SC Administrative Law Court Decisions

Petitioner filed with the Respondent, South Carolina Department of Revenue (DOR), an application for an on-premises beer and wine permit for 4510 Augusta Road, Lexington, South Carolina. DOR refused to process the application pursuant to 23 S.C. Code Ann. Regs. 7-96 (1976), on the basis that application for a location previously found unsuitable for a permit will not be processed unless the applicant can show that some material change with respect to the location has occurred. The proposed location was found unsuitable after a hearing in 1993.

The hearing in this matter was held on January 16, 1997, with jurisdiction vested in the ALJD under S.C. Code Ann. §§ 61-1-55 (Supp. 1996), 1-23-600(B) (Supp. 1996) and 1-23-310 (Supp. 1996). I find that a material change has taken place with respect to the proposed location in that the nature of the proposed business activity differs greatly from the business operation of the previous applicant, the physical amenities of the location have been altered and improved, and other businesses and licensed locations have opened since the previous denial. DOR is therefore ordered to process Petitioner's application.

Petitioner asserts that R. 7-96 is unconstitutional. In the alternative, he claims that material change has occurred with respect to the proposed location since it was found unsuitable in 1993. DOR insists that R. 7-96 is valid and that Petitioner has failed to prove a material change.

Under R. 7-96, an application for a location previously found unsuitable for a permit will not be processed by DOR unless and until an applicant demonstrates that some material change has occurred with respect to the previously denied location. The burden is on the applicant to prove that material change. The intent of the regulation is to have only one review of property which an applicant seeks to use for a permitted premises and to put an end to litigation when the applicant has had a fair opportunity to establish the property is a proper location for a permit.

An application for an on-premises beer and wine permit and mini-bottle license for the proposed location was previously filed with the ABC Commission by Melanie C. Britton, d/b/a Diamond Jim Brady's Texas Ice House, Inc., in 1993. Britton operated a video poker establishment at the location and was seeking, with the grant of the permit and license, to convert the business into a restaurant and lounge. In denying the previous permit, the ABC Hearing Officer and the Commissioners of the Department of Revenue and Taxation determined that the location was an improper one. The predominant reason for the denial was the location's close proximity to the Sycamore Acres subdivision and the detrimental impact that the sale and consumption of beer, wine, and liquor at the proposed location would have upon the safety and character of the neighborhood. These factors must be examined to determine if any changes have occurred; and if not, have any other relevant factors changed to such a degree as to warrant a reexamination of the location issue.

a. Constitutionality of R. 7-96

Petitioner claims R. 7-96 violates due process and exceeds in scope any statutory authority, but offers no case law in support of his assertion of the unconstitutionality of the regulation. A regulatory body possesses not only expressly conferred powers but also those powers necessarily inferred or implied to enable it to effectively carry out its duties. City of Rock Hill v. South Carolina Department of Health and Environmental Control, 302 S.C. 161, 394 S.E.2d 327 (1990); Carolina Water Service, Inc. v. South Carolina Pub. Serv. Comm'n, 272 S.C. 81, 248 S.E.2d 924 (1978). R. 7-96 was duly promulgated by the ABC Commission and approved by the General Assembly pursuant to Title 61. It does not operate as an unconstitutional form of collateral estoppel. Collateral estoppel requires a showing that the issue sought to be precluded was an issue actually litigated and directly determined in the prior action, and that the matter or fact directly in issue was necessary to support the first judgment. Beall v. Doe, 281 S.C. 363, 315 S.E.2d 186 (Ct. App. 1984). Thus, collateral estoppel is applicable where the decision on an issue or fact in the prior action was limited to an issue or fact not involved in the second action. Town of Sullivan's Island v. Felger, ___ S.C. ___, 457 S.E.2d 626 (Ct. App. 1995).

In the instant case, the issue is not a matter that was or could have been included in the first litigation. The issue previously decided was whether the location was a proper location for a permit in 1993. The single and narrow issue now under review is whether the application should be processed based on a showing that changes have occurred at the location since the former decision. The two issues are distinct and separate. The second issue of changed circumstance requires an investigation of facts and events which can only exist after the first denial. Thus, the facts and issues of the second action could not have been decided or addressed at the time of the first litigation. Accordingly, collateral estoppel does not apply to the instant matter and R. 7-96 does not operate as collateral estoppel.

Article I, Section 22 of the South Carolina Constitution provides in pertinent part that "[n]o person shall be finally bound by a judicial or quasi-judicial decision of an administrative agency affecting private rights except on due notice and an opportunity to be heard . . . and he shall have in all instances the right to judicial review." Just as Melanie Britton was afforded due process in consideration of her application in 1993 on the issue of suitability of location issue, so now is Petitioner afforded due process in consideration of the issue of material change. The rights to notice, an opportunity to be heard and to cross-examine witnesses, and right to judicial review were protected in the former proceeding and exist in the present matter.

b. Prior Considerations

The primary reason for denial of the previous application was the proximity of Sycamore Acres. The proposed location fronts on Augusta Road, a busy thoroughfare, at the intersection of Augusta Road and Dickert Drive. Dickert Drive is the entrance to Sycamore Acres subdivision. The proximity and character of Sycamore Acres has not changed since 1993. Petitioner attempted to establish that a number of new commercial businesses are now operating in the neighborhood, but residents testified that virtually every one of the businesses were residence-based ventures which were in operation at the time of the previous denial. Accordingly, there are no material changes to the factors relied upon in the prior denial. The homes along the principal streets of the subdivision, Dickert Drive and Maple Road, have retained their middle-income, suburban character, and many of the families have resided there since 1993. Halleywood Park, with its baseball field and tennis courts, is still in use in the subdivision.

c. Other Considerations

While Sycamore Acres has not materially changed since 1993, the application may be processed by DOR if "some material change with respect to the location" is established, even if the change relates to factors not relied upon in the prior hearing. 23 S.C. Code Regs. 7-96 (1976). The need to consider other factors is premised on the fact that the hearing body in the permitting process should consider any and all factors which demonstrate the impact a location will have on the community. See Palmer v. S.C. ABC Comm'n, 282 S.C. 246, 317 S.E.2d 476 (Ct. App. 1984). While a previous denial may have weighed specified factors against the applicant, "a material change" in other factors may require a reweighing of all factors at a subsequent date. Competing factors must be weighed and compared. The duty remains with the applicant, though, to prove the material changes. William Byers v. S.C. ABC Comm'n, 305 S.C. 243, 407 S.E.2d 653 (1991).

In the instant case, aside from the proximity and character of the surrounding residential neighborhood, factors that must also be examined and compared with those of the previous application include the nature of the business activity, physical features of the property, the number and character of businesses in the area, and the existence and proximity of other licensed locations in the area.

In 1993, the proposed location was a video poker parlor. The prior applicant sought to transform the establishment into a restaurant and lounge. Without the liquor license and beer and wine permit, the business failed. Petitioner's business is a family-oriented operation catering to baseball and softball enthusiasts. The sale of beer and wine would be a minor part of his business.

The business has been in operation since June, 1996, without the sale of beer and wine. There has been a material change in the business use of the proposed location.

Petitioner has made significant physical improvements to the location. One witness described the building on the premises as a "shack" before Petitioner purchased it. Since buying the location, Petitioner has invested over $100,000 in the construction of the batting cage facility and improvement of existing structures. The proposed location's overall appearance has been enhanced by Petitioner's work and investment and represents a material change since the previous permit denial.

Since 1993, the number and nature of businesses in the Augusta Road area has changed. Within a quarter of a mile of the proposed location, Mills Corner shopping Center has been built at the intersection of Oak Drive and U.S. Highway #1, and locations licensed to sell beer and wine have opened nearby, including: the Grove Bistro, Quick Way convenience store, and a Chinese restaurant. The introduction of new commercial businesses to the general area, particularly those selling beer and wine, presents a different situation than when the previous applicant sought a license and permit.

In the immediate vicinity of the proposed location, the business establishment directly across Augusta Road has also changed. Formerly a restaurant licensed to sell beer and wine, it reopened in August, 1994, as Bright Ideas Child Development Center. It currently serves as an after school day care facility for thirty-two children, ages 6-12. In the near future, it will operate as a full-time day care facility for younger children, ages infant to 4 years old, and the older children will be cared for at another location. While the opening of a day care across the street from the proposed location does nothing to enhance the suitability of the proposed location for the sale and consumption of beer and wine, it does represent a material change. Whether that impact is positive or negative is an issue to be addressed at a future hearing on the merits of Petitioner's application and not in a "material change" hearing under R. 7-96.

d. Conclusion

The issue here is not whether the proposed location is suitable to be licensed, but whether enough material change with respect to the proposed location has occurred since the previous permit denial to require DOR to process Petitioner's application. Despite the fact that the proximity and character of Sycamore Acres is virtually identical to its condition in 1993, material change with respect to the proposed location has occurred since the previous permit denial. Material change with respect to the location has been manifested by the difference in the nature of the business activity at the location, the physical appearance and use of the premises, and the increased commercialization of the general area. While one of the material changes that has occurred since the previous denial, the opening of a day care facility in close proximity, may be grounds for ultimately finding the location unsuitable, there are enough material changes to warrant the processing of the present application. Parties and protestants will have an opportunity to present evidence on the issue of suitability at a subsequent hearing on the merits.

