Matter of Hacker v. State Liq. Auth., 19 N.Y.2d 175 (1967)

A disciplinary proceeding by the State Liquor Authority is timely commenced, and the statute of limitations is tolled, when formal notice of a hearing is given for a violation occurring in the immediately preceding license period, even if the final determination extends into a subsequent license period.

Summary

This case addresses the application of the one-year statute of limitations in Section 118 of the Alcoholic Beverage Control Law to disciplinary proceedings against liquor licensees. The court held that the statute of limitations is tolled when the State Liquor Authority commences a disciplinary proceeding with a formal notice of hearing for violations occurring during the immediately preceding license period. The court further found that a licensee’s fraudulent misrepresentation on an original application and the act of allowing an unapproved person to benefit from the license are continuing violations, and equitable estoppel does not apply to prevent the Authority from acting on these violations, even after a license renewal.

Facts

Alexander Hacker obtained a restaurant liquor license on November 1, 1961, renewed on March 1, 1962. On September 4, 1962, the State Liquor Authority initiated proceedings to revoke Hacker’s license, alleging that he violated Section 111 by allowing his son, a convicted felon, to benefit from the license, falsely stated in his application that he would terminate outside employment, and failed to maintain adequate records. Hacker’s license was renewed again on March 1, 1963. On December 10, 1963, the Authority cancelled Hacker’s license, sustaining charges one and two.

Procedural History

The licensee sought review of the Authority’s determination. The Appellate Division, Second Department, annulled the Authority’s determination, finding that the action was time-barred and that the Authority was equitably estopped from pursuing the charges due to the license renewal.

Issue(s)

1. Whether the one-year statute of limitations in Section 118 of the Alcoholic Beverage Control Law applies to fraudulent misrepresentations made in an original liquor license application.

2. Whether the statute of limitations may be tolled under certain circumstances in administrative proceedings.

3. Whether the doctrine of equitable estoppel bars the Authority from revoking a license for violations occurring in the immediately preceding license period when the license has been renewed.

Holding

1. Yes, because the “fraud” perpetrated upon the Authority is subject to the one-year time limitation contained in section 118.

2. Yes, because the normal attributes of a Statute of Limitations must be applicable to the limitation contained in section 118, e.g., a tolling provision similar to that contained in CPLB 203 (subd. [a]).

3. No, because, according to Williston, “The fundamental basis for the estoppel is the justifiableness of the conduct of the party claiming the estoppel,” and the licensee’s conduct was not justifiable.

Court’s Reasoning

The court reasoned that while a fraudulent misrepresentation in the original application is subject to the one-year limitation, the statute is tolled when the Authority initiates disciplinary proceedings by formal notice of hearing within the preceding license period. The court likened administrative inquiries to legal proceedings, noting the time required for investigations, hearings, and formal dispositions. “It would be unreasonable to state that the entire inquiry, commencing with an investigation of alleged violations, proceeding through hearings and reports, and culminating in a formal disposition by the Authority, must all be concluded within the short period of limitation.” The court also determined that allowing an unapproved person to benefit from the license is a continuing violation of Section 111, not merely a misrepresentation at the time of application. This ongoing violation occurred within the preceding license period, making the proceedings timely. Finally, the court rejected the application of equitable estoppel, emphasizing that the licensee’s conduct (fraudulent misrepresentation and allowing a felon to benefit from the license) was not justifiable and that the licensee did not demonstrate a detrimental change in position in reliance on the license renewal. The court emphasized that Section 118 empowers the Authority to discipline a licensee “Notwithstanding the issuance” of a renewal license, thus knowledge of a violation at the time of renewal does not estop the Authority from continuing disciplinary proceedings. The court referenced Williston’s Contracts, stating “‘The fundamental basis for the estoppel is the justifiableness of the conduct of the party claiming the estoppel.’”