Case Title: DALE W. STERNER AND E. ARLENE STERNER v. UNITED STATES OF AMERICA

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1989-05-26T00:00:00Z

Document:
DALE W. STERNER AND E. ARLENE STERNER v. UNITED STATES OF AMERICA1989 WY 123774 P.2d 639Case Number: 88-99Decided: 05/26/1989Supreme Court of Wyoming
DALE W. STERNER AND E. 
ARLENE STERNER, APPELLANTS (DEFENDANTS),

v.

UNITED STATES OF 
AMERICA, APPELLEE 
(PLAINTIFF).

Appeal from the United 
States District Court for the District of Wyoming.

Susan Maher 
Guthrie, Green River, and Lee E. Karavitis, Casper, for appellants.

William S. Rose, 
Jr., Asst. Atty. Gen. for U.S., Gary R. Allen, David English Carmack, and Thomas 
R. Lamons, Tax Division, Dept. of Justice, Washington, D.C.; and Richard Allen 
Stacy, U.S. Atty., for 
appellee.

Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY, 
and GOLDEN, JJ.

THOMAS, 
Justice.

[¶1.]     The question to be 
resolved in this case is whether Wyoming law limits a perfected lien imposed 
upon a local liquor license to the period for which the license was issued. The 
United States District Court ruled that a federal tax lien for unpaid income 
taxes owed by a license transferor attached to and continued in a liquor license 
after it was transferred by the taxpayer and after the license had been renewed 
by the transferee. The transfer was by assignment to a prior owner pursuant to 
an escrow arrangement made upon the sale of the liquor business, which was the 
occasion of the initial transfer of the license to the taxpayer. The United 
States District Court ordered foreclosure and sale of the renewal license 
subject to the approval of the successful bidder by the appropriate licensing 
authority. The license transferee appealed to the United States Court of Appeals 
which then certified to this court questions of law pursuant to Sections 
1-13-104 to -107, W.S. 1977, the Federal Court State Law Certificate Procedure 
Act1, and Rules 11.01 through 11.07, 
W.R. A.P.2 We conclude that Wyoming law, in the 
absence of some different contractual provision, would require that the 
assertion and implementation of the rights of a lien holder would be limited by 
the period for which the license was granted. It is our view that the federal 
tax lien expired with the end of the term of the license issued to the 
taxpayer.

[¶2.]     In its order, the 
United States Court of Appeals submitted the following certified questions of 
Wyoming law to 
this court:

"Under the Wyoming liquor licensing 
system, does the holder of a license have a right to expect that the license 
will be renewed from year to year if the licensee continues to meet the 
statutory requirements for licensure?

"Will a perfected lien 
upon a liquor license terminate at the end of the license year, or will the lien 
automatically follow and attach to the ensuing new or renewed license without 
affirmative action by the lienor?"

Our answer to 
the first of the above questions is "Yes", as the question is qualified by the 
United States Court of Appeals. We will expand briefly upon that answer by way 
of comment. Our answer to the second question, which is in two parts, is "Yes" 
to the first part and "No" to the second part. It is in this context that we 
recognize the distinction between contractual features that may result in the 
reattachment of a lien after the end of the license year and an involuntary lien 
which cannot encompass such features.

[¶3.]     In accordance with Rule 
11.03, W.R.A.P., the United 
States Court of Appeals, in its order 
submitting the questions of state law, articulated the facts relevant to the 
questions certified as follows:

"The facts of this case 
are stated in the district court opinion. See United States v. 
Skirko, 631 F. Supp. 790 (D.Wyo. 1985). Dale W. Sterner and E. Arlene Sterner 
(Sterners) operated the Hideaway Bar and Package Store in Mills, Wyoming. As part of the 
business, they were owners and holders of Liquor License Number Two. On November 
12, 1980, the Sterners entered into a sale and escrow agreement with Marie 
Forsberg and Bull Pen Restaurant, Inc., for the sale of the business and the 
liquor license. The agreement provided that upon default, Sterners could 
terminate the agreement and retake possession of the property and liquor 
license. A reassignment of the liquor license to Sterners was executed and 
placed in escrow with the other agreement documents. In accordance with 
Wyoming law, 
the liquor license was transferred to Bull Pen Restaurant, 
Inc.

"On May 12, 1981, Marie 
Forsberg and Bull Pen Restaurant, Inc., assigned their interest in the sale and 
escrow agreement to Deanne F. Berrett, who is also known as Deanne F. Skirko 
(Skirko). Skirko agreed to comply with all of the provisions in the agreement. 
Skirko also executed a reassignment of the liquor license to Sterners, which was 
placed in escrow. Pursuant to Wyoming law, the liquor license was 
transferred to Skirko.

