No. 84-352 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

JOHN L.THIEL and KATHRYN M. THIEL, 

husband & wife, 

Plaintiffs, 

-vsTAURUS DRILLING LIMITED 1980-11, 

a Colorado limited partnership; 

NATHAN J. EMORY; D.A. DAVIDSON & 

COMPANY, a Mont. corp.; DONALD E. 

METLER; J. JOE MENA; JOHN D. PRUIT; 

GAYLE S. HIGBEE; JON MARCHI; JOSEPH 

R. SOLOMAN; and ROBERT W. PETERSEN, 

Defendants. 

ORIGINAL PROCEEDING: 

COUNSEL OF RECORD: 

For Plaintiffs: 

Hendrickson & Everson; Jim Ragain argued, Billings, 

Montana 

For Defendants: 

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

Montana &* Dorsey & Whitney; Edward J. Pluimer argued, 

Minneapolis, Minnesota (D.A. Davidson, Jon Narchi, 

Robert Peterson)& Steven Bell of Dorsey & Whitney, 

Great Falls, Montana 

Anderson, Brown, Law Firm; Steven J. Harman, Billings, 

Montana 

Richard Vermiere; Head & Moye, Denver, Colorado & 

Hibbs, Sweeney, Colberg & Koessler; Maurice R. Colberg, 

Jr., Billings, Montana (Taurus Drilling, Nathan Emory, 

Donald Metler, J. Joe Mena, John Pruit, Gayle Higbee, 

Joseph Soloman) 

For Amicus Curiae: 

Turner C. Graybill, Great Falls, Montana (Plaintiffs in 

US Dist. Ct. Nos. CV-34-17-GF, CV-84-18-GF, CV-84-19-GF 

& CV-84-20-GF) 

Michael J Mulroney, Helena, Montana (Plaintiffs in 47714, 

47715, 47716 in L & C County Dist. Ct.) 

Thomas F. Dowling, Helena, Montana (Plaintiffs in 50566, 

50534 & CV-82-246-H) 

J. Rim Schulke, Mont. Securities Dept., Helena, Montana 

Crowley Law Firm; G. Dalthorp & P. Habein, Billings, 

Montana &* Charles Wake; Lewis, D'Amato, et al., Los 

Angeles, California (Donald Jackson, Kimble, MacMichael, 

Jackson & Upton) 

Boone, Karlberg & Haddon; Sam E. Haddon, Missoula, Montana 

(Boettcher & Co., Dain Bosworth, Edward Jones & Co., Merrill 

Lynch, Pierce, Fenner & Smith & Piper, Jaffray & Hopwood, 

Inc. ) 

-- 

Submitted: September 4, 1995 

Decided : October 5, 1985 

- - -- - Clerk 
Mr. Justice Fred J. Weber del-ivered the Opinion of the Court. 

The United States District Court for the District of 

Montana has certified the following question to this Court: 

What statute or statutes of limitation apply to 

civil actions brought pursuant to § 30-10-307, MCA, 

of the Securities Act of Montana? 

Based upon the pleadings in this case, we hold that the 

8-year limitation period contained in § 27-2-202 (1) , MCA, 

applies. 

On September 16, 1980, plaintiffs John L. Thiel and 

Kathryn M. Thiel purchased two limited partnership units in 

Taurus Drilling Limited 1980-11, a Colorado limited partnership organized to explore and drill for oil and gas. Plaintiffs purchased the Taurus partnership units by paying 

$10,000 in cash and posting a letter of credit for $46,000. 

Approximately 2 years later on October 15, 1982, plaintiffs filed a complaint for rescission of their purchase. 

The complaint alleged inter alia that the offer and sale of 

the partnership units violated the Securities Act of Montana. 

Count I of the complaint alleged failure to comply with the 

securities registration requirements of 55 30-10-202 and 

-205, MCA. Count I1 alleged the making of material 

misrepresentations or omissions of material fact in 

connection with the sale of securities in violation of 

5 30-10-301(1), MCA. Count I11 alleged negligence and breach 

of fiduciary duties by the broker defendants. Count IV 

alleged negligence, breach of contract and breach of 

fiduciary duties of the non-broker defendants. 

