SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before the Administrative Law Court (“ALC or Court”) pursuant to S.C. Code Ann. §61-2-260 (Supp. 2006), §1-23-600(B) (Supp. 2006) and S.C. Code Ann. §1-23-310 et seq. (2006). The South Carolina Department of Revenue (Department) seeks to revoke Respondent's on-premises beer and wine permit and liquor by the drink license. A hearing was held before me on December 6, 2007, at the offices of the Administrative Law Court in Columbia, South Carolina.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and taking into consideration the burden of persuasion and the credibility of the witnesses, I make the following findings of fact by a preponderance of evidence:

1. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and the Respondent.

2. Respondent possesses an on-premises beer and wine permit and a liquor by the drink license. The alcohol license requires that the establishment be “primarily and substantially engaged in the preparation and serving of meals.”

3. The South Carolina Law Enforcement Division (“SLED”) received a complaint on February 26, 2007 that the Respondent JOK, Inc. d/b/a The Tavern on the Greene (“Respondent”) was not serving food at its establishment known as the Tavern of the Greene located at 2002 Green Street, Suite C, in Columbia, South Carolina. As a result, the licensed location was the subject of a SLED investigation conducted by Agent Konni Smith on February 28, 2007 at 6:00pm.

4. During the inspection, Agent Smith observed the following; a kitchen area with an upright freezer containing only ice; a refrigerator with several containers of fruit juice; a pizza oven surrounded by miscellaneous items; and a large stainless steel double sink containing items that would need to be removed before the sink could be used. Additionally, the agent found no menus.

5. The Department issued a violation report to the Respondent for not being engaged primarily and substantially in preparation and serving meals; not having a proper kitchen and kitchen equipment necessary to demonstrate food service; and not having menus or a listing of food readily available as required by Regulation §7-401.3(A).

6. As a result of the violations, the Department issued the Licensee a Notice of Intent to Revoke its Beer and Wine Permit and Liquor by the Drink License on March 22, 2007.

7. For the reasons set forth below, I find that a revocation of the licensee’s wine permit and liquor by the drink license is not warranted.

CONCLUSIONS OF LAW

Based upon the above Findings of Fact, I conclude the following as a matter of law:

1. S.C. Code Ann. §1-23-600 (Supp. 2006) grants jurisdiction to the Court to hear contested cases under the Administrative Procedures Act. Specifically, S.C. Code Ann. §61-2-260 (Supp. 2006) grants the ALC authority to hear contested case hearings in matters governing alcoholic beverages.

2. The Department is charged with the responsibility of administering the laws and regulations governing the sale of alcoholic beverages in South Carolina. See S.C. Code Ann. §61-2-80 (Supp. 2006). Pursuant to that authority, the Department may suspend or revoke an alcoholic license or beer and wine permit that violates the provisions of S.C. Code §61-6-1830 (Supp. 2006) or §61-4-590 (Supp. 2006).

3. Respondent possesses an on-premises beer and wine permit and a liquor by the drink license. S.C. Code Ann. §61-6-1820(1)(Supp.2006) requires that licenses and permits be granted only to a “bonafide” business “primarily and substantially” engaged in the business of “preparation and serving of meals or furnishing lodging.”

4. Similarly, S.C. Code Ann. Regs. §7-401.3(A) (2006) requires that any business establishment that applies for or holds a sale and consumption license pursuant to Section 61-6-1610 and is not engaged in the furnishing of lodging, must:

1. Be equipped with a kitchen that is utilized for the cooking, preparation, and serving of meals; and

2. Have readily available to its guests and patrons either "menus" with the listings of the various meals offered for service or a listing of available meals and foods, posted in a conspicuous place readily discernible by the guest or patrons; and

3. Prepare for service to customers hot meals at least once each day the business establishment chooses to be open.

The regulation further requires that if such establishment advertises, a substantial portion of its advertising must be devoted to its food services.^[1]

5. In Brunswick Capitol Lanes v. S.C. Alcoholic Beverage Control Comm’n, 273 S.C. 782, 260 S.E.2d 453 (1979), the South Carolina Supreme Court addressed the precise issue in this case of whether the appellant was “engaged primarily and substantially in the preparation and serving of meals.” The Court held that “a business which attributes only ten per cent of its gross revenues to food preparation and sale does not fulfill the ‘primary’ and ‘substantial’ requirement of the statute.” 260 S.E.2d at 783. In this case, food service is a portion of his business comprising of between 10.6% and 25.8% of his revenue according to Respondent’s cash register receipts from March of 2007 through December of 2007.^[2] Although it appeared that Respondent was not primarily or substantially engaged in the preparation and serving of meals, in violation of S.C. Code Ann. §61-6-1820, at the time of the inspection, Respondent’s register receipts show a gradual incline in business. Further, Respondent has instituted a menu which has proven to be successful.

6. The Department seeks to revoke both Respondent's on-premises beer and wine permit and liquor by the drink license. Permits and licenses issued by this State for the sale of liquor, beer and wine are privileges to be used and enjoyed only so long as the holder complies with the restrictions and conditions governing them. See Feldman v. S.C. Tax Comm’n, 203 S.C. 49, 26 S.E.2d 22 (1943). S.C. Code Ann. §61-61830 (Supp2006) provides that the Department may suspend or revoke a liquor by the drink license that no longer meets the criteria of S.C. Code Ann. §61-6-1820 (Supp. 2006).

7. Where the General Assembly authorizes a range of alternatives for an administratively imposed penalty, the administrative fact-finder may set the amount of the penalty after a hearing on the dispute. See Walker v. SC ABC Comm’n, 305 S.C. 209, 407 S.E.2d 633 (1991). As set forth above, the Department, and therefore the ALC, has jurisdiction to revoke or suspend permits authorizing the sale of beer or wine or an alcoholic beverage license. Furthermore, in lieu of suspension or revocation, a beer and wine permittee may be fined not less than twenty five dollars nor more than one thousand dollars for an infraction against Title 61, Chapter 4 or “for a violation of any regulation pertaining to beer or wine and wine.” S.C. Code Ann. §61-4-250 (Supp. 2006). The fine may range from twenty-five dollars to one thousand dollars for retail beer and wine licensees. Id. Likewise, S.C. Code Ann. §61-6-4270 (2006) provides that the Department “may, in its discretion, impose a monetary penalty upon the holder of a liquor license in lieu of suspension or revocation” for violations of Chapter 6, Article 5. Retail liquor licensees may be fined for those violations “not less than one hundred dollars nor more than one thousand five hundred dollars.” S.C. Code Ann. §61-6-4270 (Supp. 2006).

8. The Administrative Law Judge, as fact-finder, must impose a penalty based on the facts presented at the contested case hearing. To that end, an Administrative Law Judge must consider relevant evidence presented in mitigation. Mitigation is defined as a lessening to any extent, great or small. It may be anything between the limits of complete remission on one hand and a denial of any relief on the other. In a legal sense, it necessarily implies the exercise of the judgment of the court as to what is proper under the facts of the particular case. 58 C.J.S. Mitigation p. 834, 835 (1948).

9. In the present case, at the time of the inspection Respondent was not primarily or substantially engaged in the preparation and serving of meals in violation of Section 61-6-1820. However, several mitigating factors contributed to the Respondent’s non compliance. The political concerns surrounding the proposed smoking ordinance in Columbia, prompted the Respondent to serve less food in his establishment.^[3] However, after the SLED investigation, the Respondent implemented a food menu and his sales records reflect that the food menu has in fact been successful. Further, it appears that the Respondent’s business is benefiting overall by his food sales. Moreover, Respondent testified that the reason his kitchen lacked food was because the icemaker was broken and the freezer was being used for ice storage. Further, Respondent has owned the Tavern on the Greene Since 1999, and has never been cited for a violation of his beer and wine permit or his liquor by the drink license. Although revocation is within this Court’s ambit of authority, I find that a monetary penalty of $500 is more appropriate in this instance because of the mitigating circumstances.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law,

IT IS HEREBY ORDERED that the violation against Respondent’s beer and wine permit and liquor by the drink license is affirmed, and the penalty imposed for such violation is $500.00 to be paid to the Department.

AND IT IS SO ORDERED. ______________________________

CAROLYN C. MATTHEWS

December 20, 2007 SC Administrative Law Judge

Columbia, South Carolina