Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on March 31, 1982, in Miami, Florida.
For Respondent: James N. Watson, Jr., Esquire
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Whether petitioner's application for transfer of an alcoholic beverage license should be granted, or denied on the ground that the license has been revoked.
In September, 1980, petitioner Gui Dom Corporation, d/b/a Little Havana Liquor Store and Lounge ("Gui-Dom") applied for transfer of an alcoholic
beverage license. On October 9, 1980, respondent Division of Alcoholic Beverages and Tobacco ("DABT") denied this application, stating that the license "[could] not [be] transfer[red] because it was revoked by Order of the Director [of DABT]."
Gui-Dom timely requested a hearing on DABT's denial and, on December 1, 1980, this case was forwarded to the Division of Administrative Hearings for assignment of a hearing officer. Hearing was set for April 13, 1981. On March 27, 1981, Rene Valdes was granted leave to intervene as a party.
On motion of Gui-Dom and Rene Valdes, hearing was continued and reset for December 8, 1981; continued and reset for January 29, 1982; then continued and
reset, again, for March 31, 1982.
At hearing, Gui-Dom called Nathaniel Barone, Charles Kelly, Rene Valdes, and Dennis E. LaRosa as witnesses. DABT called John J. Harris. Petitioner's Exhibit Nos. 1 - 13 and Respondent Exhibit Nos. 1 - 5 were received into evidence. 1/ DABT Rule 7A-2.06(7), Florida Administrative Code, was officially recognized.
The transcript was filed on September 29, 1982. The parties subsequently filed proposed findings of fact and conclusions of law.
On January 25, 1977, Armando Calo, through counsel, filed a Notice of Lien with DABT stating that he was a bona fide mortgagee on an alcoholic beverage license (4-COP, lic. no. 23-1901) held by the Intimo Lounge, Inc., 1601 Collins Avenue, Miami Beach, Florida. Citing Section 561.65, Florida Statutes, he enclosed a copy of his chattel mortgage and a check payable to DABT in the amount of $5.00. (P-1)
By return letter dated February 4, 1977, C. L. Ivey, Jr., DABT's Licensing Supervisor, acknowledged receipt of Mr. Calo's Notice of Lien and stated that it would be made part of the Intimo Lounge, Inc. license file. At that time, administrative license revocation proceedings were pending against Intimo Lounge, Inc. So Mr. Ivey sent a copy of his February 4, 1977 acknowledgment letter to DABT's Miami Office, and included this notation:
P.S. John:
You need to immediately notify Attorney Solomon's [Calo's attorney's] office if and when an order to revoke is issued. He will then go to court to seek a judicial transfer.
(P-2)
On March 22, 1977, Charles A. Nuzum, DABT's Director, executed an order revoking Intimo Lounge, Inc.`s alcoholic beverage license. (R-1)
Eight days later, on March 30, 1977, Armando Calo sued Intimo Lounge, Inc., seeking to foreclose his chattel mortgage on its alcoholic beverage license. By letter of the same date, counsel for Mr. Calo, citing Section
561.65, Florida Statutes, notified DABT of the filing of the foreclosure action; he also asserted that Mr. Calo had no knowledge of or participation in the causes for which the Intimo Lounge, Inc. beverage license was revoked. Copies of subsequent pleadings filed in the action were sent to DABT's legal department. DABT thus knew the suit was filed and was aware of its continued progress. (Testimony of Barone; P-3, P-4, P-11)
The Circuit Court of Dade County ultimately entered a final judgment of foreclosure in Mr. Calo's favor. On August 17, 1979, pursuant to such judgment, the Clerk of the Court sold the Intimo Lounge, Inc. beverage license, at public sale, to intervenor Rene Valdes, 1710 N.W. 7th Street, Suite 7201, Miami, Florida for $25,000. Notice of the sale was published in the Miami Review, a newspaper circulated in Dade County. On August 28, 1979, the Clerk issued a Certificate of Title pursuant to Chapter 45, Florida Statutes. This Certificate certified that Intimo Lounge, Inc.`s alcoholic beverage license (4-COP, license no. 23-1901) had been sold to Rene Valdes on August 17, 1979, and that "no objections to the sale have been filed within the time allowed for filing objections." (Testimony of Valdes; P-5, P-6)
