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." |