Title: ENGINE REBUILDERS INC v SEVEN S

State: montana

Issuer: Montana Supreme Court

Document:

NO. 79-66 I N T H E SUPREME C O U R T O F T H E STATE OF M O N T A N A 1980 ENGINE REBUILDERS , INC . , Counter-Defendant and Respondent, SEVEN SEAS IMPORT-EXPORT & M E R C . , INC., and RAYMOND BRAULT, e t ux, e t a l . , Counter-Claimants and Appellants. Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , I n and f o r t h e County of Missoula. Honorable Arnold Olsen, Judge p r e s i d i n g . Counsel of Record: For Appellants: Raymond W. B r a u l t , Helena, Montana For Respondent : H i r s t , Dostal & Withrow, Missoula, Montana Worden, Thane & Haines, Missoula, Montana Datsopoulos, MacDonald & Lind, Missoula, Montana James S a d l e r , Missoula, Montana W G i 3 IS64 F i l e d : Submitted on b r i e f s : May 29, 1980 Decided: ! @ G 1 3 1980 M r . J u s t i c e Gene B. Daly delivered t h e Opinion of t h e Court. Third p a r t y p l a i n t i f f s , Seven Seas Import-Export & Mercantile, Inc., and Raymond W. Brault, appeal from an order and judgment of dismissal by t h e D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , Missoula County, dismissing t h e i r counterclaim and t h i r d p a r t y complaint i n favor of t h e counterdefendant, Engine Rebuilders, Inc., and t h i r d p a r t y defendants, Richard Dale Smith, Alice Smith, William D. H i r s t , James H. Sadler and Missoula Bank of Montana. I n June 1973 Seven Seas contracted with Engine Re- b u i l d e r s t o c o n s t r u c t a l a r g e commercial garage f o r t h e p r i c e of $46,229.50. To f a c i l i t a t e payment by Seven Seas f o r work done on t h e building, a $48,000 t r u s t fund was e s t a b l i s h e d a t Missoula Bank of Montana. Seven Seas Import-Export & Mercantile, Inc., a t t h e t i m e of contracting, consisted primarily of Raymond B r a u l t and h i s family as o f f i c e r s and shareholders. Engine Re- b u i l d e r s , I n c . , consisted primarily of Alice and Dick Smith and t h e i r family a s o f f i c e r s and shareholders. By A p r i l 5, 1974, t h e building s t i l l had n o t been completed. I n a d d i t i o n , only $1,200 remained i n t h e t r u s t account. Several of t h e subcontractors remained unpaid, having t o f i l e mechanic's l i e n s a g a i n s t t h e building t o t a l - i n g $10,543.75. To r e l e a s e these l i e n s , Engine Rebuilders paid t h e $10,543.75 and invested an a d d i t i o n a l $5,000 t o complete t h e unfinished building. Engine Rebuilders then f i l e d s u i t on A p r i l 5, 1974, claiming a p p e l l a n t s had with- drawn t h e t r u s t money and misappropriated it f o r t h e i r own personal use. The a t t o r n e y of record f o r Engine Rebuilders a l s o p e t i t i o n e d t h e c o u r t f o r a hearing whereby a p p e l l a n t s were t o appear and s t a t e why t h e c o u r t should n o t a t t a c h t h e i r personal and corporate property. The c o u r t a f t e r a hearing issued a w r i t of attachment a g a i n s t t h e property of B r a u l t and Seven Seas. O n May 28, 1975, Raymond Brault, formerly doing busi- ness a s Seven Seas Import-Export & pIercantile, Inc., f i l e d a p e t i t i o n f o r bankruptcy i n t h e United S t a t e s D i s t r i c t Court f o r C e n t r a l District of C a l i f o r n i a i n Cause No. BK-75- 09955(RW). Appellants were adjudicated as bankrupt on March 11, 1977. O n January 18, 1978, a p p e l l a n t s f i l e d an amended answer, counterclaim and t h i r d p a r t y complaint and a s e p a r a t e motion t o s t r i k e , amended answer, counterclaim, and t h i r d p a r t y complaint on behalf of Raymond W. Brault. The claims brought by a p p e l l a n t s a l l e g e d damages r e s u l t i n g from a c t i o n s by respondents i n t h e nature of l i b e l , s l a n d e r , c o n t r a c t u a l i n t e r f e r e n c e , conspiracy, negligence and conversion of personal property. Respondents moved t h e D i s t r i c t Court t o dismiss appel- l a n t s ' counterclaim and t h i r d p a r t y complaint. On September 1 4 , 1979, t h e c o u r t granted t h e dismissal, f i n d i n g appel- l a n t s ' claims barred by t h e s t a t u t e of l i m i t a t i o n s a s set f o r t h i n s e c t i o n 93-2606, R.C.M. 1947, which has s i n c e been c o d i f i e d a s s e c t i o n 27-2-204(3), MCA. This s e c t i o n pro- vides: "The period prescribed f o r commencement of an a c t i o n f o r l i b e l , slander, a s s a u l t , b a t t e r y , f a l s e imprisonment, o r seduction i s within 2 years." Appellants i n appealing the d i s m i s s a l contend t h a t t h e judgment w a s c l e a r l y erroneous. I n so contending, numerous i s s u e s have been r a i s e d by a p p e l l a n t s , b u t t h i s Court need only d e a l with t h e i s s u e of whether t h e counterclaim and t h i r d p a r t y complaint was barred by any a p p l i c a b l e s t a t u t e of l i m i t a t i o n s . I n determining whether t h e period of l i m i t a t i o n has expired i n a given case, it i s necessary t o examine two p o i n t s i n time. F i r s t , when d i d t h e cause of a c t i o n which gave rise t o t h e s u i t accrue? Second, when was t h e a c t i o n commenced? A s t o when t h e a c t i o n commenced, Rule 3, M. R. Civ. P. , s t a t e s : "A c i v i l a c t i o n i s commenced by f i l i n g a complaint with t h e court." I n t h i s i n s t a n c e a p p e l l a n t s ' counterclaim and t h i r d p a r t y complaint w a s f i l e d on January 18, 1978. Appellants argue t h a t i n determining when t h e i r a c t i o n commenced, t h e c o u r t should look s o l e l y t o when t h e i r motion f o r leave t o f i l e a motion t o s t r i k e , amended answer, counter- claim and t h i r d p a r t y complaint was f i l e d with t h e c l e r k of t h e D i s t r i c t Court, t h a t d a t e being May 7, 1976. This argument must f a i l , however, because Rule 3, M.R.Civ.P., s p e c i f i c a l l y s t a t e s , "A c i v i l a c t i o n i s commenced by f i l i n g a complaint with t h e court." A complaint cannot be equated with a motion f o r leave t o f i l e a complaint; thus, w e con- clude t h e D i s t r i c t Court was proper i n f i n d i n g t h a t appel- l a n t s ' a c t i o n commenced on January 18, 1978. A s t o when t h e l i m i t a t i o n period begins t o run, it i s necessary t o determine when a p p e l l a n t s ' a l l e g e d cause of a c t i o n accrued. Gates v. Powell (1926), 77 Mont. 554, 252 diinJQ& P. 377; Cassidy v. E % & & (1977), 173 Mont. 475, 568 P.2d 1 4 2 ; 51 Am.Jur.2d Limitations of - Actions S107 a t 679. The a l l e g e d improper a c t i v i t y giving rise t o appel- l a n t s ' a l l e g a t i o n s of l i b e l i n t h e counterclaim and t h i r d p a r t y complaint i s t h a t respondents William D. H i r s t and James H. Sadler, a s a t t o r n e y s f o r Engine Rebuilders, made improper use of District Court process by filing on April 5, 1974, the original complaint in this action. Appellants contend respondents filed this complaint knowing it con- tained unfounded and untruthful assertions and knowing that in so filing the allegations would be made public, thereby destroying appellants' business reputation. The alleged improper conduct forming the basis of appellants' allegation of slander in the counterclaim and third party complaint is that respondents, in discussions among themselves beginning on December 1, 1973, falsely accused appellants of fraudulent misrepresentation, of illegally misappropriating monies from a trust fund, and of illegally misapplying the funds to their own personal use and then allowed these accusations to form the basis of the complaint filed by Engine Rebuilders and to be disseminated to various business concerns in the community. Allegations of contractual interference, negligence, conspiracy and conversion of property made by appellants, if they are in fact proper in this action as to all respondents, are based upon the alleged slanderous actions of respondents and by the alleged improper filing of the original complaint on April 5, 1974, and the subsequent issuance of a writ of attachment as to appellants' property, thereby causing appellants to lose various contracts with other business concerns. The District Court concluded that the alleged actions giving rise to appellants' claims accrued prior to or on April 5, 1974, the date Engine Rebuilders filed the original complaint. Appellants contend, however, that the improper conduct is ongoing, calculated to produce ongoing emotional and economic pressures. Appellants further contend that as long a s t h e complaint f i l e d by Engine Rebuilders stands, t h e improper conduct continues t o e x e r t a p r e s e n t day oppression with coercion extending i n t o t h e f u t u r e . Appellants then conclude, i n t h a t t h e e f f e c t of t h e o r i g i n a l complaint i s ongoing, t h e s t a t u t e of l i m i t a t i o n s does n o t commence t o run u n t i l t h i s complaint i s dismissed. I n e f f e c t , a p p e l l a n t s a r e arguing t h a t t h e damaging r e s u l t s of respondents' a l l e g e d improper a c t i v i t y i s con- t i n u i n g , and therefore, i n determining when t h e s t a t u t e of l i m i t a t i o n s s t a r t s t o run, t h e c o u r t should look t o when t h e a l l e g e d damage ceases, n o t when t h e a l l e g e d improper conduct occurred. I n support of t h i s proposition a p p e l l a n t s r e l y on two Montana nuisance cases. Heckaman v. Northern Pac. Ry. Co. (1933), 93 Mont. 363, 20 P.2d 258; Walton v. C i t y of Bozeman (1978), - Mont. , 588 P.2d 518, 35 St.Rep. 1977. Relying on Heckaman a p p e l l a n t s would have us b e l i e v e t h a t t h e consequential i n j u r i e s r e s u l t i n g from t h e a l l e g e d improper a c t i o n s of respondents i s renewed each passing day and thus, t h e s t a t u t e of l i m i t a t i o n s does n o t begin t o run u n t i l t h e o r i g i n a l complaint f i l e d by Engine Rebuilders i s dismissed. However, such a holding i n t h i s i n s t a n c e would be c o n t r a t o t h e general r u l e s t a t e d i n Heckaman, " t h a t , when t h e a c t o r omission c o n s t i t u t i n g negligence causes d i r e c t o r immediate i n j u r y , t h e a c t i o n accrues from t h e doing of t h e a c t . . . ' I 20 P.2d a t 261. (Emphasis added.) Appellants have a l l e g e d t h a t respondents' a c t i o n s between December 1, 1973, and April 5, 1974, and t h e f i l i n g of t h e complaint by Engine Rebuilders on ~ p r i l 5, 1974, r e s u l t e d i n immediate and d i r e c t i n j u r y , t h a t being a l o s s of business r e p u t a t i o n and standing i n t h e business com- munity. Consequently, under Heckaman, a p p e l l a n t s ' a c t i o n s accrued, i n regard t o those i n j u r i e s , on April 5, 1974. Walton likewise does n o t support appellants' argument t h a t t h e i r cause of a c t i o n i s continuing i n nature. I n Walton t h e City of Bozeman reconstructed an i r r i g a t i o n d i t c h and the p l a i n t i f f incurred c o s t s and damages caused by t h e flooding of h i s land on a yearly basis. This Court held t h a t the p l a i n t i f f was n o t barred by a two-year s t a t u t e of l i m i t a t i o n because the reoccurring i n j u r i e s w e r e t h e r e s u l t of a reoccurring nuisance. Here, t h e alleged acts which caused appellants d i r e c t damages occurred a t a c e r t a i n p o i n t i n t i m e with consequential e f f e c t s . They are n o t based on reoccurring events such a s an annual snow m e l t o r spring flooding. I t being determined t h a t appellants' alleged cause of a c t i o n i s n o t reoccurring i n nature, appellants make a f u r t h e r argument i n support of t h e i r p o s i t i o n t h a t t h e s t a t u t e of l i m i t a t i o n s has n o t expired. Appellants contend t h a t the f i l i n g of a p e t i t i o n f o r bankruptcy stayed t h e t o l l i n g of t h e s t a t u t e of l i m i t a t i o n s from May 1975 u n t i l March 1977. 1 1 U.S.C. 362 of the Bankruptcy Act s t a t e s t h a t a s u i t which i s pending a g a i n s t a person a t t h e t i m e of f i l i n g a p e t i t i o n of bankruptcy s h a l l be stayed u n t i l adjudication o r dismissal of t h e p e t i t i o n . Thus, lawsuits which a r e f i l e d a g a i n s t - a bankrupt a r e stayed during t h e bankrupt proceed- ing. However, nothinq -- i n t h e Bankrupt Act - stays prevents t h e p e t i t i o n e r before t h e Bankruptcy Court - from f i l i n g claims a g a i n s t o t h e r p a r t i e s . 