Opinion ID: 1972014
Heading Depth: 1
Heading Rank: 10

Heading: The Montego Bay Bar Matter

Text: The evidence relating to the issues of respondent's alleged ownership interest, the alleged non-disclosure of that interest, and his asserted gainful pursuit in connection with the Montego Bay bar enterprise is contained in an extensive record. The evidence demonstrates beyond a reasonable doubt that in the fall of 1981, Gordon Long approached his partners in the Green Parrot and Penta, the accountant for the Green Parrot, about the possibility of acquiring a second bar known as Jerry Lynch's which was to be renamed Montego Bay. In addition to the bar, the Montego Bay property consisted of a hotel, several apartments, a kitchen and a large tract of undeveloped land on the beachfront highway. At a meeting of interested persons, respondent expressed his view that the investment value of the real estate was great. A series of informal meetings and discussions among the investors ensued and finally in early 1982 they met and agreed to purchase Montego Bay, provided the necessary financing could be obtained. Respondent felt that the property was particularly attractive as an investment because it was the only undeveloped beach-front property in the area upon which condominiums might be constructed. The ownership interest of respondent and his wife was to be structured in the same manner as the arrangement with the Green Parrot enterprise, and it was clearly understood that the deed to the property would reflect his and Kacandes' interests as tenants by the entirety with their wives. As with the Green Parrot, respondent professed he wanted to participate only in the purchase of the real estate. Language identical to that contained in the purchase-and-sale agreement for the Green Parrot was included in the purchase-and-sale agreement, dated May 14, 1982, for the Montego Bay. The agreement was for the purchase and sale of the land and bar. Gail Yaccarino was thus named as the nominee, respondent was not named, and the operation and management of the land and bar were to be undertaken as one entity. Also, the Montego Bay agreement obligated the corporation and partnership to purchase respondent's stock and partnership interest upon his death. [7] A partnership designated as Montego Bay Associates was formed to take title to the Montego Bay realty. The partners in Montego Bay Associates were identified as Long, Penta, Hirsch, Crawford, Stella Kacandes, and Gail Yaccarino. A corporation known as Montego Bay, Inc. was formed to acquire the liquor license and conduct the bar operation. The agreement for the purchase of the realty was contingent upon a transfer of the liquor license. The certificate of incorporation, filed November 25, 1981, and the stock certificates issued by the corporation reflect Crawford, Long, Penta, Hirsch, Stella Kacandes, and Gail Yaccarino as the shareholders in Montego Bay, Inc. Respondent and his wife obtained their $25,000 to be invested by obtaining a bank check in that amount payable to them jointly for which they executed a demand note as co-borrowers. In addition, respondent in his individual capacity signed a continuing personal guarantee of the bond obligation. It is clear from the Montego Bay purchase and sale agreement and the closing documents that there was no segregation of the monies that were to be paid towards the liquor license, fixtures, furniture, and equipment used in the bar business and the monies allocated towards the purchase of the realty. No separation of identity between the corporation and the partnership was observed by the participants in the Montego Bay enterprise; the assets of the two entities were commingled. The evidence also establishes that respondent failed to disclose his interest in the enterprise, particularly his interest in the corporate licensee. Respondent's name does not appear on the deed, which was recorded, notwithstanding his testimony that he held an interest in the property as tenants by the entirety with his wife, and that the parties clearly understood his name was to appear on the deed, [8] and, notwithstanding his claim to having objected to the omission of his name in the earlier Green Parrot deed. Further, respondent did not disclose his name or interest in the application for a liquor license filed on behalf of Montego Bay. In addition, respondent participated extensively in the business affairs to Montego Bay Project. During its organizational and construction phases respondent attended meetings involving both the partnership and the corporation and participated extensively in discussions dealing with the business of the enterprise. [9] Based upon our independent assessment of the record, we find from this evidence beyond a reasonable doubt that respondent was the true owner of both the stock and partnership interest in the Montego Bay enterprise, that he made a conscious effort to conceal his ownership interest, and that by virtue of his extensive participation in the business affairs and operations of this enterprise, he sought to assure the profitability of the enterprise.
We next consider the conclusions to be drawn from the evidence and factual findings pertaining to these ABC matters. We take into account particular claims and defenses raised by respondent, as well as the arguments made by the liquor licensees themselves as amicus curiae. It is argued that any interest of respondent in the liquor licensees is lawful and therefore cannot provide a basis for the assertion that his involvement in these matters was unethical. According to this argument, the operative rule, N.J.A.C. 13:2-23.31, prohibits an interest in a liquor license only by specified law-enforcement officers or others with ABC regulatory duties, and does not apply to judges. In any event, it is asserted that any impropriety in a judge's interest in a liquor license can be overcome by a judge simply disqualifying himself in a matter involving the licensee. Although the asserted unlawfulness of respondent's interest in a liquor license was part of the charges against him, we conclude that we need not resolve the question as to whether such an interest by a judge is lawful under ABC statutes and regulations. This determination, in our view, is obviated because the gravaman of these charges against respondent is that he failed to disclose his interest in the liquor licenses. N.J.S.A. 33:1-25 clearly requires, with respect to corporate applications, that the names of stockholders of 1% or more of corporate stock be stated in the application. N.J.S.A. 33:1-26 provides for the same disclosure in connection with this transfer of liquor licenses. Respondent has testified that he was not consulted in connection with either of the license applications and that he never reviewed or discussed their contents prior to their submission to the Division of Alcoholic Beverage Control. We cannot credit respondent's testimony that he had no knowledge that any disclosure as to the identity of the owners was required in connection with a liquor license application. [10] It is also asserted that under N.J.S.A. 2A:1B-7, the special panel (and presumably this Court) had no jurisdiction in these proceedings to affect the licensees in any way. We agree that our determinations here will not constitute an enforcement of ABC regulations. We note, also, that there are independent administrative proceedings currently pending before the Division of Alcoholic Beverage Control that address the subject-matter of respondent's involvement in these liquor licensees. Our adjudication in these proceedings involves only the question of whether respondent is guilty of unethical conduct under the Canons of Judicial Conduct. That determination can affect only the respondent and not these licensees. This consideration dispels as well the claim that an informal opinion of the Division of Alcoholic Beverage Control and a report of the Belmar Police Department indicating, at least tentatively, that there was nothing to prevent a judge from having an interest in a liquor license bars the Court from determining whether respondent has conducted himself unethically by failing to disclose his interest. It is also contended that a finding that respondent holds an undisclosed interest in the liquor license would be unconstitutional because it would prevent female spouses from investing in businesses with capital generated by joint spousal assets and commitments. We disagree. Here, the only issue is whether respondent himself acquired an interest in a liquor license that he failed to disclose. We conclude that he did, and that his wife's interest in these circumstances is not relevant to this determination. A determination that respondent's conduct is unethical does not bar his wife from lawful investment. As noted, we have also determined that under the circumstances, respondent, by reason of his activities in conjunction with his interest in the two liquor licenses, went well beyond what would be required simply to make and manage an investment in real estate. His extensive activities were for the purpose of establishing the financial soundness of these enterprises and assuring their profitability. We are satisfied therefore that respondent thereby engaged in gainful pursuit, as prohibited by article VI, section 6, paragraph 6 of the New Jersey Constitution. Respondent disputes this determination on the grounds that there are no definitive guidelines as to what is meant by gainful pursuit, and therefore it is unjust to find him guilty of violating this constitutional provision. We concede that in some cases there may be uncertainty as to whether particular conduct violates the constitutional stricture. However, there is a readily understandable distinction between a passive investment, which entails minimal managerial responsibility to assure its continuing soundness, and the kind of aggressive, hands-on, close supervision of a business that is necessary to enhance its commercial success. We can arrive at no conclusion other than that respondent's participation in these two enterprises far exceeded the scope of a permissible real estate investment. By his active participation in the Green Parrot and Montego Bay enterprises respondent engaged in ... gainful pursuit in violation of the Constitution of this State. Based upon these determinations, we conclude that respondent violated Canons 1, 2A, 2B, 5C(1) and 5D of the Canons of Judicial Conduct and article VI, section 6, paragraph 6 of the New Jersey Constitution.