Moore v. King

Robert S. MOORE, Director, Alcoholic Beverage
Control Division, et al. v. Leo KING

CA 96-119                                          ___ S.W.2d ___

                  Court of Appeals of Arkansas
                       Division I and III
               Opinion delivered February 5, 1997


1.   Administrative law & procedure -- standard of review. -- Review of
     administrative decisions, both in the circuit court and the
     appellate court, is limited in scope; administrative decisions
     will be upheld if they are supported by substantial evidence
     and are not arbitrary, capricious, or characterized by an
     abuse of discretion; administrative action may be regarded as
     arbitrary and capricious only when it is not supportable on
     any rational basis; the appellate court's review is directed,
     not toward the circuit court, but rather toward the decision
     of the agency; judicial review is limited because
     administrative agencies are better equipped by specialization,
     insight through experience, and more flexible procedures than
     courts to determine and analyze legal issues affecting their
     agencies. 

2.   Intoxicating liquors -- private-club permits -- when issued. -- Arkansas
     Code Annotated  3-9-222(f) (Repl. 1996) provides that the
     Alcoholic Beverage Control Board may issue a permit to operate
     a private club if the applicant is qualified and the
     application is in the public interest.
3.   Intoxicating liquors -- alcoholic-beverage permits -- factors to be
     considered before issuing. -- Among the factors that the Alcoholic
     Beverage Control Board should consider before making a
     determination, pursuant to Ark. Code Ann.  3-4-201(b) (Repl.
     1996), whether public convenience and advantage will be
     promoted by issuing an alcoholic-beverage permit are the
     number and types of alcoholic permits in the area, the
     economic impact, traffic hazards, the remoteness of the area,
     the degree of law enforcement available, input from law
     enforcement or other public officials in the area, and
     comments from area residents in opposition or support of the
     permit.

4.   Intoxicating liquors -- private-club permits -- Board's decision to grant
     application was abuse of discretion and not supported by substantial
     evidence -- circuit court's denial of permit affirmed. -- Where
     appellee, who lived near appellant lodge, and a sheriff
     testified against the private-club application, and where
     other evidence was presented purporting to show that the lodge
     had previously engaged in illegal activities, the appellate
     court held that the decision of the Alcoholic Beverage Control
     Board granting the private-club permit was characterized by an
     abuse of discretion and was not supported by substantial
     evidence; this was because, in granting the private-club
     permit, the Alcoholic Beverage Control Board failed to abide
     by two of its own regulations; the appellate court affirmed
     the circuit court's decision to deny the permit.

5.   Intoxicating liquors -- private-club permits -- lodge secretary knowingly
     provided false information at hearing -- Board erred in issuing permit. --
     Under ABC Regulation 1.32(2), no permit shall be issued to
     persons giving false information or statements in an
     application or at a hearing; it was apparent from the evidence
     presented that, on at least one occasion, the lodge had
     engaged in the practice of selling beer; the appellate court
     held that because the lodge secretary knowingly provided false
     information regarding illegal sales at the hearing, the
     Alcoholic Beverage Control Board erred in issuing the permit.

6.   Intoxicating liquors -- private-club permits -- lodge officer had been
     convicted of alcohol-related offense within five years of application --
     Board was without authority to issue permit. -- Under ABC Regulation
     1.32(6), no permit shall be issued to an entity if one of its
     officers has been convicted of an alcohol-related offense
     within five years before the date of application; the
     appellate court held that because an officer of the nonprofit
     corporation had been convicted of an alcohol-related offense
     within five years of application for the permit, the Alcoholic
     Beverage Control Board was without authority to issue the
     permit pursuant to its own rules.

7.   Administrative law & procedure -- circuit court's decision to reverse Board
     was correct in light of regulations prohibiting issuance of permit. -- The
     appellate court held that the circuit court properly exercised
     its authority and its decision to reverse the Alcoholic
     Beverage Control Board was a correct one in light of the fact
     that the pertinent ABC regulations prohibited the issuance of
     a private-club permit.

     Appeal from Randolph Circuit Court; Harold S. Erwin, Judge;
affirmed.
     Donald R. Bennett, for appellant Alcoholic Beverage Control
Board.
     Charles R. Singleton, for appellant Billy G. Taylor.
     Lyons & Emerson, by: Jim Lyons, for appellee.

