COURT OF APPEALS OF VIRGINIA 

Present: Judges Benton, Elder and Lemons 

Argued at Norfolk, Virginia 

SIGHTS & BRIGHTWATERS INVESTORS, LTD., 

 t/a THE PIT STOP 

 MEMORANDUM OPINION* BY 

v. Record No. 0378-98-1 JUDGE DONALD W. LEMONS 

 OCTOBER 27, 1998 

VIRGINIA ALCOHOLIC BEVERAGE CONTROL BOARD 

 FROM THE CIRCUIT COURT OF THE CITY OF NEWPORT NEWS 

Verbena M. Askew, Judge 

 Michael P. Lafayette (Michael B. Ware; Simon, 

Lafayette & Associates; Jones, Blechman, 

Woltz & Kelly, on briefs), for appellant. 

 (Mark L. Earley, Attorney General; Michael K. 

Jackson, Senior Assistant Attorney General; 

Louis E. Matthews, Jr., Assistant Attorney 

General, on brief), for appellee. 

 Sights and Brightwaters Investors, Ltd. appeals the final 

order of the circuit court upholding the denial of an on-premises 

beer license by the Virginia Alcoholic Beverage Control Board. 

Because the trial court committed no error, we affirm. 

BACKGROUND

 On March 20, 1997, Sights and Brightwaters Investors, Ltd., 

t/a "The Pit Stop," appellant, ("Sights") agreed to purchase the 

assets of a restaurant located at 15764 Warwick Road in the City 

of Newport News. Sights agreed to manage the seller's restaurant 

until Sights obtained its permits and licenses, including a 

license from the Virginia Alcoholic Beverage Control Board ("ABC 

 

 *Pursuant to Code § 17-116.010 this opinion is not 

designated for publication. 
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Board") to sell beer on-premises. 

 On April 15, 1997, at approximately 8:00 p.m., while Sights 

was acting as the general manager of the premises, Jeffrey Cook 

entered the establishment with several friends, including Eli 

Gibbs and Michael Moore. The group remained at the restaurant 

until between 11:00 and 11:30 p.m. Kara E. Rich, a waitress, 

testified that she served the men two pitchers of beer from the 

time they arrived until her shift ended between 9:00 and 9:30 

p.m. A written statement of another waitress, Russchelle King, 

revealed that she served the men "probably three pitchers of 

beer" after Rich's shift ended. 

 A short time before the men left the premises, an 

altercation broke out between Cook and Moore. The manager was 

notified that Cook had become obnoxious and could possibly be 

intoxicated. The bouncer of the establishment then took Cook's 

keys from Moore and gave them to Gibbs, who returned the keys to 

Cook after the men left the premises. 

 The altercation continued between Moore and Cook after they 

left the restaurant, and as they walked down the street to a gas 

station parking lot. At this time, another individual took 

Cook's wallet, and Cook ran to his automobile to retrieve a 

handgun. The police were called and upon seeing the police 

arrive, Cook drove away in a reckless manner and subsequently 

crashed into a tree. He was killed instantly. 

 The ABC Board objected to the license application filed by 
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Sights, charging that, "[t]he applicant sold alcoholic beverages 

other than as permitted by the ABC Act while the application was 

pending." After a hearing before an ABC hearing officer, the 

objection was upheld and the license was denied. 

 Sights appealed the hearing officer's decision to the ABC 

Board. In its "Final Decision and Order Refusing License," the 

ABC Board adopted the hearing officer's initial decision and 

again refused Sights' beer license. Sights appealed the ABC 

Board's final order to the Circuit Court of the City of Newport 

News. The trial court upheld the ABC Board's order and dismissed 

Sights' appeal. 

 On appeal to the Court of Appeals, Sights argues that: (1) 

the record contains no substantial evidence of a violation by 

Sights while its ABC license application was pending; (2) the ABC 

Board violated Sights' statutory and constitutional rights to due 

process of law by failing to provide notice of the facts and law 

asserted against Sights; (3) the ABC Board and the trial court 

erred by considering evidence not in the record; and (4) Sights 

should be awarded attorney's fees and costs if it substantially 

prevails on appeal. 

