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Attachment 16pzw &;Z1 zz 16a �Imdl "I Caution As of: February 13, 2014 10:01 AM EST Country Liquors, Inc. v. City Council of Minneapolis Supreme Court of Minnesota April 7, 1978 No. 47753 Reporter: 264 N.W.2d 821-t 1978 Minn. LEXIS 1386 COUNTRY LIQUORS, INC., et al., petitioners, Appel- lants, v. CITY COUNCIL OF the CITY OF MINNEAPO- LIS, et al., Respondents Disposition: [**11 Affirmed. Core Terms license, city council, transfer,, liquor, decision, location, property, requirements, council's, person, protected, due process, committee, resident, hearing, meeting, process, claims, review, property interest, arbitrary, building, business, proposed, liquor license, procedural, ordinanceg benefit, liberty, denial Case Summary Procedural Posture Appellant liquor corporation sought review of the judg- ment of the City Council of Minneapolis (Minnesota)2 which denied the corporation's request to transfer a li- quor license. Overview A corporation purchased an off -sale liquor business and sought to have the off -sale license transferred to its name in a new location. The city council, after a hearing and public protests, denied the request. The corporation sought review. On review, the court affirmed. The court held that the action of the city council was not arbitrary and ca- pricious, and unsupported by the evidence. The court noted that the council was vested with "broad discre- tion" in its consideration of a liquor license application. The court also held that the hearings held by the city coun- cil on the subject of the proposed transfer did not deny the corporation procedural due process of law by failing to afford the corporation adequate notice and an opportu- nity to cross-examine the persons who expressed disap- proval of the transfer. The court specifically noted, that the city council proceedings for the consideration of the corporation's transfer application, were not constitu- tionally defective. The court also opined that no person had a vested property right to engage in or continue to engage in the liquor business. Outcome The court affirmed the judgment of the city council. LexisNexis@ Headnotes X11 Governments > Local Governments > Administrative Boards Governments > Local Governments > Licenses Governments > State & Territorial Governments > 'Licenses HNI Where the minimum requirements of an ordinance are satisfied, a city council must consider the applica- tion for a liquor license, but is by no means divested of its legislative authority and responsibility to pass upon the merits of the application. A city council is vested with 'broad discretion" in its consideration of a liquor li- cense application. Administrative Law > Judicial Review > Standards of Re- view > Arbitrary & Capricious Standard of Review Governments > Local Governments > Licenses Governments > State & Territorial Governments > Licenses HN2 The scope of judicial review when the denial of a li- cense application is appealed is very narrow, and a re- viewing court will normally sustain such discretionary de- cisions by municipal bodies. Where such a denial is patently arbitrary and capricious, the court will not hesi- tate to act in order to prevent manifest injustice. Constitutional Law > ... > Fundamental Rights > Procedural Due Pro- cess > Scope of Protection HN3 The requirements of procedural due process apply only to the deprivation of interests encompassed by the U.S. Const. amend. XJV's protection of liberty and prop- erty, When protected interests are implicated, the right to some kind of prior hearing is paramount. But the range of interests protected by procedural due process is not in- finite, Constitutional Law > ... > Fundamental Rights > Procedural Due Pro- cess > Scope of Protection HN4 Due process "property" interests were given the fol- lowing general definition: To have a property interest in a benefit, a person clearly must have more than an ab- stract need or desire for it. He must have more than a uni- lateral expectation of it. He must, instead, have a legiti- ram ra" ro" F=4 MR f" 264 N.W.2d 8219 *823; 1978 Minn. LMS 1386, **1 mate claim of entitlement to it. It is a purpose of the ancient institution of property to Protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an oppor- tunity for a person to vindicate those claims. Property in- terests, of course, are not created by the Constitution. Rather they are created and their dimensions are de- fined by existing rules or understandings that stem from an independent source such as state law, rules or under- standings that secure certain benefits and that support claims of entitlement to those benefits. Govemments > Local Governments > Licenses (M9 HNS Under Minnesota law there is no property right in a liquor license. No person has a vested property right to engage in or continue to engage in the liquor busi- ness. F=9 Syllabus M91 IL;Z-71 A city council is vested with broad discretion in act - Ing upon liquor license applications, and on the facts of this case, the council's refusal to grant appellants' li- cense transfer application was not arbitrary or capri- cious. 2. The holder of an inactive liquor license does not pos- sess a protected property or liberty interest within the meaning of the Fourteenth Amendment. The hearings on appellants' license transfer application therefore did not violate their procedural due process rights. Couns4-, Wiese & Cox, Donald E. Wiese and Richard J, Johnson, Minneapolis, for Appellants. WgUer Jo Duffy, Jr., City Atty., Robert J. Alfton, Asst. Chy AtV., Minneapolis, for Respondents. judges© Heud before Rogosheske, Peterson, and Todd, JJ., and considered and decided by the court en bane. Otis, J., took no part in the consideration or decision of this case. Opinion by: TODD Opinion [*822] Country Liquors, Inc., purchased an off -sale li- quor business and sought to have the off -sale license transferred to its name in a new business location at 1810 Emerson Avenue North in the city of Minneapolis. The new location met the rnlimimurn standards required by Min - Page 2 of 5 neapolis ordinance. Hearings [**2) were held at which public opposition to the proposed location was expressed. As a result, the city council declined to approve the trans- fer of the license to the new location. We affirm. [*823] Country Liquors, Inc., is a Minnesota corpora- tion organized by John Sallblad, his wife Goldia, and his son Karl. All three individuals are respected members of the north Minneapolis area, They purchased an off - sale liquor business which was terminated at its existing location when its building was acquired by the state highway department in condemnation proceedings. The Sallblads desired to relocate the business to property they owned at 1810 Emerson Avenue North and filed the nec- essary transfer application with the city council. At the time the application was filed, the proposed new lo- cation was not in compliance with Minneapolis Ordi- nance No. 362.400, which provides in part: 'No liquor license shall be 'Issued for any building, room or place within three hun- dred (300) feet from any public or parochial school, or church, said distance to be mea- sured in a straight line from the building in which such school or church is conducted to the main public entrance of the premises for which [**3] license is sought.' Shortly thereafter, however, the Sallblads submit- ted plans for the structural modification of their building which would have moved the main en- trance to a point more than 300 feet from a church building. It is undisputed that the proposed remod- eling would have brought the build -Ing into compli- ance with all applicable legal requirements. The application was immediately referred by the city council to its standing committee on consumer services for further investigation and recommendation. The con- sumer services committee first considered the applica- tion at its regularly scheduled meeting on September 22, 1976. Additional consideration was given the applica- tion at the committee's October 6 and 27 meetings. At each of these sessions, a number of north Minneapolis residents appeared and spoke in opposition to the li- cense application. 1 The minutes of the October 27 meet- ing show that as of that date appellants had still failed to submit all of the information requested by the police li- cense inspector. However, no official action was taken on the application at that time. [**4] On October 29; formal notice was served on ap- pellants to appear at a November 10 committee meet - Ing and show cause why their application should not be denied for reasons appearing in the notice. Counsel for Country Liquors appeared at that meeting and dis- Residents" opposition was based generally on the potentially adverse impact of the proposed liquor store on a number of community programs and institutions. 