STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MINALEW, INC d/b/a NICK'S )

ITALIAN KITCHEN, )

)

Petitioner, )

)

vs. ) CASE NO. 83-1014

)

DIVISION OF ALCOHOLIC )

BEVERAGES AND TOBACCO, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, R. L. Caleen, Jr., Hearing Officer with the Division of Administrative Hearings, conducted a formal hearing in this case on April 20, 1983, in Lauderhill, Florida.

APPEARANCES

For Petitioner: Sy Chadroff, Esquire

200 Southeast First Street, Suite 1101 Miami, Florida 33131

For Respondent: John A. Boggs, Esquire

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

ISSUE

Whether petitioner's application to change corporate 7 officers and stockholders should be granted, or denied on the grounds that the application is incomplete and the Division of Alcoholic Beverages and Tobacco has notified petitioner that administrative charges will be filed against it.

BACKGROUND

By letter of December 14, 1982, as later amended, respondent, Division of Alcoholic Beverages and Tobacco, ("DABT") denied the application of petitioner, Minalew, Inc. d/b/a Nick's Italian Kitchen, ("petitioner") for approval of a change in corporate officers and stockholders. DABT provided grounds for its denial: (1) that the application was incomplete because of inadequate financial documentation concerning stock ownership of the principals, and (2) that DABT had previously notified petitioner that it intended to file administrative charges against it.

Petitioner requested a hearing on the denial, and on March 31, 1983, DABT forwarded this case to the Division of Administrative Hearings for assignment of

a Hearing Officer. At hearing on April 20, 1983, the sole evidence consisted of Joint Exhibits Nos. 1 through 14. 1/ No testimony was presented.

The parties filed proposed findings of fact, conclusions of law, and memoranda by May 9, 1903. No transcript of hearing has been filed.

FINDINGS OF FACT

Based on the evidence presented, the following facts are determined:

1. Petitioner, holding Alcoholic Beverage License No. 16-443, Series 2- COP, does business as Nick's Italian Kitchen at 3496 North Ocean Drive, Ft. Lauderdale, Florida.

   
   

2. On February 26, 1982, DABT notified petitioner that it [DABT] "intends to file administrative charges against your [petitioner's] license for conviction of [a] corporate officer of [a] felony (tax evasion)." (Ex. 6)

   
   

3. On September 15, 1982, petitioner corporation filed with DABT an application to change its officers and stockholders. The application, with attachments, indicated that Dominic Santarelli wished to transfer the stock of petitioner, by gift, to Dominic A. Santarelli, his son. Attached to the application was a representation by Sy Chadroff, Dominic Santarelli's attorney, that Dominic Santarelli owned one hundred percent of the stock of petitioner corporation, having acquired the balance (fifty percent) of the corporation's stock from Thomas J. and Frances Cummings pursuant to an Option Agreement dated September, 1974; and that the intended stock gift was contingent upon DABT's approval of the application. (Ex. 5)

   
   

4. By letter of October 12, 1982, DABT notified petitioner that it was unable to continue processing the application because, among other things, the following information was missing: (1) cancelled checks and other documentation of stock purchase by Dominic Santarelli from the Cummingses and (2) further documentation of the stock gift from Dominic Santarelli to Dominic A. Santarelli, his son. Ex. 6)

   
   

5. On October 14, 1982, attorney Chadroff responded to DABT's request for information. He replied that Dominic Santarelli acquired the Cummings stock for

   $10.00 pursuant to the Option Agreement attached to the application; reiterated that as a consequence, Dominic Santarelli owned one hundred percent of the corporate stock; confirmed that Dominic Santarelli had conveyed the stock, by gift, to Dominic A. Santarelli, his son; and asserted that there could be no further documentation of the gift until the gift tax return is filed. (Ex. 7)

   
   

6. On December 14, 1982, DABT informed petitioner that the application for change of officers and stockholders was being denied on grounds that (1) the application failed to show how Dominic Santarelli came into possession of the fifty percent of the corporation stock owned by the Cummingses and (2) documentation had not been provided indicating how Dominic A. Santarelli (the son) had obtained one hundred percent of the corporate stock from Dominic Santarelli (his father). (Ex. 10)

   
   

7. On December 21, 1982, petitioner challenged DABT's denial of its application and requested a Section 120.57 hearing. Thereafter, DABT granted the request and forwarded this case to the Division of Administrative Hearings. (Ex. 11)

8. On March 23, 1983, DABT filed an amendment to its December 14, 1982,denial, supplying an additional ground: that the applicant (petitioner) was not entitled to approval of the transfer because of DABT's prior notice of intent to file administrative charges, referring to the February 26, 1982, notice issued more than one year earlier. As of April 20, 1983, the date of hearing, the promised administrative charges had not yet been filed by DABT. DABT has presented no evidence, justifying, excusing, or explaining this extensive delay in filing charges. (Ex. 13)

   
   

9. On October 6, 1981, a jury of the U.S. District Court of the Southern District of Florida, found Dominic Santarelli guilty of one count of violating the federal income tax code. (Ex. 8)

   
   

10. The only evidence of record offered to establish that Dominic Santarelli, in fact, exercised his right under the Option Agreement to purchase fifty percent of the company's stock from the Cummingses is the written representation by attorney Chadroff, Dominic Santarelli's counsel. There is no evidence that petitioner ever applied for or obtained the necessary DABT approval for any such stock transfer. To the contrary, it appears that DABT's records continue to show that the Cummingses own fifty percent of the corporation's stock.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter to this proceeding. Section 120.57(1), Fla. Stat. (1981)

