BEFORE THE IOWA DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: Mr. United, Inc. d/b/a Liquor & Tobacco Point 1545 First Avenue SE Cedar Rapids, Iowa 52406 DOCKET NO. A-2008-00019 DIA NO. 08DOCBL079 PROPOSED DECISION Liquor License No. LE-1482 On or about October 8, 2008, the Cedar Rapids City Council (local authority) approved a resolution revoking Liquor License No. LE-1482, which had been issued to Mr. United, Inc., d/b/a Liquor & Tobacco Point (licensee) on or about August 14, 2008. The licensee filed a timely Notice of Appeal with the Iowa Alcoholic Beverages Division (division). The hearing was held by telephone before the undersigned administrative law judge on January 23, 2009 at 10:00 a.m. City Attorney William Wright represented the local authority. Attorney Carter Stevens represented the licensee. The record was held open until February 6, 2009 to allow the parties to submit a copy of the business lease and briefs. THE RECORD The record includes the license application and attachments; Local Authority Notice of Revocation Hearing, dated 9/5/08; Licensee Response, 9/1l/08; Notice of Appeal with attachments; Notice of Hearing; the testimony of the witnesses; Hearing Briefs; and the following exhibits: Local Authority Exhibit A: Memo, 9/4/08 (Walther to Graham) Local Authority Exhibit B: Chapter 51, Cedar Rapids Municipal Code Local Authority Exhibit C: Liquor License Application Local Authority Exhibit D: Liquor License Local Authority Exhibit E: Notice of Hearing to Revoke, 9/5/08 Local Authority Exhibit F: Resolution Revoking License, 10/8/08
Page 2 Local Authority Exhibit G: Local Authority Exhibit H: Local Authority Exhibit I: Local Authority Exhibit J: Local Authority Exhibit K: Local Authority Exhibit L: Mission of Hope Articles of Incorporation Mission of Hope Website Mission of Hope Website Mission of Hope Webpage Mission of Hope Webpage Business Lease ISSUE Whether the local authority properly revoked the liquor license based on its determination that the license had been issued in error because the licensed premises was located within 300 feet of a building used for church purposes, in violation of the local authority s ordinance? FINDINGS OF FACT 1. On July 16, 2008, the Robert Godwin Trust (Landlord) and Rabbani Wahidy (Tenant) entered into a five-year lease for the business property located at 1545 First Avenue SE in Cedar Rapids, Iowa. The lease term commenced on July 1, 2008, and the terms included a base monthly rent of $1200. The lease provided that the Tenant may use and occupy the leased premises only for such business purposes as are currently allowed on the leased premises and for which the tenant has obtained any and all lawful permits, licenses and other approvals necessary to conduct Tenant s business. The lease further provided that if the Tenant is unable to start his business because he is not able to obtain a liquor permit, Tenant shall have the option to declare the lease null and void and shall be entitled to a refund of $250.00. (Testimony of Marshall Godwin; Rabbani Wahidy; Exhibit L) 2. On or about July 17, 2008, Mr. United Inc., d/b/a Liquor and Tobacco Point (licensee), filed a new Class E Liquor License Application with the Cedar Rapids City Council (local authority) for the premises at 1545 First Avenue SE, in Cedar Rapids, Iowa. Rabbani Wahidy is the 100% owner of Mr. United Inc. The local authority s Alcohol Control Team reviewed and investigated the application and then recommended its approval by the local authority. The local authority approved the application, and LE-1482 was issued to the licensee on or about August
Page 3 14, 2008. (Testimony of Bernard Walther; Wanda Miller; Electronic Liquor License Application; Exhibit C) 3. A short time after the liquor license was granted, a citizen complained that the licensee s location at 1545 First Ave. SE violated the local authority s ordinance 51.19, due to its proximity to the Mission of Hope at 1537 1 st Ave. SE. Cedar Rapids Municipal Code 51.19, provides, in relevant part: It shall be unlawful to establish and maintain a place for the sale of liquor or beer within 300 feet of a building used for church or school purposes. The ordinance does not provide any definition for church or school purposes. Police Captain Bernard Walther is the head of the local authority s Alcohol Control Team. After receiving the complaint, Captain Walther viewed the website of the Mission of Hope and spoke to the Reverend Barbara Furman, an ordained Methodist minister who runs the mission. She confirmed that the Mission of Hope offers non-denominational worship services each Sunday. (Exhibit A; Testimony of Bernard Walther) 4. Police Lieutenant Walter Deeds is also a member of the Alcohol Control Team. He used an Ultralight LTI 20/20 Laser to measure the distance between the Mission of Hope and Liquor and Tobacco Point, according to the specifications outlined in Ordinance 51.19. and determined that the distance between them was only 138.7 feet. (Testimony of Walter Deeds; Exhibit A) 5. On September 4, 2008, Captain Walther wrote a letter to the police chief reporting the findings of the Alcohol Control Team and recommending that the local authority rescind its approval of the liquor license issued to Mr. United Inc. In the absence of a definition or further explanation for what constitutes church or school purpose, Captain Walther concluded that a regularly scheduled worship service conducted by a minister ordained by a recognized religion constituted a church purpose. Captain Walther cited Ordinance 51.27(4), which provides that a license may be revoked for an event that would have resulted in disqualification from receiving such license or permit when originally issued, as authority for the action. (Testimony of Bernard Walther, Jr.; Exhibit A)
Page 4 6. On September 5, 2008, the local authority provided notice to the licensee by certified mail that it would conduct a hearing on the recommended revocation of the liquor license on September 24, 2008 at 5:30 p.m. (Exhibit E) The licensee appeared for the hearing and was represented by counsel. On October 8, 2008, the local authority approved Resolution No. 0856-10-08 revoking the liquor license, based on the following findings: Municipal Code section 51.19 prohibits the location of an establishment which sells liquor or beer within 300 feet of a building used for church purposes. Section 51.19 does not say that the building must be used predominantly for church purposes or must be a church. The Mission of Hope is located within 138.7 feet from the licensed premises and was located there before the license was issued. The Mission of Hope building is used for church purposes in that it has regularly scheduled religious services conducted by ordained ministers. There is a regular and established congregation that attends these services. The Mission of Hope is a non-profit corporation. The Mission attends to the spiritual needs of the persons who go there for food and shelter. The location of a place to sell liquor or beer at 1545 1 st Ave SE is prohibited by Municipal Code section 51.19. (Exhibit F) 7. The Mission of Hope was established approximately seven years ago by the Reverend Barbara Furman, who is an ordained Methodist Minister. The Mission of Hope is a tax exempt organization established to provide ministry to former offenders and others in need of assistance, including the poor, homeless, and the addicted. The Mission of Hope moved to its present location at 1537 1 st Ave. SE 4½ years ago. The building is a former storefront. There are no signs specifically identifying the building as a church, but there is a large cross hanging above the front entrance. The Mission of Hope offers a non-denominational worship service every Saturday night at 6:30 p.m. and every Sunday at 10:30 a.m. and
Page 5 offers Bible studies twice a week. The worship service follows the traditional order of Methodist worship: opening prayer, sermon, offering, and benediction. In addition, the Mission of Hope provides food, clothing, and counseling to the needy. There is also a Mission of Hope Shelter, which is located approximately two blocks from the Mission of Hope. The Mission of Hope has not taken a position for or against the licensee s liquor license. (Testimony of Barbara Furman; Exhibits H-K) 8. Hy-Vee has a liquor license and is located across the street from the Mission of Hope. Hy-Vee has been present at this location for at least thirty years, although a new building was constructed approximately ten years ago. Lt. Deeds measured the distance between Hy-Vee and the Mission of Hope, according to the specifications set out in the city s ordinance, and determined that the distance was greater than 300 feet. (Testimony of Bernard Walther; Walter Deeds; Marshall Godwin) 9. Marshall Godwin has resided in the 1 st Ave SE neighborhood since 1952, and his family has owned the building at 1545 1 st Ave. SE since the 1970 s. The building has had a number of businesses, including a restaurant with a beer permit during the 1980 s. There has not been a liquor license or beer permit for this location since the Mission of Hope moved in at 1537 1 st Ave SE. Mr. Godwin negotiated the terms of the lease with Mr. Wahidy, including the stipulation that the lease was contingent on the issuance of the liquor license. Mr. Godwin did not consider the Mission of Hope to be a church, although he is a friend of the Reverend Furman and has attended worship services at the Mission of Hope approximately 3 or 4 times in the past. The Robert Godwin Trust (landlord) allowed the licensee to have the building for 60 days without rent, so that they could put the money toward remodeling costs. The licensee has made substantial improvements to the building. (Testimony of Marshall Godwin) 10. Rabbani Wahidy lives in Cedar Falls, Iowa, where he has another business with a liquor license. Before entering into the lease for this property, Mr. Wahidy visited the city s zoning office to inquire if there were any zoning restrictions for the location and was told there were none. Mr. Wahidy estimated the cost of the building improvements to be in the range of $50,000-$60,000. Without the liquor license, Mr. Wahidy does not believe he
Page 6 will be able to make sufficient income to have a successful business. (Testimony of Marshall Godwin; Rabbani Wahidy) CONCLUSIONS OF LAW I. Applicable Statutes, Administrative Rules, and Local Ordinances. A license or permit issued under Iowa Code chapter 123 may be suspended or revoked, or a civil penalty may be imposed on the licensee or permit holder by the local authority or the administrator for [a]n event which would have resulted in disqualification from receiving the license or permit when originally issued. 1 Local authorities may adopt ordinances or regulations for the location of the premises of retail wine or beer and liquor control licensed establishments. 2 The division s rules provide that counties, cities and towns are free to adopt more restrictive ordinances or regulations governing licensed liquor establishments within their jurisdiction. 3 The local authority has enacted an ordinance limiting the permissible locations for licensed liquor establishments within its jurisdiction. Cedar Rapids Municipal Code 51.19 provides: It shall be unlawful to establish and maintain a place for the sale of liquor or beer within 300 feet of a building used for church or school purposes. Such area limitations shall not apply to permits in force on January 1, 1965, nor to renewals thereof. Said 300 feet shall be determined by a measurement to be made on a perpendicular line from the center of the front door of each building to the street sidewalk and then along a line on the centre of the public sidewalk; and if there be no public sidewalks, then along the side of the right of way of the street adjacent to the properties, provided that there shall be no less than 200 feet between the nearest points of the buildings. In the case of buildings across the 1 Iowa Code section 123.39(1)(b)(4)(2007); Cedar Rapids Municipal Code 51.27(a)(4.. 2 Iowa Code section 123.39(2)(2007). 3 185 IAC 4.3.
