COURT OF
APPEALS DECISION DATED AND
RELEASED October
3, 1996 |
NOTICE |
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 96-0227
STATE OF WISCONSIN IN
COURT OF APPEALS
DISTRICT IV
AMERICAN
WORLD, INC.,
Plaintiff-Appellant,
v.
CITY
OF WISCONSIN DELLS,
Defendant-Respondent.
APPEAL
from a judgment of the circuit court for Columbia County: RICHARD L. REHM, Judge. Affirmed.
Before
Vergeront, Roggensack and Deininger, JJ.
DEININGER,
J. American World, Inc. appeals from a judgment upholding the
City of Wisconsin Dells' denial of its application for a "Class B"
liquor license, claiming that the City's action was arbitrary and
capricious. Because we find the record
demonstrates a proper exercise of discretion in denying the license, we affirm.
BACKGROUND
Section
125.51(4), Stats., places a quota
on the number of "Class B" licenses a municipality may issue.[1] The City of Wisconsin Dells' quota of
"Class B" licenses is fourteen, all of which are presently
issued. As part of the 1995-1997 state
budget bill, 1995 Wis. Act 27, the legislature enacted the following provision:
Section
4123m. 125.51(4)(u)
of the statutes is created to read:
(4)(u)1. Notwithstanding the quota
of a municipality, its governing body may issue a license to a corporation that
holds a Class "B" license, a "Class C" license and a
"Class A" license since January 1, 1992, if the licenses are issued
by that governing body.
2. No
license may be issued under subd. 1. after September 1, 1995, or 30 days after
the effective date of this subdivision [July 29, 1995], whichever is later, but
a license issued under subd. 1. on or before September 1, 1995, or on or before
30 days after the effective date of this subdivision [July 29, 1995], whichever
is later, may be renewed.
American
World is a Wisconsin corporation which operates a one-hundred-sixty room motel
and recreational complex in the City of Wisconsin Dells (City). The complex includes a restaurant and
lounge, as well as a liquor store.
American World has held the three licenses cited in
§ 125.51(4)(u)1., Stats.,
since January 1, 1992, and was thus eligible for a "Class B" license
from the City of Wisconsin Dells under the newly enacted quota exception.[2]
American
World applied for a "Class B" license on July 31, 1995, and paid all
appropriate fees. On August 14, 1995,
the City's license committee held a public meeting on the application. Richard Makowski, a principal shareholder
and president of American World, spoke in favor of the application. Speaking against the application were three
persons who operate taverns in the City, as well as at least one other person
who owns "several businesses" in the City. Also present was the state representative for the area who
explained the legislative history of the new quota exception. He indicated that Mr. Makowski had been
working "through the State Legislature" for approximately six years
to obtain a quota exception that would allow him to obtain a "Class
B" license from the City.
Attached
to and incorporated by reference in the minutes of the license committee
meeting is a summary of the comments made by citizens and committee members who
were present at the meeting. This
summary was prepared by the city attorney and assistant city attorney, both of
whom were present at the meeting. The
summary of comments is as follows:
Comments
Favoring Issuance of the License
The
license should be allowed pursuant to the spirit of competition. The strong will survive and the weak will
fall.
The
City of Wisconsin Dells needs more licenses to draw more business into the
area.
The
license quota is too limiting. This
special legislation will allow another license despite the quota.
Comments
Opposing Issuance of the License
All
liquor licenses should be processed in the same manner. This special legislation suggests that the
state can over-ride the City's power to regulate licensing.
This
special legislation is for the benefit of only one individual and as such,
prohibits others from equal access to the same benefit.
There
is a sufficient number of liquor licenses already in Wisconsin Dells.
This
person should go through the same expense that others have had to go through in
obtaining a license.
To
allow such a license would be setting a bad precedent for others - that an
individual who cannot get what they want locally can attempt to get what they
want by going through the state.
No one
on the Wisconsin Dells Council was consulted regarding the matter to obtain
input from the Mayor, the City Council and City Community Members.
The
location does not promote the downtown area of Wisconsin Dells.
Issuance
of the license for this particular location is of no benefit to the overall
development of Wisconsin Dells.
The license committee voted 3-0, with one abstention, to
recommend to the city council that American World's application be denied.
On
August 21, 1995, the city council considered the license application as a part
of its regular meeting agenda. Although
Mr. Makowski was present, apparently neither he nor anyone else spoke in favor
of or against the application. After a
brief discussion, the city council voted 3-1, with two members abstaining, to
accept the license committee's recommendation that American World's application
be denied. On August 22, 1995, the city
clerk sent Mr. Makowski a letter informing him of the denial of American
World's license application. The letter
stated the action was "based upon the following articulated reasons and
factors":
*State
[i]nterference with a matter of unique local
concern.
*Lack
of consultation by the State with the municipality.
*Concern
with regard to the location of the proposed licensed premises.
*The effect of this license on other licensees.
In
addition to stipulating that American World was eligible for a "Class
B" license under the newly enacted quota exception, the parties also stipulated
that the corporation, its principals and agents met all other requirements of
§ 125.04, Stats., for the
issuance of a "Class B" license.
Following
the denial of the license application by the city council, American World filed
this action requesting the court to direct the City to issue a "Class
B" license to American World. The
trial court determined that the action was a proceeding under
§ 125.12(2)(d), Stats., for
judicial review of the City's "failing to grant" a "Class
B" license. The court concluded
that the City's determination was not arbitrary or capricious; that it was a
conscious and reasoned decision; that the actions of the City were not wilful,
irrational or unconsidered; and that the City did not abuse its discretion. American World appeals from the judgment
denying its requested relief.[3]
ANALYSIS
It
is well settled law in Wisconsin that a nominally qualified applicant does not
have a "right" to the issuance of a liquor license from a
municipality. Marquette Sav.
& Loan Ass'n v. Village of Twin Lakes, 38 Wis.2d 310, 315, 156
N.W.2d 425, 427-28 (1968). Rather, the
decision to grant or deny a liquor license is committed to the sound discretion
of the municipal governing body. Rawn
v. City of Superior, 242 Wis. 632, 636-637, 9 N.W. 87, 89 (1943).
A
reviewing court may not substitute its judgment for the properly exercised
discretion of the governing body. State ex rel. Ruffalo v. Common Council,
38 Wis.2d 518, 525, 157 N.W.2d 568, 571 (1968). We review de novo the City's decision under the same standard as
the trial court. See Norton
v. Town of Sevastopol, 108 Wis.2d 595, 598, 323 N.W.2d 148, 150 (Ct.
App. 1982). The denial of a
liquor license application may only be set aside if the municipality acted
arbitrarily and capriciously. Id.; State ex rel. Higgins v.
City of Racine, 220 Wis. 107, 111-112, 264 N.W. 490, 492 (1936).
In
determining whether the City of Wisconsin Dells acted arbitrarily and
capriciously, the court must determine whether the action "is unreasonable
or does not have a rational basis."
Olson v. Rothwell, 28 Wis.2d 233, 239, 137 N.W.2d 86, 89
(1965). "Arbitrary action is the
result of an unconsidered, wilful and irrational choice of conduct and not the
result of the `winnowing and sifting' process." Id. This
court has further explained the arbitrary and capricious standard in J.F.
Ahern Co. v. Wisconsin State Building Commission, 114 Wis.2d 69, 96,
336 N.W.2d 679, 692 (Ct. App. 1983):
When
applying the arbitrary and capricious standard, we determine whether the
[municipality's] action had a rational basis, not whether the [municipality]
acted on the basis of factual findings.
Rational choices can be made in a process which considers opinions and
predictions based on experience.
We conclude that the City of Wisconsin Dells did not act
arbitrarily or capriciously in denying American World's application.
First,
the record in this case establishes that the City employed a regular and proper
procedure in reviewing American World's application. American World was afforded a legislative-type public hearing
before the City's license committee as well as public consideration and action
on its request by the city council. See
Ruffalo, 38 Wis.2d at 524, 157 N.W.2d at 571.
