IN RE: Rundle, Dorothy d/b/a Yankee Scoreboard 122 S. Frederick Ave. Oelwein, Iowa DOCKET NO. A DIA NO. 11ABD075
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1 Terry E. Branstad Governor of Iowa Kim Reynolds Lieutenant Governor Stephen Larson Administrator IN RE: Rundle, Dorothy d/b/a Yankee Scoreboard 122 S. Frederick Ave. Liquor License No. LC DOCKET NO. A DIA NO. 11ABD075 ADMINISTRATOR S FINAL ORDER NOW, on this 6 th day of April 2012, this matter comes before the Administrator of the Alcoholic Beverages Division (ABD) on the Notice of Appeal filed by Rundle, Dorothy, d/b/a Yankee Scoreboard (Licensee). Upon consideration of the information provided by the parties, the findings of fact, conclusions of law and other information, the Administrator has affirmed the Administrative Law Judge (ALJ) order dated December 5, PROCEDURAL HISTORY On August 23, 2011, the City of Oelwein (City) denied the application for renewal of liquor license LC filed by the Licensee. The denial was based on criminal violations and an improper license transfer. On August 24, 2011, the licensee appealed the license renewal denial to the ABD. A hearing on the above-captioned matter was held pursuant to the provisions of Iowa Code chapters 17A and 123 on November 2, The hearing was held by the ABD s administrator s designee, Administrative Law Judge (ALJ) Margaret LaMarche of the Department of Inspections and Appeals by telephone. Attorney Ron Van Veldhuizen represented the City and Attorney John Sullivan represented the Licensee. The ALJ issued a Proposed Decision affirming the City s denial of the Licensee s application on December 5, The ALJ concluded the Licensee s repeated violations of state liquor laws in the year prior to filing the most recent liquor license renewal application, brings into question the Licensee s ability to meet the standards of good moral character as required by Iowa Code 123.3(26). The Licensee appealed the Proposed Decision on December 30, 2011, to the Administrator within the required time period. In an Order dated January 4, 2012, the Administrator granted the Licensee s request for review and established a schedule for the parties to file objections or exceptions and present briefs in 1
2 support of their respective positions. The objections or exceptions and briefs of the appealing party were due on or before February 3, 2012, and responsive briefs were due on or before March 5, The record reflects that all briefs were timely filed by the parties. BASIS FOR THE APPEAL The basis for the Licensee s appeal is that the ALJ erred by concluding the City had sufficient legal reason to deny the liquor license renewal because the Licensee lacked the required good moral character to hold a liquor license. Specifically, the Licensee disagrees with each of the ALJ s findings of fact and conclusions of law relating to the rental and use of the liquor license by another person, illegal credit sales, reselling of beer not purchased from a wholesaler, and illegal advertising of alcohol brands. The Licensee additionally continues the objection that the City s exhibits (1-24) are hearsay and were admitted without proper foundation. FINDINGS OF FACT 1. The Licensee is a bar that serves food and has been owned since 1983 by Dorothy and John Rundle. There are rooms available to rent above the bar. 2. The Licensee had a previous violation of refilling bottles (Iowa Code (2)(e)) and selling on credit (Iowa Code (2)(c)) which occurred on October 25, On January 3, 2011, John Rundle fell and his health deteriorated. On March 23, 2011, Dorothy Rundle suffered a stroke. Dorothy hired Brad and Joyce Herman (the Hermans) and Helen Schroedermeier to run the bar while she recovered. 4. On April 7, 2011, Helen Schroedermeier fell and broke her arm, leaving the Hermans to run the bar. 5. On April 17, 2011, John Rundle passed away and Dorothy became the sole owner of the Licensee. 6. On April 29, 2011, an agreement was made between Dorothy Rundle and the Hermans that the Hermans would pay Dorothy Rundle $25.00 per day ($ a month) rent to run the bar. The agreement was not in writing. 7. On June 14, 2011, Dorothy Rundle took over the operations of the bar and ended her agreement with the Hermans. Dorothy Rundle employed and paid Dawn Torres and two other women to be bartenders. 8. On June 24, 2011, Attoney John W. Hofmeyer III, attorney representing Dorothy Rundle, sent a letter to the Hermans requesting payment of utilities totaling $1, along with an inventory (alcoholic beverages inventory included) balance owed totaling $ and missing property owed totaling $ On July 16, 2011, the Oelwein Police Department received a citizen complaint from Mary Wright that the Licensee was allowing her daughter, Wanda Wright, to make purchases of alcoholic beverages on credit, and had been doing so since Witness statements 2
3 provided by Mary Wright, Wanda Wright, and Tina Jessop (Wanda s sister and payee) detailed the credit sales of alcoholic beverages. Testimony provided at hearing by Oelwein police lieutenant is consistent with these witness statements. 10. On July 29, 2011, the Licensee filed an electronic renewal application for liquor license LC John Rundle and Dorothy Rundle were listed as the owners. 11. On August 10, 2011, an on-premises investigation was conducted by an Oelwein police lieutenant and an Iowa Alcoholic Beverages Division investigator to investigate the purchases on credit complaint. 12. During the investigation signs were located outside the Licensee s front and back entrance that advertised brand names of alcoholic beverages, credit tabs were located next to the cash register and under the bar, and 12 ounce containers of Killians, Guinness, Leinenkugel, Bud Select, Heineken, and Schlitz were found to not have been purchased from their respective wholesaler. 13. During the investigation, employee Dawn Torres admitted to placing signs with brand name advertising outside the establishment and allowing customers to run tabs. 14. While conducting the on-premises investigation, Dorothy Rundle was interviewed by an investigator with the Iowa Alcoholic Beverages Division. Dorothy Rundle stated during this interview that she had agreed to let Brad Herman rent her bar and use her liquor license, but the arrangement was terminated because of a dispute over property and Iowa sales tax. 15. On August 14, 2011, an interview was conducted and witness statements were collected from Brad and Joyce Herman by the Oelwein Police Department detailing the rental agreement they had with Dorothy Rundle and illegal credit sale transactions. Dorothy Rundle allowed Brad Herman to run a tab and Brad Herman provided names of additional individuals that he knew Dorothy Rundle allowed to keep credit tabs. One named individual, Wanda Wright, had already reported to police and provided a witness statement that Dorothy Rundle had allowed her to run a tab for alcoholic beverages. Testimony provided at hearing by Oelwein police lieutenant was consistent with the Hermans witness statements. 16. On August 15, 2011, witness statements were obtained from three of the individuals (Dorothy Johnson, Joshua Johnson, and Kyla Anderson) named by Brad Herman as being allowed by Dorothy Rundle to keep credit tabs. Each witness statement was consistent with what Brad Herman had stated in his witness statement. Testimony provided at hearing by Oelwein police lieutenant was consistent with the witness statements. 17. On August 23, 2011, the renewal application was denied by the local authority for criminal violations and improper license transfer. 3
4 18. Dorothy Rundle provided testimony at hearing that it is her handwriting on invoices introduced into evidence, including: a. Invoice Number 1072 dated April 28, 2011, which is to Brad & Joyce Herman, new renters of Yankee Scoreboard Lounge for a cash payment of $88.00 for April 25, 26, 27, 28 (2011). b. Invoice Numbers 1074 and 1075 dated April 28, 2011, which are to Brad & Joyce Herman listing 1 month rental for Yankee Scoreboard, $750.00, inventory already in the bar $393.00, additional charges for liquor, pop, beer, Coors, and Coors Light and a note that we still need the food inventory reported that you will use up. c. Invoice Number 1076 dated April 29, 2011, which is to Brad & Joyce Herman listing Rental for Yankee Scoreboard to , $ and additional inventory charges. 19. Dorothy Rundle testified at hearing that she did sell beer to Donald Moore and collected the money at a later date because Moore was renting a room above the bar. Invoices 2313 and 2358 show the room rental and bar charges. CONCLUSIONS OF LAW Iowa Code (2) states that the local authority shall either approve or disapprove the issuance of a liquor control license, retail wine permit, or retail beer permit; shall endorse its approval or disapproval on the application; and shall forward the application with the necessary fee and bond, if required, to the Division. Under Iowa Code (7) an applicant for a liquor control license may appeal from the local authority s disapproval of an application for a license to the administrator. In the appeal the applicant is given the opportunity to demonstrate that the applicant complies with all of the requirements for holding the license. Iowa Code (3)(c)(1) requires a class C liquor control license to be issued to a commercial establishment in the name of the individuals who actually own the entire business. The application for a liquor control license is required to contain the names and addresses of all persons having a financial interest, by way of loan, ownership, or otherwise, in the business under Iowa Code (3). Pursuant to Iowa Code (1), every license shall be issued in the name of the applicant and no person holding a license shall allow any other person to use it. Furthermore, 185 Iowa Administrative Code 4.18 states a licensee cannot transfer to anyone else the right to use the liquor license of the licensee. Iowa Code (2)(c) makes clear that a person or club holding a liquor license and the person s or club s agents or employees are prohibited from selling alcoholic beverages, wine, or beer to any person on credit, except with a bona fide credit card. This provision does not apply to sales by a hotel or motel to bona fide registered guests. Id. 4
5 185 Iowa Administrative Code 4.8 states that any violation of the Act or the rules of the division by any employee, agent or servant of a licensee shall be deemed to be the act of the licensee and shall subject the license of said licensee to suspension or revocation. Iowa Code allows a class C liquor control licensee to sell beer to consumers at retail for consumption on or off the premises. Iowa Code requires a class C liquor control licensee to sell beer purchased from a class A permittee. Under Iowa Code no signs or other matter advertising any brand of alcoholic liquor, beer, or wine may be erected or placed on the outside of any premises occupied by a licensee authorized to sell alcoholic liquor, beer, or wine at retail. Pursuant to Iowa Code (1)(a) a liquor control license may be issued to any person who is of good moral character as defined by this chapter. Iowa Code 123.3(26) defines a person of good moral character to mean, in part, that a person has such financial standing and good reputation as will satisfy the administrator that the person will comply with this chapter and all laws, ordinances, and regulations applicable to the person s operations under this chapter. 185 Iowa Administrative Code 4.2(4) further explains that the local authority or the administrator may consider an applicant s financial standing and good reputation in addition to the other requirements and conditions for obtaining a liquor control license and the local authority or the administrator shall disapprove or deny an application for a liquor control license if the applicant fails to demonstrate the applicant complies with the lawful requirements and conditions for holding the license. The local authority or the administrator may consider such factors as, but not limited to the following, when evaluating an applicant s good reputation : pattern or practice of sales of alcoholic beverages to 19- and 20-year-old persons for which the licensee, the licensee s agents or employees, have pled or have been found guilty, pattern and practice by the licensee, or the licensee s agents or employees, of violating alcoholic beverages laws and regulations for which corrective action has been taken since the previous license was issued, sales to intoxicated persons, licensee convictions for violations of laws relating to operating a motor vehicle while under the influence of drugs or alcohol, the recency of convictions under laws relating to operating a motor vehicle while under the influence of drugs or alcohol, licensee misdemeanor convictions, the recency of the misdemeanor convictions. Id. Under Iowa Code (7), an applicant for a liquor control license may appeal the local authority s disapproval of an application for a license to the Administrator. In the appeal, the applicant shall be allowed the opportunity to demonstrate in an evidentiary hearing conducted pursuant to chapter 17A that the applicant complies with all of the requirements for holding the license. BASIS FOR DECISION In administrative proceedings, the statute allows that a finding can be based upon the kind of evidence on which reasonably prudent persons are accustomed to rely for the conduct of their serious affairs, even if such evidence would be inadmissible in a jury trial. Iowa Code 17A.14. 5
6 In Gaskey v. Iowa Dep't of Transp., 537 N.W.2d 695, 698 (Iowa 1995), the courts held that hearsay evidence may constitute substantial evidence to support a factual finding in an administrative proceeding. Therefore, the ALJ properly admitted the City s exhibits. The burden of proving compliance with the statute is on the licensee. McCrea v. Iowa Department of Transportation, 336 N.W.2d 427 (Iowa 1983). The Licensee asserts that she has maintained a good reputation in her community while holding a liquor control license. The Licensee denies there was a rental agreement with the Hermans for operating her bar while she was medially incapacitated explaining that Brad was just managing the bar for her. The Licensee also denies running credit sales on alcoholic beverages for patrons, explaining that she personally paid for patron drinks and did not expect payment in return. The Administrator does not find either of these justifications argued persuasive. Based on the record, hearing testimony, and evidence reviewed by the Administrator, the Licensee did rent the bar to Brad and Joyce Herman. The rental arrangement between Brad Herman and Dorothy Rundle required Brad to pay rent, purchase alcoholic beverages inventory, and pay for business utilities during this time period. Brad Herman clearly was receiving business profits and was not being paid wages by Dorothy Rundle between April 29, 2011, and June 14, Brad Herman was never listed as an owner on the application for liquor control license LC Unquestionably Dorothy Rundle allowed Brad Herman to use liquor license LC to purchase and sell alcoholic beverages from April 29, 2011, to June 14, Consequently, the Licensee failed to demonstrate compliance with Iowa liquor laws. Based on the record, hearing testimony, and evidence reviewed by the Administrator, the Licensee has, on multiple occasions, allowed customers to purchase alcoholic beverages on credit. During the on-premises investigation an employee admitted to allowing customers to purchase alcoholic beverages on credit. Moreover, the Licensee admitted to selling beer on credit to a hotel guest on two occasions. The Licensee attempts to justify this action, stating the statute allows sales to hotel guests, but the Licensee does not hold a hotel/motel liquor license. The Licensee failed to meet her burden of proof to show compliance with Iowa liquor laws. The Licensee admitted that the Killians beer found on the premises during the investigation was not purchased from a wholesaler. The Licensee did not present any evidence to dispute the investigative findings of the additional brands of beer that were found to not have been purchased through a wholesaler. The Licensee was not in compliance with Iowa liquor laws. The Licensee admitted that the signs located outside the premises during the investigation contained name brand advertising. Licensee employee, Dawn Torres, admitted to placing signs with brand name advertising outside the establishment. The Licensee was not in compliance with Iowa liquor laws. What is in question in the particular case is whether the Licensee has the requisite good moral character for renewal of the license. The Licensee argues that the Licensee s record of voluntary compliance in the many years that the Licensee has been in operation more than demonstrates that the Licensee does possess sufficient good moral character to hold the license. However, the Licensee s illegal activities over the previous year include allowing another individual to use the liquor license, allowing illegal sales of alcoholic beverages on credit, reselling beer not purchased from a wholesaler, and illegal advertising of alcohol brands. 6
7 The Licensee s repeated violations of Iowa liquor laws fails to prove the Licensee will abide by statutes and rules that apply when operating a liquor establishment in the state of Iowa. Therefore, the Administrator concludes the Licensee does not possess good moral character to hold a liquor license in Iowa. ORDER Based on the information provided by the parties, the Administrator hereby ADOPTS the Findings of Fact, Conclusions of Law, and the Decision and Order proposed by the ALJ. IT IS THEREFORE ORDERED that denial of the application for renewal of liquor license, LC issued to Rundle, Dorothy, d/b/a Yankee Scoreboard, 122 S. Frederick Ave., Oelwein, Iowa, is hereby AFFIRMED. The parties are hereby notified that pursuant to Iowa Code 17A.19, this Order constitutes final agency action for the purpose of Iowa Code chapters 17A and 123. This Order becomes final unless a party to the hearing files a Petition for Judicial Review with the Iowa District Court within 30 days from the date of this Order. Moreover, the parties are notified that pursuant to Iowa Code 17A.19(5), the filing of a petition for judicial review does not automatically stay execution or enforcement of the ABD s action. The ABD may grant a stay on appropriate terms or other temporary remedies during the pendency of judicial review. If the ABD refuses to grant the stay or other temporary remedies, the court may grant the relief. Liquor license LC will expire effective 12:00 A.M. on May 7, Liquor, wine, and beer may not be sold, served, consumed or given away by any person in or on the premises known as, Rundle, Dorothy, d/b/a Yankee Scoreboard located at 122 S. Frederick Ave., Oelwein, Iowa, after the expiration of the liquor license, unless a stay or other temporary remedies are granted by the ABD. If the ABD refuses to grant a stay or other temporary remedies, the court may grant the relief. DATED this 6 th day of April 2012, in Ankeny, Iowa. IOWA ALCOHOLIC BEVERAGES DIVISION STEPHEN LARSON Administrator 7
8 Copies to: Margaret LaMarche Administrative Law Judge Department of Inspections & Appeals 3 rd Floor, Wallace State Office Building Des Moines, Iowa John Lundquist Assistant Attorney General Iowa Department of Justice Hoover State Office Building Des Moines, Iowa Lt. David Eick ISP, District # th Street Chief Jeremy Logan Oelwein Police Department 20 2 nd Avenue SW, Suite 200 Ron Van Veldhuizen Attorney at Law PO Box 635 City Clerk City Hall 20 2 nd Avenue SW Steve Bogle Iowa Lottery 2323 Grand Avenue Des Moines, Iowa Steven Mandernach Social Gaming Unit Lucas State Office Building Des Moines, Iowa Karen Freund Deputy Administrator of Regulation Iowa Alcoholic Beverages Division 1918 SE Hulsizer Rd Ankeny, Iowa John Sullivan Attorney at Law PO Box 409 8
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