MUNRO v. The Alcoholic Beverage Control Appeals Board of the State of California, Appellant.*

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District Court of Appeal, Second District, Division 3, California.

Russell S. MUNRO, Director of the Department of Alcoholic Beverage Control, State of California, Petitioner and Respondent, v. The ALCOHOLIC BEVERAGE CONTROL APPEALS BOARD of the State of California and Ronald C. Chaney, Defendants, The Alcoholic Beverage Control Appeals Board of the State of California, Appellant.*

Civ. 22200.

Decided: October 20, 1958

Edsel W. Haws, Sacramento, for appellant. Edmund G. Brown, Atty. Gen., and Edward M. Belasco, Deputy Atty. Gen., for respondent.

Appeal by the Alcoholic Beverage Control Appeals Board from a judgment ordering that a writ of mandate issue commanding it to set aside its decision by which it reversed a decision of the Department of Alcoholic Beverage Control and to affirm the decision of the department which denied the transfer of an on-sale general license to Ronald C. Chaney.

On June 29, 1955, Chaney filed an application with the department for the transfer to him of an on-sale general alcoholic beverage license. In support of his application he filed an affidavit on a form furnished by the department which stated:

An investigation of the application was made by an agent of the department. In his report the agent stated that Chaney did not list in his application an arrest on June 11, 1949, at Memphis, Tennessee, for which he served sixty days at a penal farm and was fined $10. The application was denied.

Chaney then petitioned the department for a hearing. A hearing officer conducted a hearing on the issue ‘Whether applicant misrepresented a material fact in application for license. And whether the issuance of the license would be contrary to public welfare and morals.’ After the hearing, he made these findings of fact:

‘1. The records of the Bureau of Criminal Identification and Investigation, State of California, reflect the following arrests and dispositions thereof for Ronald Creighton Chaney:

‘6–11–49 PD Memphis Tenn. 45221 Inv. (Larc.)

Ronald Creighton

CHANEY

6–14–49 60 ds.

Penal Farms & Fine

$10. 9–13–49

‘2. It is true that in his affidavit made in support of his application for the transfer of an on-sale general license petitioner failed to include or mention the arrest and conviction of June 11, 1949 at Memphis, Tennessee for which he served sixty days at a Penal Farm and was fined $10.00, but did include and disclose a prior arrest at Hollywood, Calif. in 1946 when he was charged with the crime of assault and as a result placed on probation.’

On these facts the hearing officer determined: ‘Petitioner misrepresented a material fact on his application for a license transfer. The granting of the petition, or issuance of the license would be contrary to public welfare and morals,’ and recommended that the petition be denied. The recommendation was adopted by the department. Chaney's petition for reconsideration was denied.

Chaney filed an appeal from the decision of the department with the appeals board. The board reversed the decision of the department on the grounds: the findings do not support the decision denying the license; there was no finding that Chaney knowingly or purposely omitted the fact of an arrest, the finding being that there was a failure to include or mention the arrest; for all that appeared, the omission was unintentional, resulting from an honest mistake or negligence; the evidence would not support such a finding had one been made; on questioning, Chaney openly and frankly admitted the arrest and fully disclosed all the circumstances surrounding it; Chaney testified it was his belief that only arrests occurring in California were required to be listed, and had he understood the application more clearly he would have listed the arrest; there was nothing in the record to show that he was given information by departmental personnel contrary to his erroneous impression as to what was required.

The appeals board concluded that the unintentional or careless omission of the arrest does not constitute good cause under section 22 of article XX of the Constitution on which to base the denial of the license, and reversed the decision of the department.

The director of the department then filed in the superior court a petition for a writ of mandate to compel the appeals board to reverse its decision and for a writ of mandate or certiorari directing the appeals board to affirm the decision of the department. An alternative writ of mandate issued. The appeals board filed a return. The court found: there was substantial evidence to support the determination of the hearing officer; the department correctly determined that Chaney misrepresented a material fact on his application, and that the transfer of a license to him would be contrary to public welfare and morals under section 22, article XX, of the Constitution; the decision of the appeals board was arbitrary and unreasonable in that it substituted its own discretion for that of the department; the appeals board incorrectly determined the issues in the matter in that the findings of the hearing officer and the department were supported by substantial evidence in the light of the whole record; the suppression by Chaney of the 1949 arrest constituted good cause for the denial of his application.1

Judgment followed ordering that a writ of mandate issue commanding the appeals board to set aside its decision and render a new decision affirming the decision of the department. The appeals board has appealed from the judgment.2

Speaking of the judgment in the present case, the Supreme Court in Munro v. Alcoholic Beverage, etc., Appeals Bd., 50 Cal.2d 863, 326 P.2d 506, 507, stated:

‘[T]he effect of the judgment is a determination that, as a matter of law, the appeals board could properly act in only one way (affirmance) and that its contrary action was without or in excess of its jurisdiction.’

