Boardwalk Bar & Grill, LLC, Relator v. East Grand Forks City Council

• Court: Court of Appeals of Minnesota
• Decided: April 11, 2016
• Docket: A15-1071
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A15-1071

Boardwalk Bar & Grill, LLC, Relator,

vs.

East Grand Forks City Council, Respondent

Filed April 11, 2016 Affirmed Smith, John, Judge*

East Grand Forks City Council File No. 15-06-60

Jade M. Rosenfeldt, Drew J. Hushka, Vogel Law Firm, Moorhead, Minnesota (for relator)

Ronald I. Galstad, Galstad, Jensen & McCann, P.A., East Grand Forks, Minnesota (for respondent)

Considered and decided by Schellhas, Presiding Judge; Johnson, Judge; and Smith,

John, Judge.

UNPUBLISHED OPINION

SMITH, JOHN, Judge

We affirm Respondent East Grand Forks City Council’s (city council) conditional

renewal of Relator Boardwalk Bar & Grill, LLC’s (Boardwalk LLC) liquor license because

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. the city code allows a conditional renewal and the provisions of the city code are not

unconstitutionally vague.

FACTS

In 1986, the City of East Grand Forks (city) created the East Grand Forks Economic

Development Authority (EDA). The mission of the EDA was to create an environment

that encouraged resident businesses to remain and grow, while also encouraging non-

resident businesses to relocate to or expand in the city.

In June 1999, the city and Boardwalk Enterprises LLP (Boardwalk LLP) entered

into the Parker Building Construction and Development Agreement (development

agreement). At this time, David J. Parker was the managing partner of Boardwalk LLP.

The development agreement required Boardwalk LLP to purchase Parcel No. 83.00816.00

(the property) from the city and construct a two-story building on the property. In

exchange, the city agreed to loan Boardwalk LLP $510,000.

On October 22, 1999, the city transferred the property to Boardwalk LLP. That

same day, the EDA agreed to loan Boardwalk LLP $510,000, with annual repayments of

$30,000 commencing in October 2003. To secure its indebtedness to the EDA, Boardwalk

LLP mortgaged the property to the city. In the mortgage agreement, Boardwalk LLP

acknowledged that it was indebted to the city in the amount of $510,000.

On November 30, 2011, Boardwalk LLP approved a resolution allowing the EDA

to perfect a mortgage on property owned by Boardwalk LLP, for a $100,000 loan made to

Boardwalk Entertainment Group, LLC. Dan and Scott Stauss signed the resolution as

owners of Boardwalk LLP.

2 On May 4, 2015, Boardwalk LLC applied to renew its liquor license with the city

council. Dan Stauss, Scott Stauss, and Jane Moss own Boardwalk LLC. On May 22, 2015,

the city’s attorney wrote a letter stating that the city council could deny Boardwalk LLC’s

renewal application because Boardwalk LLP1 had delinquent financial obligations owed to

the city.

On June 2, 2015, the city council conditionally renewed Boardwalk LLC’s liquor

license pursuant to the following conditions:

That the [c]ity renews the [l]iquor [l]icense . . . conditioned upon resolution within one (1) year by Boardwalk Enterprises, LLP with the [c]ity by either:

1. commencement of a legal proceeding by Boardwalk Enterprises, Inc.; 2. the parties’ agreement to mutual mediation and resolution of the dispute; 3. arbitration of the issue; or 4. the parties negotiating a settlement of the amount of indebtedness all prior to the renewal date.

If the obligation is not resolved within one (1) year, renewal of the license can be denied if the obligation still remains outstanding.

DECISION

Ripeness

Before addressing the merits of Boardwalk LLC’s claims, we are obligated to

address the assertion of the city council that Boardwalk LLC’s case is not ripe for review.

The ripeness doctrine “bars suits brought before a redressable injury exists.” State by

1 The letter referred to “Boardwalk Enterprises, Inc.,” but considering the entire record and the parties’ briefs, we conclude that the letter was intended to refer to Boardwalk LLP.

3 Friends of Riverfront v. City of Minneapolis, 751 N.W.2d 586, 592 (Minn. App. 2008),

review denied (Minn. Sept. 23, 2008). Ripeness issues raise a question of justiciability,

which this court reviews de novo. Id.; see Leiendecker v. Asian Women United of Minn.,

731 N.W.2d 836, 841 (Minn. App. 2007) (stating that “[r]ipeness is a justiciability

doctrine”), review denied (Minn. Aug. 7, 2007). “To establish the existence of a justiciable

controversy, the litigant must show a direct and imminent injury.” Leiendecker, 731

N.W.2d at 841 (emphasis added) (quotation omitted). Hypothetical issues that “have no

existence other than in the realm of future possibility” are not justiciable. Lee v. Delmont,

228 Minn. 101, 110, 36 N.W.2d 530, 537 (1949).

The city council argues that this case is not ripe for review because Boardwalk

LLC’s license was renewed and the possibility of any injury is hypothetical. This court

previously considered a challenge to the imposition of conditions on a business’s liquor

license. See In re On-Sale Liquor License, Class B., 763 N.W.2d 359, 365–66 (Minn. App.

