State Liquor Authority 47 Misc 2d 436 N.Y. Sup. Ct. 1965-04-29 p. 180
Mandel v. Board of Regents 250 N. Y. 173 N.Y. 1928-12-31 p. 180
Harwood v. Cornelius 21 A D 2d 961 N.Y. App. Div. 1964-07-21 p. 180
Halls v. Van Buren 46 Misc 2d 703 N.Y. Sup. Ct. 1965-04-20 p. 180
Halls v. Van Buren 24 A D 2d 693 N.Y. App. Div. 1965-07-13 p. 180
State v. New York Movers Tariff Bureau, Inc. 48 Misc 2d 225 N.Y. Sup. Ct. 1965-10-14 p. 180
College Point Wine & Liquors, Inc. v. O'Connell 296 N. Y. 752 N.Y. 1946-11-27 p. 186

Statutes and regulations cited

Alcoholic Beverage Control Law p. 179, p. 180, p. 181, p. 183, p. 184