NO. 88-220 & 88-119 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

JOHN F. RAMAGE and ANDREW E. WILSON, 

Petitioners and Appellants, 

DEPARTMENT OF REVENIJE OF THE STATE OF MONTANA, 

Respondent and Respondent. *************** 

ROSALIE WOODHALL, 

Petitioner and Appellant, 

DEPARTMENT OF REVENUE OF THE STATE OF MONTANA, 

Respondent and Respondent. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yel-lowstone, 

Honorable G. Todd Raugh, Judge presiding (88-119) 

District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

Honorable Henry Loble, Judge presiding (88-220) 

COUNSEL OF RECORD: 

For Appellants: 

Terry L. Seiffert, Billings, Montana 

(Rosalie Woodhall) 

Curtis E. Larsen, Jackson, Murdo, Grant & Larsen; 

+ Helena, Montana (John F. Ramaqe & Andrew E. Flilson) 

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Fop 3espondent: 

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- Paul Van Tricht, Helena, Montana tr, <- 1 Ll 

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LL - - Submitted on Briefs: October 6, 1988 c-> g Decided: February 3, 1989 

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Mr. Justice Wj.lliam E. Hunt, Sr., delivered the Opinion of 

the Court. 

Appellants in this consolidated action appeal from 

District Court orders upholding the denial of their 

applications for original all-alcoholic beverage licenses by 

the Department of Revenue of the State of Montana (DOR). We 

affirm. 

Appellants Ramage and Wilson and appellant Woodhall 

raise the following issue for review: 

1) Did the respective District Courts err in finding 

that substantial credible evidence supported DOR's denial of 

their applications for liquor licenses? 

Ramage and Wilson present two additional issues for our 

consideration: 

2) In the processing of an application for a liquor 

license, when must DOR' s investigation of the applicant and 

the proposed premises be completed? 

3) Does DOR have independent authority to weigh the 

evidence pertaining to public convenience and necessity when 

no protests from the public regarding the issuance of a 

liquor license are filed with the agency? 

On March 14, 1985, John F. Ramaqe and Andrew E. Wilson 

filed an application with DOR for a Yellowstone County quota 

area liquor license. Ramase and FJllson proposed to use the 

license for a bar called The Hanger that they planned to 

construct on the 8400 block of Grand Avenue, a little more 

than 5 miles outside the city limits of Billings. In April, 

1985, in response to DOR's request for evidence in support of 

public convenience and necessity, Ramage and Wilson submitted 

petitions signed by approximately 100 Billings area 

residents. The petitioners asserted their belief that the 
public need called for a new cocktail lounge and dance cluh 

at the proposed location of The Hanger. 

Thereafter, DOR published notice of the application in 

the Billings Gazette. The notice, among other things, 

invited interested persons to file written protests against. 

the issuance of the license. No protests were filed with 

DOR. 

Ramage and Wilson proceeded with the remodeling of the 

proposed premises. Refore the work was completed, however, 

fire destroyed the structure. The cause of the fire was 

unknown. After the fire, Ramaqe and Wilson commenced 

reconstruction of the building. 

Meanwhile, in July, 1985, DOR received two more 

applications for Yellowstone County liquor licenses for 

establishments to be located on the 8400 block of Grand 

Avenue. One application was from appellant Rosalie Woodhall. 

Woodhall desired the license for the operation of a proposed 

bar called R & R Store and Lounge. 

On October 18, 1985, the city of Billings annexed the 

area surrounding the proposed taverns. The annexation 

resulted in the incorporation of the sites of the proposed 

bars into the Billings city limits and the city liquor 

license quota area. 

Prior to the annexation, on October 1, 1985, DOR's 

TJicense Bureau Chief issued notices to all three applicants, 

informing them that their applications were denied because 

issuance of liquor licenses for their proposed premises was 

not justified by public convenience and necessity. Each 

notice stated: 

The location of your proposed premises is in close 

proximity to three existing establishments licensed 

for the sale and service of all alcoholic beverages 

for consumpt.ion on the premises. The service area 
surrounding the proposed premises for licensing is 

sparsely populated and the demand for all-beverages 

sale and consumption does not warrant the issuance 

of additional all-beverages licenses at this 

time . 

All three applicants requested a hearing on the 

decision. After the hearings, the hearing examiner issued 

proposed findings of fact, conclusions of law and orders, 

denying all three applications. Appellant Woodhall and 

appellants Ramage and Wilson filed exceptions to the proposed 

orders. Oral arguments were held before the Director of DOR. 

In the fall of 1986, the Director issued the final 

department decisions, modifving and adopting the hearing 

examiner's proposed orders. The Director denied the 

applications because the proposed bars were not justified by 

public convenience and necessity and the proposed premises 

were inside the Billings quota area which was full. 

