NO. 88-86 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

DAVID ERICKSON, an individual, 

and DOREEN VAIR, an individual, 

f/d/b/a STARHAVEN RANCH, LTD., 

a Montana corporation, 

Plaintiffs and Appellants, 

-vsBURTON CROFT, an individual, SHIRLEY 

CROFT, an individual, LARRY RULE, 

an individual f/d/b/a Rule Realty; 

RONALD SCHOEN, an individual; JOHN 

WARREN, an individual, SCHULTZ, DAVIS 

& WARREN, a partnership, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Fifth Judicial District, 

In and for the County of Beaverhead, 

The Honorable Frank Davis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

O'Brien & Conrad; James P. O'Brien, Missoula, Montana 

For Respondent: 

Hooks & Budewitz; Patrick F. Hooks, Townsend, Montana 

Garlington, Lohn & Robinson; Sherman V. Lohn, Missoula, 

Montana 

Submitted on Briefs: June 9, 1988 

Decided: August 5, 1988 

Filed: XU6 5 t98@ 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

David Erickson (Erickson) and Starhaven Ranch 

(Starhaven) appeal a Fifth Judicial District Court, 

Beaverhead County, grant of summary judgment to defendants 

real estate broker Larry Rule (Rule), attorney John Warren 

(Warren), and the Dillon, Montana law firm of Schultz, Davis 

& Warren. We affirm. 

This case is related to the litigation involved in 

Erickson v. First National Bank of Minneapolis (Mont. 1985), 

697 P.2d 1332, 42 St.Rep. 423. In Erickson we determined 

that the First National Bank of Minneapolis had properly 

quieted title as against Erickson to certain ranch property 

located in Beaverhead County. Erickson, d/b/a Starhaven 

Ranch, Ltd., purchased the property on a contract for deed on 

January 15, 1981 from Burton and Shirley Croft who had in 

turn purchased the property on a contract for deed from 

Herman and Patricia Clarno in 1976. The Crofts borrowed 

money from the First Bank of Minneapolis (the Bank) and, on 

August 5, 1980, assigned their purchaser's interest in the 

Clarno-Croft contract for deed to the Bank as collateral 

security. The Crofts subsequently defaulted on their 

obligations to the Bank and on July 1, 1981, the Bank 

recorded a quitclaim deed previously executed by the Crofts. 

Erickson, as president of Starhaven, was unaware of the 

assignment to the Bank or the Bank's quitclaim deed at the 

time he purchased the property from the Crofts in January of 

1981. 

Under the Croft-Starhaven contract for deed, Starhaven 

was required to make a down payment and installment payments 

at specific dates to the Crofts who in turn were to deposit 

the money into an escrow account payable to the First 
National Bank of Minneapolis. In addition, Starhaven 

executed a quitclaim deed at closing which was placed in the 

escrow account. Starhaven failed to make the payments as 

required and the Bank sent a notice of default on July 24, 

1981, to inform Starhaven that it had sixty days to cure the 

default or the property would be repossessed. The July 

notice from the Bank was Starhaven's first indication that 

the Bank was involved. 

On February 16, 1982, the Bank filed Starhaven's 

quitclaim deed and, three days later, served Starhaven with 

notice to quit the property and notice of termination. 

Starhaven failed to quit the property and instead filed. a 

quiet title action in Beaverhead County District Court. The 

Bank brought an unlawful detainer action against Starhaven 

and the two actions were subsequently consolidated. The 

trial court quieted title to the property in the Bank and 

Starhaven appealed to this Court. We reversed the District 

Court in our first opinion. The Bank subsequently petitioned 

for rehearing and, on rehearing, we affirmed that portion of 

the judgment quieting title in the Bank. Erickson, 697 P.2d 

at 1338. 

Defendant Rule acted as the real estate broker for the 

Crofts and attorney John Warren of the law firm of Schultz, 

Davis & Warren drafted the buy/sell agreement and contract 

for deed in the transaction between Erickson and the Crofts. 

On January 15, 1986, Erickson filed this lawsuit against the 

Crofts et al. Erickson's complaint alleged separate counts 

of fraud, negligence, and breach of contract against real 

estate broker Rule and his realty company and counts of 

malpractice, constructive fraud, and breach of an implied 

oral contract against Warren and his law firm. Rule and 

Warren moved separately for summary judgment on the basis 
that the applicable statutes of limitation had run and that 

Erickson's causes of action were time barred. 

On December 7, 1987, the District Court granted the 

motions for summary judgment on the grounds that no genuine 

issue of material fact existed as to the causes of action 

stated against Rule, Rule Realty, Warren and his law firm. 

Erickson appeals the order of summary judgment and raises the 

following issues: 

1. Does the doctrine of equitable tolling permit 

plaintiffs to maintain an action in tort more than three 

years after the discovery of the alleged negligent act? 

2. Did the District Court correctly rule that Count 

VII of plaintiff's complaint was a tort claim for purposes of 

the statute of limitations? 

3. Must a cause of action for the breach of an implied 

contract of employment and conflicts of interest in the 

context of the attorney/client relationship be brought within 

the statutory period proscribed by Montana's attorney 

malpractice statute, S 27-2-206, MCA? 

The first two issues above apply only to defendant 

Larry Rule and Rule Realty in this action while the last 

issue applies to defendants Warren and his law firm Schultz, 

Davis & Warren. 

Summary judgment is proper only were there are no 

genuine issues of material fact. Rule 56(c), M.R.Civ.P. The 

facts material to this case are not disputed on appeal. The 

issues to be decided by this Court on appeal are questions of 

law and we are free to review the District Court's legal 

analysis to draw our own legal conclusions. Schneider v. 

Leaphart (Mont. 1987), 743 P.2d 613, 616, 44 St.R.ep. 1699, 

1703. 

Erickson's first issue relates to the statutes of 

limitation for fraud and negligence. Section 27-2-203, MCA, 
pre;< r, ol-.s 

pester- a two-year limitation in which to commence an 

action for fraud in Montana. Actions based on negligence 

must be commenced within three years. Section 27-2-204, MCA. 

Erickson admits that the statute of limitations has run on 

both of his actions for fraud and for negligence. However, 

Erickson urges this Court to adopt and apply a doctrine 

called "equitable tolling" to avoid the consequences of the 

statute of limitations in this case. 

Erickson contends that his action in filing a complaint 

against Rule with the Montana Board of Realty Regulation (the 

Board) on November 29, 1983, serves to toll the applicable 

statutes of limitation until such time as the outcome of the 

complaint was determined by the Board. In the Board of 

Realty complaint, Erickson admits having knowledge of the 

facts which allegedly give rise to the causes of action 

against the defendants in this case as early as June of 1981. 

The Board investigated Erickson's complaint against Rule and 

on May 5, 1985, dismissed the complaint. The Board of Realty 

complaint was filed within two years of rickso on's discovery 

of Rule's alleged misrepresentations. The complaint in 

Beaverhead County District Court was filed nearly five years 

after Erickson's discovery of the facts which allegedly give 

rise to the causes of action against Rule. 

Erickson relies on case law from California, Alaska, 

and Arizona to support his argument. The cases cited stand 

for the proposition that, in certain well-defined instances, 

the statute of limitations will not be available as a defense 

where equitable principles justify tolling of the statute. 

See e.g., Jones v. Tracy School District (Cal. 1980), 611 

P.2d 441; Elkins v. Derby (Cal. 1974), 525 P.2d 81; Gudenau 

v. Sweeny Ins. Co. (Alaska 1987), 736 P.2d 763; Hosogai v. 

Kadota (Ariz. 1985), 700 P.2d 1327. A California court 

summarized the doctrine of equitable tolling as follows: 
[Clourts have adhered to a general policy 

which favors relieving plaintiff from the 

bar of a limitations statute when, 

possessing several legal remedies he, 

reasonably and in good faith, pursues one 

designated to lessen the extent of his 

injuries or damage. (Citations omitted. ) 

Addison v. State (Cal. 1978), 578 P.2d 941, 943. 

In Collier v. City of Pasadena (Cal.App. 1983), 191 

Cal.Rptr. 681, 685, the Second District California Court of 

Appeals listed the three requirements which a party seeking 

to avoid the consequences of a statute of limitations must 

meet to invoke the doctrine of equitable tolling: 

(1) timely notice to the defendant 

[within the applicable statute of 

limitations] in filing the first claim; 

(2) lack of prejudice to defendant in 

gathering evidence to defend against the 

second claim; and 

(3) good faith and reasonable conduct by 

the plaintiff in filing the second claim. 

(Additions ours. ) 

Collier also notes the historic circumstances in which the 

doctrine of equitable tolling has been invoked: 

Prior to the 19701s, statutes of 

limitation had been tolled when a 

plaintiff filed a case which promised to 

lessen damages or other harm that might 

have to be remedied through a second 

case. The statute for the second case 

was tolled while the plaintiff pursued 

the first, presumably for the purpose of 

minimizing harm . . . Another line [of 

cases] tolled statutes of limitation when 

administrative remedies had to be 

exhausted before a court would consider 

the case . . . Still a third line of 

cases tolled the limitation period of a 

second action during the pendency of a 

first action later found to be defective 
Starting in 1974, the California Supreme 

Court weaved these earlier lines of cases 

in to a new, broader doctrine -- 

"equitable tolling. 'I This doctrine 

applies "' [wlhen an injured person has 

several legal remedies and, reasonably 

and in good faith, pursues one. ' " 

(Citations omitted; additions ours.) 

