Engine Rebuilders, Inc. v. Seven Seas Import-Export & Merc., Inc.

NO. 79-66 I N T E SUPREME COURT O THE STATE OF M N A A H F OTN 1980 E N G I N E REBUILDERS , I N C ., Counter-Defendant and R e s p o n d e n t , SEVEN SEAS IMPORT-EXPORT & MERC. , I N C . , and RAYMOND BRAULT, e t ux, e t a l . , Counter-Claimants and A p p e l l a n t s . Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , I n and f o r t h e County o f M i s s o u l a . Honorable Arnold Olsen, Judge p r e s i d i n g . C o u n s e l o f Record: For Appellants: Raymond W. B r a u l t , H e l e n a , Montana F o r Respondent : H i r s t , D o s t a l & Withrow, M i s s o u l a , Montana Worden, Thane & H a i n e s , M i s s o u l a , Montana D a t s o p o u l o s , MacDonald & L i n d , M i s s o u l a , Montana James S a d l e r , M i s s o u l a , Montana S u b m i t t e d on b r i e f s : May 2 9 , 1980 W G i3 IS64 Decided: !@G 1 3 1980 Filed: Mr. J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e C o u r t . T h i r d p a r t y p l a i n t i f f s , Seven S e a s Import-Export & Mercantile, Inc., and Raymond W. B r a u l t , a p p e a l from a n o r d e r and judgment of d i s m i s s a l by t h e D i s t r i c t C o u r t of t h e F o u r t h J u d i c i a l D i s t r i c t , Missoula County, d i s m i s s i n g t h e i r c o u n t e r c l a i m and t h i r d p a r t y c o m p l a i n t i n f a v o r of t h e c o u n t e r d e f e n d a n t , Engine R e b u i l d e r s , I n c . , and t h i r d p a r t y d e f e n d a n t s , R i c h a r d Dale Smith, A l i c e Smith, William D . H i r s t , James H. S a d l e r and Missoula Bank of Montana. I n J u n e 1973 Seven S e a s c o n t r a c t e d w i t h Engine R e - b u i l d e r s t o c o n s t r u c t a l a r g e commercial g a r a g e f o r t h e p r i c e of $46,229.50. To f a c i l i t a t e payment by Seven S e a s f o r work done on t h e b u i l d i n g , a $48,000 t r u s t fund was e s t a b l i s h e d a t M i s s o u l a Bank of Montana. Seven S e a s Import-Export & Mercantile, Inc., a t the t i m e of c o n t r a c t i n g , c o n s i s t e d p r i m a r i l y of Raymond B r a u l t and h i s f a m i l y a s o f f i c e r s and s h a r e h o l d e r s . Engine R e - b u i l d e r s , I n c . , c o n s i s t e d p r i m a r i l y of A l i c e and Dick Smith and t h e i r f a m i l y a s o f f i c e r s and s h a r e h o l d e r s . By A p r i l 5, 1974, t h e b u i l d i n g s t i l l had n o t been completed. I n a d d i t i o n , o n l y $1,200 remained i n t h e t r u s t account. S e v e r a l of t h e s u b c o n t r a c t o r s remained u n p a i d , having t o f i l e m e c h a n i c ' s l i e n s a g a i n s t t h e b u i l d i n g t o t a l - i n g $10,543.75. To r e l e a s e t h e s e l i e n s , Engine R e b u i l d e r s p a i d t h e $10,543.75 and i n v e s t e d a n a d d i t i o n a l $5,000 t o complete t h e u n f i n i s h e d b u i l d i n g . Engine R e b u i l d e r s t h e n f i l e d s u i t on A p r i l 5, 1974, c l a i m i n g a p p e l l a n t s had w i t h - drawn t h e t r u s t money and m i s a p p r o p r i a t e d i t f o r t h e i r own personal use. The a t t o r n e y of r e c o r d f o r Engine R e b u i l d e r s a l s o p e t i t i o n e d t h e c o u r t f o r a h e a r i n g whereby a p p e l l a n t s were t o a p p e a r and s t a t e why t h e c o u r t s h o u l d n o t a t t a c h t h e i r p e r s o n a l and c o r p o r a t e p r o p e r t y . The c o u r t a f t e r a h e a r i n g i s s u e d a w r i t o f a t t a c h m e n t a g a i n s t t h e p r o p e r t y of B r a u l t and Seven S e a s . On May 28, 1975, Raymond B r a u l t , f o r m e r l y d o i n g b u s i - n e s s a s Seven S e a s Import-Export & p I e r c a n t i l e , I n c . , filed a p e t i t i o n f o r bankruptcy i n t h