
    In the Matter of Shore Haven Lounge, Inc., Respondent, v New York State Liquor Authority, Appellant.
    Argued May 2, 1975;
    decided June 12, 1975
    
      
      Emanuel D. Black, Eli Ratner and Peter A. Malia for appellant.
    I. The measure of penalty imposed in the cancellation proceeding, after the entry of petitioner’s "no contest” plea was, in the circumstances, a reasonable exercise of the discretion vested in the Authority by law, and was neither unduly harsh nor excessive, and should not have been disturbed by the court below. (Matter of Sagos v O’Connell, 301 NY 212; Matter of Barsky v Board of Regents of Univ. of State of N. Y., 305 NY 89; Matter of Stolz v Board of Regents of Univ. of State of N. Y., 4 AD2d 361; Matter of Stracquadanio v Department of Health, 285 NY 93; Matter of Joseph Burstyn, Inc. v Wilson, 278 App Div 253, 303 NY 242, 343 US 495; Communications Comm. v WOKO, 329 US 223; Matter of Commercial Pictures Corp. v Board of Regents of Univ. of State of N. Y., 280 App Div 260, 305 NY 336, 346 US 587; Matter of Leavitt v Board of Regents of Univ. of State of N. Y., 9 AD2d 987; Matter of Avon Bar & Grill v O’Connell, 301 NY 150; Matter of Gerbino v New York State Liq. Auth., 16 AD2d 655, 12 NY2d 904.) II. The determination of respondent disapproving petitioner’s renewal application was not arbitrary, capricious or unreasonable for its determination was supported by a rational basis in law and in fact. (People ex rel. Lodes v Department of Health, 189 NY 187; Matter of Fink v Cole, 1 NY2d 48; Matter of Katz’s Delicatessen v O’Connell, 302 NY 286; Metropolitan Bd. of Excise v Barrie, 34 NY 667; Matter of Wager v State Liq. Auth., 4 NY2d 465; Matter of Farina v State Liq. Auth., 20 NY2d 484; Matter of Restaurants & Patisseries Langchamps v O’Connell, 271 App Div 684, 296 NY 888; Matter of King v O’Connell, 280 App Div 852; Matter of Little Dutch Grill v O’Connell, 281 App Div 901; Matter of Le Club v State Liq. Auth., 20 AD2d 110.)
    
      Henry J. Boitel and Charles J. Carreras for respondent.
    The court below properly exercised its authority under CPLR 7803. (Matter of Mitthauer v Patterson, 8 NY2d 37; Matter of 125 Bar Corp. v State Liq. Auth., 24 NY2d 174; Matter of Julia’s Lounge v State of New York Liq. Auth., 44 AD2d 786; Matter of Ronall Rest, v New York State Liq. Auth., 45 AD2d 682; Becker v State Liq. Auth., 44 AD2d 594; Matter of Dunchack v State Liq. Auth., 44 AD2d 638; Matter of Pell v Board of Educ. of Union Free School Dist. No. 1, 34 NY2d 222; Matter of Leake v Sarafan, 35 NY2d 83; Matter of United Hellenes v Sarafan, 45 AD2d 687.)
   Chief Judge Breitel.

In an article 78 (CPLR) proceeding brought by licensee to review two determinations of the State Liquor Authority, the Authority appeals. After a hearing in consolidated revocation and nonrenewal proceedings, the Authority canceled licensee’s liquor license, with a $250 bond penalty, and disapproved its renewal application. The Appellate Division unanimously modified, reducing the sanction to a 30-day suspension, with the $250 bond penalty, and annulled the determination disapproving the renewal application.

The issue* is whether the Authority abused its discretion by canceling and refusing to renew licensee’s liquor license because of its careless failure to keep adequate business records and to maintain accurate ownership documents with the Authority.

There should be an affirmance. Absent evidence of willful deception or corruption, or the likelihood of either, imposition of the severe sanctions of cancellation and nonrenewal for licensee’s careless violations of the record-keeping and ownership certification requirements of the Alcoholic Beverage Control Law was so disproportionate to the violations as to constitute an abuse of the Authority’s discretion.

Licensee Shore Haven Lounge has operated under a restaurant liquor license since 1968. Investigation by the State Liquor Authority in 1972 and 1973 disclosed that licensee had failed to maintain adequate business records on the premises, in violation of subdivision 12 of section 106 of the Alcoholic Beverage Control Law. More important, the Authority learned that licensee’s principal of record, Pasquale Morgigno, was not the sole party in interest. Instead, Morgigno’s brother-in-law, Vincent Dimperio, was an undisclosed partner, to whom the day-to-day management of the business had been entrusted. Moreover, Dimperio and Morgigno’s wife had become corporate officers in 1969, without the Authority’s permission required by subdivision 2 of section 99-d of the Alcoholic Beverage Control Law. At the hearing, Morgigno entered a plea of "no contest” to the charges and specifications.

