15-006624 Rjr Charitable Holdings, Llc vs. Department Of Business And Professional Regulation, Division Of Alcoholic Beverages And Tobacco Status: Closed Recommended Order on Tuesday, May 31, 2016.

Summary: Purchaser of alcoholic beverage license at sheriff's sale not entitled to statutory transfer because sheriff's levy was on obsolete certificate.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RJR CHARITABLE HOLDINGS, LLC,

Petitioner,

vs. Case No. 15 - 6624

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF ALCOHOLIC BEVERAGES

AND TOBACCO,

Respondent,

and

PARTY LATINO CORP.,

Intervenor.

_______________________________/

RECOMMENDED ORDER

On February 19, 2016, Robert E. Meale, Administrative Law

Judge of the Division of Administrative Hearings (DOAH),

conducted the final hearing by videoconference in Tallahassee and

Miami, Florida.

APPEARANCES

For Petitioner: Samuel A. Rubert, Esqui re

Loren Newman, Esquire

Samuel A. Rubert, P.A.

3225 Franklin Avenue, Suite C - 101

Coconut Grove, Florida 33133

For Respondent: Magdalena Ozarowski, Esqu ire

Jason Douglas Borntreger, Esquire

Department of Business and

Professional Regulation

Division of Alcoholic Beverages and Tobacco

1940 North Monroe Street, Suite 40

Tallahassee, Florida 32399

For Intervenor: Louis J. Terminello, Esquire

Joshua J. Remedios, Esquire

Greenspoon Marder, P.A.

600 Brickell Avenue, 36 th Floor

Miami, Florida 33131

STATEMENT OF THE ISSUE

The issue is wh ether, pursuant to section 561.32(1)(a)

and (b) , Florida Statutes, Respondent is required to approve the

transfer of alcoholic beverage license to Petitioner after it s

purported purchase of the license at a sheriff's sale.

PRELIMINARY STATEMENT

By application filed on June 6, 2014, Petitioner requested

Responden t's approval of a transfer of a qu ota alcoholic beverage

license number BEV23 - 25971 4COP (License) from L'Boulevard Café

Sup p er Club to Petitioner.

By N otice of Intent to Deny License issued on July 9, 2014,

Respondent denied Petitioner's transfer application because

Respondent was unable to determine whether Petitioner possessed

sufficient title to the License following Respondent's receipt of

Intervenor's transfer a pplication on February 20, 2014 .

Petitioner timely requested a formal hearing. On January 8,

2 016, Intervenor filed a motion to intervene, which the

Administrative Law Judge granted by order entered on January 15,

2016.

On February 11, 2016, the Administrative Law Judge entered

an Order Denying Intervenor's Motion to Relinquish Jurisdiction

and Req uiring Respondent to Supplement Notice of Intent to Deny.

On February 15, 2016, Respondent filed a pleading stating that

Petitioner's request for a transfer of the License relies on a

sheriff's levy upon the License on March 8, 2014, and

Respondent's purc hase of the seized License at a sheriff's sale

on April 30, 2014. Respondent added that Intervenor had filed an

application for transfer of the License on February 20, 2014 -- one

month prior to the sheriff's levy. Respondent stated that,

pursuant to secti on 561.181(1)(a), Florida Statutes, it had

issued Intervenor a temporary license, and , " on May 21, 2014,

[Intervenor's] application was deemed approved per

sect ion 120.60(1), Florida Statutes .

At the hearing, Respondent called the lone witness in the

case and offered into evidence 13 e xhibits: Respondent Exhibits

A through M . Petitioner offered into evidence five exhibits:

Petitioner Exhibits A through E . Intervenor offered into

e vidence seven exhibits : In tervenor Exhibits 1 through 7. All

exhibits were admitted. 1

The court reporter filed the transcript on April 6, 2016.

The parties filed proposed recommended orders by April 19, 2016.

FINDINGS OF FACT

1. Prior to the events set forth below, La Cidr a

Corporation (La Cidra) owned the License. As issued by

Respondent, the License authorized La Cidra to sell alcoholic

beverages at a bar known as L'Boulevard Café Supper Club , 2 which

was located in leased premises at 3632 - 34 Northwest 25th Avenue

in Miam i (Premises).

2. On October 28, 2013, Steven Beltre (Beltre) obtained a

final judgment in the Eleventh Judicial Circuit Court in the

amount of about $3.4 million against La Cidra, doing business as

L'Boulevar d Cafe Supperclub. Respondent has adopted a form, DBPR

ABT - 6022, for persons to record liens against alcoholic beverage

licenses . However , at no material time did anyone record with

Respondent a lien a gainst the License in connection with the

Beltre judgment .

3. The record does not disclose when La Cidra ceased

operating the bar. However, o n January 21, 2014, Intervenor

registered "L'Boulevard Café Sup perclub" as a fictitious name ,

and Intervenor and La Cidra signed an "Application for Transfer

of Ownership of an Alcoholic Beverage License" concerning the

License .

4 . O n February 13, 2014, Intervenor purchased from La Cidra

all of it s assets, including the License . At closing, La Cidra

assigned the Premises lease by an assignment that was signed by

La Cidra, Intervenor, and the lessor. The assignment

acknowledges that Intervenor has paid the lessor a security

deposit of $10,000. A closing statement reflects a purchase

price of $100,000, which is represented by a $15,000 deposit and

$85,000 promisso ry note. On Fe bruary 20, Intervenor filed with

Respondent the application described in the preceding paragraph,

and Respondent , on the same date, issued to Intervenor a

temporary license based on the License.

5 . Five days after the closing described in t he preceding

paragraph , o n February 18, 2014, the Clerk of the Eleven th

Judicial Circuit Court issue d a Writ of Execution directing all

sheriffs in the state of Florida "to levy upon property subject

to execution of . . . La Cidra . . . to satisfy the sum of

[approximately $3.4 million]." T he Miami - Dade County Sheriff 's

O ffice levied upon property on March 8, 2014 -- 23 days after the

closing of the conveyance of the License from La Cidra to

Intervenor . The seized property included alcoholic beverages,

bar equipment, computers, televisions, phones, stage lights,

radios, smoke machines, and shop equipment , as well as the

following intangible personal property: a certificate evidencing

La Cidra as the licensee under the License, an $85,000 "secured"

promissor y note that is not further identified , and currency

totaling $17,206 in denominations as large as $100 bills .

6 . After the seizure, the s heriff advertised the sale of

the property by auction on April 30. The list of property to be

sold included the License , but not the promissory note or cash,

whose disposition is undisclosed in the record. On April 30,

2014 -- over two months after the La Cidra/ Intervenor

conveyance -- the s heriff executed a Sheriff's Bill of Sale

transferring all "right, title and int erest" of La Cidra to all

of the advertised property to Respondent for the sum of $2000

plus $140 sales tax, which represented the highest bid at the

s heriff's sale.

7. Immediately after the sheriff's levy, in March ,

Respondent was contacted by various parties, including the

sheriff's office, which provided Respondent with a copy of the

writ of execution and list of seized property . 3 On April 7, 2014,

Respondent received a letter from Daniel W. Courtney, an attorney

w hose cover letter states that he represents Intervenor. The

letter recites that Respondent properly had issued a temporar y

license to Intervenor, but later had withheld the issuance of the

permanent License to Intervenor due to its r eceipt of information

from the s heriff concerning the purported seizure of the License.

The letter asserts that this was an improper seizure because the

License was not the property of La Cidra at the time of the

seizure and request s that Respondent issue the permanent License

to Intervenor without delay.

8 . Unmoved by Mr. Courtney's letter, o n June 4, 2014,

Respondent issued a Notice of Intent to Deny License to

Intervenor. The notice cites the writ of execution issued on

February 18 and reasons that "neither the put ative tr ansferor nor

putative transferee possess [es] title for the transfer of the

[License]." This reasoning does not account for the simple

chronology of events in which the La Cidra/Intervenor conveyance

preceded the sheriff's levy and sale.

9 . On June 14, 2014, Intervenor requested a n administrative

hearing on the proposed denial. By Order of Dismissal entered

April 30, 2015, Respondent acknowledged that its failure for more

than 90 days to issue a decision on Intervenor's transfer

application for a perman ent License required Respondent to deem

that the application had been approved, pursuant to section

120.60(1). 4 The Order of Dismissal rescinds, without prejudice,

the Notice of Intent to Deny License issued on June 4, 2014 , and

notes that Respondent appr oved the transfer of the permanent

License to Intervenor on January 30, 2015 . 5

10 . At about the time that it requested an administrative

hearing on Respondent's earlier denial of its transfer

application for a permanent License , Intervenor commenced

jud icial proceedings to obtain relief from Petitioner's claims

arising out of the s heriff's s ale. Intervenor sought to

intervene in supplemental proceedings pertaining to the

underlying tort action between Beltre and La Cidra. Intervenor

also commenced a le gal action against Beltre. The trial court

denied the motion to intervene without prejudice, pending

resolution of the separate action against Beltre. Intervenor

appealed this order, but the appellate court affirmed the trial

court on June 3, 2015. On O ctober 6, 2015, the trial court

dismissed Intervenor's action against Beltre for lack of

prosecution.

11 . At the same time that Intervenor was pursuing judicial

and administrative relief, o n June 6, 2014, Petitioner filed a

transfer application for Respondent's approval of the transfer of

the License to Petitioner. The page for the signature of the

transferor is blank, but Petitioner attached to the application a

copy of the above - described Sheriff's Bill of Sale.

12 . On July 9, 2014, Respondent is sued the above - described

Notice of Intent to Deny License to Petitioner that cites

Intervenor's documentation of the La Cidra/Intervenor conveyance

as the ground for the denial.

13 . The evidentiary record omits any evidence of the fair

market value of th e License and, more importantly, as noted by

Respondent in its proposed recommended order, the fact that, on

November 13, 2013, Beltre filed with the Department of State a

judgment lien certificate.

CONCLUSIONS OF LAW

14 . DOAH has jurisdiction over th e subject matter.

§§ 120.569 and 120.57(1), Fla. Stat. Sections 561.15, 561.17,

561.27, and 561.29 vest in Respondent specific authority to

issue, renew, suspend, revoke, and otherwise regula te alcoholic

beverage licenses in accordance with the provisions of law

governing such licenses. DOAH's jurisdiction is derived from

Respondent's determination of Petitioner's substantial interests

when Respondent proposed to deny Petitioner's request for

approval of the transfer of the License to Petiti oner.

15 . The same analysis of substantial interests drives the

determination of whether Intervenor has standing. As noted

above, Respondent was required to issue the License to Intervenor

under the default provisi ons of section 120.60, but even this

" permanent" License is for a term. For standing purposes, even a

theoretical prospect of nonrenewal of Intervenor's License

suffices to confer standing upon Intervenor to participate in a

case in which Petitioner attempts to secure for itself the

issuance of the same License.

1 6 . As the applicant, Petitioner bears the burden of proving

by a preponderance of the evidence the material facts entitling

it to relief. Dep ' t of Transp. v. J.W.C. Co. , 396 So. 2d 778

(Fla. 1st DCA 1981); § 120.57(1)(j).

17 . An alcoholic beverage license is nontransferable except

under two conditions: a) "[ w ] hen a licensee makes a bona fide

sale of the [ licensed ] business " to a purchaser that meets all

applicable licensing requirements and b) "[a] person holding a

lien against a license may have his or her rights enforced in a

judicial proceeding . " 6 § 561.32(1)(a) and (b).

18 . The conveyance from La Cidra to Intervenor reveals two

unusual features of section 561.32(1)(a). First, section

561.32(1)( a) authorizes a transfer of an alcoholic beverage

license by a bona fide sale, not a bona fide purchase. A seller

sells, and a purchaser purchases, so this statutory condition for

transferability requires a determination of the good faith of the

seller. Respondent misses this point -- or, less likely, the

meaning of "bona fide" -- when it states in paragraph 28 of its

proposed recommended order: "Petitioner has failed to introduce

any evidence that the sale of the [License] from La Cidra

Corporation to Inter venor was anything other than a bona fide

sale. "

19 . From La Cidra's perspective, the sale of the License to

Intervenor was not a bona fide sale. A bona fide purchase 7 is for

value and without notice of competing claims. See , e.g. ,

Rabinowitz v. Keefer , 132 So. 297 (Fla. 1931). Applying t he same

requirements to a sale, the knowledge of the seller is at issue.

La Cidra knew of the Beltre judgment by operation of Florida law

governing the service of a summons on a defendant. Ch. 48, Fla.

Stat . 8 A good faith seller does not sell all of its assets

without accounting for a substantial judgment that was recently

entered against it.

20 . The La Cidra/Intervenor conveyance reveals another

unusual fe ature of section 561.32(1)(a). Respondent 's

determi nation that a party is entitled to hold and use an

alcoholic beverage license is not a determination that a party

owns the license, nor does Respondent's determination of who

holds and may use a license necessarily track who owns the

license. Respondent's transfer of an alcoholic beverage license

"neither transfers property rights nor vests title in the

purchaser of the license," but "serves only to maintain record

continuity in the ownership and management of a liquor business

in order that it may be regulated pursuant to Chapter 561."

Howard v. Metcalf , 487 So. 2d 43, 45 (Fla. 2d DCA 1986)

(citations omitted). Courts have long held that a statutory

transfer of a license in connection with a lease does not

constitute a change in ownership, or property - rights transfer, so

a statutory transfer cannot defeat the rights of the owner of the

license . See House v. Cotton , 52 So. 2d 340 (Fla. 1952) (per

curiam); Rosamond v. Mann , 80 So. 2d 317 (Fla. 1955); Wright v.

Cade , 349 So. 2d 833 (Fla. 1st DC A 1977).

21 . The above - cited cases involve bar leases featuring in

statutory transfers of licenses, but not property - rights

transfers, in accordance with the parties' consensual

transaction . In Coney v. First State Bank , 405 So. 2d 257 (Fla.

3d DCA 1981), a statutory transfer took place, without a

property - rights transfer , following a nonconsensual transaction :

a sheriff's levy and sale. In Coney , the owners of an alcoholic

beverage license leased a bar and the ir alcoh olic beverage

license to a party , against whom a judgment was entered on an

unrelated matter . The sheriff levied upon the license.

