Filed 12/23/14; part. pub. and mod. order 1/15/15 (see end of opn.)




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                  FOURTH APPELLATE DISTRICT

                                             DIVISION THREE


ADAM NICK et al.,

    Petitioners,                                                      G049580

         v.                                                           (Alcoholic Beverage Appeals Board
                                                                      No. AB-9335)
DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL et al.,                                              OPINION

          Respondents;

7-ELEVEN, INC.,

     Real Party in Interest.



                  Original proceeding; review of decision of Alcoholic Beverage Appeals
Board of the State of California. Decision affirmed.
                  Law Offices of Joshua Kaplan, Joshua Kaplan; Law Offices of Stephen W.
Berger and Stephen W. Berger for Petitioners.
              Kamala D. Harris, Attorney General, Alicia M. B. Fowler, Senior Assistant
Attorney General, Celine M. Cooper and Gary S. Balekjian, Deputy Attorneys General,
for Respondents.
              Solomon, Saltsman & Jamieson, Ralph Barat Saltsman and Stephen Warren
Solomon for Real Party in Interest.
                               *             *               *
              In this original proceeding, petitioners Adam Nick and Sherry Nick
(collectively, Nick) challenge respondent Department of Alcoholic Beverage Control’s
(Department) decision granting real party in interest 7-Eleven, Inc. (7-Eleven) a license to
sell beer and wine at its store located in the City of Lake Forest (City). The Alcoholic
Beverage Control Act (Bus. & Prof. Code, § 23000 et seq.; hereinafter Act)1 prohibits the
Department from issuing a license that would result in or add to an undue concentration
of licenses unless the local governing body of the area where the applicant premises is
located determines that issuing the license would serve “public convenience or
necessity.” (§§ 23958, 23958.4, subd. (b)(2).) The City determined issuing the license
would serve public convenience or necessity and the Department relied on that
determination in deciding to grant 7-Eleven’s application.
              Nick contends we must overturn the Department’s decision because the
Department improperly “ceded” its exclusive constitutional authority by treating the
City’s public convenience or necessity determination as binding and conclusive, rather
than independently making its own determination. Nick also contends the City’s public
convenience or necessity determination is void and ineffective because (1) the City failed
to make the determination within the time period specified by section 23958.4,
subdivision (b)(2), and (2) the record lacks substantial evidence to support a public


       1      All statutory references are to the Business and Professions Code unless
otherwise stated.


                                             2
convenience or necessity determination by either the City or the Department. As
explained below, these contentions fail because Nick misinterprets the governing legal
authorities and standards.
              Finally, Nick contends we must overturn the Department’s decision
because respondent Alcoholic Beverage Control Appeals Board (Appeals Board) found
7-Eleven misrepresented a material fact by failing to disclose a franchisee held a “hidden
ownership” interest in the store at issue. As we explain, the Appeals Board made no such
finding, but rather affirmed the Department’s decision and then remanded for the
Department to investigate the hidden ownership issue because Nick failed to raise it as a
basis for denying 7-Eleven’s application during the administrative hearing before the
Department. Moreover, misrepresenting a material fact in obtaining a license is a ground
for revoking or suspending a license that may be addressed after the license issues.
Accordingly, we affirm the Department’s and the Appeals Board’s decisions.

                                             I

                             FACTS AND PROCEDURAL HISTORY

              7-Eleven operates a convenience store in the City that sells a variety of
grocery, food, and other convenience items, including 7-Eleven’s exclusive brand of
certain items. Seeking to expand its offerings, 7-Eleven applied to the Department for an
“off-sale” beer and wine license, which is a license to sell beer and wine for consumption
off the premises.
              In its initial investigation, the Department determined that granting
7-Eleven’s request would result in an undue concentration of licenses because three other
stores in the same census tract already held off-sale beer and wine licenses, including a
gas station and convenience store Nick owned and operated across the street from
7-Eleven’s store. The Department therefore required 7-Eleven to obtain a determination
from the City that issuing the license would serve public convenience or necessity.


