Daley v. American Drug Stores

FOURTH DIVISION
February 26, 1998


No. 1-97-0152

RICHARD M. DALEY, as Mayor of the )
City of Chicago and Local Liquor )
Control Commissioner; MAYOR'S LICENSE ) APPEAL FROM THE
COMMISSION OF THE CITY OF CHICAGO; and ) CIRCUIT COURT OF
WINSTON L. MARDIS, as Director of the ) COOK COUNTY.
Mayor's License Commission, )
)
Plaintiffs-Appellees, )
)
v. )
)
AMERICAN DRUG STORES, INC., d/b/a )
OSCO DRUG, an Illinois corporation, )
)
Defendant-Appellant )
) HONORABLE
(The License Appeal Commission of the ) THOMAS P. DURKIN,
City of Chicago, ) JUDGE PRESIDING.
)
Defendant). )


JUSTICE SOUTH delivered the opinion of the court:

Defendant, American Drug Stores, Inc. (American), is the owner
of all of the outstanding stock of both Jewel Food Stores, Inc.
(Jewel), and Osco Drug (Osco). In 1993, American instituted a
business plan to convert a number of Chicago area Jewel stores into
Osco stores. One of the Jewel stores included in American's
conversion plan is located at 1425 West Morse, Chicago, Illinois,
which is the site at issue in this appeal.
Jewel held a package goods liquor license at the Morse store.
The Morse store is located in an area covered by a moratorium on
new liquor licenses, wherein the issuance of new package goods
liquor licenses is prohibited pursuant to section 4-60-023 of the
Municipal Code of Chicago. Chicago Municipal Code 4-60-023 (1993).
On September 22, 1993, Osco forwarded a letter to the Local
Liquor Control Commission (LLCC) requesting that the package goods
liquor license at the Morse store be transferred from Jewel to Osco
in the name of American. On December 6, 1993, the LLCC advised
Osco that it would not approve its request to transfer the liquor
license because it would constitute a "new" license in violation of
the moratorium ordinance. Additionally, the LLCC stated that it
found no special exception that would permit Jewel to transfer its
license to Osco under the present ordinance. On July 22, 1994, the
LLCC issued a written denial of Osco's application for the
transfer.
Osco appealed the denial of its transfer application to the
License Appeal Commission (LAC). Osco argued before the LAC that
because of shared ownership in the package goods liquor license,
the license could be transferred from Jewel to Osco under section
4-60-024(d) of the Municipal Code of Chicago. Chicago Municipal
Code 4-60-024(d) (1993). On March 7, 1995, the LAC reversed the
LLCC's denial of Osco's application. On June 23, 1995, the LLCC's
petition for rehearing was denied by the LAC.
Thereafter, the LLCC filed a complaint in the circuit court
for administrative review of the LAC's order. On December 18,
1996, following a hearing, the court entered an order finding that
the decision of the LAC was against the manifest weight of the
evidence and reversed the LAC's order. Osco appeals. We affirm
the order of the circuit court.
The sole issue presented in this appeal is one that raises a
question of ordinance interpretation; that is, a question of law.
Thus, the appellate court conducts a de novo review and construes
the ordinance independently without deference to the circuit
court's judgment. Villegas v. Board of Fire & Police Commissioners
of the Village of Downers Grove, 266 Ill. App. 3d 202, 639 N.E.2d 966 (1994), rev'd on other grounds, 167 Ill. 2d 108, 656 N.E.2d 1074 (1995).
In construing an ordinance, the court's objective is to
ascertain and give effect to the overall intent of the drafters.
The most reliable indicator of the drafters' intent is the language
of the ordinance. The language of the ordinance must be given its
plain and ordinary meaning. Where the language is clear and
unambiguous, the court must enforce the law as enacted, without
employing extrinsic aids to construction. Villegas, 266 Ill. App.
3d 202, 639 N.E.2d 966, rev'd on other grounds, 167 Ill. 2d 108,
656 N.E.2d 1074.
In the present case, the plain language of section 4-60-023 of
the Chicago Municipal Code prohibits the transfer of the package
goods liquor license from Jewel to Osco unless Osco qualifies under
an exception set forth in section 4-60-024 of the Code. Chicago
Municipal Code  4-60-023, 4-60-024 (1993).
Section 4-60-023 of the Chicago Municipal Code provides in
pertinent part:
"Restrictions on additional package goods
licenses.
Subject to the provisions of subsection 4-60-
021(c), no additional package goods license shall
be issued for any premises located within the
following areas: ***." Chicago Municipal Code 4-
60-023 (1993).

The ordinance goes on to list by address designated areas within
each ward where the moratorium is imposed. The site at issue in
this appeal, 1425 West Morse, Chicago, is within the moratorium
area. See Chicago Municipal Code 4-60-023 (1993).
The Chicago city council created limited exceptions to the
license prohibition through its enactment of section 4-60-024 of
the Code, which provides in pertinent part:
"Lapse of license-Transfer of interest.
Whenever the liquor license for a
premises located within an area described in
Sections 4-60-022 or 4-60-023 lapses for
failure to renew or is revoked for cause, no
new license shall be issued for that premises
***. No direct or indirect interest in the
ownership of a liquor license for a business
in an area described in Section 4-60-022 or 4-
60-023 may be transferred unless the transfer
is made (a) between spouses, legally married
to each other at the time of the application
for transfer; or (b) between parent and
natural or adopted child or children; (c) to
another person or persons by will or by
intestate succession; or (d) to another person
or persons who already share ownership in the
license, or involves the transfer of less than
five percent of the shares of the corporation.
***
Transfers described in clause (d) of this
section shall be subject to the following
restriction: no person to whom less than five
percent of the shares of a liquor license is
transferred, who did not share ownership in
the license prior to such transfer, may
purchase more than five percent of the shares
of the liquor license in any 12-month period."
(Emphasis added.) Chicago Municipal Code 4-
60-024 (1993).
On appeal, Osco contends that the circuit court erred in
holding that Osco did not fall under the "shared ownership"
exception set forth in section 4-60-024(d). Chicago Municipal Code
4-60-024(d) (1993). In support of this contention, Osco argues
that (1) the emphasis of section 4-60-024(d) is on "ownership"
rather than on the name listed on the license and, therefore, the
fact that Jewel and Osco are wholly owned subsidiaries of the same
parent company, American, qualifies Jewel to transfer the liquor
license to Osco without being subject to the moratorium
restriction; (2) the separate corporate existence of Jewel and Osco
does not preclude the application of the "shared ownership"
exception in section 4-60-024(d); (3) the fact that the Internal
Revenue Service treats American, Jewel and Osco as a single taxing
entity further evidences that shared ownership exists between the
companies; and (4) section 4-60-024(d) should be interpreted to
avoid a "chilling effect" on businesses willing to invest in
Chicago.
In Illinois, a corporation is deemed a distinct legal entity,
separate from other corporations with which it may be affiliated.
Flynn v. Allis Chalmers Corp., 262 Ill. App. 3d 136, 634 N.E.2d 8
(1994). Before a court will pierce the corporate veil of a
subsidiary corporation, it must be shown that one corporation so
controls the affairs of another that the other is the mere
instrumentality or dummy of another and that, under the
circumstances, the observance of the fiction of separate corporate
existence will sanction fraud or injustice. Flynn, 262 Ill. App.
3d 136, 634 N.E.2d 8. The supreme court has recently held that a
corporation may not pierce its own corporate veil. In re
Rehabilitation of Centaur Insurance Co., 158 Ill. 2d 166, 632 N.E.2d 1015 (1994).
In this case, there is nothing in the record that indicates
that Jewel or Osco so controls the affairs of the other that one
corporation is the mere instrumentality or dummy of the other and
that, under the circumstances, the observance of the fiction of
separate corporate existence will sanction fraud or injustice.
Absent such evidence, Jewel and Osco are deemed two separate and
distinct corporate entities. This holds true despite the fact that
both are wholly owned by the same parent corporation, American.
Moreover, as cited by the circuit court, the ownership of
capital stock of one corporation by another does not necessarily
render the stock-holding corporation the owner of the property of
the other. Logal v. Inland Steel Industries, Inc., 209 Ill. App.
3d 304, 568 N.E.2d 152 (1991). A corporation is considered
separate from its stockholders, officers, directors and other
corporations with which it may be connected for purposes of
determining its assets and liabilities. In re Rehabilitation of
Centaur Insurance Co., 158 Ill. 2d 166, 632 N.E.2d 1015.
Here, Jewel originally applied for the package goods liquor
license as the sole applicant, and the license was issued in the
name of Jewel only. Thus, the fact that Jewel and Osco are owned
by the same parent company, American, does not result in Osco
having shared ownership interest in Jewel's package goods liquor
license.
Additionally, the fact that the Internal Revenue Service
requires controlled corporations to consolidate their income for
tax purposes is not determinative of their independent status as
separate corporate entities. In re Bowen Transports, Inc., 551 F.2d 171, 178-79 (7th Cir. 1977). Consequently, the tax definition
of a controlled group of corporations does not serve to pierce
Jewel's or Osco's corporate veil and destroy their independent
status as separate corporate entities.
As to any "chilling effect" the ordinance may have on
businesses willing to invest in Chicago but unable to obtain a
liquor license in a moratorium area, the Chicago city council has
weighed the costs of the moratorium and determined that public
health and safety issues warranted the enactment of sections 4-60-
023 and 4-60-024. Chicago Municipal Code  4-60-023, 4-60-024
(1993). Such considerations are for the city council to make.
Marusic Liquors, Inc. v. Daley, 55 F.3d 258, 262-63 (7th Cir.
1995).
Accordingly, as separate and distinct corporations,
notwithstanding their common affiliation with American, Osco did
not share ownership in Jewel's package goods liquor license at the
Morse store location before the proposed transfer. Because section
4-60-024(d) makes clear that the package goods liquor license can
only be transferred to one who already shares ownership in the
license, transfer of the license from Jewel to Osco would
constitute a new license in violation of section 4-60-023 of the
Chicago Municipal Code. Chicago Municipal Code 4-60-023 (1993).
For the foregoing reasons, the order of the circuit court is
affirmed.
Affirmed.
CERDA, P.J., and McNAMARA, J., concur.