           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Kirpal Whalla,                                  :
                      Appellant                 :
                                                :
              v.                                :   No. 240 C.D. 2017
                                                :   Argued: November 13, 2017
Pennsylvania Liquor Control Board               :


BEFORE:       HONORABLE MARY HANNAH LEAVITT, President Judge
              HONORABLE MICHAEL H. WOJCIK, Judge
              HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION
BY PRESIDENT JUDGE LEAVITT                                          FILED: January 4, 2018

              Kirpal Whalla (Applicant) appeals an order of the Court of Common
Pleas of Erie County (trial court) affirming the decision of the Pennsylvania Liquor
Control Board not to validate or renew the restaurant liquor license that he purchased
at an Internal Revenue Service (IRS) tax sale. Applicant contends that he bought
the liquor license free and clear of all liens and, thus, the trial court’s decision
violated the Supremacy Clause of the United States Constitution.1 We affirm.
              Mortrapp, Inc. holds Liquor License No. R-7484, for premises located
at 1314 Griswold Plaza, Erie, Pennsylvania. The liquor license was seized by the
IRS and offered for sale at public auction on May 2, 2012. On that date, “the right,
title, and interest of Mortrapp Inc” in the liquor license was sold to Applicant for
$20,600. Public Auction Sale, Reproduced Record at 19 (R.R. __).


1
 It provides in relevant part:
       This Constitution, and the Laws of the United States ... shall be the supreme Law
       of the Land; and the Judges in every State shall be bound thereby, any Thing in the
       Constitution or Laws of any State to the Contrary notwithstanding.
U.S. CONST. art. VI, §1, cl. 2.
                 A restaurant liquor license must be renewed every two years, and the
Liquor Control Board must validate the license for each year of the license period.
Section 102 of the Liquor Code,2 47 P.S. §1-102 (defining “License period”). On
July 5, 2013, Applicant, on behalf of Mortrapp, filed two applications with the
Liquor Control Board’s Bureau of Licensing (Bureau).                   The first requested a
retroactive renewal of the liquor license for the period August 1, 2011, through July
31, 2013. The second requested a retroactive validation of the license for the period
August 1, 2012, through July 31, 2013. On July 26, 2013, Applicant filed a third
application, requesting a renewal of the liquor license for the licensing period
effective August 1, 2013, through July 31, 2015.
                 The Bureau filed objections to the three applications. First, it contended
that all three applications were untimely. Second, it noted that the applications did
not include verifications from either the Department of Revenue or the Department
of Labor and Industry that all state taxes had been paid. To the contrary, both
departments issued reports that the tax status of the license was “NOT CLEAR.”
R.R. 70, 72-73. Applicant was advised as follows:

                 The Liquor Control Board HAS NO AUTHORITY to remedy
                 any dispute over a failure to issue a tax clearance by either the
                 Department of Revenue or the Department of Labor and
                 Industry, or both. This is a matter strictly between you, the
                 licensee, and the taxing authority. Do not assume that payment
                 of all taxes constitutes clearance. Renewal of your license by the
                 Liquor Control Board requires notification from the taxing
                 agency(s) to the Liquor Control Board.

R.R. 69 (emphasis in original).



2
    Act of April 12, 1951, P.L. 90, as amended, 47 P.S. §§1-101 – 10-1001.
                                                 2
             Applicant appealed, and the Board appointed a hearing examiner, who
conducted a hearing on January 22, 2014.           Neither Applicant nor the Bureau
presented evidence. The record consisted of the three applications for renewal
and/or validation of the liquor license; the Bureau’s objections thereto; and the
hearing notice.
             At the hearing, Applicant gave an “opening statement.” Notes of
Testimony, 1/22/2014, at 6 (N.T. ___); R.R. 55. By counsel, Applicant stated that
he learned “he could not transfer this license [or] take any steps to the license transfer
without a location.” Id. at 7; R.R. 56. Further, the liquor license remains in the
possession of the IRS. Applicant filed the applications to keep the license alive until
these details could be resolved. In the meantime, the license identifies the licensee
as Mortrapp. Applicant maintained that he does not have physical control of, or
access to, Mortrapp’s records. Applicant argued that Mortrapp’s unpaid state tax
obligations, if any, are not his responsibility.
             The hearing examiner issued a recommended adjudication that the three
applications be denied. The Board agreed and adopted the recommendation. The
Board held that Applicant’s applications were untimely by reason of Section 470(a)
of the Liquor Code, 47 P.S. §4-470(a). In addition, the applications did not include
the mandatory tax clearance from either the Department of Revenue or Department
of Labor and Industry.
             Section 470(a) of the Liquor Code sets forth the procedures for
validation or renewal of a liquor license. It states as follows:

             All applications for validation or renewal of licenses under the
             provisions of this article shall be filed with tax clearance from
             the Department of Revenue and the Department of Labor and
             Industry and requisite license and filing fees, and shall include
             an application surcharge of seven hundred dollars ($700.00), at
                                            3
             least sixty days before the expiration date of same: Provided,
             however, That the board, in its discretion, may accept nunc pro
             tunc a renewal application filed less than sixty days before the
             expiration date of the license with the required fees, upon
             reasonable cause shown and the payment of an additional filing
             fee of one hundred dollars ($100.00) for late filing: And provided
             further, That except where the failure to file a renewal
             application on or before the expiration date has created a license
             quota vacancy after said expiration date which has been filled by
             the issuance of a new license, after such expiration date, but
             before the board has received a renewal application nunc pro
             tunc within the time prescribed herein the board, in its discretion,
             may, after hearing, accept a renewal application filed within two
             years after the expiration date of the license with the required
             fees upon the payment of an additional filing fee of two hundred
             fifty dollars ($250.00) for late filing. Where any such renewal
             application is filed less than sixty days before the expiration date,
             or subsequent to the expiration date, no license shall issue upon
             the filing of the renewal application until the matter is finally
             determined by the board and if an appeal is taken from the
             board’s action the courts shall not order the issuance of the
             renewal license until final determination of the matter by the
             courts. The board may enter into an agreement with the applicant
             concerning additional restrictions on the license in question. If
             the board and the applicant enter into such an agreement, such
             agreement shall be binding on the applicant. Failure by the
             applicant to adhere to the agreement will be sufficient cause to
             form the basis for a citation under section 471 and for the
             nonrenewal of the license under this section. A renewal
             application will not be considered filed unless accompanied by
             the requisite filing and license fees and any additional filing fee
             required by this section ….

47 P.S. §4-470(a) (emphasis added).         Applicant did not satisfy any of these
requirements.
             Because the liquor license expired on August 1, 2011, the renewal
application had to be filed no later than June 2, 2011. Instead, Applicant filed it on


                                           4
July 5, 2013. Even if the license had been renewed as of August 1, 2011, it needed
to be validated as of August 1, 2012, and the validation application had to be filed
by June 4, 2012. Instead, Applicant filed it on July 5, 2013. Had the license been
renewed in 2011, for the two-year renewal period, Applicant had to file the renewal
application by June 3, 2013. Instead, Applicant filed it on July 26, 2013.
             The Board acknowledged that Section 470(a) of the Liquor Code
permits nunc pro tunc review of a late-filed application if there exists a reasonable
cause for the delay and a late-filing fee paid. However, Applicant did not offer any
explanation for waiting until 2013 to submit the renewal and validation applications.
Further, he did not submit the requisite late-filing fee.
             The Board further explained that Section 470(a) of the Liquor Code
requires that “[a]ll applications for validation or renewal of licenses under the
provisions of this article shall be filed with tax clearance from the Department of
Revenue and the Department of Labor and Industry and requisite license and filing
fees[.]” 47 P.S. §4-470(a) (emphasis added). The requirements for a tax clearance
application are set forth in Section 477 of the Liquor Code, which states:

             (a) An applicant for the grant, renewal or transfer of any
             license issued pursuant to this article shall provide to the board,
             upon forms approved by the Department of Revenue, the
             following:

                    (1) the applicant’s State personal income tax
                    identification number;

                    (2) the applicant’s State sales tax number;

                    (3) the applicant’s State corporation tax number;

                    (4) the applicant’s State employer withholding tax
                    number;


                                           5
      (5) the applicant’s unemployment compensation
      account number; and

      (6) a statement that:

             (i) all State tax reports have been
             filed and all State taxes paid;
             (ii) all State taxes are subject to a
             timely administrative or judicial
             appeal; or

             (iii) all State taxes are subject to a
             duly approved deferred payment plan.

                                  ***
(d) The board shall not approve any application for the grant,
renewal or transfer of any license issued pursuant to this article
where the applicant has failed to:
      (1) provide any of the information required by
      subsection (a);

      (2) file required State tax reports; or

      (3) pay any State taxes not subject to a timely
      administrative or judicial appeal or subject to a
      duly authorized deferred payment plan.
(e) For the purpose of this section, the term “applicant” shall
include the transferor and transferee of any license issued under
this act.

(f) Upon the required submission of the annual licensing fee or
upon renewal, issuance or transfer of any license, if the
Department of Revenue or the Department of Labor and Industry
notifies the board of noncompliance with the aforementioned
provisions, the board shall not renew, issue, transfer or validate
the license. Any appeal filed therefrom shall not act as a
supersedeas.
                       ***
                              6
47 P.S. §4-477 (emphasis added).3              The Board emphasized that it lacked the
authority to approve an application for license renewal where the applicant has failed
to comply with Sections 470(a) and 477 of the Liquor Code. Accordingly, it denied
all three applications.
                 Applicant appealed to the trial court. The trial court scheduled a de
novo hearing, but the parties submitted a stipulation of facts in lieu of an evidentiary
hearing. The stipulation established that Applicant purchased the liquor license on
May 2, 2012, from the IRS and filed the applications for renewal and validation in
2013. Applicant has no connection to Mortrapp, and his authority to act on behalf
of Mortrapp was limited to the liquor license. Stipulation, ¶6; R.R. 14. The
stipulation further specified:

                 9. Mortrapp’s renewal application for the licensing period
                 effective August 1, 2011, section 10 is annotated “NOT CLEAR”
                 as to the Department of Revenue tax status and “NOT CLEAR”
                 as to the Department of Labor and Industry tax status.

                 10. Mortrapp’s validation application for the licensing period
                 effective August 1, 2012, section 10, is annotated “NOT
                 CLEAR” as to the Department of Revenue tax status and “NOT
                 CLEAR” as to the Department of Labor and Industry tax status.
                 11. Mortrapp’s renewal application for the licensing period
                 effective August 1, 2013, section 10, is annotated “NOT
                 CLEAR” as to the Department of Revenue tax status and “NOT
                 CLEAR” as to the Department of Labor and Industry tax status.

Stipulation ¶9-11; R.R. 15.
                 The trial court affirmed the Board, holding that its decision comported
with the Liquor Code. The three applications were untimely. The Board may accept


3
    Section 477 of the Liquor Code was added by the Act of June 29, 1987, P.L. 32.
                                                 7
a nunc pro tunc renewal application, but only where the licensee presents reasonable
cause for the delay in filing and includes the late-filing fee. Applicant did neither.
The parties stipulated that Applicant did not obtain the necessary tax clearances, and
Section 477(d) of the Liquor Code prohibits the Board from acting on an application
that does not have the necessary tax clearances.
               The trial court next addressed Applicant’s argument that Section 477(d)
conflicts with federal law and is, thus, preempted. Applicant argued that Section
6339(c) of the Internal Revenue Code, 26 U.S.C. §6339(c),4 released the license he
purchased from all encumbrances, including Mortrapp’s state tax debts. In support,
Applicant cited a federal bankruptcy case, In re Pompeo, 195 B.R. 43 (W.D. Pa.
1996). He also cited an unreported federal foreclosure action, United States v. R &
E Corporation, No. 98-1068, 1999 WL 680376 (E.D. Pa. August 31, 1999).
               In Pompeo, the Liquor Control Board, the Department of Revenue and
the Department of Labor and Industry argued that they had priority over other
lienholders to the proceeds of the sale of a liquor license. They argued that Section
477(d)(3) of the Liquor Code forbids the transfer of a liquor license until the
delinquent state taxes are paid. The bankruptcy court disagreed, holding that
“defendants’ property interest cannot be afforded any protection under the
distribution provisions of the Bankruptcy Code [11 U.S.C. §§101-1330] because 47




4
 It provides:
       Effect of junior encumbrances.--A certificate of sale of personal property given or
       a deed to real property executed pursuant to section 6338 [relating to a certificate
       of sale or deed to real property] shall discharge such property from all liens,
       encumbrances, and titles over which the lien of the United States with respect to
       which the levy was made had priority.
26 U.S.C. §6339(c).
                                                8
[P.S.] §4-477(d)(3) may not be construed, at least in a bankruptcy setting, as granting
to defendants a lien on a liquor license.” Pompeo, 195 B.R. at 54.
               In R & E, the central issue was the priority of a federal lien on the
proceeds of the sale of a liquor license in a foreclosure action. The IRS argued its
tax liens had priority over all but one of the tax liens of Pennsylvania’s Bureau of
Employer Tax Operations based on the dates the respective liens were recorded. The
District Court agreed, and this gave the IRS a priority to the sale proceeds.
               The trial court distinguished both Pompeo and R & E. It concluded that
neither case had any application to a licensee’s obligation to obtain state tax
clearances when seeking renewal or validation of a liquor license. Rather, they dealt
with the distribution of the monies generated by the sale of a liquor license in a
private party transaction. Here, the liquor license has not been transferred. It is still
in the name of Mortrapp.
               Applicant has appealed to this Court.5 He argues that the Supremacy
Clause prohibits the Board’s actions. He contends that the IRS’s sale of Mortrapp’s
liquor license divested all liens for unpaid taxes to the Commonwealth, making the
tax clearance an irrelevant exercise.
               The trial court held that Applicant’s applications for a license renewal
and validation were untimely filed. This alone warranted the Board’s refusal to grant
the applications.       The Board points out that Applicant did not appeal this
determination of the trial court.
               Section 470(a) of the Liquor Code states that the Board

5
  Pursuant to Section 464 of the Liquor Code the trial court is required to review the evidence de
novo. 47 P.S. §4-464. Thus, this Court’s review is limited to determining whether the trial court’s
findings are supported by substantial evidence and whether the trial court committed an error of
law or an abuse of discretion. Goodfellas, Inc. v. Pennsylvania Liquor Control Board, 921 A.2d
559, 564 n.8 (Pa. Cmwlth. 2008).
                                                9
               in its discretion, may accept nunc pro tunc a renewal application
               filed less than sixty days before the expiration date of the license
               with the required fees, upon reasonable cause shown and the
               payment of an additional filing fee of one hundred dollars
               ($100.00) for late filing[.]

47 P.S. §4-470(a) (emphasis added). The Board also may consider a “renewal
application nunc pro tunc” filed “within two years after the expiration date of the
license” upon payment of $250 for the late filing. Id. Nunc pro tunc relief may not
be granted “absent a showing that extraordinary circumstances involving fraud or its
equivalent, duress, or coercion caused the delay in filing an appeal.” Arena
Beverage Corporation v. Pennsylvania Liquor Control Board, 97 A.3d 444, 449 (Pa.
Cmwlth. 2014) (quoting In re Borough of Riegelsville from Bucks County Board of
Assessment and Revision of Taxes, 979 A.2d 399, 402 (Pa. Cmwlth. 2009)).
               Applicant has not offered any reason for his delay in filing the
applications, let alone one that rises to the level of an extraordinary circumstance.
Nor did he pay the late filing fee.            Section 470(a) specifies that a “renewal
application will not be considered filed unless accompanied by the requisite filing
and license fees and any additional filing fee required by this section.” 47 P.S. §4-
470(a).6
               Because the applications were untimely, we need not address
Applicant’s claims that the Liquor Code provisions requiring tax clearances from
the Department of Revenue and Department of Labor and Industry are preempted
by the Supremacy Clause.



6
  Additionally, the Board does not grant tax clearances. Its statutory obligation is to require
applicants for validation or renewal of liquor licenses to file tax clearances from the Department
of Revenue and the Department of Labor and Industry. 47 P.S. §4-470. Any issue Applicant had
regarding tax clearances should have been addressed to those departments.
                                               10
             In any event, the record is inadequate to consider Applicant’s
constitutional claims. Applicant argues that the “NOT CLEAR” report relates to
taxes unpaid by Mortrapp prior to Applicant’s May 2, 2012, purchase of the liquor
license. However, the stipulation of facts does not support this supposition. Indeed,
none of the applications at issue here relate to renewal or validation periods during
which Mortrapp was the sole owner. The first application seeks a license renewal
for the period 2011 through July 31, 2013; the second application seeks a license
validation from 2012 through July 31, 2013; and the third application seeks renewal
from 2013 through July 31, 2015. Absent evidence that the denial of the tax
clearance related to taxes pre-dating Applicant’s 2012 purchase, this Court cannot
address the preemption claim.
             As explained above, Applicant did not appeal the trial court’s holding
that the applications for renewal and validation were untimely filed, which is fatal.
Accordingly, the order of the Board is affirmed.

                                   ______________________________________
                                   MARY HANNAH LEAVITT, President Judge




                                         11
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Kirpal Whalla,                        :
                 Appellant            :
                                      :
            v.                        :   No. 240 C.D. 2017
                                      :
Pennsylvania Liquor Control Board     :


                                    ORDER

            AND NOW, this 4th day of January, 2018, the order of the Court of
Common Pleas of Erie County dated January 23, 2017, in the above-captioned
matter is AFFIRMED.
                                _____________________________________
                                MARY HANNAH LEAVITT, President Judge
