text:
    DENNIS and DARLENE LEAHY, Petitioners and Appellants, v. DEPARTMENT OF REVENUE, STATE OF MONTANA, and the STATE TAX APPEAL BOARD, Respondents and Respondents.
    No. 93-599.
    Submitted on Briefs May 11, 1994.
    Decided August 4, 1994.
    51 St.Rep. 665
    266 Mont. 94.
    879 P.2d 653.

      For Appellants: Thomas C. Morrison, Helena.
    For Respondents: Paul Van Tricht, Tax Counsel, Montana Department of Revenue, Helena.
   JUSTICE NELSON

delivered the Opinion of the Court.

This is an appeal from a First Judicial District Court, Lewis and Clark County, petition for judicial review of a State Tax Appeal Board (STAB) hearing, concluding that the Petitioners’ (Leahys’) horse training operation was not run for profit. We affirm.

The following are issues on appeal:

1. Did the District Court err in failing to open the record and admit additional evidence?

2. Did the District Court err in failing to take judicial notice of various evidentiary “facts”?

3. Did the District Court err in affirming the STAB’s conclusion that the Leahys’ operation was not an activity engaged in for profit?

BACKGROUND

The Leahys live in Livingston, Montana, where Darlene has run a horse training operation. Dennis is an airline pilot for United Airlines. The Leahys were audited for tax years 1983 through 1987, and the Department of Revenue (DOR) determined that the horse training operation was not an activity engaged in for profit and therefore, the DOR disallowed certain business expenses that Leahys had claimed.

The DOR determination was appealed and a DOR hearing examiner conducted a hearing on June 29, 1989. The hearing examiner affirmed the DOR’s assessment in his order, dated November 17, 1989. The parties then stipulated to waive the formal hearing and proceeded directly to the STAB. Ahearing before the STAB was held on July 24, 1991, and the STAB issued its Findings of Fact, Conclusions of Law, Order and Opportunity for Judicial Review on October 29,1991, affirming the DOR’s decision. The Leahys were represented at the STAB hearing by two nonlawyer CPAs but neither of the Leahys appeared or testified at the hearing. The Leahys filed their petition for judicial review of the STAB’s order before the First Judicial District Court on December 26,1991. The District Court filed its Order on Petition for Judicial Review on September 1, 1993, affirming the decision of the STAB. This appeal followed. Additional facts will be presented as necessary in the body of the opinion.

STANDARD OF REVIEW

When reviewing an administrative agency’s findings of fact, this Court will defer to the agency’s findings unless they are clearly erroneous. Findings of fact are clearly erroneous if they are not supported by substantial credible evidence. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601. Our standard for reviewing legal conclusions of an agency or a district court is simply to determine whether they are correct. Steer, 803 P.2d at 603.

Westmoreland Resources v. Department of Revenue (1994), 263 Mont. 303, 310-311, 868 P.2d 592, 596-597. Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285, expanded the definition of “clearly erroneous” discussed in Steer, and in doing so, developed a three-part test to determine if a finding was clearly erroneous. DeSaye, 820 P.2d at 1287. The first prong of the test, whether the findings are supported by substantial credible evidence, is generally dispositive of whether a finding is clearly erroneous.

1. ADMISSION OF ADDITIONAL EVIDENCE

Did the District Court err in failing to open the record and admit additional evidence?

Leahys contend that they were misinformed about the reality of proceedings before the STAB and therefore, evidence which was vital to their case was excluded. They state that their nonlawyer representatives were not equipped to handle the objections made by the DOR to the evidence they proposed to be admitted. The Leahys claim these objections were sustained by the STAB and they were unfairly prevented from presenting their case. The DOR asserts that the Leahys were fully aware of the factual and legal elements necessary to prove their case and the Leahys should not be heard to complain. Moreover, the DOR states that the STAB admitted all the Leahys’ testimony and evidence and the petitioners were represented by competent tax professionals.

Section 15-2-303(4), MCA (1991), now numbered § 15-2-303(5), MCA (1993), provides:

(4) Notwithstanding the provisions of 2-4-704(1), the court may, for good cause shown, permit additional evidence to be introduced.

We discussed this subsection in O’Neill v. Department of Revenue (1987), 227 Mont. 226, 231, 739 P.2d 456, 459, and stated:

Under Section 15-2-303(4), MCA, the court reviewing a STAB decision may, on its own initiative or upon motion of a party, find good cause and allow additional evidence to be introduced before the court....
We find that the showing of good cause under Section 15-2-303(4), is permissive, not mandatory. Any legally sufficient reason meets the good cause requirement of Section 15-2-303(4), MCA, and such sufficiency lies within the discretion of the reviewing court. (Citations omitted.)

In the instant case, the District Court, in its order on Leahys’ motion to add evidence, stated that “the primary reason asserted for presenting additional evidence is that Petitioners were not represented by counsel at the administrative hearing before STAB, and that this reason does not constitute good cause within the meaning of § 15-2-303(4), MCA.” Whether there is good cause to allow additional evidence to be introduced lies within the discretion of the reviewing court. O’Neill, 739 P.2d at 459. In this case, the District Court concluded there was not good cause to open the record to additional evidence. We agree.

The Findings of Fact, Interpretations of Law, Opinion and Order of the Department of Revenue Hearing Examiner, dated November 17, 1989, sets forth all issues which would be considered during the hearing before the STAB. Moreover, the Leahys had over eight months to prepare for the hearing before the STAB. The Leahys chose as their representatives two CPAs who were well-qualified and had a complete grasp of the issues which would be considered by the STAB during the hearing; Leahys could have hired counsel to represent them, had they chosen to do so. The Leahys had every opportunity to adequately prepare for the hearing and present their case before the STAB.

Although the Leahys contend tliat evidence they attempted to present during the STAB hearing was not admitted, a review of the transcript shows that the evidence was admitted, albeit with objection. There is nothing in the record to indicate that all evidence submitted to the STAB during the hearing was not considered by the STAB in its deliberations. Again, the Leahys were given every opportunity to fully present their case.

The real problem at the hearing before the STAB was not with the admission of evidence but with the failure of the Leahys to appear and testify before the Board. Darlene was not available to provide testimony necessary to the Leahys’ case. The District Court stated that the STAB was “clearly influenced by the fact that Petitioners failed to appear to testify in person and that Petitioners’ representatives were not acquainted with Petitioners during the tax years in question.” The District Court quoted the STAB:

[f] acts and circumstances must indicate that an intent for profit must exist. Mrs. Leahy’s credibility, motivation and sincerity are key matters in this determination. Yet she did not make herself available for questioning by this Board or by the Department of Revenue. Significantly, her absence prevented the Department of Revenue from corroborating details, seeking relevant information exclusively in the taxpayer’s possession (memory, thoughts, experiences), or from discerning intent and credibility. All evidence and testimony regarding her intent is therefore indirect and/or hearsay. (Emphasis in original.)

The Leahys, themselves, failed to put forth the crucial evidence in their case — Darlene Leahy’s testimony.

It is not the obligation of the administrative agency or of the District Court to second-guess litigants’ decisions in their preparation for and presentation of their case before the agency. Furthermore, litigants are not entitled to reopen their case on judicial review simply because, on 20/20 hindsight, they might have benefited from better preparation, different representation or an alternate theory or approach from that presented at the administrative hearing. The administrative hearing is not simply a “dry-run” for retrial in District Court on judicial review with more, better or different evidence.

The District Court determined there was not good cause to open the record and allow additional evidence under § 15-2-303(5), MCA (1993). In doing so, the District Court properly exercised its discretion. O’Neill, 739 P.2d at 459. We hold that the District Court did not err in denying the Leahys’ motion to present additional evidence in support of their petition for judicial review.

