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The Opinion of the Court was delivered PER CURIAM.
JUSTICE STARCHER dissents and reserves the right to file a dissenting opinion.
1. “'On
appeal of an administrative [decision] . . . findings of fact by the administrative
officer are accorded deference unless the reviewing court believes the findings
to be clearly wrong.' Syllabus Point 2 (in part), Muscatell v. Cline,
196 W.Va. 588, 474 S.E.2d 518 (1996).” Syllabus Point 2, Choma v. West
Virginia Div. of Motor Vehicles, 210 W.Va. 256, 557 S.E.2d 310 (2001).
2. “Evidentiary findings made at an administrative hearing should not be reversed unless they are clearly wrong.” Syllabus Point 1, Francis O. Day Co., Inc. v. Director, Div. of Envtl. Prot., 191 W.Va. 134, 443 S.E.2d 602 (1994).
3. “'Moot questions or abstract propositions, the decision of which would avail nothing in the determination of controverted rights of persons or property are not properly cognizable by a court.' Syllabus Point 1, State ex rel. Lilly v. Carter, 63 W.Va. 684, 60 S.E. 873 (1908).” Syllabus Point 1, State ex rel. Durkin v. Neely, 166 W.Va. 553, 276 S.E.2d 311 (1981).
4. “'Even though an issue may be technically moot, it still may be deserving of judicial resolution by meeting one or more of the following criteria: First, the court will determine whether sufficient collateral consequences will result from determination of the questions presented so as to justify relief. Second, while technically moot in the immediate context, questions of great public interest may nevertheless be addressed for the future guidance of the bar and of the public. Third, issues which may be repeatedly presented to the trial court, yet escape review at the appellate level because of their fleeting and determinate nature, may appropriately be decided.' Israel by Israel v. West Virginia Secondary Schools Activities Commission, 182 W.Va. 454, 457, 388 S.E.2d 480, 483 (1989).” Syllabus Point 6, W.Va. Educ. Ass'n v. Consol. Pub. Retir. Bd., 194 W.Va. 501, 460 S.E.2d 747 (1995).
Per Curiam:
This
case is before this Court upon appeal of a final order of the Circuit Court of
Berkeley County entered on December 8, 2004. In that order, the circuit court
upheld an administrative decision of the appellee, the State Tax Commissioner,
denying an application for renewal of an annual charitable bingo and raffle license
to the appellant, the Loyal Order of Moose, Martinsburg Lodge No. 120 (hereinafter, “Moose
Lodge”). In this appeal, the Moose Lodge contends that its license was denied
based upon an erroneous interpretation of the law. After reviewing the facts
of the case, the issues presented, and the relevant statutory and case law, this
Court reverses the decision of the circuit court.
shall
be drawn from general funds of the Licensee, and shall not be drawn or derived
from the charitable raffle accounts of the Licensee or any other entity. The
said amount shall be separate from and in addition to any proceeds derived from
the Licensee's charitable raffle operations for the 1999 and 2000 license years
or other operations under the charitable gaming laws.
The Moose Lodge, however, due to the claimed potential hardship it would have
caused its organization, failed to make the contribution. Accordingly, on October
14, 2001, the Moose Lodge defaulted on the Agreement, resulting in the Commissioner
issuing a six-month suspension of the Moose Lodge's charitable raffle license
effective October 30, 2001. The Moose Lodge did not contest the license suspension.
During
the previous month, on September 18, 2001, agents of the Commissioner's Criminal
Investigation Division (hereinafter, “CID”), along with an Alcohol
and Beverage Control (hereinafter, “ABC”) investigator, conducted a
survey at the Moose Lodge's premises, wherein their charitable games were inventoried.
The CID alleged that the Moose Lodge was in possession of several raffle games
for which it could not produce invoices or other supporting documents. At the
time of the survey, a member of the Moose Lodge told an investigator that the
games must have been given to the Moose Lodge by one of the salesman from its
raffle distributor. On December 23, 2001, another survey was
conducted by CID and ABC investigators, wherein they witnessed the conducting
of raffle games upon entrance to the Moose Lodge's building.