e United S t a t e s D i s t r i c t Court f o r C e n t r a l D i s t r i c t of C a l i f o r n i a i n Cause No. BK-75- 09955(RW). A p p e l l a n t s were a d j u d i c a t e d as b a n k r u p t on March 11, 1977. On J a n u a r y 1 8 , 1978, a p p e l l a n t s f i l e d a n amended answer, c o u n t e r c l a i m and t h i r d p a r t y c o m p l a i n t and a s e p a r a t e motion t o s t r i k e , amended answer, c o u n t e r c l a i m , and t h i r d p a r t y c o m p l a i n t on b e h a l f of Raymond W. Brault. The c l a i m s b r o u g h t by a p p e l l a n t s a l l e g e d damages r e s u l t i n g from a c t i o n s by respondents i n t h e nature of l i b e l , s l a n d e r , c o n t r a c t u a l i n t e r f e r e n c e , c o n s p i r a c y , n e g l i g e n c e and c o n v e r s i o n of personal property. Respondents moved t h e D i s t r i c t C o u r t t o d i s m i s s a p p e l - l a n t s ' c o u n t e r c l a i m and t h i r d p a r t y c o m p l a i n t . On September 1 4 , 1979, t h e c o u r t g r a n t e d t h e d i s m i s s a l , f i n d i n g a p p e l - l a n t s ' c l a i m s b a r r e d by t h e s t a t u t e of l i m i t a t i o n s a s s e t f o r t h i n s e c t i o n 93-2606, R.C.M. 1947, which h a s s i n c e been c o d i f i e d a s s e c t i o n 27-2-204(3), MCA. This s e c t i o n pro- vides: "The p e r i o d p r e s c r i b e d f o r commencement of a n a c t i o n f o r l i b e l , s l a n d e r , a s s a u l t , b a t t e r y , f a l s e imprisonment, o r seduction i s within 2 years." Appellants i n appealing t h e d i s m i s s a l contend t h a t t h e judgment w a s c l e a r l y e r r o n e o u s . I n s o c o n t e n d i n g , numerous i s s u e s have been r a i s e d by a p p e l l a n t s , b u t t h i s C o u r t need o n l y d e a l w i t h t h e i s s u e of whether t h e c o u n t e r c l a i m and t h i r d p a r t y c o m p l a i n t was b a r r e d by any a p p l i c a b l e s t a t u t e of l i m i t a t i o n s . I n d e t e r m i n i n g whether t h e p e r i o d of l i m i t a t i o n h a s e x p i r e d i n a g i v e n c a s e , i t i s n e c e s s a r y t o examine two p o i n t s i n time. F i r s t , when d i d t h e c a u s e of a c t i o n which gave rise t o t h e s u i t accrue? Second, when was t h e a c t i o n commenced? A s t o when t h e a c t i o n commenced, Rule 3, M. R. Civ. P. , states: "A c i v i l a c t i o n i s commenced by f i l i n g a c o m p l a i n t with the court." I n t h i s instance a p p e l l a n t s ' counterclaim and t h i r d p a r t y c o m p l a i n t w a s f i l e d on J a n u a r y 1 8 , 1978. A p p e l l a n t s a r g u e t h a t i n d e t e r m i n i n g when t h e i r a c t i o n commenced, t h e c o u r t s h o u l d l o o k s o l e l y t o when t h e i r motion f o r l e a v e t o f i l e a motion t o s t r i k e , amended answer, c o u n t e r - c l a i m and t h i r d p a r t y c o m p l a i n t was f i l e d w i t h t h e c l e r k of t h e D i s t r i c t C o u r t , t h a t d a t e b e i n g May 7, 1976. This argument must f a i l , however, b e c a u s e Rule 3, M.R.Civ.P., s p e c i f i c a l l y s t a t e s , "A c i v i l a c t i o n i s commenced by f i l i n g a complaint with t h e court." A complaint cannot be equated w i t h a motion f o r l e a v e t o f i l e a c o m p l a i n t ; t h u s , w e con- c l u d e t h e D i s t r i c t C o u r t was p r o p e r i n f i n d i n g t h a t a p p e l - l a n t s ' a c t i o n commenced on J a n u a r y 1 8 , 1978. A s t o when t h e l i m i t a t i o n p e r i o d b e g i n s t o r u n , it i s n e c e s s a r y t o d e t e r m i n e when a p p e l l a n t s ' a l l e g e d c a u s e of a c t i o n accrued. G a t e s v . Powell ( 1 9 2 6 ) , 77 Mont. 554, 252 diinJQ& P. 377; C a s s i d y v . E%&& ( 1 9 7 