1;2 0 L"I NZI 0 [�J &Z &;;0 L" 0 L"11 6;i 264 N.W.2d 821*823 19 7 8 MLEMS 1 386,9 cussed his clients' building and remodeling plans. He also made specific note of the fact that the structure was in technical compliance with all applicable code require- ments. Again, several representatives of north side com- munity organizations voiced opposition to appellants' application. The committee ultimately postponed its final decision, pending receipt of additional documentation in support of the generally unfavorable response to the ap- plication which had developed. The application was given final consideration at the com- mittee's November 22 meeting. Again, counsel for Coun- try Liquors was present and argued in support of the 8P - plication, and again, neighborhood residents expressed their opposition. A motion to deny the application was duly made and passed. The committee's findings, conclu- sions, and recommendations were submitted to the en- tire city council, which, on November 24, voted to deny appellants' application. Appellants [**51 petitioned the district court for a writ of certiorari to review the decision of the city council and for a writ of mandamus to compel the council to ap- prove the transfer and relocation of the license at the pro- posed location. The trial u'** ', court, following hearing, dis- missed the writs. The issues presented on appeal are: ge 3 of 5 a liquor license appflcadom Accord, Pohnafl _Y-__Q�0 N.Wd 46 — RoyaJLQn, Minn. 311 Min ---n. 555 149 .2 , 24 6J197.D; •I Paron v. City Of ShakOP-02 226 Minn. 222- 32 2d 603 (1948). [**7] We delineated the scope of judicial review of city council discretionary action in our Wajda decision. In that case, the city declined to issue a 3.2 beer license be- cause of complaints from residents concerning the nui- sance caused by the previous operation of the establish- ment in question. Characterizing the decision as "rare," this court reversed the trial court and ordered that the license be "Issued. This holding was based on the court's finding that all of the evidence upon which the city council had relied related solely to operations of previous proprietors and was not fairly probative of Mrs. Wajda's ability to conduct a peaceful enterprise. Con- cerning the scope of our review, we stated (jLg Minn. ut 343. 246111. W.2d- at 45L: (1) Was the action of the Minneapolis City Council deny- ing the transfer of the liquor license arbitrary and capri- cious, and unsupported by the evidence? (2) Did the hearings held by the city council on the sub- ject of the proposed transfer deny appellants proce- dural due [*824] process of law by failing to afford ap- pellants adequate notice and an opportunity to cross- examine the persons who expressed disapproval of the transfer? 1. Appellants argue that since their application met the standards of the applicable ordinance, the city council was compelled to approve the transfer of the license to the proposed location. This position misconstrues the ordi- nance. The requirements established by the ordinance are minimum standards. Unless an applicant can meet these minimum standards, his application cannot be con- sidered at all. HNI Where the minimum requirements are satisfied, [**61 the council must consider the appli- cation, but is by no means divested of its legislative au® thority and responsibility to pass upon the merits of the ap- plication, In Waida ij. Q o Ainn.... I Minngoolis. M° n. 3.39 246 N-_W..=2_d 455,457 (1226), we specifically I � L_ noted, contrary to appellants' assertion, that a city coun- cil is vested with "broad discretion' in its consideration of "In considering these 'Issues) we first observe that a city council is vested with broad dis- cretion in determining whether or not to is- sue or renew a 3.2 beer license, and a court's scope of review of such a determina- tion is a narrow one, which should be exer- cised most cautiously. See, generally, Ryne, Municipal Law, § 27-8; 10A Dunnell, Dig. (3 ed.) § 4911. Appellant has cited no cases, nor have we found any, where this court has reversed [**81 a decision of a legisla- tive body denying a liquor or beer license ap- plication. * * * " We further stated (310 Ubm. aL3-46. 246ht.W.2d,at 459 "As indicated above, HN2 the scope of Judi- cial review when the denial of a license ap- plication is appealed is very narrow, and this court will normally sustain such discretion- ary decisions by municipal bodies. However, in the rare case, such as the facts herein dis- close, where such a denial is patently arbi- trary and capricious, we will not hesitate to act in order to prevent manifest injustice." We reaffirm these statements, and the burden is on appellants to demonstrate the arbitrariness of the council's action. On the facts of this case, the, city council's decision to deny appellants' transfer application can hardly be de - 2 Appellants have cited several decisions from other jurisdictions which purport to limit the discretion of a city council to reject liquor license applications. Examination of these decisions reveals, however, that they were predicated on statutes which ex - n m-OAd ..gp6 1!1. (5 Pressly restricted or elirru*nated city council discretion. See, e -9-s iraodic 's Aeel. 38 .342 126 A.2d 435 1 9 ; Am - N er1v Grill. Inc. v. frow 133 W Na. 214. 51S.E.2d 244 0 4O, P119 Page 4 of 5 264 N.W.2d 821, *824; 1978 Minn. LEMS 1386, **S MR scribed as arbitrary or capricious. The council's action was the result of specific objections raised by commu- nity residents whose lives would be directly affected by FEIN the proposed liquor outlet. We would be seriously mis- guided to characterize the council's sensitivity toward the special concerns of the north Minneapolis community as arbitrariness. Indeed, the very reason for allowing the IMI council substantial [**91 latitude in these matters is to permit adequate consideration of unusual circumstances. Appellants, however, read the Wajda decision as author- Fvi ity for the proposition that the denial of a license may not be predicated upon residents' complaints in the nature (*8251 of projected *111 effects on their neighborhood. This interpretation is erroneous. Our opinion in that cast did F=1 not establish a rule of general application curtailing the e identiary weight to be accorded citizen complaints in v9 These proceedings. What troubled this court in Wajda was the fact that the subject matter of the residents" com- a pla'=q, upon which the city so heavily relied, was not ra- tionehy FaiaQed to Mrs. Wajda's personal qualifications as a license applicant, In fact, the very passage from the Wajda opinion quoted in appellants' brief highlights f=1 the distinction between the narrow matter at issue there and here (310 Alien. at _346. 246 N.W.2d ty-459): f=1 "The complaints lodged by neighbors during the -present proceedings all dealt with the improper conduct of the business and of its pa- trons while it was operated by the two pre- rMl ceding licensees. No substantial evidence in- dicated that the premises [**10] themselves were inherently unsuitable as the location of a tavern if the tavern were lawfully and prop- erly managed and operated. We therefore hold that the city councils second reason for de- nying Mrs. WaJda's 3.2 beer license applica- tion is also clearly arbitrary, capricious, and unreasonable." In this case, the objections voiced by north side resi- dents were not concerned with past misconduct associ- ated with the operation of the license applicant's prop- erty. Rather, their testimony was intended to demonstrate t - in the words of the Wajda opinion - "the premises that themselves were inherently unsuitable as the locatiorill for a liquor store. Thus, the nature of the evidence upon which the city council rested its decision in this case was implicitly approved in the Wajda opinion. We con- clude that the city council properly exercised its legisla- MIR tive function in refusing to approve Country Liquors' transfer application. ["I viewed d o viewed by the United States Supreme Court in Boar Regents v. Roth. 408 US. 5-6422 S. Ct. 2701,32 L Ed. 2d 548._(19T21. In that case, the Board of Regents of Wisconsin State University declined to renew the con- tract of a nontenured teacher. Pursuant to university rules, this action was taken without a hearing of any kind. The Supreme Court affirmed the action of the regents, holding that a nontenured teacher's interest in contract re- newal is not one to which procedural due process require- ments apply. 2. Appellants allege that their due process rights were vio- lated because they did not receive notice of each meet- ing at which the consumer services com-snittee consid- ered their application, and because they were not permitted to cross-examine the community [**11] resi- dents who opposed the application. The threshold require- ments for entitlement to due process protections were re- In reaching this conclusion, the Supreme Court first ob- served (4 08 U.S. at 569 92 1, Cf. at 2705. 33 L. Ed. 2d 548): IIHN3 The requirements of procedural due process apply only to the deprivation of inter- ests encompassed by the Fourteenth Amend- ment's protection of liberty and property. When protected interests are implicated, the right to some kind of prior hearing is para- mount. But the range of interests protected by procedural due process is not infinite." Protected "liberty"' interests were described as fol- lows (408 L.S.�at 572. 22._S�_t. at 2706. 33 [ - 2d 548 **ID_L. Ed Ap'While. this Court has not attempted to de- fine with exactness the liberty * * guaran- teed [by the Fourteenth Amendment], the term has received much consideration and some of the included things have been defi- nitely stated. Without doubt, it denotes not merely freedom from bodily restraint but also the night of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized * * as essen- tial to the orderly pursuit of happiness by free men.' Me -vier v. Nebraska; 262 U.S. 3M 399, 43 S. Ct. 625, 67 L. Ed.- 1042. * * * 1*826] 'The State, in declining to rehire the respondent, did not make any charge against him that might seriously damage his standing and associations in his commu- nity. It aid not base the nonrenewal of his con- tract on a charge, for example, that he had been guilty of dishonesty or immorality. Had it done so, this would be a different case. For 'where a person's good name, reputa- tion, honor, or integrity is at stake because of what [**13] the government is doing to him, notice and an opportunity to be heard are essential.9 * * * MR 264 N.W.2d 821, *826; 1978 Minn. LEO 1386, **13 FM In such a case, due process would ac- cord an opportunity to refute the charge be- fore University officials. In the present case, MR however, there is no suggestion whatever that the respondent's 'good name, reputation, honor, or integrity' is at stake." HN4 Due process "property" interests were given the following general definition (408 U.S. at5�77 EZ S Ct. at 27119. 33 L. Ed. 2 A'* To have a property interest in a ben- efit, a person clearly must have more than an abstract need or desire for it. He must have V49 more than a unilateral expectation of it. He must, instead, have a legitimate claim of en- titlement to it. It is a purpose of the ancient in- stitution of property to protect those claims FOR upon which people rely in their daily lives, re- liance that must not be arbitrarily under- mined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims. "Property interests, of course, are not created by the Constitution. Rather they are created Pm� and their dimensions are defined by existing rules or understandings that [**141 stem from an independent source such as state law - rules or understandings that secure certain 109 benefits and that support claims of entitle- ment to those benefits." �71 Pq F69 MIMMM With respect to the liberty interest, the city council's re- fusal to allow the license transfer casts no shadow on ap- pellants' reputation or personal character. The denial was grounded on the characteristics of the neighborhood rather than appellants' specific qualifications or lack thereof. Also, there is nothing which would prevent appel- lants from renewing their transfer application for Coun- try Liquors in a different location. Likewise, HN5 under Minnesota law there is no prop- erty night in a liquor license. This court has repeatedly stated that "no person has a vested property right to en- gage in or continue to engage in the liquor business." ti Arens it Whee of Ro ers. 240 Minn. 186,401, 61 5082,519 (19531, appeal dismissed, 347 U.S. 2.4.9, 74 S. Ct. 680. 98.L Ed. 1026 (12541. See, also, Federal Distill- ers, Inc. v. State. M Minn, r**isi 18. 222 -144 x„1975), Sabes v. City ot MinneVolis. 265 Minn. I I ZQ N W.2d 871 (1963 ); Andeopn v. Cid of A. uL 226 Minn. 186, 32 N.W.2d 538 (124ffi; faro n _v. C Sitakopee, syR Abeln v. City oLShakopee. 224 Minn. 262,28 N.W.2d 642(1247). Thus, whether or not a tacit property right in an existing license could be iden- tified for due process purposes (see, PeLn v. Sinder- igaiu4 408 U.S. 591 - rt. S. (.""t. ' 16094 . V...T Ed.A. j - :!.,I. A. 570 •[19721), itis plain that appellants cannot be said to have possessed such an interest in their inactive off -sale li- cense. Accordingly, we hold that the city council proceedings for the consideration of Country Liquors' transfer appli- cation were not constitutionally defective. Affirmed. In view of the Roth decision, we hold that appellants had neither a liberty nor property interest in the dormant li- OTIS, J., took no part in the consideration or decision cense they purchased and sought to have transferred. of this case® L&imo 0 16�11 &;z MR 6;Q M9 0 &W Caution As of: February 13, 2014 10:00 AM EST 16 2,%bez V. Waneapolis Supreme Coad of Minnesota March 22, 1963 No. 39,000 Reporter: 265 Minn. 166; 120 N.W.2d 871; 1963 Minn. LEXIS 646 Henry Sabes, v. City of Minneapolis and Others Prior History: 1***11 Proceeding by Henry Sabes in the Hennepin County District Court to enjoin the city of Minneapolis and its council, superintendent of police, and license inspector from revocation of certain licenses held by said plaintiff. After findings for defendants, Wil- liam D. Gunn, Judge, plaintiff appealed from an order de- nying his motion for a new trial, Disposition: Affirmed. ccnsee was not materially prejudiced by the insuffi- ciency of the notice he received; (2) written reports of members of a city police morals squad that recited their personal observations and experiences were admis- sible; and (3) the licensee was charged with knowledge of such activities and further proof was not required to sus- tain the revocation where evidence disclosed that the li- censee knew prostitutes were frequenting his establish- ment and numerous convictions resulted from acts of prostitution solicited on his premises. Outcome The court affirmed the judgment of the district court. I Core Terms ] LexisNexis@ Headnotes I evidence, license, permitting, violation, pTem�*Sr_El roc A, A 2 rule, prostitute, revocation, bar, notice, law, licensee, solicit, liquor, public, duty, operation, business, statements, personal, hearsay, statute, admissiNe, knowledge, testified, document, council, hearing, morals Case Summary Surnmary Procedural Posture Plaintiff, a licensee, sought review of the judgment of the Hennepin County District Court (Minnesota), which denied his motion for amended findings or a new trial in an action he filed against defendants, a city, that sought an Injunction against the revocation of various licenses for a restaurant and bar. Overview The licensee had been a long-time owner of a restaurant and bar. Neither he nor his employees had ever been convicted of any offense that arose from its operation. Each year the city issued an on -sale liquor license, as well as licenses for nonintoxicating beverages, food, ciga- rettes, and for the operation of a dance hall and a tav- ern. A council .committee recommended to the city coun- cil that all of the licenses for the operation of the premises be revoked, and the city council adopted the rec- ommendation. The licensee filed his action that sought an injunction against the revocation. The court held that-.. (1) the notice was wholly inadequate but the the fl - Constitutional Law > Prohibition Governments > Local Governments > Charters Governments > Local Governments > Licenses Governments > State & Territorial Governments > Licenses HNI Minneapolis, Minn., Code of Ordinances, § 851.420 permits the city council to revoke liquor and other li- censes for any violation of the laws of Minnesota rela- tive to the sale of liquor or to the conduct of the busi- ness of the licensee, Constitutional Law > Prohibition Governments > Local Governments > Licenses HN2 No citizen has an inherent or vested right to sell in- toxicating liquors, and municipal authorities have broad discretion within their geographical jurisdiction to deter- mine the manner in which liquor licenses shall be is- sued, regulated, and revoked. Inherent in the right to con- trol the sale of liquor is the power to regulate related activities on the licensed premises. It is the council's duty to decide whether a licensee is guilty of such unlawful conduct in the operation of his business that its continu- ance is detrimental to the public good. In reviewing the proceedings of the municipality it is not the court's function to pass on the Wisdom of the revocation, but only to determine whether the council exercises an honest and reasonable discretion, or whether it acted capri- ciously, arbitrarily, or oppressively. For the appellate court to assume greater responsibility would constitute an un- constitutional usurpation of nonjudlicial power. ZZ 1=77 (7 265 Minn. 166, * 166; 120 NX2d 87 1) ** 87 1; 1963 Minn. LEXIS 6463 * * * I Evidence > ... > Exceptions > public Records > General Overview HIV3 Afinn $ .13 provides that the original re® cord made by any public officer in the performance of his official duty shall be prima facie evidence of the facts re- quired or permitted by law to be by him recorded. MCI Administrative Law > *.. > Formal Adjudicatory Proce- durc > Evidence > General Overview Administrative Law > Judicial Pevicw > Standards of Re- view > Substantial Evidence Evidence > ... > Statements as Evidence > Hearsay > Hearsay Within Hearsay Evidence > .. > Hearsay > Ftulc Components > General Overview 0 &Q1 Th;_2 HIV4 Neither pure hearsay nor hearsay corroborated by a mere scintilla of competent evidence is sufficient. While administrative bodies arc not held to the same strict rules as Judicial tribunals, and incompetent evi- dence will not in itself be grounds for reversal, there must be some substantial evidence introduced to sustain their findings. Most of the world's work is done without rely- ing on Jury -trial rules of evidence, and that the receipt of evidence by administrative bodies is to some extent a matter of practical convenience. Evidence > Authentication > Self -Authentication Evidence > .. > Documentary Evidence > Writings > General Over- view Evidence > ... > Exceptions > Public Records > General Overview Evidence > ... > Testimony > Lay Witnesses > Personal Knowl- edge HNS All documents prepared by public officials pursu- ant to a duty imposed by law or required by the nature of their offices are admissible as proof of the facts stated therein. The reason of the rule is that it would be burden- some and inconvenient to call public officials to appear in the myriad cases in which their testimony might be re- quired in a court of law, and that records and reports pre- pared by such officials in the course of their duties are generally trustworthy. Since the official documents are a substitute for the personal appearance of the offi- cial in court, it is generally held that such documents, to be admissible, must concern matters to which the official could testify if he were called to the witness stand. The facts stated in the document must have been Within the personal knowledge and observation of the recording of- ficial or his subordinates, and that reports based upon gen- eral investigations and upon information gleaned sec- ond hand from random sources must be excluded. ton) Govemments > Local Governments > Licenses Governments > Local Governments > Police Power HN6 The mere presence of persons of immoral chamc- PER ter does not to violate a statute prohibiting the use of a bar as a place to which people resort for purposes which are injurious to the public morals, there being nothing un- lawful about permitting such persons to patronize bars and restaurants in the absence of proof that they commit- MM� ted violations on the premises. Nor is a single act of so- licitation enough to justify a license revocation undeT a statute which prohibits the licensee from permitting the premises to become disorderly. Constitutional Law > Prohibition provides rovides that every H- HN7 Minn. Slat. __6 Iffi. 14. subd. I censee shall be responsible for the conduct of his place of business and for conditions of sobriety and order 9 -ft therein. Minn. Stat. 6 340-14, stiba. 4 1-ileadnotes/Syllabus a Readnotes Licenses — hearing on revocation — adequacy of no- tice. 1. Notice given a bar and restaurant owner by a munici- pality stating only that it will consider the revocation of the owner's licenses due to the conduct and operation of his business is inadequate to apprise the licensee of t,.,..e claims against which he must defend. A licensee re- ceiving such notice is not prejudiced, however, if he has previously had actual knowledge of the charges which were proved, and ample opportunity to be heard. psi Licenses — hearing on revocation — Sdmosso RRY Of PO - lice reports, 2. In an administrative hearing called by a municipality to consider the revocation of a bar owner's licenses for permitting his premises to be used as a resort for pros- titutes, it was proper to receive into evidence as official statements under [***21 Minn. St. 600.13 the written reports of police officers reciting what they personally had observed with respect to prostitutes' soliciting custom- ers on the licensed premises. Licenses — revocation for permitting use of premises as resort for prostitutes — knowledge of license -holder, 3. The revocation of licenses by a municipality for per- mitting premises to be used as a resort for prostitutes will be sustained without proof that the owner had actual knowledge of violations of J 340W. sUM 2. if he knew his establishment was being patronized by prostitutes, and convictions for prostitution solicited on his premises occurred with such frequency that he was dutybound to take notice of their activities. Counsel: Dorfman, Rudquist, Jones & Ramstead and Leo Dorfman, for appellant Keith U. Stidd, City Attorney, and D. J. Shama, Assis- tant City Attorney, for respondents. Judges; Otis, Justice. Thomas Gallagher, Justice (dissent- 0 Wilill "I 0 0 F6_.1 265 Minn. 166, *166; 120 N.W.2d 871, **871; 1963 Minn. LEXIS 646, ***2 ing). Opinion by; OTIS I Opinion [*167] [**8731 This is an action against the munici- pal authorities of the city of Minneapolis to enjoin the re- vocation of various licenses held by plaintiff in connec- tion with the operation of an establishment 1***31 known as "South of the Border — Key Club," located at South Washington and 14th Avenues South in the city of Minneapolis. The district court entered findings of fact and conclusions of law refusing to enjoin the revoca- tion of plaintiffs licenses. From an order denying his mo- tion for amended findings or a new trial plaintiff ap- peals. The record discloses that plaintiff has been the owner of a restaurant and bar at 1323 South Washington Avenue for over 25 years. Neither he nor his employees have ever been convicted of any offense arising 1*1681 out of its operation. Plaintiff testified that he had invested over S 160,000 in the establishment and that it had a value ex- ceeding S 200,000. Each year the city has issued plain- tiff an on -sale liquor license, as well as licenses for non - intoxicating beverages, food, cigarettes, and for the operation of a dance hall and a tavern. On October 30, 1962, the Licenses Committee of the Min- neapolis City Council served the following notice on plaintiff. - 'Notice To Appear "mate October 30, 1962 "To Henry Sabes "Address 2840 Monterey Parkway "You will please take notice that at a meeting of the Li- censes Committee of the Minneapolis 1***41 City Council to be held in Room 305, of the City Hall, Min- neapolis, Minnesota, on November 7, 1962 at 9:00 a.m. The Committee will consider revocation of all your li- censes due to the conduct and operation of your busi- ness. 'You may appear and present such evidence as you de- sire. Failure to appear may jeopardize eopardize your license 'Sy order of the Licenses Committee. "By Russell R. Green, License 1nspWmT- By M. Warner." Pursuant to that notice, plaintiff and his counsel ap- peared before the Licenses Commiftee an November 7, Page 3 of 7 1962, at which time plaintiff's counsel asked whether any charge was being placed against his client arising out of the operation of the bar in question. The committee chairman replied that the purpose of the hearing was to de- termine 'whether or not this is a desirable type of opera- tion and an operation we would like to see contin- ued." Counsel persisted in his efforts to secure a specific statement of what conduct the committee claimed was in violation of the law. The most he could secure from the committee was an observation by the city attorney that It was an inquiry into the conduct of plaintiff s business based on a report by the chief of police. [***51 There- upon the chief presented and discussed a report dated Oc- tober 22, showing, among other things, the number of ar- rests and convictions for morals violations resulting from contacts made at the South of the 1*1691 Border Bar. He was quick to concede, however, that the evi- dence was not of a character which would support a criminal prosecution. At the same hearing, William Brady, head of the morals squad, was called and asked to pro- duce his files and records showing violations for prostitu- tion and other offenses resulting J**8741 from con- tacts at plaintiffs bar. Counsel for plaintiff directed the committee's attention to the authorities holding that an owner may not have his liquor license revoked for con- doning the presence of sex perverts without some show- ing of a violation of the law occurring on the prem- ises. Counsel protested that the mere presence of prostitutes in plaintiff's bar was not in itself a violation warranting revocation. With this contention the city attor- ney agreed. The hearing before the Licenses Committee was contin- ued and conducted on November 13, November 20, and November 28. On November 29, 1962, the commit- tee recommended to the city council J***61 that all of the plaintiff's licenses for the operation of the premises at 1323-1329 South Washington Avenue be revoked, and on the following day the city council acted accordingly. This action to enjoin the revocation