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Circus Liquors, Inc. v. Governing Body of Middletown Township

February 27, 2008


On appeal from the State of New Jersey Division of Alcoholic Beverage Control, OAL Docket Nos. ABC 04988-05 and ABC 08874-05.

The opinion of the court was delivered by: Fisher, J.A.D.



Argued telephonically October 31, 2007

Before Judges Stern, A.A. Rodríguez*fn1 and C.S. Fisher.

In this appeal, we consider whether the Director of the Division of Alcoholic Beverage Control was authorized to allow the holders of a third liquor license -- possessed in violation of the two-license limitation contained in N.J.S.A. 33:1-12.31 -- to retain the third license long enough to transfer it. We conclude that, in the circumstances presented, the Director mistakenly failed to immediately discontinue the license holders' unlawful conduct and, therefore, reverse.

Certain facts are undisputed. In 2005, the Township Committee of the Township of Middletown, acting as the local Alcoholic Beverage Control Board (Middletown), considered applications for the annual renewal of three liquor licenses: 1331-32-005-003 and 1331-44-033-006, which were held by Circus Liquors, Inc. (Circus), and 1331-44-028-005, which was held by Food Circus Supermarkets of Middletown, Inc. (Food Circus). The stockholders of Circus and Food Circus were identical.

N.J.S.A. 33:1-12.31 prohibits any person from "acquir[ing] a beneficial interest in more than a total of two alcoholic beverage retail licenses." Notwithstanding that ownership by Circus and Food Circus of the three liquor licenses violated this statutory prohibition, Middletown renewed all three licenses from 1998, the time of Circus's acquisition of 1331-44-033-006 (the third license), through 2004.

As a result, Circus filed a verified petition seeking relief from the Director. Acknowledging that it and Food Circus could not lawfully own the three liquor licenses simultaneously, Circus nevertheless sought a stay of the denial of renewal in order to allow the third license to be transferred to some other unrelated person. The matter was transferred to the Office of Administrative Law and assigned to an administrative law judge (ALJ).

The ALJ observed that the facts he deemed relevant were not in dispute and granted Middletown's motion for a summary decision. He concluded that Circus had no right to the third license, and that the estoppel theory offered as a means of alleviating the consequences of that illegality was without merit. In rejecting this equitable estoppel theory, the ALJ correctly recognized that a party seeking its application is required to show that it has relied "with good reason and in good faith" on the other's conduct. Summer Cottagers Assoc. v. City of Cape May, 19 N.J. 493, 503-04 (1955). The ALJ concluded that there could be no reasonable reliance upon the prior renewals of the third license because there could be no reasonable expectation that Middletown would continue to permit this violation of N.J.S.A. 33:1-12.31, regardless of the allegation that Middletown had apparently overlooked, or chosen not to observe, repeated violations of this statute since 1998.

Exceptions were filed, and the Director issued a written decision on November 21, 2006, in which he agreed with the ALJ's conclusion that:

The renewal of the license here at issue, as requested at the time by [Circus], would have facilitated the violation of State law. The decision of the local licensing body to deny renewal in the face of such facts cannot be considered arbitrary or unreasonable or by any stretch of the imagination an abuse of discretion.

We agree with this analysis as well. Although inexplicably slow to realize or acknowledge the continuing breach of the statutory prohibition,*fn2 Middletown's denial of the application for renewal of the third license was mandated by N.J.S.A. 33:1-12.31, as the Director correctly held. See Grand Union Co. v. Sills, 43 N.J. 390, 404 (1964) (holding the two-license limitation constitutional).

The Director also rejected Circus's estoppel theory, correctly holding that equitable estoppel may be invoked against a governmental entity ...

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