South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
William N. Massalon, Bill's Liquor Stores, Inc., d/b/a Bill's ABC vs. SCDOR

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
William N. Massalon, Bill's Liquor Stores, Inc., d/b/a Bill's ABC

Respondents:
South Carolina Department of Revenue
 
DOCKET NUMBER:
94-ALJ-17-0370-CC

APPEARANCES:
James H. Harrison, Attorney for Applicant

Nicholas P. Sipe, Attorney for Respondent
 

ORDERS:

ORDER AND DECISION

This matter comes before me pursuant to S.C. Code Ann. § 61-1-55 (Supp. 1993) and S.C. Code Ann. §§ 1-23-310, et seq. (Rev. 1986 & Supp. 1993) upon an application for a retail liquor license and off-premises beer and wine permit for a location at 1561 Sam Rittenberg Boulevard A and B, Charleston, South Carolina, by William N. Massalon, Bill's Liquor Stores, Inc., d/b/a Bill's ABC, AI #100147 and AI #100148 filed with the South Carolina Department of Revenue and Taxation (hereinafter referred to as "DOR"). A hearing was held on February 7, 1995. The issues considered were: (1) the suitability of the proposed business location;

(2) the nature of the proposed business activity; and (3) the applicant's eligibility to hold a license, specifically including the number of licensed locations in which the applicant currently has an interest. The off-premises beer and wine permit is granted. The retail liquor license is denied.

FINDINGS OF FACT

By a preponderance of the evidence, I find:

(1) Applicant seeks a retail liquor license and off-premises beer and wine permit for a location at 1561 Sam Rittenberg Boulevard A and B, Charleston, South Carolina.

(2) Notice of the time, date, place, and subject matter of the hearing was given to the applicant, protestants, and DOR.

(3) The proposed location is not currently licensed to sell beer and wine or liquor but was formerly licensed for approximately twenty-seven years to sell beer and wine for off-premises consumption when operated as a supermarket.

(4) The proposed location is located in the City of Charleston on Sam Rittenberg Boulevard, which is a busy five-lane thoroughfare connecting Highways 61 and 17.

(5) The proposed location is in a predominately commercial area, although the Charleston Arms, an apartment complex with 138 units that provides residences to mostly elderly tenants, is located adjacent to the proposed location..

(6) William N. Massalon testified in support of his applications.

(7) Testifying in opposition to the application were: Charles H. Norton, part owner of the Charleston Arms apartment complex; John Morrill, a retail liquor licensee with three stores in the Charleston area; Ken Janis, a retail liquor licensee with three stores in the Charleston area; and Tony Janis, wife of Ken Janis.

(8) DOR also called Michael Smith and Susan DeLoach as witnesses in regard to Applicant's relationship with and interest in retail liquor stores for which he is not a licensee.

(9) Applicant has owned and operated for at least ten years and is currently licensed to sell liquor on a retail basis at two stores at the following locations:

(a) Beaufort Plaza, Highway 170, Beaufort, South Carolina;

(b) Island Square Shopping Center, Highway 21, Beaufort, South Carolina.

(10) Applicant also owned and operated a retail liquor store in Port Royal until it was destroyed by fire in 1992.

(11) Prior to March, 1993, Massalon and Jerry Miller entered into an agreement regarding the establishment and transfer of a retail liquor store in Summerville, South Carolina. Pursuant to that agreement, Massalon would obtain a retail liquor license, open the store and operate the business until it became a profitable business, at which point Miller would apply for a retail liquor license in his own name, and then purchase the store and its inventory from Massalon pursuant to a demand note.

(12) In March, 1993, Applicant, as licensee, opened a retail liquor store in Summerville, South Carolina, and operated the store for approximately fifteen months before selling the store to Jerry Miller, d/b/a Miller Enterprises of Summerville, Inc., subject to a taking a promissory demand note for $242,000 from Miller and Michael Smith, dated May 1, 1994 (a copy of which was submitted with Respondent's Prehearing Statement and incorporated as part of the record at hearing).

(13) The balance on the demand note taken by Massalon as part of the sale of the Summerville store is still outstanding.