2. JUDICIAL NOTICE

Did the District Court err in failing to take judicial notice of various evidentiary “facts”?

The Leahys contend that the District Court should have judicially noticed a number of “commonly known facts” during the proceedings. The DOR counters that the District Court properly refused to take judicial notice of these alleged facts because they are “subject to reasonable dispute.” We agree with the DOR.

The following are the alleged facts of which Leahys requested the District Court to take judicial notice:

The Court may take judicial notice that STAB’s procedural rules are judicial in nature, even though informal and that STAB’s procedural rules allow taxpayers to be formally represented at its hearing by persons who are not qualified to practice law, by persons who are not tested regarding their ability to understand the judicial review process and by persons who may not understand the intricacies of the judicial review process.
This Court may take judicial notice that the Montana citizens are protected by the Montana Code and the Montana Constitution against persons who purport to practice law but are not qualified to do so.
As incorporated by the STAB opinion, the MDOR auditor did not believe the petitioner’s 1987 medical injuries were significant, because she had not claimed any medical expense deductions and had no checks to show that she had sustained any significant medical expenses. Nevertheless, this Court can take judicial notice that most major corporations, such as the petitioner’s husband’s employer, United Air Lines, cover their employees and their families with medical insurance....
The Court [may] take judicial notice that the profitability of horse racing in the Helena area, in recent years, has been fragile at best and it was for this reason that the petitioner had become discouraged and fearful that her hard work might not become adequately rewarded.
STAB misperceived the petitioner’s husband’s role in helping her establish her horse business. [STAB Op. p.15] The petitioner’s claimed deductions for interest expense indirectly explain the source of capital she was using to establish her business and this Court may take judicial notice that new business usually requires initial start-up capital; whether sourced by spouse’s income or a bank loan.
As stated in petitioners’ MEMORANDUM (OPENING) BRIEF, under I.R.C. § 183, horse breeders, horse racers, horse showers, and horse trainers are presumed to be for profit, if they have sustained a profit in any 2 out of 7 consecutive years. Petitioner started her horse training business in 1983. She was audited by the I.R.S. in her sixth and seventh year of business. Although fortuitous circumstances intervened to prevent Mrs. Leahy’s horse training business from becoming profitable, the I.R.S. did not disallow her claimed losses, even though making other changes to her return for 1988 and 1989. Even without supplementing the record, this Court may take judicial notice that a conscientious IRS revenue [agent] would not have likely ignored raising a substantial hobby loss issue, while scrutinizing a taxpayer’s return and raising other less significant adjustments.

In order for a fact to be judicially noticed, it must be “one not subj ect to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned.” Rule 201(b), M.R.Evid.

The District Court, in its Order on Petition for Judicial Review, addressed the issue of judicial notice of facts:

This Court, in an order dated January 27,1993, denied Petitioners’ motion to introduce new evidence into the record. In their briefs supporting the petition for judicial review, Petitioners attempt to bring in much of this same evidence by asking the Court to take judicial notice of various facts....
The Court declines to take judicial notice of the various facts asserted by Petitioners, as they are not facts that are generally known or capable of ready determination in any accurate sources, as required by the rules of evidence.

We agree with the District Court that the alleged facts sought to be judicially noticed are not facts which are “generally known” nor are they “capable of accurate and ready determination.” Moreover, many of the facts are argumentative and/or require additional information to verify their truth. O’Neill, 739 P.2d at 460. For the most part, the alleged “facts” offered by Leahys amount to nothing more than their own conclusory statements on the evidence and the law. These are simply not the type of “facts” which can be judicially noticed. As we stated in Holtz v. Babcock (1964), 143 Mont. 341, 373, 390 P.2d 801, 802:

[N] either this [C]ourt nor the district courts should be required to assume the burden of informing themselves under the doctrine of judicial notice of facts not within the actual knowledge of the court. We think in this area there is a difference between judicial knowledge and actual knowledge and that the burden resting upon a litigant to present his proof cannot be shifted to the court under the doctrine of judicial notice.

Therefore, we hold that the District Court did not err when it refused to take judicial notice of the alleged facts offered by the Leahys.

3. DISALLOWANCE OF CLAIMED LOSSES

Did the District Court err in affirming the STAB’s conclusion that the Leahys’ operation was not an activity engaged in for profit?

The Leahys argue that the STAB erred in concluding that their horse training operation was not an activity engaged in for profit and that the District Court erred in affirming the STAB. The DOR contends that the District Court correctly affirmed the STAB determination that the horse training operation was not engaged in for profit.

As stated above, the standard of review of an agency’s or District Court’s findings of fact is whether they are clearly erroneous; conclusions of law are reviewed to determine whether the law was applied correctly. Westmoreland, 868 P.2d at 596-597. Moreover, “[a] rebuttable presumption exists in favor of the agency decision.” Hoven, Vervick & Amrine v. Montana Com’r of Labor (1989), 237 Mont. 525, 530, 774 P.2d 995, 998.

Initially, we determine the correct law to be applied to determine whether the Leahys’ horse training operation is an activity engaged in for profit.

The determination of a taxpayer’s Montana income tax liability is primarily based upon the Federal Internal Revenue Code....
Montana has adopted the Federal Internal Revenue Code as the guide to be used to determine matters such as income and expense for computation of Montana income tax.

Magnuson v. Montana State Board of Equalization (1973), 162 Mont. 393, 395, 513 P.2d 1, 2.

Whether the Leahys’ horse training operation was engaged in for profit is determined by application of Federal Internal Revenue Code (I.R.C.) § 183 and Treas. Reg. § 1.183-2. Section 183,1.R.C., provides:

(a) GENERAL RULE. — In the case of an activity engaged in by an individual or an S corporation, if such activity is not engaged in for profit, no deduction attributable to such- activity shall be allowed under this chapter except as provided in this section.
(b) DEDUCTIONS ALLOWABLE. — In the case of an activity not engaged in for profit to which subsection (a) applies, there shall be allowed —
(1) the deductions which would be allowable under this chapter for the taxable year without regard to whether or not such activity is engaged in for profit, and
(2) a deduction equal to the amount of the deductions which would be allowable under this chapter for the taxable year only if such activity were engaged in for profit, but only to the extent that the gross income derived from such activity for the taxable year exceeds that deductions allowable by reason of paragraph (1).
(c) ACTIVITY NOT ENGAGED IN FOR PROFIT DEFINED. — For purposes of this section, the term “activity not engaged in for profit” means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or paragraph (2) of section 212.
(d) PRESUMPTION — If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit. In the case of an activity which consists in major part of the breeding, training, showing, or racing of horses, the preceding sentence shall be applied by substituting “2” for “3” and “7” for “5”.

“The issue of whether a taxpayer engages in an activity with the requisite intention of making a profit is one of fact to be resolved on the basis of all the surrounding facts and circumstances of the case and the burden of proving the requisite intention is on the petitioners.” Golanty v. Commissioner (1979), 72 T.C. 411, 426, 1979 WL. 3683. The surrounding facts and circumstances are evaluated using a nine element test developed primarily through case law and listed in Treas. Reg. 1.183-2(b). These nine elements include:

(1) Manner in which the taxpayer carries on the activity.
(2) The expertise of the taxpayer or his advisors.
(3) The time and effort expended by the taxpayer in carrying on the activity.
(4) Expectation that assets used in activity may appreciate in value.
(5) The success of the taxpayer in carrying on other similar or dissimilar activities.
(6) The taxpayer’s history of income or losses with respect to the activity.
(7) The amount of occasional profits, if any, which are earned.
(8) The financial status of the taxpayer.
(9) Elements of personal pleasure or recreation.

Treas. Reg. 1.183-2(b). “Although no one factor [element] is conclusive, a record of substantial losses over many years and the unlikelihood of achieving a profitable operation are important factors bearing on the taxpayer’s true intention.” A.E. and Brenda L. Boddy v. Commissioner (1984), 47 T.C. Memo 1381, 1386, 1984 WL. 15478.

On judicial review, the District Court concluded that the STAB opinion properly addressed and considered the nine element test in determining that Leahys’ horse training operation was not engaged in for profit and that the STAB’s findings of fact were not clearly erroneous and its conclusions of law were correct. We agree.

The first element which was considered by the STAB was the manner in which the taxpayers carried on the horse training activity. The STAB concluded that the Leahys did not keep adequate records and carry on the activity in a business-like manner. This assessment is supported by the record.

Darlene Leahy stated that before she moved to Montana, she worked part-time preparing income tax returns. However, her own records of the horse training operation were inadequate to verify many of her expenditures. The monthly accounts were not supported by documentary evidence such as cancelled checks or bills; many checks did not identify the purpose for the payment. Many of the checks for the operation were paid from Darlene’s personal checking account, even though she had a “business” account. In short, the records maintained by Darlene were not of the quality one would expect from a person who had professional experience preparing income tax returns.

Treas. Reg. 1.274-5, requires maintaining adequate records and provides:

(c) Rules for substantiation. (1) In general. A taxpayer must substantiate each element of an expenditure (described in paragraph (b) of this section) by adequate records or by sufficient evidence corroborating his own statement except as otherwise provided in this section.
(2) Substantiation by adequate records, (i) In general. To meet the ‘adequate records’ requirements of section 274(d), a taxpayer shall maintain an account book, diary, statement of expense or similar record (as provided in subdivision (ii) of this subparagraph) and documentary evidence (as provided in subdivision (iii) of this subparagraph) which, in combination, are sufficient to establish each element of an expenditure specified in paragraph (b) of this section.
(iii) Documentary evidence. Documentary evidence, such as receipts, paid bills, or similar evidence sufficient to support an expenditure shall be required for ...
(b) Any other expenditure of $25 or more...A document may be indicative of only one (or part of one) element of an expenditure. Thus, a cancelled check, together with a bill from the payee, ordinarily would establish the element of cost. In contrast, a cancelled check drawn payable to a named payee would not by itself support a business expenditure without other evidence showing that the check was used for a certain business purpose

The records maintained by Darlene regarding the horse training operation did not meet the standards set by Treas. Reg. 1.274-5.

Moreover, Darlene listed her occupation as “homemaker” during the years 1983 through 1985, instead of the occupation of horse trainer. She did not list any occupation during the years of 1986 and 1987 although she was still engaged in the horse training activity, albeit to a limited extent.

Additionally, the STAB opinion states that the following information was gleaned from the Leahys’ tax records:

The enterprise in question during taxable years 1983-87 was identified as “Leahy Junction” on the 1983, 1985 and 1986 tax returns. It was not indicated for 1984 and was identified as “Leahy Junction Stables” for 1987. The “principal business or profession” of the concern was identified as “sales and service” on the 1983 and 1985 tax returns, was not identified for 1984, and identified as “training service” for 1986 and “services training” for 1987. No employer identification number or proprietor social security number was listed for tax years 1983, 1984 or 1987. Dennis Leahy’s social security number was shown for the business for taxable years 1985 and 1986. No name of the proprietor of the business was shown on the Leahys’ 1983, 1984, or 1987 returns. For 1985 and 1986, the proprietor was stated to be Dennis Leahy.

Thus, Leahys’ tax returns demonstrate that the horse training activity was not treated consistently in a businesslike manner. The STAB and the District Court correctly determined that the Leahys did not satisfy the first element of the nine element test.

The second element considered by the STAB was the expertise of the taxpayer or her advisors. As part of her proof that she was an expert in the field of horse training, Darlene stated that she was licensed as a horse trainer in six states. Although Leahys’ representatives at the STAB hearing stated that they had documentary evidence of her expertise in the form of copies of licenses from various states, no evidence of such licenses was offered or admitted for the STAB’s review. Therefore, the STAB had no documentary evidence available to it to verify her claim and, accordingly, it correctly determined that this element was not satisfied.

The third element of the test reviewed by the STAB was the time and effort expended by the taxpayer in carrying on the horse training activity. Here, although the STAB determined that Darlene put a considerable amount of her time into training horses, it noted that she was not otherwise employed outside the home and that most people will, in any event, spend time and effort on a pursuit that they enjoy. Work with horses is an activity strongly identified as a recreational activity; Montana has a considerable number of “hobby farms” which facilitate the owner’s enjoyment of horses. Accordingly, the STAB concluded that the amount of time Darlene spent on horse training was of questionable merit in the case. We agree, noting that this is one instance in which testimony by Darlene about the element under consideration would have been of considerable assistance to both the petitioners and the STAB. Darlene, however, failed to testify at the hearing.

The fourth element the STAB considered had to do with the expectation that assets used in the activity may appreciate in value. The two assets discussed during the hearing were the property upon which Darlene conducted the horse training operation and a stallion she owned which she claimed to have purchased for $2,800. Darlene stated during the course of the audit, and the STAB noted, that the property upon which the horse training activity was conducted had declined in value from the time it was purchased in 1981.

Darlene produced a letter during the DOR audit stating that an equine appraiser found the fair market value of the stallion to be $20,000. However, there was no documentation as to the purchase of the stallion for $2,800. Even if the purchase price could be proven to be $2,800, the STAB correctly concluded that the appreciation of the one stallion was insufficient to offset the large annual losses from 1983 through 1987. See Boddy, 47 T.C. Memo at 1387. The Leahys did not demonstrate that the assets used in the horse training operation supported a claim that the activity was engaged in for profit.

The fifth element under consideration by the STAB evaluated the success of the taxpayer in carrying on similar or dissimilar activities. Again, although Darlene claimed she had been a successful horse trainer in six states before moving to Montana, there was no documentary evidence admitted to demonstrate that Darlene was licensed as a horse trainer in six states or that she had a successful career as a horse trainer prior to her move. Therefore, there was no concrete support for her contention that she had successfully made a profit in the horse training business in the past.

The sixth element considered by the STAB was a review of the history of income or losses with respect to the horse training activity. The Leahys’ operation lost substantial amounts of money for each of the years 1983 through 1987. In 1983, the Leahys claimed a loss of $36,746 from the horse training operation. The following were the losses for the years 1984,1985,1986, and 1987, respectively: $38,448; $40,552; $49,993; and $48,212.

The STAB noted that Darlene sustained a serious head injury in 1986 which curtailed her horse training activities in 1986 and 1987 and led her to refer clients to other trainers. However, the STAB found that her losses in 1986 and 1987 remained high, $49,993 and $48,212 respectively. Despite curtailing her horse training activities for the two years in question, there was no corresponding or discernible decrease in expenses of operation. The STAB found that the horse training operation had a “nurse cow” income from other sources which enabled it to survive, and that the operation was measurably supported by Dennis’ salary as a pilot. The STAB, therefore, properly concluded that the petitioners did not satisfy this element of the test either.

As to the seventh element of the test, the STAB considered the amount of occasional profits, if any, which were earned from the horse training operation. It found that “no profit ha[d] been shown in 1983 through 1987....” This statement is supported by the evidence and again, the STAB correctly concluded that the Leahys did not satisfy this element. See Joseph T. Tripi and Miriam V. Tripi v. Commissioner (1983), 46 T.C. Memo 1094, 1101, 1983 WL 14465.