followed. There are three basic issues for determination: (1) Whether the notice of hearing before the Licenses Com- mittee was adequate to confer jurisdiction; (2) whether the consideration by the committee of files, records, and reports of the police department was proper under an ex- ception to the hearsay rule; and (3) whether the record sup- ports a finding that plaintiff violated Minn. St. 340.14, subd. 2, prohibiting licensees from permitting their prem- ises to be used as a resort for prostitutes. I , With respect to the notice, we have no hesitation in find- ing it wholly inadequate. While the trial court recog- nized its deficiencies, he concluded that the plaintiffs at- torney had actual notice of the charges and an opportunity to be heard by the time the hearing was con- ducted on November I and November 13. with some misgivings, we hold that plaintiff has not been materi- ally prejudiced by the insufficiency of the notice he re- ceived. The importance of furnishing 1***71 proper no- [�W &W izy C Page 4 of 7 265 Minn. 166, 169; 120 N.W.2d 871, **874; 1963 Minn. LEXIS 646, ***7 Lice was discussed by Mr. Justice Mitchefl in S R _-La—teex art v. Common.Council, 53. U 1 �5 N. WL. 118, rel H hin. 238 4._� �* which reviewed the action of a municipality�701 in discharging two city employees. He stated (53 Kna. 244, 55 N.W. 120): .1.1* * * The specifications of the alleged causes should be formulated with such reasonable detail and precision as shall inform the incumbent what derelict -Ion of duty is urged against him. There should be a statement of charges with a specification of facts constituting a suffi- cient cause for removal, sufficiently distinct to apprise the officer of the grounds upon which the charges are based.' In State V i -el - Sholund- w CL/Y 9d Duluth, 125 AhnA. 425. 42 14 7 N. W -8-2-10. 821, we noted the 'Inadequacy ._..� of notice to appear before a city council in connection with a liquor license revocation, couched in terms similar W those employed in the instant case. We found the notice in- sufficient in failing to advise the licensee of the nature of the charges against him or the ground on which the re- vocation was sought, but held that the right to adequate notice had been waived- Here plaintiff did not waive his right to proper notice, and protected [***8] his record at every stage of the proceedings. However, we are of the opinion that in view of the narrow question on which the case eventually hinged, plaintiff has not been preju- diced. The revocation was ultimately based entirely upon a violation of x_340.14. subcl. Z. The use of plaintiff's premises as a resort for prostitutes had been discussed with plaintiff's employees on previous occasions. He was fully aware of the complaints made by the police in this re- spect. There was ample opportunity to meet the evi- dence presented before the Licenses Committee, and plaintiff attempted to do so. There was no request for a continuance to present additional evidence on his behalf. Although we are somewhat reluctant to condone the in- adequacy of the notice, we hold that under the circum- stances a reversal and rehearing are not warranted. 1**8751 2. The trial court found the evidence submit - F" ted to the Licenses Committee sufficient to justify the city council's determination that plaintiff had violated § 340.14, d. 2 prohibiting a licensee from permitting his premises to be used as a resort for prostitutes. HNI Minneapolis Code of Ordinances, § 851.420, ad- opted pursuant to c. 4, [***91 § 16, of the city charter, pen -nits the city council to revoke liquor 1*1711 and other licenses for any violation of the laws of Minnesota relative to the sale of liquor "or to the conduct of the business of the licensee." We hold that there was competent evidence on which the Minneapolis City Council could properly base a find- ing that plaintiff had violated J 14Q,.1.4 subd , and had consequently forfeited his right to retain his ii- ceases. HN2 No citizen has an inherent or vested night to sell 'in- toxicating liquors, and municipal authorities have broad discretion within their geographical jurisdiction to deter- mine the manner in which liquor licenses shall be is- sued, regulated, and revoked. I Inherent in the right to con- trol the sale of liquor is the power to regulate related 2 activities on the licensed premises. Basically it is the council's duty to decide whether the licensee has been guilty of such unlawful conduct in the operation of his business that its continuance is detrimental to the pub- lic good. 3 In reviewing the proceedings of the munici- pality it is not the court's function to pass on the wis- dom of the revocation, but only to determine whether the council exercised 1***101 an honest and reasonable discretion, or whether it acted capriciously, arbitrarily, or oppressively. 4 For us to assume greater responsibility would constitute an unconstitutional usurpation of non - judicial power. ' Turning to the evidence introduced over plaintiffs objec- tion at the hearing before the Licenses Committee, it is obvious that nearly all of the testimony was hearsay. The question before us, however, is the extent to which [***II] such evidence was competent and admissible un- der a 1*1721 common-law exception governing offi- cial statements, codified in HN3 6 +6Q .13 as follows. "The original record made by any public officer in the per- formance of his official duty shall be prima facie evi- dence of the facts required or permitted by law to be by him recorded. * * *" The head of the morals squad brought to the Licenses Committee hearing a number of files which he testified were regularly kept in his division of the police depart- ment. These records consisted of so-called 'kick sheets" made up by an arresting or 'Investigating officer, showing the charge and details of the offense and the transcribed stenographic statements of witnesses. Briefly summarized, these written reports, received in evii- . PAML-226 Minn. 186 ed. 620, 624* Anderson v. City, St Crowley v. Christensen. 137 U.S. 9A 91:_l 1 S. Ct. 13, 15. 34 L. I ') 11227. 226 Mi 122. 228 32 ISI w. �QL 607a 2 A L 19L32 N.W.-5 (2d) �3 8. 541 - Pam Y_- .Z;4.14 - I Clevelard v, -!Qount-v of Rice, 21&Minn. 18® 1 2W. (2d) 641. 643. 1 Moskoyitz . y. City of St. PSUL 218 Minn. 543. 549. 16 NX (2d) 745. 748. 4 ainbridV._City nf Minne---1:01 I L.R.A. 19160t 224. HunstigMv. Kilian, 130 Minn. 474.479. 153 N.W. 869,871. 10 L;_ I 0 0 670--z &W Y.71 �0 M" G, 265 Minn. 166, * 172-0 120 N.W.2d 871, **875; 1963 Minn. LEXIS 646, *** I I dente over plaintiffs objection, disclosed the following: Officer foreman stated that on August 21, 1961, he went to the South of the Border Bar and ordered a drink; that he was shortly thereafter propositioned by a girl sit- ting next to him at the bar; that he followed her to a ho- tel room where he arrested her; and that she was con- i fined. Officer Brady con- victed of prostitution and f corroborated the report by testifying that 1***121 he saw them leave the bar and followed them to the hotel. [**8761 A written report of officer Hannon described his being solicited in South of the Border on September 150 1961; Officer Johnson was solicited there on Octo- ber 11, 1961, both resulting in convictions. The records showed other solicitations and convictions in reports of officer Erickson on October 11, 1961, Mr. Brady tes- tifying to the arrests; Officer Farrell on November 7. 1961; Officer Martin on January 14, 1962; Officer Coo- per on March 15, 1962; and Officer Thorson on April 14, 1962. In addition to these written reports, Officers Foreman and O'Brien testified that they had been solicited at plain- tifrs bar, and Officer Bailey testified that on three occa- sions he witnessed leaving the bar couples whose sub- sequent arrests resulted in convictions for prostitution. Therewere other reports and statements offered and re- ceived at the Licenses Committee hearing which were clearly incompetent under any of the rules of evidence. These consisted, for the most part, of stenographically transcribed statements of men convicted of various mor- als [*1731 offenses, who identified plaintiff's bar as the place they were 1***131 solicited. In addition there were parts of the official reports which purported to quote third persons as stating they had been solicited at plain- tiff's bar. These statements were patently inadmissible as hearsay on hearsay. Deferring for a moment a consideration of the admissibil- ity of the officers' reports covering their own activities and observations, we look to the rules generally prevail- ing in administrative hearings. It has been held that HN4 neither pure hearsay nor hearsay corroborated by a mere scintilla of competent evidence is sufficient. '6 While administrative bodies are not hold to the same strict rules as Judicial tribunals, and incompetent evi- Page 5 of 7 dence will not in itself be grounds for reversal, there must be some substantial evidence introduced to sustain their findings. 