Collier, 191 Cal.Rptr. at 684. 

Rule asserts that Erickson's complaint against him to 

the Board of Realty Regulation does not give him notice to 

begin investigating the facts which form the basis of the 

second claim in District Court. For this reason, Rule 

contends, Erickson has not met the first requirement of 

equitable tolling, timely notice to the defendant, as set 

forth in Addison and Collier. We agree. 

As pointed out by Rule, the Board of Realty Regulation 

governs the licensing of real estate brokers and salesmen. 

Sections 37-51-201 et seq., MCA. Upon receiving a complaint 

against a real estate broker, and after investigation and 

hearing, the Board may revoke or suspend a broker or 

salesman's license. Section 37-51-321, MCA. Persons found 

to have violated the statutes pertaining to real estate 

brokers and salesmen may face criminal penalties and may also 

have damages in a civil action imposed against them by a 

"court of competent jurisdiction." Section 37-51-323, MCA. 

Therefore, Rule is correct in his assertion that the Board of 

Realty may only revoke or suspend a broker's license and has 

no power to award damages for negligence or fraud. Section 

37-51-323, MCA. Rule also points out that the Board is not 

designated by law as a quasi-judicial board pursuant to 

§ 2-15-124, MCA. See § 2-15-1867, MCA. Under these 

circumstances, Erickson's Board of Realty Regulation 

complaint does not give adequate notice of the existence of a 

legal claim. Gudenau, 736 P.2d at 768. Under the facts as 
presented, Erickson has failed to meet the first element of 

equitable tolling. Consequently, we need not decide whether 

this Court recognizes the doctrine of equitable tolling and 

we need not address the parties' arguments with regard to the 

remaining two elements of the doctrine. 

Erickson also makes an argument in passing that the 

litigation involved in Erickson v. First National Bank of 

Minneapolis (Mont. 1985), 697 P.2d 1332, 42 St.Rep. 423, 

somehow gave Rule notice of the facts which form the basis of 

the second claim. We note that Rule was not a party to the 

Erickson litigation nor were the claims in Erickson the same 

as presented in this action. The Erickson litigation does 

not satisfy the notice requirement of the doctrine of 

equitable tolling. 

Count VII of Erickson's complaint incorporated by 

reference the fraud and negligence counts. Count VII went on 

to allege that an implied contract existed between Erickson 

and Rule and that Rule breached certain duties that arose 

2z ~rom the implied contractual relationship. The duties 

allegedly breached are identical to those alleged in the 

fraud and negligence counts. Erickson acknowledges that no 

express oral or written contract existed between him and 

Rule. Nonetheless, Erickson argues in his second issue on 

appeal that Count VII is an implied contract action and that 

the five year statute of limitations for unwritten contracts 

specified in S 27-2-202(2), MCA, applies. The District Court 

ruled that the "gravamen" of the causes of action alleged in 

Count VII sound in common law fraud and negligence. The 

District Court relied on this Court's decision in Quitmeyer 

v. Theroux (1964) , 144 Mont. 302, 395 P. 2d 965, to conclude 

that, regardless of the contract label placed on Count VIT by 

Erickson, Count VII "simply rehashes" the fraud and 
negligence claims and is, therefore, time barred by the 

statutes of limitations, 5 27-2-203 and S 27-2-204, MCA. 

Erickson contends that he may elect between a contract 

theory or negligence theory where his claim has a basis under 

either theory and cites to Unruh v. Buffalo Bldg. Co. (Mont. 

1981), 633 P.2d 617, 618, 38 St.Rep. 1156, 1158, for support. 

Erickson's contention in this regard begs the question 

because the election to pursue one cause of action over 

another must be more than a mere relabeling of a claim to 

avoid the consequences of a statute of limitations. 