The eighth element evaluated by the STAB was the financial status of the taxpayers. The comments to Treas. Reg. 1.183.2(8) state that:

The fact that the taxpayer does not have substantial income or capital from sources other than the activity may indicate that an activity is engaged in for profit. Substantial income from sources other than the activity (particularly if the losses from the activity generate substantial tax benefits) may indicate that the activity is not engaged in for profit especially if there are personal or recreational elements involved.

26 C.F.R. § 1.183-2(8) The STAB noted, for example, that Dennis’ salary for 1987 was over $84,000 and yet the Leahys paid no income tax. It further concluded that the horse training operation’s losses shielded Dennis’ salary from taxation. A review of the tax returns for the Leahys in the tax years at issue demonstrate that the Leahys paid no or minimal tax for the years in question even though Dennis’wages were substantial.

The STAB found that Dennis’ salary ranged from $67,000 to $87,000 during the years in question: The STAB concluded that “[h]is salary must have been used to subsidize the horse training activities since this entity couldn’t sustain itself through its own gross income.” The evidence supports the STAB’s conclusion and indicates an intent that the horse training activity was not engaged in for a profit. See Boddy, 47 T.C. Memo at 1388.

The final element involves the presence of personal or recreational motives in carrying out the activity — “[t]he presence of personal motives in carrying on of an activity may indicate that the activity is not engaged in for profit, especially where there are recreational or personal elements involved.” Horse training, breeding and racing are activities traditionally associated with recreation and personal pleasure.

The STAB noted in its opinion, however, that Darlene stated that she derived no pleasure from the horse training operation but would continue to work at it until the operation could be sold. Even if the Leahys could demonstrate there is not a personal motive or recreational aspect for their operation of the horse training activity, this fact alone does not counterbalance the failure of proof on the other elements of the test. See Golanty, 72 T.C. at 430.

The STAB’s conclusion that the horse training operation conducted by the Leahys was not an activity engaged in for profit is not clearly erroneous, and the STAB’s interpretation of the law as it applies to the instant case is correct. Moreover, the District Court correctly affirmed the STAB in its findings and conclusions.

We affirm the District Court.

JUSTICES HUNT, GRAY, TRIEWEILER and WEBER concur.


source: Caselaw Access Project

author: JUSTICE HARRISON

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. GARY ALLEN COX, Defendant and Appellant.
    No. 93-114.
    Submitted on Briefs June 24, 1994.
    Decided August 9, 1994.
    51 St.Rep. 680.
    266 Mont. 110.
    879 P.2d 662.

      For Appellant: J. Mayo Ashley^ Attorney at Law, William F. Hooks, Appellate Defender’s Office, Helena.

      For Respondent: Hon. Joseph P. Mazurek, Attorney General, John P. Connor, Jr., Assistant Attorney General, Pamela P. Collins, Assistant Attorney General, Helena; and Christopher Miller, Powell County Attorney, Deer Lodge.
   JUSTICE HARRISON

delivered the Opinion of the Court.

Appellant Gary Alan Cox (Cox) appeals the Third Judicial District Court, Powell Couaty, jury verdict convicting him of two counts of kidnapping, pursuant to § 45-5-302, MCA; burglary, pursuant to § 45-6-204, MCA; and five counts of deliberate homicide pursuant to § 45-5-102(l)(b), MCA, the felony murder rule. We affirm.

The following issues are presented on appeal:

1. Did the District Court abuse its discretion when it denied Cox’s motion for an expert on prison conditions to assist with his compulsion defense?

2. Did the District Court err when it concluded that Cox was not denied due process when unmarked prison clothing was not preserved after the riot?

3. Did the District Court abuse its discretion when it denied Cox’s motion to dismiss his felony murder charges?

4. Did the District Court abuse its discretion when it admitted into evidence autopsy photographs of the five protective custody victims?

A prison riot occurred at Montana State Prison on the morning of September 22, 1991. The riot began in the Maximum Security Unit (Unit) of the prison just after the morning exercise period when a sergeant and four floor officers were returning three inmates from exercise Yard Area number 5 to their cells. The Unit is a separate building which housed sixty-eight inmates, including Cox, at the time of the riot. The Unit consisted of six housing blocks referred to by the letters A through F. Each Block consisted of sixteen cells. Exercise Yard Area number 5 was part of the interior open-air exercise area located within the confines of the Unit. At both ends of the Unit there were control cages guarded by officers who controlled “sally port” doors from the inside of these cages. (The sallyport doors are designed for added security so that each door opens independently, allowing the first door to close before the second one opens onto a Block.)

On the morning of the riot, the officer guarding the west or “main” control cage opened the sally port doors to allow the three inmates back from the exercise area onto C Block. The west control cage guard testified that as he was opening the C Block doors, he noticed that eight or nine inmates, including Cox, were running through the door from the exercise yard and entering the Unit. The inmates had gained access to this area due to the fact that the chain link fence surrounding Yard 5, one of six interior open-air exercise areas, had been “worked” by some of the inmates over a period of time in order to weaken it and eventually allow them access through it. In addition, the first sally port door which led from Yard 5 into the building had not been immediately closed before the second inside door opened onto C Block.

According to some members of the prison community, the riot was not a spontaneous decision. The fact that the chain link fence had been “worked” indicates that at least some of the inmates were alert to possible opportunities to take action — although specific plans may not have been formulated. Although Cox testified that he had not helped to “work” the fence prior to the day of the riot, he did admit to participating in a plan to “cause a little ruckus, tear some stuff up and draw attention to the conditions in Maximum Security.” He also admitted to prying open the fence on the day of the riot.

As the first inmates gained entrance into the Unit, one of the inmates propped open the electronic door, leading from the corridor to the inner door of the Unit, with a sand bucket used for cigarette butts. This enabled more inmates to enter the building. Some of the inmates attempted to enter the control cages. The two guards at these control cages, fearing for their lives, eventually exited through the escape hatches on the roof. The inmates continued their attempts to gain access to the control cages which contained the keys to the other cells. Although the control cages were protected by plexiglass shields, some of the inmates burned holes through the plexiglass of the east cage door and retrieved the cell keys inside. Later, inmates also gained access to the west cage. Eventually they were able to open all of the cell and Block doors to release the other inmates.

During the riot, the ten inmates on D Block of the Unit were particularly fearful because of their special status within the prison system. These inmates had been designated “protective custody’ status due to the prison administration’s determination that they were in need of protection from other inmates for either providing information to the prison administration on other inmates, or because the types of crimes they had committed characterized them as being at risk within the prison hierarchy. These inmates were designated “close security” classification which entailed more freedom than “maximum security” classification. Because these inmates were cooperative within the prison system and did not have to be handcuffed or restrained outside of their cells, they were assigned special supervised tasks such as cleaning the Unit and doing the laundry. They were allowed more material privileges and possessions than the Maximum Security inmates, for example, they were permitted to have canned sodas and were allowed to wear khaki pants and shirts as distinguished from the Maximum Security inmates who were forced to wear orange jumpsuits.

According to the prison warden, protective custody inmates were housed in the same building as the Maximum Security inmates because the building was equipped with security devices, and, other than that building, there was no other viable option. The warden testified that in most state prison systems there are separate facilities for these inmates, but that the Montana prison system lacked sufficient funding to accommodate such a facility.

During the course of the riot, as the inmates were overtaking C Block, five stranded floor officers took refuge in lower C Block’s shower area which consisted of a three-by-five foot cubicle. In order to further secure themselves inside this one-person shower area, they stuffed a water-soaked mattress in front of themselves and locked the door with the shower padlock. The mattress had become soaked by the automatic sprinkler system due to fires started by the inmates. Eventually, all of the cell mates on C Block were freed. The five officers had no other option than to remain in this tiny shower throughout the course of the riot in order to protect themselves.

