The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)


STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

CORPORATIONS:

LIQUOR CONTROL:

Unlicensed consumption of alcoholic liquor on premises of banquet hall corporation in same building occupied by restaurant corporation where corporations have common owners

Where a banquet hall corporation and a restaurant corporation with common owners operate in the same building, the banquet hall corporation, which sells no food or alcoholic liquor, but allows its patrons to consume alcoholic liquor on the premises without requiring additional consideration, need not be licensed under the Michigan Liquor Control Act.


Opinion No. 6963

November 25, 1997


William A. Forsyth
Kent County Prosecuting Attorney
416 Hall of Justice
333 Monroe, N.W.
Grand Rapids, MI 49503


You have asked a question which may be stated as follows:

Where a banquet hall corporation and a separate restaurant corporation having common owners operate in the same building, must the banquet hall corporation, which sells no food or alcoholic liquor, but allows its patrons to consume alcoholic liquor on the banquet hall premises without requiring additional consideration, be licensed under the Michigan Liquor Control Act?

Information provided with your request indicates that customers arranging private parties in the banquet hall would be encouraged but not required to obtain their food from the restaurant corporation located in the same building.

Your concern over the legality of the described arrangement arises from the Michigan Liquor Control Act, 1933 (Ex Ses) PA 8, MCL 436.1 et seq; MSA 18.971 et seq (the Act). Section 26c of the Act, which prohibits the consumption of alcoholic liquor for a consideration on unlicensed premises consisting of a commercial establishment "selling food," provides as follows:

(1) A person shall not maintain, operate, lease, or otherwise furnish to any person, any premises or place which is not licensed under this act, where the other person may engage in the drinking of alcoholic liquor for any consideration.

(2) A person shall not consume alcoholic liquor in a commercial establishment selling food if the commercial establishment is not licensed under this act. A person owning, operating, or leasing a commercial establishment selling food which is not licensed under this act shall not allow the consumption of alcoholic liquor on its premises.

(3) This section shall not apply to any hotel or any licensee under this act.

(4) This section shall not be construed to repeal or amend section 26b.

(5) As used in this section, "consideration" includes any fee, cover charge, the storage of alcoholic liquor, the sale of food, ice, mixers, or other liquids used with alcoholic liquor drinks, or the furnishing of glassware or other containers for use in the consumption of alcoholic liquor in conjunction with the sale of food.

(footnote omitted).

The section 26c(2) prohibition was added to the Michigan Liquor Control Act by 1980 PA 185, in response to the decision of the Michigan Court of Appeals in Moraco v Wayne County Prosecutor, 98 Mich App 322, 325; 296 NW2d 246 (1980), holding that a restaurant unlicensed by the Liquor Control Commission could permit its patrons to drink wine brought on the premises by the patrons where the restaurant received no consideration for affording such a privilege. See, Senate Legislative Analysis, SB 1148, June 30 1980, citing the need to hold licensees responsible for "consumption of alcohol by those already obviously inebriated."

The law places no limitation upon the number of corporations a person may form. Each is an artificial legal entity separate from its officers and shareholders. Bourne v Muskegon Circuit Judge, 327 Mich 175, 191; 41 NW2d 515 (1950). Courts will respect each corporation, unless they are used to commit fraud or to avoid legal obligations. US v Certain Parcel of Land in Wayne County, Michigan, 466 F2d 1295, 1297 (CA6, 1972); CMS Energy Corp v Attorney General, 190 Mich App 220, 232; 475 NW2d 451 (1991). Common ownership of more than one corporation is not an indication of fraud. Yankoviak v Public Service Comm, 349 Mich 641, 649; 85 NW2d 75 (1957).

A corporation operating a banquet hall which does not sell food to its patrons, but permits its patrons to consume alcoholic liquor brought on the premises, need not be licensed pursuant to section 26c of the Act, provided that the banquet hall operator receives no additional consideration for permitting alcoholic liquor to be brought on the premises. OAG, 1981-1982, No 5963, pp 331, 333-334 (August 20, 1981); OAG, 1985-1986, No. 6367, pp 293, 294 (June 4, 1986). In the instant situation, the fact that a separate corporation sells food in the same building available to patrons of the banquet hall corporation does not require a different result since each corporation is a distinct legal entity, albeit under common ownership.

It is my opinion, therefore, that where a banquet hall corporation and a separate restaurant corporation having common owners operate in the same building, the banquet hall corporation, which sells no food or alcoholic liquor but allows its patrons to consume alcoholic liquor on the banquet hall premises without requiring additional consideration, need not be licensed under the Michigan Liquor Control Act.



FRANK J. KELLEY
Attorney General