Although DABT was aware of the protracted mortgage foreclosure litigation involving the Intimo Lounge, Inc. beverage license --which it had earlier revoked -- it never protested or sought to block the foreclosure action. It was not a party to the action; neither did it attempt to become one. (Testimony of Barone, Valdes)
In September, 1979, a month after the judicial foreclosure sale, Nathaniel Barone, counsel for Intimo Lounge, Inc., wrote R. B. Burroughs, Jr., Secretary of the Department of Business Regulation, asking what steps were necessary to keep the Intimo Lounge, Inc. beverage license viable. An internal memorandum suggests that DABT was, at first, unprepared to answer that question and preferred, instead, to delay answering until an application for the license was filed. But, on October 4, 1979, Harold F. X. Purnell, the Department's General Counsel replied on behalf of Secretary Burroughs:
It is the Division's position that the
. . . license has been and presently is revoked pursuant to the actions pre- viously taken by [DABT]. Further, that in the absence of an order of appropriate jurisdiction entered in a proceeding to which the Division is a party we are powerless to transfer such license.
(Testimony of Barone; P-7, P-10)
Meanwhile, Rene Valdes, notified DABT of his purchase of the Intimo Lounge, Inc. beverage license and asked that it be held in escrow while he found a suitable purchaser and location. When DABT refused, Mr. Valdes petitioned the court, which had rendered the foreclosure judgment, to require DABT to process and transfer the license. The court denied his petition, at least in part, because DABT was not a party to the proceeding. After the court hearing, Mr. Valdes, together with his attorney, Charles Kelly, and DABT's counsel, Mr. Purnell, met outside the chambers and discussed their next step. Mr. Kelly discussed seeking a mandamus ordering DABT to issue the license. Mr. Purnell suggested, instead, that Mr. Valdes find a location and purchaser for the license, then submit an application to DABT -- something which Mr. Valdes had not yet done. Although Mr. Purnell did not assure them that the application
would be approved, both Mr. Valdes and Mr. Barone gained an impression that it would be. 2/ Mr. Valdes, following Mr. Purnell's suggestion, found a location and buyer, then applied for a transfer of the license. DABT's denial resulted in this proceeding. (Testimony of Barone, Valdes)
Under Section 561.65(1), Florida Statutes (1977), a lender licensed by the state holding a lien on an alcoholic beverage license had the right to enforcement of his lien against the license within 12 days after any order of revocation, provided it was revoked for causes which the lienholder had no knowledge and did not participate. If the lienholder purchased the license at foreclosure sale, he could operate under it or transfer it to a qualified person. Until August 17, 1980, it was DABT's long-standing practice and policy to make no distinction between licensed and unlicensed lenders (lien-holders). It allowed both licensed and unlicensed lienholders to file notice of liens against beverage licenses and honored the subsequent transfer of the license if the lien was enforced within 12 days of revocation. This practice was abruptly changed on the basis of an agency legal opinion. On August 17, 1980, one month before Gui-Dom filed its application, DABT's General Counsel rendered a legal opinion limiting Section 561.65 relief to lenders licensed by the state. After that date, until 1981, when the legislature removed the "licensed lender" language of Section 561.65, DABT applied Section 561.65 literally and only accepted liens filed by licensed lenders. (Testimony of LaRosa; P-13)
But in October, 1980, DABT did not deny Gui-Dom's application for transfer of the Intimo Lounge, Inc. license because Armando Calo, the lienholder, lacked a lender's license. Instead, the application was denied because the license had been earlier revoked. As later explained by Barry Schoenfeld, DABT's Chief of Licensing: 2
[DABT] felt at the time that . . . there really was no license, that
the license had already been revoked, and that there was no license for the court to sell [to Valdes].
(P-13, p. 25). But Section 561.65 specifically permits liens, under specified conditions, to survive license revocation. When asked to explain DABT's position in light of Section 561.65, Mr. Schoenfeld replied, "I don't know that I can explain it." (P-13, p. 16) Neither could Mr. Schoenfeld adequately explain why, in cases similar to this, DABT has approved license transfers while, here, they have not. (P-13, p. 23) It was not until after the denial of Gui-Dom's application that DABT contended that Section 561.65, Florida Statutes (1977), provides no relief because Armando Calo was not a licensed lender. (P- 9, P-13).
Rene Valdes, a beverage license broker, operates a business known as "Beverage License, Inc." He specializes in obtaining and transferring alcoholic beverage licenses for clients and has a working knowledge of the Beverage Law, including DABT rules and practice. When he purchased the Intimo Lounge, Inc. license at the judicial sale, he did not know that it had been revoked by DABT. He did, however, know that there was license revocation litigation between Intimo Lounge, Inc. and DABT. He also knew that DABT had issued an emergency order suspending Intimo Lounge, Inc.'s license; and he knew that there were circuit court foreclosure proceedings involving the license. Yet he failed to ascertain the status of the license -- either by checking the files of DABT or the circuit court. But even if he had discovered that the license had been revoked, under DABT's long-standing practice and interpretation of Section
561.65, it would have made no difference. The license would have "survived" revocation because Armando Calo had timely enforced his lien. And it could have been sold at a judicial sale and transferred to a new qualified purchaser. (Testimony of Valdes, Harris; P-13)
DABT has provided no record foundation for its abrupt discontinuance of prior agency practice and policy in August, 1980, a policy which allowed both licensed and unlicensed lien holders to file and timely enforce liens against beverage licenses. This policy enabled a lien to survive license revocation; and the license, which had been revoked earlier could then be transferred by judicial sale. The only explanation given for the change in policy, a change which DABT now relies on as cause for denying Gui-Dom's application, is that the agency changed its legal interpretation of Section 561.65 (1977). (Testimony of LaRosa; P-13)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Fla. Stat. (1981).
In licensing proceedings, an applicant must prove its entitlement to the requested license, that it meets all criteria and standards for issuance. See, J.W.C. Co. v. Department of Transportation, 396 So.2d 778 (Fla. 1st DCA 1981)
The general rule is that changes to licensing statutes apply to applications which are pending at the time of enactment. See, Department of Environmental Regulation v. Oyster Bay Estates, 384 So.2d 891 (Fla. 1st DCA 1980); Davidson v. City of Coral Gables, 119 So.2d 704 (Fla. 3rd DCA 1960). Gui-Dom thus contends that the 1981 amendment to Section 561.65, Florida Statutes, enacted after its application was filed, is controlling. This amendment, provides, in pertinent part:
Section 561.65 Mortgagee's interest in license.--
Any person holding a bona fide mortgage or lien or security interest in a spirituous alcoholic beverage license in this state
shall have the right to enforcement of a lien against that license within 12 days after any order of revocation or suspension by an admini- strative officer or department of the govern- ment for a cause or causes of which the lien- holder did not have knowledge or in which he did not participate. The division is required to notify any lienholder properly filing pur- suant to subsection (4) of a pending revo- cation or suspension. Liens or security interests in spirituous alcoholic beverage licenses existing prior to July 1, 1981, shall not be affected by the provisions of this section.
The purchaser at a foreclosure sale shall have the right to operate under such license, if otherwise lawfully qualified and autho- rized by the division to do so, or to have a reasonable time within which to transfer the
license to some person qualified under the laws of this state to operate such license.
In two significant respects, existing protections granted to lienholders by Section 561.65 were enlarged and extended. The lienholder need no longer be a licensed lender, and a right was conferred upon a purchaser at foreclosure sale, even if the purchaser was not the prior lienholder. If this amendment applies here, Gui-Dom's application must be granted.
