No. 88-195 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

THOMAS CMISHOLM AND DONALD CHISHOLM, 

Plaintiffs and Appellants, 

-vsFIRST NATIONAL BANK OF GLASGOW, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Seventeenth Judicial District, 

In and for the County of Valley, 

The Honorahle B.W. Thomas, Judge presidina. 

COUNSEL OF RECORD: 

For Appellant: 

Dennis Patrick Conner, Great Falls, Montana 

Charles S. Lucero, Great Falls, Montana 

For Respondent : 

Jacque W. Rest; Habedank, Cumming, Best, Maltese and 

Savage, Sidney, Montana 

Submitted on Briefs: Oct. 13, 1988 

Decided: December 22. 1988 
Mr. Justice John Conway Harrison delivered the Opinion of the 

Court. 

This appeal comes from an amended order of the District 

Court of the Seventeenth Judicial District, Valley County, 

Montana, in which appellants' action was dismissed and 

judgment was entered in favor of respondent. We affirm. 

The District Court's original order dismissed all 

claims dependent upon the appellants' ownership of certain 

property which they alleged they were wrongfully deprived. 

The District Court ordered a later hearing to determine which 

issues in the complaint remained. Ry an amended order, from 

which this appeal arises, all of the appellants' claims were 

dismissed and judgment was entered for the respondent. 

Two issues are presented for our review: 

1. Did the District Court abuse its discretion b57 

dismissing any of the claims against the bank? 

2. Even if the District Court's dismissal under Rule 

41(b) was proper, was it error to dismiss all claims in the 

complaint? 

We begin by noting that dismissal under Rule 41(b), 

M.R.Civ.P. is a harsh remedv. Because the result is severe, 

courts should refrain from dismissing an action or claim 

unless there is no other adequate remedy available and where 

the facts sufficiently call for such a result. The facts of 

this case are numerous and the District Court file abundant. 

Yet, stripped from the morass are those facts which lead to 

our affirmance of the District Court order. 

Appellants are the owners of a masonry business in 

Shelby, Montana. In 1979, the appellants started a new 

business venture in Glasgow, Montana, involving the 

manufacture of cement blocks. The respondent, First National 

Rank of Glasgow, made loans to the appellants in order for 
them to get the business started. The appellants were unable 

to make the Glasgow business survive, and in October, 1982, 

appellants turned the business over to Nelson Corscadden. 

In 1983, appellants sought to recover certain equipment 

in Corscadden's possession which appellants alleged belonged 

to their Shelby business and was not part of the transferred 

Glasgow business. Corscadden denied appellants' allegations 

and refused to hand over the equipment. Appellants filed a 

complaint against Corscadden in September, 1983, alleging 

conversion of their property. In February, 1984, before the 

case came to trial, Corscadden filed a Chapter 11 Bankruptcy 

Petition, and the state court action against Corscadden was 

automatically stayed. 

Appellants, on August 1, 1984, filed a complaint 

against the respondent (hereinafter referred to as bank) in 

Cascade County, alleging the bank had secretly conspired to 

deprive the appellants of the property rights to the 

equipment held by Corscadden. That suit was transferred to 

Valley County District Court on September 27, 1984. 

The appellants filed a proof of claim against 

Corscadden in the Bankruptcy Court on August 14, 1984. At 

the same time, appellants moved the Bankruptcy Court to lift 

the automatic stay in order for them to proceed against 

Corscadden and the bank before a jury in the state district 

court. The Bankruptcy Court took no action on that motion. 

In April, 1985, appellants renewed their motion before 

the Bankruptcy Court to lift the automatic stay. The 

Bankruptcy Court denied the motion and requested the 

appellants file an adversary complaint. The court added that 

this was a core issue and with a complaint filed, the issue 

would be resolved in June of that year. No adversary 

complaint was f <led. 
The bank moved the District Court for partial summary 

judgment on March 13, 1986. The bank requested the District 

Court to abstain from asserting jurisdiction over the 

property ownership dispute, claiming the Bankruptcy Court had 

exclusive jurisdiction. On March 27, 1986, during the 

hearing on this motion, appellantsv previous attorney, Erik 

Thueson, resisted the motion to abstain, arguing the issue 

should be heard in state court before a jury because " [il n a 

State Court, my clients are entitled to certain rights of due 

process . . . In a Bankruptcy Court this is untrue." 

