Opinion
Argued February 23, 1960
Decided April 1, 1960
Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, HENRY EPSTEIN, J.
Emanuel D. Black and Hyman Amsel for appellants. Monroe I. Katcher, II, for respondent.
This article 78 proceeding, brought by the petitioner Max Gross to compel the New York City Alcoholic Beverage Control Board to receive his application for a restaurant liquor license, poses for decision the validity of rule 45 promulgated by the State Liquor Authority.
The petitioner, owning and operating a restaurant in New York City, was licensed some years ago by the Authority to sell beer and cider at retail on the premises. In June of 1959, finding that there was an ever-increasing demand by his patrons for liquor and wine, Gross submitted to the local New York City Board, in accordance with the provisions of the statute (Alcoholic Beverage Control Law, § 64), an application for "a change of class of [his] license, from beer and cider only, to liquor, wine, beer and cider" for on-premises consumption.
The board refused to accept Gross' application on the ground that he had failed to obtain the permission of the Liquor Authority to file an application, the permission being in the form of a waiver as required by the Authority's rule 45. The board's action was sustained by Special Term, which granted a motion to dismiss Gross' petition to compel acceptance of his application, but the Appellate Division reversed, denied the motion and granted leave to appeal to this court on certified questions.
The relevant portion of rule 45 provides:
"NOW, THEREFORE, BE IT RESOLVED AND ORDERED, that on and after February 1st, 1959 and pending the completion of the aforesaid survey and study and determination thereon, the number of annual restaurant liquor or wine licenses, hotel liquor or wine licenses and eating place beer licenses shall be limited to the number in effect throughout the state after all applications for such licenses filed prior to February 1st, 1959 or filed as the result of the next succeeding paragraph have been acted upon, and it is further
"RESOLVED AND ORDERED, that during the period February 1st, 1959 through January 31st, 1960, no application for any of the aforesaid licenses (whether by way of an original application or by way of a change in class) shall be accepted by any Local Board or Zone Office of the Liquor Authority except that any person may be granted a waiver of the foregoing limitation provided that he shall establish by proof satisfactory to the State Liquor Authority compliance with * * * [certain specified] conditions".
Although on its face rule 45 seems designed simply to limit the number of on-premises licenses, its actual thrust is to erect a new and unauthorized procedure for the granting of these licenses. (See Matter of Kaplan v. Rohan, 8 A.D.2d 270, 273, appeal dismissed on ground appellants not aggrieved 7 N.Y.2d 884. ) This contradiction between appearance and reality is made manifest by a close reading of the operative paragraphs of the rule, especially this sentence: "the number of annual restaurant liquor or wine licenses, hotel liquor or wine licenses and eating place beer licenses shall be limited to the number in effect throughout the state after all applications for such licenses filed prior to February 1st, 1959 or filed as the result of the next succeeding paragraph have been acted upon". Since the next succeeding paragraph provides that " any person may be granted a waiver of the foregoing limitation" if he meets the conditions prescribed by the Authority, it is clear that what appears to be an absolute limitation on licenses, pursuant to subdivision 2 of section 17, is actually an unauthorized change in the statutory procedure for granting licenses under sections 55, 64 and 121. Thus, in effect, rule 45 repeals and amends express provisions of the Alcoholic Beverage Control Law without the sanction of law.
Section 64 declares that "Any person may make an application to the appropriate board for a license to sell liquor at retail to be consumed upon the premises where sold" and goes on to provide that the procedure to be followed shall, so far as applicable, be that set forth in section 54. Section 55 is identical with section 64 except that it relates to beer instead of liquor and, like section 64, it too incorporates the provisions of section 54 insofar as the controlling procedure is concerned. It is to be noted that, in contradistinction to rule 45, both section 64 and section 55 provide that "Any person may make an application". It should also be noted that neither section 54, 55 or 64 nor any other section of the statute makes any mention of the waiver procedure incorporated into rule 45, or any waiver procedure, as an alternative to those specific and detailed procedures which the Legislature saw fit to establish in section 54.
The change which rule 45 seeks to impose on the statutory scheme by requiring a pre-application waiver is no mere matter of detail; it goes to the very heart of the procedure prescribed by the Legislature in the Alcoholic Beverage Control Law. In outline, the statutory procedure found in sections 54 and 121 provides for an application, approval or disapproval by the local board, review by the Authority and review of the Authority's action by the courts. At various stages of this procedure, written statements of disapproval are required and there is also provided a hearing by the Authority under stated circumstances. For this elaborately detailed legislative plan of application and review, the Authority in rule 45 would substitute the simple alternative of forbidding local boards to accept and act upon applications except when the Authority issues a waiver after a written application.
Since section 121 of the Law only provides for review in cases where the Authority has either denied, issued or revoked a license, one important effect of rule 45 is to deny judicial review in the case of a person who is prevented from obtaining a license by being refused a waiver. As the unanimous Appellate Division for the Third Department expressed it in the very recent case of Matter of Kaplan v. Rohan ( 8 A.D.2d 270, 273, supra), in consequence of rule 45, "unsuccessful applicants are * * * denied access to the courts for purposes of review".
The rule also avoids other of the procedural safeguards which the Legislature thought important enough to set up when it enacted section 54. Thus, an unsuccessful applicant is, by reason of rule 45, denied a license without a written statement of the grounds of denial, without a hearing and without either an administrative or judicial review of the denial — despite the fact that each and every one of these important safeguards is expressly provided for by sections 54 and 121 of the Law. This represents a gross administrative usurpation of legislative power.
In view of all this, it may well be asked, how does the Authority seek to justify its action? The opening paragraph of rule 45 recites that it is "Promulgated * * * pursuant to Sections 2, 17 and 111 of the Alcoholic Beverage Control Law". Although there are numerous sections of the Law which give the Authority express power to promulgate rules (see, e.g., § 98 [rule 19]; § 99-b [rule 15]; § 100, subd. 6 [rule 14]; § 101-b [rule 16]; § 101-c [rule 31]), it is clear that neither section 2, section 17, section 111 nor any other provision authorizes it to enact so far-reaching a change as rule 45 makes in the application procedure prescribed by the statute. Thus, section 2 simply declares the policy of the Alcoholic Beverage Control Law and section 111 merely provides that there shall be no transfer of licenses unless the Authority in its discretion so decides. However, as indicated, neither of those sections may reasonably or, indeed, conceivably be read to empower the Authority to prescribe a variant procedure for license applications.
The Authority, though, points to that portion of subdivision 2 of section 17 which states that it shall have power to "limit in its discretion the number of licenses of each class to be issued within the state or any political subdivision thereof, and in connection therewith to prohibit the acceptance of applications for such class or classes of licenses which have been so limited." This clause does permit the agency to limit the number of applications which may be filed; and, if rule 45 were really a limitation on the number of licenses issued, and not a provision for an alternative method of granting licenses by way of waiver, there is no doubt that it would be valid, and so we held in Matter of Brenner v. O'Connell ( 308 N.Y. 636) which involved rule 17. As comparison of rule 17 and rule 45 quickly reveals, however, there is at least one great and striking difference between them. While the former provides an absolute limitation on the number of licenses, rule 45, although announced and labeled as such a limitation, actually provides for an alternative method of granting licenses. In other words, although the statute, in subdivision 2 of section 17, authorizes a rule limiting the number of licenses and prohibiting the acceptance of applications beyond such a limit, it does not authorize a procedure for granting licenses which in every respect is contrary to, and at odds with, that expressly provided by the Legislature itself.
Where the Authority promulgates a rule providing for an absolute limitation on the number of licenses, it may prohibit acceptance of applications and permissibly foreclose judicial review of the decisions which it makes. This is the clear meaning of section 17 (subd. 2) and section 121 of the Alcoholic Beverage Control Law. (See Matter of Brenner v. O'Connell, 308 N.Y. 636, 643, concurring opinion, supra.) But where the Authority, in the guise of setting an "absolute limitation", actually sanctions the grant of an unlimited number of waivers of such a limitation, the limitation is illusory, and we are confronted with an alternative method of issuing licenses. Neither section 17 nor any other section of the Law authorizes the Authority to prescribe such an alternative to section 54. And, furthermore, it deprives applicants of substantial rights to review at both the administrative and judicial level.