As remedies for the statutory violations alleged in 

Counts I and I1 of their complaint, plaintiffs claimed that 

they were entitled, under S 30-10-307, MCA, to rescind their 

purchase and recover the consideration paid for the security, 

interest and attorney fees. Defendants filed a motion to 
dismiss Counts I and I1 on the grounds that the 2-year 

statute of limitation in S 27-2-211 (1) (c) , MCA, barred claims 

based on liabilities created by statute. 

United States District Court Chief Judge Battin held 

that the 2-year limitation applied to the securities registration claim and dismissed Count I of the complaint. Defendants filed a motion for clarification or further 

consideration, seeking to have Count I1 dismissed as well. 

Plaintiffs asserted that the 8-year limitation of 

5 27-2-202(1), MCA, applied to both counts. They requested 

certification of the issue to this Court. 

The federal court certified the question and this Court 

heard oral argument on which statute or statutes of limitation apply to actions brought pursuant to 5 30-10-307, MCA, 

the civil enforcement provision of the Securities Act of 

Montana? 

I 

The legislature adopted the Securities Act of Montana in 

1961. Sec. 2, Ch. 251, L. 1961. The Act contained substantial provisions from the Uniform Securities Act promulgated 

by the Conference of Commissioners on Uniform State Laws. 

Some variations were made in order to accommodate the Uniform 

Act to situations peculiar to Montana. 

The original Securities Act of Montana contained a 

5-year limitation on criminal prosecutions and a 2-year 

limitation on private enforcement of civil liabilities. 

Sections 15-2021 (1) and 15-2022 (3), R.C.M. 1947. The 1981 

Montana Legislature extended the limitation on criminal 

prosecutions from 5-years to 8 years after the alleged violation, or within 1 year after the date the commissioner or 

prosecuting officer becomes aware of the violation. 

Section 30-10-306 (1) , MCA. 
In 1967, the legislature eliminated the 2-year statute 

of limitation on civil enforcement of the Act. No limitation 

period was substituted when the "two (2) years after the 

contract of sale" language was deleted from $ 15-2022 (3), 

R.C.M. 1947. The federal court has asked us to explore the 

outer limits of this statutory black hole. 

I1 

The judicial function in construing and applying statutes is to effect the intention of the legislature. In 

determining legislative intent, the Court looks first to the 

plain meaning of the words used in the statute. If intent 

cannot be determined from the content of the statute, we 

examine the legislative history. Dorn v. Bd. of Trust. of 

Billings Sch. Dist. (Mont. 1983), 661 P.2d 426, 430, 40 

St-Rep. 348, 352. 

In this case, the legislature omitted the specific 

2-year-from-sa le 1 imitation without substituting a different 

period of limitation. Thus, the Court's primary tool for 

ascertaining legislative intent, i.e., the "plain meaning" of 

the words used in the statute, is of no assistance. We must 

turn to the legislative history. 

In 1967, Representatives James, Nutting and Cox introduced House Bill No. 515, entitled "An Act Amending Section 

15-2022, R.C.M. 1947, Relating to Civil Remedies Afforded 

Purchasers of Securities Sold in Violation of the Securities 

Act of Montana; Providing for a Cause of Action to Be Brought 

Within Two (2) Years after Discovery of Violation." House 

Bill 515 proposed to amend $ 15-2022(3), R.C.M. as follows: 

. . . No person may sue under this section more- than tw6 (2) years - after the 

ee~traet-e4-se4e discovery of a violation 

of the ~rovisions of this act . . . . 
The rest of the language in the bill is identical to that in 

the original statute. 

The House Judiciary Committee discussed H.B. 515 on 

February 1, 1967. Committee Minutes sparsely report that: 

HB 515 was discussed. Mrs. James, chief 

sponsor, could not appear. Testifying as 

a proponent was: Harry H. Jones, Investment Department, State Auditor's Office, 

Helena, Montana. 

. . . [actions on other bills] 

-- HB 515: Hall moved it -- DO PASS, AS AMEND- 

- ED. which amendment would stzke the 

provision of actions having to be brought 

within 2 years and the one making the 

bill effective immediately, and the 

motion carried. Hall also moved that the 

amendment be adopted, which also carried. 

