Sights & Brightwaters Investors v. VA ABC ( 1998 )

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
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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 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
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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
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.
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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
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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.
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