No. 93-340
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
NANCY C TOKUMOTO, d/b/a
.
Kadena's Gourmet Take-Away,
Petitioner and Appellant,
DEPARTMENT OF REVENUE OF THE STATE
OF MONTANA and GREENLEAF RESTAURANT
AND HOTELS CORPORATION, d/b/a
Greenleaf Cafe and Delicatessen,
Respondents and Respondents.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Douglas G. Harkin, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Robert J. Sullivan, Boone, Karlberg & Haddon,
Missoula, Montana
For Respondents:
David L. Nielson, Tax Counsel, Office of Legal
Affairs, Department of Revenue, Helena, Montana
Milton Datsopoulos, Datsopoulos, MacDonald
& Lind, Missoula, Montana (Greenleaf)
Submitted on Briefs: February 3, 1994
Decided: February 24, 1994
Filed:
Justice William E. Hunt delivered the opinion of the Court.
Petitioner/Appellant, Nancy C. Tokumoto, d/b/a Kadenals
Gourmet Take-Away (Tokumoto), appeals from an order of the Fourth
Judicial District Court, Missoula County, af finning the decision of
the Department of Revenue which awarded a beer/wine license in the
City of Missoula to respondent, Greenleaf Restaurant (Greenleaf).
We affirm.
The dispositive issue is whether the District Court erred when
it affirmed the Department of Revenue's findings that Greenleaf was
qualified to receive an on-premises consumption beer/wine license.
In early 1991, the City of Missoula annexed adjoining property
increasing the city's population. The Department of Revenue (DOR)
found that this increase justified issuance of four new beer/wine
licenses to Missoula businesses, pursuant to § S 16-4-203 and -502,
MCA. Twenty-one Missoula businesses applied for the licenses. DOR
held a hearing on October 22, 1991, for purposes of considering the
applications, pursuant to S 16-4-207(3), MCA. Seventeen applicants
appeared, including Greenleaf's sole proprietor and stockholder,
Mr. ~ e r h i ,who testified that he was not a United States citizen.
Many other applicants objected to his application based on this
admission because, they argued, residency and state voter
registration requirements were conditions precedent to DORis
consideration of a licensee application.
On December 24, 1991, the hearing officer sent notice of a
proposed decision to all interested parties which stated that
Greenleaf was to be one of the successful applicants. The hearing
2
examiner found that the citizenship requirement under 5 16-4-
401(2) (a) (iii), MCA, could be satisfied at any time prior to DOR's
order for the issuance of the new licenses, and that Mr. Merhi's
citizenship was not a condition precedent far consideration of
qualification or fitness for a license. In addition, the hearing
examiner found that Tokumoto would be an alternate recipient in the
event any one of the four successful applicants did not receive a
license.
In January 1992, Tokumoto submitted written objections to the
hearing examiner's proposed decision. On July 24, 1992, DOR
adopted the proposed findings of the hearing examiner that awarded
Greenleaf a license.
Tokumoto sought judicial review, pursuant to 5 16-4-411, MCA,
in the Fourth Judicial District, Missoula County. She contested
DORqs acceptance of Greenleaf's application on the basis that at
the time of GreenleafFs application, 5 16-4-405(3)(c), MCA,
required Mr. Merhi to be a state registered voter, which first
required him to be a United States citizen. DOR contended that
16-4-401 (2), MCA, requires the applicant to be a registered voter
only by the time DOR orders the issuance of a license, and that Mr.
Merhi could meet that requirement. Further, DOR expressed that it
routinely grants liquor licenses for facilities not yet built,
allowing businesses to bring premises up to a standard of
suitability prior to issuing a license. In a similar manner, DUR
argued that eligibility requirements for beer/wine licensee
applicants could be cured prior to issuance of the license.
The District Court, giving deference to DORis interpretation
of its own regulations, found that DOR correctly interpreted
§§ 16-4-401 and - 4 0 5 , MCA, when it issued its approval af the
license to Greenleaf. On April 19, 1993, Tokumoto filed a motion
requesting the District Court to reconsider its order of April 9,
1993, which the court denied. On June 8, 1993, Tokumoto filed this
appeal.
Did the District Court err when it affirmed the Department of
Revenue's findings that Greenleaf was qualified to receive an
on-premises consumption beer/wine license?
The administration of liquor licenses is governed by the
Montana Alcohalic Beverage Code, which includes licensing criteria
set forth in 5 16-4-401 through -405, MCA. Section 16-4-
4 0 1 (2)(a)(iii) , MCA, provides:
In the case of a license that permits on-premises
consumption, the department must find in every case in
which it makes an order for the issuance of a new license
or for the approval of the transfer of a license that:
....
(iii) the applicant is a resident of the state and
is qualified to vote in a state election
[Emphasis added].
. . . .
Section 16-4-401 (2) (b)(i) , MCA, requires:
(b) in the case of a corporate applicant:
(i) the owners of at least 51% of the outstanding
stock meet the requirements of subsection (2) (a) (iii)
. . * .
Section 16-4-405(3)(c), MCA, provides:
(3) A license under this code may not be issued if
the department finds from the evidence at the hearinq
held pursuant to 16-4-207 (3) that:
(c) the applicant or the premises proposed for
licensing fail to meet the eligibility or suitability
criteria established by this code .. . .
[Emphasis
added].