On January
10, 2002, as a result of the violation of the charitable gaming laws,
including conducting raffles while its license had been suspended, the Commissioner
ordered a revocation of the Moose Lodge's license, replacement of its officers,
and a payment of a civil monetary penalty. On April 24, 2002, the Moose Lodge
protested and appealed the order. Subsequently, the Commissioner gave notice
to the Moose Lodge that it had decided to withdraw that particular legal action.
On May 30, 2002, the Commissioner formally moved to dismiss, with prejudice,
the matter against the Moose Lodge. On April 25, 2002, however, in lieu of pursuing
formal charges against the Moose Lodge for its alleged past violations, the Commissioner
instead decided to deny the Moose Lodge's 2002 renewal application for its license.
The Moose Lodge then protested the denial of its license, and on February 13,
2003, the Commissioner issued its Final Administrative Decision upholding the
denial of the Moose Lodge's 2002 license renewal. On December 8, 2004, the Circuit
Court of Berkeley County upheld the administrative decision and determined that
the denial of the Moose Lodge's 2002 license renewal was valid. This appeal followed.
“Moot
questions or abstract propositions, the decision of which would avail nothing
in the determination of controverted rights of persons or property are not properly
cognizable by a court.” Syllabus Point 1, State ex rel. Lilly v. Carter,
63 W.Va. 684, 60 S.E. 873 (1908).
Nonetheless, in Syllabus Point 6 of W.Va. Educ. Ass'n v. Consol. Pub. Retir.
Bd., 194 W.Va. 501, 460 S.E.2d 747 (1995), we held that:
'Even
though an issue may be technically moot, it still may be deserving of judicial
resolution by meeting one or more of the following criteria: First, the court
will determine whether sufficient collateral consequences will result from determination
of the questions presented so as to justify relief. Second, while technically
moot in the immediate context, questions of great public interest may nevertheless
be addressed for the future guidance of the bar and of the public. Third, issues
which may be repeatedly presented to the trial court, yet escape review at
the appellate level because of their fleeting and determinate nature, may appropriately
be decided.' Israel by Israel v. West Virginia Secondary Schools Activities
Commission, 182 W.Va. 454, 457, 388 S.E.2d 480, 483 (1989).
In this
case, since the Moose Lodge's license has been restored and the numerous penalties
levied against it now dismissed, the Commissioner is correct that the issues
surrounding this appeal are technically moot. However, having carefully reviewed
all the facts of this case, we believe that negative collateral consequences
of the 2002 denial of the Moose Lodge's license are readily demonstrated by the
record. Moreover, the issues surrounding the denial of the Moose Lodge's license
renewal are clearly capable of repetition because it is virtually certain that
the Commissioner will continue to incorrectly interpret and misapply the use
of proceeds rule in the same manner it did against the Moose Lodge. Thus, in
reviewing this case on appeal, and in light of our holding in W.Va. Educ.
Ass'n v. Consol. Pub. Retir. Bd., we are primarily concerned with two issues
which we believe must be resolved due to substantial public impact with regard
to the Commissioner's future enforcement of the applicable West Virginia laws.
First, we believe that the Commissioner interpreted the use of proceeds rule
as provided by W.Va. Code § 47-21-15 much too narrowly due to its failure
to consider the statute in its entirety. Secondly, we believe that
the $81,018.00 penalty, as provided by the 1999 Alternative Disposition Agreement,
was coerced by the Commissioner and should not have been the basis for the
denial of the Moose Lodge's 2002 license renewal.
In the
case at hand, the initial problems arose following the July 23, 1999, “Notice
of Intent to Suspend Charitable Bingo and Raffle Licenses Notice of Hearing” which
was sent to the Moose Lodge. The Notice of Hearing explained that the Commissioner
was going to suspend the Moose Lodge's charitable bingo and raffle licenses for
a period of six months, effective September 1, 1999. Soon after the Notice of
Hearing was mailed to the Moose Lodge, the Commissioner's Criminal Investigation
Division (CID) began conducting a series of mandatory meetings around the state
with different charitable raffles licensee groups. During an August 8, 1999,
meeting, held in Martinsburg, West Virginia and attended by the Moose Lodge,
the CID officials, which included the Commissioner's attorneys, told representatives
of the Moose Lodge, as well as other fraternal groups, that they were subject
to loss of licensure, monetary penalties, and even criminal sanctions if they
used any of their net charitable raffle proceeds for any of their operational
expenses, including mortgage payments. The information presented by the CID during
its numerous meetings was a more restrictive policy regarding the use of those
proceeds than was previously expressed or enforced by the Commissioner in prior
years.