Although the Committee Minutes indicate that Harry Jones 

of the State Auditor's Office spoke as a proponent of the 

bill, there is no evidence as to what Mr. Jones said. No one 

spoke in opposition. There was no record why Rep. Hall moved 

to strike the "2 years from discovery" limitation or why the 

original "2 years from sale" limitation was deleted. 

House Bill 515 passed both houses in this amended form 

and was signed into law by the Governor in 1967. The current 

civil liabilities provision, $ 30-1.0-307, MCA, contains no 

time limitation. 

Since neither the plain meaning of the statute nor the 

legislative history sheds any light on the legislature ' s 

intent in deleting the original limitation, we look next to 

the circumstances surrounding the change in the law. 

In 1964, the Administrator of the Seattle Regional 

Office of the Securities and Exchange Commission publish.ed an 

article that sharply criticized both the federal and state 

statutes of limitation in civil cases. 
Both acts provide for a very short statute of limitations. In fact, this period 

is so short as to negate much of the 

benefit designed to accrue to investors. 

The Montana Act provides a two-year 

period from date of sale. The Federal 

Act provides for only one year from date 

of sale for violations of the registration requirements. In the case of fraud 

the Federal Act extends this period to 

one year from discovery, with a maximum 

of three years. The Montana Act makes no 

such distinction. 

This short statute of 1-imitations provided by the acts unquestionably precludes 

effective use of the civil liabilities 

provisions by purchasers.. . . 

Newton, A Look at the Montana Securities Act and Its Relation ---- --- 

-- to the Federal Securities Act, 

Plaintiffs and several amici curiae contend that the Montana 

Legislature deleted the 2-year limitation in response to such 

criticism. Defendants assert that plaintiffs' idea that the 

2-year limitation was under siege is historical fiction. 

Nothing in the legislative minutes indicates that any 

committee or individual referred to Mr. Newton's article in 

discussing the change in the law. We draw no conclusion from 

the fact that this article existed prior to the legislature's 

amendment of the statute. 

The legislature is presumed to have full knowledge of 

existing laws. Department of Revenue v. Burlington Northern, 

Inc. (1976), 169 Mont. 202, 211, 545 P.2d 1083, 1088. At the 

time the 2-year limitation was deleted from S 15-2022, 

R.C.M., the Revised Code contained four alternative statutes 

of limitation that might apply to civil securities cases: 

93-2601. Periods of limitation prescribed. The peri~ds~rescribed for the 

commencement of actions, other than for 

the recovery of real property, are as 

follows: 

93-2603. Within eight years. Within 

eight years: An action upon any 
contract, obligation, or liability, 

founded ed upon an instrument in writing. 

93-2606. Within -- kwo years. Within two 

years: . . . (2) An action upon a statute, or upon an undertaking in a criminal 

action, for a forfeiture or penalty to 

the state. 

93-2607. Two-year limitation. Within 

two years: . . . (4) An action for relief 

on the ground of fraud or mistake, the 

cause of action in such case not to be 

deemed to have accrued until the discovery by the aggrieved party of the facts 

constituting the fraud or mistake. 

93-2613. Actions for relief not hereinbefore provided - for. An action for 

relief not hereinbefore provided for must 

be commenced within five years after the 

cause of action shall have- accrued. - 

Similar 8, 2 and 5 year limitations are contained today in 

SS 27-2-202 (1) , -211 (1) , -203 and -215, MCA. 

A statute of limitation is the legislature's rough 

approximation of "the point at which the interests in favor 

of protecting valid claims are outweighed by the interests in 

prohibiting stale ones. l1 Johnson v. Railway Express Agency 

(1975), 421 U.S. 454, 463-64. 

