Opinion
No. 4-777 / 04-0345
Filed February 24, 2005
Appeal from the Iowa District Court for Story County, Timothy J. Finn, Judge.
Talisman, Inc., d/b/a Chris' Tap, appeals from the denial of its application for the renewal of its liquor license. AFFIRMED.
Benjamin T. Doran of Doran, Anderson Baltimore, P.L.C., Boone, for appellant.
Thomas J. Miller, Attorney General, and Karen Doland, Assistant Attorney General, for appellee Iowa Alcoholic Beverage Division.
Stephen A. Owen of Gonnerman, Owen Stonehocker, L.L.P., Ames, for appellee City of Cambridge.
Heard by Sackett, C.J., and Vogel, Zimmer, Hecht, and Eisenhauer, JJ.
Talisman, Inc., appeals from the denial of its application for the renewal of its liquor license. We now affirm.
I. Background Facts and Proceedings.
Talisman, Inc. (Talisman) owned and operated a bar in the City of Cambridge for eight years and throughout this period was licensed by the State to serve alcoholic beverages to its patrons. Talisman was persistently delinquent in paying for its municipal services, including water. The record reveals that numerous delinquency notices were provided by the City to Talisman over a period of years.
On July 31, 2002, Talisman submitted a liquor license renewal application to the Cambridge City Council (Council), the local authority responsible for approving the application. After discussion at its September 3, 2002 meeting, the Council voted to deny Talisman's application. Although Council members discussed during the meeting Talisman's history of providing strip or exotic dancing, the City notified the Iowa Alcoholic Beverage Division that the application was denied because of Talisman's "habitual delinquency of [its] local utility bill (water, sewer, and garbage)." The record reveals the Council's approval of Talisman's previous liquor license application was conditioned on Talisman's promise to rectify its persistent delinquency.
Talisman appealed the Council's denial of the renewal application. The Alcoholic Beverages Division of the Iowa Department of Commerce (agency), held an evidentiary hearing on November 26, 2002. Talisman contended the Council's decision to deny the application was based on impermissible factors, such as the nature of the business and its clientele. Talisman asserted before the agency that the Council's decision to reject the application was not motivated by delinquent payment of utility bills because the liquor license applications of other licensees in Cambridge were approved despite their delinquent payment of utility bills. Talisman placed in the agency record newspaper articles quoting the Mayor and the City Clerk of Cambridge as evidence that the Council's claimed reason for the denial was a mere pretext. The agency rejected Talisman's arguments and concluded the Council's denial of the application was for reasons allowed by law.
Talisman also notes that one of the Council members who voted to deny the application had his own history of delinquent utility payments.
One of these articles reported the City's mayor believed Talisman's strip club "was the reason" four vacant lots to the north of the bar "remain empty." Another article quoted the mayor as follows: "I would say the general feeling in town is negative towards that place. I am not sure any place wants to have that type of establishment."
Talisman subsequently sought judicial review of the final agency action pursuant to Iowa Code chapter 17A (2003). In addition to its pretext argument, Talisman contended on judicial review the Council was estopped from basing its denial on utility payment delinquencies because the city consistently acquiesced in those delinquencies by renewing previous liquor license renewal applications. The district court rejected both the pretext and acquiescence arguments and affirmed the agency's action.
Talisman's estoppel argument was raised before the agency and the City responded to it. The agency's final decision noted "[t]he Administrator has reviewed the record with regard to all issues raised by the parties," but found the Council's denial of the renewal application was proper. The agency, however, did not specifically address the estoppel argument. We find the issue is nonetheless preserved for our review as the City addressed it and the agency was given the opportunity to rule on the issue. Soo Line R. Co. v. Iowa Dep't of Transp., 521 N.W.2d 685, 691 (Iowa 1994).
Talisman now appeals from the district court's review of the final agency action, reasserting both its pretext and estoppel arguments.
II. Scope and Standard of Review.
Review of an agency determination is for errors at law. Cobb v. Employment Appeal Bd., 506 N.W.2d 445, 447 (Iowa 1993). We review district court decisions on judicial review of agency action under the standards of Iowa Code chapter 17A. Locate.Plus.Com, Inc. v. Iowa Dep't of Transp., 650 N.W.2d 609, 612 (Iowa 2002). As the district court is itself acting in an appellate capacity to correct errors of law on the part of the agency, on appeal "we apply the standards of Iowa Code section 17A.19(10) to the agency action to determine whether our conclusions are the same as those of the district court." Swanson v. Employment Appeal Bd., 554 N.W.2d 294, 296 (Iowa Ct.App. 1996). We will grant relief where substantial rights of a party have been prejudiced because the agency action is in excess of the agency's statutory authority, is unsupported by substantial evidence, is unreasonable, arbitrary, or capricious, or is affected by other error of law. Iowa Code § 17A.19(10) (2003). An agency's findings of fact are binding on reviewing courts when such determinations "are clearly vested by a provision of law in the discretion of the agency" and supported by substantial evidence. Iowa Code § 17A.19(10)( f); Mycogen Seeds v. Sands, 686 N.W.2d 457, 465 (Iowa 2004). The agency is given broad authority to grant, suspend or revoke liquor control licenses for cause and thus the authority to make the factual determinations in this case is clearly vested in the agency. Iowa Code § 123.20(5) (2003). Evidence is substantial if a reasonable mind would accept it as adequate to reach a finding. Swanson, 554 N.W.2d at 296.
III. Discussion.
A. Persistent Delinquency.
As noted above, the Council's report to the Iowa Alcoholic Beverage Division cited Talisman's persistent utility payment delinquencies as the reason for denying Talisman's renewal application. To be eligible for a liquor license, the applicant must be of good moral character. Iowa Code § 123.30(1)(a) (2001). "Person of good moral character" is defined as one having "financial standing and good reputation as will satisfy the administrator that the person will comply with this chapter, and all laws, ordinances, and regulations applicable to the person's operations under this chapter." Iowa Code § 123.3(26)(a). The agency has further defined the financial standing and reputation requirement to include the prompt payment of all taxes, and the prompt payment to local authority of fees or charges made for municipal services. Iowa Admin. Code r. 185-4.2(4)(a) (2001).
The persistent failure on the part of Talisman to make prompt payments for the municipal services it relied on to continue its enterprise clearly impugns Talisman's financial standing and reputation as defined by the agency regulation. Thus, we find no error in the agency's determination that Talisman's persistent history of utility payment delinquencies alone justifies the Council's denial and the agency's affirmance of that denial unless Talisman can establish as a matter of law either that the Council did not rely or was estopped to rely on such delinquencies as a ground for denying the application.
B. Allegations of Pretext.
Talisman contends the Council was searching for any "legal" reason to justify the denial of Talisman's application, and that the Council's primary motivation was to rid the city of the entertainment offered in the bar, the clientele attracted by the entertainment, and the perceived negative effect the bar had on the development of the surrounding area. Talisman relies on the mayor's statements made contemporaneous to the denial, which indicated collateral benefits would accrue to the city as a result of the Council's action. We note the mayor was not a voting member on the Council.
Talisman also points to the fact that other liquor licensees in Cambridge were also delinquent in the payment for municipal services in 2002 but were not similarly denied their liquor licenses. This, contends Talisman, is evidence that the Council was not genuinely concerned with the delinquency and must, therefore, have used Talisman's delinquency as a mere pretext to discriminate against its business activities. A careful review of the other licensees' delinquencies suggests they were not of the size or scope of the ones admitted by Talisman, and they were promptly cured.
The agency record contains substantial evidence that Talisman's utility bill payments were chronically delinquent and that the denial of Talisman's liquor license renewal application was based on a history of such delinquencies. Although there is also substantial evidence in the record tending to prove the Council had other reasons unrelated to Talisman's utility payment delinquencies, we cannot say as a matter of law that the reason offered by the city was pretextual. We therefore reject Talisman's pretext argument as the renewal application was properly denied on substantial evidence of Talisman's poor financial standing. Iowa Admin. Code r. 185-4.2(4)(a) (2001).
C. Estoppel by Acquiescence.
Talisman next argues the Council has acquiesced to Talisman's persistent delinquencies by failing to take enforcement actions and by continually approving prior renewal applications. Such acquiescence, Talisman contends, estops the city from relying on the delinquency as a justification for the denial.
We doubt this equitable doctrine has any application in this action at law. See Weltzin v. Nail, 618 N.W.2d 293, 298 (Iowa 2000) (in action at law, assertion of an equitable defense does not automatically invoke the court's equitable jurisdiction). But assuming without deciding estoppel may be asserted in this context, we conclude Talisman has failed to establish the elements of a valid estoppel by acquiescence claim.
Estoppel by acquiescence focuses on whether the actions or inaction of the right-holder indicate an intention to waive a known, enforceable right. Davidson v. Lengen, 266 N.W.2d. 436, 439 (Iowa 1978). This branch of estoppel law applies "where a person knows or ought to know that he is entitled to enforce his right . . . and neglects to do so for such a length of time as would imply that he intended to waive or abandon his right." Humboldt Livestock Auction, Inc. v. B H Cattle Co., 261 Iowa 419, 432, 155 N.W.2d. 478, 487 (1967). It is the burden of the party advancing the estoppel theory to prove the intent to waive by clear and convincing evidence. Henderson v. Millis, 514 N.W.2d. 497, 505 (Iowa 1985). Where acts and conduct are relied upon as proof of waiver, the intention of the party charged with waiver must clearly appear. Continental Cas. Co. v. G.R. Kinney Co., 258 Iowa 658, 660, 140 N.W.2d. 129, 130 (1966).
We find ample evidence in the record supporting the district court's determination that Talisman failed to establish the Council intended to waive the history of delinquencies as a ground to deny Talisman's renewal applications. The city of Cambridge sent numerous notices of the back payments for municipal services to Talisman during its years of operation. The record reveals the Council in prior years noted its concern with respect to Talisman's utility payment delinquencies when approving renewal applications. The record reveals that Talisman responded to the Council's concerns with assurances on at least one prior occasion that the delinquency problem would be cured. The decisions to approve prior applications were based on such assurances. It is well settled that a party seeking equity must come with clean hands. Kimm v. Kimm, 564 N.W.2d. 468, 474 (Iowa Ct. App. 1990). Talisman may not rely on conduct it claims constitutes acquiescence where its own remedial assurances contributed to the Council's delay in asserting the persistent delinquencies as a ground to deny prior renewal applications. Accordingly, we find no error in the district court's rejection of Talisman's estoppel by acquiescence argument, and we therefore affirm on this issue.