Second,
we conclude that the City's actions were based on rational choices. The City provided American World with its
reasons in writing for denying the application: "State interference with a matter of unique local concern;
lack of consultation by the state with the municipality; concern with regard to
the location of the proposed licensed premises; and the effect of this license
on other licensees." The concerns
regarding location and effect on other licensees are noted in the summary of
public comments at the license committee meeting. These two reasons for denial are based on public input to the
governing body, are not irrational, and are thus sufficient in and of
themselves to substantiate the exercise of reasoned discretion.
American
World, however, claims that the City's stated concerns regarding location and
effect on other licensees were merely pretexts, while the remaining two reasons
reflect the real, arbitrary and capricious basis for the decision: animus on the
part of city officials toward the legislature for enacting the quota exception
as part of the state budget bill. As
noted above, there is a basis in the record for city concerns about location
and effect on other licensees, and our inquiry need go no further. "[T]he motives which actuate municipal
authorities in performing an act within the scope of their power will not be
inquired into by the courts in the absence of fraud, corruption, or
oppression." State ex rel.
Boroo v. Town Board, 10 Wis.2d 153, 162, 102 N.W.2d 238, 243 (1960); see
2A E. McQuillin, Municipal Corporations
§ 10.35 (3d ed. 1996).
Moreover,
it appears that the governing body's distaste for the newly enacted quota
exemption stems in large measure from its perceived unfairness. The minutes of the city council meeting
reflect, for example, that one council member "stated ... his
objection ... was that this State provision did not afford any other
citizen equal access to this same benefit." Another member cited a letter received by the City from a state
senator who was critical of the legislative enactment: "Such budget provisions circumvent the
quota system for a liquor license permit and outrage people believing in fair
play throughout Wisconsin." These
comments reflect a rational consideration of local concerns and public
sentiment. See State ex
rel. Smith v. City of Oak Creek, 139 Wis.2d 788, 800-801, 407 N.W.2d
901, 906 (1987) (Section 125.51, Stats.,
and "the case law of our state ... provide ... that
the ultimate question of whether to issue such a license to a particular
applicant is a matter of local concern."); Johnson v. Town Board,
239 Wis. 461, 462, 1 N.W.2d 796, 797 (1942) (upholding a town's denial of
a license "for reasons wholly unconnected with [the applicant's] fitness
merely because it considered that no licenses should be granted in view of the
community sentiment.")
We
do not hold that a governing body may arbitrarily refuse to grant a liquor
license solely on the basis of political differences with the state legislature. But, where, as here, the governing body
conducts a proper review of the application, considers public sentiment and
local concerns, and has a rational basis for denial, the municipality's action
may not be disturbed.
By the Court.—Judgment affirmed.
Recommended for
publication in the official reports.
[1] A "Class
B" license authorizes the retail sale of intoxicating liquor, by the glass
and not in the original container, for consumption on the premises. It also permits the sale of wine in the
original container for off-premises consumption. Section 125.51(3)(a), Stats. The "Class B" license quota is
generally based on population, but also involves a "grandfather"
provision for the number of licenses issued as of August 27, 1939. Section 125.51(4)(b)(2), Stats.
[2] The licenses presently held by American World
authorize retail sale of intoxicating liquor (including wine) in original
containers for off-premises consumption ("Class A," § 125.51(2), Stats.); retail sale of wine by the
glass or in an opened original container for on-premises consumption
("Class C," § 125.51(3m)); and retail sale of fermented malt
beverages for on or off-premises consumption (Class "B," § 125.26(1),
Stats.). Thus, American World could sell packaged
liquor, beer and wine for off-premises consumption and it could serve beer and
wine to its restaurant and lounge customers.
Without a "Class B" license under § 125.51(3), Stats., however, it could not serve
intoxicating liquor by the glass for on-premises consumption.
[3] The court also concluded it had the authority
to grant the relief requested by plaintiff and that § 125.51(4)(u), Stats., is constitutional. Neither issue is raised on this appeal. Further, the parties stipulated that the
City did not commit any "technical procedural error[s]," such as open
meetings law violations or insufficiencies of notice. While American World notes in its brief that no tape recordings
of either the license committee or city council meetings were made available to
the court, it did not allege in the trial court or on this appeal any
procedural deficiencies in the proceedings conducted by the City of Wisconsin
Dells.