The evidence before the hearing officer was without conflict that the omission to list the 1949 arrest was unintentional. Chaney testified the reason he omitted to list that arrest was:

‘I just thought it was a State license. I should have understood the application more plainly and I just didn't put it down. * * *

‘Q. And you testified, I believe, earlier, that when you filled out this affidavit, it was your understanding that the arrest that they were inquiring, wanting to know about arrests here in the State of California, because you were applying for a State license? A. That is true.

‘Q. You signed this in front of Miss Dolores Blair? A. Yes, sir.

‘Q. Do you recall her making any statement to you as to arrests in other states or federal arrests? A. No, not in other states. She had asked me if I ever been arrested, however——

‘Q. But it was your understanding at that time it was just for arrests here in the State of California? A. Yes.’

The affidavit filed with the application is all in typewriting with the exception of ‘1946 Hollywood Flight Prob’ and Chaney's signature; a Miss Blair in the office of the department typewrote it.

Chaney is married and has three children. He was 18 years of age at the time of the 1949 incident. Concerning that incident, he testified:

‘Q. I call your attention to the date June 11, 1949 and ask whether you were arrested by the Memphis, Tennessee, Police Department on that date? A. Yes, I was.

‘Q. What was the charge? A. Well, it was larceny.

‘Q. Would you like to explain what happened; the circumstances surrounding this arrest? A. Yes, sir. Another fellow and I, we stole a fan, and we were arrested trying to pawn it.

‘Q. And were you tried? A. Yes, sir.

‘Q. And what was the disposition? A. Sixty days.

‘Q. Did you spend sixty days in jail? A. Yes, sir.’

Since 1949 he has resided in Borrego Springs, San Diego County, and has not been arrested or in trouble of any kind. For three years he engaged in carpentry work and a construction business. After that he managed a country club in Borrego Springs. A number of letters were introduced in evidence, all attesting to the fact that he has led a model life following his boyhood indiscretions. There was no contradiction of this evidence.

The Constitution provides that the Department of Alcoholic Beverage Control shall have the exclusive power, except as therein provided and in accordance with the laws enacted by the Legislature, to license the sale of alcoholic beverages in this state. The department has the power, in its discretion, to deny a license if it shall determine ‘for good cause’ that the granting of such license would be contrary to public welfare or morals. Const. art. XX, § 22, as amended in 1956.

When any person aggrieved thereby appeals from a decision of the department denying a license for the sale of alcoholic beverages, the appeals board ‘shall review the decision subject to such limitations as may be imposed by the Legislature. In such cases, the board shall not receive evidence in addition to that considered by the department. Review by the board of a decision of the department shall be limited to the questions whether the department has proceeded without or in excess of its jurisdiction, whether the department has proceeded in the manner required by law, whether the decision is supported by the findings, and whether the findings are supported by substantial evidence in the light of the whole record. * * * In all other appeals the board shall enter an order either affirming or reversing the decision of the department. * * * Orders of the board shall be subject to judicial review upon petition of the director or any party aggrieved by such order. * * * The provisions of this section shall be self-executing, but nothing herein shall prohibit the Legislature from enacting laws implementing and not inconsistent with such provisions.’ Const. art. XX, § 22, as amended in 1956. See similar provisions in Bus. & Prof.Code, §§ 23084–23091.

The constitutional scheme concerning alcoholic beverage control is an uncommon one. Two independent agencies are created: (1) the department which, as to the granting of licenses, acts as an administrative trial court; and (2) the appeals board, which is the administrative appellate court. There is no provision either in the Constitution or in the implementing legislation which authorizes direct court review of the decisions of the department. Section 23077 of the Business and Professions Code provides that the appeals board shall exercise such powers as are vested in it by section 22, article XX, of the Constitution, ‘and may adopt such rules pertaining to appeals and other matters within its jurisdiction as may be required.’ The Constitution imposes the duty on the appeals board of reviewing the decisions of the department. The appeals board is a Constitution-created quasi-judicial body discharging judicial duties. Koehn v. State Board of Equalization, 50 Cal.2d 432, 326 P.2d 502. The courts may not usurp the constitutional powers of the appeals board.

The department's discretion under section 22 is not absolute but must be exercised in accordance with the law, and the provision that it may deny a license ‘for good cause’ necessarily implies that its decision should be based on sufficient evidence and that it should not act arbitrarily in determining what is contrary to public welfare or morals. Stoumen v. Reilly, 37 Cal.2d 713, 717, 234 P.2d 969.

It was the duty of the appeals board in the present case to determine judicially whether the decision of the department is supported by the findings or whether the findings of the department rest on substantial evidence in the light of the whole record. The Constitution does not spell out the scope of court review of orders of the appeals board. It has been held that the scope of such review is limited to determining whether the decision of the appeals board is supported by substantial evidence, and that both the superior court in a mandate proceeding and a reviewing court on appeal therefrom are without authority to reweigh the evidence. 5501 Hollywood, Inc., v. Dept. of Alcoholic Beverage Control, 155 Cal.App.2d 748, 751, 318 P.2d 820.

Section 1094.5 of the Code of Civil Procedure provides that where mandate is issued for the purpose of inquiring into the validity of any final administrative order or decision, the inquiry, where it is claimed that the findings are not supported by the evidence in cases in which the court is not authorized to exercise its independent judgment on the evidence, is whether there has been any prejudicial abuse of discretion; and abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record. The final administrative order here is the order of the appeals board. The court in a mandate proceeding to review the action of the appeals board is not authorized to exercise its independent judgment on the evidence. Covert v. State Board of Equalization, 29 Cal.2d 125, 131–132, 173 P.2d 545.

The question here is not whether the decision of the department is supported by the findings or whether the findings of the department are supported by substantial evidence in the light of the whole record. It is the function of the appeals board, acting in a quasi-judicial capacity, to determine those questions. The appeals board reviews the decision of the department; the court in a mandate proceeding reviews the order of the appeals board. The question before the superior court was whether the appeals board abused its discretion in reversing the decision of the department. And the question here is whether the court below erred in determining as a matter of law that ‘the appeals board could properly act in only one way (affirmance) and that its contrary action was without or in excess of its jurisdiction.’ Munro v. Alcoholic Beverage etc., Appeals Bd., 50 Cal.2d 863, 326 P.2d 506. This view is fortified by the fact that judicial review does not lie from a decision of the department. A party aggrieved by a decision of the department must appeal to the appeals board before seeking mandate. The courts have no jurisdiction to entertain a proceeding in mandate if no appeal is taken. Fiscus v. Dept. of Alcoholic Beverage Control, 155 Cal.App.2d 234, 235, 317 P.2d 993; Van De Veer v. Dept. of Alcoholic, etc., Control, 155 Cal.App.2d 817, 820–821, 318 P.2d 686.

The department found that Chaney ‘failed to include or mention the arrest’ of 1949. It did not find that he did so intentionally, knowingly, or wilfully. For all that appears, the omission resulted through mistake, forgetfulness, negligence, or some other unintentional reason. From the mere fact that he failed to include or mention that arrest, it concluded that he misrepresented a material fact in his application for a license transfer. It cannot be held, as a matter of law, that the appeals board erred in holding that in order to establish ‘good cause’ for denying Chaney a license something more must be shown than a mere unintentional failure to list the 1949 arrest, and that the decision of the department is not supported by the evidence.

Black defines a misrepresentation as an intentional, false statement respecting a matter of fact. Concealment has been defined as the designed and intentional withholding of a material fact which in honesty and good faith ought to be communicated. Sun Ins. Office, Ltd. of London v. Mallick, 160 Md. 71, 153 A. 35, 43; Lawson v. Southwestern Voluntary Ass'n, 168 Va. 294, 191 S.E. 648, 649.

Allegretti v. Bd. of Osteopathic Examiners, 145 Cal.App.2d 435, 302 P.2d 694, was a proceeding in mandate to compel the respondent board to annul its order suspending the license of the petitioner, an osteopathic physician and surgeon. One of the charges was that the petitioner carried a professional advertisement using the suffix ‘M.D.’ in the classified section of the telephone directory. Holding a finding that the petitioner was negligent in not finding out what the charges for the advertising were for or how his name was listed was insufficient to justify a judgment affirming the order of the respondent board suspending the petitioner's license, this court stated (145 Cal.App.2d at page 440, 302 P.2d at page 698):

‘Petitioner could have been negligent in these respects and yet innocent of any wrongful intention. Upon the other hand the finding that he was negligent does not acquit him of having acted in bad faith and with ulterior motives.

‘The question is not merely whether petitioner had actual knowledge of the erroneous listing. It is rather the question whether he had reasonable cause to believe that his name was or might be incorrectly listed and refrained from making inquiry with the intention of taking advantage of the telephone company's mistake, if a mistake were being made. If his omission to make inquiry was wilful rather than innocent his lack of knowledge would be no defense to a charge that he made use of the suffix ‘M.D.’ The basic question, therefore, was whether his professed ignorance was the result of carelessness or culpability. * * *

‘It is not contended by respondent that a physician and surgeon can be subject to discipline for mere negligence. As applicable to physicians and surgeons there are in the Business and Professions Code some 26 specifications of acts which constitute unprofessional conduct. By their very nature they relate to acts intentionally performed and which would not be the consequence of mere negligence.’

In Marchica v. State Board of Equalization, 107 Cal.App.2d 501, at page 509, 237 P.2d 725, at page 731, this court stated:

‘The Sales Tax Act [Rev. & Tax. Code, § 6001 et seq.] prevents the retention of a tax paid after it is barred by the statute of limitations in the absence of fraud or an intent to evade. The existence of fraud or an intent to evade was essential to confer upon the board the power which it exerted. In the present case the deficiency assessment and the penalties were predicated on fraud. The fraud meant by the statute is actual, intentional wrong-doing, and the intent required is the specific purpose to evade a tax believed to be owed. [Citation.] The only evidence in this case is the failure to file correct returns. The burden of proving fraud is not sustained by merely establishing a deficiency. [Citation.] The failure to file a correct return does not necessarily constitute fraud. [Citation.] The mere omission from a tax return of items which should have been included does not show a fraudulent intent. [Citation.] If returns are filed a deficiency necessarily arises from an understatement in the returns. An understatement may have resulted from ignorance, bad advice, honest mistake, negligence, or misinterpretation of law; none of which in itself would constitute fraud.

‘Fraud is odious. It is never presumed; but must be established by proof. The presumption always is in favor of good faith, innocence, honesty and fair dealing, except, perhaps, where confidential relations are involved. This presumption has been held to approximate in strength that of innocence of crime. [Citation.] It is to be noted that any person who renders a false or fraudulent return is guilty of a misdemeanor. [Citation.] One asserting fraud, except, perhaps, where confidential relations are involved, has the burden of proving it.’

Sautter v. Contractors' State License Bd., 124 Cal.App.2d 149, 268 P.2d 139, was an appeal from a judgment ordering that mandate issue commanding the respondent board to set aside its decision revoking certain licenses of the petitioner and ordering that they be restored to him. The petitioner was a contractor. One of the charges before the board was that the petitioner had misrepresented his experience in an application for a license. The board found him guilty of the charge. The superior court found that he did not intentionally misrepresent his experience or any other fact. Section 7112 of the Business and Professions Code, dealing with causes for disciplinary action against contractors, provides: ‘Misrepresentation of a material fact by an applicant in obtaining a license constitutes a cause for disciplinary action.’ On the board's appeal the court stated (124 Cal.App.2d at page 156, 268 P.2d at page 144):

‘Appellant states that the mere doing of the act is forbidden regardless of the state of mind of the wrongdoer, but cites no authority. Respondent maintains that in determining whether there is ground for disciplinary action, the matter of good faith is important. It was so held in State Bar of California v. Rollinson, 213 Cal. 36, 1 P.2d 428 and In re Jung, 13 Cal.2d 199, 88 P.2d 679.’

Nelson Valley Bldg. Co. v. Morrisey, 135 Cal.App.2d 738, 288 P.2d 135, and Federal Communications Commission v. WOKO, Inc., 329 U.S. 223, 67 S.Ct. 213, 91 L.Ed. 204, cited by the director, are not helpful. In the Nelson case the applicant for a contractor's license ‘knowingly’ made a false statement in his application. In the WOKO case the applicant for renewal of a license deliberately furnished the commission with false information and the deception had been carried on for about twelve years.

