Opinion
A131206
10-25-2011
CONCORDE EQUITY II, LLC, Plaintiff and Respondent, v. JOSEPH Q. BRETZ et al, Defendants; CREDITORS TRADE ASSOCIATION, INC., et al., Claimants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(City & County of San Francisco Super. Ct. No. CGC-09-492710)
Claimants Creditors Trade Association, Inc. and Tony Carracci appeal from an order granting distribution of the proceeds from the sale of a liquor license to Concorde Equity II, LLC (Concorde) as a secured creditor of the holder of the liquor license. Claimants contend that granting Concorde priority as a secured creditor is prohibited by Business and Professions Code section 24076. We disagree and shall affirm the trial court's order.
All statutory references are to the Business and Professions Code unless otherwise noted.
FACTUAL AND PROCEDURAL HISTORY
On May 5, 2009, Concorde made a loan to Joseph Q. Bretz and David L. Blackford and several limited liability companies they owned, including SF Night Life, LLC (SF Night Life). The loan was evidenced by a promissory note and secured by personal guarantees and security interests in the assets of the companies. When the loans became delinquent, Concorde filed suit. On September 18, 2009, the delinquent parties stipulated to the entry of judgment against them, jointly and severally, in the amount of $379,950. The stipulation provided for the entry of judgment permitting foreclosure of Concorde's security interest in all collateral pursuant to the security agreements. The judgment was entered on November 19, 2009.
In a separate action, on November 13, 2009, Creditors Trade Association, Inc. obtained a judgment against S.F. Night Life in the amount of $4,574.04. On February 9, 2010, after costs were awarded, the judgment was increased to $8,683.04 .
On April 29, 2010, the trial court granted a motion by Concorde for postjudgment enforcement orders and assigned to Concorde "all non-exempt rights to receive payments of any nature or type from debts due, accounts receivable, and other contract rights from each and every business in which Bretz and Blackford have an interest." The court ordered the appointment of Kevin Singer as receiver to take possession of Liquor License No. 466969 held by SF Night Life and to sell the license in accordance with applicable provisions of law and apply the proceeds from the sale to the satisfaction of the debtors' obligations. The receiver was authorized to sell the liquor license free and clear of liens, deposit the net proceeds in trust, determine the validity of disputed liens, and make a recommendation to the court as to how the proceeds should be distributed.
The receiver proceeded to sell the license to a buyer approved by the Department of Alcoholic Beverage Control (the ABC), opened an escrow for the transfer, and placed the net proceeds of $73,538.01 in trust for distribution as directed by the court. He then filed a motion recommending that as a first priority creditor he be paid receiver fees of $23,205.42 and that Concorde receive the remaining balance of $50,332.59 as a secured creditor of real property under the third statutory priority. No funds from the sale of the liquor license remained to pay the claims of any other creditors.
Claimants objected to the proposed distribution, arguing that Concorde was barred by section 24076 from taking a security interest in a liquor license and therefore was not a secured creditor as to the proceeds of the sale of the license. Over claimants' objection, the court adopted the receiver's recommendation and ordered the sale proceeds to be distributed to the receiver and Concorde.
Claimants filed a timely notice of appeal.
DISCUSSION
1. Alcoholic Beverage Control Act
The California Constitution vests the Legislature with the exclusive power to license and regulate the manufacture, sale, purchase, possession and transportation of alcoholic beverages within the State. (Cal. Const., art. XX, § 22) The Legislature has exercised this authority by creating the ABC. (§ 23000 et seq.) The statute vests with the ABC "the power, in its discretion, to deny, suspend or revoke any specific alcoholic beverage license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals, or that a person seeking or holding a license has violated any law prohibiting conduct involving moral turpitude." (Cal. Const., art. XX, § 22, subd. (d).) This authority extends to the transfer of liquor licenses. (Pacific Firestone Escrow Co. v. Food Giant Markets, Inc. (1962) 202 Cal.App.2d 155, 158.) The authority of the ABC to control the transfer of liquor licenses is the same as its control over the initial issuance of a license. (Richards v. Department of Alcoholic Beverage Control (2006) 139 Cal.App.4th 304, 313.) All transfers are subject to investigation and approval by the ABC. (Id. at p. 314.) Integral to the statutory scheme is section 24076, which provides that "No licensee shall enter into any agreement wherein he pledges the transfer of his license as security for a loan." This section qualifies the right of a license holder to transfer a liquor license. (Golden v. State (1955) 133 Cal.App.2d 640, 644.)
Section 24076 provides in full: "No licensee shall enter into any agreement wherein he pledges the transfer of his license as security for a loan or as security for the fulfillment of any agreement. No license shall be transferred if the transfer is to satisfy a loan or to fulfill an agreement entered into more than 90 days preceding the date on which the transfer application is filed, or to gain or establish a preference to or for any creditor of the transferor, except as provided by Section 24074, or to defraud or injure any creditor of the transferor."