The Liquor Authority, as the dissenting opinion observes (p. 542), unquestionably possesses "a large degree of flexibility" in exercising the discretion vested in it, but such flexibility certainly does not sanction either the announcement of a "policy" or the promulgation of a rule by the agency which contravenes explicitly mandated legislative procedures. More specifically, to state the matter briefly, the Authority is without power to adopt a scheme of its own to deal with applications for licenses and employ it as a substitute for that provided by the Legislature. Rule 45 was issued in excess of the grant of statutory authority and must be stricken as invalid.
The order of the Appellate Division should be affirmed, with costs, and the first question certified answered in the affirmative, the second question certified answered in the negative, and the third question certified need not be answered.
The decisions about to be made in this case and in Matter of Swalbach v. State Liq. Auth. ( 7 N.Y.2d 518), handed down herewith, strike at the very heart of the legislative policy declaring that the regulation and control of the traffic in alcoholic beverages "will best be carried out by empowering the liquor authority of the state to determine whether public convenience and advantage will be promoted by the issuance of licenses to traffic in alcoholic beverages" (Alcoholic Beverage Control Law, § 2).
From 1934 to date, this court has been careful not to substitute its judgment for that of the State Legislature and the Liquor Authority in the carrying out of that stated policy. A majority are now not only striking down a determination, made pursuant to a stated policy of the Authority, respecting the location of licensed premises, on the ground that it could not adopt a policy in that respect, but have gone one step further by declaring that rule 45, promulgated in 1956 (Alcoholic Beverage Control Law, §§ 2, 17, subd. 2; § 111), is "a gross administrative usurpation of legislative power not to be tolerated". They seek to justify this impeachment of a high level agency of our State Government by reading the rule not only as a calculated plan or scheme on the part of the Authority to evade its clear administrative responsibility respecting statutory procedures in the issuance of liquor licenses (§§ 54-55, 64), but also as a subtle device to deprive the applicant of his fundamental right of court review.
In essence, rule 45 limits liquor licenses for on-premises consumption "to the number in effect" on the stated date and those to be issued in accordance with the conditions there provided. Local boards may not accept for filing and processing any application for license (whether by way of assigned application or change in class) except that any person may be granted a waiver of the limitation, provided he establish, by proof satisfactory to the State Liquor Authority, compliance with certain enumerated conditions, in addition to which "the applicant must make a prima facie showing that public convenience and advantage will be served and promoted after consideration of the neighborhood and the number and condition of hotels, restaurants and other eating places in the proposed area, whether licensed or not".
Rule 45 is substantially the same as rule 17. The latter rule was promulgated in 1952, pursuant to the same statute. It limited the number of licenses to those "in effect" on the stated date, and forbade local boards to accept applications during a stated period, except under certain named circumstances. When that rule was challenged, we upheld it ( Matter of Brenner v. O'Connell, 308 N.Y. 636).
Rule 45 differs only as to the necessities of the subject matter dealt with. It relates to liquor licenses for "on-premises" consumption (§ 64), while rule 17 relates to liquor licenses for "off-premises" consumption (§§ 63, 79). In each instance the fundamental consideration is whether public convenience and advantage will be promoted. In either situation the Authority has the ultimate responsibility. A proper exercise of that broad discretion respecting licenses for "on-premises" consumption requires a large degree of flexibility, so that licenses may be issued whenever and wherever a bona fide eating place demonstrates to the Authority that such license or change in class will promote public convenience or advantage and will not add to the evils which the law is designed to prevent.
The court below has read the waiver requirement of rule 45 as an unwarranted restriction on the manner of issuance of licenses, and not contemplated by subdivision 2 of section 17, since the applications there mentioned are "in connection" with the limitation on the issuance of licenses. Such a reading flouts the long expressed policy of the State (§§ 2, 17, 111), and would be wholly inconsistent with our holding in regard to rule 17 ( Matter of Brenner v. O'Connell, supra). Requiring a waiver during the proscribed period "in connection" with license applications before a local board may receive and process them is not at all unreasonable. It provides a procedure which in no way alters statutory standards for the control of the liquor traffic but, in fact, is an aid to expeditious and efficient administration, since it provides a prompt method of determining whether public convenience and advantage will be served before there has been a vast amount of time, money and paper work expended in connection with a hearing before the local board. The showing in each instance is materially different. We must bear in mind that ultimately it is the Authority which determines whether a license shall issue or a change shall be allowed. As has often been said, there is no inherent right in a citizen to engage in the liquor traffic ( Crowley v. Christensen, 137 U.S. 86; Matter of Wager v. State Liq. Auth., 4 N.Y.2d 465).
Moreover, there is no merit to the contention that rule 45 is indefinite and uncertain in its application because it does not specify a numerical limitation on licenses, for the reason that the limitation mentioned refers to those in existence on a stated time and also those that may be issued in compliance with the conditions. The very nature of an eating place license necessitates the exercise of a broad unhampered discretion in order that public convenience and advantage will be promoted. Although we approved rule 17, which limited licenses "to the number in effect" ( Matter of Brenner v. O'Connell, supra), it does not follow that rule 45 must be stricken down because not so limited.
The challenge to rule 45, based on the alleged nonreviewability of a denial to issue a waiver, is wholly without substance. If, indeed, denial to issue a waiver is tantamount to a denial of a license, it follows as day follows night that the disappointed applicant can have a review in the manner provided by article 78 of the Civil Practice Act or "by any other appropriate remedy" (Alcoholic Beverage Control Law, §§ 2, 121, subd. 1). The failure of section 121 to specify the denial of a waiver is not evidence of nonreviewability. The confusion seems to arise out of an unwarranted attempt to apply the language of subdivision 2 of section 64 to the license of a bona fide restaurant. Section 55 prescribes the standard by which the bona fide restaurant should be judged. It was not intended to apply, nor does it apply, to a restaurant eligible for a liquor and wine license ( Matter of Fernandez v. State Liq. Auth., 306 N.Y. 600, revg. 282 App. Div. 770). We have repeatedly declared that the intention of the Legislature in the enactment of a law should be ascertained from the cause or necessity which led to the enactment ( People ex rel. Wood v. Lacombe, 99 N.Y. 43, 49), and that the "end to be served, the mischief to be averted, supply the clews and the keys by which construction must be governed" ( Surace v. Danna, 248 N.Y. 18, 25; Caddy v. Interborough R.T. Co., 195 N.Y. 415).
It is significant that in the four years of its existence the rule has operated successfully and without challenge, that the vast number of persons subject to the regulatory jurisdiction of the Authority do not oppose it, and that the Legislature, aware of its existence, has not seen fit to void it or in any other manner indicate its displeasure with the rule.
It is basic that "State courts should uphold State regulation whenever possible" ( People v. Nebbia, 262 N.Y. 259, 271). On appeal to the Supreme Court of the United States, that court stated ( sub nom. Nebbia v. New York, 291 U.S. 502, 537-538): "Times without number we have said that the legislature is primarily the judge of the necessity of such an enactment, that every possible presumption is in favor of its validity, and that though the court may hold views inconsistent with the wisdom of the law, it may not be annulled unless palpably in excess of legislative power." The same comment applies with equal cogency to the problem now considered.
Matter of Kaplan v. Rohan ( 8 A.D.2d 270), so strongly relied on by the majority in support of its decision, is distinguishable both on procedural and factual grounds. Nothing said in that opinion is binding on this court, nor does it necessarily point the way this court should follow. Moreover, it is the fact here that no waiver was requested and none has been denied.
I dissent and vote to reverse the order appealed from and to reinstate the order of Special Term, with costs. The first and third questions certified should be answered in the negative, and the second question certified should be answered in the affirmative.
Judges FROESSEL, VAN VOORHIS and FOSTER concur with Judge FULD; Judge DYE dissents in an opinion in which Chief Judge DESMOND and Judge BURKE concur.
Order affirmed, etc.