     John B. Robbins, Chief Judge.
     Pocahontas Moose Lodge #2405, one of the appellants herein,
filed an application for a private-club permit with appellant
Arkansas Alcoholic Beverage Control (ABC) Division on May 20, 1994. 
The ABC Division thereafter received written objections to the
application from the Randolph County Sheriff, the Pocahontas
Assistant Chief of Police, and appellee Leo King, a nearby property
owner.  As a result of the public official objections, the ABC
Division Director initially denied the application on June 23,
1994, and the applicant appealed.  After a hearing before the ABC
Board, the Board voted to grant the application, and this decision
was appealed to the Randolph County Circuit Court on October 18,
1994.  The circuit court reversed the decision of the ABC Board and
denied the application on October 13, 1995.  The appellants now
appeal the ruling of the circuit court, arguing that it erred in
finding that the ABC Board's decision to grant the permit was not
supported by substantial evidence.  In addition, the appellants
contend that the circuit court erred by usurping the authority and
discretion of the ABC Board, thereby substituting its judgment for
that of the administrative agency.  We affirm the decision of the
circuit court.
     Review of administrative decisions, both in the circuit court
and here, is limited in scope.  In Re Sugarloaf Mining Co., 310
Ark. 772, 840 S.W.2d 172 (1992).  Such decisions will be upheld if
they are supported by substantial evidence and are not arbitrary,
capricious, or characterized by an abuse of discretion.  Arkansas
Alcoholic Beverage Control Board v. King, 275 Ark. 308, 629 S.W.2d 288 (1992).  Administrative action may be regarded as arbitrary and
capricious only when it is not supportable on any rational basis. 
Partlow v. Arkansas State Police Commissioner, 271 Ark. 351, 609 S.W.2d 23 (1980).  The appellate court's review is directed, not
toward the circuit court, but rather toward the decision of the
agency.  In Re Sugarloaf Mining Co., supra.  Judicial review is
limited because administrative agencies are better equipped by
specialization, insight through experience, and more flexible
procedures than courts, to determine and analyze legal issues
affecting their agencies.  First National Bank v. Arkansas State
Bank Commissioner, 301 Ark. 1, 781 S.W.2d 744 (1989).
     Arkansas Code Annotated section 3-9-222(f) (Repl. 1996)
provides that the ABC Board may issue a permit to operate a private
club if the applicant is qualified and the application is in the
public interest.  Arkansas Code Annotated section 3-4-201(b) (Repl.
1996) pertains to the restricting of the quantity of permits issued
in the state and provides:
       The Alcoholic Beverage Control Board is empowered to
     determine whether public convenience and advantage will
     be promoted by issuing the permits and by increasing or
     decreasing the number thereof; in order to further carry
     out the policy hereinbefore declared, the number of
     permits so issued shall be restricted.
There are a number of factors that the ABC should consider before
making such a determination, including the number and types of
alcoholic permits in the area, economic impact, traffic hazards,
remoteness of the area, degree of law enforcement available, input
from law enforcement or other public officials in the area, and
comments from area residents in opposition or support of the
permit.  Edwards v. Arkansas Alcohol Beverage Control, 307 Ark.
245, 667 S.W.2d 660 (1984).
     Gordon Steven Rice is the secretary of Pocahontas Moose Lodge
#2405 and testified on its behalf.  He stated that the lodge
currently had 192 members and had been in existence for a little
more than a year.  Mr. Rice explained that the continuing practice
was for each member to bring his own beer to the lodge, and that
no member was allowed to possess more than 24 beers on the lodge
premises.  He further testified that no alcohol was sold on the
premises and that sometimes he would take beer orders and transport
alcoholic beverages from a nearby wet county to the lodge, and that
this practice made him uncomfortable.  Mr. Rice explained that the