Soon
thereafter, on August 11, 1999, based on advice provided by the CID's attorneys
at the August 8, 1999, meeting, the Moose Lodge waived its right to have a hearing
to challenge the alleged violations in the Commissioner's July 23, 1999, Notice
of Hearing. It is clear to any impartial observer that the threats of criminal
sanctions, monetary penalties, and loss of license weighed heavily on and unduly
influenced the decision-making process of the Moose Lodge when it executed the
Agreement to waive its right to the hearing. It was not until September 9, 1999,
after consulting with an attorney, that the Moose Lodge learned that the CID's
interpretation of the use of proceeds rule under the West Virginia's charitable
raffle laws was a matter open to a different interpretation.
The Moose
Lodge argues that the Commissioner's interpretation of the rules governing the
use of proceeds rule is erroneous due to its inconsistent application of certain
key terms of art in the governing statute. According to the Moose Lodge, one
example of such inconsistent application was how the Commissioner applied the
use of proceeds rule to military veterans organizations versus how they applied
the same rules to fraternal organizations such as the Moose Lodge. Under current
West Virginia laws, for any group to be licensed to conduct charitable raffles,
the entity has to qualify as a “charitable or public service organization” as
provided by W.Va. Code § 47-21-5 (1984). (See
footnote 1) The Moose Lodge
contends that in spite of having satisfied the licensing requirement, the Commissioner
incorrectly determined that a group such as the Moose Lodge would not be entitled
to use the net proceeds from its conduct of charitable raffles for any of its
organizational expenses because W.Va. Code § 47-21-15(c) requires that
such proceeds only be used for “charitable and public service” purposes.
We find
the Commissioner's interpretation of the use of proceeds rule, which was subsequently
upheld by the circuit court, to be unreasonably restrictive in light of the clear
language of the statute when read in its entirety. Moreover, its strong reliance
on W.Va. Code § 47-21-15(c), seems to ignore subsections (a) and (b) of
that same section of the statute. West Virginia Code § 47-21-15(c) provides:
(c)
The cost of any refreshments, souvenirs or any other item sold or otherwise provided
through any concession to the
patrons may not be paid for out of the gross proceeds from the raffle occasion.
The licensee shall expend all net raffle proceeds and any interest earned on
the net raffle proceeds for the charitable or public service purposes stated
in the application within one year after the expiration of the license under
which the raffle occasions were conducted. A licensee which does not qualify
as a qualified recipient organization may apply to the commissioner at the
time it applies for a raffle license or as provided in subsection (e) [sic
(f)] of this section for permission to apply any or all of its net proceeds
to directly support a charitable or public service activity or endeavor which
it sponsors.
In spite of section (c), it is clear to us that the Commissioner failed to
read that provision in conjunction with those of W.Va. Code § 47-21-15(a)
and (b) which provide:
(a)
The reasonable, necessary and actual expenses incurred in connection with the
conduct of raffle occasions, not to exceed twenty-five percent of the gross proceeds
collected during a license period, may be paid out of the gross proceeds of the
conduct of raffle, including, but not limited to:
(1)
Rent paid for the use of the premises: Provided, That a copy of the rental agreement
was filed with the raffle license application with any modifications to the rental
agreement to be filed within ten days of being made: Provided, however, That
in no event may the rent paid for the use of any premises exceed the fair market
value of rent for the premises;
(2)
The cost of custodial services;
(3)
The cost to the licensee organization for equipment and supplies used to conduct
the raffle occasion;
(4)
The cost to the licensee organization for advertising the raffle occasion;
(5)
The cost of hiring security personnel, licensed pursuant to the provisions of
article eighteen, chapter thirty of this code; and
(6)
The cost of providing child care services to the raffle patrons: Provided, That
any proceeds received from the provision of child care services shall be handled
the same as
raffle proceeds.