7 ) , 173 Mont. 475, 568 P.2d 1 4 2 ; 51 Am.Jur.2d - L i m i t a t i o n s of A c t i o n s S107 a t 679. The a l l e g e d improper a c t i v i t y g i v i n g r i s e t o a p p e l - l a n t s ' a l l e g a t i o n s o f l i b e l i n t h e c o u n t e r c l a i m and t h i r d p a r t y c o m p l a i n t i s t h a t r e s p o n d e n t s William D . H i r s t and James H . S a d l e r , a s a t t o r n e y s f o r Engine R e b u i l d e r s , made improper use of District Court process by filing on April 5, 1974, the original complaint in this action. Appellants contend respondents filed this complaint knowing it con- tained unfounded and untruthful assertions and knowing that in so filing the allegations would be made public, thereby destroying appellants' business reputation. The alleged improper conduct forming the basis of appellants' allegation of slander in the counterclaim and third party complaint is that respondents, in discussions among themselves beginning on December 1, 1973, falsely accused appellants of fraudulent misrepresentation, of illegally misappropriating monies from a trust fund, and of illegally misapplying the funds to their own personal use and then allowed these accusations to form the basis of the complaint filed by Engine Rebuilders and to be disseminated to various business concerns in the community. Allegations of contractual interference, negligence, conspiracy and conversion of property made by appellants, if they are in fact proper in this action as to all respondents, are based upon the alleged slanderous actions of respondents and by the alleged improper filing of the original complaint on April 5, 1974, and the subsequent issuance of a writ of attachment as to appellants' property, thereby causing appellants to lose various contracts with other business concerns. The District Court concluded that the alleged actions giving rise to appellants' claims accrued prior to or on April 5, 1974, the date Engine Rebuilders filed the original complaint. Appellants contend, however, that the improper conduct is ongoing, calculated to produce ongoing emotional and economic pressures. Appellants further contend that as l o n g a s t h e c o m p l a i n t f i l e d by Engine R e b u i l d e r s s t a n d s , t h e improper c o n d u c t c o n t i n u e s t o e x e r t a p r e s e n t day o p p r e s s i o n with coercion extending i n t o the future. Appellants then c o n c l u d e , i n t h a t t h e e f f e c t of t h e o r i g i n a l c o m p l a i n t i s ongoing, t h e s t a t u t e of l i m i t a t i o n s d o e s n o t commence t o r u n u n t i l t h i s complaint i s dismissed. I n e f f e c t , a p p e l l a n t s a r e a r g u i n g t h a t t h e damaging r e s u l t s of r e s p o n d e n t s ' a l l e g e d improper a c t i v i t y i s con- t i n u i n g , and t h e r e f o r e , i n d e t e r m i n i n g when t h e s t a t u t e o f l i m i t a t i o n s s t a r t s t o r u n , t h e c o u r t s h o u l d l o o k t o when t h e a l l e g e d damage c e a s e s , n o t when t h e a l l e g e d improper c o n d u c t occurred. I n s u p p o r t of t h i s p r o p o s i t i o n a p p e l l a n t s r e l y on two Montana n u i s a n c e c a s e s . Heckaman v. N o r t h e r n Pac. Ry. Co. ( 1 9 3 3 ) , 93 Mont. 363, 20 P.2d 258; Walton v. C i t y of Bozeman ( 1 9 7 8 ) , - Mont. , 588 P.2d 518, 35 St.Rep. 1977. R e l y i n g on Heckaman a p p e l l a n t s would have u s b e l i e v e t h a t t h e c o n s e q u e n t i a l i n j u r i e s r e s u l t i n g from t h e a l l e g e d improper a c t i o n s o f r e s p o n d e n t s i s renewed e a c h p a s s i n g day and t h u s , t h e s t a t u t e o f l i m i t a t i o n s d o e s n o t b e g i n t o r u n u n t i l t h e o r i g i n a l c o m p l a i n t f i l e d by Engine R e b u i l d e r s i s dismissed. However, such a h o l d i n g i n t h i s i n s t a n c e would b e c o n t r a t o t h e g e n e r a l r u l e s t a t e d i n Heckaman, " t h a t , when t h e a c t o r o m i s s i o n c o n s t i t u t i n g n e g l i g e n c e c a u s e s d i r e c t o r immediate i n j u r y , t h e a c t i o n a c c r u e s from t h e d o i n g of t h e a c t .. .'I 2 0 P.2d a t 261. (Emphasis a d d e d . ) A p p e l l a n t s have a l l e g e d t h a t r e s p o n d e n t s ' a c t i o n s between December 1, 1973, and A p r i l 5, 1974, and t h e f i l i n g of t h e c o m p l a i n t by Engine R e b u i l d e r s on ~ p r i l , 1974, 5 r e s u l t e d i n immediate and d i r e c t i n j u r y , t h a t b e i n g a l o s s of b u s i n e s s r e p u t a t i o n and s t a n d i n g i n t h e b u s i n e s s com- munity. Consequently, under Heckaman, a p p e l l a n t s ' a c t i o n s a c c r u e d , i n r e g a r d t o t h o s e i n j u r i e s , on A p r i l 5, 1974. Walton l i k e w i s e d o e s n o t s u p p o r t a p p e l l a n t s ' argument t h a t t h e i r c a u s e of a c t i o n i s c o n t i n u i n g i n n a t u r e . In Walton t h e C i t y of Bozeman r e c o n s t r u c t e d a n i r r i g a t i o n d i t c h and t h e p l a i n t i f f i n c u r r e d c o s t s and damages c a u s e d by t h e f l o o d i n g of h i s l a n d on a y e a r l y b a s i s . This Court held t h a t t h e p l a i n t i f f was n o t b a r r e d by a two-year s t a t u t e of l i m i t a t i o n because t h e reoccurring i n j u r i e s w e r e t h e r e s u l t of a r e o c c u r r i n g n u i s a n c e . Here, t h e a l l e g e d a c t s which c a u s e d a p p e l l a n t s d i r e c t damages o c c u r r e d a t a c e r t a i n p o i n t i n t i m e with consequential e f f e c t s . They are n o t based on r e o c c u r r i n g e v e n t s such a s a n a n n u a l snow m e l t o r s p r i n g flooding. I t b e i n g d e t e r m i n e d t h a t a p p e l l a n t s ' a l l e g e d c a u s e of a c t i o n i s n o t r e o c c u r r i n g i n n a t u r e , a p p e l l a n t s make a f u r t h e r argument i n s u p p o r t of t h e i r p o s i t i o n t h a t t h e s t a t u t e of l i m i t a t i o n s h a s n o t e x p i r e d . A p p e l l a n t s contend t h a t t h e f i l i n g of a p e t i t i o n f o r b a n k r u p t c y s t a y e d t h e t o l l i n g of t h e s t a t u t e of l i m i t a t i o n s from May 1975 u n t i l March 1977. 1 U.S.C. 1 3 6 2 of t h e Bankruptcy Act s t a t e s t h a t a s u i t which i s pending a g a i n s t a p e r s o n a t t h e t i m e of f i l i n g a p e t i t i o n of b a n k r u p t c y s h a l l be s t a y e d u n t i l a d j u d i c a t i o n o r d i s m i s s a l of t h e p e t i t i o n . Thus, l a w s u i t s which a r e f i l e d a g a i n s t - b a n k r u p t a r e s t a y e d d u r i n g t h e b a n k r u p t proceed- a ing. i n th - However, nothinq - -e Bankrupt Act stays prevents - t h e p e t i t i o n e r b e f o r e t h e Bankruptcy C o u r t from f i l i n g claims a g a i n s t o t h e r p a r t i e s . 1 U.S.C. 1 108 of t h e Bankruptcy A c t p r o v i d e s f o r a t o l l i n g of t h e s t a t u t e of l i m i t a t i o n s i n r e g a r d t o t h e t r u s t e e i n bankruptcy; b u t again, t h e Act s t a t e s nothing a b o u t a s u s p e n s i o n of t h e s t a t u t e of l i m i t a t i o n s on a c t i o n s t h a t t h e bankrupt could f i l e a g a i n s t o t h e r p a r t i e s . I n M a t t e r of Dickson ( D . N.C. 1 9 7 7 ) , 432 F.Supp. 752, t h e c o u r t a d d r e s s e d t h e i s s u e of whether a b a n k r u p t c o u p l e c o u l d i n v o k e t h e t o l l i n g p r o v i s i o n of 1 U.S.C. 1 2 9 ( e ) of t h e Bankruptcy A c t ( t h i s s e c t i o n h a s been c o d i f i e d under t