Neither Dimperio nor Morgigno’s wife had any criminal record. There was no suggestion that Morgigno had been anything other than careless in his record-keeping, his failure to disclose Dimperio’s participation in the business, and his neglect to file a change of corporate officers. Morgigno testified that he thought that he had not done anything wrong because of the close family relationship among the principals.

The result of this case accords with the restatement of principles, including that of judicial restraint, governing administrative sanctions contained in Matter of Pell v Board of Educ. (34 NY2d 222, 230-235). More recently, in Matter of Ahsaf v Nyquist, decided simultaneously with this appeal (37 NY2d 182), the court, as it did in Matter of Butterly & Green v Lomenzo (36 NY2d 250, 255), adheres to those principles in applying them to regulated licensees as distinguished from internal agency employees and officers.

Thus, the support for the Appellate Division’s judgment is the undisputed absence of conscious violation of the law by, and ulterior motivation of, licensee or its principals, or even the likelihood of such ulterior motivation (see, e.g., Matter of Potter v New York State Liq. Auth., 37 AD2d 760; compare, e.g., Matter of Hacker v New York State Liq. Auth., 19 NY2d 177, 184; Matter of R & L Bar & Grill v New York State Liq. Auth., 34 AD2d 933). At worst, there was, in this case, gross carelessness by licensee without any evidence of prejudice to the public interest, except perhaps in the abstract. With no reason to believe that the laxness by licensee will continue, the licensee should not suffer the fact or the threat of a death sentence to its enterprise (see Matter of L'Intrigue v New York State Liq. Auth., 29 AD2d 854). Moreover, by reducing the sanction imposed to a 30-day suspension and a bond penalty of $250, the fault of the licensee was not being treated lightly by the Appellate Division.

The court does not minimize the paramount importance of requiring and enforcing strict record-keeping by licensees under the Alcoholic Beverage Control Law and preserving the accuracy and authenticity of records within the regulatory agency reflecting ownership and operation of licensees. Thus, should licensee from this point on fail to comply meticulously with the requirements of the law and regulations applicable to it, an entirely different basis would exist for the imposition of the agency’s sanctions.

Under the circumstances, there is no occasion, as there may often be, to remit the matter to the agency to reconsider the sanctions imposed. Only needless delay would result, especially in the regularization of the status of the licensee and of its ownership documents filed with the agency (see Matter of Ahsaf v Nyquist, 37 NY2d 182, supra; Matter of Pell v Board of Educ., 34 NY2d 222, 234, supra).

Accordingly, the judgment of the Appellate Division should be affirmed, with costs.

Jasen, J.

(dissenting). I would reverse the order of the Appellate Division and reinstate the determination of the State Liquor Authority.

From the evidence before this court, and considering the nature and gravity of the violations committed and conceded by petitioner’s "no contest” plea, there was more than a reasonable basis for the penalty imposed herein. Pursuant to sections 118 and 119 of the Alcoholic Beverage Control Law, the Authority instituted a proceeding to revoke petitioner’s license upon the following charges:

"1. That the licensee has failed to keep and maintain on the licensed premises adequate and accurate books and records of the business conducted on the licensed premises as required by Section 106, subd 12 of the Alcoholic Beverage Control Law.

"2. That the licensee violated Section 99-d, subd 2 in that it effected a corporate change without having first duly obtained the permission of the Authority.”

In addition thereto, the Authority instituted a proceeding of nonrenewal of petitioner’s license upon the following specifications: "The authority is not satisfied that Pasquale Margigno, sole principal of record of [the] licensee corporation, is the sole and true party in interest in the licensed premises.”

At the hearing of the charges, petitioner pleaded "no contest” to all charges in the revocation proceeding and specifications in the nonrenewal proceeding. Subsequently, the Authority adopted the findings of the hearing officer in the revocation matter and determined the appropriate penalty to be cancellation of the license with a demand made against the bond in the sum of $250; and in the nonrenewal matter, determined that the proper penalty was not to renew the license.

The petitioner, in permitting an unauthorized person to avail himself of the license herein and concealing material facts from the Authority, was guilty of violations of the most serious nature. These violations strike at the very heart of the State’s control and supervision of the trafficking of alcoholic beverages. The Legislature regarded such conduct so disruptive of the orderly regulation of the alcoholic beverage industry as to authorize the penalty of revocation. (Alcoholic Beverage Control Law, §§ 110, 111, 114, subds 2, 6; § 118.) In order to carry out the intent of the Legislature with respect to the use of a license, it is understandable that strict accountability of each license is necessary.

Accountability is impossible where availing is tolerated, proper records are not kept, and through deceit and deception the identity of an interested party is concealed. If unchecked, such conduct would render illusory regulation of the manufacture, sale and distribution of alcoholic beverages within the State in derogation of fundamental public policy. While revocation of the petitioner’s license, a much more serious penalty, may have been warranted in the circumstances here revealed, cancellation certainly was not an abuse of discretion and should not be disturbed. (Matter of Pell v Board of Educ., 34 NY2d 222, 232.)

Judges Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur with Chief Judge Breitel; Judge Jasen dissents and votes to reverse in a separate opinion.

Judgment affirmed.  