7 We have noted that most of the world's work is done without relying on Jury -trial rules of evidence, and that the receipt of evidence by adrnlinis- trative bodies is to some extent a matter of practical con- venience. " one court in writing a revocation opinion has wryly observed, "A policeman guiding himself by the strict rules of evidence would be chargeable with inca- pacity; and a general would be guilty 1***141 of a mili- aci tart' crime," 9 quoting Sir Henry Sumner Maine in "The Theory of Evidence." Since our statute embodies official statements as a com- mon-law exception to the, hearsay rule,, the prerequi- sites for the admissibility of such evidence must be exam- ined. Wigmore points out that the designation "public documents" is a misnomer and that a more accurate de- i1s "official statements. He 10 He scription of the exception notes that the exception is a matter of expedi- ency 1***151 and not necessity, since it need not be shown that the witness is unavailable by reason of death, absence, or other 1*1741 disability. The rationale of the rule seems to be that even if it is physically possible to produce -a Witness who has made a report, it w., ould tend to disrupt the efficient functioning of public employ- ees to require their repeated appearance in court. Wigmore goes on to say that the disadvantages of fail- ing to administer the oath or to subject the witness to cross -examination 1**8771 are offset by the probable trust- worthiness of a report which is likely to be accurate if made in the regular course of the official's duties. There is a presumption that an official charged with per- forming a duty will correctly describe his activities. Nor is it essential that the official action be taken as a re- sult of any formal direction or regulation. The officer may have performed his duties pursuant to a casual or- der of a superior. So also it [***161 is enough if they are functions necessarily inherent in the office. Finally. Wig- more observes that the rule is limited to official state- ments based on personal observation. " In Federal practice the common-law exception to the hear- say rule is codified in 28 Y ECA. § I 3 and made ap- plicable to criminal cases by Rule 27 of Federal Rules of Practice. A leading case construing the Federal statute is Olender v. United States (9 Cir.) 210 F. (2d) 795, 801, 6 Walker v. Citv of San Gabriel. 20 CAL _2d) 879, - 8811 129 P. L24) 542, 351, 142 A.L.R. 1383; Consolidated Edison Co. v. N.L.R.B. 305 U.S. 1973 59 S&t.,206j 3 L. ed. 126; Willapoint oysters v. Ewing (9 Cir.) 174 F. (2d) 676, 691; 2 S. Admin- istrative Law, § 14.11. 7 Hughes v. Deotof bLbfic Safety. 200 Minn. 1 §,25. 273 N.W. 618, 623: Note, 23 Minn. L. Rev. 74. a State ex irel. HaLdgtone Brick Co. v,� Dent . of Urnmerce, 114—Minn. 200, 20-1,212 N.)K. 8-1, 82. 9 Walker v. City of Clinton, 244 Iowa 1099, till, 59 N.W. (2d) 785, 791. 10 5 Wigmore, Evidence (3 ed.) §§ 1630 to 1635. 11 See, also, McCormick, Evidence, § 291. 0 ["I U�Z LZ 1�g 0 L6;J ZY 0 265 Minn. 166, *174; 120 N.W.2d 871, **877; 1963 Minn. LEXIS 6469 ***16 42 A.L.R. (2d) 736, 744,, where the court summarized the rule as follows: "Generally stated, the rule is that HNS all documents pre- pared by public officials pursuant to a duty imposed by law or required by the nature of their offices are admis- sible as proof of the facts stated therein. * * * The rea- son of the rule is that it would be burdensome and incon- venient to call public officials to appear in the myriad cases in which their testimony might be required in a court of law, and that records and reports prepared by [***171 such officials in the course of their duties are generally trustworthy. * * * "Since the official documents are a substitute for the per- sonal appearance of the official in court, it is generally held that such documents, to be admissible, must con- cern matters to which the official could testify if he were called to the witness stand. * * * Thus, this circuit and 1*1751 most of the other circuits which have passed on the question have held that the facts stated in the document must have been within the personal knowledge and observation of the recording official or his subordinates, and that reports based upon general in- vestigations and upon information gleaned second hand from random sources must be excluded." " Appellant relies on Bqrnes v. Northwest Airlines, 223 - Minn. ,110 433, 4 7 N. W. Qg)f I for the exclu- sion of the reports written by members of the mor- als [***181 squad. In that case we held that an army board's investigation report concerning the causes of an airplane accident was not admissible because it con- tained expressions of opinion or the exercise of judg- ment and discretion. The rule laid down in the Barnes case as it applies to official statements and to business re- cords under § 600.02 is entirely consistent with the re- sults we here reach. We have held in a number of cases that self-serving opinions and conclusions may not be re- ceived under the statute On the other hand, in constru- ing § 600.02, we have allowed into evidence, as part of a record kept in the regular course of business, a sales- man's daily reports written in his own hand, reciting fac- tually the events which occurred while he was stranded in an automobile before he died from exposure. 14 [***191 Based on these authorities, we hold that the writ- ten reports of members of the morals squad, reciting Page 6 of 7 their personal observations and experiences with respect to the solicitation of customers by prostitutes in South of the Border — Key Club Bar, were admissible in this ad- ministrative hearing and support a finding that plain- tiff's bar was used as a resort for prostitutes within [**878] the meaning of the statute. While much incom- petent evidence was also received, we are of the opin- ion that in proceedings of this kind it did not linvalidage aw render the competent evidence ineffective to justify the license revocation. 3. Finally, it is the contention of appellant that the word "permit,"*' 1*1761 used in f 340,14. suhd�, 2, prohibit- ing a licensee from permitting the premises to be used as a resort for prostitutes, connotes knowledge and con- sent and that the city has failed to sustain its burden of proof with respect to these elements. Plaintiff himself testified that he knew prostitutes frequented his establish- ment and knew their identity, but protested that he had no knowledge of their having solicited and that he could not evict them unless they were violating the law. [***201 In support of his position, appellant relies on Sme-y-, Robi'nma- 15 Aft', L& 56 M.E. 594. That was an action to recover penalties against a pharmacist under a statute prohibiting him from permitting an unlicensed em- ployee to sell drugs. We held that the word "permit" in- cluded an element of assent, and, where the pharma- cist had no knowledge of the offense, he was not liable. RN6 The mere presence of persons of immoral charac- ter has been held not to violate a statute prohibiting the use of a bar as a place "to which people resort for purposes which are injurious to the public morals," there being nothing unlawful about permitting such persons to pa- tronize bars and restaurants in the absence of proof that they committed violations on the premises. " Nor is a single act of solicitation enough to justify a license re- vocation under a statute which prohibits the licensee from 16 permitting the premises to become disorderly. In a prosecution under a child labor law for "permitting" work in a particular industry, Mr. Justice Cardozo stated that an employer had a duty to inquire into the conditions pre- vailing in his business- that the statute implied knowl- edge of the violation or the [***211 opportunity through reasonable diligence to acquire knowledge; and that there was no safety in ignorance "if proper inquiry would avail." 17 12 See, also, Jacotson v..Bryan. 2.44 Wis. 35.9, 367, U N.W. (2d) 789. 793; Hadlgy v. Ross, 5 Okla. 89. 9L I L4 P. (2d) 939, 941. 13 Bro" v. SL Paul -gity Ry. Co. 241 Minn. 15. 26. 6" NX (2d) 68& 6%. ..44 A.L.Q..(2d) 515: Boutan v. T%vin,City Motor iIIP�IrBus Co. 248 Minn. 240, 247. 80 N.W. (20130. 37. FE" 14 ChillstTom v. Tmian Seed Co. 242 Minn. 471. 65 NX 2d 888. Stoumen v. Reilil 37-Lal.�969._2LL 24) 713, 716, 234 P. (2d) 16 Matter of Mlgliacci2 v. O'Connell. 307 N.Y.J66. 122.NXJ2_d1 214. Peonle ex rel. Price v. Sheffield Fams-Slawson-Decker Co. 225 N.Y. 25, 30, J21, N.E. 474, 476. n rAn rM9 0 P" 0 M" 265 Minn. 166, *176; 120 N.W.2d 871) **878; 1963 Minn. LEXIS 646, ***21 A recent California case involved the revocation of a li- cense for '*'Permitting' the premises to be used as place to which people resorted for purposes injurious to the public morals. The court held that the word "**per- mir implied no affirmative act and no intent, but mere passivity, or 1*1771 an abstaining from preventive ac- tion. 18 In a New Jersey action to revoke a license for permitting premises to be used by prostitutes for solicita- tion, the owner defended on the ground there had been no direct proof that the activities occurred with his knowl- edge and consent. However, the court sustained a find- ing which noted "we [***221 would have to be naive to believe that these women could have solicited on the promises without anyone connected with the manage- ment learning of it. 19 To the same effect is our opinion in State v RoggrsJ45 M hm. 103,..306, 177 M. W. 3513, 1-5.2. There we held that in the absence of direct evi- dence that defendant had knowledge of immoral prac- tices on his premises, the illicit commerce was in- dulged in so openly and for such a length of time that defendant must have known his hotel was being used as a house of *111 fame. Nor can a licensee plead igno- rance by delegating his responsibilities to an employee. State v. SobeLm gn. 199 Minn. 232.235..71=V. W....484. 485. Under the statute, HN7 "Every licensee shall be respon- sible for the conduct of his place of 1**8791 busi- ness and for conditions of sobriety and order therein." 340.14. _sAbd. 2. We therefore (***231 conclude that where, as here, the evidence discloses that the licensee knew prostitutes were frequenting his establishment, and numerous convic- tions resulted from acts of prostitution solicited on his premises, he is charged with knowledge of such activi- ties and further proof is not required to sustain the revo- cation. Affirmed. IM -1 Dissent by; GALLAGHER Dissent Thomas Gallagher, Justice (dissenting). I concur with the majority that the notice under which plaintiff was required to appear before the committee for the purpose of defending his right to continue opera- tions under his license was entirely Inadequate and that plaintiff at no time waived his rights with respect to its suf- ficiency. However, I disagree with the majority's conclu- sion that notwithstanding this, because someone had INM Mi2 Page 7 of 7 previously "'discussee with him certain (*1781 com- plaints which were nowhere specified in the notice, his constitutional right to due process had not been denied. Further, I cannot adhere to a concept of due process which would permit hearsay evidence to stand as the main sup- port for findings which in effect will cause plaintiff the loss of an investment of the estimated value of $ 200,000. Even Minn. 1***241 St. 600.13, under which the majority hold such evidence is admissible, specifi- cally provides that it shall be prima facie evidence only as to matter contained in the documents referred to therein. It would seem logically to be implied from such lan- guage that plaintiff should have been accorded his consti- tutional right to confront the makers of such reports and to subject them to cross-examination under oath in an effort to overcome the prima facie effect of such evi- dence. The majority hold that because plaintiff knew that a num- ber of prostitutes were among his customers that this was sufficient to establish his violation of 6 340.14. suhd- 2, even though, as defendant concedes, he would have no more right to eject them from his premises than would the owner of any retail establishment which they might choose to patronize. It seems here that plaintiff is made the victim of circumstances he could not control. The re- cent influx into the city of great numbers of prostitutes from Chicago, Omaha, and Kansas City is known to de- fendant and the diligent and conscientious effort of its police department to eliminate them is to be com- mended. Plaintiff is vested with no legal author- ity 1***251 to prevent their coming into his establish- ment, which by law is open to all adults of their or other racial origins. There is no evidence whatever that plain- tiff was aware of the occasions, testified to by mem- bers of the police morals squad, when the patrons of his bar turned their efforts toward solicitation of assign- ments with other customers. The record establishes that before the influx referred to above, plaintiffs operation of his establishment had been satisfactory, and that on all I occasions he cooperated with the police in an effort to maintain a lawful place of business for his patrons. I do not feel that he should be penalized to the extent of the loss of his property because of an evil which he did not create, which he did not foster or encourage, and which he had no legal authority to control 1*1791 or eliminate. It is almost certain that even though plaintiff s place be closed, the evil will continue to exist and that similar problems will anise in other sections of the city for so long as economic conditions and human feelings fore- close legitimate employment opportunities to large seg- ments of our population. is S3yggle v.. State B.Qid of FaUliZaflgl 125 Cg, AM. Qd) 432. 270 P _. a 18 19 Benedetti v. Board of Commys. 35 N.J. SuRer. 30, 34, 113 A. 2d 443 46. 16�1 &Z2 &Z &Z �Z 0 0 1"0 ;L;] Positive As of: February 12, 2014 2#048 PM EST Godfather Inc. v. Bloomingon Court of Appeals of Minnesota October 15, 1985 No. 0485-831 Reporter: 375 N.W.2d 68; 1985 Minn. App. LEXIS 4586 Godfaiher, Inc., Relator, v. The City Of Bloomington, Respondent Subsequent History: [**l] Petition for Review De- nied, December 13, 1985. Review denied by GoCather, Inc. v. City of Rloomim- ton, 1985 Minn. LEXIS 1344 (Minn., Dec. 13, 1985) Prior History.- Review of City of Bloomington Court. Disposition: Affirmed. come taxes for employees, the, corporation's employees had previously allowed the open use of marijuana at a cer- tain bar, and the owner had failed to disclose contin- gent liabilities and pending litigation in which he and the corporation were defendants. Furthermore, the court found that there was no evidence that the Council consid- ered improper factors contained in the police report when it decided to deny the corporation's application for a liquor license. Outcome The court affirmed the decision denying the corporation a liquor license. Core Terms Lex:isNe7ds@ Headnotes L ------- W" I license, liquor license, city council, council, capriciously, medicine, failed, lake, law, godfather, administrative, speakeasy, hearing, operate, arbitrarily, authority, charac- ter, cooperate, employee, person,, police, record, act Cue Summary -1 Procedural Posture Appellant corporation sought review of a decision of re- spondent Bloomington City Council (Minnesota), which denied his application for a liquor license. The cor- poration argued that the Council acted arbitrarily and ca- priciously and that the licensing process was procedur- ally irregular because a police investigation report was sent to the Council. Overview The corporation, which proposed to operate an Italian res- taurant, applied for an on -sale intoxicating liquor li- cense with the city. After a lengthy investigation, culmi- nating in a police report filed by the chief of police, the Council denied the corporation's application on the ba- sis that the owner lacked "good moral character." Subse- quently, the corporation sought review of the decision, alleging that the Council acted arbitrarily and capri- ciously, and that it was error for the police investigation re- port to be sent to the Council. The court affirmed. Spe- cifically, the court held that the Council's decision was not arbitrary and capricious where, the corporation's owner had improperly failed to withhold federal and state in- Govemments > Local Governments > Licenses HNI Minn. Stat. § 340.131. subd. 12 (1984) and Bloom- ington City , Minn., Code § 13.29(2) prohibit the issu- ance of a liquor license to a person not of "good moral character." A city council is vested with broad discre- tion in determining whether or not to issue or renew a [li- quor] license, and a court's scope of review of such a de- termination is a narrow one, which should be exercised most cautiously. Nevertheless, the licensing authorities must not act arbitrarily or capriciously and courts will interfere to prevent an abuse of discretionary power; and will grant relief from unreasonable, arbitrary, capri- cious, or fraudulent action of municipal authorities. *Uabus 1. City Council's decision to deny an initial liquor li- cense application was not arbitrary or capricious. 