I find, by a preponderance of the evidence, the following facts:

1. On March 29, 1996, Petitioner Johnny D. Smith filed an application with DOR for an on-premises beer and wine permit, AI #108263, for a location at 4510 Augusta Road, Lexington, South Carolina.
2. The proposed location, known as the Stadium Club Hitters Park and Training Center, includes baseball and softball batting cages, outdoor patios and walkways, a kitchen, and other indoor facilities for eating and viewing the batting cages in a press box type atmosphere.
3. Numerous written protests to Petitioner's application have been filed by local residents.
4. DOR refuses to process the Petitioner's application on the basis that the proposed location was found unsuitable to be licensed to sell beer and wine by orders of an ABC Hearing Officer and the Commissioners of the South Carolina Department of Revenue and Taxation, when a previous applicant sought an on-premises beer and wine permit and mini-bottle license.
5. An application for an on-premises beer and wine permit and mini-bottle license for the proposed location was previously filed with the ABC Commission by Melanie C. Britton, d/b/a Diamond Jim Brady's Texas Ice House, Inc., on April 13, 1993.
6. Upon receipt by the ABC Commission of written protests to Britton's application, a contested case hearing was conducted by ABC Hearing Officer H. Ronald Stanley, on July 13, 1993.
7. ABC Hearing Officer Stanley issued an Order dated August 10, 1993, which is incorporated herein by reference, denying the application and finding inter alia:

. . . [T]he location for which the applicant seeks an on-premises beer and wine permit and a sale and consumption license is an unsuitable location because of its proximity to the Sycamore Acres subdivision. I find that the granting of a permit and license for the subject location is likely to be detrimental to the public interest and may pose a threat and endanger the health, safety and welfare of the residents of Sycamore Acres.

1. ABC Hearing Officer Stanley's Order was appealed to the South Carolina Department of Revenue and Taxation, and a hearing before the Commissioners of that agency was held on November 16, 1993.
2. Based upon the contested case hearing record and arguments made on appeal, the Commissioners of the South Carolina Department of Revenue and Taxation issued an order dated January 28, 1994, incorporated herein by reference, affirming the Hearing Officer's order with additional findings and conclusions. The Commissioners held, inter alia:

. . .[T]he location of the subject business is inappropriate for an on-premises beer and wine permit or a mini-bottle license due to the proximity of the establishment to the residential subdivision of Sycamore Acres and Halleywood Park. If an on-premises beer and wine permit or a mini-bottle license is issued to this location, the Sycamore Acres neighborhood may be used as a cut through to Mineral Springs Road which connects with Leaphart Road and Highway 378. These roads connect to numerous subdivisions and increased traffic would likely occur in Sycamore Acres from patrons leaving the Texas Ice House and returning to their homes. The granting of an on-premises beer and wine permit or a mini-bottle license will cause a detrimental effect to that community by changing the character of the neighborhood and causing danger to the residence [sic] who are walking, jogging or playing in the neighborhood.

1. Since the previous denial, the proximity and character of the Sycamore Acres subdivision has had no material change.
2. At the time of the previous denial, the proposed location was a video poker parlor. The former applicant sought to transform the establishment into a restaurant and lounge.
3. Petitioner's business has been in operation at the proposed location since June, 1996, and is a family-oriented operation catering to baseball and softball enthusiasts, with the sale of beer and wine intended to be a minor part of the business.
4. Since the previous denial, the nature of the business activity at the proposed location has materially changed from a video poker parlor attempting to be converted to a restaurant and lounge to a batting cage facility.
5. At the time of the previous denial, the physical premises of the proposed location was in poor condition and was described as a "shack."
6. Since the previous denial, Petitioner has invested over $100,000 in the construction of the batting cage facility and improvement of existing structures.
7. Since the previous denial, Petitioner has made significant physical improvements to the location.
8. The overall physical appearance of the proposed location has been enhanced by Petitioner's work and investment and represents a material change since the previous permit denial.
9. Since the previous denial, new commercial businesses have opened in the vicinity of the proposed location, including several which are licensed to sell beer and wine.
10. Since the previous denial, Mills Corner shopping center has been built at the intersection of Oak Drive and U.S. Highway #1 within a quarter of a mile of the proposed location.
11. Since the previous denial, the Grove Bistro, Quick Way convenience store, and a Chinese restaurant have opened in the vicinity of the proposed location and have been licensed to sell beer and wine.
12. The introduction of new commercial establishments in the vicinity of the proposed location, particularly those licensed to sell beer and wine, presents a material change.
13. At or before the time of the previous denial, the business establishment directly across Augusta Road from the proposed location was a restaurant licensed to sell beer and wine, but it eventually closed.
14. Since the previous denial, the business establishment directly across Augusta Road from the proposed location reopened as Bright Ideas Child Development Center and currently serves as an after school day care facility for thirty-two children, ages 6-12.
15. The change in the business activity at the business establishment directly across Augusta Road from the proposed location constitutes a material change.