Page 7 street from each other, the measurement shall be made along the lines as above described and then be projected across the street, the distance across said street to be included in the measurement at a point where the liens on the opposite sides of the street are at the minimum distance from each other. Cedar Rapids Municipal Code 51.10(a) provides that no liquor control license or beer permit shall be approved for premises which do not conform to all applicable laws, ordinances, resolutions, and health and fire regulations. II. Analysis A. Local Ordinance-Separation Distance Requirements The applicable statutes and rules clearly authorize the local authority to enact and enforce ordinances restricting the location of licensed liquor establishments within its jurisdiction. The local authority has duly enacted its Municipal Ordinance 51.19 which prohibits a licensed liquor establishment from being located within 300 feet of a building used for church...purposes. As pointed out by the local authority, the language used in the ordinance is broad, and the evidence clearly established that the Mission of Hope is a building used for church purposes. Worship services are regularly conducted in the building and are led by an ordained minister. Bible study is also conducted in the building. The additional uses for the building, i.e. providing food, clothing and counseling to the needy, are not inconsistent with its use for church purposes. The Mission of Hope Shelter is in a separate building and is not at issue in this case. In addition, the Mission of Hope was established at this location and providing church services prior to the issuance of the liquor license. Although Hy-Vee is also nearby, its liquor license is not affected by the ordinance. The Hy-Vee was established at this location and had a liquor license prior to the Mission of Hope moving into the neighborhood. When the distance between the Hy- Vee and the Mission of Hope was measured using the specifications set out in the ordinance, the distance between the two buildings was greater than 300 feet.
Page 8 The licensee essentially argues that since the Hy-Vee is nearby and selling liquor, then the local authority cannot argue that the presence of the licensee s establishment has a detrimental impact. However, the local authority is not required to show detrimental impact in order to enforce its duly enacted ordinances. In addition, two licensed liquor establishments may have a greater detrimental effect on a neighborhood than one. No one is asserting that the licensee has done anything wrong to result in this revocation action. The local authority s Alcohol Control Team was aware of the Mission of Hope when it investigated the application but recommended approval because the officers apparently misunderstood the scope of the ordinance and only looked for the presence of traditional churches. A mistake was made. Nevertheless, the licensed premises do not conform to Municipal Ordinance 51.19 because the premises is within 300 feet of a building used for church purposes. B. Promissory Estoppel In its brief, the licensee asserts two legal doctrines in support of its claim that the local authority should be prevented from revoking its liquor license, even if it is non-conforming. Under both doctrines, the licensee essentially argues that the equities of case favor the licensee keeping the liquor license. First, the licensee cites to the doctrine of Promissory Estoppel, which is based on the Restatement (2 nd ) of Contracts, Section 90. The Iowa Supreme Court has recognized the doctrine and has summarized its elements as: 1. A clear and definite agreement; 2. Proof that the parties seeking to enforce the agreement reasonably relied upon it to its detriment; and 3. A finding that the equities support enforcement of the agreement. 4 The Iowa Supreme Court has noted that in applying the doctrine of promissory estoppel, each case must be decided in light of its surrounding facts and circumstances. There 4 Amana Society v. Colony Inn, Inc., 315 N.W.2d 101, 117(Iowa 1992), citing In re Estate of Graham, 295 N.W. 2d 414, 418-419(Iowa 1980).