Because there is no statute of limitations for civil 

enforcement actions under 5 10(b), of the Federal Securities 

Exchange Act of 1934, federal cou'rts apply the relevant P 

statute from each forum state. Cahill v. Ernst & Ernst (7th 

Cir. 1980), 625 F.2d 151, 153. Selection of "the most analogous" statute of limitations is. governed by the courts1 

characterization of the claim. Board of Regents v. Tomanio 

(1980), 446 U.S. 478, 488. The choice of which statute of 

limitations ultimately applies rests upon a determination of 

which statute will best effectuate the congressional policies 

underlying the federa 1 Act. 
The underlying policy and purposes of Montana's Securities Act are expressed in § 30-10-102, MCA: 

Parts 1 through 3 of this chapter shall 

be construed to: 

(1) protect the investor, persons engaged in securities transactions, and the 

public interest; 

(2) promote uniformity among the states; 

and 

(3) encourage, promote, and facilitate 

capital investment in Montana. 

Subsections (1) and (3) were added by the legislature in 

1983. Prior to that time, the Act contained one policy 

statement: "Parts 1 through 3 of this chapter shall be so 

construed as to effectuate its general purpose to make uniform the law of those states which enact it." Section 

30-10-102, MCA (1981). Since the Act no longer has one 

primary purpose, each of the three declared purposes must be 

ba lanced against the others. In choosing an appropriate 

statute of limitations for civil securities cases in Montana, 

we keep each of these purposes in mind. 

Each party and amicus curiae has a preference as to 

which genera1 limitation is most appropriate to the case. 

Plaintiffs contend that the 8-year limitation of 

S 27-2-202(1), MCA, is most appropriate. That section 

provides : 

The period prescribed for the commencement of an action upon any contract, 

obligation, or liability founded upon an 

instrument in writing is within 8 years. 

Counsel for the Montana Securities Department of the State 

Auditor's Office asserts that securities transactions can 

best be described as bilateral, executory contracts, and that 

the civil remedy for violations of the Securities Act is the 

traditional contract remedy of rescission with interest minus 

income received. 
Defendants contend that the 2-year limitation on a 

"liability created by statute" applies. Section 27-2-211(1), 

MCA, provides: 

Within 2 years is the period prescribed 

for the commencement of an action upon: 

(a) a statute for a penalty or forfeiture when the action is given to an 

individual or to an individual and the 

state, except when the statute imposing 

it prescribes a different limitation; 

(c) a liability created by statute other 

than: 

(i) a penalty or forfeiture; or 

(ii) a statutory debt created by the 

payment of public assistance. 

Defendants point out that Count I of plaintiffs' complaint 

alleges registration violation of §§ 30-10-202 and -205, MCA. 

Defendants argue that the registration requirement did not 

exist at common law, and that claims of registration violations cannot be construed as a contract action. Defendants 

contend that the 2-year limitation also applies to Count I1 

because (1) plaintiffs' complaint recites statutory violation 

and seeks statutory remedies, and (2) liabilities created by 

the sale of a security by "fraud or misrepresentation" under 

the Act are vastly different from those imposed in a common 

law fraud action. 

Under certain circumstances, potential liability in tort 

may coexist with a liability in contract. When the facts 

warrant either form of action, an injured party has the right 

to elect which form of action he will pursue. Garden City 

Floral Co. v. Hunt (1953), 126 Mont. 537, 543-44, 255 ~.2d 

352, 356. The general rule applied to situations falling 

within the twilight zone of contract and tort law is that 
doubt must be resolved in favor of an action based upon 

contract. Unruh v. Buffalo Bldg. Co. (Mont. 1981), 633 P.2d 

It is, of course, possible to allege several, individual 

causes of action based upon the same injury. A court may be 

obligated to segregate plaintiff ' s various claims and apply 

separate statutes of limitations to each. Mu1 tiple periods 

of limitation could apply to the same case. Construing this 

theory of election of remedies with reference to statutes of 

limitations, the United States Supreme Court has stated: 

. . . If the choice of the statute of 

limitations were dependent upon the 

particular facts or the precise legal 

theory of each claim, counsel could 

almost always argue, with considerable 

force, that two or more periods of limitations should apply to each § 1983 

claim. Moreover, under such an approach, 

different statutes of limitations would 

be applied to the various S 1983 claims 

arising in the same State, and multiple 

periods of limitations would often apply 

to the same case. There is no reason to 

believe that Congress would have sanctioned this interpretation of its 

statute. 

Wilson v. Garcia (1985), U.S. , 103 S.Ct. 1938, 

1946. We appreciate the logic of this analysis and see no 

reason why it should not be followed in securities cases, 

where claims of fraud, statutory violation, breach of fiduciary duty, and breach of contract may all spring from the same 

injury. 

