November 15 2007
DA 06-0668
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 298
YVONNE OWENS, d/b/a DUMAS WALKERS
COWBOY BAR & SALOON,
Petitioner and Appellant,
v.
MONTANA DEPARTMENT OF REVENUE,
Respondent and Appellee.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV 02-539A
Honorable Ted O. Lympus, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Yvonne M. Owens (Pro Se), Kalispell, Montana
For Appellee:
Michele R. Crepeau, Special Assistant Attorney General, Helena, Montana
Submitted on Briefs: August 9, 2007
Decided: November 15, 2007
Filed:
__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.
¶1 Yvonne Owens (Owens) appeals from the order and judgment of the Eleventh Judicial
District Court, Flathead County, affirming the Final Agency Decision made by the Director
of the Department of Revenue (Director) to revoke her all-beverages license. We affirm.
¶2 Owens raises a number of issues for the first time on appeal that we decline to review.
Generally, this Court will not address issues that were not raised before the district court.
Wheelsmith Fabrication v. Dept. of Labor, 2000 MT 27, ¶ 11, 298 Mont. 187, ¶ 11, 993 P.2d
713, ¶ 11. We need to address only whether the District Court correctly affirmed the
Director’s decision to revoke Owens’s all-beverage license.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Owens applied for an all-beverages license in April of 1996 for Flathead County. The
Department of Revenue (Department) may award a county license only for those locations
whose nearest entrance sits more than five miles from the nearest city limit. Section 16-4-
201, MCA. Owens provided in her application a Certified Survey Affidavit signed by a
private licensed land surveyor named Christopher Balstad, Jr. (Balstad) to demonstrate
compliance with this requirement. The affidavit asserted that the premises sat “more than
five miles from the incorporated city of Kalispell.” The Department approved the
application based on this information and Owens received the license.
¶4 Montana Department of Justice Investigator Andrew Brinton (Brinton) received three
separate contacts in March of 1998 alleging a problem with Owens’s license, including a
charge that her establishment was not located beyond the five mile requirement. Brinton
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learned that Balstad had measured the distance for the original application merely by taking a
scaled reading from a map.
¶5 Brinton solicited three bids for conducting a land-based survey to confirm whether
Owens’s bar satisfied the distance requirement. The successful bidder, Eby and Associates
of Kalispell, measured the radial survey distance and determined that the bar’s nearest
entrance sat 4.911 miles (470 feet short of 5 miles) from the nearest boundary of the city
limits of Kalispell. The Department notified Owens that it was revoking her license based
upon the incorrect information in her application and her noncompliance with the distance
requirement.
¶6 Owens contested the revocation before a hearing examiner pursuant to § 2-4-611,
MCA. Tom Sands (Sands), the former owner of the property, testified. Sands, a licensed
surveyor who had performed numerous certified surveys for liquor license applications,
knew that an establishment must sit five miles outside of city limits in order for an applicant
to obtain a county all-beverages license. Sands testified that he knew that Owens intended to
use the property for a bar, and that he believed he had informed her that the property sat
within five miles of the city limits.
¶7 Balstad testified that he took his measurement by scaling the distance on a map. He
testified that he went to the City Planner’s Office in Kalispell to obtain the map and to
determine the location of the city boundary. Balstad testified that the city zoning
administrator, Brian Wood (Wood), showed Balstad the location of the Kalispell city limit.
Balstad testified that he used an engineer’s ruler to measure the distance from the city limit
to Owens’s property. Balstad also testified that he did not use the nearest door entrance as
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his measuring point, but instead measured from the property boundary closest to the
Kalispell city limits.
¶8 Wood testified that Balstad came to his office to measure the distance of the property
from the Kalispell city limit. Wood testified that his primary responsibility in their exchange
constituted giving accurate information to Balstad regarding the existing city boundary.
Wood testified that Balstad made no determination regarding the property’s compliance with
the five mile distance requirement on the initial visit to the City Planner’s Office. He
testified that he and Balstad discussed Balstad’s “conclusion” that the property sat beyond
the five mile radius on a subsequent visit. Wood testified that he concurred in that
conclusion.
¶9 The hearing examiner heard testimony from both Eby and surveyors testifying on
behalf of Owens, most notably Balstad himself, regarding the imprecise nature of scaling
from a map. In contrast, both Eby and another surveyor present on behalf of Owens,
testified as to the high degree of precision attainable with the equipment and methods
employed by Eby. Eby testified in detail as to the equipment she used and her methodology.
The hearing examiner recommended that the Director affirm the revocation. Owens
objected.
¶10 Owens and the Department filed briefs and presented argument to the Director. The
Director adopted the hearing examiner’s findings of fact and recommendation without
modification in the Final Agency Decision and revoked Owens’s license. The Director
pointed to the substantial evidence supporting the hearing examiner’s findings as detailed in
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the 44-page recommendation. Owens sought judicial review and the District Court upheld
the Department’s revocation.