On the record the conclusion of the appeals board, that Chaney did not knowingly or purposely conceal the fact of the 1949 arrest in his application, appears to be a reasonable one. Indeed it is difficult to see how it could have come to any other conclusion. It could reasonably conclude that the evidence failed to establish any intent to conceal or to mislead the department. We think it cannot be said, as a matter of law, that ‘the appeals board could properly act in only one way (affirmance) and that its contrary action was without or in excess of its jurisdiction.’ It stated that under the authority granted the department by the Constitution the department could consider whether Chaney ‘knowingly or purposely’ omitted the arrest; that in such a case ‘it is the omission itself coupled with intent to withhold information which becomes important in considering the character and suitability of the applicant’; that there was no finding that Chaney knowingly or purposely omitted the fact of an arrest, the finding being that there was a failure to include or mention the arrest; for all that appeared, the omission was unintentional, resulting from an honest mistake or negligence; that the evidence would not support a finding that Chaney knowingly or purposely omitted the fact of the arrest.

The appeals board held that the unintentional or careless omission of the arrest does not constitute good cause under section 22 of article XX of the Constitution on which to base a denial of the license, and that the denial in the present case was an abuse of discretion. We cannot say that it was unreasonable for it to conclude that the decision of the department denying the license is not supported by the findings, and that the unintentional or careless omission of the arrest does not constitute good cause under section 22 of article XX of the Constitution on which to base the denial of the license.

And it cannot be held, as a matter of law, that the appeals board erred in holding that the arrest and conviction in 1949 together with the arrest of 1946 are not of sufficient materiality to furnish a reasonable basis on which to deny the license. In this connection the appeals board said:

‘The remaining question is whether the arrest and conviction in 1949 together with the arrest of 1946 are of sufficient materiality to furnish a reasonable basis upon which to deny the license. We think not. The arrest in Tennessee occurred when the appellant was 19[18] years of age. Since that time the record shows that appellant has not been in any trouble and has pursued a useful and industrious course of conduct. The recommendations of several people which are contained in the record demonstrate that appellant is a responsible citizen and completely qualified to assume the responsibilities of a licensee. The unfortunate incidents of childhood furnish little, if any, basis for an appraisal of his present reputation and suitability. We think that the ends of justice will best be served by closing the book on those unfortunate incidents, thus allowing appellant to pursue his ways as a responsible citizen.’

In Jones v. Maloney, 106 Cal.App.2d 80, 234 P.2d 666, the licensee whose license as an insurance agent was revoked had been convicted of two misdemeanors: disturbing a public assemblage, and disturbing the peace and resisting an officer. The court stated (106 Cal.App.2d at page 91, 234 P.2d at page 672):

‘The missing finding in our case is the fact that the licenses were obtained by the concealment. The findings say nothing about the licenses having been ‘obtained’ either by ‘concealment’ or by ‘knowing misrepresentation’ and the evidence in the case is not sufficient to have supported such a finding had one been made. The misdemeanor convictions were of ancient date. The offenses themselves bear no peculiar or apt relation to petitioner's qualifications for a license as an insurance agent. As there is no sufficient finding of fact to support it, the second charge must fall.'

Also see In re McCue, 211 Cal. 57, 293 P. 47.

It follows that the finding of the superior court that the appeals board incorrectly determined the issues in the matter cannot be sustained, and that the judgment must be reversed.

The appeal from the order granting the petition and from the peremptory writ is dismissed; the judgment is reversed.

I dissent. In Munro v. Alcoholic Beverage, etc., Appeal Bd., Cal.App., 329 P.2d 758, 760, which involved a question of fact, it was held that the ‘Appeals Board was simply called upon to determine whether the findings of the department were supported by substantial evidence in the light of the whole record. It was not permitted to exercise an independent judgment on the facts as contended for by appellant.’ In the present case, in my opinion, there was substantial evidence in the light of the whole record to support the findings, determination, and decision of the department in denying the application. The department was not required to accept the explanation offered by Chaney. The form of the affidavit, wherein he did not answer fully regarding arrests, called specifically for his full statement as to arrests under the laws of California, or of any other state, or of the United States.

In my opinion the judgment should be affirmed.

FOOTNOTES

1.  The finding of the court that Chaney suppressed the facts went beyond the finding of the department. The department merely found that he ‘failed to include or mention the arrest.’ To suppress, in this sense, means the intentional withholding of some fact. Murray v. Brotherhood of American Yeomen, 180 Iowa 626, 163 N.W. 421, 428.

2.  Respondent director moved to dismiss the appeal on the ground the appeals board is not a party aggrieved and therefore not entitled to appeal. The Supreme Court denied the motion. Munro v. Alcoholic Beverage, etc., Appeals Bd., 50 Cal.2d 863, 326 P.2d 506.

VALLEÉ, Justice.

SHINN, P. J., concurs.