    
    

12. Ordinarily, an applicant has the burden of proving its entitlement to the requested license. See, Fla. Department of Transp. v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981)

    
    

13. DABT is empowered to investigate and require the submittal of information allowing it to act on applications for transfer of alcoholic beverage licenses, including transfer of an interest in a license or change in an officer or director of a corporate licensee. See, Sections 561.17-561.19, Fla. Stat. 1981. Section 561.32 further provides:

    
    

    (2) No one shall be entitled as a

    matter of right to a transfer of a license or interest in a license or to a change of executive officers or directors when the division has notified the licensee in writing that revocation or suspension proceedings have been or will be brought

    against the license; and the transfer of such license or financial interest in such license or the change of executive officers or directors in such case shall be within the discretion of the division.

    
    

14. Here, DABT provided three reasons for its denial. (Although the third ground was added after the ninety-day permitting review period allowed by Section 120.60(2), Fla. Stat. (1981), no statute or rule prohibits an agency from amending its original, and timely denial by adding an additional ground.) DABT's first reason was that, essentially, petitioner supplied inadequate documentation to show how the son, Dominic A. Santarelli, obtained the

    corporation stock from Dominic Santarelli, his father. The uncontroverted documents of record indicate that Dominic A. Santarelli was to obtain the stock by gift, and that the gift was contingent upon DABT's approval of the transfer. DABT has not shown what further documentation could now be provided, or reasonably requested from an applicant. Hence, this stated reason does not justify denial.

    
    

15. The second reason relied upon by DABT is that the licensee is not entitled to the requested transfer because of DABT's prior notice of intent to file administrative charges. In Astral Liquors, Inc. v. Dept. of Business Regulation, Div. of Alcoholic Beverages and Tobacco, Case Nos. 82-475 and 32- 1803 (Fla. 3rd DCA, February 22, 1983) [8 FlW 623] the District Court of Appeal concluded that under Section 561.32, DABT had "absolute discretion" to deny a transfer when administrative charges against a license pending or notice has been given that charges would be filed. Under such circumstances, the court held that DABT is not even obligated to explain its reasons or policy behind its decision to deny the transfer. Id. Compare, Guerra v. Florida Department of Labor and Employment Security, Case Nos. 81-1493, 81-1734 (Fla.. 3rd DCA, March 13, 1983) [8 FLW 831] Fn. 4, where the same court recognized that the right to know the factual basis and policy reasons for agency action stems from our " notions of basic fairness which should surround all governmental activity. "

    
    

16. Nevertheless, although DABT is granted wide latitude here, it cannot, and should not, exercise its description unfair or arbitrary manner. Notice of intent to file charge was given in February, 1982, yet charges have, without explanation not been filed. A notice of intent to file charges cannot be used as a pretext to indefinitely defy the otherwise legitimate transfer of a license. Beverage licensees and applicants are entitled to administrative due process and their rights must be treated with "due regard"; their applications must be processed with "reasonable dispatch." See, Section 120.60(2); 120.68(12)(c); 120.57(1)(b)9 Fla. Stat. (1981). DABT's February, 1982, notice of intent to file charges should not, therefore, provide a basis for denial.

    
    

17. Petitioner, however, has not satisfied the third reason given by DABT for denial of the application: lack of adequate documentation as to how Dominic Santarelli came into possession of fifty percent of the corporate stock owned by the Cummingses. The representation by Dominic Santarelli's attorney that Mr. Santarelli ,exercised his right under the Option Agreement constitutes hearsay, and without more, cannot supply a basis for a finding of fact. Section 120.58(1)(a) Fla. Stat. (1981). Other than this hearsay statement of counsel, there is no evidence establishing that Dominic Santarelli obtained the Cummings' stock pursuant to the Option Agreement or by some other method. According to DABT's records, the Cummingses still own fifty percent of the corporate stock of petitioner. Under such circumstances DABT is entitled to investigate and require the applicant to supply evidence sufficient to establish how the applicant obtained one hundred percent of the licensee's stock (a fact which conflicts with DABT's license records) , which he now seeks approval to transfer to another. This matter is of more than passing interest, since, if Dominic Santarelli obtained one hundred percent of the stock, he did so without seeking or obtaining DABT approval, in violation of Section 561.32. Accordingly, it is concluded that, on this ground alone, petitioner's application should be denied.

    
    

18. The parties' proposed findings of fact have been considered. To the extent they are incorporated in this Recommended Order, they are adopted; otherwise they are rejected as unsupported by the evidence or unnecessary to resolution of the issues presented.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED that petitioner's application be denied on grounds of incompleteness, in that it has not been shown how Dominic Santarelli obtained fifty percent of the stock of petitioner corporation owned (on DABT's books) by Thomas and Frances Cummings.

DONE and RECOMMENDED this 2nd day of June, 1983, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 1983.

ENDNOTE

1/ Individual exhibits will be referred to as "Ex. ".

COPIES FURNISHED:

Sy Chadroff, Esquire Suite 1101

200 S.E. First Street Miami, Florida 33131

John A. Boggs, Esquire Department of Business Regulation

725 South Bronough Street Tallahassee, Florida 32301

Mr. Howard M. Rasmussen Director

Division of Alcoholic Beverages and Tobacco

725 South Bronough Street Tallahassee, Florida 32301

Docket for Case No: 83-001014

Orders for Case No: 83-001014