                            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)


                            Submitted on Briefs:       September 2, 1993
                                            Decided:   January 28, 1994
Filed:
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.       On
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. 1 new trial or retrial ha,d i:1 an app?-l.!.iite
                    ra
     court in whi~ch .the whole :zase is gi:ne into ._._i.~ _- no -tria!~
                                                      .%s it .._._ . . . ~--
     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 - nova review, the tribunal or hearing officer (here the
        de   -
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 non-
renewal 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 post-

termination    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.




                                                                      '"-.. 1..
Justice Fred J. Weber concurs in the f




                                16