2009). In Class B., the city council renewed a liquor license without conditions for Gabby’s

Saloon and Eatery. Id. at 362. The city council subsequently adopted multiple conditions.

Id. at 365. On appeal, this court held that “the city exceeded its express and implied legal

authority by imposing conditions on Gabby’s’ . . . liquor license.” Id. at 372.

Here, Boardwalk LLC has not lost its license for failing to comply with the renewal

conditions. But, just like in Class B., this court may consider Boardwalk LLC’s claim that

the city council exceeded its express or implied legal authority. See id. (holding that the

city’s imposition of conditions on a liquor license denied due process even though the

4 license was not yet revoked). Therefore, the city council’s argument that Boardwalk LLC’s

claims are not ripe for review fails.

Conditional renewal

Boardwalk LLC asserts that the city ordinance regarding restrictions on liquor

licenses does not provide grounds to conditionally renew its liquor license. See East Grand

Forks, Minn., Code of Ordinances (EGFCO) § 117.03(B) (2010). A city council has

“broad discretion” when determining whether to renew a liquor license, and this court’s

scope of review “is a narrow one, which should be exercised most cautiously.” See Wajda

v. City of Minneapolis, 310 Minn. 339, 343, 246 N.W.2d 455, 457 (1976). This court may

modify or reverse a city council’s decision “if the city violated constitutional provisions,

exceeded its statutory authority, made its decision based on unlawful procedure, acted

arbitrarily or capriciously, made an error of law, or lacked substantial evidence in view of

the entire record submitted.” Montella v. City of Ottertail, 633 N.W.2d 86, 88 (Minn. App.

2001). The interpretation and application of a city ordinance, however, is a question of

law that this court reviews de novo. Cannon v. Minneapolis Police Dep’t, 783 N.W.2d

182, 192 (Minn. App. 2010).

Boardwalk LLC first asserts that the city council could not conditionally renew its

liquor license because it is not an applicant that owes a debt to the city. We are not

persuaded. The ordinance provides:

No license under this chapter shall be granted for operation on any premises upon which taxes, assessments, or installments thereof, or other financial claims of the city are owed by the applicant and are delinquent and unpaid. For the

5 purpose of this section APPLICANT includes persons, and related persons:

(1) Owning at least a 50% beneficial interest in the proposed license or in the entity making the application; and

(2) At least an undivided 1/2 interest in the premises proposed to be licensed or at least a 50% beneficial interest in the entity owning the premises.

EGFCO § 117.03(B).

The municipal code broadly defines “person” as “an individual, person, persons,

firm, corporation, copartnership, trustee, lessee, or receiver.” EGFCO § 10.05(B) (2010).

The code does not define “related.” But “related” has been defined to mean “[b]eing

connected; associated.” The American Heritage Dictionary 1523 (3d ed. 1992).

Here, Dan and Scott Stauss are partners of Boardwalk LLP and they collectively

own a majority share of Boardwalk LLC. Thus, Boardwalk LLP qualifies as a “related

person.” Additionally, “Whenever used in any clause prescribing and imposing a penalty,

the term[] Person . . . as applied to any unincorporated entity shall mean the partners or

members thereof . . . .” EGFCO § 10.05(B). Dan and Scott Stauss are partners of

Boardwalk LLP, they own at least a 50% beneficial interest in the entity making the liquor

license application, and they also own an undivided half interest in the premises proposed

to be licensed. Therefore, based on the broad language contained in the municipal code

and the similarity in ownership, Boardwalk LLP falls within the definition of an

“applicant” that owes a debt to the city.

Boardwalk LLC also asserts that EGFCO § 117.03(B) does not apply because the

debt is owed to the EDA, not to the city. Boardwalk LLC supports its claim by asserting

6 that the October 1999 promissory note requires Boardwalk LLP to repay the EDA. We are

not persuaded. Boardwalk LLP signed the development agreement in June 1999 and a

mortgage agreement in October 1999, stating that it is indebted to the city in the amount of

$510,000. A “mortgage is an independent contract, though collateral to the instrument

which it secures, and . . . [it] may be foreclosed even though an action on [a] note is barred.”

