McAtee v. Whitefish Credit Union

11/07/2017

DA 17-0037
Case Number: DA 17-0037

IN THE SUPREME COURT OF THE STATE OF MONTANA

2017 MT 268

DEANNA H. McATEE,

Plaintiff and Appellant,

v.

WHITEFISH CREDIT UNION; and
MORRISON AND FRAMPTON, PLLP,

Defendants and Appellees.

APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-14-1017D
Honorable David M. Ortley, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Mark M. Kovacich, Ben A. Snipes, Kovacich Snipes, P.C.,
Great Falls, Montana

Michael J. McKeon, Jr., McKeon Law, PLLC, Butte, Montana

For Appellee Whitefish Credit Union:

Scott D. Hagel, Crowley Fleck PLLP, Kalispell, Montana

For Appellee Morrison & Frampton, PLLP:

Brian J. Smith, Tessa A. Keller, Garlington, Lohn & Robinson, PLLP,
Missoula, Montana

Submitted on Briefs: August 23, 2017

Decided: November 7, 2017

Filed:

__________________________________________
Clerk
Justice Michael E Wheat delivered the Opinion of the Court.

¶1 This appeal comes from the District Court’s grant of a motion to dismiss finding

McAtee’s amended complaint constituted improper serial litigation.

¶2 We restate the issue on appeal as follows:

Did the District Court err in granting defendants’ motion to dismiss McAtee’s
amended complaint when it found that the action constituted improper serial
litigation pursuant to § 3-1-502, MCA?

FACTUAL AND PROCEDURAL BACKGROUND

¶3 McAtee is the owner of The Mortgage Source (TMS), a mortgage company that

brokered loans under a line of credit with Whitefish Credit Union (WCU). McAtee

brokered a construction loan, which the borrowers defaulted on in 2008. McAtee was

included on the loan as a personal guarantor, and TMS held a trust indenture on the

property and assigned its interest in the trust indenture to WCU. The assignment was not

recorded. Subsequently, WCU, through its attorneys, Morrison and Frampton, PLLP

(M&F), filed suit against TMS to foreclose on the defaulted loan. WCU alleged that

when the borrowers defaulted, the construction was unfinished; McAtee then borrowed

money from a friend to finish it, and put his interest as first priority secured mortgage.

WCU alleged McAtee pledged WCU’s collateral rather than TMS’s collateral as security

for the mortgage to the new lender, leaving WCU with an unsecured loan. WCU alleged

fraud in the foreclosure by McAtee. These allegations led to criminal fraud charges

against McAtee. The District Court determined that the new lender was a bona fide

purchaser for value, so WCU no longer had a secured interest. Ultimately, both the

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criminal and civil fraud claims were dismissed. WCU alleges it dismissed all of its

claims against McAtee when she went through bankruptcy.

¶4 In September 2014, prior to the resolution of these claims, McAtee filed a motion

for leave to amend her answer in the WCU foreclosure case to add M&F as a party to the

action and to assert claims for malicious prosecution and abuse of process. In December

2014, the District Court denied McAtee’s motion to amend her answer in the WCU

complaint, reasoning the parties had been litigating for over three years, sufficient time

for McAtee to “clarify and solidify” her allegations.

¶5 McAtee filed the instant case, as a separate action against WCU and M&F, for

abuse of process and malicious prosecution. On January 30, 2015, McAtee amended this

complaint. On March 5, 2015, WCU and M&F filed a M. R. Civ. P. 12(b)(6) motion to

dismiss; the defendants included considerable materials from the underlying foreclosure

case and requested the judge to convert the motions to motions for summary judgment if

necessary. On December 20, 2016, the District Court granted the M. R. Civ. P. 12(b)(6)

motion to dismiss the McAtee complaint with prejudice, concluding that “the filing of

this cause of action constitutes improper serial litigation of a claim,” that the suit is based

upon the same facts and transactions as those alleged in the foreclosure litigation, and

that it is therefore impermissible under § 3-1-502, MCA. McAtee appeals.

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 STANDARD OF REVIEW

¶6 We review de novo a district court’s ruling on a motion to dismiss pursuant to

M. R. Civ. P. 12(b)(6). Western Sec. Bank v. Eide Bailly LLP, 2010 MT 291, ¶ 18, 359

Mont. 34, 249 P.3d 35.

DISCUSSION

¶7 Did the District Court err in granting defendants’ motion to dismiss McAtee’s
amended complaint when it found that the action constituted improper serial
litigation pursuant to § 3-1-502, MCA?

¶8 McAtee argues the District Court incorrectly dismissed her complaint when it

found her action constituted improper serial litigation. WCU agrees that the District

Court’s dismissal of McAtee’s complaint based on § 3-1-502, MCA, is legally incorrect.

However, it asserts the District Court reached the correct result and urges this Court to

uphold the dismissal. The District Court dismissed McAtee’s complaint because she was

first “denied the opportunity to add a defendant and two causes of action [to the

underlying foreclosure litigation], so she filed this action.” The District Court found her

pleadings to be impermissible, concluding that § 3-1-502, MCA, barred her complaint,

citing In re Stewart, 163 Mont. 432, 517 P.2d 879 (1974).

¶9 Section 3-1-502(1), MCA states:

If an application for an order, made to a judge of a court in which the action
or proceeding is pending, is refused in whole or in part or is granted
conditionally, no subsequent application for the same order shall be made
to any other judge, except of a higher court.

Pursuant to the statute, when a judge denies a request for an order a party may not seek

“the same order” from another judge. In Stewart, an incapacitated person, Gavin, filed a

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petition for restoration to capacity, which the district court denied. Stewart, 163 Mont. at

433, 517 P.2d at 879. After a new judge was appointed to the case, Gavin’s counsel filed

another petition for restoration to capacity. The new judge ordered Gavin to restored

capacity. Based on an application for writ of supervisory control, this Court determined

the petitions were the same and the second petition should have been denied. Stewart,

163 Mont. at 433-34, 517 P.2d at 880.

¶10 Unlike Stewart, McAtee did not attempt to obtain different results by seeking the

same order from another judge. McAtee filed a motion to amend and commenced a

separate proceeding through the filing of a new complaint. Section 3-1-502, MCA,

“forbids only a subsequent application for the same order to any other judge.” Marvel

Brute Steel Bldg. v. Bass, 189 Mont. 480, 483, 616 P.2d 380, 382 (1980). McAtee has

not asked any judge for “the same order” to allow the amended pleading. McAtee has

instead filed this separate action asserting her malicious prosecution claims, which

accrued after WCU filed its action. Section 3-1-502, MCA, does not bar McAtee’s

original complaint.

¶11 WCU agrees § 3-1-502, MCA, does not bar McAtee’s complaint but urges this

Court to uphold the dismissal on other grounds. Although the District Court did not

address any of the arguments advanced by the parties, its order granting the motions to

dismiss cannot be affirmed on other grounds. The District Court did not convert the

M. R. Civ. P. 12(b)(6) motions into motions for summary judgment, never gave McAtee

notice that it would do so, and McAtee was never afforded the opportunity for a hearing.

See Meagher v. Butte-Silver Bow City-County, 2007 MT 129, ¶¶ 16-17, 337 Mont. 339,

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160 P.3d 552; Cole v. Flathead County, 236 Mont. 412, 418-19, 771 P.2d 97. Therefore,

despite WCU and M&F’s extensive factual arguments, their M. R. Civ. P. 12(b)(6)

motions had the effect of “admitting all well-pleaded allegations in the complaint.”

Reidelbach v. Burlington N. and Santa Fe Ry. Co., 2002 MT 289, ¶ 14, 312 Mont. 498,

60 P.3d 418. McAtee’s complaint properly alleges every element of her claims under

Montana law. We will not consider in the first instance the merits of WCU’s and M&F’s

substantive grounds for judgment in their favor.

CONCLUSION

¶12 The District Court incorrectly dismissed McAtee’s petition based on § 3-1-502,

MCA. McAtee’s original complaint is not improper serial litigation and therefore is not

barred. We decline to address the alternative grounds proffered by WCU and M&F to

uphold the District Court’s decision.

¶13 Reversed and remanded for further proceedings consistent with this Opinion.

/S/ MICHAEL E WHEAT

We Concur:

/S/ LAURIE McKINNON
/S/ BETH BAKER
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE

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