We have held that the standard for reviewing an administrative
agency's conclusions of law is whether the agency's interpretation
of law is correct. Steer, Inc. v. Department of Revenue (1990),
245 Mont. 470, 474-75, 803 P.2d 601, 603.
Tokumoto claims that DOREs award of the beer/wine license to
Greenleaf resulted in substantial prejudice to her. She emphasizes
that the parties do not dispute that at the time of application, at
the hearing, and at the issuance of the preliminary findings and
proposed order, Greenleaf's owner, Mr. Merhi, was not a United
States citizen.
Tokumoto argues that 5 16-4-401(2) (a)( i i i ) ,
MCA, clearly sets
forth the criteria that must be met in every case in which DOR
makes an order, but that the statute is silent as to when the
evidence of qualifications must be presented. Tokumoto asserts
that DORFs interpretation of the statute, that an applicant could
qualify any time befare DOR makes a final order for the issuance of
a new license, is incorrect because it requires insertion of
language not in the statute. Tokumoto contends that, on the
contrary, the plain language of S 16-4-405 (3) (c), MCA, clearly and
unambiguously dictates that an applicant be eligible as determined
by evidence produced at the hearing.
The hearing examiner found:
It has been long-standing, past practice of the
Department to permit applicants to cure defects in an
application prior to actual issuance of a license, the
specific and unequivocal term used in the statute.
Therefore, citizenship is not used as a criteria in
looking to the applicants before this hearing.
DOR asserted that Tokumotols interpretation of the statutes
employed too narrow a reading. It reasoned:
Just as the Department allows the premises to be brought
to a standard of suitability after submission of the
[liquor license] application, so should an [beer/wine
licensee] applicant be permitted to complete attainable
eligibility criteria after submission of the application.
The District Court gave deference to DORgs interpretation of
its own regulations, The court found that from the plain language
of 5 5 16-4-401 and -405, MCA, "DOR cannot issue a license if the
evidence at the hearing reveals that the applicant failed to meet
the eligibility criteria . . . . [and] DOR cannot issue a license
if the applicant is not a resident of the state . . . ." The court
was persuaded by DORIS long-standing past practice to permit
applicants to cure defects in an application prior to actual
issuance of a license.
We have held that "[tlhis court shows great deference to an
interpretation given a statute by the agency charged with its
administration." Norfolk Holdings, Inc. v. Montana Dept. of
Revenue (lggl), 249 Mont. 40, 44, 813 P.2d 460, 462 (citations
omitted). We agree with DOR and the District Court.
Although Mr. Merhi was not a citizen at the time of the
hearing, the record shows that he was taking affirmative steps to
obtain United States citizenship to become eligible by the time of
issuance of the license. DOR historically has granted liquor
licenses for premises that are not even constructed on the
condition that the premises would be constructed according to the
plans presented it and further contingent upon the premises meeting
applicable building codes, sanitary inspections, and health codes.
Not to do so would mean that an applicant who did not have the
premises fully ready for use could never be granted a license, even
if he acted in reliance of the possibility of receiving a license.
In the past, DOR has allowed beer/wine license applicants to cure
eligibility requirement defects for the same reason. Mr. Merhi's
gamble, that he may not have become a United States citizen by the
time DOR ordered issuance of the four licenses, did not
substantially prejudice Tokumoto, but affected him alone. If he
had failedto obtain citizenship in time, Tokumoto apparently would
have been the beer/wine license recipient.
We affirm the District Court.
Justice
Justice Karla M. Gray, dissenting.
I respectfully dissent from the opinion of the Court.
It is not disputed that the hearing held in this matter was
required by 5 16-4-207(3), MCA, because written protests had been
filed. It also is not disputed that, at the time of the hearing,
Greenleaf's owner did not meet the eligibility criteria contained
in § 16-4-401(2) (a)(iii), MCA.
These undisputed facts lead inexorably to § 16-4-405, MCA.
That statute prohibits the issuance of a retail alcoholic beverage
license if the Department finds from the evidence at the hearinq
that the applicant fails to meet the eligibility or suitability
criteria provided by statute. There is no mystery here; the
statutory language is plain, clear and unambiguous. If evidence
produced at the hearing establishes that an applicant does not meet
the eligibility criteria, the Department must so find. Having so
found, the license cannot be issued to the applicant.
The hearing examiner, the District Court and this Court rely
on the Department's past practices in giving "deference" to the
Department's interpretation of the statutes at issue here. Such
reliance is totally unwarranted where, as here, the past practices
are clearly at odds with the plain statutory language.
Our standard of review is whether the agency and the District
Court correctly interpreted the law. It is clear that they did
not. Agencies are not free to act in a manner which contravenes
laws enacted by the legislature; nor are they entitled to deference
in their interpretation of the law when that interpretation is
based on actions and practices which do not comply with the law.
The fact is that the statute at issue here does not say what
the District Court said it says. Section 16-4-405, MCA, does not
say that the Department cannot issue a license if the applicant
fails to meet the statutory eligibility criteria by the time the
license is issued. Section 16-4-405, MCA, states clearly that a
license cannot be issued if the Department finds, from the evidence
at the hearinq, that the applicant does not meet the criteria. The
Court's opinion ignores the clear statutory language. In so doing,
the Court violates its most fundamental obligation with regard to
statutory interpretation: to declare what a statute says, without
omitting what is contained therein. Section 1-2-101, MCA.
Moreover, the portions of the Court's decision relating to the
Department's practices with regard to premises suitability and
prejudice to Tokumoto are entirely irrelevant. The fact that the
Department has acted contrary to the statute with regard to both
premises suitability and applicant eligibility hardly bolsters the
legal propriety of its actions. Nor does any statute at issue here
require Tokumoto to show prejudice.
I would reverse the District Court.