Page 9 can be no hard and fast rules for determining when it is appropriate. 5 It is doubtful that it is ever appropriate to invoke the doctrine of promissory estoppel in a liquor licensing appeal, which by its nature impacts the public welfare, health, peace, morals and safety. 6 Nevertheless, the record here does not support the finding of a clear and definite agreement between the local authority and the licensee. The Alcohol Control Team was aware of the Mission of Hope but assumed that it was not an impediment to the liquor license. However, it is the city council, not the Alcohol Control Team, who must make the decision whether to approve the liquor license. It is not at all clear that the members of the city council were aware of the close proximity of the Mission of Hope, that they knew that church services were conducted within the building, or that they ever considered whether the Mission of Hope was a building used for church purposes in making their licensing decision. There is no record that this issue was ever discussed or explicitly decided by the city council. It is inappropriate to apply the doctrine of promissory estoppel to prevent the local authority from revisiting its licensing decision in this case. C. Vested Rights Second, the licensee argues that the local authority s issuance of the liquor license should be considered binding under the doctrine of vested rights. In a line of cases addressing building permits, the Iowa Supreme Court has recognized that when a building permit holder makes expenditures in reliance on the building permit, he may acquire vested rights in that permit, and the city may be estopped from revoking the permit. 7 However, as pointed out by the local authority, the licensee s reliance on the vested rights doctrine is misplaced. The Iowa Supreme Court has also recognized that if a permit was not validly issued or the building does not comply with applicable 5 Johnson v. Pattison, 185 N.W.2d 790, 795 (Iowa 1971). 6 Iowa Code section 123.1(2007); See ABC Disposal Systems, Inc. v. Department of Natural Resources, 681 N.W.2d 596, 607 (Iowa 2004) (Equitable estoppel will not lie against a government agency except in exceptional circumstances. A person seeking to invoke the doctrine of equitable estoppel against a governmental body bears a heavy burden, particularly when the government acts in a sovereign or governmental role rather than a proprietary one.) 7 Citing Chamberlain LLC v. City of Ames, No. 06-1487, issued November 12, 2008; BNH Investments, Inc. v. City of Coralville, 209 N.W.2d 115, 118(Iowa 1973).
Page 10 requirements, a permit can be revoked notwithstanding the permit holder s reliance. 8 It is unclear whether the Court would extend the vested rights doctrine to estop a licensing authority from revoking a beer permit or liquor license, as opposed to a building permit. Nevertheless, even if the doctrine could apply to liquor licenses, the licensee s premises did not conform to the separation distance requirements provided in the local authority s ordinance at the time the application was submitted, and therefore the license was not validly issued. For this reason alone the licensee should not be permitted to claim vested rights. In addition, the licensee failed to specify exactly when the leasehold improvements were made. Since the licensee had possession of the premises at least six weeks before the liquor license was issued, some or all of the improvements may have been made prior to the local authority approving the application. It is unclear that the leasehold improvements were made in reliance upon the decision to issue the liquor license. III. Effect of Revocation If a liquor license is revoked, the liquor control licensee is not thereafter permitted to hold a liquor license, wine permit, or beer permit in the state of Iowa for a period of two years from the date of revocation. In addition, the premises for which the license has been revoked may not be relicensed for one year. 9 At hearing, the local authority acknowledged that it had not considered the impact of Iowa Code section 123.40 when it took the revocation action, nor had it intended for the licensee or the landlord to suffer such consequences. The consequences of Iowa Code section 123.40 are unfair and disproportionate when the license was issued by mistake and the licensee has done nothing wrong to lose the liquor license. In addition, as of the date of the hearing, the Mission of Hope was still considering moving to a new location. If the Mission of Hope did move further away and the building was no longer used for church (or school) purposes, this licensee (or a new tenant) should not be prohibited from reapplying for a liquor license. For these reasons, the local authority s action 8 Chamberlain at 5, citing City of New Hampton v. Blayne-Martin Corp., 594 N.W.2d 40, 44-45. 9 Iowa Code section 123.40(2007).
Page 11 should be modified to a rescission of the license, rather than a revocation. ORDER IT IS THEREFORE ORDERED that the action of the Cedar Rapids City Council with respect to Liquor License No. LE-1482 issued to Mr. United, d/b/a Liquor and Tobacco Point, is hereby AFFIRMED as MODIFIED. If this Proposed Decision becomes final agency action, Liquor License LE-1482 shall be RESCINDED. 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 50021. 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. Dated this 25 th day of February, 2009.
Page 12 Margaret LaMarche Administrative Law Judge Department of Inspections and Appeals 3rd Floor, Wallace State Office Building Des Moines, IA 50319 CC: See Attached Mailing List
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