(14) After the sale of the Summerville store, Massalon and Miller entered into another agreement for a similar arrangement with the opening and initial operation of a retail liquor store (and adjacent store for the sale of beer and wine for off-premises consumption) at the proposed location by Massalon. After opening the store and getting the business to a profitable stage, Massalon intends to sell the store to Miller subject to a demand note and having the location relicensed in Miller's name.

(15) Jerry Miller is a resident of the state of Tennessee.

(16) Michael Smith, Massalon's former brother-in-law, is the manager of the Summerville store and a 1% shareholder and officer in Miller Enterprises of Summerville, Inc.

(17) Massalon occasionally consults with Smith regarding the operation of the Summerville store. Smith rarely communicates with Jerry Miller.

(18) Massalon provides Miller's Summerville store with bookkeeping, computer, and pricing services in exchange for compensation.

(19) Massalon also provides computer and bookkeeping services for a fee to other retail liquor stores for which he is not a licensee, including two stores in Charleston and one in Hilton Head.

(20) Susan DeLoach has owned and operated a retail liquor store in Frogmore, South Carolina, since August 1, 1993, as a shareholder in a corporation with David Mitchell, Mitchell being the individual named as the licensee.

(21) Susan DeLoach was employed for four years as a bookkeeper by Massalon prior to managing the Frogmore store.

(22) Susan DeLoach continues to perform bookkeeping services, including record keeping tasks associated with payroll and sales taxes for Massalon's two Beaufort stores and the Miller Summerville store.

(23) Massalon loaned DeLoach $4,000 after DeLoach opened her store, the balance of which has been subsequently repaid.

(24) DeLoach received a second loan from Massalon and currently owes him approximately $2,000 on the note.

(25) Massalon has routinely transferred liquor from his stores to stores for which he is not the licensed operator when those stores are experiencing an inventory shortage. Those stores include Susan DeLoach's Frogmore store and the Miller Summerville store. In exchange for the transferred liquor, Massalon receives a check made out to the name of the liquor wholesaler with which he does business. Massalon then includes the check with his own payment when ordering new supplies from the wholesaler.

(26) When the proposed location operated as a supermarket, the residents of the Charleston Arms did not experience any significant problems because of the sale of beer and wine for off-premises consumption.

(27) No school, church, or playground is within three hundred feet (300') of the proposed location.

. (28) Applicant is over twenty-one years of age, is a resident of the State of South Carolina, and has maintained his principal residence in South Carolina for more than thirty (30) days prior to filing.

(29) Applicant has not had a license or permit revoked in the last five years.

(30) Applicant is of adequate character and repute to hold a retail liquor license and beer and wine permit.

(31) Notice of the application appeared in a newspaper of general circulation in the area of the proposed location for three consecutive weeks and was posted at the proposed location for fifteen days.



CONCLUSIONS OF LAW

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

(1) The South Carolina Administrative Law Judge Division is empowered to hear this case pursuant to S.C. Code Ann. § 61-1-55 (Supp. 1993) and Chapter 23 of Title 1 of the 1976 Code, as amended.

(2) S. C. Code Ann. § 61-9-320 (Supp. 1993) provides the criteria to be met before issuance of a beer and wine permit.

(3) S.C. Code Ann. § 61-3-420 (Supp. 1993) provides the requirements to be met by an applicant seeking a retail liquor license.

(4) Pursuant to S.C. Code Ann. § 61-3-730 (Supp. 1993), a permit or license must not be issued if the applicant is not a suitable person to be licensed or the place of business is not a suitable place.

(5) A liquor license is not a property right or contract, but a permit or privilege granted by the State in the exercise of its police powers to do what would otherwise be unlawful. Restrictions and conditions may be attached to limit the privilege. The issuance or refusal of a license rests within the sound discretion of the official empowered to hear the matter. Wall v. S.C. ABC Commission, 269 S.C. 13, 235 S.E.2d 806 (1977); See Feldman v. S.C.Tax Commission, 203 S.C. 49, 26 S.E.2d 22 (1943).

(6) An administrative law judge has the sole and exclusive power to grant, issue, suspend and revoke retail liquor dealers' licenses in protested and contested cases pursuant to S.C. Code Ann. § 61-3-410 (Supp. 1993).

(7) As the trier of fact, an administrative law judge is authorized to determine the fitness or suitability of the proposed business location of an applicant for a permit to sell beer and wine using broad but not unbridled discretion. Ronald F. Byers v. S.C. ABC Commission, 281 S.C. 566, 316 S.E.2d 705 (S.C. App. 1984).

