Matter of Standard Food Products Corp. v. O'Connell

Dye, J. The State Liquor Authority has suspended for a period of thirty days the wholesale liquor license held by the petitioner-appellant and has directed a forfeiture of its bond. According to the record before us, the petitioner-appellant is engaged in the wholesale liquor business in the city of New York, serving between 3,500 and 4,000 customers to whom it makes deliveries in its own trucks except in the Staten Island area where a licensed liquor truckman is hired. Due to the unusual demands for popular brands of whiskey, the leading distillers developed a practice of furnishing wholesalers with allocation lists wherein specified quantities of whiskey were allotted to retailers listed therein. Such a list was furnished by Car-stair’s Distilling Company to the petitioner-appellant who gave copies of it to its salesmen for use in their assigned territories, without checking same for current license holders. The practice óf petitioner was to accept the list as accurate and to rely on its salesmen who were instructed to check on the retailer’s license when taking an order, to list the license number on the order and to take no orders from any unlicensed retailer. The same instructions were applicable to truckmen making deliveries. A salesman, employed by the petitioner-appellant and assigned to the Staten Island territory, discovered that Car-stair’s allocation list contained the names and addresses of retailers who had gone out of business or who, for various reasons, were not currently licensed to sell whiskey. This discrepancy suggested a scheme, the execution of which furnished the basis of the charges herein. It worked in this fashion: The salesman made out a fake order in the name of the nonexistent or t unlicensed retailer, noting thereon a fictitious *55 license number and marking it for C.O.D. delivery. This fake order was then processed in the same manner and along with genuine orders. In the usual course, a package containing the whiskey called for by the fake purchase slip was sent to the delivery platform, together with a C.O.D. delivery receipt, and was there picked up by Wacker’s Express, a licensed liquor truckman regularly hired by the appellant. By prearrangement the driver of the express truck delivered the whiskey to the salesman who put up the cash called for by the C.O.D. invoice. The truck driver then signed the delivery' receipt in the name of the presumed purchaser with an illegible signature and turned it into the office along with the cash and the genuine receipts for bona fide transactions. The fake order, having been handled as a C.O.D., had never passed through the credit department where it would have been subjected to a check before delivery. In this manner, many small lots of whiskey, aggregating about thirty-six cases, were diverted. One step in the normal procedure was overlooked and led to its exposure. The scheme was uncovered when the petitioner-appellant, in keeping with routine office practice, mailed a paid invoice containing an itemized statement of the transaction to an unlicensed retailer whose name had been used by the dishonest salesman in furtherance of his fraudulent scheme and such person, on receipt of the paid invoice, knowing that it had neither purchased nor received the Carstair’s whiskey mentioned, reported it to the State Liquor Authority who made an investigation which revealed the above circumstances. This appear brings up for review the sufficiency of this evidence as a matter of law to sustain the determination of the State Liquor Authority that the appellant had made sales of alcoholic beverages to unlicensed persons within the meaning of the statute. Section 100, subdivision 2, of the Alcoholic Beverage Control Law provides: “ No manufacturer and no wholesaler shall sell, or agree to sell or deliver in this state any alcoholic beverage for the purposes of resale to any person who is not duly licensed pursuant to this chapter to sell such beverages, at wholesale or retail, as the case may be, at the time of such agreement and sale.” Section 3, subdivision 28, reads as follows: “ ‘ Sale ’ means any transfer, exchange or barter in any manner or by any means *56 whatsoever for a consideration, and includes and means all sales made by any person, whether principal, proprietor, agent, servant or employee of any alcoholic beverage and/or a warehouse receipt pertaining thereto. To sell ’ includes to solicit or receive an order for, to keep or expose for sale, and to keep with intent to. sell and shall include the delivery of any alcoholic beverage in the state.” The statutory definitions in section 3, subdivision 28, broad as they are, do not of themselves enlarge the prohibition contained in section 100, subdivision 2, but depend, as do other regulatory statutes, upon proof of a clear violation of the prohibited acts before the penalty provisions will be enforced. We have heretofore held that when acts not mala in se are to result in loss or impairment of life, liberty or property the applicable statute should be narrowly construed (People v. Shakun, 251 N. Y. 107), and th at considerations of expediency ” must not outweigh a lack of proof (People v. Wallace & Company, 282 N. Y. 417, 420). Similarly, a license to engage in the liquor business, even though frequently referred to as a privilege and not a right, when it has been issued and acted upon by the holder, should be subject to revocation or suspension only upon competent proof showing a clear violation of the applicable regulatory provision. Under the proof in this record we are unable to say that the petitioner-appellant sold or agreed to sell or deliver ;alcoholic beverages to unlicensed persons for the purpose of resale. The proof shows that the liquor was not ordered or received, or price paid-therefor, by the unlicensed person named on the purchase slip — his name, in fact, being used, without knowledge or authority, to conceal a fraudulent diversion. The only testimony in the record regarding the ultimate disposition of the liquor is that the salesman — the actual recipient — used some for his personal consumption and gave the rest to his friends. Both the petitioner-appellant and the purported purchaser were the victims of a fraudulent scheme engineered by a dishonest employee, and there is no factual support for the conclusions that the petitioner-appellant either sold or agreed to sell or deliver liquor to any unlicensed person for the purpose of resale, as defined by the statute. While it may be said that the petitioner-appellant was lax in the conduct of its business, the suspension of its license and the *57 forfeiture of its bond cannot be supported on the theory of its neglect or failure to discover that the fake purchaser was unlicensed, for nondiscovery was not the violation with which the petitioner-appellant was charged. The order of the Appellate Division should be reversed and the determination of the State Liquor Authority annulled, with costs in this court and in the Appellate Division.