NO. 91-032
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
ARLIN HOVELAND, WENDY HOVELAND, .... .
individually and as guardian for
DANYEL HOVELAND,
Plaintiffs and Appellants,
-vs-
CHARLES E . PETAJA,
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Nat Allen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Ronald F. Waterman; Gough, Shanahan, Johnson &
Waterman, Helena, Montana
For Respondent:
Charles E. Petaja, pro se, Helena, Montana
Submitted on Briefs: December 4, 1991
.-.
. ;f^ Decided: March 24, 1992
Filed:
f >
.C
.
Clerk
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Appellants Arlin and Wendy Hoveland and their minor child,
Danyel, appeal from an order of the First Judicial District Court,
Lewis and Clark County, converting a motion to dismiss into a
motion for summary judgment without giving notice to the parties
and granting the motion for summary judgment in favor of the
respondent, Charles E. Petaja.
We reverse and remand.
Appellants raise the following issues for this Court to
consider:
1. Whether the District Court erred in converting a motion
to dismiss into a motion for summary judgment without giving notice
to the appellants, thereby denying them a reasonable opportunity to
present all material pertinent to Rule 56, M.R.Civ.P.
2. Whether the District Court erred when it granted summary
judgment to the defendant.
On September 6, 1987, appellants and daughter were injured in
an automobile accident near Townsend. Appellants filed a lawsuit
against John Dinsmore and the State of Montana, alleging
negligence.
Prior to the filing of the lawsuit, appellants retained
respondent as counsel. On September 29, 1987, appellants signed a
contingency fee agreement with the respondent. This agreement
allowed respondent to recover 30 percent of any settlement
obtained. It also provided that appellants pay for costs and
expenses of the litigation. The lawsuit continued to progress for
three years. During that period, respondent had advanced moneys
for costs of litigation and other expenses that appellant incurred.
On October 12, 1989, appellant Arlin Hoveland and respondent
entered into another contingency fee agreement. The second
agreement allowed respondent to receive 40 percent of any
settlement obtained. Neither Mrs. Hoveland nor Danyel signed the
second agreement.
On January 8, 1990, the lawsuit with Dinsmore was settled, and
the State settled a few weeks later. The total amount of the
settlement was approximately $260,000.
On January 18, 1990, respondent went to appellants' home and
presented the family with an accounting of $141,978.81 based on the
30 percent contingency agreement. This amount only included the
Dinsmore settlement because the State had not yet settled. The
appellants disputed the amount. They allege that as an inducement
to settle, respondent represented to them that he would reduce his
fee and pay expenses and costs of the litigation, guaranteeing the
appellants $175,000. Appellants rejected the accounting.
Respondent did not tender any money due to the appellants, and
deposited $141,978.81 into an account exclusively under his
control. Appellants allege that some of this money has been spent
on purposes other than the trust provided to appellants. Pursuant
to a motion, the account was frozen by the District Court on
April 23, 1990. On August 23, 1990, the court released the funds
in the account to the appellants. The amount totaled approximately
$100,000.
On May 23, 1990, appellants filed a complaint against
respondent on the basis of fraud, negligence, and contract
theories. On July 30, 1990, respondent filed a motion to dismiss,
a motion to strike, and a motion for a more definite statement.
Respondent alleged that pursuant to the 40 percent contingency
agreement, appellants were entitled to only $115,000. Both sides
filed the appropriate briefs and attached exhibits. In addition,
both parties filed notices of submittal and waived oral argument.
On November 21, 1990, the District Court issued its ruling.
The court converted the motion to dismiss into a motion for summary
judgment. The court failed to give notice of its intention to
convert the motions, and granted the motion for summary judgment in
favor of the respondent. On November 29, 1990, appellants filed a
motion for relief from judgment. The court denied the motion.
Appellants appeal.
I
The first issue to be resolved is whether the District Court
erred in converting a motion to dismiss into a motion for summary
judgment without giving notice to the appellants, thereby denying
them a reasonable opportunity to present all material pertinent to
Rule, 56 M.R.Civ.P.
A motion to dismiss under Rule 12 (b)(6), M.R. Civ.P., allows
the District Court to only examine whether "a claim has been
adequately stated in the comp1aint.I' Gebhardt v. D.A. Davidson &
Co. (l983), 203 Mont. 384, 389, 661 P.2d 855, 857. The District
Court may only inquire into the content of the complaint.
Gebhardt, 661 P.2d at 857. The effect of such a motion is
admitting to all the well pleaded allegations in the complaint and
it should not be dismissed Itunlessit appears beyond a reasonable
doubt that the plaintiff can prove no set of facts which would
entitle him to relief." Gebhardt, 661 P.2d at 858.
However, Rule 12(b), M.R.Civ.P., allows the court to convert
a motion to dismiss into a motion for summary judgment when matters
outside the pleadings are presented to the court. Rule 12(b),
M.R.Civ.P., states in part:
If, o n a motion asserting the defense numbered (6) to
dismiss for failure of the pleading to state a claim upon
which relief can be granted, matters outside the pleading
are presented to and not excluded by the court, the
motion shall be treated as one for summary judgment and
disposed of as provided in Rule 56, and all parties shall
be given reasonable opportunity to present all material
made pertinent to such motion by Rule 56.
Thus, the court may use its discretion to exclude matters outside
of the pleadings when considering a motion to dismiss. If it
decides to include such matters outside of the pleadings, then it
shall treat the motion as a motion for summary judgment.
Previously we have held that before a court can convert a
motion to dismiss into a motion for summary judgment, it must give
notice to the parties of its intention to convert the motion.
State ex rel. Dept. of Health and Environmental Sciences v. City of
Livingston (1976), 169 Mont 431, 436, 548 P.2d 155, 157; Graveley
v. Macleod (l978), 175 Mont. 338, 344, 573 P.2d 1166, 1169. The
purpose of notice is to allow the parties a reasonable opportunity
to present all material made pertinent to the motion and avoid
surprise.
Formal notice by the court gives the party opposing the motion
for summary judgment an opportunity to produce additional facts by
affidavit or otherwise which would create a genuine issue of
material fact to preclude summary judgment under Rule 56,
M.R.Civ.P. First Federal Savings and Loan v. Anderson (1989), 238
Mont. 296, 299, 777 P.2d 1281, 1283.
We hold that the District court erred in failing to give
notice of its intention to convert a motion to dismiss into a
motion for summary judgment.
As a result of our holding in Issue I above, we need not
discuss Issue 11.
Reversed and remanded.
We concur:
March 24, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Ronald F. Waterman
GOUGH, SHANAHAN, JOHNSON & WATERMAN
P.o. Box 1715
Helena, MT 59624
NICHOLAS C. JACQUES
Attorney at Law
318 Broadway
Helena, MT 59601
CHARLES E. PETAJA
Attorney at Law
615 S. Oakes
Helena, MT 59601
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA