Hymanson v. City of St. Paul , 329 N.W.2d 324 ( 1983 )

PETERSON, Justice.

By a resolution dated August 19, 1982, the St. Paul City Council unanimously revoked various liquor and entertainment licenses held by Lucky Lanes, Inc. (The business run by Lucky Lanes, Inc. is more commonly known as “Pudge’s.”) Plaintiffs Lucky Lanes, Inc. and Kit Hymanson (the sole shareholder and president of Lucky Lanes, Inc.) sought a permanent injunction against revocation of the licenses in district court. The permanent injunction was denied. We affirm.

Issues raised on appeal include: (1) whether the notice and hearing requirements of the contested case provisions of Minn.Stat. §§ 14.57 to 14.70 (1982), Minnesota’s Administrative Procedure Act (APA), were followed; and (2) whether the APA requires the appointment of a hearing examiner to conduct initial liquor license revocation proceedings. Our discussion is brief because division in the court centered only upon the hearing examiner issue.

Before a liquor license may be revoked in Minnesota, a licensee is entitled to a hearing pursuant to the sections of the APA mentioned above.¹ Minn.Stat. § 340.-135 (1982). We are satisfied that notice and hearing requirements were amply met in this case. A notice of a public hearing before the city council was sent to plaintiffs on July 8, 1982. The notice described the ordinance violations (an after-hours display of alcohol, and indecent exposure by male dancers performing at Pudge’s) for which revocation or suspension of licenses might occur. The notice also mentioned that complaints by neighborhood residents near Pudge’s would be heard. The hearing held on August 10, 1982, was orderly. Council Member Victor Tedesco presided, aided on legal questions by a city attorney. After listening to testimony presented, both adverse and favorable to Pudge’s, the city council unanimously voted to revoke plaintiffs’ licenses.² We uphold the decision, as falling within the grant of broad discretion given to municipal authorities to determine the issuance, regulation, and revocation of liquor licenses. Sabes v. City of Minneapolis, 265 Minn. 166, 120 N.W.2d 871 (1963); cf. Wajda v. City of Minneapolis, 310 Minn. 339, 246 N.W.2d 455 (1976).

A closer question is whether a hearing examiner should have been appointed to conduct initial liquor license revocation proceedings. We emphasize the word initial to relate an important point about the role of hearing examiners: their functions are subordinate to a reviewing agency’s (in this case, the city council’s) power. A hearing examiner presides at meetings and makes recommendations for decision. But the agency is not bound by the findings and recommendations of the hearing examiner. K. Davis, Administrative Law Text, § 10.07 (3rd ed. 1972). In this sense, the relationship differs from that of an appellate court reviewing a lower court’s findings of fact: an agency could make new findings and decide contrary to the hearing examiner’s recommendation. Id. at § 10.04. A hearing examiner takes no power away from an agency.

The historical background and function of hearing examiners aids in analysis of legislative intent involved in Minn.Stat. § 340.-135 (1982).³ Since 1975, contested case provisions of the APA have provided the procedural framework within which governing authorities may revoke or suspend liquor licenses. Section 340.135, however, never explicitly incorporated the sections of the APA pertaining to hearing examiners, and their functions and duties, Minn.Stat. §§ 14.48 to 14.56 (1982).⁴ The Attorney General found this omission telling, and advised the Minneapolis City Attorney that no hearing examiner need be appointed to conduct hearings concerning revocation or suspension of an intoxicating liquor license. Op.Atty.Gen., 218g-14, Nov. 5, 1976. Municipalities in Minnesota have followed this guidance ever since. And although the Attorney General opinion is not controlling, we are persuaded that this opinion reflects the true legislative intent embodied in Minn.Stat. § 340.135.⁵ Similarly, when the city council incorporated section 340.135 by reference in its ordinance, it may be presumed that it intended the construction that the Attorney General had advised in its opinion. ' This is manifested by the council’s action in not appointing a hearing examiner. The statute, by incorporating the contested case procedures, brought notice and hearing requirements to an area noted for its irregularity of process. Many jurisdictions had no notice or hearing requirements, nor were these constitutionally required. See, Annot., 35 A.L.R.2d 1067 (1954). Nor did Minnesota municipalities have procedures for liquor license revocations matching the finely detailed notice and hearing requirements of the APA. See, e.g., St. Paul, Minn. Legislative Code § 308.14 (1976); Duluth, Minn. Legislative Code § 8-68 (1959) (automatic revocation upon conviction of the licensee of a gross misdemeanor or felony). Imposition of contested case procedures on widely varying procedures usually applicable for liquor license revocations did bring uniformity— and this, we believe, was its intended result.

To go one step further — to say hearing examiners are necessary before a liquor license can be revoked in Minnesota cities statewide — comports neither with past interpretation of section 340.135, nor with what we believe this section sought to attain, nor with the historical functions of hearing examiners. Our interpretation of legislative intent leads to the following holding: Minn.Stat. § 340.135 does not require the appointment of a hearing examiner to conduct initial liquor license revocation proceedings.⁶

Affirmed.

1 . The notice and hearing requirements outlined by the APA rise above those constitutionally mandated. Under Minnesota law, there is no property right in a liquor license. Country Liquors, Inc. v. City Council of Minneapolis, 264 N.W.2d 821, 826 (Minn.1978), quoting Arens v. Village of Rogers, 240 Minn. 386, 401, 61 N.W.2d 508, 519, appeal dismissed, 347 U.S. 949, 74 S.Ct. 680, 98 L.Ed. 1096 (1954): “[Njo person has a vested property right to engage in or continue to engage in the liquor business.”

2 . After extensive evidence was introduced, plaintiffs stipulated to the two aforementioned ordinance violations. The city council also found that the activities of the licensee also created a serious danger to public health, safety, and welfare. This constitutes an additional ground for adverse action against a licensee in St. Paul. St. Paul, Minn. Legislative Code § 310.06, subd. 2(7) (1981). Plaintiffs alleged that notice was inadequate to inform them of this possible ground for revocation. While the written notice was not as specific as it could have been, we are convinced that plaintiffs had actual notice — both by previous meetings with neighborhood residents, the license inspector, city council members, and the mayor — that Pudge’s business was creating serious problems in the surrounding neighborhood. The possibility that the licenses would be revoked for this reason was discussed at the public hearing. Under these circumstances, we have no difficulty upholding the city council’s decision against arguments that the decision was based on inadequate notice and was arbitrary and capricious. See, Sabes v. City of Minneapolis, 265 Minn. 166, 120 N.W.2d 871 (1963).

3 . Minn.Stat. § 340.135 (1982), provides:

The authority issuing or approving any license or permit pursuant to the intoxicating liquor act may either suspend for not to exceed 60 days or revoke such license or permit upon a finding that the licensee or permit holder has failed to comply with any applicable statute, regulation or ordinance relating to intoxicating liquor. No suspension or revocation shall take effect until the licensee or permit holder has been afforded an opportunity for a hearing pursuant to sections 14.57 to 14.70.

(Emphasis supplied.)

4 . As the dissent correctly notes, certain provisions of the contested case procedure do refer to these sections, but our further discussion demonstrates why we do not think these references are dispositive of the issue.

5 . Corroborative of this analysis is the fact that the legislature has never amended Minn.Stat. § 340.135 to specifically mandate use of hearing examiners — despite a suggestion in a dissent in Flame Bar, Inc. v. City of Minneapolis, 295 N.W.2d 586 (Minn.1980) (Justices Yetka and Scott, dissenting) that hearing examiners ‘ be appointed. The majority opinion rested upon a jurisdictional ground, and never reached the hearing examiner issue. The legislative inaction — in the face of some confusion — is indicative, we believe, of a position favoring the nonappointment of hearing examiners.

6 . Even if we were inclined to read such a requirement into Minn.Stat. § 340.135, the facts of the case suggest a waiver of the right to have initial proceedings before a hearing examiner. Plaintiffs, assisted by counsel, had more than a month’s notice of the meeting with the city council. Yet they never made a request to have a hearing examiner appointed. Rather, they chose to meet directly — and to negotiate — with the city council. Only when their efforts failed with the city council did the hearing examiner issue arise.