On April 18, 1986, District Court Judge R. C. 

McDonough, (who is now a member of this Court) entered an 

order in which he ruled the Rankruptcy Court had exclusive 

jurisdiction to decide the property dispute, and further 

noted that the Bankruptcy Court had specifically refused to 

allow the state court to decide the issue. The order stated 

that a determination in state District Court could well lead 

to inconsistent adjudication, and that no significant burden 

would result by having the issue adjudicated in Rankruptcy 

Court. Most importantly, however, the ord-er read in 

pertinent part: 

IT IS THEREFORE ORDERED that the 

pre-trial and trial of this action are 

hereby VACATED in order to give the 

plaintiffs the opportunity to have the 

issue of the ownership of this property 

be decided in Rankruptcy Court and make a 

report to this Court within sixty (60) 

days as to their progress. If the 

decision -- on this issue -- is not diligent 

pursued -- by the Plaintiffs, the Court will 

consider a renewal of - the motion by 

the nefendant precludiTg this Court from 

asserting jurisdiction to decide the 

ownership of the proper%. 

- - - (Emphasis 

added. ) 
There was nothing uncertain or ambiguous about the order. 

Its clear purpose was to have the ownership issue settled, 

either by adjudication in the Bankruptcy Court, or through 

agreement with Corscadden that one of the parties was the 

rightful owner of the equipment. 

Appellants, dissatisfied with this order, filed a 

petition for a writ of mandamus with this Court, seeking to 

have this order withdrawn and a trial rescheduled in the 

District Court. On December 30, 1986, we denied the 

petition, finding there was a plain, speedy and adequate 

remedy in the Bankruptcy Court. State ex rel. Chisholm v. 

District Court (Mont. 1986), 731 P.2d 324, 43 St.Rep. 2317. 

On February 6, 1987, appellants filed what they 

denominated "Motion For Appropriate Action" in the Bankruptcy 

Court. By this motion, appellants requested the Bankruptcy 

Court to either proceed on the issue before a jury, or to 

lift the automatic stay of the state district court action. 

Although both requests were previously denied by the 

Bankruptcy Court, appellants renewed their requests under the 

guise of a motion for appropriate action. Quite clearly, 

attorney Theuson was not only dissatisfied with his position, 

but he refused to accept it. 

On March 3, 1987, the bank filed a renewed motion for 

partial summary judgment and motion to abstain. In its 

memorandum in support, the bank gave the District Court a 

chronology of events of the case. Further, the bank noted 

that appellants had not only failed to file an adversary 

proceeding in Bankruptcy Court, but had also failed to report 

their progress on the resolution of the ownership issue to 

the District Court as required by the April 18, 1986, 

District Court order. 

After a hearing before the District Court on March 17, 

1987, the bank's motion was denied as "premature." However, 
Judge McDonough required appellants to make a report to the 

court within sixty days on the progress made in resolving 

this issue. On April 14, 1987, Thueson wrote a letter to 

Judge McDonough which stated little more than "[appellants! 

continue to run into snags that are slowing the disposition 

of the bankruptcy matter down." 

On July 7, 1987, the bank moved for involuntary 

dismissal of the appellants' action. On August 17, 1987, the 

District Court heard arguments from counsel for both parties 

on the bank's motion. Attorney Theuson assured the court 

that the ownership issue had been resolved and that a signed 

settlement agreement would be filed forthwith. 

On September 25, 1987, the District Court, having no 

settlement agreement before it, issued an order in a final 

attempt to force resolution of the property ownershi-p issue. 

That order read in pertinent part: 

Since there remains doubt as to 

whether the matter has been settled 

between the parties, and because this 

case cannot proceed until the bankruptcy 

decision has been rendered, or a 

settlement reached by the parties, IT IS 

ORDERED that plaintiffs have sixty (60) 

additional days within which to furnish 

this Court with proof that the bankruptcy 

issues have been settled and compromised. 

If no such compromise is reached within 

60 days, plaintiffs must furnish this 

Court with proof that a timely request 

has been made by them to the bankruptcy 

court to schedule this matter for 

adversarial hearing at the earliest 

convenient time. If plaintiffs fail to 

furnish either (a) proof of settlement or 

(b) proof of diligent pursual of the 

adversarial hearing in bankruptcy court, 

this Court will then entertain a renewed 

Motion by d.efendant for involuntary 

dismissal of this action with prejudice. 
On November 30, 1987, the bank moved for involuntary 

dismissal under Rule 41(b), specifically noting that 

appellants had failed to furnish proof of settlement or 

pursual of an adjudication in Bankruptcy Court. A copy of 

the settlement agreement was ultimately filed with the 

District Court. Attached as an exhibit to appellants' 

response brief to the bank's motion was a so-called "Mutual 

Release Of All Claims," dated July 31, 1987. Elonetheless, 

the District Court was not apprised of the settlement until 

December 14, 1987, and a stipulation for dismissal without 

prejudice of the Bankruptcy claim was not executed by the 

appellants' attorney and Corscadden's attorney until December 

10, 1987. 

In their second response brief to the bank's motion for 

involuntary dismissal, appellants argued that a settlement 

was "sanctioned" by Judge McDonough, and the court should 

"finally set a trial date so this matter can be resolved." 

Appellants further stated: 

Defendant next contends that the "Mutual 

Release" does not resolve the issue of 

ownership. To the contrary, the 

Chisholms, through the Mutual Release, 

have given up and surrendered their legal 

claims against Corscadden. 

The defendant also argues that there can 

be no settlement where there is no 

resolution of ownership. This is untrue. 

By definition, settlement is entered into 

by the parties to resolve a conflict 

short of factual finding concerning the 

issues in the case. At any rate, the 

settlement resolves ownership. 

It is quite obvious that appellants are talking out of 

both sides of their mouth. They wanted to resolve the 

ownership issue, thereby complying with t.he various court 
orders, yet they did not want to be hound by that disposition 

of the issue as it affects their suit against the bank. By 

presenting the District Court with the late-filed "Mutual 

Release," the appellants said to the court in essence: Here 

is the ownership issue right back in your lap, Judge, we are 

finally going to get a trial of this issue before a jury in 

state district court. As did the District Judge, we refuse 

to condone such a position. 

On February 2, 1988, presiding District Judge B.W. 

Thomas entered a memorandum order granting the bank's motion 

for involuntary dismissal. The court ordered d-ismissal of 

all claims which were dependent on appellants' ownership of 

the disputed property. The court reasoned that either (1) 

the settlement will be accepted as being timely made and 

interpreted as fully conceding the ownership rights of 

Corscadden; (2) the appellants would be deemed as havinq 

refused to resolve the issue as required by Judge McDonough's 

order of April 18, 1986; or (3) the appellants would have 

failed to diligently prosecute the action against the bank by 

refusing to have the ownership issue resolved. The court 

held that on any basis, dismissal would result. 

On February 9, 1988, the bank moved the District Court 

to modify its February 2, 1988 order to dismiss all claims in 

the appellants1 complaint because, they alleged, all claims 

were dependent on the ownership of the property. In an 

amended order and judgment for the bank dated March 35, 1988, 

the District Court ordered: 

1. The motion to dismiss is granted 

insofar as all claims of plaintiffs which 

are dependent on the issue of whether 

plaintiffs were wrongfully deprived of 

the ownership of their property are 

concerned. 
2. Since all claims of plaintiffs' 

complaint are dependent upon the issue of 

whether plaintiffs were wrongfully 

deprived of the ownership of the disputed 

property, all claims (claims I-V) are 

hereby dismissed with prejudice because 

of plaintiffs' failure to prosecute 

diligently, and their failure to comply 

with orders of this Court. 

Rule 41(b), M.R.Civ.P., provides: 

Involuntary dismissal - effect thereof. 

For failure of the plaintiff to prosecute 

or to comply with these rules or any 

order of court, a defendant may move for 

dismissal of an action or of any claim 

against him . . . Unless the court in its 

order for dismissal otherwise specifies, 

a dismissal under this s~xbdivision and 

any dismissal not provided for in this 

rule, other than a dismissal for lack of 

jurisdiction or failure to join a party 

under Rule 19, operates as an 

adjudication upon the merits. 