SUBSTANTIAL EVIDENCE

 The standard by which a trial court must review the findings 

of a state agency is not equivalent to a trial de novo. School 

Board v. Nicely, 12 Va. App. 1051, 1062, 408 S.E.2d 545, 551 

(1991). In reviewing an agency decision, "[t]he scope of court 
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review of a litigated issue under the [Administrative Process 

Act] is limited to determination [of] whether there was 

substantial evidence in the agency record to support the 

decision." State Board of Health v. Godfrey, 223 Va. 423, 433, 

290 S.E.2d 875, 880 (1982); see Code § 9-6.14:17. The 

substantial evidence standard is "designed to give great 

stability and finality to the fact-findings of an administrative 

agency." Va. Real Estate Commission v. Bias, 226 Va. 264, 269, 

308 S.E.2d 123, 125 (1983). A trial court may reject the 

findings of fact "only if, considering the record as a whole, a 

reasonable mind would necessarily come to a different 

conclusion." Id. (citing B. Mezines, Administrative Law § 51.01 

(1981)). 

 The ABC Board upheld the hearing officer's decision that 

"the applicant sold alcoholic beverages other than as permitted 

by the A.B.C. Act while the application was pending." The ABC 

Board determined that "the initial decision [sh]ould be adopted 

and incorporated herein by reference as the final decision of the 

Board." 

 At the hearing before the ABC hearing officer, the evidence 

revealed that Cook, Moore and Gibbs were present at the 

establishment under Sights' management for approximately 21⁄2 to 3 

hours. The written statement of Michael Moore, Cook's friend, 

was introduced, and stated that Cook "had been drinking alot 

[sic]" before the men arrived at the establishment, that they 
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consumed four pitchers of beer while there, and "he [Cook] was 

drunk." Moore's statement also described an altercation which 

broke out between himself and Cook, and stated that Cook was 

acting "like a real punk." Moore's statement further revealed 

that Cook "drank most of the four pitchers" and that Cook 

questioned Gibbs and Moore about whether they could "handle 

drinking." 

 Eli Gibbs' written statement was also introduced, which 

recounted an altercation between Moore and Cook after Moore 

requested that the bouncer take Cook's keys. Detective Dallas 

Mitchell testified that statements made by Moore and Gibbs 

immediately after the incident supported that Moore and Cook "had 

got into a fight due to the way Jeffrey Cook was acting and 

intoxicated [sic]." Evidence of Cook's blood alcohol content, 

almost three times the legal limit, was also introduced. 

 Kara Rich, the first waitress to serve the men, testified 

that after she served the men two pitchers of beer, she finished 

her shift and joined them. She played pool with Cook. While she 

stated that she did not observe anything unusual in Cook's 

behavior, she did not have any direct conversation with him. 

Rich stated that after she left Cook, she was not paying "real 

close" attention to him, and did not even notice when he left. 

 Russchelle King, the second waitress to serve the men, made 

a statement in which she said that she served the three men 

"probably three pitchers," but that she was not certain because 
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she "was serving a lot of people." King also said, "I don't 

remember him [Cook] being there the whole entire time, maybe I 

just didn't pay attention to him exactly." She described Cook as 

"mouthy." King's statement also revealed that Cook acted 

"punkish" and that when she said that she might have to call the 

bouncer over to his table, he responded "do whatever you know 

I'll mess him up whatever [sic]. . . ." 

 Robert Kleinschmidt, the bouncer, made a statement in which 

he acknowledged interacting with the men two times that evening. 

 The first time, the men were being rowdy and he had to quiet 

them down. The second time occurred when Cook approached 

Kleinschmidt to obtain his car keys, which Moore was holding. 

Kleinschmidt's statement also contained an admission that he had 

"no idea" how much the men had to drink and that he guessed that 

the men had been in the establishment for "two and a half, three 

hours," but that number was "only a rough estimate cause [sic] I 

see a lot of people." 

 There was conflicting evidence introduced by Sights which 

supported its contention that it did not know, or have reason to 

know, that Cook was intoxicated at the time its employees served 

him. Rich also testified that she did not think that Cook was 

intoxicated at the time she served him. King's statement 

included her observation that when she served the men, "they 

seemed fine." Gibbs made a statement that the three men had 

split only two pitchers of beer between them the entire time that 
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they were at the establishment. 

 The hearing officer concluded that the evidence showed that 

the applicant, Sights, sold beer to a person that it had reason 

to believe was intoxicated. Specifically, the hearing officer 

concluded: 

 [T]he subject's behavior was erratic and he 

was argumentative, particularly with one of 

his companions. At the time of the 

subsequent autopsy, the blood alcohol content 

was .23 percent, and the evidence shows he 

had consumed alcoholic beverages prior to his 

arrival and continued to consume a 

substantial quality [sic] of beer while on 

the premises. 

The hearing officer discounted the testimony of Sights' 

witnesses, finding that the testimony was "not reliable" because 

they were "either not eyewitness observations or the statements 

were contrary to the weight of the evidence." 

 Code § 4.1-304 proscribes selling alcoholic beverages to a 

person who the seller knew, or had reason to believe, was 

intoxicated at the time of the sale. Whether the employees were 

inattentive to the numerous signs of intoxication exhibited by 

Cook - as observed by his companions - or the substantial amount 

of beer consumed by him on the premises, is irrelevant to whether 

there has been a violation of Code § 4.1-304. As sellers, 

Sights' employees were charged with gauging the level of 

intoxication in their patrons, and their failure to do so does 

not absolve Sights of the obligations of its license application. 

 A licensee may not hide behind self-imposed ignorance. 
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 Based upon the evidence, including Cook's antagonistic and 

argumentative demeanor, and the amount of alcohol consumed by him 

over the course of the evening,1

 Sights' employees did have 

reason to believe that Cook was intoxicated. Despite the 

objective manifestations of his intoxication, they continued to 

serve him beer while he remained on the premises. Therefore, we 

hold that substantial evidence was introduced to support the 

hearing officer's conclusions.2 There has been no showing that a 

reasonable mind would necessarily disagree with these findings, 

and sufficient evidence exists to sustain the objection that 

Sights sold alcoholic beverages to a person it had reason to know 

was intoxicated at the time of the sale, a violation of Code 

§ 4.1-304. 

NOTICE OF FACTS AND LAW

AND EVIDENCE OUTSIDE THE RECORD

 Prior to a hearing on the issuance of a license, the ABC 

Board is required to provide an applicant with notice of any 

issues or objections. Code § 9-6.14:12; Regulations of the 

Virginia Alcoholic Beverage Control Board, 3 VAC § 5-10-140. The 

 

 1According to the two waitresses, the three men were served 

five pitchers of beer over a period of 21⁄2 to 3 hours. 

Additionally, Cook had been drinking before his arrival at the 

restaurant. 

 2A review of the evidence does not support the hearing 

officer's finding that the bouncer, Robert J. Kleinschmidt, 

returned Cook's keys to Cook. The only evidence introduced 

indicates that Moore obtained Cook's keys directly from Cook, and 

when Cook asked Kleinschimdt to retrieve his keys from Moore, 

Kleinschimdt gave the keys to Gibbs, not Cook. 
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actions of the ABC Board in "granting or refusing to grant a 

license shall be subject to review in accordance with the 

Administrative Process Act." Code § 4.1-224. The Administrative 

Process Act (the "APA") provides that the ABC Board must provide 

"reasonable notice" to an applicant of the "matters of fact and 

law asserted or questioned by the agency." Code § 9-6.14:12(B). 

 This notice must include the "time, place and issues involved." 

 3 VAC § 5-10-140. 

 The Notice of Hearing initially received by Sights stated 

two objections to the issuance of an on-premises beer license. 

The two objections were: 

 (1) "The applicant sold alcoholic beverages 

other than as permitted by the ABC Act while 

the application was pending"; and (2) "The 

applicant has not demonstrated financial 

responsibility sufficient to meet the 

requirements of the business proposed to be 

licensed." 

The second objection was withdrawn prior to the evidentiary 

hearing held before the hearing officer, leaving only the 

objection related to the impermissible sale of alcoholic 

beverages. 

 At Sights' request, filed contemporaneously with its notice 

of appeal to the circuit court, the ABC Board provided it the 

meeting minutes from the hearing before the ABC Board. The 

minutes contained the following statement, "Uphold the Hearing 

Officer's decision to refuse the beer on-premises license 

- License at this location revoked due to 2 deaths and other 
- 10 - 

problems." On appeal, Sights argues that it had never been given 

notice of an objection related to either "2 deaths" or "other 

problems." 

 When a trial court reviews the decision of an agency, the 

"duty of the court with respect to issues of fact is limited to 

ascertaining whether there was substantial evidence in the agency

record upon which the agency as the trier of facts could 

reasonably find them to be as it did." Code § 9-6.14:17 

(emphasis added). On appeal, Sights also argues that the 

reference to "2 deaths and other problems" fell outside the scope 

of the agency record. 

 The record reveals that the hearing before the hearing 

officer addressed both Sights' pending application and the 

revocation of the current license held by LOLLIPOP II, Inc. at 

the same location. In calling the hearing to order, the hearing 

officer stated that "this matter comes to a hearing because of 

charges filed against LOLLIPOP II, Inc., trading as Bluebeard Go 

Go 2 . . . and a companion application objection as to Sights and 

Brightwaters LTD, trading as the Pit Stop, which is at the same 

location. . . ." Testimony at the hearing included the fact that 

the current owner had been charged with murder and "he was barred 

[from the business] because it was a condition of his release 

from jail on the charge of murder." 

 The ABC Board's final order of October 8, 1997 stated that 

the decision was based upon the objection that "the applicant 
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sold alcoholic beverages other than as permitted by the A.B.C. 

Act while the application is pending." Specifically, the order 

cited violations of Code §§ 4.1-222(A)(1)(n), 4.1-302 and 

4.1-304. Code § 4.1-222(A)(1)(n) proscribes violations of the 

ABC Code while a license application is pending. Code § 4.1-302 

states the penalty for the illegal sale of alcoholic beverages 

generally. Code § 4.1-304 proscribes the sale of alcoholic 

beverages to any person whom the seller "knows, or has reason to 

believe," is intoxicated at the time of the sale. The final 

order further states that, "upon review of the record, the Board 

being of the opinion that it has reasonable cause to believe the 

objection is substantiated by the evidence, the license should be 

refused, and the initial decision [sh]ould be adopted and 

incorporated by reference as the final decision of the Board 

. . . ." (Emphasis added). 

 The ABC Board's order adopted and incorporated the findings 

of the hearing officer. The mention of "2 deaths and other 

problems" contained in the ABC Board minutes constitutes a 

gratuitous reference to the revocation of the current license, 

held by LOLLIPOP II, Inc., rather than a basis upon which the ABC 

Board relied in refusing Sights' license application. We hold, 

therefore, that Sights did receive proper notice of the facts and 

law upon which its license was refused, and that therefore, 

neither the Board, nor the trial court, considered evidence 

outside the scope of the record. 
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ATTORNEY'S FEES AND COSTS

 Pursuant to Code § 9-6.14:21, a party is entitled to recover 

attorney's fees and costs when it substantially prevails on the 

merits of an appeal and where the agency's position is not 

substantially justified. Because Sights has not prevailed on the 

merits of this appeal, we affirm the trial court's refusal to 

award Sights attorney's fees and costs. 

CONCLUSION

 Because there was substantial evidence in the agency record 

to support the decision to deny Sights' application, because the 

procedures were based upon proper notice to Sights, and because 

neither the Board nor the trial court considered evidence outside 

the agency record, the trial court's order upholding the agency's 

determination is affirmed. 

 Affirmed.
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Benton, J., dissenting. 

 The crux of the proceeding in this case concerned whether 

Sights "[sold] any alcoholic beverages to any person when at the 

time of such sale [Sights] kn[ew] or ha[d] reason to believe the 

person to whom the sale [was] made [was] . . . intoxicated." 

Code § 4.1-304. Accepting as true all the facts relied upon by 

the ABC Board and cited in the majority opinion, none of the 

evidence tended to prove the violation. 

 No evidence proved that when the patron was in the 

restaurant, he exhibited conduct indicating that he was 

intoxicated and, nevertheless, was served alcoholic beverages. 

Kara Rich, a waitress, testified that she served two pitchers of 

beer to the patron and his companions over a period of two hours. 

 During that time, she observed them playing pool and darts. 

When her work shift ended, she played two or three games of pool 

with the patron. She testified that the patron was not unsteady 

on his feet, did not slur his speech, and showed no other signs 

of intoxication. Another waitress, Russchelle King, who also 

served beer to the group, stated in an affidavit that the patron 

and his companions exhibited no conduct indicating they either 

had been drinking before they arrived at the restaurant or were 

intoxicated in the restaurant. She observed the patron and his 

friends playing darts and saw no evidence that any of them were 

intoxicated. 

 Significantly, the hearing officer noted in his findings of 
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fact the following testimony, which described the conduct of the 

patron prior to the altercation: 

 [Waitress,] Kara Rich testified that [the 

patron] was not showing evidence of 

intoxication by the time she had worked that 

evening, and that she had consumed beer with 

the group after work. After that, she stated 

she shot pool with [the patron] until 

approximately 10:30 p.m. When she turned her 

attention to another patron, she stated she 

did not notice anything which indicated 

intoxication on the part of [the patron]. 

The hearing officer pointed to no evidence that tended to prove 

the patron was served beer when he appeared intoxicated or after 

he became argumentative. Indeed, the uncontradicted evidence 

from both waitresses was that the patron gave no indication of 

intoxication prior to his verbal altercation with his companion. 

 The hearing officer also made no finding that the waitresses 

were "inattentive to . . . signs of intoxication" or were 

"hid[ing] behind self-imposed ignorance." Moreover, no testimony 

by the patron's companions suggests that the patron showed signs 

of intoxication while he was being served beer in the restaurant. 

 At 11:30 p.m. the patron engaged in a verbal altercation 

with one of his companions. The evidence proved that the 

patron's condition became apparent only after the verbal 

altercation occurred. When the patron became argumentative and 

disruptive, he was not again served alcoholic beverages. After 

the verbal altercation, one of the restaurant's employees 

escorted the patron from the restaurant and gave the patron's car 

keys to his companion. Outside the restaurant, the patron became 
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involved in an incident with a man who took the patron's wallet. 

 The patron then obtained his keys from his companion, drove his 

car off the road, and died in the accident. 

 The evidence that the patron had a high blood alcohol 

content after his death is insufficient to prove that, while the 

patron was in the restaurant drinking alcoholic beverages, he 

appeared intoxicated or exhibited conduct indicating 

intoxication. Absent evidence in the record and a finding by the 

hearing officer, we have no basis on appeal to speculate that the 

waitresses were "inattentive." No evidence proved that any of 

the employees of the restaurant either were inattentive to the 

patron's condition or had reason to believe the patron was 

intoxicated. Indeed, common experience tells us that "[a person] 

under the influence of intoxicants may at times conduct himself 

[or herself] with the utmost care and dignity." Spickard v. City 

of Lynchburg, 174 Va. 502, 504, 6 S.E.2d 610, 611 (1940). 

 "We [have] recognize[d] that the substantial evidence 

standard accords great deference to the findings of the 

administrative agency, but even under this standard the evidence 

must be relevant to the conclusion reached." Atkinson v. ABC 

Commission, 1 Va. App. 172, 178, 336 S.E.2d 527, 531 (1985). 

When, as in this case, "there is not substantial evidence in the 

record to support the [agency's decision]," id., we must reverse 

the circuit court's order upholding that decision. No evidence 

supports the conclusion that the patron was sold beer when the 
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employees of the restaurant knew or had reason to believe the 

patron was intoxicated. 

 For these reasons, I would reverse the trial judge's order 

upholding the ABC Board's refusal to grant a license to Sights.