Ramage and Wilson filed a petition for judicial review 

with the First Judicial District Court, Lewis and Clark 

County. The District Court denied the petition and affirmed 

DOR's final decision. 

Woodhall filed a petition for judicial review with the 

Thirteenth Judicial District Court, Yellowstone County. On 

December 12, 1986, the District Court remanded the petition 

for a redetermination of the public convenience and necessity 

issue. On April 13, 1987, the hearing examiner entered 

supplemental findings of fact, conclusions of law and 

proposed order. The hearing examiner concluded that 

Woodhall's proposed R & R Store and Lounge failed to meet the 

statutory requirements for public convenience and necessity. 

Woodhall filed exceptions to the proposed order but did 

not request oral argument. On July 13, 1987, the Director 

rejected Woodhall's exceptions and adopted the hearing 

examiner's supplemental findings, conclusions and order. 
Woodhall again submitted the case to the Yellowstone 

County District Court. The District Court affirmed the 

Department's final decision. 

Woodhall filed an appeal of the District Court order, as 

did Ramage and Wilson. Upon motion by DOR, the appeals were 

consolidated into one action. 

Both District Courts upheld DOR's denial of the 

appellants' liquor license applications on the ground that 

the issuance of such licenses would not be iustified by 

public convenience and necessity. Appellants argue that 

their respective District Courts erred in finding that DOR's 

denial was supported by substantial credible evidence. 

The Montana legislature has delegated the administration 

of the Montana Alcoholic Beverage Code, SS 16-1-101 through 

16-1-411, MCA, to DOR. Section 16-1-301, MCA. DOR's powers 

include the ability to issue liquor 1-icenses. Section 

16-1-302 (8), MCA. DOR may issue a license to any person it 

approves as fit and proper to sell alcoholic beverages, as 

long as the number of licences do not exceed quota 

limitations. Section 16-4-201, MCA. In addition, DOR must 

find that the issuance of such license is justified by public 

convenience and necessity. Section 16-4-203, MCA. 

Public convenience and necessity is not defined in the 

statute books. Nor can a precise definition of the phrase be 

found in agency regulations. This Court has acknowledged the 

diffic~ilties inherent in defining the term. In Baker Sales 

Barn, Inc. v. Montana Livestock Commission (1962), 140 Mont. 

1, 12, 367 P.2d 775, 781, we recognized that whether an 

application is justified by public convenience and necessitv 

depends on the facts of each case. Because the determination 

of public convenience and necessity involves such a 

fact-intensive nqur it is not necessary that DOR adopt 

rigid rules defining the term. " [Tlhe choice made between 
proceeding by general rule or by individual, - ad - hoc 

litigation is one that lies primarily in the informed 

discretion of the administrative agency." NLRB v. Bell 

Aerospace Co. (1974), 416 U.S. 267, 293, 94 S.Ct. 1757, 1771, 

40 L.Ed.2d 134, 153 (quoting SEC v. Chenery Corp. (1947), 332 

U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995, 2002). 

DOR1s use of the adjudicative process to determine whether 

applications for liquor licenses are warranted by public 

convenience and necessity is not, as Ramage and Wilson argue, 

an invalid exercise of rulemaking authority. 

Ramage and Wilson also argue that DOR is left completely 

unguided by its failure to adopt rules precisely defining 

public convenience and necessity. This is not so. In 

previous administrative decisions, DOR established standards 

for use in public convenience and necessity determinations. 

In the VFW Case (1986), DOR No. 85-P-011, 10, the Director 

delineated these guidelines when he quoted favorably from a 

prior proposed order: 

[PI ublic convenience and necessity are advanced 

where the issuance of the license will materially 

promote the public's ability to engage in the 

licensed activity. This determination involves an 

evaluation of a variety of criteria, includinq 

inter alia the business abilities and character of 

the applicant, the demand for services in the area 

to be served, the impact on existing purveyors, and 

an:7 adverse impact on the area to be served. No 

single factor is a necessary or sufficient 

indicator of public convenience and necessity . . . 

Because DOR has established criteria to guide its 

determinations of public convenience and necessity, we need 

not fear arbitrary decisions subject only to the whim of the 

agency. 

The District Courts did not err in concluding that the 

findings of fact made by the hearing examiner and adopted by 

the Director were supported by substantial credible evidence. 
At both hearings, DOR submitted evidence through it-s 

investigators Willems and St. John. The investigators' 

testimony indicated that the proposed sites were located in 

rural, sparsely populated regions. Further testimony and 

documentary evidence established that in October, 1985, three 

bars already served the area surrounding the sites of 

appellants' proposed premises. In addition, the records 

showed that since 1980 at least four bars located in the same 

area as the appellants' establ-ishments that had been 

originally licensed under the Yellowstone County quota area 

were later annexed into the city quota area. After the 

annexation, the licenses of these four bars were transferred 

to more populous areas of the city. 

Judical review of an administrative agency's factual 

findings is quite narrow. A court reviewing an agency action 

may not substitute its judgment for that of the agency as to 

the weight of the evidence on questions of fact. Section 

2-4-704(2), MCA. Findings of fact will be upheld unless 

clearly erroneous. Facts supported by subtantial credible 

evidence in the record are not clearly erroneous. Section 

2-4-704 (2) (e) , MCA, construed - in Billings v. Billings 

Firefighters Local No. 521 (1982), 200 Mont. 421, 431, 651 

P.2d. 627, 632. The testimony and documents introduced through 

inspectors Willems and St. John constitute substantial 

credible evidence that supports DOR's findings of fact. 

Whether the substantial credible evidence established by 

DOR demonstrates that the issuance of liquor licenses to the 

appellants was not justified by public convenience and 

necessity is a question of law. Judicial review of legal 

questions is much broader than judicial review of factual 

issues. We will not hestitate to overturn an agency's legal 

conclusion that is characterized by an abuse of discretion. 

Section 2-4-704 (2) (f) , MCA. 
The records demonstrate a sparse population, the 

existence of other bars in the immediate area and a history 

of license transfers from outlying regions to the inner city. 

These facts indicate a lack of public demand for additional 

taverns in the area. Without a showing of public demand, 

public convenience and necessity cannot be justified. DORIS 

concli~sion that issuance of liquor licenses to the appellants 

was not warranted by public convenience and necessity was not. 

therefore an abuse of discretion. The District Courts did 

not err in upholding the agency's decision to deny the 

applications. 

Ramage and Wilson contend that DOR abused its discretion 

and exceeded its statutory authority by failing to make an 

investigation and determination of their qualifications 

within 30 days of receipt of their completed application. 

They argue that DOR therefore is precluded from denying their 

application. 

Montana law requires DOR to thoroughly investigate a 

liquor license applicant as well as the premises of the 

proposed bar. Section 16-4-402(2), MCA, provides: 

Upon receipt of a completed application for a 

license under this code, accompanied by the 

necessary license fee or letter of credit as 

provided in 16-4-501 (7) (f) , the department shall 

within 30 days make a thorough investigation of all 

matters pertaining thereto and shall determine 

whether such applicant is qualified to receive a 

license and his premises are suitable for the 

carrying on of the business and whether the 

requirements of this code and the rules promulgated 

by the department are met and complied with. 

Ramage and Wilson argue that DOR failed to comply with S 

16-4-402(2), MCA, because it failed to conduct a final 

investigation within 30 days after the paperwork for their 

application had been submitted. We do not agree. 

Section 16-4-402 (2) , MCA, requires DOR to determine 
both that the applicant is qualified to receive a 

license and that the premises are suitable for carrying on 

the business of selling alcohol. In addition, agency 

requlations mandate that, before a determination of 

suitability can be made, a health and safety inspection 0.F 

the proposed establishment must be conducted. Section 

42.12.122, ARM. Such an inspection cannot take place before 

construction of the building is completed. Therefore, the 

30-day investigative period required by S 16-4-402(2), MCA, 

does not begin to run until the applicant has submitted all 

the required paperwork - and the proposed establishment has 

been constructed. 

In the present case, Ramage and Wilson submitted the 

paperwork required for application in April, 1985. However, 

as of October 1, 1985, the date upon which the application 

was denied, the building proposed to house The Hanger had not 

been completed. Hence, DOR did not abuse its discretion by 

failing to issue or deny the application 30 days after the 

paperwork had been submitted because the proposed 

establishment had not been constructed by that time. 

Ramage and Wilson next argue that once they submitted 

evidence in support of a showing of public convenience and 

necessity and no public protests were received, DOR was 

required to automatically approve their application. They 

maintain that DOR has no independent authority to weigh the 

evidence pertaining to public convenience and necessity when 

no protests from the public regardinq the issuance of a 

license are filed with the department. 

This argument is totally without merit. As noted 

previously, the legislature has delegated to DOR the power to 

issue liquor licenses. Section 16-1-302 (8), MCA. Before a 

License may be issued, DOR must determine that its issuance 

is justified by public convenience and necessity. Section 
16-4-203, MCA. In order to make this determination, DOR must 

independently weigh the evidence submitted by the applicants. 

The lack of public protest does not extinguish this duty. 

Ramage and Wilson also argue that the time for 

determining the quota area for a liquor license application 

is the date the application is submitted, not the date the 

application is approved or denied. Because we hold that the 

District Courts did not err in upholding DOR's decisions to 

deny the applications on the basis of public convenience and 

necessity, we need not examine this issue. 

We affirm the District Courts. 

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Justices /