                                             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
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                                                     Submitted on Briefs: October 6, 1988
 LL            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, S S 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 n q u r 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:
     [ P I 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
     a: adverse impact on the area to be served. No
      n7
     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 - Billings v. Billings
                                             in
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 - 7 0 4 ( 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~sionthat 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 - the proposed establishment has
                        and
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
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