(b)
The actual cost to the licensee for prizes, not to exceed the amounts as specified
in section eleven of this article, may be paid out of the gross proceeds of the
conduct of raffle.
As sections
(a) and (b) clearly provide, there are numerous expenses which the Moose Lodge
had the right to pay out of the proceeds collected during its raffle sessions.
The narrow interpretation of the statute by the Commissioner, which seems to
have ignored the aforesaid sections of the Code, resulted in the preclusion of
paying for any such expenses by the Moose Lodge or by any other similarly situated
organization. Moreover, perhaps due to the fact that it did not challenge the
Commissioner's interpretation of W.Va. Code § 47- 21-15, since it waived
its right to the July 23, 1999, Notice of Hearing, the Moose Lodge entered into
an Alternative Disposition Agreement with the Commissioner whereby it agreed
to the donation of $81,018.00 and an admission that it violated the use of proceeds
rule. As explained earlier, under the agreement the Moose Lodge was told to make
the $81,018.00 charitable donations out of its “general funds . . . not
be drawn or derived from the charitable raffle accounts” by October 15,
2000, in order to have its suspension withdrawn.
The Moose
Lodge subsequently attempted, but was unsuccessful in getting the West Virginia
Legislature to clarify the disputed use of proceeds rules under the charitable
raffles laws as interpreted by the Commissioner. During the summer of 2001, the
Moose
Lodge's counsel sought from the Commissioner a clear and detailed explanation
of the legal basis for its interpretation of the use of proceeds rule, particularly
as it related to veterans and fraternal organizations. On July 10, 2001, the
Commissioner responded in writing to those inquiries. Soon afterward, and due
to the hardship which would have occurred with regard to the $81,018.00 sought
by the Commissioner, the Moose Lodge attempted to avoid suspension of its charitable
raffles license by trying to negotiate a mutually agreed installment payment
amount of the total donations called for under the 1999 agreement. When the
negotiations failed, the Commissioner notified the Moose Lodge that its charitable
raffles license was suspended for a period of six months, beginning October
30, 2001.
After
fully reviewing the Commissioner's reasoning as to why it found that the Moose
Lodge improperly used the proceeds of its raffle in 1999, a raffle which it clearly
had a valid license to conduct, we believe the Commissioner, in addition to his
failure to fully consider the provisions of W.Va. Code § 47-21-15 in its
entirety, may have also ignored other relevant charitable raffle laws of this
State in determining the charitable status of the Moose Lodge. It is clear to
us that the Commissioner has chosen to primarily rely on federal income tax treatment
of a particular entity in interpreting West Virginia's charitable raffle law.
While it may be proper to consider such laws, we believe the Commissioner should
have also considered W.Va. Code § 47-21-2(a)(1)-(8) which provides that
for purposes of this article, unless specified otherwise: (a) “Charitable
or public service activity or endeavor” means any bona fide activity or
endeavor which directly benefits a number of people by:
(1)
Contributing to educational or religious purposes; or
(2)
Relieving them from disease, distress, suffering, constraint or the effects of
poverty; or
(3)
Increasing their comprehension of and devotion to the principles upon which this
nation was founded and to the principles of good citizenship; or
(4)
Making them aware of or educating them about issues of public concern so long
as the activity or endeavor is not aimed at supporting or participating in the
campaign of any candidate for public office; or
(5)
By lessening the burdens borne by government or voluntarily supporting, augmenting
or supplementing services which government would normally render to the people;
or
(6)
Providing or supporting nonprofit community activities for youth, senior citizens
or the disabled; or
(7)
Providing or supporting nonprofit cultural or artistic activities; or
(8)
Providing or supporting any political party executive committee.
There
was no analysis by either the Commissioner or the circuit court as to whether
the Moose Lodge exclusively participated in any of those types of activities
which would have meant that it would be classified as a “qualified recipient
organization” and therefore received more leniency in how it uses the proceeds
of its raffles. West Virginia Code § 47-21-2(m) provides:
“Qualified
recipient organization” means any bona fide, not for profit, tax-exempt,
as defined in subdivision (p) of this section, incorporated or unincorporated
association or organization which is organized and functions exclusively to
directly benefit a number of people as provided in subparagraphs (1) through
(7), subdivision (a) of this section. “Qualified recipient organization” includes,
without limitation, any licensee which is organized and functions exclusively
as provided in this subdivision.
We make no determination today with regard to whether the Moose Lodge should
be classified as a qualified recipient organization because such a determination
is not relevant to the resolution of the issues before us in the case at hand.
Yet, we do want to point out that the record before us is replete with examples
of such activities by the Moose Lodge, and while the positive contributions
they have made are too numerous to list in their entirety, it is clear to us
that it has engaged in substantial activities which easily qualify under sections
one through eight of the aforementioned section of the West Virginia Code.
For example, the Moose Lodge has repeatedly made countless donations to the
United Way, the Berkeley County Senior Services, the Berkeley County Alzheimer's
Association, the Youth Awareness programs, the Martinsburg High School Band
Boosters (for uniforms), Big Brothers/Big Sisters, Girl Scouts and Boys Scouts,
the Relay for Life, People to People, Hospice of the Panhandle, U.S. Foodservice,
American Cancer Society, Avon Breast Cancer, and to the Martinsburg Firefighters.
To restrict the Moose Lodge's donations to these and the countless other community-related
programs would be devastating to the entire region.
Moreover,
there is no dispute that the Moose Lodge is a charitable or public service organization
as provided by W.Va. Code § 47-21-2(b), which explains that a:
“Charitable
or public service organization” means a bona fide, not for profit, tax-exempt,
benevolent, educational, philanthropic, humane, patriotic, civic, religious,
fraternal or eleemosynary incorporated or unincorporated association or organization;
or a volunteer fire department, rescue unit or other similar volunteer community
service organization or association; but does not include any nonprofit association
or organization, whether incorporated or not, which is organized primarily for
the purposes of influencing legislation or supporting or promoting the campaign
of any single candidate for public office.
Perhaps the Commissioner could have assisted the Moose Lodge in guiding it
through the balkanized maze enveloping West Virginia's charitable raffle laws.
Doing so would have ensured that the Moose Lodge was able to maximize its ability
to contribute to its surrounding community through its numerous positive efforts
and significant donations which benefit the greater community of the Eastern
Panhandle of the State.
We believe
that the evidence in this case demonstrates that the Commissioner's interpretation
of W.Va. Code § 47-21-15 was applied much too strictly against the Moose
Lodge and should have been read in its entirety so that all of the sections
of the statute were given proper weight and consideration. Consequently, based
on our law it was unreasonable for the Commissioner not to allow some part of
the raffle proceeds to be used to pay reasonable expenses surrounding the Moose
Lodge's charitable raffles as provided by W.Va. Code § 47-21-15(a) and (b).
Likewise, given the result of the decision by this Court, we further find that
the Moose Lodge's decision to enter into the 1999 Agreement, which
included the acquiescence to pay $81,018.00 to charitable organizations from
its general revenues, was coerced by the Commissioner due to draconian threats
against the Moose Lodge, which at the time was not represented by counsel.
Given the possible sanctions, including the threat that it was subject to loss
of licensure, substantial monetary penalties, and even threats of criminal
sanctions, it is easy to understand why the Moose Lodge entered into the Agreement.
Fear of criminal prosecution and incarceration and fear that even more stringent
sanctions could have been levied against the Lodge by the Commissioner which
would have consequently resulted in even more substantial hardship to the Moose
Lodge are great motivators but are unduly harsh and coercive. Resulting potential
financial hardships would necessarily have limited the Moose Lodge's ability
to continue to support the many worthwhile organizations it contributes to
on a yearly basis.
In summary,
we believe that the circuit court's finding of fact that the Moose Lodge presented
no evidence of coercion with regard to the $81,018.00 penalty was clearly wrong.
We further find that the circuit court erred in affirming the Commissioner's
unreasonable and incomplete interpretation of the use of raffle proceeds rules
as set forth in W.Va. Code § 47-21-15.