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) 

Filed: 

Submitted on Briefs: February 3, 1994 

Decided: February 24, 1994 
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 f inning 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. ~erhi, 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 -405, 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- 

401 (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) (iii), 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 55 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.