Following the sheriff's sale, Respondent advised the

owners/ lessors that the purchaser could freely transfer the

license, e ven though, under the lease, the license reverted to

the owner s/lessors on termination of the lease. The

owners/ lessors moved to set aside the sheriff's sale, as did the

purchaser on discovering that the license was not freely

transferable. The court hel d that an alcoholic beverage licens e

is subject to levy and sale ; rejected the purchaser's claim

because he could have discovered this restriction in the lease,

which was a matter of public record ; and dismissed the

owners/ lessors' claim because the purcha ser could acquire nothing

more than the judgment d ebtor's interest in the license . The

court reasoned that, i f Respondent disregarded the lessor's

reversionary interest, the time for adjudicating competing

ownership claims would be after the lease terminated.

22 . Respondent should have denied timely the

La Cidra/Intervenor conveyance because it was not a good faith

sale, as explained above. As discussed in more detail below, the

validity of the property - rights tra nsfer in the

La Cidra/Intervenor conveyance, although not free from doubt, is

a matter outside of administrative jurisdiction. The proper

result would have been that Intervenor owned the License, but

could not obtain a statutory transfer so as to be able to use the

License -- a difficult result, but one necessitated by La Cidra's

sale of the License without accounting for the Beltre judgment.

23 . Turning to Petitioner's transaction, Petitioner claims

that Respondent must approve its application for the tr ansfer of

the License because Petitioner purchas ed the License at the

sheriff's sale. The parties have not disputed that a sheriff's

sale may constitute a bona fide sale by a licensee, so as to fall

within section 561.32(1)(a). Clearly, a sheriff's sale of an

alcoholic beverage license may qualify as a sale of the licensed

business. Less clear is whether a sheriff's sale may qualify as

a sale by the licensee. 9 But, in a case raising a number of

difficult legal issues, the Administrative Law Judge will f ollow

th e lead of the parties and treat the sheriff as the licensee

within the meaning of section 561.32(1)(a). 1 0

24 . A s held in Coney , a sheriff can levy upon and sell only

the interest of the judgment debtor in property. Accord , Holland

v. State , 15 Fla. 455, 519 (1876) ; Accent Realty of Jacksonville,

Inc. v. Crudele , 496 So. 2d 158, 161 (Fla. 3d DCA 1986) (judgment

lien attaches only to property for which judgment debtor holds

legal title) . For this reason, the Sheriff's Bill of S ale warns

that the only interest transferred is the interest of La Cidra.

Based on the chronology of transactions , Petitioner could not

purchase at the sheriff's sale the License of La Cidra because La

Cidra had sold the License to Intervenor , and Respondent had

canceled the License of La Cidra when Intervenor issued the

temporary License to Intervenor : these transactions address,

respectively, the property - rights transfer and the statutory

transfer .

25 . Petitioner counters that Intervenor has tried and failed

to obtain judicial relief to set aside the levy and sale and

argues that the Administrative Law Judge and Respondent must thus

disregard the La Cidra/Intervenor conveyance . This argument is

unpersuasive . First, it addresses only the property - rights

transfer, not the statutory transfer. The seized certificate

became obsolete at the moment that Respondent issued a temporary

certificate on the same License to Intervenor. At that moment,

the certificate signified nothing and its seizure was

meaningless, regardless of who owned it.

26 . Second, Petitioner's argument does not justify ignoring

the plain chronology of transactions . Prior to the seizure, a

purchase and sale of the License had already taken place, so that

no property rights continued t o attach to a certificate of

La Cidra's License. It is far from clear that Intervenor is

required to take any action to set aside the sheriff's sale to

Petitioner ; it is at least as likely that Petitioner is required

to take action to invalida te as a fraudulent transfer the

conveyance from La Cidra to Intervenor . 1 1 Even if Intervenor were

required to take action , Intervenor may not have exhausted its

judicial remedies . For these reasons , the Administrative Law

Judge declines to treat Intervenor's failure to obtain judicial

relief se tting aside the sheriff's sale a s a judicial

invalidation of the La Cidra conveyance to Intervenor.

27 . Citing Intervenor's failure to obtain judicial relief,

Petitioner also argues that the Administrative Law Judge and

Respondent may not provide such judicial relief to Intervenor by

determining that it possesses legal title to the License. This

argument represents an extension of the principle that the

Administrative Law Judge and Respondent lack the auth ority to

deter mine legal title to the License.

28 . Petitioner fails to acknowledge, though , that lawful

agency action may require that an agency make subordinate factual

determinations of matters whose legal determinations are reserved

to circuit court. See , e.g. , Fla. Admin. Code R. 18 - 21.004(3)(a)

and (b) (in exercising its lawful jurisdiction of whether to

issue a dock permit, agency makes factual determinations of

riparian lines and o wnership of adjacent upland). I n the cited

rule, the agency's factual determinations of riparian lines and

ownership of adjacent uplands do not legally settle these

matters , but drive the agency's ultimate determination of whether

to issue a dock permit. In the present case, Respondent 's

factual determ ination of whether the sheriff levied up on and sold

La Cidra's License does not settle the property rights to the

License, but drives Respondent's ultimate determination of

whether to approve an application for a statutory transfer of the

License.

29 . Another distinction between the judicial and agency

determinations of the s ame issue is the level of analy tical

complexity in each exercise. As compared to t he circuit court's

legal determination of these property - rights issues between two

nonagency parti es with competing ownership claims , the agency's

factual determination of these issues may be more generalized or

approximate because the real - world determination of this matter

is reserved to circuit court and the agency's factual

determina tion of this ma tter is subordinate to the ultimate issue

in the administrative proceeding.

30 . Thus, in making factual determinations in the present

case, the Administrative Law Judge and Respondent give effect to

t he plain chronology of transactions , but not to the p rospect of

a judicial invalidation of Intervenor's ownership claim . The

result is that Respondent must deny Petitioner's claim for a

statutory transfer under section 561.32(1)(a).

31 . The question remains of whether Petitioner's claim for a

statutory t ransfer qualifies under section 561.32(1)(b), which

applies to a transfer resulting from the enforcement of a lien

against an alcoholic beverage license. This statutory subsection

authorizes a statutory transfer due to the enforcement of a lien

against a license.

32 . The first question is whether a lien ever attached to

the License. A judgment is not a lien. Even the recording of an

original judgment fails to establish a lien against the real

property of the county in whose re cords the judgment is r ecorded:

as required by statute, only a certified copy of the judgment

establishes a judgment lien. § 55.10(1); Smith v. Venus

Condominium Ass'n, Inc. , 352 So. 2d 1169 (Fla. 1977; Steinbrecher

v. Cannon , 501 So. 2d 659 (Fla. 1st DCA 1987).

33 . Histori cally, a judgment became a lien against nonexempt

personal property located in the county within the jurisdiction

of the sheriff when he or she received the writ of execution. 1 2

Steinbrecher , supra ; Accent Realty , supra ; Smith v. Purdy ,

272 So. 2d 545 (Fla. 3d DCA 1973). The priority of the lien was

based on when the writ of execution was delivered to the sheriff.

Flagship State Bank v. Carantzas , 352 So. 2d 1259, 1262 (Fla. 1st

DCA 1977). An execution lien attached to all of the debtor's

nonexemp t property and meant that a sale of nonexempt property

after the delivery of a writ of execution to the sheriff did not

destroy the execution lien against property within the sheriff's

jurisdiction not yet levied upon. Accent Realty , supra at 161;

Carantz as , supra at 1261.

34 . Since 2001, a judgment becomes a lien against nonexempt

personal property in Florida, other than "fixtures, money,

negotiable instruments, and mortgages," when the judgment

creditor files a judgment lien certificate with the Department of

State. § 55.202(2)(a) , Fla. Stat. ; § 55.203; In re Stembridge ,

2007 Bankr. LEXIS 4672 (S.D. Fla. 2007). A judgment creditor not

obtaining a lien through sections 55.202 and 55.203 or whose lien

has expired may proceed against a judgment deb tor's property by

any available judicial process; if the creditor proceeds by writ

of execution, the lien attaches at the time of levy and only upon

the property levied upon. § 55.205(1).

35 . On the present record, no lien attached to the License.

Bel tre never filed a judgment lien certificate wit h the

Department of State , and t he lien under section 55.205(1) could

not attach to the License because the sheriff's seizure of an

1 8

obsolete certificate was meaningless. For these reasons ,

Respondent could no t approve a statutory transfer to Petitioner

under section 561.32(1)(b).

36 . Consideration of Beltre 's filing of a judgment lien

certificate on November 13, 2013 , explains the timing of the La

Cidra/Intervenor conveyance on February 13, 2014 -- 93 days after

the filing of the judgment lien certificate , but does not compel

a different result . Section 561.65(4) provides:

In order to perfect a lien or security

interest in a spirituous alcoholic beverage

license which may be enforceable against the

license, the party which holds the lien or

security interest, within 90 days of the

date of creation of the lien or security

int erest, shall record the same with the

division on or with forms authorized by the

division . . ..

37 . The statutory directive of how to "perfect" a lien that

is "enforceable against the license" raise s a problem in

interpretation due to the difference be tween the attaching and

perfecting of a lien . Compare chapter 679, part II, Florida

Statutes (attachment) , with chapter 679, part III, Florida

Statutes (perfection). Typically, 1 3 a lien attach es to or is

created against specifi c property "when it becomes enforceable

against the debtor with respect to the collateral . "

§ 679.2031 (1) . Without perfecting the lien, pursuant to the

provisions of the security agreement and note, a lienholder may

enforce its lien against the collateral as long as the debtor

con tinues to own the property and without regard to any liens not

in existence when the lienholder's lien attached, unless other

liens have been perfected in the meantime . However, t he

lienholder must perfect its lien for the lien to remain

enforceable against the property after the owner conveys the

property or after subsequent liens -- consensual or

nonconsensual -- attach to and are perfected against the property .

§ 679.3171. See generally Commer. Credit Counseling Servs. v.