In Unruh this Court recognized that "'[ulnder certain 

circumstances, a ground of liability in tort may coexist with 

a liability in contract, giving the injured party the right 

to elect which form of action he will pursue. ' " Unruh, 633 

P.2d at 618 (citing Garden City Floral Co. v. Hunt (19531, 

126 Mont. 537, 255 P.2d 352). Unruh is unpersuasive in this 

case. The Unruh holding was premised on the fact that the 

claim in question was not based on negligence but was based 

on the breach of an implied warranty. For that reason, this 

Court concluded that the plaintiff could elect to pursue the 

implied warranty theory and the eight year statute of 

limitations for contracts would apply. Unruh distinguishes 

Quitmeyer because the claim in Quitmeyer was based on 

negligence. While Count VII of Erickson's complaint alleges 

the existence of an implied contract, the asserted actionable 

conduct is based on the same fraud and negligence allegations 

contained in the time barred negligence and fraud counts of 

his complaint. The gravamen of the claim, not the label 

attached, controls the limitations period to be applied to 

that claim. Thiel v. Taurus Drilling Ltd. (Mont. 1985) , 710 

P.2d 33, 38, 42 St.Rep. 1520, 1527; Quitmeyer, 395 P.2d at 

969. The gravamen of Count VII is fraud and negligence and 

the claim is time barred by S 27-2-203 and 5 27-2-204, MCA. 
Rule also argues that Erickson has failed to present a 

genuine issue of inaterial fact as to the existence of an 

implied contract between him and Erickson. The above 

discussion presumes that an implied contract existed but 

finds that the claim asserted sounds in fraud and negligence 

and is, therefore, time barred. From the above analysis it 

is apparent that Erickson's Count VII is time barred 

regardless of the existence of an implied contract because of 

the nature of the claim asserted. While we tend to agree 

with Rule that there are no facts to establish an implied 

contract, we need not address the parties' arguments on the 

subject in light of the foregoing discussion. 

Erickson's final issue affects only defendant Warren 

and his law firm. The District Court found Erickson's legal 

malpractice claim against Warren to be time barred by the 

legal malpractice statute of limitations, $ 27-2-206, MCA. 

Erickson's complaint also alleged the existence of an implied 

contract in the context of the attorney-client relationship. 

The District Court ruled that this implied contract claim, 

though "novel and somewhat ingenious," was also time barred 

by the legal malpractice statute of limitations. The 

District Court reasoned as follows: 

To escape the obvious consequences of the 

legal malpractice statute . . . the 

Plaintiffs seek to stay in court on an 

implied contract theory by invoking the 

five year statute (27-2-202, MCA). 

The Court will not allow a party to 

escape the consequences of a specific 

malpractice statute [of limitations] by 

permitting a party to state a claim for 

professional negligence in terms of a 

breach of contract. To do so would make 

the malpractice statute meaningless. If 

Plaintiff's position is sound, there 
would have been no need for the 1977 

malpractice statute . . . 

The Court has considered the authorities 

cited by Plaintiffs but finds them to be 

inapplicable since the jurisdictions have 

no malpractice statute similar to 

5 27-2-206, MCA. 

In summary, there are no disputed issues 

of fact. The Plaintiffs admittedly had 

knowledge of the facts essential to their 

malpractice claim in 1981. Such claims 

are accordingly barred by the three-year 

limitation of action (5 27-2-206, MCA) . This section applies whether the action 

is premised in tort or contract. 

(Emphasis theirs; additions ours.) 

The District Court's order granting summary judgment to 

Warren is dated December 7, 1987. Erickson filed a notice of 

appeal on January 7, 1988. On March 25, 1988, this Court 

decided the case of Schweitzer v. Estate of Halko (Mont. 

1988), 751 P.2d 1064, 1066, 45 St.Rep. 611, 613-614. Warren 

argues that the legal malpractice statute of limitations 

applies to all claims against an attorney in the 

attorney-client relationship regardless of how those claims 

are enumerated and cites to Schweitzer for support. 

In Schweitzer, the District Court was presented with 

several claims, including an implied contract claim, in the 

context of an attorney-client relationship. The District 

Court noted that, when an attorney undertakes to represent a 

client, a contract and relationship is formed. If the 

attorney's services are improper, the District Court 

reasoned, there is a breach of contract. These improper 

services, by definition are "bad" acts, or "bad" practices 

-- hence, malpractice. The District Court concluded that 

acts of legal malpractice, however denominated, fall within 

the purview of 5 27-2-206, MCA. The District Court also 
noted that a specific statute, S 27-2-206, MCA, prevails over 

a general statute, S 27-2-202, MCA, to the extent the two 

statutes are inconsistent with each other. We found the 

District Court's reasoning to be correct in Schweitzer and 

find Warren's related argument to control in this matter. 

Erickson's claims against Warren and the law firm of 

Schultz, Davis & Warren sound in legal malpractice and are 

time barred by S 27-2-206, MCA. Schweitzer, 751 P.2d at 

1066; see also, Southland Mechanical Constructors Co. v. 

Nixen (Cal.App. 1981), 173 Cal.Rptr. 917, 923. 

We hold that Erickson's claim against Rule, Rule 

Realty, Warren and Schultz, Davis & Warren are time barred 

and summary judgment was properly granted by the District 

Court. 

Affirmed. / &,

i 

/ 4 

Justice 

We concur: