Matter of El Nuevo Encuentro Bar Corp. v New York State Liq. Auth.

[*1] Matter of El Nuevo Encuentro Bar Corp. v New York State Liq. Auth. 2009 NY Slip Op 51844(U) [24 Misc 3d 1241(A)] Decided on August 27, 2009 Supreme Court, Bronx County Massaro, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 27, 2009
Supreme Court, Bronx County

In the Matter of the Application of El Nuevo Encuentro Bar Corp., Petitioner,

against

New York State Liquor Authority, Respondent.



301202-2009



For Petitioner

Guy Parisi, Esq.

For Respondent

Thomas J. Donohue, Esq.

Scott Weiner, Esq.

Dominic R. Massaro, J.

Pending before the Court is Petitioner's motion pursuant to Alcohol Beverage Control Law §121(2) for an order (1) vacating Respondent's cancellation of Petitioner's on-premises liquor license, which terminated Petitioner's right to trade in alcoholic beverages; and (2) directing the New York State Liquor Authority to accept a not guilty plea to charges set forth in the Notice of Pleading for Case No.48549, and to conduct an administrative hearing upon such charges. Respondent based its ruling adverse to Petitioner following a determination that Petitioner defaulted in administrative disciplinary proceedings before it.

As a consequence of Respondent's refusal to reconsider its decision, Petitioner filed an Article 78 petition seeking reversal of cancellation of Petitioner's license. It was averred that cancellation took place without a hearing, and that such action denied federal and state due process rights, otherwise being arbitrary and capricious. Further, Petitioner says cancellation is not supported by "substantial evidence," is an excessive penalty and an abuse of discretion.

The Court focuses upon Petitioner's request to find that Respondent abused its discretion by refusing to allow a de novo hearing before an administrative law judge in light of Petitioner's claimed excusable default.[FN1] Petitioner maintains that Respondent was required to hold such a [*2]hearing before permanently suspending Petitioner's license, and that Respondent was arbitrary in denying Petitioner's request to reconsider the Authority''s action which was based upon Petitioner's default. In essence, Petitioner seeks relief analogous to CPLR Rule 5015(a) for excusable default.[FN2]

Concerning its administrative default, Petitioner says it received no timely notice of the agency's proceedings. Petitioner explains its non-receipt of the "Notice of Proceedings to Cancel or Revoke" by the pattern of mail theft in Petitioner's business area. Likewise, Petitioner's principal says she did not receive any notices directed to her individually because she had recently moved her residence. In this regard, her residential building superintendent's affidavit states that no mail box was available for Petitioner's principal because of ongoing construction at the site.

Section 54.1 of Title 9, New York Code of Rule and Regulations provides, in pertinent part,

that alcohol licensing disciplinary proceedings shall be commenced by the serving of a Notice of Pleading upon the licensee. Such notice is deemed duly served if delivered in person or if sent by registered or certified mail to the licensee addressed to the licensed premises with a copy sent by first class mail to the residence of record of the licensee, or of any officer or director of a corporate licensee, or any general partner of a partnership licensee.

Here, Respondent knew Petitioner did not receive notice but, as otherwise provided by its regulations, merely forwarded a copy to Petitioner's principal (Tr., p. 4). That notice was not returned to Respondent. However, while conforming to regulations, the Court notes that the notice was not sent by registered or certified mail. Normally, service is considered complete when the document is entrusted into the custody of the Unites States Postal Service (see, CPLR 2103[b][2][c]) regardless of delivery or receipt by Petitioner (see generally, A & B Service Station v. New York State, 50 AD2d 973 [3rd Dept. 1975]). However, there are exceptions (see generally, Zucco Grocery Corp. v. New York State Liquor Authority, 203 AD2d 120 [1st Dept. 1994] [ postal service returned notice and principle's return receipt not returned]); Neptune Inn Restaurant, Inc. v. Division of Alcohol Beverage Control of New York State Liquor Authority, 193 AD2d 436 [1st Dept. 1993] [Authority mailed to principle's former address where new address had been filed]).

While the Court initially found Respondent complied with notice requirements, subsequent attention is directed to the Zucco Grocery case, supra., where the First Department found Respondent's revocation of that petitioner's liquor license was properly annulled because the Authority failed its burden of proof concerning adequate hearing notice. In Zucco Grocery, Respondent's papers revealed that the notice was never delivered because it was improperly addressed and the person signing the return receipt was unknown to petitioner's principle. Here, undisputed proof shows that the Postal Service advised Respondent that Petitioner did not receive the notice at the premises address and no evidence exists that a second attempt was made following return of the undelivered notice.

In essence, Respondent refuses to reconsider its holding because Petitioner was "reckless and negligent" in managing its affairs and thus caused the lack of notice that lead to [*3]default (Tr. p. 4). According to Respondent, Petitioner bares total responsibility for the Authority's inability to timely notify. In response, Petitioner says it cannot be found negligent because security conditions, at both the licensee's establishment and its principal's residence caused conditions over which it had no control and that resulted in the lack of receipt. Petitioner claims it is otherwise an observant and law-abiding business.

