No. 88-195
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
THOMAS CMISHOLM AND DONALD CHISHOLM,
Plaintiffs and Appellants,
-vs-
FIRST 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 b7 5
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< l e d .
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 " [ i l 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 - - diligent
is not
pursued - - Plaintiffs, the Court will
by the
consider a renewal of - motion by
the
the nefendant precludiTg this Court from
asserting jurisdiction to decide - the
ownership - - proper%.
of the (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 o f
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 3 5 , 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 ~ a l l s ( 1 9 8 1 ) ~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
I
Date 411-L-
EDITORIAL DEPARTMENT
West Publishing Co., P.O. Box 3526, St. Paul, M N 55165
Please make the following correction in the opinion in
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In second
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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 f l \
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