"Subsequently, Skirko 
defaulted in her payments to Sterners. Sterners notified Skirko by certified 
mail dated January 9, 1984, that she was in default. When Skirko did not cure 
her default, the Sterners terminated the agreement by removing the documents 
from escrow on May 9, 1984.

"Previously, on July 19, 
1982, the Internal Revenue Service (I.R.S.) had assessed Skirko for unpaid 1980 
federal income taxes. On March 2, 1983, the I.R.S. filed with the Clerk and 
Recorder of Natrona County, Wyoming, a notice of federal tax lien against Skirko 
for the assessment of unpaid federal income taxes. The I.R.S. served a levy on 
Skirko to collect her tax liabilities and any statutory additions. On May 9, 
1984, the same day the Sterners terminated the sales agreement by removing 
documents from escrow, the I.R.S. seized the liquor license, which was to expire 
on September 6, 1984.

"On May 11, 1984, 
Sterners filed an application for transfer of the liquor license from Skirko to 
themselves. Sterners filed Skirko's reassignment of the liquor license with the 
Mills Town Clerk on May 14, 1984. On July 3, 1984, Sterners filed an application 
for renewal of the liquor license. The Mills Town Council approved renewal of 
the liquor license to the Sterners on September 5, 1984. The Sterners paid the 
license fee of $1,500 to the Mills Town Clerk on September 6, 
1984.

"On December 11, 1984, 
the United States (Government) commenced this action seeking, among other 
things, judgment against the Sterners to quiet title to and to foreclose the 
federal tax lien on the liquor license. One issue before the district court was 
whether the Government forfeited its interest in the liquor license by failing 
to take action before expiration of the one-year term of the liquor license. The 
district court concluded the tax lien did not expire when the one-year term for 
the liquor license expired, because the Sterners merely renewed the liquor 
license and did not receive a new liquor license."

[¶4.]     Our affirmative 
response to the first question posed by the United States Court of Appeals rests 
upon a Wyoming 
statute and this court's interpretation of its effect. Section 12-4-104, W.S. 
1977, provides in pertinent part:

"(c) The owner and holder 
of an expired liquor license or permit or one due for expiration has a 
preference right to a new license for the same location. After the required 
notice and a public hearing, each application claiming renewal preference shall 
be promptly considered and acted upon by the licensing 
authority."

In subsection 
(e), the same statute authorizes judicial review of an adverse decision by the 
licensing authority on an application for a renewal license. The statute 
specifically forecloses an applicant for a new license from judicial review. The 
legitimacy of the expectation of renewal on the part of the holder of the 
license is perhaps most definitively captured in City of Evanston v. Whirl Inn, 
Inc., 647 P.2d 1378 (Wyo. 1982). In that case, this court held, in substance, 
that the action of the licensing authority in denying a renewal was limited to 
determining, by virtue of a trial de novo, whether the decision of the licensing 
authority was supported by substantial evidence, was arbitrary or capricious, 
was beyond the power of the licensing authority to make, or violated some 
constitutional right of the license holder. Consequently, interpreting the 
question posed by the court of appeals to mean that the licensee who meets the 
statutory requirements for licensure could attack the determination of the 
licensing authority on the foregoing grounds, the licensee would have the right 
to expect that the license would be renewed. We do note, however, that the 
licensing authority "may refuse to renew, in the presence of proper facts and 
proceedings, because the license holder's privilege is not irrevocably vested 
but it is only a privilege." Whirl Inn, 647 P.2d  at 1387.

[¶5.]     Turning then to the 
second question certified by the United States Court of Appeals, we confess that 
it is difficult to address under state law. The Wyoming legislature specifically has 
foreclosed involuntary liens in § 12-4-604, W.S. 1977, which 
provides:

"No license or permit 
shall be transferred or sold except as provided by W.S. 12-4-601 through 
12-4-603, used for any place not described in the license or permit at the time 
of issuance or subject to attachment, garnishment or 
execution."

This court has 
had no occasion to consider, for that reason, whether a perfected involuntary 
lien upon a liquor license would terminate at the end of the license year. We 
acknowledge the proposition that federal law controls whether the federal tax 
lien will attach to a Wyoming liquor license, despite the state 
statute protecting such licenses from attachment, garnishment, or execution. 
United States v. National Bank of Commerce, 472 U.S. 713, 105 S. Ct. 2919, 86 L. Ed. 2d 565 (1985); United States v. Rodgers, 461 U.S. 677, 103 S. Ct. 2132, 76 L. Ed. 2d 236 (1983); United States v. Bess, 357 U.S. 51, 78 S. Ct. 1054, 2 L. Ed. 2d 1135 (1958); United States v. Mitchell, 403 U.S. 190, 91 S. Ct. 1763, 29 L. Ed. 2d 406 (1971). We understand that the role of this court is to define the nature of 
any interest a taxpayer may have in a Wyoming liquor license. Commerce. See Aquilino 
v. United States, 363 U.S. 509, 80 S. Ct. 1277, 4 L. Ed. 2d 1365 (1960); United 
States v. Durham Lumber Co., 363 U.S. 522, 80 S. Ct. 1282, 4 L. Ed. 2d 1371 (1960); 
Commissioner v. Stern, 357 U.S. 39, 78 S. Ct. 1047, 2 L. Ed. 2d 1126 (1958). We also recognize the cases arising in Wyoming which have 
declared that a liquor license has value as property within the state. Bogus v. 
American National Bank of Cheyenne, Wyoming, 401 F.2d 458 (10th Cir. 1968); Johnson v. Smith, 
455 P.2d 244 (Wyo. 1969). See Gladstone Hotel, Inc. v. 
Smith, 487 P.2d 329 (Wyo. 1971); Hill v. 
Hamilton, 368 P.2d 957 (Wyo. 
1962).

[¶6.]     Our understanding of 
these cases is that, in each instance, the concern of the court was with the 
identification of a property right which could be transferred or, alternatively, 
used as security for the payment of contractual obligations, usually incurred in 
connection with the acquisition of a liquor business. In none of those cases was 
the court confronted with an issue of identifying the temporal existence of such 
a property right. Assuming that the legislature meant what it said when it 
adopted § 12-4-106(a), W.S. 1977,3 there would exist no inherent 
barrier to parties contracting for the substitution of successive licenses in 
connection with a secured transaction, or perhaps even contracting for the 
transfer of some future license. We do not find this proposition specifically 
addressed in the prior cases.

[¶7.]     The only precedent from 
this court which is apt, even by analogy, in the context of the question posed 
is State ex rel. Schwartz v. Jones, 61 Wyo. 350, 157 P.2d 993 (1945), in which 
this court dismissed, under the concept of mootness, an appeal from the 
dismissal of a petition for writ of mandamus that sought to require the City of 
Cheyenne to grant a liquor license. The premise for the dismissal was that such 
a license expires at the end of a year and, since it appeared impossible for any 
judgment to be efficacious prior to the end of the period for which the liquor 
license had been sought, the case had to be dismissed under the concept of 
mootness. The conclusion to be drawn is that there was no property for the 
judgment of the court to affect after the expiration of the license term. The 
logical application of Schwartz results in a conclusion that the property right 
to which the federal tax lien attached expired at the end of the license period 
which apparently occurred at midnight separating September 5, 1984 from 
September 6, 1984.

[¶8.]     While we are conscious 
of a claim that this proposition is inconsistent with prior authority, we remind 
the reader that we cannot be certain that the prior cases did not involve 
contractual provisions satisfying the results and, in any event, this particular 
issue was not there present. We are sensitive of our reluctance to issue any 
advisory opinion, and we do not do so here but, given the emergence of this 
particular issue, it would appear prudent for those who may be contemplating 
some transaction relating to a liquor license to be sure to provide, by contract 
between the parties, that the contractual rights will relate to any license 
issued in the future as well as to the one in existence at the time of the 
contract.

[¶9.]     While authority on 
point is not available, our conclusion in this regard is consistent with what 
can be discerned as a clearly articulated state policy relative to liquor 
licenses. As we have noted, the statute provides for no involuntary liens under 
state law. The purpose of the local licensing provisions found in §§12-4-101 to 
-702, W.S. 1977, is the exercise of regulatory control by licensing authorities 
over those who engage in the retail sale of intoxicating liquors in Wyoming. A part of that 
control is to limit the period for which a license may be in existence and to 
periodically require licensees to justify their continuing privilege to engage 
in the business of retail liquor sales. Thus, a limitation upon the right to 
transfer, voluntarily or involuntarily, to the particular license in existence 
at the time of the contract, or upon the attachment of a lien, is consistent 
with state policy. The recognition of contractual provisions relating to future 
acquired property, while perhaps an exception to that policy, certainly is a 
feature which the United 
States cannot claim to be present in connection 
with the attachment of an involuntary lien.

[¶10.]  In addition, there is a pragmatic feature 
of the limitation that we impose. The role of the licensing authority under the 
Wyoming 
statutes is regulatory in nature. The licensing authorities are not necessarily 
intended or equipped to adjudicate contests with respect to ownership or 
priority of rights in licenses. A rule which provides that the property right 
continues only for the license period substantially ameliorates any such 
responsibilities that otherwise might be thrust upon licensing authorities. The 
practical effect of the rule justifies its articulation as a matter of 
law.