(8) The determination of suitability of a location is not necessarily a function solely of geography. It involves an infinite variety of considerations related to the nature and operation of the proposed business and its impact on the community within which it is to be located.

Kearney v. Allen, 287 S.C. 324, 338 S.E.2d 335 (1985).

(9) The proposed location is suitable and proper for the issuance of a beer and wine permit, based upon the predominantly commercial nature of the area and past history of the location while previously licensed to sell beer and wine.

(10) Applicant meets the statutory requirements for the issuance of a beer and wine permit.

(11) Pursuant to S.C. Code Ann. § 61-3-460 (Supp. 1993), no more than three retail liquor licenses shall be issued to any one licensee.

(12) S.C. Code Ann. § 61-3-461 (Supp. 1993) provides:

No person, directly or indirectly, individually or as a member of a partnership or an association, as a member or stockholder of a corporation or as a relative to any person by blood or marriage within the second degree, shall have any interest whatsoever in any retail liquor store licensed under this section except the three stores covered by his retail dealer's licenses, as provided for in Section 61-3-460.

(13) Where the language of a statute is clear and unambiguous, there is no room for construction and the terms of the statute must be given their literal meaning. Duke Power Co. v. S.C. Tax Commission, 292 S.C. 64, 354 S.E.2d 902 (1987). The language of § 61-3-461 clearly prohibits a person from having any interest whatsoever, either directly or indirectly, individually or as a member of an association, in more than three retail liquor stores.

(14) In a Massachusetts case interpreting a statute similar to § 61-3-461, which forbade, inter alia, any "combination of persons" from holding more than three retail liquor licenses(1), it was held that the existence of a "combination of persons" is a question of fact which may be inferred from such circumstantial evidence as the existence of common bookkeeping offices; substantial intercompany dealings; common use of various assets; and a decision-making pattern whereby the owner of one business entity has authority to act on behalf of others. See Johnson v. Martignetti, 374 Mass. 784, 375 N.E.2d 290 (1978). The existence of a "combination of persons" was found where a licensee performed work, both with and without compensation, for three other stores; where the four stores engaged in transactions involving the exchange of liquor; and the stores employed the same accounting firm. The Court held that "guidance, assistance and financial support" were among the factors supporting a finding that the statute had been violated.

Powers v. Sixty Broadway, Inc., ____ Mass. ____, 356 N.E.2d 704 (1976).

(15) S.C. Code Ann. Regs. 7-35 (1976) provides that "No alcoholic liquors may be transferred from one retail liquor location without special permission in advance of the South

Carolina Alcoholic Beverage Control Commission..." except, subject to certain conditions, for transfers between stores owned by the same licensee.

(16) A liquor license may be denied if, in the opinion of the fact finder, the applicant is not a suitable person to be licensed. Wall v. S.C. ABC Commission, 269 S.C. 13, 235 S.E.2d 806 (1977).

(17) The evidence in this case, including Applicant's outstanding loans to other licensees; the transfer of inventory among the stores; Applicant's performance of bookkeeping services for the other stores; Applicant's provision of consulting services for the Summerville store; the applicant's setting prices for the Summerville store; the performance of services for Applicant's stores by the owner of the Frogmore store; and Applicant's two retail liquor licenses currently held in his own name, is sufficient to support the conclusion that Applicant has an "interest" in at least three retail liquor stores.

(18) As long as Applicant has an interest in three or more licensed retail liquor stores, he is disqualified from holding any additional retail liquor licenses pursuant to S.C. Code Ann.

§§ 61-3-460 and 461 (Supp. 1993).

(19) Because of Applicant's outstanding loans to other licensees; the transfer of inventory among the stores; Applicant's performance of bookkeeping services for the other stores; Applicant's provision of consulting services for the Summerville store; Applicant's setting prices for the Summerville store; the performance of services for the applicant's stores by the owner of the Frogmore store; and the fact that Applicant currently holds two retail liquor licenses, Applicant is an unsuitable person to be granted another retail liquor license pursuant to S.C. Code Ann. § 61-3-730 (Supp. 1993); Wall v. S.C. ABC Commission, supra.

