VALLERGA v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL (1959)

The Department of Alcoholic Beverage Control revoked the general on-sale liquor license of Albert Vallerga and Mary Azar. The Alcoholic Beverage Control Appeals Board affirmed the revocation. This appeal is taken from the judgment of the Superior Court denying a writ of mandate to compel the Department to annul its order and to reinstate the license.

In June of 1956 the Department filed its First Amended Accusation charging the licensees with the violation of section 24200(e) of the Business and Professions Code, in that ‘From on or about September 7, 1955 until the date hereof [June 1, 1956], the portions of the premises of the licensees, where the activities permitted by the license are conducted, have been and still are a resort for sexual perverts, to wit: Homosexuals.’

A hearing was had on this accusation. The hearing officer recommended a revocation. The Department adopted this recommendation, and ordered a revocation of the license. The Department found that there had been no prior formal accusations made against the licensees, and then found that the charge contained in the accusation, quoting it as charged, was true. It was also found that Vallerga, one of the licensees, admitted at the hearing that the premises ‘were established as a resort for lesbians and homosexuals, and that he was aware that said premises were a hangout for homosexuals.’ For these reasons the Department determined that ‘the continuance of the said license would be contrary to public welfare and morals within the meaning of said words as used in Article XX, Section 22, of the California Constitution.’

The licensees appealed. The Appeals Board, without referring to any conduct of patrons on the licensed premises, held that, if the licensees knowingly permitted homosexuals to gather on the licensed premises, it violated section 24200(e) and justified revocation of the license. There is not one word in the decision about illegal, immoral, disgusting or indecent acts having been committed on the premises. The Department prosecuted the case, and the Appeals Board affirmed it, without any reference to the conduct of patrons while on the premises. The theory of both boards was that section 24200(e) prohibits the using of the licensed premises as a resort or gathering place for sexual perverts; that homosexuals are sexual perverts as a matter of law, and that if the licensed premises are so used, a violation justifying revocation of the license has occurred.

This is a misinterpretation of the law. In the leading case of Stoumen v. Rielly, 37 Cal.2d 713, 234 P.2d 969, the licensee was charged with operating a disorderly house to which people resorted for purposes which were injurious to public morals, health, convenience or safety. The trial Administrative Board found that the licensee maintained such a disorderly house in that he knowingly permitted persons of homosexual tendencies to patronize that bar and to use the bar as a meeting place. The Administrative Board ordered the suspension of the license. This was reversed by the Supreme Court in a unanimous opinion. The court pointed out that there ‘was no evidence of any illegal or immoral conduct on the premises or that the patrons resorted to the restaurant for purposes injurious to public morals' (37 Cal.2d at page 715, 234 P.2d at page 970), and then held that the disorderly house statute there involved did not attempt to regulate mere patronage by any particular class of persons without regard to their conduct on the premises. The court stated (37 Cal.2d at page 716, 234 P.2d at page 971): ‘Members of the public of lawful age have a right to patronize a public restaurant and bar so long as they are acting properly and are not committing illegal or immoral acts; the proprietor has no right to exclude or eject a patron ‘except for good cause,’ and if he does so without good cause he is liable in damages. See Civ.Code, §§ 51, 52. In analogous cases it has been held that a liquor license could not be revoked on the ground that prostitutes had dined in the licensee's restaurant, In re Farley, 217 N.Y. 105, 111 N.E. 479, and that a conviction of maintaining a bawdy house was not supported by evidence that women of loose or immoral character had obtained lodging in defendant's hotel. Patterson v. State, 9 Okl.Cr. 564, 132 P. 693, 695. In the Patterson case the court pointed out that such women are human beings entitled to shelter and that it is not a crime to give them lodging unless it is done for immoral purposes. The same reasoning applies to the patronage of a public restaurant and bar by homosexuals, and mere proof of patronage, without proof of the commission of illegal or immoral acts on the premises, or resort thereto for such purposes, is not sufficient to show a violation of section 58.'

It was then held that from the fact that homosexuals used the licensed premises as a meeting place it could not be inferred that illegal or immoral acts were committed on the premises.

After determining that mere patronage did not violate the maintenance of a disorderly house statute, the court then went on to hold that, because of such patronage, the license could not be revoked under Article XX, section 22 of the Constitution, which provides that a license may be revoked if the administrative agency determines ‘for good cause that the granting or continuance of such license would be contrary to public welfare or morals.’ The court said (37 Cal.2d at page 717, 234 P.2d at page 971): ‘The board's discretion under section 22, however, is not absolute but must be exercised in accordance with the law, and the provision that it may revoke a license ‘for good cause’ necessarily implies that its decisions should be based on sufficient evidence and that it should not act arbitrarily in determining what is contrary to public welfare or morals. * * * In order to establish ‘good cause’ for suspension of plaintiff's license, something more must be shown than that many of his patrons were homosexuals and that they used his restaurant and bar as a meeting place.'

The Stoumen case was decided in 1951. In 1955 the Legislature added section 24200(e) to the Business and Professions Code. (Stats. of 1955, p. 2230, Chap. 1217.) As then amended, and as it now reads, that section provides, in part, that it shall be a ground for the suspension or revocation of a license if ‘the portion of the premises of the licensee upon which the activities permitted by the license are conducted are a resort for illegal possessors or users of narcotics, prostitutes, pimps, panderers, or sexual perverts.’

Literally, this section seems to make revocation permissible if the licensed premises are simply used as a ‘resort’ by ‘sexual perverts.’ But because such a literal interpretation would raise grave doubts as to the constitutionality of the section, it has not been literally construed. It has been held that the section must be interpreted in view of the holding in the Stoumen case as to what constitutes ‘good cause’ for the revocation of a license. The reason for this interpretation is obvious. The Legislature, in enacting section 24200(e), acted under the authority and power granted by Article XX, § 22 of the state Constitution. As the section read in 1951 when the Stoumen case was decided, it provided that the State Board of Equalization shall have the power ‘in its discretion, to deny or revoke any specific liquor license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals.’ In the Stoumen case, as already pointed out, it was held that this provision did not confer uncontrolled discretion upon the Board, and that before a license could be revoked there must exist good cause, and that in order to establish ‘good cause’ under the section ‘something more must be shown than that many of his patrons were homosexuals and that they used his restaurant and bar as a meeting place.’ While this section of the Constitution was later amended, in this respect, the Constitutional language is still as it was in 1951 when the Stoumen case was decided. That case necessarily decided that ‘good cause’ for revocation of a license must consist of something more than mere patronage; there must be conduct on the premises that indicates that the continuance of the license would be contrary to public welfare or morals. Thus the Stoumen case necessarily decided that the Legislature was without power to provide that mere presence of a prohibited class was sufficient to revoke a license. It was for this reason, and in order to perserve the constitutionality of section 24200(e) that it was held that mere presence of homosexuals or of sexual perverts under the section was not enough and that in the absence of improper or illegal conduct on the licensed premises, the license could not be revoked.

The first of the cases so holding was Kershaw v. Dept. of Alcoholic Bev. Control, 155 Cal.App.2d 544, 318 P.2d 494, decided in 1957. In that case the enforcement officials contended, as they do here, that the use of the licensed premises as a meeting place for homosexuals was alone sufficient, under section 24200(e), to revoke the license. In refuting this contention, and in holding that improper conduct on the licensed premises was required before a license could be revoked, this court stated (155 Cal.App.2d at page 550, 318 P.2d at page 498): ‘It would seem a fair inference to conclude that in making that amendment [the addition of § 24200(e)] the Legislature acted in the light of and consistently with the rule of the Stoumen case, by inference excluding from the coverage of subdivision (e) the type of conduct which the Supreme Court had declared harmless and not inimical to public welfare or morals. The court having so recently and with such clarity said it, why should the Legislature say it again?’ There was, however, evidence of illegal and immoral conduct on the part of patrons to the knowledge of the licensee sufficient to sustain the revocation.

This interpretation of section 24200(e) was reaffirmed in the recent case of Nickola v. Munro, 162 Cal.App.2d 449, 328 P.2d 271, decided in July of 1958. There, as in the Kershaw case, and in the instant case, it was contended that, upon proof that homosexuals used the licensed premises as a meeting place, the license could be revoked. This court stated (162 Cal.App.2d at page 455, 328 P.2d at page 274): ‘We do not think that section 24200(e), was passed by the Legislature to repeal or to change the rule of the Stoumen case to the effect that improper or illegal or immoral conduct must occur on the premises before discipline of the licensee is permitted, but was passed with the Stoumen case in mind to clarify the rule of that case.’ In the Nickola case there was ample evidence of improper conduct on the premises, and of the licensee's knowledge of such conduct.

A petition for hearing was denied in the Nickola case. No petition for hearing was filed in the Kershaw case. It must, therefore, be accepted that, under section 24200(e), a license may not be suspended or revoked simply because homosexuals or sexual perverts patronize the bar in question. Before such deprivation can occur there must be improper, illegal, disgusting or immoral acts of conduct committed on the premises to the knowledge of the licensee. As already pointed out, unless section 24200(e) is so interpreted, there would be grave doubts as to its constitutionality. The Stoumen case was interpreting what constitutes ‘good cause’ for the revocation of a license under the Constitution. This constituted a limitation on the Legislature as well as on the administrative board. The only way that the constitutionality of section 24200(e) could be saved was to assume that the Legislature was not attempting to overrule the Supreme Court's interpretation of the Constitution, but was acting in conformity thereto. That is the explanation of the Kershaw and Nickola cases.

In the present case the proceeding was commenced and tried on the theory that mere patronage by homosexuals, to the knowledge of the licensees, was sufficient to warrant a revocation of the license. As already pointed out, there is no charge or finding that immoral, improper, disgusting or illegal acts were committed on the premises. The respondent, nevertheless, seeks to uphold the revocation on the ground that there was substantial evidence of such conduct. We think that respondent may properly urge such a contention, and that, if the record shows such conduct, the judgment should be affirmed.

The period involved in the charge contained in the amended accusation is from September 7, 1955, to June 1, 1956, a period of about nine months. The bar commenced operations in 1946, and in 1950 Vallerga purchased a half interest. During all the period it was operating, and particularly during the nine-month period involved in the charges, there had been no arrests for improper conduct on the premises, except one when the bartender called the police to eject an intoxicated patron. During the nine-month period involved in the charge, the licensed premises were subjected to frequent and intensive surveillance by the city and military police. Admittedly, not once during this period did the police call the attention of the licensees or their employees to any improper acts on the part of patrons that they had observed, nor was any person arrested for improper acts on the premises.

At the hearing, the enforcement officials were primarily interested in proving that the bar had a general reputation for being a hangout for homosexuals. This was done under that portion of section 24200(e) providing that ‘the character of the premises may be proved by the general reputation of the premises in the community as a resort for * * * sexual perverts.’ There is no doubt that the enforcement officials proved that the licensed premises were used as a meeting place by homosexuals. The Deputy Chief of the Oakland Police Department, the Patrol Captain of the area where the bar is located, the sergeant in charge of that patrol, the patrol officer in the area, and the sergeant in charge of the Armed Forces Police all testified that the reputation of the bar was bad in that its patronage consisted almost exclusively of homosexuals and lesbians. This fact was not in controversy. In fact, Vallerga, one of the licensees, testified that the bar was established in 1946 for homosexuals, and that it continued to be such an establishment from that date up to the date of the hearing; that in 1950, when he purchased a one-half interest in the bar, he consulted an attorney and was advised that since his bar was a public place, he was under a duty, and had the right, to serve his customers as long as they behaved themselves. Obviously, this evidence that the bar was largely patronized by homosexuals, is of importance only in showing that the licensee knew or should have known of this fact. Since the licensee admitted this fact, there was no dispute as to it. Contrary to the contention of the enforcement officials, this fact alone, as already pointed out, was not sufficient to justify a revocation of the license.

All of the police officials laid great emphasis upon the fact that the majority of female customers were dressed in mannish attire, and that the patrons of the bar usually paired off men with men, and women which women. These facts, if entitled to any legal significance, merely emphasized the fact that the patrons were homosexuals or lesbians. Of themselves, these acts did not amount to immoral, indecent, disgusting or improper acts. They merely tended to prove that the patrons were homosexuals, a fact the licensee admitted. That fact alone, for reasons already stated, did not justify revoking the license.

During the nine-month period of intensive surveillance the police officers did testify that they did observe a few isolated acts which are relied upon to support the revocation order. Several of the police officers testified that, on occasion, women were observed dancing with, and kissing, other women. This is not necessarily offensive, illegal or improper conduct that would justify the revocation of the license.

The most damaging testimony was given by a policewoman who went to the bar as an undercover agent. She testified that she sat at a table and that a patron dressed in mannish costume sat down and stated to her ‘You're a cute little butch.’ Later in the evening this patron kissed the witness. A waitress of the establishment, Buddy by name, came by and warned the participants that if they wanted to continue such activity they should go into the rest room. Other than through this waitress, there was no evidence the licensees knew of this activity or that they had been told of it. The officer did not complain to anyone about this conduct.

Another police officer (who had been in the bar 10 times) on one occasion observed a display of affection between two men. He observed these two embrace and whisper to each other with their foreheads touching. He heard one of the men state to the bartender ‘Arley and I are going steady.’ There was no evidence that the acts of affection between these two men were or should have been observed by the licensees or their employees.

This is a fair summary of the alleged misconduct that was observed during the nine-month period. Some of the officers visited the bar during this period almost daily, while others were present several times a week. At most, the conduct observed indicated that the patrons were homosexuals. But that fact alone will not support the revocation. The conduct observed was not similar to the conduct observed in the Kershaw and Nickola cases which was held to support revocation orders. There the conduct was disgusting, immoral and illegal. It clearly demonstrated that the continuance of the licenses would be ‘contrary to public welfare or morals.’ The same cannot be said of the conduct ovserved here.

The other contentions of appellants attacking the constitutionality of section 24200(e) on various grounds were all decided adversely to appellants in the Kershaw or Nickola cases, or in both, and are without merit.

The judgment is reversed with instructions to the trial court to grant a peremptory writ of mandate directing the Administrative Board to set aside its order of revocation and to take such further action as may be proper.

PETERS, Presiding Justice.

BRAY and FRED B. WOOD, JJ., concur.