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Whalla v. Pennsylvania Liquor Control Board

Commonwealth Court of Pennsylvania

January 4, 2018

Kirpal Whalla, Appellant
v.
Pennsylvania Liquor Control Board

          Argued: November 13, 2017

          BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge HONORABLE MICHAEL H. WOJCIK, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge

          OPINION

          MARY HANNAH LEAVITT, President Judge

         Kirpal Whalla (Applicant) appeals an order of the Court of Common Pleas of Erie County (trial court) affirming the decision of the Pennsylvania Liquor Control Board not to validate or renew the restaurant liquor license that he purchased at an Internal Revenue Service (IRS) tax sale. Applicant contends that he bought the liquor license free and clear of all liens and, thus, the trial court's decision violated the Supremacy Clause of the United States Constitution.[1] We affirm.

         Mortrapp, Inc. holds Liquor License No. R-7484, for premises located at 1314 Griswold Plaza, Erie, Pennsylvania. The liquor license was seized by the IRS and offered for sale at public auction on May 2, 2012. On that date, "the right, title, and interest of Mortrapp Inc" in the liquor license was sold to Applicant for $20, 600. Public Auction Sale, Reproduced Record at 19 (R.R.).

          A restaurant liquor license must be renewed every two years, and the Liquor Control Board must validate the license for each year of the license period. Section 102 of the Liquor Code, [2] 47 P.S. §1-102 (defining "License period"). On July 5, 2013, Applicant, on behalf of Mortrapp, filed two applications with the Liquor Control Board's Bureau of Licensing (Bureau). The first requested a retroactive renewal of the liquor license for the period August 1, 2011, through July 31, 2013. The second requested a retroactive validation of the license for the period August 1, 2012, through July 31, 2013. On July 26, 2013, Applicant filed a third application, requesting a renewal of the liquor license for the licensing period effective August 1, 2013, through July 31, 2015.

         The Bureau filed objections to the three applications. First, it contended that all three applications were untimely. Second, it noted that the applications did not include verifications from either the Department of Revenue or the Department of Labor and Industry that all state taxes had been paid. To the contrary, both departments issued reports that the tax status of the license was "NOT CLEAR." R.R. 70, 72-73. Applicant was advised as follows:

The Liquor Control Board HAS NO AUTHORITY to remedy any dispute over a failure to issue a tax clearance by either the Department of Revenue or the Department of Labor and Industry, or both. This is a matter strictly between you, the licensee, and the taxing authority. Do not assume that payment of all taxes constitutes clearance. Renewal of your license by the Liquor Control Board requires notification from the taxing agency(s) to the Liquor Control Board.

R.R. 69 (emphasis in original).

          Applicant appealed, and the Board appointed a hearing examiner, who conducted a hearing on January 22, 2014. Neither Applicant nor the Bureau presented evidence. The record consisted of the three applications for renewal and/or validation of the liquor license; the Bureau's objections thereto; and the hearing notice.

         At the hearing, Applicant gave an "opening statement." Notes of Testimony, 1/22/2014, at 6 (N.T. _); R.R. 55. By counsel, Applicant stated that he learned "he could not transfer this license [or] take any steps to the license transfer without a location." Id. at 7; R.R. 56. Further, the liquor license remains in the possession of the IRS. Applicant filed the applications to keep the license alive until these details could be resolved. In the meantime, the license identifies the licensee as Mortrapp. Applicant maintained that he does not have physical control of, or access to, Mortrapp's records. Applicant argued that Mortrapp's unpaid state tax obligations, if any, are not his responsibility.

         The hearing examiner issued a recommended adjudication that the three applications be denied. The Board agreed and adopted the recommendation. The Board held that Applicant's applications were untimely by reason of Section 470(a) of the Liquor Code, 47 P.S. §4-470(a). In addition, the applications did not include the mandatory tax clearance from either the Department of Revenue or Department of Labor and Industry.

         Section 470(a) of the Liquor Code sets forth the procedures for validation or renewal of a liquor license. It states as follows:

All applications for validation or renewal of licenses under the provisions of this article shall be filed with tax clearance from the Department of Revenue and the Department of Labor and Industry and requisite license and filing fees, and shall include an application surcharge of seven hundred dollars ($700.00), at least sixty days before the expiration date of same: Provided, however, That the board, in its discretion, may accept nunc pro tunc a renewal application filed less than sixty days before the expiration date of the license with the required fees, upon reasonable cause shown and the payment of an additional filing fee of one hundred dollars ($100.00) for late filing: And provided further, That except where the failure to file a renewal application on or before the expiration date has created a license quota vacancy after said expiration date which has been filled by the issuance of a new license, after such expiration date, but before the board has received a renewal application nunc pro tunc within the time prescribed herein the board, in its discretion, may, after hearing, accept a renewal application filed within two years after the expiration date of the license with the required fees upon the payment of an additional filing fee of two hundred fifty dollars ($250.00) for late filing. Where any such renewal application is filed less than sixty days before the expiration date, or subsequent to the expiration date, no license shall issue upon the filing of the renewal application until the matter is finally determined by the board and if an appeal is taken from the board's action the courts shall not order the issuance of the renewal license until final determination of the matter by the courts. The board may enter into an agreement with the applicant concerning additional restrictions on the license in question. If the board and the applicant enter into such an agreement, such agreement shall be binding on the applicant. Failure by the applicant to adhere to the agreement will be sufficient cause to form the basis for a citation under section 471 and for the nonrenewal of the license under this section. A renewal application will not be considered filed unless accompanied by the requisite filing and license fees and any additional filing fee required by this section ….

47 P.S. §4-470(a) (emphasis added). Applicant did not satisfy any of these requirements.

         Because the liquor license expired on August 1, 2011, the renewal application had to be filed no later than June 2, 2011. Instead, Applicant filed it on July 5, 2013. Even if the license had been renewed as of August 1, 2011, it needed to be validated as of August 1, 2012, and the validation application had to be filed by June 4, 2012. Instead, Applicant filed it on July 5, 2013. Had the license been renewed in 2011, for the two-year renewal period, Applicant had to file the renewal application by June 3, 2013. Instead, Applicant filed it on July 26, 2013.

         The Board acknowledged that Section 470(a) of the Liquor Code permits nunc pro tunc review of a late-filed application if there exists a reasonable cause for the delay and a late-filing fee paid. However, Applicant did not offer any explanation for waiting until 2013 to submit the renewal and validation applications. Further, he did not submit the requisite late-filing fee.

         The Board further explained that Section 470(a) of the Liquor Code requires that "[a]ll applications for validation or renewal of licenses under the provisions of this article shall be filed with tax clearance from the Department of Revenue and the Department of Labor and Industry and requisite license and filing fees[.]" 47 P.S. §4-470(a) (emphasis added). The requirements for a tax clearance application are set forth in Section 477 of the Liquor Code, which states:

(a) An applicant for the grant, renewal or transfer of any license issued pursuant to this article shall provide to the board, upon forms approved by the Department of Revenue, the following:

(1) the applicant's ...

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