NO. 93-197

IN THE SUPREME COURT OF THE STATE OF MONTANA

1993

C. HAYDON LIMITED and

DR. K. M. CLEWS,

Plaintiffs and Respondents,

-vsMONTANA MINING PROPERTIES, INC.,

a Montana corporation: et al.,

Defendants, Third-Party Plaintiffs

and Appellants,

-vsFRANK CROWLEY,

Third-Party Defendant,

and

W. D. MURRAY, JR.,

Third-Party Defendant and Respondent.

APPEAL FROM: District Court of the Second Judicial District,

In and for the County of Silver Bow,

The Honorable James E. Purcell, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Joan E. Cook: Miller & Cook, Great Falls,

Montana

For Respondents:

Greg J.

Montana

Skakles; Johnson, Skakles & Kebe, Anaconda

W. D. Murray, Jr., Attorney at Law, Butte, Montana

David M. McLean; Knight, Dahood, McLean, Everett

& Dayton, Anaconda, Montana

Submitted on Briefs: August 26, 1993

Filed: c 07 1993 Decided: Dec~efiber 7, 1993

c,k ~~p;~~~
Justice John Conway Harrison delivered the Opinion of the Court.

This is an appeal from the District Court of the Second

Judicial District, Silver Bow County. Appellant Montana Mining

Properties, Inc. (MMPI) appeals from a motion granted in favor of

W. D. Murray, Jr. (Murray) to dismiss for failure to comply with

Rule 9(b), M.R.Civ.P., and from an order granting Murray summary

judgment pursuant to Rule 56(c), M.R.Civ.P. We affirm.

The issues are:

1 . Did the District Court err by granting Murray's motion to

dismiss for failure to state a claim, pursuant to Rule 12(b)(6),

M.R.Civ.P.?

2 . Did MMPI have a reasonable opportunity to amend its

pleading?

Murray was a director and an attorney for MMPI, a corporation

of twelve Montana entities holding real property in Butte, Montana.

He resigned in the fall of 1990. In February 1991, a corporate

merger took place in British Columbia, Canada.

Shortly thereafter, MMPI President Malcolm Clews (Clews) began

billing MMPI directly for services and expenses owed him. The

bills resulted from a consulting agreement between Clews and then

general manager of MMPI, Frank Crowley (Crowley). An April 4,

1991, letter from Crowley to Clews acknowledged the debt and the

agreement.

Crowley was also owed monies by MMPI, as acknowledged by a

letter from Clews to Crowley dated April 2, 1991. The letters of

April 2nd and 4th were not found in MMPI's corporate records; but

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rather, in the personal records of Clews and Crowley. In the fall

of 1991, following the corporate merger and a change in management,

Clews and Crowley terminated their association with MMPI.

Two additional letters, "telefaxed" from Clews to Murray on

October 3 and 4, 1991, are present in the record. According to

MMPI, these letters--combined with the debt acknowledgement letters

of April 2nd and 4th--are evidence of conspiracy, fraud and breach

of fiduciary duties by Clews, Crowley and Murray.

On April 7, 1992, Clews brought an action against MMPI to

recover damages for breach of contract, breach of the implied

covenant of good faith and fair dealing, fraudulent

misrepresentations, and willful and negligent infliction of

emotional distress. On MMPI's motion, the court dismissed all

counts except breach of contract.

MMPI filed a third-party complaint on October 26, 1992,

against Crowley and Murray. The complaint alleged conspiracy to

commit fraud, common law fraud, and breach of a fiduciary duty

based on fraud.

On November 25, 1992, Murray filed a motion to dismiss for

failure to comply with Rule 9(b), M.R.Civ.P. Specifically, Murray

argued that MMPI did not plead the nine elements of fraud with

sufficient particularity. At the February 24, 1993, hearing on the

motion to dismiss, MMPI asked the District Court to consider

matters outside of the pleadings--the letters of April 2 and 4,

1991--which were attached to MMPI'S answers to Murray's

interrogatories. MMPI also asked for additional discovery and

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twenty days to amend its complaint.

On March 17, 1993, the District Court granted Murray's motion

to dismiss with prejudice and granted Murray summary judgment. The

court found that MMPI failed to plead with particularity its theory

of fraud against Murray. The basis for the court's decision was

that MMPI's allegations were contradictory and lacked specificity,

and that the allegations were based on "information and belief"

unsupported by fact. MMPI appeals.

I

Did the District Court err by granting Murray's motion to

dismiss for failure to state a claim, pursuant to Rule 12(b)(6),

M.R.Civ.P.?

We will not dismiss a complaint for failure to state a claim

"unless it appears beyond doubt that the plaintiff can prove no set

of facts in support of his claim which would entitle him to

relief." Proto v. Missoula County (1988), 230 Mont. 351, 352-53,

749 P.2d 1094, 1095-96. In considering Murray's motion to dismiss,

we construe the complaint in the light most favorable to MMPI, and

all allegations of fact are taken as true. See Willson v. Taylor

(1981) I 194 Mont. 123, 126, 634 P.2d 1180, 1182.

The District Court granted Murray's motion to dismiss for

failure to state a claim because it found that MMPI failed to

allege fraud against Murray with sufficient particularity. See

Rules 12(b)(6) and 9(b), M.R.Civ.P. In order to comply with Rule

9 (b) r a complainant must allege, with particularity, facts to

support the following nine elements of fraud:

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1)

2)

3 )

4 )

5 )

6)

7 )

8)

9)

a representation:

the falsity of the representation:

its materiality:

the speaker's knowledge of its falsity or ignorance of

its truth:

the speaker's intent that it should be relied on;

the hearer's ignorance of the falsity of the

representation:

the hearer's reliance on the representation;

the hearer's right to rely on the representation; and

consequent and proximate injury caused by reliance on

L.~~ . . tne representation.

Pipinich v. Battershell (1988), 232 Mont. 507, 511, 759 P.2d 148,

151 (citation omitted).

The District Court found, and we agree, that MMPI failed to

meet the requirements of Rule 9(b), M.R.Civ.P., in three respects.

First, allegations in paragraphs III and XI of MMPI's third-party

complaint contradicted allegations in paragraphs VIII and X.

Specifically, paragraphs III and XI stated that MMPI "knew no facts

with regard to the existence of the alleged consulting agreement"

until the Clews suit was filed, while paragraphs VIII and X alleged

that Murray made false representations to MMPI that Clews was due

monies pursuant to an agreement. Moreover, although MMPI alleged

that a representation was made, it failed to allege the time and

place of the representation, or to whom it was made.

Second, allegations in paragraphs IV, V, VII and VIII were

made "upon information and belief" of MMPI's counsel, Joan Cook,

who signed the complaint for MMPI. Allegations of fraud cannot

ordinarily be based "on information and belief" except as to

matters peculiarly within the opposing party's knowledge. Schlick

v. Penn-Dixie Cement Corp. (2d Cir. 1974), 507 F.2d 374, 379, cert.

denied, 421 U.S. 976 (1975). To satisfy Rule 9(b) in the latter

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instance, the allegations must be accompanied by a statement of

facts upon which the belief is founded. Segal v. Gordon (2d Cir.

1972), 461 F.2d 602, 608.

In this case, MMPI based its allegations on information and

belief. MMPI failed to demonstrate that the falsity of Murray's

representation to MMPI--that Clews was due monies pursuant to an

agreement--was peculiarly within Murray's knowledge. Furthermore,

the record is void of any facts upon which the alleged beliefs were

founded. As the District Court noted:

The employment of such extravagant terms as "fraud,"

"conspiracy," and other words of like malign import,

unaccompanied by a statement of fact upon which the

charges of wrongdoing rest, is a useless waste of words.

Brandt, et al. v. McIntosh, et al. (1913), 47 Mont. 70, 72, 130 P.

413, 414 (citation omitted).

Third, MMPI offered no factual support for its allegations

and, thus, did not meet the requirements of Rule 9(b), M.R.Civ.P.

Although MMPI alleged a representation and its falsity, it did not

present facts in support of those allegations. MMPI failed to

address the third through ninth elements of fraud, as set out

above. Put simply, MMPI failed to allege fraud with sufficient

particularity.

MMPI argues that Rule 9(b), M.R.Civ.P., must be read in

conjunction with Rule 8(a), M.R.Civ.P., which requires that the

pleadings contain only a "short and plain statement of the claim."

See Fraunhoffer v. Price (1979), 182 Mont. 7, 14-15, 594 P.2d 324,

328-29. While MMPI's contention is generally true, the statement

cannot be so "short" or so "plain" as to defeat the purposes of

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Rule 9(b). As the District Court correctly determined, Rules 9(b)

and 8(a), M.R.Civ.P., should be harmonized. See 2A James Wm.

Moore, Moore's Federal Practice, 5 9.03(2). One of the purposes of

Rule 9(b) is to protect reputations from unwarranted charges of

fraud, "especially professionals whose reputations in their fields

of expertise are most sensitive to slander . . . . " Semegen v.

Weidner (9th Cir. 1985), 780 F.2d 727, 731.

Viewing the record in the light most favorable to MMPI, we

find no evidence in the record to support MMPI's allegation of

fraud against Murray. See Willson, 634 P.2d at 1182. MMPI'S

allegations against Murray were contradictory, were not

sufficiently particular, and were unsupported by fact. The

District Court correctly: a) concluded that MMPI's complaint did

not sufficiently plead the nine elements of fraud; and b) denied

MMPI's motion to dismiss.

Because the District Court properly granted Murray's motion to

dismiss for failure to state a claim, we need not address whether

MMPI had a reasonable opportunity to present sufficient facts to

preclude summary judgment.

II

Did MMPI have a reasonable opportunity to amend its pleading?

MMPI contends that the District Court denied its request to

amend its complaint against Murray at the February 24, 1993,

hearing. At that hearing, MMPI argued that it had discovered

additional facts which would cure its complaint, if deficient.

MMPI argues that the District Court abused its discretion by

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depriving MMPI the opportunity to amend its complaint.

However, a fair reading of the transcript indicates that the

court invited MMPI to amend its complaint. Joan Cook, MMPI's

attorney, stated:

Your Honor, I do have facts that I have gained since the

time that I filed this complaint, that I can show,

factual, about this complaint. If you feel that it is

deficient, I feel that I can, with the opportunity to

amend, add facts that would satisfy it.

The District Court responded: "Okay." However, MMPI never

requested leave to amend its complaint after the February 24th

hearing. MMPI had a reasonable opportunity to amend, but simply

failed to do so. MMPI's assertion that the District Court abused

its discretion by depriving MMPI of an opportunity to amend its

complaint is without merit.

The record also reveals that MMPI had ample opportunity to

amend its pleading before the February 24th hearing. On October

26, 1992, MMPI filed its third-party complaint against Murray.

Murray filed a motion to dismiss on November 25, 1992. Because a

motion to dismiss is not a responsive pleading, MMPI could have

amended its complaint without leave of court within twenty days of

Murray's motion to dismiss. See Rule 15(a), M.R.Civ.P. Clearly,

MMPI had a reasonable opportunity to amend its pleading, but failed

to do so.

Affirmed.

Just&e

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We concur:

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