NO. 90-582
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
TED EVERTZ,
Petitioner and Appellant,
STATE OF MONTANA; MONTANA BOARD OF
LAND COMMISSIONERS; DEPARTMENT OF
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STATE LANDS; CORY B. MARTINSON and
IRENE B. MARTINSON, "
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APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Jeffrey M. Sherlock, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James A. Patten, Patten Law Firm,
Billings, Montana
For Respondents State of Montana:
Lon J. Maxwell, Daprtment of State Lands,
Helena, Montana
For Respondents Martinson:
Jock 0 Anderson, Gough, Shanahan, Johnson
.
& Waterman, Helena, Montana
Submitted on Briefs: May 10, 1991
Decided: July 2, 1991
Filed:
Clerk
Justice Terry N. Trieweiler delivered the opinion of the Court.
Ted Evertz appeals the decision of the District Court of the
First Judicial District for Lewis and Clark County, affirming an
appraisal made by the Department of State Lands of improvements to
a State Land lease formerly owned by Evertz. We affirm the
District Court.
The issue on appeal is whether the District Court erred in
accepting the Department's appraisal over the values proffered by
Evertz. Specifically, Evertz contends that: (1) the District
Court's decision cannot be supported by the record; (2) he was
denied due process; and (3) the District Court used the wrong
criteria in arriving at the value of his improvements.
Evertz is the former lessee of Department of State Lands Lease
No. 4458, which consisted of approximately 1500 acres in Prairie
County. Evertz's lease was cancelled due to mismanagement of the
property, and the lease was transferred to Cory and Irene
Martinson. Pursuant to S 77-6-302, MCA, Evertz sought compensation
from the Martinsons for the improvements to the land. However, the
parties could not agree on a value. In accordance with 5 77-6-306,
MCA, a panel of arbitrators was chosen to decide the value of the
improvements. Each party selected one arbitrator. The arbitrators
selected by the parties chose the third member of the panel.
The arbitrators entered their decision, assigning a value of
$2800 to the improvements. Evertz's valuation of the improvements
was $53,132. iss satisfied with the arbitrators' valuation, the
petitioner appealed the decision to the Department of State Lands,
pursuant to 5 77-6-306(3), MCA. The Department and its employee,
Sharon Moore, reviewed the arbitrators1 findings. Ms. Moore
prepared a 16 page document detailing each and every improvement
to the lease claimed by Evertz, and indicated she agreed with the
findings of the arbitrators. Relying on Moore's findings, the
Department thereafter affirmed the decision of the arbitrators.
Evertz petitioned the District Court for judicial review of
the Department's decision, pursuant to subsection (4) of
5 77-6-306, MCA. The court found that "the decision of the
arbitrators and supported by the investigation of Ms. Moore is more
credible than Evertz s assertion^^^ and affirmed the decision of the
Department of State Lands. The court then directed the successors
in interest to Evertz, the Martinsons, to pay $2800 to Evertz.
This appeal followed.
Evertz contends that the procedure followed at the agency
level and upon judicial review denied him due process, and that he
is entitled to a trial de novo before the District Court. Evertz
states that the record before the lower court was compiled without
any opportunity on his part to challenge or dispute the parties
providing the information.
In cases where the parties cannot agree on the value of
improvements, there is a procedure provided by statute to reach an
equitable decision. Section 77-6-306, MCA, states that if a
decision cannot be reached between the parties, both the former
lessee and the current lessee are allowed to appoint an arbitrator.
The arbitrators then appoint a third arbitrator. Together they
assign a value to the improvements. This procedure was utilized
by Evertz and the Martinsons. Both parties were on equal footing,
having personally selectedthe person to serve as their arbitrator.
Both parties were free to provide information or documentation to
the arbitrators. Evertz's chosen arbitrator, who was presumably
familiar with the property in question, participated in the panel's
joint decision setting the value of the improvements at $2800.
Upon request for agency review of the decision, the Department
sent Sharon Moore into the field to inspect the tract and gather
information. Moore was familiar with the property, having been
there some 30 times in the prior six years. In the scope of her
review, Moore sought the advice of many individuals knowledgeable
of the leasehold and of appraising methods. She then compiled a
report for the Department's review.
The Department, upon reviewing all the evidence before it,
including information supplied by Evertz, affirmed the panel's
decision. The petitioner then sought judicial review.
At that review, Evertz argued that the record should consist
solely of the depositions of himself and Sharon Moore. He argued
that the record proffered by the Department was compiled without
his input, and that he was unable to cross-examine any of the
people who had supplied the information. The Department argued,
and the court agreed, that all testimony and documentation created
by the arbitrators and the Department in reaching their valuation
should be included in the record. The District Court gave Evertz
the opportunity to cross-examine any or all of the witnesses that
Sharon Moore relied on and submit their deposition testimony.
However, he chose to present only the testimony of Ms. Moore and
himself.
We conclude that the District Court properly considered all
the documentation regarding the leasehold upon its review. There
is no indication in 5 77-6-306, MCA, that the judicial review is
to be a trial de novo, as Evertz maintains. The lower court is in
a better position to understand how a decision was reached if it
is able to review all of the material used to reach that decision.
As the District Court stated, Evertz had ample opportunity to
provide the court with depositions of any of the people involved
in the valuation process or mentioned in Sharon Moore's report.
He did not do so.
Evertz correctly notes that one of the primary purposes of
judicial review is to assure that parties have been afforded due
process. State ex rel. Bailey v. Grande, 154 Mont. 437, 445, 465
P.2d 334, 339 (1970). This Court stated in Great Northern Railway
Co. v. Roosevelt County, 134 Mont. 355, 362, 332 P.2d 501, 505
(1958), that I1l[d]ue process of law1 refers to and means certain
fundamental rights which our system of jurisprudence has always
recognized, that is, of requiring notice to be given and a hearing
had before property may be taken . . . . l1 Evertz had two
opportunities to present evidence on his behalf, both at the
Department review of the arbitration proceedings and at the
judicial review. While 5 77-6-306(3), MCA, does not provide for
a hearing and an opportunity to examine witnesses as part of the
Department review, he clearly had that opportunity on appeal to the
District Court. He cannot now claim he was not afforded due
process if he chose not to exercise his rights at either of those
reviews. The petitioner has not offered credible evidence to show
that he was denied an effective opportunity to be heard. Goldberg
v. Kelly, 397 U.S. 254, 268, 90 S.Ct 1011, 25 L.Ed 287 (1970).
Evertz next contends that the District Court improperly
received the opinion testimony of Moore, and that her opinion was
based on hearsay.
While Sharon Moore was not a professional appraiser, the
statute does not require the use of professional appraisers. The
statute requires that the Department Ifshall examine the
improvementsw and decide whether the arbitrators1 award should be
upheld. Sharon Moore was qualified to make that examination for
two reasons: (1) She had extensive knowledge of the property in
question, based on her supervisory authority over the State lease
in question since 1983, and had visited the land some 30 times
prior to her review; and (2) The primary focus of her inquiry was
the propertyls original cost and its current condition. Section
77-6-303, MCA. This inquiry did not require the expertise of a
professional appraiser. The credibility and weight to be given to
opinion testimony are matters for the district court's
determination in a non-jury proceeding. We conclude that no abuse
of discretion resulted fromthe District Court's reliance on Sharon
Moore's opinion in this case. City of Fairview v. Deming,
238 Mont. 496, 778 P.2d 876 (1989).
As to Evertz's contention that part of Moore's opinion was
based upon hearsay, this Court held in State Highway Commission v.
Greenfield, 145 Mont. 164, 169, 339 P.2d 989, 992, (1965), that an
opinion on land valuation may be based upon hearsay, if it is found
to be reliable.
Evertz next contends that the District Court did not properly
consider the factors used by him in determining the value of his
improvements. Specifically, Evertz states that in determining the
value of the improvements the District Court should not be limited
to the initial cost, but should include the replacement cost as
well.
The statute regarding valuation, 5 77-6-303 (1), MCA, states
in pertinent part:
In determining the value of these improvements,
consideration shall be given to their original cost,
their present condition, their suitableness for the uses
ordinarily made of the lands on which they are located
The statute refers to original cost and present condition as
starting points for valuation. It is clear that the purpose is to
compensate lessees for their expenses with some consideration of
the extent to which the improvement has been depreciated.
Evertzls methodology of valuation uses replacement cost.
There is a great difference between the two methods, resulting, in
this case, in two very different valuations. As noted by the
Department, a former lessee, by using a replacement cost method and
thereby assigning market prices to improvements on his lease could
effectively "chillI1 the bidding process on a lease. It is not
unlikely that the Martinsons, or any other potential lessee, would
be reluctant to acquire the lease in this case if they were forced
to pay Evertzls replacement valuation of $54,000. The Department
used the process called for in the statute, and the District Court
did not err in accepting those values rather than the values
offered by the petitioner.
We affirm the District Court.
We Concur: //
&,dvr& Chief Justice