                                             3
              Acting on 7-Eleven’s request, the City’s Director of Development Services
investigated the matter and concluded that issuing the license would serve public
convenience or necessity. Nick appealed that determination to the City’s Planning
Commission and then to the City Council. The City Council conducted a public hearing
on Nick’s appeal and independently determined that issuing the license to 7-Eleven
would serve public convenience or necessity. The City forwarded its determination to the
Department. Nick sought to overturn the City’s decision by seeking a writ of
administrative mandamus, but the Superior Court denied Nick’s writ petition and we
affirmed that decision in Nick v. City of Lake Forest (Dec. 23, 2014, G047115)
___ Cal.App.4th ___ (Nick I) <http:www.courts.ca.gov/opinions.htm>.
              Nick also filed a protest with the Department, raising several reasons why it
should deny 7-Eleven’s application, including claims that issuing the license would result
in an undue concentration of off-sale licenses in the area and 7-Eleven offered nothing
unique in the sale of alcoholic beverages that is not already available in the community.
After receiving the City’s public convenience or necessity determination, the
Department’s investigator completed her investigation regarding 7-Eleven, its
application, the surrounding community, and Nick’s protest. The investigator prepared a
report analyzing Nick’s protest and recommending the Department deny the protest and
grant 7-Eleven’s application.
              In November 2012, the Department conducted an evidentiary hearing on
Nick’s protest at which the Department, 7-Eleven, and Nick each called witnesses and
presented evidence. The administrative law judge issued a proposed decision denying
Nick’s protest and granting 7-Eleven’s application. The proposed decision explained
issuing the license to 7-Eleven would raise the total of off-sale liquor licenses to four, but
this would result in a minimal degree of overconcentration because the statutory formula
establishing the threshold for undue concentration authorized three licenses for the census
tract. The proposed decision also noted that, after considering a wide variety of factors

                                              4
and making numerous findings, the City determined issuing the license would serve
public convenience or necessity despite the undue concentration of licenses in the area.
              Effective February 2013, the Department adopted the administrative law
judge’s proposed decision as its own and Nick appealed the decision to the Appeals
Board. The Appeals Board affirmed the Department’s decision to deny Nick’s protest
and grant 7-Eleven’s application, but it also remanded for the Department to conduct
further proceedings it deemed appropriate on an issue Nick failed to raise before the
Department—whether 7-Eleven materially misrepresented a franchisee’s possible
ownership interest in the store that would justify suspending or revoking 7-Eleven’s
license under section 24200.
              Nick timely filed a petition for a writ of review challenging the
Department’s and Appeals Board’s decisions. We granted the petition, ordered the
Department to certify the administrative record of its proceedings, and now consider
Nick’s petition.

                                             II

                                       DISCUSSION

A.     Relevant Legal Background on Licenses to Sell Alcoholic Beverages
              The California Constitution grants the Department “exclusive power” to
license the sale of alcoholic beverages “in accordance with the laws enacted by the
Legislature.” (Cal. Const., art. XX, § 22.) The Department may, “in its discretion, . . .
deny, suspend or revoke any specific alcoholic beverage license if it shall determine for
good cause that the granting or continuance of such license would be contrary to public
welfare or morals, or that a person seeking or holding a license has violated any law
prohibiting conduct involving moral turpitude.” (Ibid.; Rondon v. Alcoholic Beverage
Control Appeals Bd. (2007) 151 Cal.App.4th 1274, 1281.)



                                             5
              The Legislature enacted the Act to regulate the sale of alcoholic beverages
and establish procedures and standards for granting, denying, suspending, and revoking
licenses to sell alcoholic beverages. Upon receipt of an application for a liquor license,
the Act requires the Department to “make a thorough investigation to determine whether
the applicant and the premises for which a license is applied qualify for a license and
whether the provisions of [the Act] have been complied with, and [also to] . . . investigate
all matters connected therewith which may affect the public welfare and morals.”
(§ 23958.) The Department must deny an application “if either the applicant or the
premises for which a license is applied do not qualify for a license under [the Act].”
(Ibid.)
              As pertinent here, the Act also requires the Department to deny an
application if its investigation reveals “issuance would result in or add to an undue
concentration of licenses, except as provided in Section 23958.4.” (§ 23958, italics
added.) Section 23958.4 provides an undue concentration of off-sale retail licenses
occurs when “the ratio of off-sale retail licenses to population in the census tract or
census division in which the applicant premises are located exceeds the ratio of off-sale
retail licenses to population in the county in which the applicant premises are located.”
(§ 23958.4, subd. (a)(3).)
              When the issuance of a license would result in or add to an undue
concentration, section 23958.4 provides the Department nonetheless “may issue a license
. . . [¶] . . . if the local governing body of the area in which the applicant premises are
located, or its designated subordinate officer or body, determines within 90 days of
notification of a completed application that public convenience or necessity would be
served by the issuance.” (§ 23958.4, subd. (b)(2).) If the local governing body or its
designee “does not make a determination within the 90-day period, then the [D]epartment
may issue a license if the applicant shows the [D]epartment that public convenience or
necessity would be served by the issuance.” (Ibid.) Regardless whether the local

                                              6
governing body or the Department makes the public convenience or necessity
determination, the exclusive power to issue a liquor license remains with the Department.
(Cal. Const., art. XX, § 22; see §§ 23958, 23958.4, subd. (b)(2).) The Department’s
decision to grant or deny an application for a license to sell alcoholic beverage “is broad
and inclusive and is not subject to judicial control when exercised within its legal limits.”
(Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd.
(2002) 100 Cal.App.4th 1066, 1073 (Deleuze).)
              Any party aggrieved by the Department’s decision to issue or deny a
license may appeal that decision to the Appeals Board. (Cal. Const., art. XX, § 22;
§§ 23081, 23084.) The Appeals Board’s scope of review is narrow: it “shall not receive
evidence in addition to that considered by the [D]epartment” and its review “shall be
limited to the questions whether the [D]epartment has proceeded without or in excess of
its jurisdiction, whether the [D]epartment has proceeded in the manner required by law,
whether the decision is supported by the findings, and whether the findings are supported
by substantial evidence in the light of the whole record.” (Cal. Const., art. XX, § 22;
§ 23084; Deleuze, supra, 100 Cal.App.4th at p. 1071.) The Appeals Board may remand a
matter for reconsideration if it determines the Department failed to consider relevant
evidence either because the evidence could not have been produced at the Department’s
hearing despite the exercise of reasonable diligence or the Department erroneously
refused to consider the evidence. (Ibid.)
              Any party aggrieved by the Appeals Board’s final decision may file a
petition for writ of review with “the Supreme Court or . . . the court of appeal for the
appellate district in which the proceeding arose.” (§ 23090; Deleuze, supra,
100 Cal.App.4th at p. 1071.) The appellate court reviews the Department’s decision, not
the Appeals Board’s decision, and exercises the same limited review as the Appeals
Board. (§ 23090.2; Kirby v. Alcoholic Bev. etc. Appeals Bd. (1972) 7 Cal.3d 433, 436
(Kirby); Deleuze, at p. 1072.) Furthermore, section 23090.2 provides, “Nothing in this

                                              7
article shall permit the court to hold a trial de novo, to take evidence, or to exercise its
independent judgment on the evidence.” (§ 23090.2.) Thus, the scope of judicial review
“is quite limited.” (Sepatis v. Alcoholic Bev. etc. Appeals Bd. (1980) 110 Cal.App.3d 93,
102 (Sepatis).)
              “Neither this court nor the [Appeals] Board may ‘“disregard or overturn a
finding of fact of the Department . . . for the reason that it is considered that a contrary
finding would have been equally or more reasonable.’” [Citation.] ‘[I]f it be conceded
that reasonable minds might differ as to whether granting [a license] would or would not
be contrary to public welfare, such concession merely shows that the determination of the
question falls within the broad area of discretion which the Department was empowered
to exercise.’ [Citation.]” (Kirby, supra, 7 Cal.3d at p. 436; see § 23090.3 [“The findings
and conclusions of the [D]epartment on questions of fact are conclusive and final and are
not subject to review”].)
              “Of course, the discretion exercised by the Department under section 22 of
article XX of our Constitution ‘“is not absolute but must be exercised in accordance with
the law, and the provision that it may revoke [or deny] a license ‘for good cause’
necessarily implies that its decisions should be based on sufficient evidence and that it
should not act arbitrarily in determining what is contrary to public welfare or morals.’”
[Citations.] Nevertheless, it is the Department, and not the [Appeals] Board or the courts,
which must determine whether ‘good cause’ exists for denying a license upon the ground
that its issuance would be contrary to public welfare or morals. [Citations.]” (Kirby,
supra, 7 Cal.3d at pp. 436-437.) “As long as there is substantial evidence to support the
Department’s determination, as long as the decision is a reasonable one under the
evidence, the decision must be upheld as a valid exercise of the Department’s discretion
conferred by the Constitution.” (Department of Alcoholic Bev. Control v. Alcoholic Bev.
etc. Appeals Bd. (1982) 136 Cal.App.3d 315, 318 (Kolender); see Department of