It is not necessary for the Court to repeat the facts surrounding the substantive allegations considered by a divided Authority when it determined that Petitioner's liquor license should be suspended and then converted, by operation of law, to revocation for Petitioner's failure to pay the monetary penalty imposed for "after hours" sale of alcoholic beverages. Notwithstanding, the Court notes that on November 24, 2008, Petitioner's counsel requested reconsideration of the original ruling upon the grounds that the licensee received no hearing notice and otherwise had a meritorious defense. The reconsideration request was not acted upon and Petitioner's counsel resubmitted the request on December 10, 2008, with a corrected case number. The divided determination rejected reconsideration on December 18, 2008, without discussion, except to note that the alternate penalty of license revocation was imposed for nonpayment, effective December 23, 2008.

In a 2 to 1 decision, the Authority declined to reconsider its refusal to allow a hearing but gave no reason in its minutes for declining excusable default in a factual situation where it is admitted, in its answer, that Respondent applies CPLR 5015(a) standards in other cases (see, West 43rd Street Rest. Corp. v. NYS Liquor Authority, Index No. 128704-01994 [Sup Ct. New York 1994]).

It is significant that the Authority's actions were not unanimous. Commissioner Healey opposed Respondent's actions upon both the substantive charges and the denial of reconsideration. Commissioner Healey also voted to table the underlying case until the Authority's subsequent January 8, 2009, meeting. The Authority clearly had discretion to permit Petitioner a hearing explaining its default and revocation defenses. Under these circumstance the Court cannot dismiss Petitioner's claim that Respondent acted arbitrarily and denied Petitioner due process (see generally, Dworman v. New York State Div. of Housing & Community Renewal, 94 NY2d 359 [1999]). Clearly, Petitioner's requested relief is analogous to excusable default in an action before a court (see generally, Adames v. New York City Transit Authority, 126 AD2d 462 [1st Dept. 1987]).

The Court finds Respondent's decision denying reconsideration is sufficiently vague and incomplete so that the Court lacks an informed basis for proper review of Petitioner's claim of denial of constitutional due process where an excusable default occurred. Therefore, this matter is returned to Respondent to explain its reasons for denying excusable default, including a fair hearing if necessary with a record adequate for review (see generally, Matter of Fairchild Corp. v. Boardman, 56 AD3d 778 (2nd Dept. 2008). Such referral is within the Court's inherent power in furtherance of its judicial function (see generally, Alvarez v. Snyder, 264 AD2d 27 [1st Dept. 2000]); People v. Green, 170 Misc 2d 519 [Sup. Ct. Bronx 1996]) (see also, Yates v. Lansing, 9 Johns 395 [1811]). Any other course would be a denial of due process (cf., Application of Bergansky v. State of New York Liquor Authority, 68 Misc 2d 251 [Sup. Ct. 1971], rev'd, 39 AD2d 849 [1st Dept. 1972]; aff'd, 33 NY2d 813 [1973).[FN3]

Under this direction, Respondent is free to otherwise reconsider its previous holding and [*4]accept a not guilty plea to charges set forth in the Notice of Pleading for Case #48549 and to conduct an administrative hearing on such charges. Accordingly, the Court remands this case to the Authority for subsequent agency action consistent with this opinion.

As previously stated, the Court's role in an Article 78 proceeding is limited to a determination whether the agency's decision was made in violation of lawful procedure, including abuse of discretion as to penalty and whether an action is arbitrary and capricious (see generally, Matter of Pell v. Bd. of Education, 34 NY2d 222 [1974]). Here, the Court's function is completed upon finding the New York State Liquor Authority acted rationally (see generally, Howard v. Wyman, 28 NY2d 434 [1971]). Commissioner Healey's opposition to both the substantive charges and the denial of reconsideration presents an issue concerning whether the Authority acted arbitrarily. Likewise, without knowing the Authority's actual reasons for denying excusable default, the Court cannot determine the rationality of that decision.Upon the foregoing, it is

ORDERED that this matter is returned to Respondent for appropriate proceedings in accordance with this decision and order.

The foregoing constitutes the decision and order of this Court.

Dated: Bronx, New York

August 27, 2009

Hon. DOMINIC R. MASSARO

JUSTICE OF THE SUPREME COURT Footnotes

Footnote 1: The Court's prior order in this case required the parties to advise whether the "substantial evidence" issue mandated transfer to the Appellate Division for disposition (see, CPLR §7804[g]). CPLR §7803(4) and §7804[g] empowers the appellate court in an Article 78 proceeding where an underlying hearing was held and evidence taken, to review whether a determination is based upon "substantial evidence" present in the record. Both parties agree that transfer is not required here because the "substantial evidence" issue is not present. The Court concurs that transfer is not required.

Footnote 2: CPLR Rule 5015(a)(1) provides, in pertinent part, that the Court may relieve a party, upon such terms as may be just upon the ground of "excusable default," if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or, if the moving party has entered the judgment or order, within one year after such entry.

Footnote 3: Application of Bergansky involves license denial based upon applicant's criminal record. The Appellate Division opinion is distinguishable because the Court found rehabilitation would not impact the Authority's denial decision. Such a factual pattern does not present it self here here.