1 1 U.S.C. 108 of t h e Bankruptcy A c t provides f o r a t o l l i n g of the s t a t u t e of l i m i t a t i o n s i n regard t o t h e t r u s t e e i n bankruptcy; b u t again, t h e Act s t a t e s nothing about a suspension of t h e s t a t u t e of l i m i t a t i o n s on a c t i o n s t h a t t h e bankrupt could f i l e a g a i n s t o t h e r p a r t i e s . I n Matter of Dickson (D. N.C. 1977), 432 F.Supp. 752, t h e c o u r t addressed t h e i s s u e of whether a bankrupt couple could invoke t h e t o l l i n g provision of 1 1 U.S.C. 29(e) of t h e Bankruptcy Act ( t h i s s e c t i o n has been c o d i f i e d under t h e new Bankruptcy A c t a t 1 1 U.S.C. 108). I n ~ i c k s o n both t h e bankrupt and t h e t r u s t e e i n bankruptcy brought an a c t i o n a g a i n s t a defendant a l l e g i n g v i o l a t i o n s of t h e Truth i n Lending Act. I n d e a l i n g with t h e i s s u e of whether a one- year s t a t u t e of l i m i t a t i o n s had t o l l e d , t h e c o u r t s t a t e d : ". . . This a c t i o n was commenced a f t e r t h e s t a t u t e had run. T i t l e 1 1 U.S.C. S29 ( e ) , however, g i v e s a t r u s t e e two years a f t e r adjudication of bankruptcy t o bring any ac- t i o n n o t barred a t t h e time t h e bankruptcy p e t i t i o n w a s f i l e d . . . "The a c t i o n was n o t barred when t h e Dicksons f i l e d t h e i r p e t i t i o n , and s o t h e t r u s t e e ' s a c t i o n i s n o t barred. "There -- i s no t o l l i n g provision -- f o r t h e debtors, however, -- and so t h e i r a c t i o n i s barred bv t h e s t a t u t e , and w i l l be dismissed." --C- --- 432 F.Supp. a t 756. (Emphasis added.) Since t h e r e i s no t o l l i n g of a s t a t u t e of l i m i t a t i o n s f o r anyone b u t a t r u s t e e i n bankruptcy, a p p e l l a n t s by f i l i n g a p e t i t i o n f o r bankruptcy d i d n o t suspend t h e running of t h e s t a t u t e a s t o t h e i r claims. Appellants' a l l e g e d claims as s t a t e d i n t h e counter- claim and t h i r d p a r t y complaint were derived from a c t i v i t y occurring p r i o r t o and on April 5, 1974, t h e d a t e on which t h e o r i g i n a l complaint was f i l e d by Engine Rebuilders, Inc. The s t a t u t e of l i m i t a t i o n s was n o t t o l l e d a s t o those claims. Therefore, t h e D i s t r i c t Court was n o t erroneous i n looking a t t h i s d a t e and January 18, 1978, t h e d a t e a p p e l l a n t s ' a c t i o n w a s f i l e d , i n determining i f t h e s t a t u t e of l i m i t a - t i o n s had expired. The period between t h e s e two d a t e s being over t h r e e years, t h e D i s t r i c t Court was proper i n finding a p p e l l a n t s ' claims barred. The D i s t r i c t C o u r t ' s finding t h a t a l l of a p p e l l a n t s ' claims, including those f o r c o n t r a c t u a l i n t e r f e r e n c e , con- s p i r a c y , negligence and conversion of property, a r e barred under s e c t i o n 27-2-204(3), MCA, which only a p p l i e s i n t h i s i n s t a n c e t o claims of l i b e l and slander was n o t challenged by a p p e l l a n t s i n t h e i r b r i e f . However, even i f such a challenge had been made, t h e c o u r t could have dismissed it by looking t o t h e a p p l i c a b l e two-year and three-year s t a t u t e s of l i m i t a t i o n s f o r each claim, a l l of which have expired. Appellants a l s o challenge t h e D i s t r i c t Court's f i n d i n g t h a t a l l words r e s u l t i n g from a c o u r t a c t i o n a r e p r i v i l e g e d and thus cannot support a claim f o r l i b e l o r slander. However, i n t h a t a l l of a p p e l l a n t s ' claims, whether o r n o t based on p r i v i l e g e d a c t i v i t y , a r e barred by t h e s t a t u t e of l i m i t a t i o n s , t h i s i s s u e need n o t be discussed. The dismissal of a p p e l l a n t s ' counterclaim and t h i r d p a r t y complaint i s affirmed. W e concur: