Keywell v. Messerschmidt

Adams, J.

This is an action for specific performance of an agreement to transfer a license issued by the Michigan liquor control commission.

In 1937, Henry C. Keywell and Rose Keywell, his wife, plaintiffs and appellees, were the owners of a hotel in the city of Detroit. Henry C. Keywell and Herman Messerschmidt, deceased, whose estate is now in probate in Wayne county, with Eleanor Messerschmidt, defendant and appellant, acting’ as executrix thereof, operated a business in the hotel under a class “B” hotel liquor license.

On June 14, 1937, Keywell sold the business, including all fixtures and equipment, to Messerschmidt and transferred his interest in the liquor license-with the approval of the Michigan liquor control commission. At the same time that the transfer was made and as a part of the entire transaction, the-parties executed a 5-year lease of a portion, of the hotel property and a chattel mortgage to Keywell securing certain indebtedness. In the lease Messerschmidt agreed to keep the licensed business in the hotel and to transfer the license back to Keywell at the end of the term.

Five years later, in 1942, a second lease was executed, together with a new chattel mortgage and a separate agreement in reference to the transfer of’ the license.

Again on June 2, 1947, at the expiration of the-second term, a third lease of 5 years was signed by the parties, a new chattel mortgage given, and a new agreement executed in reference to transfer of -the license. This last agreement constitutes the basis for the present action, the pertinent portion reading as follows:

“That it is understood that the present license issued by the Michigan liquor control commission or any and all renewals thereof, or any and all other licenses that may he issued by the liquor control commission, or any other governmental body, shall "be and remain a part of the premises at all times ; and that said license and/or licenses cannot be removed from said premises by the party of the second part, nor sold or assigned or encumbered by him in .any manner whatsoever voluntarily or involuntarily; that in the event there is a breach of the terms .and the conditions of the lease, or there is issued an order of the liquor control commission or any other lawful body or court, requiring said license and/or licenses to be transferred, that said license and/or licenses shall be transferred forthwith to the parties of the first part. And that upon the expiration of the term of the lease and the full and faithful performance thereof, the party of the second part [Messerschmidt] shall assign and transfer said license to the parties of the first part. * * *

“That the party of the second part does by these presents, authorize and appoint the parties of the first part [Keywells] to execute said assignment and transfer as his attorney, in fact; said power of attorney to be irrevocable and continuing.”

Herman Messerschmidt died on February 6, 1952, and Eleanor Messerschmidt was appointed executrix of his estate by the probate court of Wayne county. At the expiration of the term of the lease, Keywells made demand upon the executrix for a transfer of the liquor license to them and, upon refusal, this action was instituted for specific performance. The circuit court found for the plaintiff and appointed a receiver to manage the business pending appeal to this Court.

It is the position of the defendant that the existence of the agreement to transfer the license was unknown to the commission and therefore in violation of the Michigan statutes and the rules and regulations of the Michigan liquor control commission and that as a result, the agreement itself is unenforceable. She claims that because a copy of the-agreement was not filed with the Michigan liquor-control commission, it resulted in the concealment of an interest in the license in violation of rule 31 adopted by the liquor control commission pursuant to their rule-making authority provided by PA 1933-(Ex Sess), No 8, § 7, as amended by PA 1945, No 133' (CL 1948, §436.7 [Stat Ann 1951 Cum Supp. § 18.977]). That rule reads as follows:

“No licensee shall sell or transfer his license, or any interest therein, without the consent of the liquor control commission; nor shall any person or persons obtain a license in his or their name for the use and benefit of another person whose name does not appear on the license.

“No licensee shall transfer location of his license,, make any alterations in the physical structure -of his licensed premises, or change the character of ■ the-business for which the license was granted without the consent of the commission being first duly obtained.”

The parties conceded on the record that the agreement to transfer was not filed with the liquor control commission, and we must presume that the commission did not know of its existence. No reason is-suggested for the failure to file nor is there indication of any intent or effort to conceal.

"We are of the opinion, however, that the agreement does not constitute a present and existing interest in a license such as is referred to in the rule as: “a license * * * for the use and benefit of another person.” During the 15-year period that Messerschmidt held the license from the commission, he was, insofar as the record shows, the exclusive owner thereof. He neither shared the profits with anyone nor was his use and exercise of the license dictated by another. Had he violated the statute or the rules and regulations of the commission during that period, he could have been penalized by the commission even to the extent of the cancellation of the license and neither the Keywells nor any other person could have objected to such action.

The agreement of the parties provided for 2 things; namely, that the license would not be removed from the hotel and that it would, be transferred to the Keywells on the happening of a specified contingency. We find nothing in the Michigan liquor control act that prohibits such an agreement nor do we find any provision in the act or in the rules and regulations of the commission requiring that such an agreement be filed in the commission office.

It is the further contention of the appellant that the agreement to transfer the license upon the termination of the lease is void as being contrary to public policy. Again we cannot agree. The statute authorizes a transfer of such a license and in the absence of fraud or other unconscionable conduct there can be no violation of public policy in an agreement to do that which is legal.

In an opinion of this Court in 1944 where substantially similar circumstances existed, it was said:

“Defendant claims that an agreement to transfer the license is contrary to public policy and void. This claim is untenable now in Michigan since the enactment of PA 1933 (Ex Sess), No 8, § 17, as amended by PA 1937, No 281 (CLS 1940, § 9209-32, Stat Ann 1943 Cum Supp § 18.988), which enacted that licenses may be transferred with the consent of the commission and certain licenses shall be approved by the local legislative body. The word “transferred” as used here implies and carries with it the making of an agreement of transfer. It is therefore not illegal in Michigan to' agree to make a transfer. It is simply subject to the consent of the commission and of the local legislative body.” Roodvoets v. Anscer, 308 Mich 360.

A decree will enter directing the defendant to forthwith execute and file with the Michigan liquor control commission an application for transfer of license and, .upon approval thereof by the commission, a good and sufficient transfer of such license to the plaintiffs. In addition, the decree shall require a final accounting by the receivers heretofore appointed by the circuit court. Funds in the possession of the receivers shall be paid over to the plaintiffs after deduction of a reasonable sum for services of Eleanor Messerschmidt in the operation of the business, not exceeding the sum of $500 per month for the period subsequent to June 2, 1952, together with the necessary and proper expenses of the receivership. Costs of the litigation to appellees. ’

Dethmers, C. J., and Butzel, Carr, Bushnell, Sharpe, Boyles, and Reid, JJ., concurred.