While the five officers were taking refuge in the shower area, two protective custody inmates, also fearing for their lives, barricaded themselves in the west laundry room for protection from the rioting maximum security inmates. The two protective custody inmates did not expect to survive the riot. While barricaded inside the laundry room, one of them wrote a list, on the clothes dryer, of five names of maximum security inmates. These were the names of the inmates who were, allegedly, threats to the lives of the two protective custody inmates. Cox’s name was on that list.

As the riot continued, the prison administration attempted to decipher the situation and develop a plan of action. The warden, ultimately responsible for the decision about when to enter the Unit, alerted the Disturbance Control Team, which consisted of specially trained correctional officers. At approximately 2:00 p.m., they entered the Unit through the escape hatches on the roof since the doors to the Unit were barricaded. They came out into the west end of the Unit, and regained control of the Unit one Block at a time, beginning with C Block. After retaking Blocks C, B, and A, the captain encountered a protective custody inmate who informed him that his friends in D Block were being murdered. The captain and another officer searched D Block and found the bodies of five protective custody inmates. They also found another inmate who was still alive but whose throat had been slit. After securing D Block, the captain posted an officer at D Block to prevent tampering or destruction of evidence at the crime scene, and alerted the Criminal Investigation Bureau of the Department of Justice about the victims in D Block.

Because of the destruction done to the Unit, the inmates were moved to another area of the prison for several weeks. That afternoon, agents from the Criminal Investigation Bureau went through the Unit and collected evidence, and then notified the State Crime Lab in Missoula which, in turn, sent investigators. Autopsies were performed on the five deceased inmates, and it was determined that the causes of death were either multiple blunt force traumas to the head, ligature strangulations, incise wounds to the necks, or combinations thereof. ¡

The riot lasted approximately four hours. Other than the two officers who escaped onto the roof, the five officers locked in the one-person shower in C Block, were the only correctional officers in the Unit who witnessed the events of those four hours. Several maximum security inmates, including Cox, were eventually charged and convicted for their roles in the riot of September 22, 1991.

I

Did the District Court abuse its discretion when it denied Cox’s motion for an expert on prison conditions to assist with his compulsion defense?

Trial courts have broad discretion to determine the relevancy of evidence. We will not overturn this determination unless the District Court abused its discretion. State v. Hall (1990), 244 Mont. 161, 169, 797 P.2d 183, 188.

Section 45-2-212, MCA, states that in order to prove the defense of compulsion, the defendant must prove that the compulsion to perform the offensive conduct was caused by a threat or menace of imminent infliction of death or serious bodily harm. State v. Owens (1979), 182 Mont. 338, 347, 597 P.2d 72, 77. The defendant must also prove that his belief that death or bodily harm would be inflicted was a reasonable belief. Section 45-2-212, MCA.

Cox, in support of Ms defense of compulsion, moved to Mre an expert on prison conditions. Cox also joined an existing motion, made by another defendant, for a mob psychology expert to assist with his defense. In addition, Cox requested a separate private investigator to clarify any potential conflict among the defendants and witnesses testifying at trial. Ultimately, the District Court, in its July 14,1992 order allowed Cox’s request for a separate private investigator, but denied Cox’s motion for a prison conditions expert on the grounds, as set out in an earlier June 12,1992 order, that the defense of compulsion imposes an objective standard rather than a subjective one and, therefore, any analysis of the effect of prison conditions on Cox’s state of mind would be irrelevant to the defense of compulsion. Accordingly, since Cox had indicated that the mob psychology expert would be of no value without the other two experts, the District Court also denied Cox’s motion for that expert.

The compulsion defense merges the common law defenses of necessity, justification, compulsion, duress and “choice of two evils.” City of Missoula v. Asbury (Mont. 1994), 873 P.2d 936, 938, 51 St.Rep. 383, 384, citing State v. Ottwell (1989), 240 Mont. 376, 379, 784 P.2d 402, 404. Other state courts, such as the Wyoming Supreme Court, when considering the “reasonable fear” element of the defense theories of duress and coercion, have held that expert testimony on the effect of prison conditions on the defendant’s state of mind would be irrelevant to those defenses. Amin v. State (Wyo. 1991), 811 P.2d 255, 260. In Amin, two inmates who were charged with kidnapping and aggravated assault and battery of state prison counselors, attempted to defend themselves by using the theories of duress and coercion. Amin, 811 P.2d at 260. The Wyoming Court held that these defendants were not entitled to present a physician/psycMatrist’s conclusion that prison conditions caused them to commit certain acts in an attempt to save their lives. Amin, 811 P.2d at 259. We find tMs holding compellmg and supportive of our decision here to affirm the District Court’s denial of Cox’s motion for a prison conditions expert to testify about Cox’s subjective state of mind at the time of the riot. Accordingly, we hold that Cox’s Sixth Amendment right to present a compulsion defense was not violated by the District Court’s denial of his motions for additional experts because the testimony of such experts would be irrelevant to the compulsion defense.

Cox also contends that the testimony of the prison conditions expert would have benefitted Ms defense theory of mental disease or defect. The District Court, however, is required only to appoint one qualified psychiatrist or licensed clinical psychologist when mental disease or defect is at issue. Section 46-14-202(1), MCA. The District Court, in denying Cox’s motion, stated that a psychiatrist had already been appointed to determine Cox’s mental state, including his ability to form the requisite mental state for the crime of burglary — the underlying crime of Cox’s felony murder charges. We hold that the District Court did not abuse its discretion in denying Cox’s request to present evidence of a prison conditions expert’s testimony at trial.

II

Did the District Court err when it concluded that Cox was not denied due process when unmarked prison clothing was not preserved after the riot?

Cox contends that the District Court violated his due process rights when it failed to preserve alleged exculpatory evidence. Cox argues that, had the clothing he had worn during the riot been preserved, lack of victims’ blood on his clothing would have proven that Cox had not been involved in the struggles with the protective custody victims.

We considered this same issue in the companion case of State v. Gollehon (1993), 262 Mont. 293, 304, 864 P.2d 1257, 1264, and held that it is well settled that, although a criminal defendant has a right to obtain exculpatory evidence, police officers are not required to procure evidence on behalf of a defendant. State v. Sadowski (1991), 247 Mont. 63, 79, 805 P.2d 537, 546. In order for a defendant to be successful in a claim of per se violation of due process, that defendant must prove that the exculpatory evidence was deliberately or intentionally suppressed. Sadowski, 805 P.2d at 547. In addition, the defendant must prove that the suppressed material possessed an actual exculpatory value that was apparent before the destruction. State v. Halter (1989), 238 Mont. 408, 412, 777 P.2d 1313, 1316; quoting California v. Trombetta (1984), 467 U.S. 479, 488-89, 104 S.Ct. 2528, 2534, 81 L.Ed.2d 413, 422.

Here, there is no indication that any clothing was “apparently exculpatory” and intentionally destroyed in an effort to suppress evidence. In the aftermath of the riot, the inmates were ordered to strip in the event that any concealed weapons were in their possession. The prison administration was not yet convinced that the situation was under control. Given the circumstances, it was not unusual for clothing to be misplaced or destroyed during the chaos. The main priority was to prevent further violence. There is no evidence that any clothing was intentionally destroyed.

Finally, even if Cox could have secured his clothing and proven that there was no trace of victims’ blood on his clothing, he would not have been exculpated for the murders of the protective custody inmates since he was being charged pursuant to § 45-5-102(l)(b), MCA, the “felony-murder” rule.

Cox was charged with deliberate homicide because he was found by the jury to be legally accountable for the commission of burglary and, during that burglary, he, or another person legally accountable for that burglary, caused the death of other human beings. Section 45-5-102(l)(b), MCA. Proof that Cox actually committed the physical act that resulted in the death of any of the protective custody inmates is not required. Therefore, the lack of blood on Cox’s clothing, if indeed it could have been proven, would not have been exculpatory evidence under § 45-5-102(l)(b), MCA. As in Gollehon, we conclude that the destruction of Cox’s clothing does not constitute deliberate suppression of valuable exculpatory evidence. Accordingly, Cox was not deprived of his constitutional right to due process.

Ill

Did the District Court abuse its discretion when it denied Cox’s motion to dismiss his felony murder charges?

This Court will only disturb the District Court’s ruling on a motion to dismiss upon a determination of an abuse of discretion. State v. Hedrick (1987), 229 Mont. 145, 150, 745 P.2d 355, 358.

Cox contends that no causal connection existed between his burglary charge and the five homicides because the evidence did not indicate that he or the other maximum security inmates actually planned to kill any protective custody inmates. Intent to kill is not a prerequisite to being convicted under the felony minder rule. In fact, the purpose of the felony murder rule is to ensure that people who engage in dangerous acts likely to result in death are held responsible for any resulting deaths, whether or not the acts were planned or premeditated. State v. Nichols (1987), 225 Mont. 438, 449, 734 P.2d 170, 176. The felony murder rule creates an alternate means of holding one responsible for reckless actions likely to result in death. The only causal connection required is that the death actually occurred during the underlying felony or the flight thereafter. Section 45-5-102(l)(b), MCA. Here, the five deaths occurred during the underlying burglary offense.

Cox was charged with burglary pursuant to § 45-6-204, MCA. According to that statute, a conviction is upheld if a person “knowingly enters or remains unlawfully in an occupied structure with the purpose to commit an offense therein.” Section 45-6-204, MCA. When Cox knowingly entered and remained in Block D without permission or supervision, he was “entering and remaining unlawfully as defined in § 45-6-201, MCA, which states that “a person enters or remains unlawfully in or upon any... occupied structure, or premises when he is not licensed, invited, or otherwise privileged to do so.” Section 45-2-101(40), MCA, defines “occupied structure” as “any building ... suitable for human occupancy or night lodging of persons ....” Accordingly, the various Blocks of the prison are defined as “occupied structures.” Gollehon, 864 P.2d at 1260-61.

As for the requirement, pursuant to § 45-6-204, MCA, that the defendant possess the “purpose to commit an offense therein,” we conclude that Cox did possess such an intent. An “offense” is defined as any felony or misdemeanor. Section 45-2-101(42), MCA. Cox was charged, by information, with the offense of riot. Section 45-8-103(1), MCA, states, in relevant part, that a person commits the offense of riot when he purposely and knowingly engages in an act of violence or threat to commit an act of violence as part of an assemblage of five or more persons, which act or threat presents a clear and present danger of or results in damage to property or injury to persons.

Cox had the intent to participate in the riot from the moment he entered the Unit. He himself testified, “I thought, yea, I thought the conditions in Max were bad enough that I would participate ... and play my part in the riot... and face the consequences for it.”

Cox admitted that he made a conscious choice to enter D Block, and did so knowingly. According to his testimony, he entered with “maybe as many as twenty-five or thirty people.” These “twenty-five or thirty inmates, according to Cox, possessed “all manner of’ weapons. Cox, carrying a “stick” as a weapon, “barged” into D Block with these other rioting inmates. These actions certainly constituted an “act of violence or threat to commit an act of violence as part of an assemblage of five or more persons,” pursuant to § 45-8-103(1), MCA. The outcome was the destruction of property, injury to persons, and five deaths.

Furthermore, Cox agreed that he himself created the “fear element” on D Block which caused the protective custody inmates to arm themselves in self-defense. He also admitted that it would not have surprised him if the protective custody inmates on D Block got “messed up or beat up a little bit.”

We conclude that Cox committed the offense of burglary with intent to commit riot. Within the course of the riot, five protective custody inmates were murdered. Therefore, the requisite causal connection existed between the commission of the underlying burglary offense and the murders of the five protective custody inmates. Accordingly, we hold that the District Court did not abuse its discretion when it denied Cox’s motion to dismiss his felony murder charges.

IV

Did the District Court abuse its discretion when it admitted into evidence autopsy photographs of the five protective custody victims?

Cox contends that he was unfairly prejudiced when the State introduced twenty-one autopsy photographs, taken by the medical examiner, of the five protective custody victims. We addressed this identical issue as it related to the same set of photographs in the companion case of Gollehon, 864 P.2d at 1262-63. In that case, the argument was raised by defendant Gollehon and rejected by this Court.

When reviewing a trial court’s evidentiary ruling, we will not overturn that trial court’s determination of relevance or admissibility absent a showing of an abuse of discretion. State v. Crist (1992), 253 Mont. 442, 445, 833 P.2d 1052, 1054. When considering whether specific photographs should be admitted into evidence at trial, the trial court must weigh the probative value against the danger of unfair prejudice, and admit the evidence unless the danger of unfair prejudice substantially outweighs the probative value. Rule 403, M.R.Evid.

Cox contends that the photographs lacked probative value since they did not provide the jury with any additional information or clarify any disputes. He argues that no disputes existed as to the identities of the victims, the nature or locations of the injuries, or the causes of death, and, therefore, the photographs lacked probative value. We disagree.

Here, as in Gollehon, the State contends that the selected photographs corroborated much of the inmates’ testimony concerning Cox’s actions and the actions of other maximum security prisoners during the riot. Gollehon, 864 P.2d at 1263. We conclude that the corroborative value of the photographs is indicative of their probative value. We have previously upheld the admissibility of photographs which accurately represented the victim’s appearance at the autopsy and which were reasonably necessary to depict the multiplicity and extent of the injuries. State v. Powers (1982), 198 Mont. 289, 294, 645 P.2d 1357, 1360. We conclude that the photographs of the protective custody victims were accurate and reasonably necessary to depict the multiple wounds of the victims.

Cox also contends that the brutality depicted in the photographs unduly prejudiced the jury. We reiterate our conclusion in Gollehon, in which we cited State v. Doll (1985), 214 Mont. 390, 400, 692 P.2d 473, 478: “[w]e will not demand that a trial be sanitized to the point that important and probative evidence must be excluded.” Here, as in Gollehon, the State’s method of selecting and displaying the photographs was intentionally designed to demonstrate the injuries while being as uninflammatory as possible. The medical examiner testified that, out of the more than two-hundred photographs taken, the twenty-one photographs he selected for trial were the most instructive. The State posted these photographs ten to twelve feet from the jury. Each victim’s photograph was discussed individually, then turned away from the jury and replaced by the next photograph. After the medical examiner’s testimony, the photographs were removed and sealed by the District Court. Most importantly, the photographs were not allowed into the jury room.

We hold, as in Gollehon, that the District Court did not abuse its discretion in admitting the twenty-one autopsy photographs. The safeguards taken by the State along with the probative value of the photographs outweigh the prejudicial effect.

The judgment of the District Court is affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES HUNT, NELSON and WEBER concur.


author: JUSTICE NELSON

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. RAY LICHT, Defendant and Appellant.
    No. 93-278.
    Submitted on Briefs June 24, 1994.
    Decided August 11, 1994.
    51 St.Rep. 686.
    266 Mont. 123.
    879 P.2d 670.

      For Appellant: William Hooks, Appellate Defender, Helena.
    For Respondent: Hon. Joseph P. Mazurek, Attorney General, George Schunk, Assistant Attorney General; David Rice, Hill County Attorney.
   JUSTICE NELSON

delivered the Opinion of the Court.

The Defendant, Ray Licht, was charged by amended information with two counts of criminal sale of dangerous drugs, both felonies, in violation of § 45-9-101, MCA. After a jury trial held in the Twelfth Judicial District Court, Hill County, Licht was found guilty of both charges on December 4, 1992. Licht appeals from those convictions. We reverse in part and remand for further proceedings consistent with this opinion, and we affirm in part.

Licht raises two issues on appeal:

1. Did the District Court err in refusing to grant a mistrial or a new trial, when it was discovered (during trial that the State had failed to reveal a prior electronically monitored meeting in which the informer approached Licht?
2. Did the District Court err in denying Licht’s motion to dismiss Count II because the State failed to prove with sufficient evidence that Licht sold, bartered, exchanged, or gave away marijuana to Ernest LaMere?

On May 4,1992, members of the Tri-Agency Drug Task Force (Task Force) arranged to have a confidential informant, Alex Doney, attempt to purchase drugs from Licht in a controlled buy. The members of the Task Force participating in the purchase attempt were Monte Reichelt, the Chief Deputy of the Hill County Sheriff’s Office, and James Brewer, a Deputy Sheriff of the Blaine County Sheriff’s office. The officers fitted Doney with an electronic transmitter, commonly known as a body wire, so that they could keep track of Doney and monitor any conversation between Doney and Licht. The officers also gave Doney marked money with the purpose of retrieving it from Licht after the transaction.

The Task Force officers drove Doney to the motel where Licht was staying and dropped him off. Doney approached Licht, who was working on his vehicle, and asked if he had any marijuana for sale. Licht responded that he had some and that it was “twenty dollars a piece.” Licht and Doney then got into Licht’s vehicle and drove to a discount store’s parking lot where Doney gave Licht $40.00 of the marked money and received two grams of marijuana in return. After the transaction took place, Doney got out of the car, and Licht drove away. The Task Force officers immediately picked up Doney who turned over the two gram bags of marijuana to Deputy Reichelt.

After dropping Doney off at a motel, the Task Force officers contacted Jerry Smith, a probation and parole officer, and Steve Marden, a deputy with the Hill County Sheriff’s office, to assist them in arresting Licht and in searching his residence, person and vehicle. Licht, however, was not home.

The officers drove around Havre searching for Licht, and spotted his vehicle parked near the Corner Bar. The officers observed Licht get out of his vehicle and enter the tavern. Approximately one minute later Licht and another man, Ernest LaMere, exited the tavern and walked to the back of the building. Deputy Marden and Smith then witnessed an exchange take place between LaMere and Licht. Although neither Marden nor Smith observed what the two men exchanged, Deputy Marden testified at trial that he saw LaMere put the object he received from Licht into his right front pants’ pocket. Marden also testified that the two men were acting suspiciously and were looking around as if scanning the area.

Shortly after the transaction, Licht drove away, leaving LaMere at the Comer Bar. Officer Brewer testified that after LaMere left Licht’s vehicle, he (LeMere) got into a brown colored Wagoneer that another individual was driving and left the Corner Bar. All four officers followed Licht to a convenience store where he was arrested. Licht had in his possession one of the marked twenty dollar bills the Task Force officers had given to Doney to purchase the drugs.

Officers Marden and Reichelt returned to the Corner Bar and observed LaMere standing by the driver’s door of a parked Wagoneer, talking to the driver. The officers approached LaMere and noticed a bulge in his right front pants’ pocket. After a pat-down search, the officers determined LaMere had a plastic baggy in his right front pants’pocket and asked him to remove it. LaMere refused the officers’ requests to remove the object, therefore, the officers placed him under arrest and removed a plastic bag containing marijuana from LaMere’s right front pants’ pocket.

Licht was charged with two counts of criminal sale of dangerous drugs, both felonies. An omnibus hearing was held, and an Omnibus Hearing Order was entered granting Licht “complete discovery.” A jury trial was held December 3 and 4,1992. At trial, the State called LaMere as a witness. LaMere testified that he did not buy the marijuana from Licht, but had found it in the mens’ room of the Corner Bar. LaMere also testified that on the day he was arrested, he was intoxicated and taking pain medication for a recent stab wound, and therefore had trouble remembering the events clearly. Deputies Reichelt and Marden testified that LaMere did not appear to be intoxicated when they arrested him. Licht never admitted selling marijuana to LaMere or Doney.

During trial, the State asked deputy Reichelt how he recognized Licht’s voice over the body wire. Reichelt testified that he recognized Licht’s voice because approximately two weeks to one month earlier, the Task Force had Doney attempt to purchase drugs from Licht. Doney wore a body wire during this earlier attempt, and Reichelt testified he heard Licht over the body wire at that time.

Reichelt testified that he could not remember whether records had been kept of this earlier meeting or, if any had been prepared, whether they had been turned over to the State. The testimony at trial was the first time defense counsel had notice that law enforcement had previously attempted to purchase drugs from Licht.

As a result of the testimony concerning the earlier contact, defense counsel moved for a mistrial and asked for a new trial following the State’s case-in-chief. Defense counsel argued that the prosecution withheld evidence which would have allowed the defense to present an entrapment defense. The court denied the motion for a mistrial, but apparently was concerned over the lack of documentation and the fact that, if any documentation did exist, the State should have turned it over to defense counsel. The court therefore ordered the Task Force to search their files for any documentation relating to the earlier contact, and to return any such documentation to the court within the hour. The court reserved any further rulings on the matter.

Defense counsel then moved for a directed verdict of acquittal on Count II, for lack of sufficient evidence. The court denied this motion and allowed the jury to deliberate on both counts. The jury found Licht guilty of both charges on December 4,1992. Licht was sentenced to four years imprisonment on both counts on December 9, 1992.

On December 16, 1992, Licht filed a post-trial motion for a new trial alleging that new evidence establishing entrapment was presented at trial. The court held a hearing on the motion on March 15, 1993. Although the defense did not argue the “new evidence” issue at this hearing, the State at this time revealed that the Task Force had previously used Doney in an attempt to purchase drugs from Licht on April 23,1992.

The State also admitted that the Task Force had a written report of the April 23rd meeting, which allegedly was inadvertently not turned over to defense counsel prior to trial. The State alleged the written report had been turned over to defense counsel at “the end of the day,” pursuant to the court’s order directing the Task Force to search their files. The “end of the day” apparently references some time during the last day of the trial. The report itself was never offered into evidence, and no testimony was offered to support or refute the motion for new trial. Therefore, the court denied the motion without hearing any testimony concerning the report, or having it admitted into evidence, and entered a written order to that effect on March 22, 1993. Licht subsequently appealed his convictions to this Court on April 20,1993.

I. FAILURE TO DISCLOSE

The first issue Licht raises on appeal is whether the District Court erred when it denied his motion for a mistrial, or in the alternative, whether the District Court erred when it denied his motion for a new trial. The grounds for both motions are the same, and raise the issue of whether Licht was prejudiced by the State’s failure to disclose, pre-trial, evidence of the prior electronic surveillance.

Section 46-15-322, MCA (1991), sets forth the State’s statutory-obligation of disclosure in a criminal case. Subsections (1) and (2) of that statute provide: 1

(1) Upon request, the prosecutor shall make available to the defendant for examination and reproduction the following material and information within the prosecutor’s possession or control:
(a) the names, addresses, and statements of all persons whom the prosecutor may call as witnesses in the case-in-chief;
(b) all written or oral statements of the defendant and of any person who will be tried with the defendant;
(c) all written reports or statements of experts who have personally examined the defendant or any evidence in the particular case, together with the results of physical examinations, scientific tests, experiments, or comparisons;
(d) all papers, documents, photographs, or tangible objects that the prosecutor may use at trial or that were obtained from or purportedly belong to the defendant; and
(e) all material or information that tends to mitigate or negate the defendant’s guilt as to the offense charged or that would tend to reduce the defendant’s potential sentence.
(2) At the same time, the prosecutor shall inform the defendant of, and make available to the defendant for examination and reproduction, any written or recorded material or information within the prosecutor’s control regarding:
(a) whether there has been any electronic surveillance of any conversations to which the defendant was a party;
(b) whether an investigative subpoena has been executed in connection with the case; and
(c) whether the case has involved an informant and, if so, the informant’s identity if the defendant is entitled to know either or both of these facts under Rule 502 of the Montana Rules of Evidence.

In interpreting § 46-15-322 and § 46-15-327, MCA, (the latter statute requiring continuing disclosure), this Court has stated that while the prosecution is under an initial and continuing obligation to disclose all pertinent information it may gather,"... the statutes have no effect until the State actually develops the knowledge of a specific act, fact, or information that exculpates the defendant.” State v. Shaver (1988), 233 Mont. 438, 447, 760 P.2d 1230, 1235.

The State admits that it failed to turn over the evidence of the prior contact to the defense prior to trial and acknowledges that this failure to disclose appears to be a violation of § 46-15-322(2)(a), MCA. The State argues, however, that the police may have been confused as to whether they had to turn over reports of all electronic surveillance regardless of whether the evidence was inculpatory or exculpatory. The State maintains that our holding in Shaver indicates the State has no duty to disclose the types of information set forth in § 46-15-322, MCA, until the State actually develops exculpatory information. The State maintains that this aspect of the prosecution’s statutory disclosure obligation needs clarification. We agree that clarification is necessary.

The statute at issue is clear in its requirements. While § 46-15-322(l)(e), MCA, imposes a mandatory duty on the prosecution to disclose all material and information that might be generically referred to as “exculpatory,” subsections (l)(a) through (d) and (2)(a) through (c), of that statute contain no such limiting language. We hold that, under the plain language of subsections (l)(a) through (d) and (2)(a) through (c), the prosecution is obligated to disclose all material and information listed whether inculpatory or exculpatory. As to subsections (l)(a) through (d) and (2)(a) through (c), § 46-15-322, MCA, contemplates full disclosure of all of the material and information listed within the prosecutor’s possession and control. It is not up to the State or its agents to determine whether any such material or information is inculpatory or exculpatory; the legislature has left that decision to the defendant. We therefore clarify Shaver and all other decisions of this Court to the extent that any such cases indicate a contrary rule.

In the instant case, the District Court denied Licht’s motion for a mistrial or new trial made at the end of the State’s case-in-chief without any evidence or information concerning the existence or contents of the report. Following the verdict, the court again denied the motion for a new trial. The court did so after only hearing the representations made by the prosecution concerning the contents of the report, as the defense did not pursue the failure to disclose as a ground for a new trial at the March 15,1993 hearing.

At this point in time we still do not know what is actually in the report; it was not offered into evidence and no testimony was presented concerning its contents. Moreover, we do not know why the prosecution failed to disclose the report and prior contact — whether such failure was negligent, intentional or by reason of some misunderstanding of the disclosure requirements of the law. Finally, Licht has failed to demonstrate how, if at all, his defense was prejudiced by the prosecution’s failure to disclose the report and prior contact, except to argue that he might have been able to use the report for an entrapment defense.

The law in Montana regarding the effect of the suppression of or failure to disclose evidence by the prosecution is set forth in State v. Craig (1976), 169 Mont. 150, 153, 545 P.2d 649, 651, and is reiterated in State v. Patterson (1983), 203 Mont. 509, 512-13, 662 P.2d 291, 293. Suffice it to say that, notwithstanding the statutory obligation of the State to disclose as set forth above, not every suppression of evidence or failure to disclose will necessarily mandate a new trial. While there may or may not have been a violation of the defendant’s due process rights by reason of the State’s failure to disclose the prior contact of Licht by the Task Force, we cannot decide that issue nor will we presume prejudice on the basis of the record before us.

At this juncture, we hold simply that the District Court erred in denying the defendant’s motions for mistrial and new trial without having the actual report before it in evidence, without reviewing the report, without testimony as to why the report was not disclosed at the outset, and without finding, on the basis of that evidence and record, that no due process right or defense of the defendant was prejudiced by the State’s failure to disclose the report and the prior contact by the Task Force.

Accordingly, we reverse the District Court’s denial of Licht’s motions for new trial and remand this case for a new hearing, consistent with this opinion, on those motions.

II. SUFFICIENCY OF EVIDENCE

The second issue Licht raises on appeal concerns whether the District Court erred in denying his motion to dismiss Count II because, according to Licht, the State failed to prove with sufficient evidence that he sold, bartered, exchanged, or gave away marijuana to LaMere. Licht correctly states in his brief that the State has the burden of proving each element of a crime beyond a reasonable doubt. State v. Starr (1983), 204 Mont. 210, 214, 664 P.2d 893, 895. Licht contends that the facts presented at trial do not establish the offense of criminal sale of dangerous drugs beyond a reasonable doubt.

In support of his argument Licht notes the following: (1) none of the officers actually witnessed Licht give LaMere marijuana, or LaMere give Licht money; (2) LaMere testified that he found the marijuana on the floor of the men’s room in the Corner Bar, and did not pay anyone for it; (3) Licht did not admit selling marijuana to LaMere; and (4) LaMere had plenty of opportunity to get the marijuana from any number of sources prior to and after the officers saw Licht and LaMere talking outside the Comer Bar. Licht also notes that none of the officers were watching LaMere after the exchange, as they all left to find Licht. In addition, Officer Brewer testified that he saw LaMere leave the Corner Bar in a brown Wagoneer which was driven by another individual.

When the issue on appeal is whether there was sufficient evidence to support a jury verdict, the standard of review is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. State v. Lyons (1992), 254 Mont. 360, 363, 838 P.2d 397, 399.

Section 45-9-101(1), MCA (1991), in pertinent part, defines the offense of criminal sale of dangerous drugs as follows:

A person commits the offense of criminal sale of dangerous drugs if he sells, barters, exchanges, gives away, or offers to sell, barter, exchange, or give away ... any dangerous drug, as defined in 50-32-101.

Accordingly, the prosecution had to prove that LaMere received the marijuana the officers found in his possession from Licht. At trial the following evidence was presented to prove that Licht committed the criminal sales charge set forth in Count II. Several officers observed Licht enter the Corner Bar and then exit the tavern with LaMere approximately one minute later. Deputy Marden and Smith witnessed an exchange take place between LaMere and Licht. Although neither Marden nor Smith observed what the two men exchanged, Deputy Marden testified at trial that he saw LaMere put the object he received from Licht into his right front pants’ pocket, the same pocket where the officers found the marijuana. Marden also testified that the two men were acting suspiciously and were looking around as if scanning the area.

It is well established that the resolution of factual matters is for the jury, and if the verdict is supported by substantial evidence this Court must affirm the decision. State v. Price (1988), 234 Mont. 144, 148, 762 P.2d 232, 235. (Citations omitted). The fact that the evidence presented was circumstantial does not preclude a finding that Licht sold drugs to LaMere. State v. Lynn (1990), 243 Mont. 430, 435, 795 P.2d 429, 433. We conclude that the evidence presented, along with the fact that Licht was arrested for selling marijuana to Doney on the same day as the transaction with LaMere took place, provides substantial evidence upon which a rational jury could have found Licht was guilty of all the essential elements of the offense of criminal sale of dangerous drugs.

REVERSED IN PART AND REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION; AFFIRMED IN PART.

JUSTICES HUNT, TRIEWEILER, GRAY, and WEBER concur.