It is undisputed that it is within the sound discretion 

of the District Court to dismiss an action under Rule 41 (b) , 

M.R.Civ.P., Brymerski v. City of Great ~alls (1981)~ 195 

Mont. 428, 636 P.2d 846, and we encourage the cautious 

exercise of that discretion. As stated in Von Poppenheim v. 

Portland Boxing Comm. (9th Cir. 1971), 442 F.2d 1047, 1049, 

cert. denied 404 U.S. 1039, 92 S.Ct. 715, 30 L.Ed.2d 731: 

Because a dismissal under Rule 41 (b) is 

such a harsh remedy, and because such 

dismissals are frequently occasioned by 

inattention of counsel rather than by 

plaintiff's own wrongdoing, courts are 

rightfully reluctant to employ 41 (b) 

sanctions for failure to comply with an 

order of the court . . . It is equally 

clear, however, that aggravated 

circumstances may make dismissal under 

41(b) appropriate . . . In those cases 

the district iudge will be reversed only 
if he has abused his discretion in 

dismissing the action. 

In this case, the dismissal grounds for failure to 

prosecute was the result of the appellants' failure to comply 

with the court's order to resolve the issue. The appellants 

were fully warned that their continuing failure to resol~re 

the ownership issue would result in dismissal. The 

appellants' noncompliance with the District Court's order was 

a flagrant attempt to avoid resolution of the ownership issue 

in Bankruptcy Court. As a result, dismissal was proper. 

For some tactical reason, appellants' attorney 

willfully and deliberately chose to ignore the court orders. 

NOW, nearly five years after the actions complained of took 

place, and some four and one-half years after the complaint 

against the bank was filed, the appellants argue that the 

issue should be resolved in the District Court. Had the 

appellants complied with the request of the Bankruptcy Court 

to file an adversary proceeding, or with the direct order of 

the District Court, this issue could have been resolved, one 

way or another, as early as June of 1985. We refuse to 

condone such contumacious and deliberate disobedience to 

reasonable and lawful court orders. We conclude that the 

District Court, with great patience, properly exercised its 

discretion, without abuse. 

The appellants next claim that the District Court erred 

in dismissing all of the claims against the bank. They argue 

that even if the District Court correctly dismissed those 

claims dependent on whether the appellants were wrongfull;7 

deprived of the disputed property, it nonetheless erred in 

concluding that all claims in the complaint were dependent on 

that issue. We disagree. 

Rule 41(h) clearly provides for the dismissal of a 

claim or an action. The District Court was not hound to 
CORRECTION 

Date 411-LI EDITORIAL DEPARTMENT 

West Publishing Co., P.O. Box 3526, St. Paul, MN 55165 

Please make the following correction in the opinion in 

&) -rrq$?, -19 5 Title: - 

first column, line In second from bottom. 

-&.m\\O oh 5 SA~L~&~Y~G 

~~AWLW 

should read 

The expense of making changes is such that we cannot undertake it for 

items of merely typographical style. 

West Publish~ng Co. 

N182c 
dismiss only certain of appellants' claims which were related 

to the court order with which they refused to comply. It was 

fully within the discretion of the District Court to dismiss 

the entire action against the bank. The amended order 

states: 

[A111 claims (claims I-V) are hereby 

dismissed with prejudice because of 

plaintiffs ' failure to prosecute 

diligently, and their failure to comply 

with orders of this Court. 

We find the dismissal of the appellants' action against 

the bank was not an abuse of discretion. The amended order 

and judgment are affirmed. 

We concur: A I I 

\Cfiief Justice fl\ 
Mr. Justice John C. Sheehy specially concurring: 

I concur with the result here. Since this Court and the 

District Court felt that the ownership of the property was a core 

issue in the state court action, it was proper to require Chisholm 

to proceed in bankruptcy court. But even the bankruptcy court 

seemed of the opinion that the bank case was outside the bankruptcy 

court's dominion (see dissent, J. Morrison, Chisholm, 731 P.2d at 

326). An attorney should not be castigated for representing his 

client in murky waters. 

L .)A .e - Justice 

Mr. Justice William E. Hunt, Sr.: 

I concur with Mr. Justice Sheehy 

/ 

Justice