No. 86-571 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

STATE OF MONTANA, ex rel., LOREN S. 

VRANISH, H. LEE TOWER, GALLATIN-MADISON 

RANCH CO., a Montana corp., C. DALE and 

LORETTA COLLINS, AL DYKSTERHOUSE, HENRY 

DYKSTERHOUSE, et al., 

Relators, 

-vsTHE DISTRICT COURT OF THE FIRST JUDICIAL 

DISTRICT OF THE STATE OF MONTANA, IN AND 

FOR THE COUNTY OF LEWIS & CLARK and THE 

HONORABLE HENRY LOBLE, Presiding Judge, and 

D.A. DAVIDSON & CO., INC., 

Respondents. 

ORIGINAL PROCEEDING: 

COUNSEL OF RECORD: 

For Relator: 

Luxan & Murfitt; Michael J. Mulroney argued, Helena, 

Montana 

For Respondent: 

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

Montana 

Dorsey & Whitney; Edward J. Pluimer, Minneapolis, 

Minnesota 

Hon. Henry Loble, District Judge, Helena, Montana 

Submitted: May 26, 1987 

Decided: August 12, 1987 

Filed: AUG 12 1987 

Clerk 
Mr. Justice William E. Hunt, Sr., delivered the Opinion of 

the Court. 

This is an original proceeding before the Montana 

Supreme Court. Relators are applying for a writ of 

supervisory control regarding an order issued by the District 

Court of the First Judicial District on September 30, 1986 

denying their claim for punitive damages. We deny the 

application for a writ of supervisory control. 

The issues in the application are: 

1. Should relators be estopped from requesting Count 1 

be treated as a separate and distinct common law fraud claim 

for punitive damages purposes where respondents allege 

relators have previously represented to the trial court that 

Count 1 is a statutory claim under the Montana Securities Act 

for statute of limitations purposes? 

2. Did the trial court correctly rule that Count 1 of 

relator-plaintiffs' complaint was a statutory claim under the 

Securities Act and that it should be treated as such for all 

purposes under the litigation? 

3. Did the trial court err when it dismissed relator's 

punitive damages claim for Count 3? 

Relators filed their original complaint in February, 

1982, and amended it in March, 1982 and December, 1983. The 

complaint is related to a 1976 purchase of limited 

partnership interests in a tax shelter known as Energy and 

Utility Coal Investments, Tnc. 

To avoid lengthy and potentially unnecessary discovery, 

both parties agreed that the statute of limitations issue 

should be settled prior to commencing discovery. On May 23, 

1986, relators moved the trial court for a ruling that an 

eight-year statute of limitations applied to Count 1 of their 
second amended complaint because it was part of a statutory 

claim under the Securities Act of Montana, § 30-10-307, MCA. 

The trial court found that Count 1 of the amended complaint 

is a claim brought under the Securities Act and ordered that 

the eight-year statute of limitations in S 27-2-202(1), MCA, 

is applicable to all three counts. 

Respondent D. A. Davidson filed two subsequent motions 

which were orally argued. The first motion sought 

clarification of the statute of limitations applicable to 

Count 1 and requested the Court to treat Count 1 consistently 

for all purposes in the litigation. 

The second motion requested the dismissal of plaintiff's 

punitive damages claim since D. A. Davidson alleges the order 

found Counts 1 and 2 to be Security Act claims and Count 3 to 

be a breach of contract claim also under the Securities Act 

with the result that no punitive damages were recoverable. 

On September 30, 1986, the District Court granted both 

of respondents' motions and relators appeal the second motion 

denying the punitive damages claims as to Counts 1 and 3 but 

not as to the second count. 

Relators bring this original proceeding for a writ of 

supervisory control on the dismissal of their punitive 

damages claim. The case is properly before this Court as 

this appears to be the only adequate remedy available to 

relators because the question of damages would necessitate a 

complete retrial of the matter. 

Rela-tors argue that their complaint is a civil 

securities action alleging common law fraud and mistake and a 

violation of 5 30-10-307, MCA, in connection with 

respondent's sale to relators of limited partnership 

interests in a coal tax shelter. In their application, they 

claim Count 1 of the amended complaint charges common law 

fraud on the part of the defendant; Count 2 charges 
securities law violations; and Count 3 charges breach - of 

contract with the later two counts incorporating by inference 

the allegations of the preceding counts. They argue it was 

error to dismiss their punitive damages claim with respect to 

the common law fraud alleged in Count 1 and with respect to 

their breach of contract allegation in Count 3. 

Relators contend the trial court erred in concludina 

that since the action included the statutory claim, all 

counts were limited in recovery to the remedy provided by the 

Civil Securities Act under § 30-10-307, MCA, which does not 

provide for punitive damages. They argue here that Thiel v. 

Taurus Drilling Ltd. 1980-11 (Mont. 1985), 710 P.2d 33, 41 

St.Rep. 152, did not limit the eight-year statute of 

limitations period to just statutory claims. Instead they 

argue Thiel holds that the eight-year statute of limitations 

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

and that Count 1 of this action is part of just such a "civil 

action" brought pursuant to this statute. 

The Thiel case dealt primarily with the question of 

which statute of limitations should apply to an action in a 

securities case. In that case this Court stated: 

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. Multiple periods 

of limitation could apply to the same case. 

Construing this theory of election of remedies with 

reference to statute of limitations, the United 

States Supreme Court has stated: 

" . . . If the choice of 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 § 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. , 105 S.Ct. 

1938, 1946, 85 L.Ed..2d 254." 

- 

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. 

Thiel at 38. 

Relators contend the Thiel court in essence sanctioned 

statutorily provided punitive damages from S 27-1-221, MCA, 

for a fraud count, such as their Count 1, when it 

specifically recognized that different periods of limitation 

should not be applied to different counts. Under this 

analysis they contend: (1) there may be different counts in 

a civil securities action; (2) each count carries an 

eight-year statute of limitations; and, (3) plaintiffs, in 

such actions, are entitled to the damages each count provides 

if they met the requisite burden of proof. 

While we believe these final three contentions do have 

merit, we note respondent's contentions paint a different 

picture of the controversy. Respondent argues the relators 

should be estopped from now claiming Count 1 is a separate 

and distinct common law fraud claim after having successfully 

argued below that Count 1 is not such a claim but is part of 

a statutory claim brought pursuant to the Securities Act. 

To address this issue we must consider both the August 

18, 1986 Order which allowed relators to utilize an eight 

year statute of limitation and which found that Count 1 was 

brought under the Securities Act and the September 30, 1986 
Order which dismissed relators punitive damages claim under 

Count 1. 

Relators' memorandum supporting its motion for an 

eight-year statute of limitations read as follows: 

Count One of Plaintiffs Second Amended Complaint in 

this action is part of a civil action brought 

pursuant to § 30-10-307 M.C.A. and is thus covered 

by the eight-year limitation period. (Emphasis in 

original. ) 

The District Court found: 

Count One is a claim brought under the Securities 

Act. Therefore, in accordance with Thiel the 

eight-year limitations period of $ 27-2-202 (1) , MCA, is applicable to Count One of plaintiffs' 

Second Amended Complaint. 

Relators now say: 

Count One of the Second Amended Complaint charges 

common law fraud on the part of the defendant. 

Relators represented to the trial court that Count 1 was 

a statutory claim and the court found it to be characterized 

as such. A court will consider those issues placed before it 

by the parties. Relators are estopped from now arguing Count 

1 is not a statutory claim but a common law fraud claim. 

Further, we find no error by the trial court in the 

characterization of Count 1 as a statutory claim. The trial 

court recognized that each count could be interpreted as 

sounding in contract, tort or statutory violation but found 

the essence of Count 1 was the alleged violation of the 

Montana Securities Act. It correctly concluded Count 1 could 

not be characterized as one claim for statute of limitations 

purposes but characterized as another type of claim for 

damages purposes. This Court has previously found it is 

imperative to characterize and treat each claim consistently 

for all purposes in the litigation. Israelson v. ~ountain 

Tractor Co. (1970), 155 Mont. 69, 467 P.2d 149. 
So long as this rule is applied consistently for all 

relevant purposes, the benefits and burdens of pursuing or 

defending a certain theory are fairly distributed in 

accordance with the law. We find no error on this issue. 

Since we have found no error in the characterization of 

relator's Count 1 as a statutory claim we further conclude 

that the eight-year statute of limitations applies to this 

case and relators are not entitled to seek punitive damages 

under their Securities Act claims. 

Relators third argument is that the trial court erred in 

dismissing their claim for punitive damages under Count 3 of 

their second amended complaint. In that count, relators 

assert a breach of contract and argue that the defendant 

violated an implied covenant of good faith and fair dealing 

in connection with that breach. They contend the trial court 

erroneously and prematurely ruled on the punitive damages 

claim with respect to Count 3. They further contend that 

discovery was not complete and facts were not yet developed 

on this count so the decision which held punitive damages 

were not available in this action effectively dismissed Count 

3 as well as Count 1 discussed above. 

D. A. Davidson, in contrast, argues that the trial court 

did not err when it held that Count 3 was also a claim 

brought pursuant to the Montana Securities Act. They claim 

that while either characterization of Count 3 as a breach of 

contract case or as a statutory violation is plausible, the 

outcome would be the same under both characterizations 

because relators would be entitled to an eight-year statute 

of limitations but could not seek punitive damages. 

They contend Count 3 has never been a claim for breach 

of the implied covenant of good faith and fair dealing but is 

solely a breach of contract claim, the two being entirely 

different claims. 
In its analysis of Count 3, the District Court concluded 

that the Count was brought under the Securities Act of 

Montana, as well as pursuant to principles of common law 

fraud and for damages for breach of a contractual obligation. 

The District Court further pointed out that in Count 3, the 

plaintiffs incorporated both Counts 1 and 2, which both 

constitute Securities Act claims. For these reasons, the 

District Court concluded that Count 3 was a claim brought 

pursuant to the Securities Act in the same manner as was true 

with Counts 1 and 2. We approve that analysis by the District Court. We also point out that to the extent that Count 

3 is classed as a breach of contract claim, punitive damages 

are not recoverable under Lemley v. Allen (1983) , 203 Mont. 

37, 659 P.2d 262. 

Section 30-10-307, MCA, which is a part of the 

Securities Act, provides that any person who offers or sells 

a security in violation of specified sections or offers or 

sells a security by means of fraud or misrepresentation is 

liable for the consideration paid for the security, together 

with interest at 10 percent, costs and reasonable attorney 

fees, less the amount of any income received on the security. 

If there is a sale of a security by means of fraud, as 

alleged in the pleadings, it specifically comes under the 

provisions of § 30-10-307, MCA, which allows recovery only of 

the consideration paid for the security plus interest, costs 

and attorney fees. This is a specific legislative limitation 

on the right of recovery of damages in such a transaction. 

We have concluded that the complaint essentially sets forth 

claims under the Securities Act. That was the basis for 

application of the eight-year statute of limitations. We 

conclude that it would be inconsistent to allow the plaintiff 

to remain in court under the eight-year statute of 

limitations because the claims are under the Securities Act 
and yet disregard the limitation upon damages set forth in 

the same Securities Act. 

We affirm the holding of the District Court in its 

dismissal of the punitive damages claim as to Count 3. 

Relator's writ of supervisory control is denied. 

We Concur: 

Chief Justice 

Mr. Justice L. C. Gulbrandson: 

I concur with the result, but not with all that is said in 

A the foregoing decision. , , ,

Justipe 

/'