While a licensee's right to transfer a liquor license is restricted, the statute also prescribes a method by which transfer may be accomplished and creditors of the licensee protected. "The state in the exercise of its police power properly may regulate the manner in which creditors of the licensee may seek some protection in the collection of their debts from the proceeds of the sale of a license." (Pacific Firestone Escrow Co. v. Food Giant Markets, Inc., supra, 202 Cal.App.2d at p. 158.) Sections 24070 through 24082 provide this method. The licensee must file an application for permission to transfer the license to a particular party, which the ABC must approve. (§ 24073.) If approved, the proceeds from the transfer must be placed in an escrow account from which a court-appointed receiver makes distribution to the licensee's creditors in a prescribed order of priority. (§ 24074.) Section 24074 provides the priority-based system for distributing the proceeds. "[T]he Legislature has established a mandatory and exclusive system of priorities intended to replace other procedures such as levy and execution in order to protect all parties of the transaction and, at the same time, to prevent the use of liquor licenses or its transfer directly or surreptitiously as a security device." (Grover Escrow Corp. v. Gole (1969) 71 Cal.2d 61, 65.) Under this mandatory scheme, sale proceeds are distributed to creditors in a hierarchy of eight priority statuses. The payment of secured creditors is the third priority to the extent the proceeds "arise from the sale of the security." (§ 24074.) Claimants' claim is of a lower priority.
Section 24074 in pertinent part states: "Before the filing of such a transfer application with the department, if the intended transfer of the business or license involves a purchase price or consideration, the licensee and the intended transferee shall establish an escrow with some person, corporation, or association not a party to the transfer acting as escrow holder, and the intended transferee shall deposit with the escrow holder the full amount of the purchase price or consideration. The transfer application shall be accompanied by a description of the entire consideration. The description shall include a designation of cash, checks, promissory notes, and tangible and intangible property, and the amount of each thereof. The licensee and intended transferee shall also enter into an agreement, which agreement shall be deposited with the escrow holder, directing the escrow holder, after the requirements for transfer as provided in Section 24049 are satisfied, to pay out of the purchase price or consideration, whether the consideration takes the form of cash, checks, promissory notes, or tangible or intangible property, the claims of the bona fide creditors of the licensee who file their claims with the escrow holder before the escrow holder is notified by the department of its approval of the transfer of the license or if the purchase price or consideration is not sufficient to pay the claims in full, to distribute the consideration as follows: [¶] . . . [¶] Third, to the payment of claims of secured creditors to the extent of the proceeds which arise from the sale of the security."
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Code of Civil Procedure section 708.630, subdivision (b) provides: "The court may appoint a receiver for the purpose of transferring the judgment debtor's interest in an alcoholic beverage license that is transferable under Article 5 (commencing with Section 24070) of Chapter 6 of Division 9 of the Business and Professions Code, unless the judgment debtor shows in the proceeding to appoint a receiver that the amount of delinquent taxes described in Section 24049 of the Business and Professions Code and claims of creditors with priority over the judgment creditor pursuant to Section 24074 of the Business and Professions Code exceed the probable sale price of the license." 2. Application to Concorde's Claim
We review the trial court's interpretation of these statutory provisions de novo. (California Teachers Assn. v. Governing Bd. of Hilmar Unified School Dist. (2002) 95 Cal.App.4th 183, 190.) " 'Our fundamental task in construing a statute is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute. [Citation.] We begin by examining the statutory language, giving the words their usual and ordinary meaning. [Citation.] If there is no ambiguity, then we presume the lawmakers meant what they said, and the plain meaning of the language governs. [Citations.] If, however, the statutory terms are ambiguous, then we may resort to extrinsic sources, including the ostensible objects to be achieved and the legislative history.' " (Id. at p. 191.)
Claimants contend that the proceeds from the transfer of the liquor license do not "arise from the sale of the security" within the meaning of section 24074 because under section 24076 a liquor license cannot be pledged as security for a loan. Agreements to transfer a liquor license have been held to violate section 24076 where a loan agreement provides for the transfer of the license as security for the loan. In Holt v. Morgan (1954) 128 Cal.App.2d 113, 115, for example, an agreement between a creditor and liquor licensee under which the creditor agreed to dismiss a claim in exchange for a promissory note secured by a power of attorney authorizing transfer of the liquor license in the event of default was invalidated. In Citrigno v. Williams (1958) 255 F.2d 675, an agreement under which the assignee of a lease and liquor license were to retransfer the license to the former owners after the lease expired was held to be invalid.
In the present case, however, there was no pledge of the liquor license to the secured lender or to anyone else. Concorde's loan was not secured by a pledge of the liquor license but by a security interest in the assets of SF Night Life and other businesses. Upon the sale of the license to an approved purchaser, the proceeds of the sale became subject to the security agreement, so that Concorde was a "secured creditor" with respect to those funds within the meaning of section 24074.This process conformed with both the letter and the purpose behind the governing statutory provisions. The " 'purpose of section 24076 [is] to prevent a transfer of ownership by any means other than the procedure, compliance with which would limit transfers to those who are qualified to hold licenses.' " (Greve v. Leger (1966) 64 Cal.2d 853, 860.) Under the procedure followed here there was no possibility that the liquor license would become the property of a transferee not approved by the ABC. There is thus no reason why, once the liquor license was transferred with ABC approval, the monetary proceeds of the sale should not be distributed in accordance with the priority scheme specified in section 24074.
Hence the trial court correctly interpreted and applied sections 24074 and 24076 and properly approved the receiver's recommended disposition to Concorde of the remaining proceeds of the sale of the liquor license after making the higher priority distribution for the fees of the receiver.
DISPOSITION
The order appealed from is affirmed.
Pollak, J. We concur: McGuiness, P. J. Jenkins, J.