Lundberg v. Nw. Nat’l Bank of Minneapolis, 299 Minn. 46, 48, 216 N.W.2d 121, 123

(1974). Moreover, the terms “city” and “EDA” have been interpreted to represent a single

entity to avoid inconsistent results when the terms have been used interchangeably. See

Eagan Econ. Dev. Auth. v. U-Haul Co. of Minn., 787 N.W.2d 523, 535–36 (Minn. 2010).

Therefore, Boardwalk LLP is indebted to the city.

Finally, Boardwalk LLC argues that the record does not contain evidence of

delinquent financial obligations. “City council action is quasi-judicial and subject to

certiorari review if it is the product or result of discretionary investigation, consideration,

and evaluation of evidentiary facts.” Staeheli v. City of St. Paul, 732 N.W.2d 298, 303

(Minn. App. 2007) (quotation omitted). “[This court] will not retry facts or make

credibility determinations, and [it] will uphold the decision if the lower tribunal furnished

any legal and substantial basis for the action taken.” Id. at 303–04 (quotation omitted).

Substantial evidence includes: “(1) such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion[,] (2) more than a scintilla of evidence[,]

(3) more than some evidence[,] (4) more than any evidence[,] or (5) the evidence

considered in its entirety.” Cannon, 783 N.W.2d at 189.

7 Here, the record contains sufficient evidence of a delinquent financial obligation.

First, in June 1999, Boardwalk LLP and the city entered into an agreement whereby

Boardwalk LLP agreed to repay the city $510,000. Second, in a promissory note dated

October 22, 1999, Boardwalk LLP agreed to pay the EDA $510,000. Third, on October

22, 1999, Boardwalk LLP signed a mortgage and agreed that it owed the city $510,000, as

evidenced by the promissory note. Fourth, Dan Stauss and Jane Moss signed two

agreements stating that they met with the city twice in July 2014 to discuss the settlement

of various disputes between Boardwalk LLP and the city. Fifth, at a city council meeting

in May 2015, a city council member stated that the debt owed to the city was “significantly

higher” than $2,600. Finally, at a city council meeting in June 2015, there were numerous

discussions that referenced a debt between Boardwalk LLP and the city. Therefore, the

record contains sufficient evidence of a delinquent financial obligation.

Void for vagueness

Boardwalk LLC asserts an as-applied challenge to EGFCO § 117.03(D) (2010),

stating that it is vague and violates due process. We disagree. “The constitutionality of an

ordinance is a question of law which this court reviews de novo.” Hard Times Cafe, Inc.

v. City of Minneapolis, 625 N.W.2d 165, 171 (Minn. App. 2001) (quotation omitted). City

ordinances “are presumed constitutional, and the burden of proving that they are

unconstitutional is on the [party challenging the ordinance].” Minn. Voters All. v. City of

Minneapolis, 766 N.W.2d 683, 688 (Minn. 2009). “Courts should exercise extreme caution

before declaring a[n] [ordinance] void for vagueness.” Hard Times Cafe, 625 N.W.2d at

171.

8 The due-process clause of the fourteenth amendment prohibits vague statutes and,

thus, ordinances. Id. “A[n] [ordinance] is void due to vagueness if it defines an act in a

manner that encourages arbitrary and discriminatory enforcement, or the law is so

indefinite that people must guess at its meaning.” Id. (quotation omitted). Using general

language in an ordinance does not make it vague. Id. “An entity challenging the

constitutionality of a[n] [ordinance] on vagueness grounds must show the ordinance lacks

specificity as to its own behavior rather than some hypothetical situation.” Id. at 172

(quotation omitted).

EGFCO § 117.03(D) (2010) states: “Notwithstanding any provision of law to the

contrary, the [c]ouncil may, upon a finding of the necessity therefor, place special

conditions and restrictions, in addition to those stated in this chapter, upon any license as

it, in its discretion, may deem reasonable and justified.”

Here, the city council could have denied Boardwalk LLC’s application because it

was in violation of EGFCO § 117.03(B). Instead of denying Boardwalk LLC’s liquor

license, the city council agreed to a conditional renewal. Because it was in violation of

EGFCO § 117.03(B), Boardwalk LLC did not have to “guess” that its license could be

subject to revocation or conditional renewal. See Hard Times Cafe, 625 N.W.2d at 172

(stating that an ordinance was not unconstitutionally vague when the license holder had an

association with illegal activity). Therefore, EGFCO § 117.03(D) does not violate

Boardwalk LLC’s due-process rights.

Affirmed.