Based on the foregoing Findings of Fact and Discussion, I conclude the following as a matter of law:

1. The Administrative Law Judge Division has jurisdiction in this matter pursuant to S.C. Code Ann. §§ 61-1-55 (Supp. 1996); 1-23-600(B) (Supp. 1996); and 1-23-310 (Supp. 1996).
2. DOR shall not process an off-premises beer and wine permit where an application has been denied by the S. C. Alcoholic Beverage Control Commission unless some material change with respect to the location has occurred. 23 S.C. Code Ann. Regs. 7-96 (1976).
3. A material change with respect to a location is any change of a meaningful nature to any factor that is relevant to the decision of whether the location for a beer and wine permit is a proper location. S.C. Code Ann. § 1-9-320(6) (Supp. 1996).
4. The hearing body in the permit process should consider any and all factors which demonstrate the impact a location will have on the community. See Palmer v. S.C. ABC Comm'n, 282 S.C. 246, 317 S.E.2d 476 (Ct. App. 1984).
5. A regulatory body possesses not only expressly conferred powers but also those powers necessarily inferred or implied to enable it to effectively carry out its duties. City of Rock Hill v. South Carolina Department of Health and Environmental Control, 302 S.C. 161,

394 S.E.2d 327 (1990); Carolina Water Service, Inc. v. South Carolina Pub. Serv. Comm'n, 272 S.C. 81, 248 S.E.2d 924 (1978).

1. Regulation 7-96 was duly promulgated by the ABC Commission and approved by the General Assembly pursuant to Title 61.
2. Collateral estoppel requires a showing that the issue sought to be precluded was an issue actually litigated and directly determined in the prior action, and that the matter or fact directly in issue was necessary to support the first judgment. Beall v. Doe, 281 S.C. 363, 315 S.E.2d 186 (Ct. App. 1984). Thus, collateral estoppel is applicable where the decision on an issue or fact in the prior action was limited to an issue or fact not involved in the second action. Town of Sullivan's Island v. Felger, ___ S.C. ___, 457 S.E.2d 626 (Ct. App. 1995).
3. The single and narrow issue now under review is whether the application should be processed based on a showing that changes have occurred at the location since the former decision. The issue previously decided was whether the location was a proper location for a permit in 1993. The two issues are distinct and separate. The second issue of changed circumstance requires an investigation of facts and events which can only exist after the first denial. Thus, the facts and issues of the second action could not have been decided or addressed at the time of the first litigation. Accordingly, collateral estoppel does not apply to the instant matter and R. 7-96 does not operate as collateral estoppel.
4. Article I, Section 22 of the South Carolina Constitution provides in pertinent part that "[n]o person shall be finally bound by a judicial or quasi-judicial decision of an administrative agency affecting private rights except on due notice and an opportunity to be heard . . . and he shall have in all instances the right to judicial review." Just as Melanie Britton was afforded due process in consideration of her application in 1993 on the issue of suitability of location, so now is Petitioner afforded due process in consideration of the issue of material change. The rights to notice, an opportunity to be heard and to cross- examine witnesses, and right to judicial review were protected in the former proceeding and exist in the present matter.
5. Any issues raised in the proceedings or hearing of this case but not addressed in this Order are deemed denied. ALJD Rule 29B.

IT IS THEREFORE ORDERED that DOR process the application filed by Petitioner for an on-premises beer and wine permit for the proposed location, subject to written protest.

AND IT IS SO ORDERED.

________________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

February 26, 1997

Columbia, South Carolina