2. There was no procedural irregularity an denying the li- quor license. Counsel: Gerald M. Singer, Minneapolis, Minnesota, for Appellant. David R. Ornstein, BloomiagLqn UY H&U.B100ming- =, Minnesota, for Respondent. Van Page 2 of 3 375 N.W.2d 68, *69-P 1985 Minn. App. LEXIS 4586, **1 [�Q 0 IZZ VIEV IN" M" F" 7 lizil Judges: Considered and decided by Popovich, Chief Judge, Wozniak, Judge, and Huspeng', Judge, with oral ar- gument waived. Opinion by: POPOVICH Opinion [*69] Appellant Godfather, Inc. seeks review of a li- quor license denial by the Bloomingto City Council. Ap- pellant contends (1) the council acted arbitrarily and ca- priciously, and (2) the licensing process was procedurally irregular because a police investigation re- port was sent to the city council. We affirm. FACTS Godfather, Inc., a Minnesota corporation proposing to op- erate Vino's Italian Cuisine, applied for an on -sale in- toxicating liquor license with the City of Bloomington. John Anzevino, Jr., the sole shareholder of the corpora- tion, would be the facility's manager. The city con- ducted a lengthy [**2] 'investigation, culminating in a po- lice report filed by its chief of police. The city manager also issued a report recommending denial. The parties agreed to a fact-finding hearing which was held before an administrative law judge from the State Office of Admin- istrative Hearings. The administrative law judge is- sued findings of fact and conclusions of law but because of the submission for the limited purpose of fact- finding did not weigh the importance the city might as- sign one fact or another, and issued no recommendation whether the license should be granted. The findings and conclusions are highly detailed and referenced. Anzevino, 47 years old, has been affiliated with liquor es- tablishments all his life. From 1972 to June 1976 he was a one-third owner and manager of the Park Terrace Supper Club (a.k.a. Duff's 9*n the Park). In 1977 he be- came the owner and manager of the Godfather Restau- rant in Richfield, which closed on December 31, 1984 be- cause of condemnation proceedings for a large urban renewal project. Connected with the Qodfather was the Speakeasy Bar. The Speakeasy Bar had a separate en- trance from the restaurant and catered to a young, rowdy, destructive, over -drinking clientele. [**3] In June 1980 a fight erupted between two motorcycle gangs, resulting in a shooting. The use of drugs, particularly marijuana, occurred at times with the knowledge of bar- tenders, waitresses and hostesses. By 1984, most of the problems [*701 associated with the Speakeasy Bar had noticeably diminished. In N6vember 1981 a corporation controlled by Anzevino was granted a liquor license by the City of Medicine Lake to operate Vino's Godfather, H. In seeking ap- proval, Anzevino told the Medicine Lake City Council he would have a restaurant serving gourmet Italian food up- stairs and a workingman's bar downstairs. The they H lost money and closed down a year later. It re - opened in November 1982 under a format called the "M G's.- Games, Girls, Guys, Fun and Food," featuring top- less female and male dancers. Prior to opening the new format, Anzevino was requested by city officials to keep the original format but would only do so if the city underwrote his losses. On November 8 the Medicine Lake City Council passed a public nudity ordinance effec- tive November 25, 1982. Following citations, Anzevino sued in federal court to have the ordinance declared un- constitutional. The city later [**4] agreed not to en- force the citations until it passed a constitutional ordi- nance, which it did on December 24, 1982. Anzevino closed the Medicine Lake operation around January 12, 1983. The administrative law hearing disclosed that many per- sons working at Anzevino's Richfield operation did not have federal, state, and social security taxes with- held. This reduced the employer's share of unemploy- ment compensation contributions. In addition, on the license application Anzevino was re- quired to supply, he was asked, 'Do you have any con- tingent liabilities? Legal claims.? Are you a defendant in any suits or legal actions?" Anzevino answered, "Ne or 'None to these questions. In fact, Anzevino personally was the subject of many le- gal claims involving his personal guarantee on behalf of a corporation known as "Arrive Alive.' There were also outstanding dram shop suits pending against Godfather, Inc. Neither Anzevino nor any establishment he owned or man- aged was ever convicted of a violation of any liquor or- dinance or statute. The city council, at its regular meeting on February 11, 1985, held a public hearing and denied the application be- cause Anzevino lacked "good moral character" in [**5] that: (1) applicant failed to withhold state and fed- eral 'Income tax and pay social security and unemploy- ment compensation for a number of employees; and due V to this failure, he was under investigation by local, state and federal authorities- (2) applicant failed in pre- venting others from using drugs in the Speakeasy Bar, (3) applicant failed to disclose on his liquor application that he was a defendant in a number of lawsuits; and (4) applicant refused to cooperate with the City of Medi- cine Lake by operating a topless dancing show in his es- tablishment. ISSUES 1. Did the Bl2gmingrton City Council act arbift-adly and capriciously in denying Anzevino's application for a li- quor license? 2. Was the licensing process procedurally infirm? 7 IQ] 0 b6�1 ia ["I Fia-Z M2 lz:;71 0 375 N.W.2d 68, *70; 1985 Minn. App. LEMS 4586, **5 mftw. stut._ § 340.13 and Bloomi ., subd. 12 (1984) ing_ Lqn CKy Code § 13.29(2) HNI prohibit the issuance of a fiquor license to a person not of "good moral charac- ter.' The city council rejected Anzelfino's application for a license on that basis,, [A] city council is vested wrath broad discre- tion in determining whether or not to issue or renew a [liquor] license, and a court's scope of review of such a determination is a [**6] narrow one, which should be exer- cised most cautiously. * * * Nevertheless * * * the licensing authorities must not act ar- bitrarily or capriciously and "courts will in- terfere to prevent an abuse of discretionary power, and will grant relief from unreason- able, arbitrary, capricious, or fraudulent ac- tion of municipal authorities." WaLda %P. City of MinneaglLs,. 3„10 Minn. 339, 343, 246 N.W.2d 455a.452 (12261 quoting [*71] 2 E. McQuillan, Municipal Corporations § 10.37 (3d ed. 1979). We cannot say the council's decision to deny Anzevino a license was arbitrary or capricious. The administrative law judge's findings and conclusions, clearly supported by the evidence, indicated Anzevino (1) improperly failed to withhold federal and state income taxes for some em- ployees and failed to withhold and forward social secu- rity contributions, (2) Anzevino's employees, including managerial employees, failed to follow management's written procedures in connection with the open use of marijuana at the Speakeasy Bar, (3) Anzevino failed to co- operate with the City of Medicine Lake in connection with the nude dancing at the Medicine Lake facility, and (4) Anzevino failed to disclose [**7] contingent liabili- ties and pending litigation in which he and his corpora- tion were defendants. While we agree with Anzevino that the record does not show he intentionally violated the withholding laws, the other areas of concern to the council are legitimate and reflect an absence of arbitrariness. The council is en - tided to consider the misconduct associated with the Speakeasy Bar while Anzevino was the owner. The re - Page 3 of 3 sponsibility for its operations rested with Anzevino. The U could consider his record in dealing wkh d council a usage, underage drinking, assaults, and othe�nd'dems which relate to his fitness and character to hold a Diquor li- cense. Anzevino does not dispute the administrative law judge's conclusion he did not cooperate with the Medi- cine Lake officials regarding the nude dancing, but ar- gues the episode should not have been given much weight. We do not know how much impact it had on the council, but the city has a legitimate interest in determin- ing a liquor license applicant's cooperation or lack of co- operation with city officials. The record fully supports the council's concerns over An- zevino's failure to disclose contingent liabilities with his application. He [**8] denied he had any claims or he was a defendant in any pending suit. The record showed he was a defendant in several pending suits. The city was justifiably concerned about his honesty. 2. Anzevino also argues the licensing procedure was un- fair because a police report submitted to the city coun- cil before the hearing contained many allegations and ac- cusations which were later dropped as a possible basis to deny or approve the application. As a result of the re- port, the city council referred the matter to an indepen- dent hearing examiner. See Miller it Qal of Saint Paul. 363 N.W.2d SM. a 13 (Minn. Ct. ARa. 19a5i, pet. for rev. denied, (Minn. Apr. 26, 1985). The administrative law judge's report clearly stated that extraneous matters were not litigated and would not be an appropriate basis for license denial. The council's decision to deny the li- cense was confined to the matters litigated which could properly be a basis to deny the license. Anzevino claims he was damaged by the "muckraking"' in the po- lice report. There is no evidence the council considered improper factors. DECISION 4 The record supports the Bl2=ngq11 City Council's de- nial of a liquor license. It did not [**9] act arbitrarily or capriciously in denying the liquor license because of a lack of good moral character. The license process was not handled 'improperly. FAI