T. CHIPS, INC., d/b/a APPLES, )
vs. ) CASE NO. 84-2590
Respondent. )
Pursuant to notice a hearing was conducted in this case on February 13, 1985, in Fort Lauderdale, Florida, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing by the following counsel:
For Petitioner: Henry A. Amoon, Esquire
For Respondent: Louisa E. Hargrett, Esquire
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
By letter dated May 31, 1984, the Respondent disapproved an application for change of corporate officers of I. T. Chips, Inc., the Petitioner in this case. The Petitioner requested a hearing on the disapproval.
At the hearing the parties introduced one joint exhibit, the Petitioner introduced one exhibit, and the Respondent introduced eleven exhibits. No witnesses were called on behalf of the Petitioner. The Respondent presented the testimony of the following witnesses: Hyman Brodsky, Mary DeLucia, Althea Gunning, Daniel Weiss, Pat Roberts, and Michael D'Ambrosia. Subsequent to the hearing Proposed Recommended Orders were filed by both parties; on March 8, 1985, by the Respondent and on March 18, 1985, by the Petitioner.
Based on the exhibits introduced into evidence and the testimony of the witnesses at the hearing, I make the following findings of fact:
On January 3, 1984, an application for transfer of alcoholic beverage license number 16-262, in the name of I. T. Chips, Inc., to JNJ, Inc., d/b/a Apples, was delivered to the Lauderhill District Office of the Division of Alcoholic Beverages and Tobacco by Michael Rapp. The application and personal questionnaire of Michael Rapp, Vice President of JNJ, Inc., revealed that he had been convicted of a felony within the last 15 years. Upon being informed by Sgt. Pat Roberts that the application for transfer would be denied because Rapp's conviction was disqualifying, Rapp withdrew the application.
On January 6, 1984, Michael Rapp submitted an amended application for transfer of this same alcoholic beverage license to JNJ, Inc., d/b/a Apples.
The amended application listed Janet Swift, a/k/a Janet Swift Rapp, as sole corporate officer and shareholder. An agreement for purchase and sale submitted with the application revealed that JNJ, Inc., was purchasing from MAM Restaurant Corporation all assets located at 1201 East Hallandale Beach Boulevard, Hallandale, Florida, the address of the licensee, I. T. Chips, Inc., for a total price of $418,600.00. The purchase and sale agreement acknowledged that a down payment in the amount of $18,600.00 had been made by JNJ, Inc., and provided for the remaining debt of $400,000.00 to be paid in monthly installments of
$4,800.00 and be secured by a mortgage. The application stated that Frederick Cusolito and Janet Swift would be the sole financial investors in the business and that the corporation's banking business would be conducted at the Bank of Hallandale & Trust Company. Janet Swift swore that the information provided on the application was true.
Whatever, Inc., is a corporation with the same business address as JNJ, Inc. Michael Rapp is the President and Secretary of Whatever, Inc. Whatever, Inc., had a bank account at the Bank of Hallandale & Trust Company and Michael Rapp was an authorized signer on the account. During January of 1984, Whatever, Inc., was writing checks to pay some of the operating expenses of the business located at 1201 East Hallandale Beach Boulevard.
JNJ, Inc., with an address of 1201 East Hallandale Beach Boulevard, Hallandale, Florida, had a bank account at Flagship Bank of Miami. The bank records show Janet Swift as president of the corporation and Michael Rapp as Vice President. During December of 1983, the following deposits were made to the JNJ, Inc., account at the Flagship Bank of Miami: $92,500.00 from Martin I. Roth at L & M Consultants, $27,000.00 from David J. S. Gottfried, $39,000.00 from the Hanseatic Development Corporation (described as a "loan"), and
$87,000.00 from an unidentified account at the Bank of Ireland in New York. None of the people or entities from whom these deposits were received were listed as financial investors of JNJ, Inc., on the sworn application filed by Janet Swift for the transfer to JNJ, Inc. None of them were listed as financial investors of I. T. Chips, Inc., on the sworn application filed by Janet Swift for change of business name and change of officers of I. T. Chips, Inc.
Martin I. Roth, the authorized signer on the bank account of L & M Consultants who actually signed the L & M Consultants checks which were deposited in the JNJ, Inc., account, was convicted of a felony in 1981.
On January 19, 1984, JNJ, Inc., borrowed $75,000.00 from Schmidt Industries, Inc., a Missouri corporation. To secure that loan, JNJ, Inc., entered into a Security Agreement (chattel mortgage) pursuant to which JNJ, Inc., pledged liquor license series number 4 COP, permit number 16-262, as security for the repayment of the $75,000.00 loan. Liquor license series number
4 COP, permit number 16-262 is the liquor license issued to I. T. Chips, Inc. 1/
The facts described in paragraphs 3, 4, 5, and 6, above, came to the attention of DABT Investigator Michael D'Ambrosia during the course of his investigation of the January 6, 1984, application to transfer the I. T. Chips, Inc., license to JNJ, Inc. D'Ambrosia met with representatives of JNJ, Inc., discussed with them the information he had acquired during the course of his investigations, and requested that he be provided with certain additional information. Thereafter, District Supervisor Richard Boyd recommended disapproval of the January 6, 1984, application on April 3, 1984. On April 4, 1984, before any final agency action was taken on the application, JNJ, Inc., withdrew the application to transfer the I. T. Chips, Inc., license to JNJ, Inc.
On April 4, 1984, Janet Swift signed an application for a change of business name and a change of corporate officers of the licensee corporation, I.
Chips, Inc. 2/ This application was filed on April 11, 1984, with the Division of Alcoholic Beverages and Tobacco. Janet Swift was again listed as sole corporate officer and shareholder. The sworn application filed in April of 1984 contained the following financial information:
JNJ, Inc., which held a temporary license, which has since been withdrawn, executed an Agreement for Purchase and Sale with MAM Restaurant Corporation on 12/8/83. JNJ, Inc., the stock of which is owned exclusively by Janet Swift, has abandoned the premises, since Janet Swift has purchased all of the stock in I. T. Chips, Inc., for which she paid no consideration other than assuming the existing debts. I. T. Chips, Inc. has agreed to assume the mortgage referred to in the Agreement for Purchase and Sale; to wit, the initial principal sum of $400,000.00, payable at the rate of $4,800.00 per month, which will be paid from the proceeds of the operation of the business herein. Janet Swift is the sole and exclusive owner of
T. Chips, Inc., and no other person, firm or entity has any interest, direct or indirect, in the said business.
The application which was signed on April 4, 1984, and filed on April 11, 1984, did not contain any information about the financing of the business other than what is quoted immediately above, and did not list any person as having an interest in the business other than Janet Swift. On April 4, 1984, Janet Swift swore to the truth of the following statement which is printed on the application form:
I swear or affirm under penalty of perjury as provided for in Florida Statutes 837.06 and 559.791, that the foregoing information
is true to the best of my knowledge, and that no other person, persons, firm or corporation, except as herein indicated, has an interest in the alcoholic beverage license or cigarette permit for which these statements are made.
On April 4, 1984, Schmidt Industries, Inc., had an interest in the alcoholic beverage license which was the subject of the application signed by Janet Swift, because that same license was pledged as collateral for a
$75,000.00 loan, and pursuant to a chattel mortgage, Schmidt Industries, Inc., had a security interest in that license to guarantee the payment of the loan. 3/ On April 4, 1984, JNJ, Inc., was a financial investor in the I. T. Chips,
Inc., license or business because I. T. Chips, Inc., received the benefit of the
$18,500.00 down payment that JNJ, Inc., made to MAM Restaurant Corporation and
I. T. Chips, Inc., received the benefit of the $75,000.00 that JNJ, Inc., borrowed from Schmidt Industries, Inc. On April 4, 1984, the persons and entities described in paragraph 4, above, who wrote checks deposited in the JNJ, Inc., bank account were indirect financial investors in the I. T. Chips, Inc., license or business because I. T. Chips, Inc., was either the successor to or the alter ego of JNJ, Inc. On April 4, 1984, Frederick Consolito was an indirect financial investor in the I. T. Chips, Inc., license or business because I. T. Chips, Inc., was either the successor to or the alter ego of JNJ, Inc. 4/
The foregoing findings of fact incorporate the substance of the vast majority of the findings of fact proposed by the parties. In those few instances where I have made findings contrary to the proposed findings, it is because the persuasive competent substantial evidence was to use contrary of the proposed findings. In those few instances where I have omitted the substance of findings proposed by a party, it is because the proposed finding was irrelevant, immaterial, cumulative, or not supported by persuasive competent substantial evidence.
CONCLUSIONS OF LAW
Based on the foregoing findings of fact and on the applicable legal principles, I make the following conclusions of law:
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this case.
Applicants for alcoholic beverage licenses are required to notify the Division of Alcoholic Beverages and Tobacco of all persons having a direct or indirect interest in the business for which a license is sought or in the license itself. Section 561.17, Florida Statutes. A security interest in an alcoholic beverage license is an indirect interest in such license. Section 561.32, Florida Statutes. Prior to the application signed by Janet Swift on April 4, 1984, JNJ, Inc., had executed a security agreement in favor of Schmidt Industries, Inc., pursuant to which alcoholic beverage license number 16-262 was pledged as security for a $75,000.00 loan. That security agreement was still in effect on April 4, 1985, and I. T. Chips, Inc. (Janet Swift) was required to inform the Division of Alcoholic Beverages and Tobacco of such security agreement in the application filed in April of 1984.
I. T. Chips, Inc., and Janet Swift, received $18,000.00 from JNJ, Inc., by virtue of a down payment in that amount made by JNJ, Inc., and Janet Swift to MAM Restaurant Corporation in connection with a purchase agreement secured by the alcoholic beverage license. JNJ, Inc., which was shown to have received large amounts of money from various persons including two convicted felons, was a financial investor in the business and license of I. T. Chips, Inc., for which Janet Swift applied to be an officer.
Since neither Schmidt Industries, Inc., nor JNJ, Inc., was disclosed on the application of Janet Swift as providing financing, or having a security interest in the license, Janet Swift failed to disclose all persons having a direct or indirect interest in the business at the time of the April 1984 application. Because complete financial information is necessary to insure that unqualified persons do not hold an interest in alcoholic beverage licenses, it is material to the application. By swearing on her application that she had revealed all financial information, Janet Swift falsely swore to a material fact.
The manner in which I. T. Chips, Inc., and JNJ, Inc., by and through Janet Swift, dealt with each other and with other persons and entities, leads to the conclusion that they must be considered one entity. As stated in Mayer v. Eastwood-Smith & Co., 164 So. 684, 687 (Fla. 1935),
[C]ourts will look through the screen of corporate entity to the individuals who compose it in cases in which the corporation was a mere device, or shown to accomplish some ulterior purpose, or is a mere instrumentality or agent of another corporation or individual owning all or most of its stock, or where the purpose is to evade some statute or to accomplish some fraud or illegal purpose.
See also Vantage View, Inc. v. Bali East Development Corp., 421 So. 2d 728 (Fla. 4th DCA 1982), which contains a comprehensive discussion of Florida law on piercing the corporate veil.
The principal of both corporations, Janet Swift, conducted business under whichever corporation suited her interests best at the time, as evidenced by the statement on the application of I. T. Chips, Inc., that JNJ, Inc. (Janet Swift), had abandoned the premises and I. T. Chips, Inc. (Janet Swift), was taking over. There was not even a pretense of observing the corporate fiction. The following language from Adult World, Inc. v. Division of Alcoholic Beverages and Tobacco, 408 So. 2d 605 (Fla. 5th DCA 1981), in which an individual licensee against whom charges had been brought sought to transfer his license to a corporation of which he was sole officer and shareholder, is applicable in this case:
We believe this decision [to disallow transfer] is consistent with the public's interest in seeing that the laws and regulations governing the operation of establishments dispensing alcoholic beverages are obeyed and not defeated by a transparent subterfuge. More is required than an owner changing hats to that of corporate president.
Inasmuch as I. T. Chips, Inc., is nothing more than the the alter ego of JNJ, Inc., the monies lent to or deposited into accounts of JNJ, Inc., by convicted felons and other undisclosed entities and persons are monies of I. T. Chips, Inc., and should have been revealed as financial interests on the
application. Two of such undisclosed persons having a direct or indirect interest in the business were convicted felons (Michael Rapp and Martin I. Roth), and, therefore, were persons precluded by Section 561.15, Florida Statutes, from holding an alcoholic beverage license.
Inasmuch as each of the grounds upon which the Division of Alcoholic Beverages and Tobacco proposes to deny the application has been proven by persuasive competent substantial evidence, it is concluded that the application should be denied.