h e new Bankruptcy A c t a t 1 U.S.C. 1 108). I n ~ i c k s o nb o t h t h e b a n k r u p t and t h e t r u s t e e i n b a n k r u p t c y b r o u g h t a n a c t i o n a g a i n s t a d e f e n d a n t a l l e g i n g v i o l a t i o n s of t h e T r u t h i n Lending Act. I n d e a l i n g w i t h t h e i s s u e of whether a one- y e a r s t a t u t e of l i m i t a t i o n s had t o l l e d , t h e c o u r t s t a t e d : ". . . T h i s a c t i o n was commenced a f t e r t h e s t a t u t e had r u n . T i t l e 1 U.S.C. 1 S29 ( e ) , however, g i v e s a t r u s t e e two y e a r s a f t e r a d j u d i c a t i o n of b a n k r u p t c y t o b r i n g any a c - t i o n n o t barred a t t h e time t h e bankruptcy petition was filed ... "The a c t i o n was n o t b a r r e d when t h e Dicksons f i l e d t h e i r p e t i t i o n , and s o t h e t r u s t e e ' s a c t i o n i s n o t barred. "There - - t o l l i n g p r o v i s i o n - - i s no for the d e b t o r s , however, - - t h e i r a c t i o n i s and s o and w i l l b a r r e d bv t h e s t a t u t e , - - - be d i s m i s s e d . " --C- 432 F.Supp. a t 756. (Emphasis a d d e d . ) S i n c e t h e r e i s no t o l l i n g of a s t a t u t e of l i m i t a t i o n s f o r anyone b u t a t r u s t e e i n b a n k r u p t c y , a p p e l l a n t s by f i l i n g a p e t i t i o n f o r b a n k r u p t c y d i d n o t suspend t h e r u n n i n g of t h e s t a t u t e a s t o t h e i r claims. A p p e l l a n t s ' a l l e g e d c l a i m s as s t a t e d i n t h e c o u n t e r - c l a i m and t h i r d p a r t y c o m p l a i n t were d e r i v e d from a c t i v i t y o c c u r r i n g p r i o r t o and on A p r i l 5, 1974, t h e d a t e on which t h e o r i g i n a l c o m p l a i n t was f i l e d by Engine R e b u i l d e r s , I n c . The s t a t u t e of l i m i t a t i o n s was n o t t o l l e d a s t o t h o s e c l a i m s . T h e r e f o r e , t h e D i s t r i c t C o u r t was n o t e r r o n e o u s i n l o o k i n g a t t h i s d a t e and J a n u a r y 1 8 , 1978, t h e d a t e a p p e l l a n t s ' a c t i o n w a s f i l e d , i n d e t e r m i n i n g i f t h e s t a t u t e of l i m i t a - t i o n s had e x p i r e d . The p e r i o d between t h e s e two d a t e s b e i n g o v e r t h r e e y e a r s , t h e D i s t r i c t C o u r t was p r o p e r i n f i n d i n g appellants' claims barred. The D i s t r i c t C o u r t ' s f i n d i n g t h a t a l l of a p p e l l a n t s ' c l a i m s , i n c l u d i n g t h o s e f o r c o n t r a c t u a l i n t e r f e r e n c e , con- s p i r a c y , n e g l i g e n c e and c o n v e r s i o n of p r o p e r t y , a r e b a r r e d under s e c t i o n 27-2-204(3), MCA, which o n l y a p p l i e s i n t h i s i n s t a n c e t o c l a i m s of l i b e l and s l a n d e r was n o t c h a l l e n g e d by a p p e l l a n t s i n t h e i r b r i e f . However, even i f such a c h a l l e n g e had been made, t h e c o u r t c o u l d have d i s m i s s e d i t by l o o k i n g t o t h e a p p l i c a b l e two-year and t h r e e - y e a r statutes of l i m i t a t i o n s f o r e a c h c l a i m , a l l of which have e x p i r e d . Appellants a l s o challenge t h e D i s t r i c t Court's finding t h a t a l l words r e s u l t i n g from a c o u r t a c t i o n a r e p r i v i l e g e d and t h u s c a n n o t s u p p o r t a c l a i m f o r l i b e l o r s l a n d e r . However, i n t h a t a l l o f a p p e l l a n t s ' c l a i m s , whether o r n o t based on p r i v i l e g e d a c t i v i t y , a r e b a r r e d by t h e s t a t u t e of l i m i t a t i o n s , t h i s i s s u e need n o t be d i s c u s s e d . The d i s m i s s a l o f a p p e l l a n t s ' c o u n t e r c l a i m and t h i r d p a r t y complaint i s affirmed. W e concur: