BEFORE THE IOWA DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION DOCKET NO. A DIA NO. 09DOCBL163

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1 BEFORE THE IOWA DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: Carniceria El Michoacano Inc. d/b/a Carniceria El Michoacano Inc Myrtle Street Sioux City, IA DOCKET NO. A DIA NO. 09DOCBL163 PROPOSED DECISION New Class C Beer Permit Application On June 1, 2009, the Sioux City City Council (local authority) approved a motion to deny the application for a new Class C Beer Permit filed by Carniceria El Michoacano Inc., d/b/a Carniceria El Michoacano (applicant) for the premises located at 2600 Myrtle Street in Sioux City, Iowa. The denial was based on BNH zoning restrictions. (Ex. 1) On October 30, , the Alcoholic Beverages Division (Division) provided the applicant with written notice of the local authority s denial, and notified the applicant of its right to appeal within 30 days. The applicant appealed and a telephone hearing was held before the undersigned administrative law judge on January 14, 2010 at 9:00 a.m. Assistant City Attorneys Justin Vondrak and Nicole Jensen Harris represented the local authority. Carniceria El Michoacano Inc. was self-represented by its owner, Francisco Mendez. Although Francisco Mendez understands some English, he needed an interpreter in order to fully understand and participate in the hearing. Prior to hearing, the parties agreed that Francisco Mendez nephew, Edgar Mendez, would translate the proceedings for him. (Continuance Order) The record was held open for a brief time following hearing for the local authority to submit a complete copy of Sioux City Zoning Ordinance (Exhibit 6), which was discussed during the hearing. THE RECORD The record includes a copy of the electronic Class C beer permit application and attachments; the Division s Notice of Denial issued 10/30/09; Notice of Appeal; 1 The delay in formally notifying the applicant of the denial and right to appeal is not explained in the record.

2 Page 2 Notice of Hearing; Continuance Order; the testimony of the witnesses; and the following exhibits: Local Authority Exhibit 1: City Council Minutes, 6/1/09 Local Authority Exhibit 2: Audiotape of City Council Meeting, 6/1/09 Local Authority Exhibit 3: Certified Copy of Sioux City Zoning Ordinance, Local Authority Exhibit 4: Certified Copy of Sioux City Zoning Ordinance, Local Authority Exhibit 5: Zoning Map Local Authority Exhibit 6: Certified Copy of Sioux City Zoning Ordinance, ISSUE Whether the local authority properly denied the applicant s Class C beer permit application based on a determination that issuance of the beer permit would violate the local authority s zoning ordinance prohibiting liquor stores in BNH zones? FINDINGS OF FACT Francisco Mendez is the 51% owner of Carniceria El Michoacano Inc. d/b/a Carniceria El Michoacano, which is a retail grocery store located at 2600 Myrtle Street in Sioux City, Iowa. Carniceria El Michoacano has been open for two years and sells fresh meat, vegetables, milk, bread, and other grocery items. Customers have asked Francisco Mendez if he would also sell beer at his store. On March 18, 2009, Carniceria El Michoacano, Inc. (applicant) filed a new application for a Class C beer permit with the Sioux City City Council (local authority). (Mendez testimony; Electronic Beer Permit Application) A Class C beer permit may only be issued to the owner or proprietor of a grocery store or pharmacy, and it only permits the sale of beer, in original containers, to consumers at retail for consumption off the premises. 2 The local authority enacted its zoning ordinance in (Hanson testimony) Chapter of the zoning ordinance created a BN Neighborhood Business 2 Iowa Code sections , , (2009).