The 1981 amendment to Section 561.65(1), by its terms, does not "affect" liens which were filed, such as here, prior to July 1, 1981. However, this limitation does not forbid applying the amendment insofar as it (1) grants the right to enforce a lien to unlicensed lenders, and (2) grants a non- lienholder purchaser at a foreclosure sale the right to operate under, or transfer, the beverage license. Under this construction, it must be concluded that Gui-Dom is entitled to transfer of the license at issue.
If, however, it is concluded that the 1981 amendment to Section 561.65 is inapplicable, DABT's decision in this case is controlled by Section 561.65 and related provisions of Chapter 561, as they existed prior to July 1, 1981. These provisions provide, in pertinent part:
Section 561.32 Transfer of license.--
. . . However, no one shall be entitled as a matter of right to a transfer of a li- cense when revocation or suspension procee- dings have been instituted against a license, and transfer of license in any such case shall
be within the discretion of the division. (e.s.)
* * *
Section 561.65 Mortgagee's interest in license.--
Any lender licensed by the state holding a bona fide mortgage or other lien on a spi- rituous alcoholic beverage license in Florida shall have the right to enforcement of his
lien against the said license within 12 days after any order of revocation or suspension by an administrative officer or department of the government for a cause or causes in which said lienholder did not have knowledge or did not participate.
If any lienholder is the purchaser at a foreclosure sale of said license, he shall have the right to operate under said license if otherwise lawfully qualified and autho- rized by the Division [of Alcoholic Beverages and Tobacco] to do so or to have a reasonable time within which to transfer the said license to some person qualified under the laws of this state to operate such license.
If any such bone fide mortgagee or lien- holder shall serve notice in writing on the division of the extension of such lien and accompany said notice with the payment of a fee of $5 to the division, which money shall
be used by the division to defray the costs of providing this service, then such lien-
holder shall be notified in writing of the filing of an order to show cause as to why said license should not be suspended or re- voked, and also said lienholder shall be fur- nished a copy of any order of suspension or revocation. In this event, the 12 days within which to file for the enforcement of the lien by the lienholder shall commence running from the date of the mailing of the copy of the order of revocation suspension. (e.s.)
Although Section 561.65 granted special protection only to licensed lenders holding liens against revoked beverage licenses, DABT had, until August 17, 1980, (when its legal interpretation abruptly changed) a long-standing policy and practice of granting similar protection and treatment to unlicensed lenders. An agency's long-standing practice constitutes an administrative construction of a statute which the courts ordinarily give great weight. 3/ See, Outdoor Advertising Art, Inc. v, Department of Transportation, 366 So.2d 114, 115 (Fla. 1st DCA 1979). Under DABT's pre - August 17, 1980 construction of Chapter 561, Florida Statutes, Gui-Dom would clearly be entitled to transfer of the license. (Armando Calo enforced his lien within the time allotted by Section 561.65, Florida Statutes (1977), the Intimo Lounge, Inc. license was then purchased by Rene Valdes at a judicial sale, and Gui-Dom is otherwise qualified for the transfer. Also, See, Rule 7A-2.06(7), Fla. Admin. Code.
The critical question is whether DABT has supplied a record basis for abruptly discontinuing its prior agency practice and policy. An agency may change its incipient policy but it cannot do so without providing a record foundation in a Section 120.57 proceeding. Florida Cities Water v. Florida Public Service Commission, 384 So.2d 1280, 1281 (Fla. 1980). ("Nonetheless, when an agency elects to adopt incipient policy in a non-rule proceeding, there must be an adequate support for its decision in the record of the proceeding.") See, Anheuser - Busch, Inc. v. Department of Business Regulation, 393 So.2d 1177 (Fla. 1st DCA 1981). Deviation from prior agency policy or practice, without adequate explanation, is reversible error. See, Section 120.68 (12)(b) Fla. Stat. (1981). The only record foundation or explanation for DABT's August, 1980 change in policy (a change sought to be applied here) is that the agency changed its legal interpretation of Section 561.65. Florida Cities Water, supra, is controlling. In that case, the agency offered "no reason for the abrupt discontinuance of prior agency policy other than that it was 'wrong as a matter of law.'" Id. at 1281. The court found that explanation to be no record foundation at all. Id.