¶11 The District Court based its initial order on documents provided by the parties as the
Department had failed to transmit the administrative record. Owens appealed. We
dismissed the appeal without prejudice to provide the District Court the opportunity to make
its decision based upon the entire administrative record. Owens v. Montana Dept. of
Revenue, 2006 MT 36, 331 Mont. 166, 130 P.3d 1256. The District Court again affirmed the
Department’s decision to revoke the all-beverages license after reviewing the entire record,
including the hearing transcript and the parties’ briefs. This appeal followed.
STANDARD OF REVIEW
¶12 We review agency findings to determine whether they are clearly erroneous. Section
2-4-704(2)(a)(v), MCA. We review an agency’s conclusions of law to determine if they are
correct. Hofer v. Montana DPHHS, 2005 MT 302, ¶ 14, 329 Mont. 368, ¶ 14, 124 P.3d
1098, ¶ 14. The same standard of review applies to “both the District Court’s review of the
administrative decision and our subsequent review of the District Court’s decision.” Hofer, ¶
14.
¶13 The scope of our review is narrow in considering the Director’s factual findings.
Ramage v. Dept. of Revenue, 236 Mont. 69, 74, 768 P.2d 864, 867 (1989). We may not
substitute our judgment for that of the agency as to the weight of the evidence. Section 2-4-
704(2), MCA. We employ a three-part test to determine whether an agency’s findings of fact
are clearly erroneous: (1) we review the record to see if substantial evidence supports the
findings, (2) if substantial evidence supports the findings, we determine if the agency
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misapprehended the effect of the evidence, and (3) if both of the above are satisfied, we still
may decide a finding is clearly erroneous if a review of the record leaves the Court with the
definite and firm conviction that a mistake has been committed. Kiser v. State, Dept. of
Revenue, 1999 MT 228, ¶ 7, 296 Mont. 93, ¶ 7, 987 P.2d 363, ¶ 7.
DISCUSSION
¶14 Owens contends that the Director lacked sufficient evidence to determine that her
property sat within the five mile radius. She also contends that the Director lacked sufficient
evidence to determine that her application contained false information. She further asserts
that the Director misapprehended the effect of the evidence in deciding to revoke her license.
¶15 The hearing examiner set forth his findings of fact in great detail after conducting a
thorough hearing. The examiner found that Sands, the seller of the property, had put Owens
on notice that the property might not comply with the distance requirement. The examiner
heard testimony from both sides regarding the potential for error in the scaled map
measurement performed by Balstad.
¶16 Balstad testified that he had measured from Owens’s nearest property boundary rather
than from the nearest door entrance. The administrative rules governing the applications,
however, define “premises” as the actual building and areas outside, and attached to, the
licensed buildings to which patrons have free access and where the preparation, sale, service
or consumption of alcohol occurs. Admin. R. M. 42.13.111(7)-(8). Thus, the hearing
examiner heard testimony that Balstad not only employed an unreliable methodology, but
that he also used an invalid landmark in taking his measurement.
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¶17 Witnesses for Owens and the Department spoke to the reliability of Eby’s land-based
survey. The examiner heard no testimony to refute Eby’s determination that the distance
was less than five miles. The examiner found that Balstad’s survey was unreliable and that
Eby’s land-based survey accurately measured the distance at 4.911 miles. Consequently, the
examiner found that Owens had received invalidly a county license despite the fact that her
property sat within the five mile radius. The examiner also found that Owens’s original
application included false information in that it asserted that the proposed location sat
beyond the five mile limit. The Director adopted all of these findings without modification.
Substantial evidence supports the Director’s findings and nothing in the record indicates that
the Director misapprehended the effect of these findings.
¶18 Owens next asserts that the Director misapplied the statutes and administrative rules
concerning all-beverages licenses. As outlined in § 16-4-201, MCA, establishments
operating with county all-beverages licenses must sit in unincorporated county areas, and the
nearest entrance of the premises must be at least five miles from incorporated cities or towns.
The governing administrative rules require applicants to provide a sworn statement or
affidavit from a surveyor or government official attesting to the “exact distance from the
nearest corporate boundary to the proposed premises . . . .” Admin. R. M. 42.12.130(2). The
agency may revoke the license if it finds that an applicant made a false statement in any part
of the original application. Sections 16-4-402(3)(a), 16-4-406(2)(b), MCA.
¶19 Owens filed a Notice of Supplemental Authority during this appeal. Owens directed
this Court’s attention to an amendment to § 16-4-402, MCA, enacted by the 2007 legislature.
Section 1, Ch. 257, L.2007. The amendment prohibits the Department from revoking a
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license on the basis of a false statement in an application if the statement “is based upon a
verifiable assertion made by a governmental officer, employee, or agent that an applicant
relied upon in good faith . . . .” Section 1, Ch. 257, L.2007; § 16-4-402(3)(b), MCA. The
provision applies to all revocation proceedings that “have not been finally adjudicated on . .
.” as of April 26, 2007. Section 3, Ch. 257, L.2007.
¶20 Owens claims that she based the statement in her application regarding the situs of the
property upon a “verifiable assertion” made by Wood, the city zoning administrator. She
contends that she relied in good faith on Wood’s concurrence that her property met the five
mile distance requirement. She asserts that the Department cannot revoke her license based
upon her good faith reliance.
¶21 The Department did not revoke Owens’s license, however, solely on the basis of the
false statement included in her application. The Department correctly noted that the quota
provisions for all-beverages licenses also invalidated Owens’s license. Section 16-4-201,
MCA, constrains the Department’s ability to issue all-beverages licenses when administering
the program. The quotas set forth in § 16-4-201, MCA, limit the number of city licenses that
the agency can issue. The Department may not issue licenses to applicants who do not
satisfy the distance requirements. Section 16-4-201, MCA.
¶22 The hearing examiner found that Owens’s bar sat within five miles of the nearest city
limit of Kalispell. This finding conflicted with Owens’s survey affidavit. The examiner’s
finding revealed not only the presence of false information in Owens’s application, but also
that the Department had issued invalidly a county license for an establishment that required a
city license. The Director correctly concluded that the statutory and administrative
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guidelines allowed for the revocation of Owens’s license. The District Court, in turn,
correctly affirmed the Director’s application of the law. We will not disturb that decision.
¶23 Affirmed.
/S/ BRIAN MORRIS
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JOHN WARNER
Justice Patricia Cotter dissents.
¶24 I dissent from the Court’s blithe dismissal of Owens’s claims. I would reverse the
District Court’s judgment affirming the Final Agency Decision and remand with instructions
to reinstate Owens’s license.
¶25 The Court offers two bases for its decision. The first—that there was a false
statement included in Owens’s application justifying the revocation—was effectively dealt a
death blow by the recent amendment to § 16-4-402, MCA, as referenced in ¶ 19 of the
Court’s Opinion. The amendment provides that if a false statement in an application is based
upon a verifiable assertion of a governmental agent upon which an applicant relied in good
faith, the Department may not revoke a license on the basis of such a false statement. This
amendment applies by its terms to this case, as these revocation proceedings have not yet
been finally adjudicated (Opinion, ¶ 19), and is dispositive of the “false statement” grounds
for revocation.
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¶26 As Owens points out and this Court concedes, Brian Wood, the city zoning
administrator, concurred with Balstad’s conclusion that the property sat beyond the 5-mile
radius. Opinion, ¶ 8. Woods testified during the administrative hearing of March 8-9, 2001,
to this effect, confirming that he and Balstad together performed a “fairly simple
mathematical procedure” using the scale of the USGS maps to determine where the 5-mile
line would be, and further that he concurred in the conclusion that the property in question
was beyond the 5-mile line. Owens and Balstad had every right to rely on this assertion.
Thus, Owens has demonstrated on the record “a verifiable assertion made by a governmental
officer, employee or agent” upon which she was entitled to and did rely in good faith. Under
the law as amended, therefore, any false statement as to distance may not be used as a basis
for revocation of her license.
¶27 Seemingly conceding the preclusive effect of this statutory change (Opinion, ¶ 21),
the Court offers an alternative conclusion, that being that the quota provisions for all-
beverage licenses also invalidated Owens’s license. The Court states that because “the
Department had issued invalidly a county license for an establishment that required a city
license,” the Director correctly concluded that Owens’s license should be revoked. Opinion,
¶ 22. With all due respect, this conclusion is both unfair and wrong. It is unfair because the
reasoning is circular—the argument that the license was invalid rests upon the “false
statement” grounds eliminated by the statutory amendment noted above. Moreover, any
mistake ostensibly made was that of the Department, and not Owens. More importantly, it is
wrong because in 1997, the City of Kalispell informed the Department that as a result of an
annexation, Owens’s premises was now located within the corporate boundaries of Kalispell,
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thus requiring Owens to obtain a City license. Owens proceeded to obtain a City license as
directed by the Department, paying twice the fee for the privilege when she renewed her
license the following year. Therefore, any problem ostensibly created by virtue of the
erroneous issuance of a County license was eliminated by the Department when it
instructed Owens to secure a City license and she did so.
¶28 Owens jumped through every administrative hoop required, securing all approvals and
the license needed to proceed with the construction of her bar. Justifiably assuming that her
license was valid, she then spent 13 months and considerable money in improving the
premises. The revocation of her license years after the fact is neither just nor legally
supportable. I would therefore reverse and remand with instructions to reinstate Owens’s
license. I strongly dissent from our refusal to do so.
/S/ PATRICIA COTTER
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