DISCUSSION

The primary focus in this matter involves the issue of whether Applicant's involvement with retail liquor stores, other than the two licensed in his name, rises to the level of having a direct or indirect interest of any kind whatsoever, so as to preclude Applicant from being eligible for another retail liquor license in his name. S.C. Code Ann. §§ 61-3-460 and 461 (Supp. 1993) provide that a retail liquor dealer is prohibited from holding more than three retail liquor licenses and from having an interest in any other retail liquor stores other than the maximum three held in his own name. Consistent with those prohibitions, it follows logically that a retail liquor dealer having a combination of licenses and/or interests in more than three retail stores, is not eligible for issuance of an additional license.

The material facts are relatively undisputed. The applicant, Mr. Massalon, holds two retail liquor licenses in Beaufort. He admits to also having certain personal and/or business connections with retail liquor stores in Summerville, Frogmore, Charleston, and Hilton Head. The question to be resolved, however, is the extent of his connections and involvement with the stores for which he is not the licensee and whether his relationship with those stores amounts to an impermissible interest in those businesses.

There is very little available case law for guidance on the issue. South Carolina courts are silent on the subject. At the conclusion of the hearing, counsel for the parties were invited to submit post trial briefs or memoranda citing legal authority for their positions, but neither party made such a submission. At the hearing, DOR did submit to the Court two Internal Revenue Service cases, American Processing and Sales Company v. United States, 371 F.2d 842

(Ct. Cl. 1967) and Byerlite Corporation v. Williams, 286 F.2d 285 (6th Cir. 1960), in support of its position that an outstanding loan to a retail liquor licensee gives the lender an interest in the debtor's liquor business. The above cited cases, however, relate to the deductibility of such transactions for federal income tax purposes and offer little assistance in deciding the issue before this Court. The Massachusetts cases cited in the foregoing Conclusions of Law provide the best persuasive authority for the present facts and statutory law.



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Evidence was presented that established that Massalon has numerous connections with several liquor stores not licensed in his name. None of the connections, in and of themselves,

necessarily amounts to an "interest" in a store licensed in another person's name, but the cumulative effect of Massalon's involvement and relationship with the other stores is such that Massalon has a pecuniary stake in the operation of those stores. There is no statutory definition nor formula set forth to determine the existence of an "interest." The statute does not say "ownership interest," "controlling interest," "financial interest," or "beneficial interest." Under a literal application of the statutory provisions in question, a person is precluded from having any interest whatsoever, directly or indirectly, in more than three liquor stores. South Carolina law requires a literal application of a statute when the terms are clear and ambiguous. Duke Power Co. v. S.C. Tax Commission, 292 S.C. 64, 354 S.E.2d 902 (1987). The clear meaning of the statute prohibits even an indirect interest of any kind. Applicant clearly has an interest in businesses which pay him for bookkeeping and computer services. He clearly has an interest in stores in which the store's owner/licensee owes Massalon a financial debt, a debt that was incurred as a result of Massalon opening and establishing the business in the first place. The plan for the proposed location is the same as for the Summerville store now licensed in the name of Jerry Miller. Given the past and present arrangements between Miller and Massalon and the potential for similar deals in the future, the two certainly have a commonality of interest in the Summerville store being successfully operated.

For the foregoing reasons expressed in the Findings of Fact, Conclusions of Law, and Discussion provided herein, Applicant is not eligible or suitable to hold the retail liquor license applied for. That is not to say that he is not of suitable character or does not otherwise meet the criteria for the issuance of the license. It merely means that as long as Bill Massalon maintains an interest in three or more retail liquor stores, whether that interest is as licensee or merely by virtue of a business or financial relationship, no new retail liquor licenses should be issued to him.







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ORDER

IT IS THEREFORE ORDERED that the application of William N. Massalon for an off-premises beer and wine permit be granted and that the application of William N. Massalon for a retail liquor license be denied.

AND IT IS SO ORDERED.





_______________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

March 2, 1995

Columbia, South Carolina

a:/94-0370





































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1. Mass. G.L. c. 138, Section 15, provides: "No person, firm, corporation, association, or other combination of persons, directly or indirectly, or through any agent, employee, stockholder, officer or other person or any subsidiary whatsoever, shall be granted, in the aggregate, more than three such [retail liquor store] licenses in the commonwealth, or be granted more than one such license in a town or two in a city."


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