NO. 93-116

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

HAZEL MARIE PHILLIPS,

Petitioner and Respondent,

v.

TRUSTEES, MADISON SCHOOL DISTRICT NO. 7,

and NANCY KEENAN, Superintendent of

Public Instruction,

Respondents and Appellants.

APPEAL FROM: District Court of the First Judicial District,

In and for the County of Lewis and Clark,

The Honorable Thomas C. Honzel, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Charles E. Erdmann, Erdmann Law Office,

Helena, Montana (for Madison School District)

Kathleen Holden, Chief Legal Counsel,

Office of Public Instruction, Helena,

Montana (for Nancy Keenan)

For Respondent:

J. C. Weingartner, Attorney at Law,

Helena, Montana

For Amicus Curiae:

Janice Frankino Doggett, Attorney at Law! Helena,

Montana (for Montana School Boards Association)

Emilie Loring, Attorney at law, Missoula,

Montana (for Montana Education Association)

Filed:

Submitted on Briefs: September 2, 1993

Decided: January 28, 1994
Justice William E. Hunt, Sr., delivered the opinion of the Court.

The Madison School District No. 7 Trustees (trustees), and

Nancy Keenan, Montana Superintendent of Public Instruction (state

superintendent), appeal from an order of the First Judicial

District Court, Lewis and Clark County, reversing the state

superintendent's decision concerning the termination of respondent,

Hazel Marie Phillips, a Twin Bridges school teacher.

We affirm.

Did the District Court err when it reversed the state

superintendent's decision, which had reversed the county

superintendent's decision, on the grounds that the county

superintendent considered evidence not available to the trustees?

In 1989, Phillips was a tenured English and Art teacher

employed by the Madison School District for over 16 years. On or

about January 3, 1989, the trustees passed a resolution declaring

a school district financial emergency and authorized a ballot to

consider a $103,020 emergency levy for the high school, and a

$73,621 emergency levy for the elementary school. The voters

defeated the levies. At a meeting on February 3, 1989, the

trustees eliminated a number of programs including the English/Art

program. On February 23, 1989, the trustees submitted a second

proposed set of emergency levies at $38,884 and $47,277, of which

the voters approved. On March 1, 1989, the trustees informed

Phillips of the school superintendent's recommendation to eliminate

her position in a reduction of force, due to the financial

2
emergency. On March 22, 1989, at the hearing for Phillips and two

other tenured teachers, the trustees voted to accept the school

superintendent's recommendation that Phillips' teaching contract be

terminated.

Phillips claimed that the school superintendent recommended

her termination to the trustees because of a personality conflict

between the two. On April 17, 1989, Phillips appealed the decision

to the county superintendent. On October 24, 1989, the county

superintendent found that Phillips was unjustly terminated because

of a personality conflict with the school superintendent, and not

because of a financial emergency. On November 22, 1989, the

trustees filed an appeal to the state superintendent who affirmed

the county superintendent on November 30, 1990.

On December 28, 1990, the trustees filed a petition for

judicial review in the Fifth Judicial District Court, Madison

County. Subsequently, the parties determined that the record

reviewed by the state superintendent was incomplete. O n

February 19, 1991, by agreement and stipulation of the parties, the

court remanded the case to the state superintendent with orders to

obtain and review all the evidence presented by the parties to the

county superintendent.

On June 27, 1991, the state superintendent reversed her first

decision by reversing the decision of the county superintendent.

The state superintendent found that on October 24, 1989, the county

superintendent improperly weighed financial informationunavailable

3
to the trustees on March 22, 1989, when they decided to accept the

school superintendent's recommendation that Phillips' contract be

terminated.

On August 27, 1991, Phillips filed a petition for judicial

review in the First Judicial District Court, Lewis and Clark

County, asking the court to reverse the final order of the state

superintendent and to reinstate the order of the county

superintendent. On December 10, 1992, the First Judicial District

Court found that because the hearing with the county superintendent

was de novo, the county superintendent properly could consider any

information before her, including the financial evidence admitted

at the hearing without objection by the trustees. Further, the

court found that the county superintendent's findings of fact were

not clearly erroneous, and her conclusions of law were neither

arbitrary nor capricious. Consequently, the District Court

reversed the decision of the state superintendent and reinstated

the county superintendent's decision that had reversed the

trustees' decision to terminate Phillips* contract.

On January 25, 1993, the trustees and state superintendent

filed this appeal.

Did the District Court err when it reversed the state

superintendent's decision, which had reversed the county

superintendent's decision, on the grounds that the county

superintendent considered evidence not available to the trustees?

4
We agree with the First Judicial District Court. The District

Court properly upheld the county superintendent's decision, after

finding that it was supported by reliable, probative, and

substantial evidence, and not clearly erroneous. Section

2-4-704(2)(a)(v), MCA. The court then properly determined that the

hearing before the county superintendent was a hearing de novo.

Johnson v. Beaverhead County High Sch. Dist. (1989), 236 Mont. 532,

771 P.2d 137; Yanzick v. School Dist. 23 (1982), 196 Mont. 375, 641

P.2d 431; Section 20-3-210(l) and (3), MCA. Because the county

superintendent's review is de novo, the county superintendent could

review any relevant issues of law or fact before her at the time of

the hearing.

The county superintendent's findings of fact and conclusions

of law reveal that in light of the trustees' claim of a financial

emergency, she considered financial data regarding the school

district's budget: "The Reserve account in the amount of

$57,298.00 for the 1989-90 fiscal year was double the 1987-88

amount of $25,227.00 and triple the 1988-89 amount of $14,704.00.VV

At the hearing, Phillips introduced an exhibit into evidence dated

July 24, 1989, containing the 1989-90 high school budget of

$57,298.71, for the year beginning July 1, 1989, and another

financial summary dated August 2, 1989. Both of these summaries

post-date March 22, 1989, the date on which the trustees voted to

terminate Phillips' contract.

5
We hold that the proceedings before the county superintendent

were de novo proceedings and she could properly consider all

relevant evidence presented to her.

We affirm the District Court.

We concur:

Chief Justice

Justices

6
Justice James C. Nelson specially concurs.

I concur in the result reached by this Court, although I do so

while acknowledging the impossible position in which the statutory

scheme places the board of trustees.

MY frustration is primarily grounded in the anomalous

situation ably discussed by the dissent regarding the use of

evidence not available to the Trustees or in existence at the time

of their decision, at the & m hearing before the county

superintendent. Under § 20-4-205, MCA, the board of trustees is

required to make its teacher hiring decisions for the next school

year at a time before final budgetary information is available

under Title 20, Chapter 9, Part 1. As the respondents correctly

point out in their brief on appeal:

In good financial times this process generally works as

districts can expect to receive increased state support

and some growth in district taxable valuation. In

troubled financial times, however, or where districts are

experiencing declining enrollment, the trustees find

themselves in a situation where they must make staffing

decisions before they are aware of their final budget

revenue figures. In these situations the trustees make

the best decision they can with the available

information.

Under that sort of statutory scheme, one can hardly fault the

school board for planning programs and hiring teachers and staff

very conservatively, especially when the board is increasingly

faced with failed school levy elections, taxpayer revolts and major

changes in school funding laws that seemingly follow each session

of the legislature and each court challenge.

Notwithstanding, our school laws also provide that a teacher

who claims that his or her teaching contract was, for an improper

7
reason, not renewed by the board of trustees, is entitled to a I'&

nova" hearing before the county superintendent. sec!::,oas %!I-3-2iG,

20-4-204, MCA; Johnson v. Beaverhead Cty. Sch. D. (1~989j, 236 Mont.

532, 534, 771. P.2d 137, 138; Yanzick v. School District No. 23

(1982), 196 Mont. 375, 385, 641 P.2d 431, 437.

A de nova hearing is "[a] new hearing oc a hearing for the

second time, contemplating an entire trial in [the] same manner in

which [the] matter was originally heard and a review of prfU~ious

hearing. On hearing 'de nova' [the] court hears [the] inatte: as

court of original and not appellate jurisdiction." lxacji:s LSW

Dictionary 649 (5th ed. 1979).

In Pickett v. City of Billings (1993) __ Knnt. P.2d

, 50 St. Rep. 1586, 158G, we recently stated:

Hlacjr's Law Dictionary (4th ed. 1968) 3.157'7, de~fines tr.iaJ.

de Ii@"@ as 1f L.ra 1 new trial or retrial ha,d i:1 an app?-l.!.iite

court in whi~ch .the whole :zase is gi:ne into ._._i.~ .%s it _- no.._._ -tria!~ . . . ~--

whatever had been had in the court belcg." The:re.fore, a

district court must conduct the procecdinys before it s

if the case had orjxinated in that court, following all

statutes and rules governing district cour~t: proceedl.nqs.

(Emphasis added).

Section 20-3-210, MCA, briefly describes the proce;:ure by

which the county superintendent conducts a hearing do novor, That

section provides in pertinent part:

(3) The county superintendent shall hear the appeal and

take testimony in order to determine the facts rela,ted to

the controversy and may administer oaths to the witnesses

that testify at the hearing. The county superintendent

shall prepare a written transcript of the hearing

proceedings. The decision on the matter of the

controversy that is made by the county superintendent

must be based uoon thucts established at the hearing.

Section 20-3-210(3), MCA. (Emphasis added.) Also, 5 2-4-703, MCA,

8
provides that "the court may order that the additional evidence be

taken before the agency upon conditions determined by the court."

In an Opinion of the Attorney General discussing whether a

hearing before a county superintendent is an original proceeding

with de - - nova consideration, the Attorney General stated that:

The term "hearing" when used with reference to a

proceeding is an equity term synonymous with "trial," and

includes the reception of evidence and arguments thereon

for the sake of deciding correctly thereon. Grant v.

Michaels [(1933)], 94 Mont. 452, 461, 23 P.2d 266.

Montana law thus has specified a de nova type proceeding

upon appeal to the county superintendent, and not merely

a review of a decision of a school board. An analogous

situation is an appeal from justice court to district

court. Although that proceeding is referred to as an

appeal, it is a trial de nova and original proceeding.

The decision rendered by the school board is not voided

by full consideration of the controversy by the county

superintendent, but the board's decision is taken into

consideration alone with facts, documents and testimony

presented at the hearina.

35 Op. Att'y. Gen. No. 42 (1973). (Emphasis added.) The last

sentence of the above paragraph implicitly contemplates that

additional evidence may be presented at the county superintendent's

level of hearing and review.

While the above authorities do not precisely address the

relevance of post-termination evidence at the hearing de nova, and

while the position taken by the respondents and by the dissent has

logical appeal -- why should the school board's hiring decisions be

second guessed on the basis of budget evidence not even in

existence when the board was required to make its decisions? --

nevertheless, despite exhaustive research, I have located no

persuasive authority which would preclude the use of that sort of

evidence in a de nova proceeding, given the obligation of the

9
county superintendent to act as the initial fact finder in the

controversy.

Moreover, the cited authorities do contemplate that on a

hearing or trial de nova, that the evidence is to be presented "as

if the case had originated in that [tribunal]" and "as if no trial,

whatever, had been had in the [tribunal] below" and on the basis of

facts, documents and testimony established and presented at the &

m hearing. Under those authorities, there is nothing to

preclude the de nova finder of fact from considering relevant

evidence that may not have been available to the first tribunal,

given the requirement that the second hearing is an original, "from

scratch" proceeding.

On de - - nova review, the tribunal or hearing officer (here the

county superintendent) is entitled to hear all relevant evidence on

the controversy at issue. See § 2-4-612, MCA, which makes Rule

402, M.R.Evid., applicable to administrative agencies. Rule 402,

M.R.Evid., states that all relevant evidence is admissible, except

where specific exceptions apply.

"Relevant evidence" is simply:

. . . evidence having any tendency to make the existence of

any fact that is of consequence to the determination of

the action more probable or less probable than it would

be without the evidence . . . [and] . . . may include

evidence bearing upon the credibility of a witness or

hearsay declarant.

Rule 401, M.R.Evid. Stated another way, the test of relevancy is:

. ..whether an item of evidence will have any value, as

determined by logic and experience, in proving the

proposition for which it is offered.

Derenberger v. Lutey (1983), 207 Mont. 1, 9, 674 P.2d 485, 489.

10
Importantly, our rules of evidence do not qualify relevancy on the

basis of when the evidence came into existence in relation to the

matter at issue.

If, as in the instant case, the teacher claims that the nonrenewal of her contract for lack of funds was merely a pretext,

then proh~ibiting the use of relevant, post-termination evidence

regarding the availability of funds might deprive her of one of the

most probative pieces of evidence with which she can prove her

case.

Moreover, on balance, it makes more sense to admit such

evidence than to disallow it. If the evidence is admitted, the

school board still has the ability to prove that its decision not

to renew the teacher's contract was based solely on financial

reasons and was not merely a pretext to justify a wrongful

discharge. If, on the other hand, the evidence cannot even be

considered, then the teacher is deorived of using the one piece of

evidence that, along with other evidence, might prove that her

allegations are correct.

Quite simply, if, as here, the statutory scheme forces a

Hobson's choice, then, the hearing & novo, being, at its root, a

search for the truth, we should err on the side of allowing more

relevant information on the issue rather than less.

Accordingly, while acknowledging the well-reasoned and argued

positions of the Trustees here,

dissent, I must, nevertheless, concur.
Chief Justice J. A. Turnage:

I concur in the specially concurring opinion of Justice

Nelson.

' Chief Justice

12
I respectfully dissent from the opinion of the Court. I would

reverse the District Court.

My disagreements with the Court are two. First, the Court

does not address the District Court's threshold determination that

the Trustees waived their objection to consideration of posttermination information by the County Superintendent. I would

reverse the District Court on this issue because it is my view that

the Trustees made a sufficient and, indeed, legally correct

objection to the relevance of that information. While the record

can be read narrowly to support the District Court's determination

that no tlobjectionl' stated in such terms was made, I would read the

record before us more generously under these circumstances where

neither party raised or briefed the "objection/waiver" issue in the

District Court.

It seems to me that a fair reading of the record indicates

that the parties agreed to allow all the post-termination evidence

into the record for purposes of the County Superintendent's hearing

subject to objections in their post-hearing briefs. The Trustees

then argued in their brief that the school district was unaware of

what the reserve fund level ultimately would be at the time they

were compelled to make their termination decision; in essence, I

read that to be an objection to the post-termination evidence on

relevance grounds. Certainly it appears that the parties so

understood matters to and through the subsequent proceedings in the

District Court during which Phillips did not raise an issue with

regard to any waiver by the Trustees. For these reasons, I would

13
reverse the District Court's determination that the Trustees failed

to object and thereby waived their right to object to use of the

post-termination evidence.

Second, the Court's total lack of discussion of the

significant issue before us for the first time in this case--

namely, whether such post-termination evidence can be used by a

county superintendent in reviewing a termination decision made by

school district trustees--is troubling. While that discussion is

ably provided in Justice Nelson's concurrence, the formal Court

opinion is devoid of legal analysis of the issue.

On the merits of that critical issue--whether evidence not in

existence at the time of the Trustees' decision can be used in

reviewing that decision--I also disagree with the Court. The Court

correctly states that hearings before a county superintendent of

the kind at issue here are de nova hearings. The Court then

proceeds to a conclusion that, because the hearing is de nova, any

relevant issues of law or fact before the County Superintendent

could be reviewed as if the Trustees' decision had never taken

place. I agree with that conclusion as well. The crux of the

issue, though, is precisely that raised by the Trustees--is

evidence regarding the financial circumstances of the school

district which did not exist at the time of the Trustees' decision

"relevant" in reviewing that decision? The Court seems to conclude

that it is, without specifically so stating and without discussion

or citation to authority. I disagree.

It is my view that post-termination evidence--that is,

14
evidence which did not exist at the time a termination decision was

statutorily required--is not relevant and, therefore, cannot be

used by a county superintendent in reviewing a termination

decision. While a county superintendent's hearing is de nova under

our interpretations of 5 20-3-210, MCA, that conclusion does not

mandate or even suggest a conclusion that l'facts" which did not

exist at the time of the decision are relevant. The Trustees must

act within statutory time frames and they must act based on

information available at that point in time. To suggest that a

decision made on the only information available properly can be

reviewed at a later time by either the county superintendent, the

state superintendent, or any court, based on an entirely different

informational and evidentiary basis is without logic and puts

school trustees in an untenable position.

Sections 20-3-210(l) and (3), MCA, provide in pertinent part:

[T]he county superintendent shall hear and decide all

matters of controversy arising in the county as a result

of decisions of the trustees of a district in the county.

. . .

The county superintendent shall hear the appeal and take

testimony in order to determine the facts related to the

controversy.

The "Controversy1 before the County Superintendent in this case was

the validity of the Trustees' decision to terminate Phillips.

Section ZO-3-210(3), MCA, authorizes the County Superintendent to

determine the "facts related to" that controversy. The related

facts, I submit, can be only those which existed at the time the

controversy came into existence, namely, the facts which existed

15
and which were available to the Trustees at the time they made

their decision. To hold that later-existing "facts" relate, and

thus are relevant, to an earlier decision, is to graft into

substantive Montana law the kind of hindsight which each of us

always hopes will not be used to judge our personal or professional

decisions. I cannot agree.

'"-..

Justice Fred J.

1..

Weber concurs in the f

16