                                               8
Alcoholic Bev. Control v. Alcoholic Bev. etc. Appeals Bd. (1982) 133 Cal.App.3d 814,
817; Sepatis, supra, 110 Cal.App.3d at pp. 102-103.)

B.     The Department Did Not “Ced[e]” Its Authority to the City
              Nick contends we must overturn the Department’s decision to grant
7-Eleven’s application because the Department improperly “ceded” its authority to the
City by treating the City’s public convenience or necessity determination as “conclusive
and binding.” According to Nick, the City’s determination was merely advisory and the
Department was required to independently investigate 7-Eleven’s application to make its
own public convenience or necessity determination. Nick, however, misconstrues the
governing statutes and mischaracterizes the Department’s investigation and
determination.
              As explained above, section 23958 prohibits the Department from issuing a
license that would result in or add to an undue concentration of licenses unless “the local
governing body of the area in which the applicant premises are located . . . determines
within 90 days of notification of a completed application that public convenience or
necessity would be served by the issuance.” (§ 23958.4, subd. (b)(2).) If the local
governing body makes this determination, the Department “may” issue the license despite
an undue concentration. (§§ 23958, 23958.4, subd. (b)(2).) Nothing in the plain
language of either section 23958 or section 23958.4 requires the Department to
independently determine whether issuing the license would serve public convenience or
necessity if the local governing body already made that determination. (Jenkins v.
Teegarden (2014) 230 Cal.App.4th 1128, 1138-1139 (Jenkins) [“‘“If the plain,
commonsense meaning of a statute’s words is unambiguous, the plain meaning
controls”’”].) Section 23958.4, subdivision (b)(2) requires the Department to make its
own public convenience or necessity determination only if the local governing body fails
to do so within the 90-day period specified in the statute. (§ 23958.4, subd. (b)(2) [“If the


                                             9
local governing body, or its designated subordinate officer or body, does not make a
determination within the 90-day period, then the [D]epartment may issue a license if the
applicant shows the [D]epartment that public convenience or necessity would be served
by the issuance”].)
              The previous version of section 23958 allowed the Department to deny an
application that would result in or add to an undue concentration of licenses unless the
applicant made a showing to the Department that issuing the license would serve public
convenience or necessity. (Kolender, supra, 136 Cal.App.3d at pp. 318-319, fn. 2.) In
1994, the Legislature amended section 23958 and enacted section 23958.4 to delete the
requirement that the Department make the public convenience or necessity determination,
and instead shifted that responsibility to the local governing body. (Stats. 1994, ch. 630,
§§ 1, 2.) By changing the Act, we must presume the Legislature intended to eliminate the
Department’s obligation to make the public convenience or necessity determination in
favor of the local governing body. (See City of Irvine v. Southern California Assn. of
Governments (2009) 175 Cal.App.4th 506, 522 [“‘Under the rules governing statutory
construction, when the Legislature enacts an amendment, we presume it “‘indicates that it
thereby intended to change the original act by creating a new right or withdrawing an
existing one.’” [Citation.] “‘Therefore, any material change in the language of the
original act is presumed to indicate a change in legal rights’”’”]; Suman v. BMW of North
America, Inc. (1994) 23 Cal.App.4th 1, 10-11 [“‘It is a well recognized principle of
statutory construction that when the Legislature has carefully employed a term in one
place and has excluded it in another, it should not be implied where excluded’”].)
              Nick cites nothing in the language of section 23958.4 nor any case
authority to support his contention the Department must independently make its own
public convenience or necessity determination. Instead, Nick points to the constitutional
provision granting the Department the exclusive power to license the sale of alcoholic
beverages. According to Nick, the Department’s “blind adherence” to the City’s public

                                            10
convenience or necessity determination results in an unconstitutional divestiture of its
exclusive authority. Nick’s argument fails because it misconstrues both the governing
constitutional provision and statues, and also ignores the other factors the Department
considers in deciding whether to issue a license.
              Article XX, section 22 of the California Constitution grants the Department
the exclusive power to license the sale of alcoholic beverages “in accordance with laws
enacted by the Legislature.” (Cal. Const., art. XX, § 22; Stroh v. Midway Restaurant
Systems, Inc. (1986) 180 Cal.App.3d 1040, 1048 [“The Department has the power to
issue and revoke licenses according to the specifications set out in the statutes’].)
Consistent with this constitutional provision, the Legislature established the limitation on
licenses based on undue concentration, created the exception to that limitation based on
public convenience or necessity, and required the local governing body to make the
public convenience or necessity determination rather than the Department. (§§ 23958,
23958.4.) By relying on a local governing body’s public convenience or necessity
determination, the Department does not divest itself of its constitutional authority, but
rather follows the statutory instructions on how to exercise that authority.2
              Moreover, in making a public convenience or necessity determination a
local governing body does not license the sale of alcoholic beverages; it merely makes a
determination to aid the Department in exercising its constitutional authority. The
Department still retains the discretion and final decision on whether to issue the license.
Indeed, the Department still must determine whether the applicant and the premises for
which a license is sought satisfy the Act’s other requirements, and whether issuing the


       2     Nick also contends allowing the Department to rely on the City’s public
convenience or necessity determination violates the California Constitution’s supremacy
clause, which precludes any local governmental action that is in conflict with state law.
Again, Nick is mistaken. The City is not taking any action that conflicts with state law; it
is making a determination that state law requires it to make.


                                             11
license would be contrary to public welfare or morals. (See Cal. Const., art. XX, § 22;
§ 23958.) A local governing body’s public convenience or necessity determination is
only one of many factors bearing on the Department’s final decision; by no means is it
determinative.
              Nick’s contention also fails because the Department did not “blind[ly]
adhere[]” to the City’s determination and treat it as “binding and conclusive.” As section
23958 requires, the Department made a thorough investigation of 7-Eleven, its store, the
surrounding community, and all matters that may affect the public welfare and morals.
The Department’s investigator spoke with law enforcement officials about the
application, visited 7-Eleven’s store on numerous occasions, worked with the City to
obtain the necessary information, and spoke with Nick (the only protestant) regarding his
objections. When the investigation revealed the area where 7-Eleven’s store is located
already had the maximum number of off-sale licenses based on the statutory definition of
undue concentration, the Department required 7-Eleven to obtain a public convenience or
necessity determination from the City.
              After receiving the City’s public convenience or necessity determination,
the Department reviewed the factors the City considered in reaching its determination,
and the specific findings the City made to support it. Based on its own investigation, the
Department concluded the City’s determination was reasonable and that issuing the
license would benefit the neighborhood by providing a convenient location to purchase
convenience items, including 7-Eleven’s exclusive brand, while also purchasing alcoholic
beverages. The Department’s investigator also noted the neighborhood would benefit
because the store was located in a shopping center that both residents and workers in the
area regularly use to obtain common convenience products and services. Finally, the
Department’s investigator noted issuing the license would result in only a minimal degree
of overconcentration because it would be the fourth off-sale license in a census tract that
allows three off-sale licenses without a public convenience or necessity determination.

                                             12
The Department therefore did not cede any of its authority to license the sale of alcoholic
beverages to the City.

C.     The City Timely Issued Its Public Convenience or Necessity Determination
              Nick contends the City’s public convenience or necessity determination is
void, and the Department therefore was required to make its own independent
determination, because the City failed to act within the 90-day time period
section 23958.4, subdivision (b)(2) establishes. According to Nick, the 90-day period
began on June 29, 2010, when the Department “requested” the City make a public
convenience or necessity determination, and therefore the City’s authority to act expired
before its decision on October 4, 2010. The statute’s plain language does not support
Nick’s contention. (Jenkins, supra, 230 Cal.App.4th at pp. 1138-1139 [statute’s
unambiguous and plain meaning controls].)
              Section 23958.4, subdivision (b)(2) states, “The 90-day period shall
commence upon receipt by the local governing body of (A) notification by the
[D]epartment of an application for licensure, or (B) a completed application according to
local requirements, if any, whichever is later.” Accordingly, neither the Department nor
anyone else requesting a public convenience or necessity determination starts the 90-day
period. Rather, it is the local governing body’s receipt of the Department’s notification
or a completed application that triggers the time period. Nick, however, fails to point to
any evidence in the record showing when the City received either the request the
Department purportedly made on June 29, 2010, or a completed application under its
local requirements.
              The City Council resolution announcing the City’s public convenience or
necessity determination states, “on July 6, 2010, the City received a request from Permits
and Licenses Resource Center (‘PLRC’), on behalf of 7-Eleven, requesting a
determination of Public Convenience or Necessity.” (Italics added.) The City treated


