97-666
No. 97-666
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 145
UNIFIED INDUSTRIES, INC.,
Plaintiff and Appellant,
v.
WALTER D. EASLEY, et al.,
Defendants and Respondents.
APPEAL FROM: District Court of the Twenty-First Judicial District,
In and for the County of Ravalli,
The Honorable Jeffrey H. Langton, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John D. Greef, Attorney at Law, Hamilton, Montana
For Respondents:
Jeffrey B. Hays; Recht, Hays & Hayes, Hamilton, Montana
Submitted on Briefs: February 18, 1998
Decided: June 9, 1998
Filed:
__________________________________________
Clerk
Justice Karla M. Gray delivered the Opinion of the Court.
¶1 Unified Industries, Inc. (Unified) sued numerous defendants, under
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several legal theories, seeking the declaration of an easement across their
property to property it owns and an injunction prohibiting them from
obstructing its use of the easement. Defendants Arthur J. Frank, William J.
Harris, Gloria E. Harris, Kent Olsen, Laura Olsen, Kevin J. Robinson, and
Kathy A. Robinson (Specified Defendants) moved for summary judgment and
the Twenty-First Judicial District Court, Ravalli County, granted the motion.
Judgment was entered accordingly, Unified appeals, and we affirm.
¶2 We rephrase the issues raised on appeal as follows:
¶3 1. Did the District Court err in concluding that Unified had been
transacting business in Montana without a certificate of authority from the
Montana Secretary of State?
¶4 2. Did the District Court err in concluding that Unified was
transacting business illegally?
¶5 3. Did the District Court err in concluding that Unified was
equitably estopped from claiming a prescriptive easement based on use during
the statutory five-year period?
BACKGROUND
¶6 Unified is a nonprofit Utah corporation organized in 1979. It has
"members" rather than shareholders; its members are Apostolic United
Brethren. Unified acquired certain properties in Montana in 1982, some of
which had been owned by another nonprofit corporation which also had
"members," and subsequently allowed its members to build houses on the
properties, as had the previous corporate owner. One of Unified's properties
had a deeded right of access over Bitterroot Ridge Road and another had a
deeded right of access over both Bitterroot Ridge Road and Bourne Lane.
Other properties acquired by Unified in the same area did not have deeded
access via either of the roads, but Unified's members residing on those
properties used the roads to travel to Pinesdale for many years. In 1994, the
defendants discovered that members who live on Unified's properties without
deeded access used Bitterroot Ridge Road and Bourne Lane to travel to
Pinesdale and blocked both roads with locking cables.
¶7 In April of 1995, Unified obtained a certificate of authority to transact
business in Montana from the Montana Secretary of State. It subsequently
filed a complaint--and later an amended complaint--seeking a declaration that
its members had established either a public or private prescriptive easement
across Bitterroot Ridge Road and Bourne Lane, that the roads were public, or
that the members had an easement by grant and requesting an injunction
prohibiting obstruction of the members' use of the easement. Several of the
defendants filed confessions of judgment and others filed a combined answer
and demand for jury trial.
¶8 Depositions were taken and, thereafter, the Specified Defendants moved
for summary judgment. The District Court granted the motion concluding that,
although Unified was not barred from maintaining the action for lack of a
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certificate of authority, it was equitably estopped from claiming a prescriptive
easement because it had been illegally transacting business in Montana. The
District Court also concluded that, with the exception of Unified's deeded right
of access to two parcels, the Specified Defendants were entitled to judgment
as a matter of law on Unified's other theories of access. Judgment was entered
accordingly and Unified appeals from those portions of the District Court's
order on summary judgment which relate to its prescriptive easement claim.
STANDARD OF REVIEW
¶9 We review a district court's ruling on summary judgment de novo,
applying the same Rule 56(c), M.R.Civ.P., criteria applied by the district
court. Montana Metal Buildings, Inc. v. Shapiro (1997), 283 Mont. 471, 474,
942 P.2d 694, 696 (citation omitted). The moving party must establish the
absence of genuine issues of material fact and entitlement to judgment as a
matter of law. Montana Metal Buildings, 283 Mont. at 474, 942 P.2d at 696
(citation omitted). If the moving party satisfies its burden, the party opposing
summary judgment must present substantial and material evidence that raises
a genuine issue of material fact. Montana Metal Buildings, 283 Mont. at 474,
942 P.2d at 696 (citation omitted). We review conclusions of law to determine
whether the district court's interpretation of the law is correct. Ash Grove
Cement Co. v. Jefferson County (1997), 283 Mont. 486, 491-92, 943 P.2d 85,
89 (citation omitted).
DISCUSSION
¶10 1. Did the District Court err in concluding that Unified had
been transacting business in Montana without a certificate of authority
from the Montana Secretary of State?
¶11 Section 35-2-820(1), MCA, provides that a corporation may not
transact business in Montana until it has obtained a certificate of authority
from the secretary of state. Section 35-2-820(2), MCA, lists activities which
do not constitute transacting business, including owning real or personal
property that "does not produce income or is not used in the performance of
a corporate function." In their motion for summary judgment, the Specified
Defendants argued that Unified had owned property that was used in
performing a corporate function for a number of years prior to obtaining a
certificate of authority and, therefore, Unified was transacting business
illegally in Montana under § 35-2-820, MCA.
¶12 The District Court concluded that Unified's acquisition of real property
rights constituted the transacting of business in Montana under § 35-2-820(2),
MCA, because one of Unified's corporate functions--as stated in its amended
Articles of Incorporation--was to act as a holding company for real estate.
Unified argues on appeal that it was not transacting business and, therefore,
the District Court's conclusion was erroneous. The Specified Defendants
respond that Unified conceded in the District Court that it was transacting
business in Montana and, even if it did not concede the issue, Unified should
not be permitted to raise this issue for the first time on appeal.
¶13 The record reflects that, in opposing summary judgment, Unified did
not specifically argue that it was not transacting business in Montana. Instead,
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Unified argued that, while § 35-2-821(1), MCA, prohibits a foreign
corporation transacting business in Montana from maintaining a court
proceeding until it obtains a certificate of authority from the secretary of state,
it had obtained a certificate of authority prior to instituting this action and was
authorized to maintain this proceeding.
¶14 We conclude that Unified's statement in the District Court that "[a]
foreign corporation transacting business in this state may maintain a
proceeding in any court of this state after obtaining a certificate of authority,"
followed immediately by an affirmative statement that Unified had a certificate
of authority, is an implicit concession that it was transacting business in
Montana. Moreover, Unified did not respond to the Specified Defendants'
summary judgment argument that it was transacting business. In our view, this
failure to respond also constitutes an implicit concession that it was, in fact,
transacting business in Montana during the time period in which it acquired
and held real property here. Thus, Unified did not argue in the District Court
that it was not transacting business in Montana.
¶15 The general rule in Montana is that this Court will not address either
an issue raised for the first time on appeal or a party's change in legal theory.
Day v. Payne (1996), 280 Mont. 273, 276, 929 P.2d 864, 866 (citation
omitted). The basis for the general rule is that "it is fundamentally unfair to
fault the trial court for failing to rule correctly on an issue it was never given
the opportunity to consider." Day, 280 Mont. at 276-77, 929 P.2d at 866
(citation omitted).
¶16 Unified argues in this regard that, even if it is arguing that it was not
transacting business for the first time on appeal, that issue falls within the
exception to the general rule set forth in Jones v. Fireman's Fund Insurance
Company (Cal. Ct. App. 1969), 76 Cal.Rptr. 97, 99 (citations omitted). Under
Jones, a court may address an issue raised for the first time on appeal "where
the facts are not disputed and the issue merely raises a new question of law."
Jones, 76 Cal.Rptr. at 99 (citations omitted). Indeed, that exception to the
general rule is "well recognized" in California. See Jones, 76 Cal.Rptr. at 99
(citations omitted).
¶17 Unfortunately for Unified, however, it is changing its theory on appeal
in Montana, rather than in California, and we have not adopted the California
exception. Moreover, we decline to do so here. This Court addresses only
issues which are legal or equitable; we are not fact finders. Adopting the
California exception would effectively swallow our general rule against
addressing new issues or changes in legal theory on appeal. Furthermore, it
is our view that the California exception is not fair to trial courts who ruled on
the legal issues presented to them and who could then find themselves held in
error on an issue or theory they had no opportunity to address.
¶18 Finally, Unified argues that the Specified Defendants raised the
transacting business issue in the District Court in their brief in support of
summary judgment and, therefore, the issue is not newly raised on appeal.
While it is true that the Specified Defendants raised the issue, Unified's
argument misses the mark. The point is that Unified did not controvert the
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Specified Defendants' contention that it was transacting business. Unified
having failed to do so in the District Court, we will not allow it to raise the
issue here for the first time. Therefore, we decline to address this issue
further.
¶19 2. Did the District Court err in concluding that Unified was
transacting business illegally?
¶20 The District Court concluded that, under § 35-2-820, MCA, Unified
had been transacting business in Montana illegally prior to April 24, 1995,
when it obtained its certificate of authority. Unified argues that the District
Court's conclusion is incorrect as a matter of law under § 35-2-821(5), MCA.
Unified did not raise this argument in opposing summary judgment, however,
and as discussed above, we will not address an issue raised for the first time
on appeal or a party's change in theory. See Day, 280 Mont. at 276, 929 P.2d
at 866 (citation omitted).
¶21 Unified contends that we should consider § 35-2-821(5), MCA, on
appeal because it relied on § 35-2-821(1), MCA, in the District Court.
According to Unified, relying on one subsection of the controlling statute in
the District Court should be sufficient to preserve for appeal an issue under a
different subsection. In this regard, it argues that, unlike the defendants in
Farm Credit Bank of Spokane v. Hill (1993), 266 Mont. 258, 879 P.2d 1158,
it presented the controlling statute to the District Court and, therefore, Farm
Credit Bank is inapplicable.
¶22 In Farm Credit Bank, the Hills did not raise a certain federal statute as
a basis for dismissal at the district court but, on appeal, argued that the district
court should have sua sponte applied the statute. Farm Credit Bank, 266
Mont. at 262-63, 879 P.2d at 1160. We stated that "[w]hen a party argues for
the application of a statute for the first time on appeal, the party raises a new
set of questions that were not presented to the district court; and this Court
will not find the district court to have erred on an issue that was 'not presented
to or ruled on by the lower court.' " Farm Credit Bank, 266 Mont. at 263, 879
P.2d at 1161 (quoting Hanley v. Department of Revenue (1983), 207 Mont.
302, 307, 673 P.2d 1257, 1259). As a result, we declined to address the Hills'
arguments regarding the statute. Farm Credit Bank, 266 Mont. at 263, 879
P.2d at 1161.
¶23 Unified's argument that Farm Credit Bank is inapplicable here is
without merit. As was the case in Farm Credit Bank, Unified's arguments to
the District Court under § 35-2-821(1), MCA, involved a legal issue entirely
distinct from the issue it presents to this Court under § 35-2-821(5), MCA.
Section 35-2-821(1), MCA, provides that "[a] foreign corporation transacting
business in this state without a certificate of authority may not maintain a
proceeding in any court in this state until it obtains a certificate of authority."
Unified argued below that, because it had obtained a certificate of authority
in 1995, it was authorized to maintain the present action. Unified argues on
appeal, however, that the District Court's conclusion that it was transacting
business illegally was erroneous under § 35-2-821(5), MCA, which provides
that "[n]otwithstanding the provisions of subsections (1) and (2), the failure of
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a foreign corporation to obtain a certificate of authority does not impair the
validity of its corporate acts or prevent it from defending any proceeding in
this state." This argument that subsection (5) validates Unified's transacting
of business prior to having obtained a certificate of authority is totally separate
and distinct from that made in the District Court.
¶24 Unified's arguments to this Court under a different subsection of § 35-2-821,
MCA,
present a new set of legal questions and it would be unfair to
fault the District Court for failing to rule correctly on questions it was never
given the opportunity to consider. See Farm Credit Bank, 266 Mont. at 263,
879 P.2d at 1161 (citation omitted). Moreover, we will not address a party's
change in theory on appeal. See Day, 280 Mont. at 276, 929 P.2d at 866
(citation omitted). We decline to address this issue.
¶25 3. Did the District Court err in concluding that Unified was
equitably estopped from claiming a prescriptive easement based on use
during the statutory five-year period?
¶26 The District Court concluded that Unified was equitably estopped from
claiming a prescriptive easement based on use during a period when it was
illegally transacting business in Montana. It further concluded that equitable
estoppel prohibited Unified's claim of a prescriptive easement based on use by
the prior owner which also was a foreign corporation transacting business
illegally in Montana. As a result, the District Court concluded that Unified
had failed to establish a five-year period of prescriptive use and, therefore, its
claimed prescriptive easement failed as a matter of law.
¶27 The Specified Defendants raised the equitable estoppel issue in their
motion for summary judgment in the District Court; Unified did not respond.
Similarly, Unified waited until its reply brief on appeal to argue that the
elements of equitable estoppel were not met and, consequently, that the
District Court erred in granting summary judgment to the Specified Defendants
on that basis.
¶28 As discussed above, a party may not raise a new issue or change its
theory on appeal. See Day, 280 Mont. at 276, 929 P.2d at 866 (citation
omitted). Nor, as we repeatedly have stated, may a party raise an issue for the
first time in its reply brief. See, e.g., State v. Hagen (1997), 283 Mont. 156,
159, 939 P.2d 994, 996 (citations omitted); EBI/Orion Group v. Blythe (1997),
281 Mont. 50, 57, 931 P.2d 38, 42 (citation omitted); Loney v. Milodragovich,
Dale & Dye, P.C. (1995), 273 Mont. 506, 512, 905 P.2d 158, 162 (citation
omitted); see also Rule 23(c), M.R.App.P. For both of these reasons, Unified's
argument that the elements of equitable estoppel were not satisfied is not
properly before this Court and we decline to address it.
¶29 Affirmed.
/S/ KARLA M. GRAY
We concur:
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/S/ J. A. TURNAGE
/S/ W. WILLIAM LEAPHART
/S/ JIM REGNIER
/S/ WILLIAM E. HUNT, SR.
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