This limitation on an agency's retroactive application of "invisible policymaking," Straughn v. O'Riordan, 338 So.2d 832, 834 (Fla. 1976), acts as a self-enforcing incentive to rulemaking, a process which ensures an agency's proposed policy will be applied prospectively, after notice to affected persons and opportunity for public debate and scrutiny. See, Section 120.54, Fla. Stat. (1981); Anheuser-Busch, Inc., supra. When an agency chooses not to cast its policy in rules, it must repeatedly prove its non-rule policy in Section 120.57(1) proceedings. Hill v. School Board of Leon County, 351 So.2d 732, 733 (Fla. 1st DCA 1977). Such proof requires something more than simply announcing that the agency changed its legal interpretation. 4/
It is concluded, therefor, that Gui-Dom has established its entitlement to the requested license under Section 561.65 (1981). Even if Section 561.65 (1981) is inapplicable, Gui-Dom has shown that it meets all DABT
pre - August 1980 licensure criteria -- criteria derived from long-standing agency policy and practice. 5/ These criteria are controlling since there is no record basis for DABT's post-August, 1980 nonrule criteria.
Finally, two assertions have been made which require response. First, DABT argues that the doctrine of caveat emptor defeats Gui-Dom's and Mr. Valdes' claim because, with ordinary care, Mr. Valdes could have discovered-- prior to his purchase -- that the Intimo Lounge, Inc. license had been revoked. But this doctrine cannot be used to defeat procedural rights and administrative due process granted by Chapter 120, Florida Statutes (1981). Second, Gui-Dom argues that DABT is equitably estopped from denying its application because of Mr. Purnell's (DABT's General Counsel) representations to Mr. Valdes. But Mr. Purnell's representations do not constitute the "affirmative act" which is required before equitable estopped may be applied against the State. See, Greenhut Construction Co. v. Henry A. Knott, 247 So.2d 517, 524 (Fla. 1st DCA 1971).
The parties' proposed findings of fact and conclusions of law are adopted to the extent they are incorporated in this recommended order. Otherwise, they are rejected as unsupported by the evidence, unnecessary to resolution of the issues presented, or contrary to law.
That Gui-Dom's application for transfer of alcoholic beverage license no.
23-1901, series 4-COP, be granted.
DONE AND RECOMMENDED this 3rd day of February, 1983, in Tallahassee, Florida.
R. L. CALEEN, JR. Hearing Officer
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 1983.
," respectively.
2/ This finding is based on the testimony of Mr. Barone. Although Mr. Valdes testified Mr. Purnell assured them that the license would be granted, Mr.
Barone's version of this conversation is considered more credible.
3/ DABT might have concluded that Section 561.32 and 561.65, when read in pari materia, granted it authority to allow lien foreclosures and license transfers-- after revocation proceedings--even if these were not rights explicitly granted by Section 561.65. The subsequent 1981 amendment to Section 561.65 made explicit that which earlier was based only on agency policy and discretion.
4/ "[P]olicymaking by adjudication has certain costs as well. Foremost among those costs to the agency is that the accuracy of every factual premise and the rationality of every policy choice which is identifiable and reasonably debatable must be shown by some kind of evidence undergirding the order which makes that policy choice on that factual premise." Anheuser-Busch, Inc., supra, at 1182.
5/ Significantly, Section 561.32(1), Florida Statutes (1979) granted DABT broad discretion in transferring licenses after license revocation proceedings are instituted.
Charles A. Nuzum, Director Division of Alcoholic Beverages & Tobacco
Gary R. Rutledge, Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
James N. Watson, Jr., Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