purpose of the lodge is to provide a social atmosphere and to raise
money for charities and the community.  According to Mr. Rice,
there were no membership dues.  Instead, the members would donate
money, which would later be used for operating expenses.  Mr. Rice
opined that, if the application were granted, this would benefit
the community.  He based this opinion in part on the fact that
there are only two other private clubs in the county, one of which
is a relatively expensive country club, and the other of which has
its membership restricted to veterans.
     Appellee Leo King testified against the private-club
application.  He stated that he lives 190 feet from the lodge, and
that their activities cause a general disturbance.  Mr. King gave
accounts of loud music being played late at night as well as beer
cans littering the premises.  He believed that the granting of a
permit would lower the value of his property, and he testified that
all of the neighbors in the vicinity of the lodge opposed its
application.
     Sheriff Rob Sammons also testified that he was in opposition
to the application.  He noted that there were not extensive
problems with the existing private clubs, but expressed concern
that another club might cause too heavy a burden on the sheriff's
office.  Sheriff Sammons did, however, acknowledge that the lodge
serves a useful purpose in the community.
     There was other evidence presented on behalf of the appellee
which purported to show that the lodge had previously engaged in
illegal activities.  For example, it was established that a member
of the lodge had been convicted of selling a beer to an ABC agent. 
In addition, the appellee introduced minutes of some of the lodge's
meetings which purported to show that alcohol was being sold on the
premises.  Minutes from a December 7, 1993, meeting included a
handwritten notation indicating that prices on drinks would be
$2.00 on everything but Crown [Royal] and $1.00 for beer.  Minutes
from a January 10, 1994, meeting indicated that a proposal had been
made to have a happy hour from 4:00 p.m. until 6:00 p.m., during
which drink prices would be reduced by 25 cents.
     We find that the decision of the ABC Board was characterized
by an abuse of discretion and was not supported by substantial
evidence.  This is because, in granting the private-club permit,
the ABC Board failed to abide by two of its own regulations. 
Therefore, we affirm the circuit court's decision to deny the
permit.
     ABC Regulation 1.32(2) provides the following:
     Section 1.32.  Persons not entitled to Issuance of
     Permit.  No permit shall be issued to:
     (2)  Persons Giving False Information or Statements in
     Application or Hearing.  Any individual, partnership or
     corporation if such individual or any member of such
     partnership or any officer, director, managing agent
     or stockholder holding more than five percent (5%)
     of the stock in such corporation knowingly gave any
     false information or made any false statements on any
     application or any hearing required by these Regulations
     or by any Alcoholic Beverage Control Law of the State of
     Arkansas[.]
In the instant case, secretary Gordon Steven Rice acknowledged that
a lodge member, namely Tommy Starr, had previously sold a beer to
an ABC agent and had been reprimanded for doing so.  In addition,
Mr. Rice was aware of lodge minutes which indicated that the lodge
would have a happy hour and would charge for alcoholic beverages. 
Despite having this knowledge, Mr. Rice testified that, "We do not
sell liquor in violation of the law," and further stated, "To
my knowledge we have never sold liquor at all."  It is apparent
from the evidence presented that, on at least one occasion, the
lodge had engaged in the practice of selling beer.  Because
Mr. Rice knowingly provided false information at the hearing, the
ABC Board erred in issuing the permit.
     From an inquiry into the record of this case, it is also
evident that ABC Regulation 1.32(6) had been violated; this
regulation reads as follows:
          Section. 1.32 Persons Not Entitled to Issuance of
     Permit.  No permit shall be issued to:

     (6)  Persons Convicted of Certain Crimes.  Any
     individual, partnership or corporation if such individual
     or any member of such partnership or any officer,
     director, managing agent or any stockholder holding more
     than five percent (5%) of the stock of such corporation
     has been convicted of a felony or has within (5) five
     years before the date of application been under the
     sentence of any Court for the conviction of any violation
     of the laws of the State of Arkansas or any state of the
     United States relating to alcoholic beverages[.]

It is undisputed that Tommy Starr had previously violated
alcoholic-beverage laws and was convicted after illegally selling
a beer on lodge premises.  Minutes from a lodge meeting held on
April 25, 1994, listed the officers who were elected for 1994 and
1995.  Among these officers was three-year trustee Tommy Starr. 
Because an officer of the nonprofit corporation had been convicted
of an alcohol-related offense within five years of application for
the permit, the ABC Board was without authority to issue the permit
pursuant to its own rules.
     The appellant's remaining argument is that the circuit court
erroneously usurped the authority and discretion of the ABC Board
in reversing its decision.  We disagree.  It is the function of
the circuit court to uphold decisions of the ABC Board when such
decisions are supported by substantial evidence.  In the instant
case, the circuit court properly exercised its authority, and its
decision to reverse the Board was a correct one in light of the
fact that the pertinent ABC regulations prohibited the issuance of
a private-club permit.
     Affirmed.
     Stroud and Griffen, JJ., agree.
     Pittman, Jennings, and Rogers, JJ., dissent.
=================================================================
                 Judith Rogers, Judge, dissents.
     
     Today's decision of the court is unprecedented in the annals
of our jurisprudence, for in the process of overturning the ABC
Board's decision to grant a permit, this court boldly makes
findings of fact of its own on questions never offered to the Board
as grounds for the denial of the permit.  Our function on appeal
does not entail making findings of fact nor is it proper to
overturn a fact-finder's decision based on arguments never
presented to the fact-finder for determination.  I am thus
compelled to protest this blatant usurpation of the Board's
authority.
     In the prevailing opinion, the court overturns the Board's
decision based on the perceived violation of two regulations.  The
first regulation concerns the authority of the Board to deny a
permit when it finds that false statements are made at the hearing. 
However, appellee did not refer to this regulation at the hearing
and never so much as argued to the Board that the permit should be
denied because this witness's testimony was untruthful.  Conse-
quently, the Board made no finding as to the truthfulness of the
witness's testimony.  Yet this court, on its own initiative, judges
the veracity of this witness's testimony and makes a finding of
fact that the testimony was knowingly false and untruthful.  
     The second regulation provides for disqualification when an
officer of the corporation seeking a permit has been convicted of
violating any law relating to alcoholic beverages.  The prevailing
opinion makes a finding of fact, based on some obscure designation
of this individual as a "3 yr. trustee," that this person is an
officer of the corporation.  It is abundantly clear, however, that
the subject of this particular regulation appears for the first
time in appellee's responsive brief in this court.  Appellee did
not present testimony that this person was an officer of the
corporate applicant and did not rely on this regulation in its
opposition to the permit.  Since the issue was not raised, the
Board was not called upon to make a finding of fact concerning the
application of this regulation.  As a matter of fact, since this
issue was not fleshed out at the hearing, we have no earthly idea
what a "three-year trustee" is, and indeed this person's status as
an officer of the corporate applicant, to which the regulation
speaks, is very much a subject of disputed fact because this person
is not among those listed as an officer of the corporation on the
application for the permit or the accompanying articles of
incorporation.  Nevertheless, in the face of this conflicting
evidence, this court resolves this question of disputed fact,
concerning an issue raised for the first time on appeal, and finds
that this person is an officer of the corporation.  That this court
is taking on the role of a fact-finder is tacitly admitted in the
prevailing opinion, because hidden in a footnote, it acknowledges
that it looked to the record "to determine" that this person was an
officer of the corporation.
     Two principles of law are controlling here.  It has been
repeatedly held that we will not set aside an administrative
determination upon a ground not presented to the agency because to
do so would deprive the agency of the opportunity to consider the
matter, make its ruling and state the reasons for its action. 
Franklin v. Ark. Department of Human Services, 319 Ark. 468, 892 S.W.2d 262 (1995).  Secondly, reviewing courts may not supply
findings by weighing the evidence themselves, because that function
is the responsibility of the administrative agency which sees the
witnesses as they testify.  The Green House, Inc. v. Arkansas
Alcoholic Beverage Control, 29 Ark. App. 229, 780 S.W.2d 347
(1989).  With these principles in mind and governed by our limited
standard of review, it is our task to examine the decision of the
Board based on the arguments presented to that body and based on
the findings made by the Board in response to those issues placed
before it.  It is not our function to pass judgment on matters
which could have been raised, but were not, or to make findings of
fact with respect to issues raised for the first time in this or
any appeal from that decision.  The circuit court overturned the
Board's decision on grounds not argued before the Board and
otherwise substituted its judgment for that of the Board.  By
affirming that decision, this court falls into the same error, and
I dissent.
     I am authorized to state that Judges Pittman and Jennings join
in this dissent.