W . W. Grainger, Inc. , 840 N.E. 2d 843, 848 (Ind. App. 2006) ("The

term 'attachment' encompasses creation of a security interest by

execution of a security agreement between the parties, while

'perfection' is an additional step that makes the security

intere st effective against third parties.") (cited with approval

in HSBC Bank USA, NA v. Perez , 165 So. 3d 696, 700 (Fla. 4th DCA

2015) (perfection is important because it "determin[es] matters

of priority" and "provide[s] third parties with notice of the

transa ction") .

38 . Section 561.65(4) in no way addresses the attachment

or creation of liens in alcoholic beverage licenses. S ection

561.65(4) does not govern the term and conditions of the

attachment of such liens against licenses or the enforceability

of such liens when the only parties involved are the debtor and

the lienholder. Simply put, section 561.65(4) does not disturb

the contractual undertakings of t he debtor and creditor in the

absence of third parties becoming involved with the collateral.

39 . Section 561.65(4) is a notice statute for third parties

subsequently doing business with the debtor and taking actions

with respect to the collateral. Obv iously, the debtor and

original lienholder do not r equire recordings under section

561.65(4) for notice of their original transaction. As a notice

statute, s ection 561.65(4) provide s the exclusive means for a

lienholder to enforce its lien against an alco holic beverage

license, if the debtor conveys the license or to the extent that

subsequent liens have been perfected against the license.

40 . A careless reading of section 561.65(4) gives precedence

to the enforceability language over the reference to perfecting a

lien . The effect of such a reading is needlessly to release an

alcoholic beverage license from a security agreement, even in the

absence of third parties subsequently having taken any action

regarding the collateral. T hree opinions supporting th is

misinterpretation of section 561.65(4) to varying degrees would

confer windfalls upon debtors at the expense of creditors -- an

unlikely legislative intent .

41 . The earliest source of confusion on this point is dictum

In re S e ville Entertainment Complex, Inc. , 79 B.R. 491 (Bankr.

N.D. Fla. 1987) :

This statute is clear and unambiguous. In

order to perfect a lien in a liquor license

which is enforceable against the license, a

lienholder must file the appropriate forms

with the Division of Alcoholic Beverages.

The penalty for the failure to do so is that

the lien is unenforceable against the

license.

7 9 B.R. at 492. 1 4

42 . The next of these three cases involves implied dictum.

In Splash Entertainment, Inc. v. Sons of Ireland, Inc. , 867 So.

2d 423 (Fla. 3d DCA 2004) , a license owner purchased a bar and

secured the purchase - money loan with its alcoholic beverage

license . The purchase - money note went into default , and the

lienholder commenced a legal action to foreclose its lien against

the license. There were no subsequent conveyances by the license

owner or additional liens attaching to or perfected in the

license . The absence of third parties meant that the court

should have allowed the lienholder to enforce its rights agains t

the purchase - money debtor without regard to section 561.65(4) or

the perfection of the lien. Instead, c iting the broad language

of Seville , above, the Splash court subscribed to the

debtor - windfall construction of section 561.65(4) , believing that

the l ienholder's failure timely to record its lien with

Respondent would liberate the license from the security agreement

between the parties. Fortunately, this part of the opinion was

dictum because the court held that the lienholder had complied

timely with section 561.65(4).

4 3 . But two cases of dictum bego t a holding in VMI

Entertainment , LLC v. Westwood Plaza, LLC , 152 So. 3d 617 (Fla.

1st DCA 2014) , where the court failed to distinguish between the

attachment and perfection of a lien . A lessor leased a bar to a

lessee that owne d an alcoholic beverage license, but no security

agreement covered the license. The lessee defaulted , and the

lessor obtained an ex - parte, prejudgment writ of attachment

against the license. As noted by the court , by law, an

attachment creates a lien in any property that may be subject to

postjudgment execution. Reading broadly the "enforceability"

clause of section 561.65(4), the court reversed the trial court's

order denying a motion to dissolve the attachment writ agains t

the license. Even in the absence of third parties, the VMI court

held that the attachment lien had never been perfected under

section 561.65(4) , so the lien could not be enforced against the

license . 1 5

44 . E ven if the Beltre judgment lien attached to the

License , t he present case should not be susceptible to the

debtor - windfall misreading of section 561.65(4) . Intervenor is a

third party for which the notice statute is designed, so the

Beltre judgment is not enforceable, under section 561. 32(1)(b),

against the License as owned by Intervenor, as at least one of

the parties correctly calculated when La Cidra conveyed the

License to Intervenor three days after the closing of Beltre's

90 - day window for recording his judgment lien . 1 6 For the purpose

of determining whether Respondent should approve a statutory

transfer under section 561.32(1)(b) , the La Cidra/Intervenor

conveyance effective ly precludes such approval.

RECOMMENDATION

It is

RECOMMENDED that Respondent deny the application of

Petitioner for a statutory transfer of the License.

DONE AND ENTERED this 31st day of May , 2016 , in Tallahassee,

Leon County, Florida.

S

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of May , 2016 .