[¶11.]  Based upon an analogy from precedent, 
public policy, and the pragmatic impact of the rule, our answer to the second 
question posed is that a perfected lien upon a liquor license will terminate at 
the end of the license year, in the absence of some contractual provision which 
permits the substitution of future property, and the lien will not automatically 
follow and attach to the ensuing new or renewed license without some affirmative 
action by the lienor. We perceive the effect of this rule, in an instance such 
as this, as requiring the United States to either achieve the 
foreclosure of its lien prior to the end of the license period or to relevy upon 
any new license acquired by the taxpayer. In many instances, that would pose no 
problem but, in this instance where the holder of the license in the new term is 
a different person from the taxpayer, that well may be a 
problem.

[¶12.]  We cannot avoid commenting upon a feature 
of the record that the parties did not perceive as significant. Consequently, it 
was not called to the attention of the United States District Court. The 
disposition by that court clearly is premised upon its conclusion that the 
license held by the Sterners after September 6, 1984 was a renewal of Liquor 
License Number Two from the Town of Mills. The court pointed out that at no time 
was a new license issued. Section 12-4-104, W.S. 1977, provides the procedure to 
be followed "[w]hen an application for a license, permit, renewal or any 
transfer of location or ownership thereof has been filed with a licensing 
authority * * *." Section 12-4-104(b) then provides:

"Any license or permit 
authorized under this title shall not be issued, renewed or transferred until on 
or after the date set in the notice for hearing protests. If a renewal or transfer hearing, the 
hearing shall be held no later than thirty (30) days preceding the expiration 
date of the license or permit." (emphasis added).

In this 
instance, the hearing was noticed for August 8, 1984. The license period, 
according to the license, was "for the term of one year being from the 6th day 
of Sept., A.D., 1983, to the 6th day of Sept., A.D., 1984." The only logical way 
to understand that term is that it began at midnight on September 6, 1983, and 
it ended at midnight on September 5, 1984, i.e. to September 6, 1984. From 
August 8, 1984 until September 5, 1984 is a period of 29 days only and, 
therefore, the hearing was not "held no later than thirty days preceding the 
expiration date of the license or permit." Under these circumstances, as a 
matter of law, the license was not a renewal license, but that feature makes no 
difference with respect to our answer to the certified 
question.

[¶13.]  In our view, the property right in a 
liquor license in Wyoming is a transitory one, existing only for 
the one-year term. Consequently, we are comfortable with a conclusion that the 
lien which the United 
States perfected upon this liquor license 
terminated on midnight September 5, 1984.

[¶14.]  In accordance with Rule 11.07, W.R.A.P., 
this opinion shall be sent by the clerk of this court under the seal of the 
Supreme Court to the United States Court of Appeals for the Tenth Circuit and to 
the parties.

FOOTNOTES

1 The Federal Court State 
Law Certificate Procedure Act, §§ 1-13-104 to -107, W.S. 1977, is named in § 
1-13-104, W.S. 1977. Definitions are provided in § 1-13-105, W.S. 1977, which 
include the courts of appeal in the term "federal court" and specify that the 
"supreme court" is the supreme court of Wyoming. Section 1-13-106, W.S. 1977, 
provides:

"The supreme court may 
answer questions of law certified to it by a federal court when requested by the 
certifying court if there are involved in any proceeding before the federal 
court questions of law of this state which may be determinative of the cause 
then pending in the federal court, and as to which it appears to the federal 
court there is no controlling precedent in the existing decisions of the supreme 
court."

Section 
1-13-107, W.S. 1977, authorizes the supreme court to adopt rules of practice and 
procedure to implement or facilitate the utilization of the 
procedure.

2 Rules 11.01 through 
11.07, W.R.A.P., are the procedural rules adopted to implement the Federal Court 
State Law Certificate Procedure Act. Of particular significance is Rule 11.03 
which provides:

"A certification order 
shall set forth the question of law to be answered; and a statement of all facts 
relevant to the questions certified and showing fully the nature of the 
controversy in which the questions arose."

3 Section 12-4-106(a), 
W.S. 1977, provides:

"A license or permit is 
considered a personal privilege to the holder and the term of the license or 
permit is for one (1) year unless sooner revoked. When a valid license or permit 
is determined to be part of the estate of a deceased holder, the administrator 
or executor of the estate may exercise the privilege of the deceased under the 
license or permit until the expiration of the license or 
permit."