3 Page 3 Zone. (Ex. 4) Chapter of the zoning ordinance created a BNH Heavy Neighborhood Business Zone. (Ex. 3) Carniceria El Michoacano is located in an area that is zoned BNH. (Ex. 5) The purpose of the BNH zone, as stated in the ordinance, is to provide: neighborhood locations for gasoline service stations and specified retail shopping and consumer service establishments intended primarily for the convenience of nearby residential areas 3 The zoning ordinance defines retail shopping establishment. The definition provides, in relevant part, that a retail shopping establishment is: a store or shop engaged in the sale of commodities or goods to individual customers for personal use rather than for resale, including but not limited to: Bakeries, Grocery, delicatessen and specialty food stores Meat market, 4 The zoning ordinance specifies principal permitted uses and prohibited uses in the BNH zone. The principal permitted uses in the BNH zone includes grocery stores. 5 The zoning ordinance defines the prohibited uses in the BNH zone as follows: The uses prohibited in the BN zone are expressly prohibited in the BNH zone, subject to the provisions of Chapter The prohibited uses in the BN zone include, in pertinent part, bars, taverns, cocktail lounges and any other establishments which sell beer or intoxicating liquor for consumption on the premises 7 and liquor stores. 8 The zoning ordinance does not define liquor or liquor stores. (Ex. 6; Hanson testimony) 3 Sioux City Zoning Ordinance (Ex.3) 4 Sioux City Zoning Ordinance (Ex. 6) 5 Sioux City Zoning Ordinance (5). (Ex. 3) 6 Sioux City Zoning Ordinance (Ex. 3) 7 Sioux City Zoning Ordinance (7). (Ex. 4) 8 Sioux City Zoning Ordinance (8). (Ex. 4)

4 Page 4 Brent Nelson, Sioux City Senior Planner, and Jeff Hanson, Sioux City Community Development Operations Manager, both reviewed the Class C beer permit application for compliance with the local authority s zoning ordinances. They concluded that the sale of packaged beer for consumption off premises is a prohibited use in the BNH zone. In reaching this conclusion, Mr. Nelson and Mr. Hansen relied on the prohibition of liquor stores in BNH zones, which they interpreted to prohibit all alcoholic beverage sales, including sales of beer or wine. The ordinance does not contain any provision that specifically permits sales of alcoholic beverages in BN or BNH zones, and they both believed that any use not specifically listed as a permitted use in the BNH zone is automatically prohibited. (Nelson, Hanson testimony; Ex. 3 and Ex. 4) The local authority reviewed and considered the Class C beer permit application at its meeting on June 1, Jeff Hanson presented the staff opinion that the zoning ordinance prohibits all alcoholic beverage sales in a BNH zone. Mr. Hanson advised the local authority that while the zoning ordinance did not define liquor, staff was considering further text amendments to present to the local authority in the near future which may allow beer and wine but not alcohol in the BNH zone. Mr. Hanson also informed the local authority that there were currently five existing liquor licenses in the BNH zone but that all were issued prior to the enactment of the zoning ordinance in 1976 and therefore were legal non-conforming uses. (Ex. 2) On June 1, 2009, the local authority voted to deny the beer permit application based solely on failure to comply with the BNH zoning ordinance. (Nelson, Hanson testimony; Exhibits 1, 2) At the hearing before the Division, Jeff Hanson testified that staff research revealed just one beer permit in the BNH zone that was approved by the local authority after This beer permit was for a convenience store and gas station located at 19 th and Castleman, which is approximately 7 blocks south and 1-1 ½ miles west of Carniceria El Michoacano. This beer permit was approved prior to Jeff Hanson s employment by the city, and he was not familiar with the circumstances surrounding its approval. (Hanson testimony) CONCLUSIONS OF LAW There is no real factual dispute in this case. The parties agree that Carniceria El Michoacano is a grocery store located in a BNH zone in Sioux City. The

5 Page 5 applicant has applied for a Class C beer permit. A Class C beer permit allows a grocery store or pharmacy to sell beer, in original containers, to consumers at retail for consumption off the premises. 9 A Class C beer permit does not permit any sale of alcoholic liquor, 10 nor does it permit the sale of beer for consumption on the premises. The sole dispute concerns the proper interpretation and application of the local authority s zoning ordinance. The legislature has authorized local authorities to adopt ordinances or regulations for the location of the premises of retail wine or beer and liquor control licensed establishments. 11 The division s rules further provide that counties, cities and towns are free to adopt more restrictive ordinances or regulations governing licensed liquor establishments within their jurisdiction. 12 In addition, the applicant for a liquor license or beer permit has the burden to establish that its premises conform to all applicable laws, ordinances, resolutions, and health and fire regulations. 13 The Administrator of the Alcoholic Beverages Division defers to the local authority s construction of its own zoning ordinance when the construction is supported by reasoned legal argument. 14 The local authority may adopt zoning ordinances restricting the location of business that have liquor licenses or beer permits. However, zoning restrictions are construed strictly to favor the free use of property and will not be extended by implication or interpretation. 15 The Supreme Court has held that in interpreting ordinances it is appropriate to apply the general rules of construction for statutes. 16 The Court resorts to the rules of statutory construction only when the terms of the statute are ambiguous. 17 Ambiguity exists if reasonable persons can disagree on the meaning of a statute. 18 An ambiguity may arise from the meaning of particular words or from the general 9 Iowa Code sections , , (2009). 10 The Iowa Alcoholic Beverages Control Act refers to alcoholic liquor and intoxicating liquor and defines these terms to include beer only if the beer contains more than five percent alcohol. See generally Iowa Code section 123.3(3),(4),(5),(7), and (33). 11 Iowa Code section (2)(2009) IAC Iowa Code section (2); (6)(2009). 14 See Administrator s Final Decision, Docket No. A (May 7, 2004). 15 City of Okoboji v. Okoboji Barz, 717 N.W.2d 310, 314 (Iowa 2006)(citing Ernst v. Johnson County, 522 N.W.2d 599, 602(Iowa 1994). 16 Lauridsen v. City of Okoboji Bd. of Adjustment, 554 N.W.2d 541, 543(Iowa 1996). 17 State v. Wiederien, 709 N.W.2d 538, 541(Iowa 2006). 18 Id.