ENDNOTES

1/ On March 3, 2016, with the leave of the Administrative Law

Judge, Petitioner filed an affidavit to rebut testimony of

Respondent's witness contending that Respondent's policy

prohibits the issuance of certain alcoholic beverage licenses to

purchasers at sheriffs' sales. Four days later, the affidavit,

which claimed to identify several such approvals, spawned a

motion to strike from Intervenor, which contended that the cited

approvals were factually distinguishable. Three days later,

Petitioner responded to Intervenor's motion to strike. Four days

later, Intervenor filed a reply to the response. The

Administrative Law Judge strikes the affidavit and ensuing

filings on the ground of relevance.

2/ The different spellings of "Supper Club" are inconsequ ential.

3/ March 10, 2014, was a particularly busy day for the License

file in Respondent's Miami office. In addition to the fax from

the sheriff's office described in the accompanying text,

Tanya Garcia Vega, an attorney who did not disclose her client ,

requesting a lien search on the License, which she identified as

in the name of La Cidra Corporation, pending transfer by a

temporary certificate to Intervenor, and Stuart R. Kalb, an

attorney who also did not disclose a client, providing Respondent

with copies of the above - described Beltre judgment; instructions

for levy, which identify the License; and License information

showing the holder as La Cidra Corporation, but a current

transfer pending.

One week later, on March 17, 2014, Respondent accura tely

advised Ms. Vega that its records did not indicate the presence

of any liens against the License. Two weeks later, on March 31,

2014, Respondent's Miami office received a second request for a

lien search on the License from Mark Johnson, whose intere st in

the License is undisclosed. On April 8, 2014, Respondent

accurately advised Mr. Johnson that its records did not indicate

the presence of any liens against the License.

4/ The deadline was not monitored when Respondent transferred

Intervenor's fil e from its licensing department to its legal

department.

5/ The rescission may be without prejudice pending the prospect

of judicial resolution of the ownership claims in the License of

Intervenor and Petitioner.

6/ The sole issue in this case is whether Petitioner is entitled

to a transfer of the License under the above - cited language of

section 561.32(1)(a) or (b). The parties have not addressed

other statutory requirements, such as those specifying the

fitness of a proposed licensee and requ iring the payment of

license - transfer fees, so this recommended order does not address

these issues.

7/ The requirement of a bona fide purchaser or purchase, rather

than a bona fide seller or sale, is much more common in the law.

See , e.g. , § 695.01 (un recorded conveyance or mortgage is

ineffective against creditor or subsequent purchaser for a

valuable consideration and without notice); § 679.3171 ("licensee

of a general intangible or a buyer, other than a secured party,

of collateral other than tangibl e chattel paper, tangible

documents, goods, instruments, or a certificated security takes

free of a security interest if the licensee or buyer gives value

without knowledge of the security interest and before it is

perfected"); § 379.321(1) ("a person who becomes a licensee of a

general intangible in good faith, without knowledge that the

license violates the rights of another person in the general

intangible, and in the ordinary course from a person in the

business of licensing general intangibles of that kind" takes

free of even a perfected security interest); § 726.109 ("transfer

is not voidable under s. 726.105(1)(a) against a person who took

in good faith and for a reasonably equivalent value").

The law governing notice recognizes constructive noti ce, as of

recorded documents, and actual notice. See , e.g. , Hagan v. Sabal

Palms, Inc. , 186 So. 2d 302 (Fla. 2d DCA 1966). Typically, given

their greater familiarity with the subject of the purchase and

sale, especially as to the property's potential vulnerability to

liens due to the liabilities of the owner, ignorant sellers, who

are the focus of section 561.32(1)(a), would seem much rarer than

ignorant purchasers. But it is always a perilous task to

delineate the boundaries of parties' ignorance, especially when

such claims are self - serving.

8/ The omission from the record of the fair market value of the

License at the t ime of the La Cidra/Intervenor conveyance is

material because courts may consider the adequacy of the

consideration, not for determining whether a purchase is for

value, but for determining whether the purchaser bought the

property in good faith, see, e.g. , Byrom v. Gallagher , 609 So. 2d

24 (Fla. 1992), and whether a conveyance was a fraudulent

transfer to defeat a creditor. § 726.105(1)(a).

I n reality, as discussed below, La Cidra, as well as

Intervenor, also had constructive notice of the Beltre judgment

lien that had attached when a judgment lien certificate was filed

with the Department of State. Even though the lien was not

timely perfected, so as to be effective against Intervenor, its

creation Ï and the constructive notice of the attached lien impu ted

to La Cidra and Intervenor -- deprived the La Cidra/Intervenor

conveyance of its good faith, regardless from which partyÓs

perspective it is examined.

9/ Admittedly, the statutory prohibition against transferring

alcoholic beverage licenses is sub ject to a wide range of

exceptions by operation of section 561.32(1)(a) and (b).

Section 561.32(5) implies as much by relieving the parties of

certain fees when a license transfer "occurs by operation of law

because of a death, judicial proceedings, court appointment of a

fiduciary, foreclosure or forced judicial sale, bankruptcy

proceedings, or seizure of a license by a government agency." An

unanswered question is whether such transfers by operation of law

may occur under section 561.32(1) (a) or must oc cur under

section 561.32(1)(b).

10/ As discussed in more detail below, the better practice for

judgment lienholders is to file a judgment lien certificate with

the Department of State to create a lien, as provided by

sections 55.202(2)(a) and 55.203; to record the lien with

Respondent to perfect the lien, as provided by section 561.65(4);

and then to foreclose the lien through judicial process, within

the meaning of section 561.32(1)(b).

11/ See sections 726.105, 726.106, 726.108, and 726.110.

12/ Th is is the law to which, during the hearing, the

Administrative Law Judge mistakenl y referred as current law.

The Administrative Law Judge regrets the inconvenience.

13/ Some liens are perfected when they attach to property. See,

e.g. , § 679.3091.

14/ The court's holding is that a creditor's filing of a security

interest in an alcoholic beverage license with the Secretary of

State, but not Respondent, failed to perfect a lien in the

license. The opinion notes that the lienholder had filed with

the Sec retary promissory notes, security agreements, and

mortgages, suggesting that the lienholder had lent money to the

license owner and taken the license as collateral. However, the

license owner was in bankruptcy, and the trustee in bankruptcy

had objected t o the lienholder's claim, so the dispute likely

involved the claims of competing lienholders and was not limited

to a claim by the purchase - money lienholder against the debtor

without third parties. Accord Dery v. Occhiuzzo & Occhiuzzo

Enters., Inc. , 771 So. 2d 1276 (Fla. 4th DCA 2000) (lienholder

that failed timely to record lien against license with Respondent

subordinated to lienholder that timely filed subsequent lien with

Respondent).

See also U.S. v. McGurn , 596 So. 2d 1038 (Fla. 1992), which

po sed the opposite filing or recording situation of that in

Seville . In McGurn , lessors of real property used as a bar

obtained a security interest in an alcoholic beverage license

owned by the lessees. The lessors recorded the lien with

Respondent within 90 days of the execution of the security

agreement, but not with the Secretary of State. The bar failed,

and the lessors brought an action in circuit court to foreclose

their lien in the license. The United States filed notices of

liens for unpaid taxes and contended that the lessors had not

perfected their lien in the license. The court held that the

sole filing necessary to perfect a lien in an alcoholic beverage

license is set forth in section 561.65(4).

15/ The question of whether a lien must be pe rfected implicitly

recognizes at least the distinction between the attachment and

perfection of a lien. In another case involving a third party,

Mathias v. Walling Enters. , 609 So. 2d 1323 (Fla. 5th DCA 1992),

the trial court determined that an unperfecte d landlord's lien in

an alcoholic beverage license had priority over a lien in the

same license that had been perfected pursuant to section

561.65(4). The appellate court noted that the Uniform Commercial

Code, as enacted in Florida, recognized the priori ty of certain

unrecorded possessory liens over recorded security interests, but

noted that the security interest had been perfected before the

landlord's lien had arisen. The court concluded that the

landlord's lien attached to the license and the lessor did not

have to perfect its lien under section 561.65(4) or any other

statute, but the perfected security interest was superior to the

landlord's lien. The court certified two questions to the

supreme court.

In Walling Enters. V. Mathias , 636 So. 2d 12 94 (Fla. 1994), the

supreme court declined to answer the certified question of

whether a landlord's lien had to be perfected under section

561.65(4), but answered in the negative the question of whether a

landlord's lien may attach to an alcoholic beverage license,

reasoning that a license, as a general intangible, did not

constitute the kind of property to which a landlord's lien may

attach.

16/ Based on the principles of administrative law discussed

above, the Administrative Law Judge and Respondent may not

determine the validity of the La Cidra/Intervenor conveyance

under the fraudulent - transfer statutes, §§ 726.105, 726.106 and

726.109, essentially undertaking the task of forecasting the

outcome of complicated judicial labors were Petitioner timely to

commence a legal action to invalidate the La Cidra/Intervenor

conveyance.

COPIES FURNISHED:

Samuel A. Rubert, Esquire

Loren Newman, Esquire

Samuel A. Rubert, P.A.

3225 Franklin Avenue , Suite C - 101

Coconut Grove, Florida 33133

(eServed)

Magdalena Ozarowski, Esquire

Jason Douglas Borntreger, Esquire

Division of Alcoholic Beverages and Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399

(eServed)

Louis J. Terminello, Esquire

Jos hua J. Remedios, Esquire

Greenspoon Marder, P.A.

600 Brickell Avenue, 36th Floor

Miami, Florida 33131

(eServed)

Thomas Philpot, Director

Division of Alcoholic Beverages and Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399

(eServed)

Jason Maine, General Counsel

Department of Business and

Professional Regulation

Capital Commerce Center

2601 Blair Stone Road

Tallahassee, Florida 32309

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.