The choice of which statute of limitations should apply 

ultimately rests on a characterization of the essence of the 

claim. In determining which limitation should apply to 

claims under the federal Securities Act, the federal courts 

select the state statute of limitations that will best effectuate the congressional policies underlying the Act. 

Likewise, in characterizing plaintiffs' claims here, the 

legislative purposes of uniformity, investor protection, and 

promotion of investment must be weighed in the balance. 
Only two Montana Securities Act cases have reached this 

Court: State v. Duncan (1979), 181 Mont. 382, 593 P.2d 

1026, and Brown v. Merrill, Lynch, Pierce, Fenner, Etc. 

(1982), 197 Mont. 1, 640 P.2d 453. In Duncan, we affirmed a 

criminal conviction for deceptive practices and sale of 

unregistered securities. In determining whether an investment contract security was sold, we adopted the following 

broad definition of "security" from the United States Supreme 

Court: 

The touchstone [of an investment contract] is the presence of an investment 

in a common venture premised on a reasonable expectation of profits to be derived 

from the entrepreneuria 1 or managerial 

efforts of others. 

Duncan, 181 Mont. at 392, 593 P.2d at 1032, quoting united 

Housing Foundation, Inc. v. Forman (1975), 421 U.S. 837, 852. 

Section 30-10-103(11), MCA, includes "investment contract" in 

its definition of "security." Our opinion i.n Duncan, a 

criminal case, is relevant here only in that it discusses 

security in contract terms. 

Brown was a civil action by two individual investors 

against a brokerage firm. Although. Securities Act violations 

purportedly occurred, plaintiffs chose to frame their complaint in tort causes of action of negligence and fraud, 

praying for actual and punitive damages. Brown, 197 Mont. at 

7 & 10-11, 640 P.2d at 456 & 458. The Securities Act does 

not allow for punitive damages. See S 30-10-307, MCA. The 

Court addressed each of plaintiffs' five causes of action 

separately in determining whether summary judgment in favor 

of defendants had been properly granted. No statute of 

limitations or choice of remedy issue was raised in Brown. 

Neither Duncan nor Brown offer guidance as to the manner 

in which plaintiffs' claims should be characterized in this 

case. 
Count I alleges violations of the Units' Order of 

Registration and securities registration requirements, in 

that defendants failed to deliver a copy of the Private 

Placement Memorandum to plaintiffs prior to sale, failed to 

file a copy of the map and other geological and economic 

information used as sales literature, and failed to disclose 

defendant Davidson's ownership interest in the common stock 

of Taurus Oil. Count I1 contains allegations of fraud or 

deceit as well as violations of the Act. Count 111 alleges 

negligence and breach of fiduciary duties on the part of the 

broker-dealers and agents. Count IV alleges negligence, 

breach of contract and breach of fiduciary duties on the part 

of the officers, directors and general partners of Taurus 

Drilling. 

The complaint specifies that paragraphs 9 through 20 are 

incorporated by reference into each of the four counts. 

Allegations of material misrepresentations and untrue statements of fact are contained in paragraphs 9 through 20. We 

also note that, although Counts I11 and IV do not allege 

specific statutory violations, the Securities Act of Montana 

implicitly establishes a code of conduct to be followed by 

brokers and others involved in the sale of any security. 

Section 30-10-301, MCA; Brown, 197 Mont. at 9, 640 P.2d at 

457. We find that each count of plaintiffs' complaint in 

this case can be interpreted as sounding in tort, contract or 

statutory violation. 

Where there is a substantial question as to which of two 

or more statutes of limitations should apply, the genera1 

rule is that the doubt should be resolved in favor of the 

statute containing the longest limitations. Akada v. Park 

12-01 Corp. (Wash. 1985), 695 P.2d 994, 995. Where doubt 

exists as to the nature of the action, courts lean toward 

application of the longer period of limitations. Shew v. 
Coon Bay Loafers, Inc. (Wash. 19691, 455. P.2d 359, 366, 

citing Hughes v. Reed (10th Cir. 1931), 46 F.2d 435, 440. 