6 Page 6 scope and meaning of a statute in its totality. 19 Absent a statutory definition or an established meaning in the law, words in the statute are given their ordinary and common meaning by considering the context within which they are used. Under the guise of construction, an interpreting body may not extend, enlarge or otherwise change the meaning of a statute. 20 In this case, the local authority has enacted a zoning ordinance that expressly permits certain uses and also expressly prohibits certain uses in the BNH zone. Under permitted uses, the zoning ordinance expressly authorizes grocery stores in a BNH zone. 21 Under prohibited uses, the zoning ordinance expressly prohibits bars, taverns, cocktail lounges, and any other establishments which sell beer or intoxicating liquor for consumption on the premises in one subsection, and it prohibits liquor stores in a subsequent subsection. 22 The first cited subsection does not apply in this case because Carniceria El Michoacano has not applied to sell beer for consumption on the premises and only seeks to sell packaged beer for consumption off the premises. Thus, the only contested issue is whether the express prohibition of liquor stores in BNH zones means that the sale of packaged beer by a grocery store is also prohibited. At the time of the application, the local authority s zoning ordinance did not define the terms grocery store, intoxicating liquor, liquor, or liquor stores. 23 Although one subsection of the ordinance listing prohibited uses essentially recognizes intoxicating liquor and beer as distinctive products, the ordinance only uses the word liquor and not intoxicating liquor in the later subsection that prohibits liquor stores. 24 The local authority has interpreted liquor store to prohibit all sales of alcoholic beverages, including beer and wine. The applicant, however, essentially contends that it is not reasonable to interpret liquor store to include grocery stores selling only packaged beer for 19 Id. 20 Auen v. Alcoholic Beverages Div., 679 N.W.2d 586,590(Iowa 2004). 21 Sioux City Zoning Ordinance section (5). (Ex. 3) 22 Compare Sioux City Zoning Ordinance section (7)(emphasis added) with (8); (Ex. 3, 4) 23 There was some discussion at the local authority s hearing on June 1, 2009 that additional definitions might be added to the ordinance but no evidence was presented to show that this has since occurred. (Ex. 2) 24 The Iowa Alcoholic Beverages Act uses a similar approach by referring to and defining alcoholic liquor or intoxicating liquor in its initial provisions (See, e.g. Iowa Code sections 123.1, 123.3(5), (2)) but at times referring solely to liquor in later provisions. (See, e.g. Iowa Code section , , )

7 Page 7 consumption off the premises. Reasonable persons could disagree as to whether the prohibition of liquor stores in BNH zones also prohibits sales of packaged beer at grocery stores. Therefore, the zoning ordinance is ambiguous and requires interpretation, at least with respect to the Class C beer permit application at issue in this case. Since the zoning ordinance does not define liquor or liquor stores, it is appropriate to consider the ordinary and common meaning of these terms. The dictionary defines liquor as an alcoholic beverage made by distillation rather than fermentation. 25 The dictionary definition of liquor therefore excludes wine and beer, both of which are fermented alcoholic beverages. 26 In addition, it is also appropriate to consider the definitions provided in the Iowa Alcoholic Beverage Control Act. Although the Act broadly defines alcoholic beverage to include alcoholic liquor, wine and beer, 27 the Act s definitions for alcoholic liquor and intoxicating liquor only include high proof beers and wines. 28 Therefore, both in common usage and as used in the state licensing statute, the term liquor does not include ordinary beer that has less than five percent alcohol by weight. The dictionary definition of liquor and the statutory definitions provided in the Alcoholic Beverages Act do not support the local authority s broad interpretation of its prohibition on liquor stores to also prohibit grocery stores from selling packaged beer. Adding sales of packaged beer to a grocery store does make the grocery store a liquor store. A liquor store is commonly understood to mean a business that sells distilled spirits, wine, and beer. Finally, although a local authority s interpretation and application of its own zoning ordinance is entitled to deference from the Alcoholic Beverages Division, the local authority s interpretation in this case is further weakened by staff s admission that there is an existing beer permit for a convenience store/gas station located in a BNH zone that was issued after 1976, when the zoning ordinance went into effect. This information was not presented to the local authority at the time of the license denial and may have resulted in a different outcome if it had been presented. 25 The American Heritage Dictionary, Second College Edition. 26 See definitions of beer and wine found at Iowa Code section 123.3(7) and (37). 27 Iowa Code section 123.3(4)(2009). 28 Iowa Code section 123.3(3),(5),(7), and (33).

8 Page 8 The applicant has effectively established that its application for a Class C beer permit may not be denied solely on the grounds that the local authority s zoning ordinance prohibits liquor stores in BNH zones. This proposed decision does not address the applicant s compliance with any separation requirements that may be established by a zoning ordinance. Although distance separation requirements were briefly mentioned during the local authority s meeting on June 1, 2009, they were never presented as a reason for this denial and this issue was not argued at hearing. ORDER IT IS THEREFORE ORDERED that the action of the Sioux City City Council denying the application for a Class C Beer Permit filed by Carniceria El Michoacano, Inc. d/b/a Carniceria El Michoacano, Inc. is hereby REVERSED. Pursuant to the administrative rules of the division, any adversely affected party may appeal a proposed decision to the Administrator of the Alcoholic Beverages Division within thirty (30) days after issuance of the proposed decision. In addition, the Administrator may initiate review of a proposed decision on the Administrator's own motion at any time within thirty (30) days following the issuance of a proposed decision. 185 IAC 10.27(1) and (2). Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA Unless otherwise ordered, each appealing party may file exceptions and briefs within thirty (30) days of the notice of appeal or order for review. Within thirty (30) days thereafter, any party may file a responsive brief. The Administrator may shorten or extend the briefing period as appropriate. The Administrator may resolve the appeal on the briefs or provide an opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm, reverse or modify the proposed decision. A party who is adversely affected by the proposed decision shall not be deemed to have exhausted administrative remedies unless the adversely affected party files a request for review of the proposed decision within the time provided and the Administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision.

9 Page 9 Dated this 4 th day of February, Margaret LaMarche Administrative Law Judge Department of Inspections and Appeals 3rd Floor, Wallace State Office Building Des Moines, IA 50319

10 Copies to: Margaret LaMarche Administrative Law Judge Department of Inspections & Appeals Administrative Hearings Division Wallace State Office Bldg-3 rd Fl., 502 E 9 th Des Moines, Iowa John Lundquist Assistant Attorney General Department of Justice Hoover State Office Building Des Moines, Iowa Lt. Rick Henderson ISP, District # Highway 3 Cherokee, Iowa John Henry Ellison, Chief Investigator Iowa Lottery 2323 Grand Avenue Des Moines, Iowa Gayle Collins Commissioner Iowa Alcoholic Beverages Division 1918 SE Hulsizer Ankeny, Iowa Nicole Jensen Assistant City Attorney City Hall PO Box 447 Sioux City, Iowa Beverly Zylstra Social Gaming Unit Lucas State Office Bldg. Des Moines, Iowa Karen Freund Iowa Alcoholic Beverages Division Licensing Supervisor 1918 SE Hulsizer Ankeny, Iowa Chief Doug Young Sioux City Police Department 601 Douglas Sioux City, Iowa Francisco Mendez Carniceria El Michoacano Inc. d/b/a Carniceria El Michoacano 2600 Myrtle Street Sioux City, Iowa 51103

STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION

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