                                            13
this request as the trigger for the 90-day period and began processing the request. It
therefore timely made the public convenience or necessity determination 90 days later, on
October 4, 2010.
                In Nick’s view, the City Council resolution fails to establish the City timely
made its determination because neither the Department nor 7-Eleven offered any
evidence to show the City’s receipt of PLRC’s request marked the completion of
7-Eleven’s application under the City’s local requirements, and thereby triggered the
90-day period. In the absence of such evidence, Nick argues we must use the
Department’s June 29, 2010 request as the trigger for the time period. He is mistaken for
four reasons.
                First, as explained above, the trigger date is the date the City received the
Department’s request, not the date the Department made the request. Second,
section 23958.4, subdivision (b)(2), states the 90-day period starts when the local
governing body receives the Department’s notification or a completed application under
its local requirements, whichever is later. Even if we assume the City received the
Department’s request on June 29, 2010, the time period still would not start on that date
unless the City also received 7-Eleven’s completed application on or before that date, and
Nick offers no evidence on this point. Third, the City Council resolution shows the City
treated receipt of the PLRC’s request on 7-Eleven’s behalf as the trigger for the statutory
period, and therefore as 7-Eleven’s completed application. Fourth, the burden was on
Nick to show the City failed to act within the 90-day time period because it is presumed
the City regularly performed its official duty. (Evid. Code, § 664; Fukuda v. City of
Angels (1999) 20 Cal.4th 805, 820.) The purported deficiency in the evidentiary record
therefore is fatal to Nick’s position; neither the Department nor 7-Eleven have the burden
to establish timeliness.




                                               14
D.     Substantial Evidence Supports the Public Convenience or Necessity Determination
              Regardless whether the Department or the City was required to make the
public convenience or necessity determination, Nick contends the record in this case
cannot support a determination that issuing the license to 7-Eleven would serve public
convenience or necessity. In Nick’s view, a public convenience or necessity
determination requires evidence showing the license applicant “would offer something
‘unique’ in connection with the sale of alcoholic beverages” that is not already offered in
the community, and 7-Eleven cannot make that showing because Nick’s convenience
store located directly across the street sells “an identical product mix of consumer items,”
including beer and wine. Nicks argument lacks merit because it relies on an erroneous
legal standard.
              In Nick I, we explained the Act does not define the phrase “public
convenience or necessity,” but rather leaves it to the local governing body to determine
on a case-by-case basis what factors bear on the public convenience or necessity
determination. (Nick I, supra, ___ Cal.App.4th at pp. ___ [pp. 13-14, 17].) Contrary to
Nick’s argument, there is no single fact that must be established. Instead, a local
governing body makes a public convenience or necessity determination to aid the
Department in exercising its broad discretion to issue liquor licenses, and therefore the
local governing body exercises the same broad discretion as the Department.
Accordingly, the primary considerations are whether the local governing body relied on
reasonable factors based on the facts of the particular case, and whether substantial
evidence supports the determination. (Id. at pp. ___ [pp. 16-17].) The courts will not
disturb the determination unless the local governing body acts arbitrarily or without
evidentiary support. (Id. at pp. ___ [pp. 13-14].)
              To challenge the sufficiency of the evidence to support the public
convenience or necessity determination on 7-Eleven’s application, Nick therefore would
have to show no substantial evidence supported either the City’s determination or the


                                             15
Department’s decision to rely on that determination. It is not enough to show the City or
the Department could have reached a different decision; Nick must show they were
required to do so. Nick fails to meet this burden because his challenge to the sufficiency
of the evidence is based on an erroneous legal standard. In Nick I, we concluded the
City’s public convenience or necessity determination on 7-Eleven’s application was
reasonable and supported by substantial evidence. (Nick I, supra, ___ Cal.App.4th at
pp. ___ [pp. 15, 17].) Nick fails to provide any valid reason why the Department’s
decision to rely on the City’s determination was unreasonable or unsupported by the
evidence.

E.     No “Hidden Ownership” Finding Exists That Required the Department to Deny
       7-Eleven’s Application
              Nick contends we must overturn the Department’s decision to grant
7-Eleven’s application based on the Appeals Board’s finding 7-Eleven failed to disclose a
co-ownership interest a franchisee held in the store at issue. According to Nick, the
failure to disclose this interest taints 7-Eleven’s entire application and violates
section 24200, subdivision (c), which allows the suspension or revocation of the license if
the applicant has misrepresented a material fact in obtaining a license. Nick’s argument
is without merit because the Appeals Board did not make a “hidden ownership” finding,
as Nick contends.
              Although the Appeals Board acknowledged a 7-Eleven consultant testified
on cross-examination that a franchisee held an ownership interest 7-Eleven did not
identify on its application, the Appeals Board made no findings on hidden ownership
because Nick failed to raise the issue as a basis for denying 7-Eleven’s application, and
therefore 7-Eleven had no opportunity to present evidence to the Department explaining
the true nature of its relationship with the franchisee. The Appeals Board therefore
affirmed the Department’s decision granting 7-Eleven’s application, but remanded the
matter for the Department “to take appropriate steps to determine what, if any, ownership

                                              16
interest exists and what bearing, if any, that has on the propriety of the Department’s
issuance of a license.”
              This course of action is consistent with the governing authorities, and does
not invalidate the Department’s decision to grant 7-Eleven’s application. The Appeals
Board was precluded from receiving any evidence the Department did not consider in
reaching its decision (Cal. Const., art. XX, § 22), but the Appeals Board could remand for
the Department to consider evidence that could not in the exercise of reasonable diligence
have been presented to the Department during the original proceedings (ibid.; § 23084;
Deleuze, supra, 100 Cal.App.4th at p. 1071). Here, the Appeals Board determined
7-Eleven reasonably could not have presented evidence regarding its legal relationship
with the franchisee during the original proceedings because Nick did not raise the issue.
Moreover, the code section on which Nick relies addresses the permissible grounds for
suspending or revoking a license; it does not address the decision to grant or deny an
application. (See § 24200.) The Appeals Board’s decision appropriately reconciles these
authorities by upholding the Department’s decision to grant 7-Eleven’s application and
preserving the misrepresentation issue by remanding it to the Department for further
consideration. If the Department’s investigation reveals 7-Eleven made a material
misrepresentation, the Department may proceed to suspend or revoke 7-Eleven’s license
as it deems appropriate. If the Department’s investigation reveals no material
misrepresentation, then no further action is required.




                                             17
                                           III
                                     DISPOSITION

             The Department’s and Appeals Board’s decisions are affirmed. The
Department, the Appeals Board, and 7-Eleven shall recover their costs on appeal.



                                                 ARONSON, ACTING P. J.

WE CONCUR:



FYBEL, J.



IKOLA, J.




                                           18
Filed 1/15/15




                       CERTIFIED FOR PARTIAL PUBLICATION*

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               FOURTH APPELLATE DISTRICT

                                       DIVISION THREE


ADAM NICK et al.,

    Petitioners,                                        G049580

        v.                                              (Alcoholic Beverage Appeals Board
                                                        No. AB-9335)
DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL et al.,                                ORDER (1) DENYING
                                                        REHEARING; (2) MODIFYING
         Respondents,                                   OPINION; AND (3) CERTIFYING
                                                        OPINION FOR PARTIAL
7-ELEVEN, INC.,                                         PUBLICATION; NO CHANGE IN
                                                        JUDGMENT
     Real Party in Interest.


                  The petition for rehearing filed by appellants Adam Nick and Sherry Nick
is DENIED.
                  It is ordered the opinion filed in the above-entitled matter on December 23,
2014, is hereby MODIFIED as follows:
                  1.    On page 2, the second paragraph starting with “Nick contends we
must overturn” and continuing at the top of page 3, delete the entire paragraph and
replace it with the following two paragraphs:

    _______________
    *          Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this
    opinion is certified for publication with the exception of parts II.C., II.D., and II.E.
                     In the published portion of this opinion, we address Nick’s
       contention the Department improperly “ceded” its exclusive constitutional
       authority by treating the City’s public convenience or necessity
       determination as binding and conclusive, rather than independently making
       its own determination. As explained below, this contention fails because it
       misconstrues the duties of the Department and the City under the Act, and
       also mischaracterizes the Department’s investigation and decision in
       granting 7-Eleven’s application.
                     The unpublished portion of the opinion addresses Nick’s
       contentions the City’s public convenience or necessity determination is
       void because the City failed to make the determination within the time
       period specified by section 23958.4, subdivision (b)(2), and the record
       lacks substantial evidence to support a public convenience or necessity
       determination by either the City or the Department. These contentions are
       not persuasive because they fail to recognize the proper event triggering the
       statutory time period and the broad deference given to the City in making a
       public convenience or necessity determination.
              2.     On page 3, the first sentence of the first complete paragraph, starting
with “Finally, Nick contends,” delete the entire sentence and replace it with the following
sentence:
       Finally, we address in the unpublished portion of the opinion Nick’s
       contention we must overturn the Department’s decision because respondent
       Alcoholic Beverage Control Appeals Board (Appeals Board) found
       7-Eleven misrepresented a material fact by failing to disclose a franchisee
       held a “hidden ownership” interest in the store at issue.
              3.     On page 4, the fourth sentence of the third paragraph starting with
“The proposed decision also noted” and continuing at the top of page 5, delete the word

                                             2
“that” between the words “noted” and “after,” and delete the words “the undue” between
the words “despite” and “concentration” and replace them with the words “an over,” so
the sentence reads:
      The proposed decision also noted, after considering a wide variety of
      factors and making numerous findings, the City determined issuing the
      license would serve the public convenience or necessity despite an over
      concentration of licenses in the area.
             4.       On page 5, the second sentence of the first full paragraph, starting
with “The Appeals Board affirmed,” delete the words “it deemed appropriate” between
the words “further proceedings” and “on an issue” so the sentence reads:
      The Appeals Board affirmed the Department’s decision to deny Nick’s
      protest and grant 7-Eleven’s application, but it also remanded for the
      Department to conduct further proceedings on an issue Nick failed to raise
      before the Department—whether 7-Eleven materially misrepresented a
      franchisee’s possible ownership interest in the store that would justify
      suspending or revoking 7-Eleven’s license under section 24200.
             5.       On page 9, the first sentence of the first full paragraph, starting with
“Nick contends we must overturn the Department’s decision,” delete the words “we must
overturn the Department’s decision to grant 7-Eleven’s application because” so the
sentence reads:
      Nick contends the Department improperly “ceded” its authority to the City
      by treating the City’s public convenience or necessity determination as
      “conclusive and binding.”
             6.       On page 11, the first full sentence of the partial paragraph at the top
of the page, starting with “Nick’s argument fails,” delete the word “statues” between the
words “provision and” and “and also,” and replace it with the word “statutes” so the
sentence reads:

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       Nick’s argument fails because it misconstrues both the governing
       constitutional provision and statutes, and also ignores the other factors the
       Department considers in deciding whether to issue a license.
              7.     On page 12, the third sentence of the first full paragraph, starting
with “The Department’s investigator spoke with law enforcement officials,” delete the
parenthetical statement “(the only protestant)” between the words “with Nick” and
“regarding his” so the sentence reads:
       The Department’s investigator spoke with law enforcement officials about
       the application, visited 7-Eleven’s store on numerous occasions, worked
       with the City to obtain the necessary information, and spoke with Nick
       regarding his objections.
              These modifications do not change the judgment.
              Finally, 7-Eleven, Inc. and the California Department of Alcoholic
Beverage Control request that our opinion be certified for publication. It appears that our
opinion meets the standards set forth in California Rules of Court, rule 8.1105(c), except
for parts II.C., II.D., and II.E. We therefore PARTIALLY GRANT the requests and
order the opinion published except for parts II.C., II.D., and II.E.



                                                  ARONSON, ACTING P. J.

WE CONCUR:


FYBEL, J.


IKOLA, J.




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