Underground, Inc., d/b/a The Underground v. City of Knoxville ( 2000 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 2000 Session
UNDERGROUND, INC., d/b/a THE UNDERGROUND, v. THE CITY OF
KNOXVILLE, TENNESSEE
Direct Appeal from the Chancery Court for Knox County
No. 142803-2 Hon. Daryl R. Fansler, Chancellor
FILED AUGUST 25, 2000
No. E2000-00609-COA-R3-CV
The Beer Board summarily suspended Petitioner’s licence to sell beer and following a hearing,
revoked the permit. On appeal to Chancery Court, the Chancellor upheld the revocation. We affirm.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.
HERSCHEL PICKENS FRANKS , J., delivered the opinion of the court, in which HOUSTON M. GODDARD ,
P.J., and D. MICHAEL SWINEY, J., joined.
Jerrold L. Becker and Samuel W. Brown, Knoxville, Tennessee, for appellant, Underground, Inc.,
d/b/a The Underground.
Michael Kelley, Charles W. Swanson and Jason H. Long, Knoxville, Tennessee, for appellee, The
City of Knoxville, Tennessee.
OPINION
In this action the Beer Board’s revocation of Petitioner’s permit to sell beer was
upheld by the Chancery Court. Petitioner appealed to this Court.
The issues presented for review are:
1. Whether the trial court erred in upholding revocation of the Underground’s
beer permit, because the Beer Board acted illegally, arbitrarily, and in
excess of its jurisdiction, by denying the Underground the requisite due
process?
2. Whether the trial court erred in upholding revocation of the Underground’s
beer permit, because the Beer Board’s decision was not supported by
substantial and material evidence?
On March 25, 1999, the Beer Board summarily suspended the Underground’s beer
permit pending a scheduled hearing pursuant to Section 4-27(d) of the Knoxville City Code,
based on “receipt of credible information that the permittee has violated various provisions of
Article II of Chapter 4 of the Code, Chapter 24 of the Code, or any other law or ordinance”
related to sale of beer.
Hearings were subsequently held on April 15 and 20, 1999, and both sides
presented proof. The Beer Board then voted to revoke the Underground’s beer permit.
Before the Chancery Court, the parties agreed that the case would be tried upon
the record developed before the Beer Board, and no further proof was offered. In upholding the
revocation of the beer permit, the Chancellor said the Underground appeared to be under “intense
scrutiny” and that the police may have had some personal motivation in subjecting the
establishment to such scrutiny, but he concluded that if illegal activities were taking place, the
motivation of the police was immaterial.
The Chancellor found that the testimony of Jane Doe, a confidential informant,
regarding her trips to the Underground as a minor was incredible and gave it no weight, but he
did find that the testimony of two minors who were allowed to enter the Underground where beer
was being served, without showing identification, as well as the testimony of two police officers
who observed minors, either in the Underground or leaving the same, where beer was being
consumed. The Chancellor also found that several charges against the Underground were
without merit.
As to the first issue on appeal, the proper standard by which the trial court
reviews the Beer Board’s decision, is “with a trial de novo as a substitute for an appeal”. Tenn.
Code Ann. §57-5-108(d). “De novo” in this instance means that the trial judge is to weigh the
evidence and make her own decision without regard to any action the Beer Board may have
taken, thus substituting her own judgment for that of the Board, as opposed to merely deciding
whether the Beer Board acted arbitrarily or illegally. Richards v. Lewisburg Alcoholic Beverage
Commission, 543 S.W.2d 852 (Tenn. 1977); Cantrell v. DeKalb Co. Beer Board, 376 S.W.2d
480 (Tenn. 1964); Tucker v. Humphreys County, 944 S.W.2d 613 (Tenn. Ct. App. 1996).
In this case, the Chancellor was required to weigh the evidence and make his
decision regarding the merits of the charges, as if the case had originated in his own court.
Richards.
The basis of the appellant’s argument seems to be that the Board acted improperly
by summarily suspending the beer permit pending a hearing, thus a denial of the petitioner’s due
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process.
A beer permit is not a property right. Sparks v. Beer Committee of Blount County,
339 S.W.2d 23 (Tenn. 1960). Thus, the suspension of a beer permit cannot trigger an
unconstitutional denial of procedural due process, as appellant urges this Court to find. Eye
Clinic, P.C. v. Jackson-Madison County General Hosp., 986 S.W.2d 565 (Tenn. Ct. App. 1998).
Moreover, the Supreme Court has previously found that due to the procedural safeguards
guaranteed by a de novo review in Tenn. Code Ann. §57-5-108(d), notice is not absolutely
necessary, nor is the lack thereof fatal to a beer permit revocation. Richards. We conclude that
this issue is without merit.
The Underground also argues that the beer permit was improperly revoked
because there was no substantial and material evidence to provide a basis for revocation. The
initial summary revocation was based upon “credible information that the permittee has violated
various provisions of Article II of Chapter 4 of the [City] Code, Chapter 24 of the Code, or any
other law or ordinance regulating the manufacture, sale, receipt, possession or transportation of
intoxicating liquor.” While we have not been provided with a copy of the City’s ordinance, both
parties agree that the provision is set forth in the Code, and the City has, pursuant to its police
power, enacted such provision allowing it to summarily suspend beer permits on the above-
quoted basis. See Richards.
The question thus becomes whether credible information existed. There is
nothing in the record to show exactly what information the Beer Board and the City Law
Department had been given at the time of the summary suspension. The information that was
presented at the subsequent hearing demonstrated that minors had been allowed to enter the
Underground without being asked for identification when beer was being served, and the
Underground was, by admission, a place where dancing occurred. The Trial Court found the
underaged witnesses testimony to be credible, which provided a basis for revocation of the beer
permit, based upon the City Code Section 4-40(c) which does not allow beer to be sold where
dancing is allowed and minors are allowed to frequent. Where the Trial Judge observes and
hears the witness, we defer to his judgment on the issue of credibility. The evidence supports the
Chancellor’s finding that Section 4-40(c) was violated and forms a valid basis for revoking the
Underground’s beer permit. We affirm the judgment of the Trial Court revoking the
Underground’s beer permit.
The cost of the appeal is assessed to the appellant, Underground, Inc., and the
cause remanded.
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HERSCHEL PICKENS FRANKS , J.
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