This [general rule] serves the legislative intent of protecting defendants from 

stale claims, yet provides an approach of 

liberality which affords a plaintiff 

party-litigant maximum free access to our 

court system. Although statutes of 

limitation are primarily designed to 

assure fairness to defendants because 

they prevent claims from being brought 

when the relevant evidence is so old that 

it is unreliable, the policy of repose is 

outweighed when the interests of justice 

require ot.herwise. 

Williams v. Lee Way Motor Freight (Okla. 1984), 688 P.2d 

As discussed above, the legislature deleted the 

2-years-from-sale limitation from the Act at the same time it 

rejected a proposed limitation of 2-years-from-discoveryof-violation. Limitations longer than 2 years are found in 

5s 27-2-202(1) & -215, MCA. An action founded upon an instrument in writing must be commenced within 8 years. Section 27-2-202 (1) , MCA. An action for relief not otherwise 

provided for must be commenced within 5 years after the cause 

of action accrues. Section 27-2-215, MCA, is Montana's 

"catch-all" statute of limitation. No federal court has 

applied a state catch-all limitation period to any claims 

made under the federal Securities Act. Cahill v. Ernst & 

Ernst (7th Cir. 1980), 625 F.2d 151, 155. 

Application of the longer limitation period comports 

with the Act's purposes of protecting the investor and encouraging capital investment. We recognize that the other 

purpose of promoting uniformity among the states is not 

promoted by our application of the 8-year limitation in 

Montana. Most state securities acts contain statutes of 

limitations in the 2 to 4 year range. See e.g., ~laska Stat. 

s 45-55.220 (f) (1980) ; Colo.Rev.Stat. § 11-51-125 (8) (Supp. 

1984); Idaho Code 5 30-1446 (3) (1980); Nev. Rev. Stat. 

s 90.200 (5) (1979); N.M. Stat. Ann. 5 58-13-42(A) (Supp. 

13 
1983) ; Okla. Stat. Ann. tit. 71, S 408 (a) (2) (e) (Supp. 1985) ; 

Utah Code Ann. S 61-1-22 (5) , (Supp. 1983) ; Wash. Rev. Code 

Ann. S 21.20.430 (4) (b) (1983) ; Wyo. Stat. S 17-4-122 (e) 

(1977). The legislature deleted the 2-year limitation from 

the Montana Act. It is for that same body to harmonize our 

securities law with the laws of other states, should it chose 

to do so. 

Based upon the pleadings and the facts presented to us 

by the federal court in this case, we hold that the 8-year 

limitation period contained in 5 27-2-202(1), MCA, applies to 

civil actions brought pursuant to S 30-10-307, MCA, of the 

Securities Act of Montana. 

We concur: 

Chief Justice 
Mr. Justice L.C. Gulbrandson, dissenting. 

1 respectfully dissent. 

I agree with the majority that the selection of the 

appropriate statute of limitations rests on the 

characterization of the essence of the claim, with an effort 

to effectuate the declared legislative policies. In my view, 

the majority has failed to characterize the claims, and 

instead has found "that each count of plaintiffs' complaint 

can be interpreted as sounding in tort, contract, or 

statutory violation," and the majority then proceed to adopt 

the statute of limitations containing the longest time 

period. 

This Court in Anderson v. Applebury (1977), 567 P.2d 

951 at 955 stated: 

[p] laintiffsf amended complaint. . . seeks recovery of damages and penalties 

for alleged statutory violations. 

Applicable to such claims is the two year 

period of limitations. 

Relying upon that authority, I would hold that United 

States District Court Judge Battin correctly applied the two 

year limitation to the securities registration claim. 

The histories of the Securities Act of Montana and the 

Uniform Securities Act suggest that claims brought under 

those Acts are based on fraud. Relying upon those histories, 

the declared purposes of the Montana Legislature in enacting 

the Securities Act, and the allegations of plaintiffs' 

complaint, I would characterize the remainder of the claims 

as sounding in tort, and would apply the two year from 

discovery time period of limitations as expressed in 

S 27-2-203, MCA, and as interpreted in Mobley v. Hall (Mont. 

19831, 657 P.2d 604, 40 St.Rep. 49.