Court Opinion

ID: 1075480
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:15:01.520334+00
Date Added: 2024-06-11T12:40:51.159968
License: Public Domain

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.
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

                                - 2 -
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

                                 - 3 -
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 2½ 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

                                 - 4 -
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

                               - 5 -
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

                                - 6 -
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.

                                 - 7 -
     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

     1
      According to the two waitresses, the three men were served
five pitchers of beer over a period of 2½ to 3 hours.
Additionally, Cook had been drinking before his arrival at the
restaurant.
     2
      A 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.

                               - 8 -
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

                               - 9 -
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

                               - 10 -
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.

                               - 11 -
                    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.

                               - 12 -
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

                               - 13 -
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

                               - 14 -
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

                               - 15 -
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.

                             - 16 -