Seven Seas Import-Export v. Handee

No. 79-52 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

SEVEN SEAS IMPORT-EXPORT & MERCANTILE, INC. , a Mont. Corp. , Plaintiff and Appellant,

HANDEE FOODS, INC., a Mont. Corp., and FREDERICK W. KRIEGER, Individually, Defendants and Respondents.

.1 from: District Court of the Fourth Judicial District, In and for the County of Missoula, The Honorable James B. Wheelis, Judge presiding.

Counsel of Record: For Appellant: Raymond W. Brault, Helena, Montana For Respondent : Tipp, Hoven & Skjelset, Missoula, Montana

Submitted on Briefs: October 9, 1980

Decided : JAB 1 4 ma Filed: JAR 1 4 TPir

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 .

Seven S e a s Import-Export & Mercantile, Inc., appeals a summary judgment g r a n t e d 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, t h e Honorable James B. Wheelis p r e s i d i n g , i n f a v o r of Handee Foods, I n c . , and F r e d e r i c k W. Krieger.

On August 25, 1978, a p p e l l a n t f i l e d s u i t a l l e g i n g t h r e e claims f o r r e l i e f . Each c l a i m was based on a c o n s t a b l e ' s s a l e , on May 29, 1974, of goods l e f t a t a warehouse owned by Handee Foods, I n c . , and r e n t e d t o Raymond B r a u l t , p r e s i d e n t of Seven S e a s Import-Export & Mercantile, Inc.

B r a u l t r e n t e d a p o r t i o n of t h e warehouse from r e s p o n -d e n t i n 1973. H e a p p a r e n t l y needed t h e s p a c e t o s t o r e s p e c i f i e d t y p e s o f f i b e r g l a s s i n s u l a t i o n t o b e used i n t h e c o n s t r u c t i o n of m e t a l b u i l d i n g s .

A p p e l l a n t a l l e g e s t h a t i n March 1974 i t became necess a r y t o t e r m i n a t e t h e r e n t a l agreement w i t h Handee Foods t o a l l o w a p p e l l a n t ' s performance on c e r t a i n o t h e r c o n t r a c t matters outside t h e state. Seven S e a s a t t h i s t i m e was i n a r r e a r s i n r e n t a l payments amounting t o a p p r o x i m a t e l y $896.

Appellant f u r t h e r a l l e g e s t h a t B r a u l t wrote t o respond e n t , a d v i s i n g i t o f t h e s i t u a t i o n and g i v i n g r e s p o n d e n t a q u a n t i t y o f t h e i n s u l a t i o n s t o r e d i n t h e warehouse e q u a l i n w h o l e s a l e p r i c e t o t h e amount of r e n t owing. The b a l a n c e of t h e i n s u l a t i o n was t h e n a l l e g e d l y s o l d by a p p e l l a n t t o v a r i o u s o t h e r b u s i n e s s c o n c e r n s which w e r e t o l d t h e y c o u l d

o b t a i n t h e i r r e s p e c t i v e q u a n t i t i e s a t r e s p o n d e n t ' s warehouse. Respondent was a l l e g e d l y informed o f t h e o t h e r pur-

c h a s e r s and was t o r e l e a s e t h e i n s u l a t i o n when t h e y came t o p i c k i t up. A p p e l l a n t c o n t e n d s , however, r e s p o n d e n t r e f u s e d t o r e l e a s e t h e i n s u l a t i o n , l a i d c l a i m t o t h e e n t i r e t y of t h e s t o r e d i n s u l a t i o n , and t h e n i m p r o p e r l y s o l d i t , r e t a i n i n g t h e proceeds.

~ e s p o n d e n t ,by way o f answer, d e n i e d b e i n g c o n t a c t e d by B r a u l t as t o h i s need t o t e r m i n a t e t h e r e n t a l agreement; d e n i e d a c c e p t i n g any q u a n t i t y of i n s u l a t i o n a s payment of a p p e l l a n t ' s r e n t ; d e n i e d b e i n g informed of t h e s a l e o f t h e b a l a n c e of t h e i n s u l a t i o n t o o t h e r b u s i n e s s c o n c e r n s ; and d e n i e d t h a t any p u r c h a s e r s came t o p i c k up t h e i r r e s p e c t i v e quantities. Respondent t h e n a d m i t s s e l l i n g t h e i n s u l a t i o n s t o r e d i n i t s warehouse f o r nonpayment of r e n t by a p p e l l a n t .

A f t e r t h e c o m p l a i n t was f i l e d , a p p e l l a n t s e r v e d v a r i o u s i n t e r r o g a t o r i e s on r e s p o n d e n t . Respondent, i n answering them, r e v e a l e d t h a t t h e i n s u l a t i o n was s o l d on May 29, 1974, t o Handee Foods, I n c . , t h e h i g h e s t b i d d e r , f o r $2,424.55. Respondent a l s o s t a t e d t h a t t h e s a l e was conducted p u r s u a n t t o s e c t i o n 71-3-1203, MCA, by a c o n s t a b l e f o r t h e J u s t i c e C o u r t a t r e s p o n d e n t ' s warehouse. The s a l e w a s a d v e r t i s e d by p o s t i n g n o t i c e on May 1 6 , 1974, i n f i v e p u b l i c p l a c e s i n Missoula County.

Respondent a l s o s e r v e d i n t e r r o g a t o r i e s on a p p e l l a n t . However, t h e y w e r e n e v e r answered. No s a n c t i o n s w e r e req u e s t e d by r e s p o n d e n t , and, t h u s , t h e i n t e r r o g a t o r i e s w e r e n o t p a r t o f t h e r e c o r d s u b m i t t e d on t h e motion f o r summary

judgmen t . Respondent f i l e d i t s motion f o r summary judgment on

March 23, 1979. A h e a r i n g on t h e m a t t e r w a s h e l d on ~ p r i l

9 , 1979, a f t e r which t h e D i s t r i c t C o u r t g r a n t e d t h e motion, f i n d i n g t h a t a l l c l a i m s b r o u g h t by a p p e l l a n t w e r e b a r r e d by

a p p l i c a b l e s t a t u t e s of l i m i t a t i o n . A t the t i m e the ~ i s t r i c t C o u r t made i t s d e c i s i o n , t h e s u b m i t t e d r e c o r d i n c l u d e d t h e c o m p l a i n t , answer, r e s p o n d e n t ' s answers t o i n t e r r o g a t o r i e s ,

and a n a f f i d a v i t , f i l e d t h e day o f t h e h e a r i n g , s t a t i n g t h a t F. ~ i c k Baker had p u r c h a s e d a q u a n t i t y o f i n s u l a t i o n from

a p p e l l a n t b u t was d e n i e d a c c e s s t o t h e goods by r e s p o n d e n t .

A p p e l l a n t moved t o v a c a t e t h e c o u r t ' s o r d e r on J u n e 8 , 1979. However, c o u n s e l f a i l e d t o n o t e t h e m a t t e r f o r h e a r -ing. A f t e r r e c e i p t of t h e motion t o v a c a t e , r e s p o n d e n t s e r v e d on a p p e l l a n t a n o t i c e t h a t t h e motion was deemed d e n i e d p u r s u a n t t o Rule 59, M.R.Civ.P., i n t h a t i t had n o t been n o t e d o r h e a r d w i t h i n t e n d a y s of s e r v i c e a s r e q u i r e d .

Summary judgment was e n t e r e d on December 1 6 , 1980, and Seven S e a s a p p e a l s .

A p p e l l a n t r a i s e s numerous c o l l a t e r a l c o n t e n t i o n s on appeal. The s o l e m a t t e r a t i s s u e , however, i s whether 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 c l a i m s a r e b a r r e d by t h e s t a t u t e s of l i m i t a t i o n and, t h e r e f o r e , p r o p e r i n g r a n t i n g r e s p o n d e n t ' s motion f o r summary judgment.

I n d e t e r m i n i n g whether t h e p e r i o d o f 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 t h e d i d t h e c a u s e of a c t i o n which gave r i s e t o t h e s u i t a c c r u e ? Second, when was t h e a c t i o n commenced? Engine R e b u i l d e r s , I n c . v . Seven S e a s Impor t-Expor t & M e r c a n t i l e (198 0 ) , Mont. , 615 P.2d 871, 37 St.Rep. 1406.

Rule 3 , M.R.Civ.P., provides t h a t a c i v i l a c t i o n i s commenced upon t h e f i l i n g of t h e c o m p l a i n t . I n t h i s ins t a n c e , t h e s u i t w a s i n i t i a t e d on August 26, 1978.

A s t o when t h e c a u s e of a c t i o n a c c r u e d and t h e l i m i t a -t i o n p e r i o d t h u s s t a r t e d t o r u n , i t i s n e c e s s a r y t o examine t h e p a r t i c u l a r b a s i s and t h e o r i e s upon which a p p e l l a n t s e e k s relief.

A s a b a s i s f o r h i s c a u s e of a c t i o n , a p p e l l a n t a l l e g e s i n i t s c o m p l a i n t t h a t r e s p o n d e n t took improper c o n t r o l o v e r t h e i n s u l a t i o n s t o r e d i n i t s warehouse; s o l d i t w i t h o u t a u t h o r i t y and t h e n r e t a i n e d t h e p r o c e e d s . In asserting this

c a u s e of a c t i o n , a p p e l l a n t makes a c l a i m f o r r e c o v e r y f i r s t on a t h e o r y t h a t a c o n s t r u c t i v e t r u s t was e s t a b l i s h e d whereby

r e s p o n d e n t , a s t r u s t e e , h e l d t h e i n s u l a t i o n and t h e p r o c e e d s t h e r e f r o m f o r t h e b e n e f i t of a p p e l l a n t .

A p p e l l a n t t h e n a s s e r t s a second t h e o r y of r e c o v e r y , sounding i n t o r t ( c o n v e r s i o n ) , c o n t e n d i n g t h a t r e s p o n d e n t s o l d t h e i n s u l a t i o n a t a n i m p r o p e r l y conducted s a l e and, t h u s , i s l i a b l e f o r t h e v a l u e of t h e goods.

Appellant f i n a l l y contends, a s a t h i r d claim f o r r e l i e f , t h a t due t o t h e w i l l f u l and wanton d i s r e g a r d of i t s r i g h t s , i t i s e n t i t l e d t o exemplary damages.

Upon r e v i e w of a p p e l l a n t ' s c o m p l a i n t , i t i s a p p a r e n t t h a t t h e 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 c l a i m of r e c o v e r y o c c u r r e d on o r p r i o r t o t h e d a t e r e s p o n d e n t had t h e i n s u l a t i o n s o l d , May 29, 1974. Conseq u e n t l y , o v e r f o u r y e a r s have p a s s e d between t h e a c c r u a l of t h e c a u s e of a c t i o n and t h e commencing of s u i t .

A p p e l l a n t c o n t e n d s t h a t , i n d e t e r m i n i n g when t h e c a u s e o f a c t i o n a c c r u e d , w e s h o u l d n o t look t o t h e d a t e t h e i n s u l a -t i o n w a s s o l d b u t t o t h e d a t e a p p e l l a n t made a demand f o r t h e r e t u r n of t h o s e goods, J u l y 1 9 , 1978. Appellant b a s i s t h i s argument on a n a l l e g a t i o n t h a t i t w a s w i t h o u t knowledge of t h e s a l e u n t i l i t made a demand f o r t h e r e t u r n of t h e insulation.

I n r e j e c t i n g a p p e l l a n t ' s argument, we n o t e t h a t when a c o u r t i s p r e s e n t e d w i t h a motion f o r summary judgment, it

must r e l y on t h e s u b m i t t e d p l e a d i n g s , d e p o s i t i o n s , answers t o i n t e r r o g a t o r i e s and a d m i s s i o n s on f i l e , t o g e t h e r w i t h any s u p p o r t i n g a f f i d a v i t s , i n f o r m u l a t i n g i t s r u l i n g on t h e motion. Rule 56 ( c ), M.R.Civ.P. The D i s t r i c t C o u r t w i l l n o t be h e l d i n e r r o r on t h e b a s i s of documents n o t b e f o r e i t a t t h e t i m e it renders i t s decision. Baylor v. Jacobson ( 1 9 7 6 ) , 170 Mont. 234, 552 P.2d 55.

I n t h i s i n s t a n c e t h e a l l e g a t i o n of l a c k of knowledge, demand and t h e n r e f u s a l t o r e t u r n t h e goods was n o t r a i s e d i n t h e c o m p l a i n t , t h e answer, t h e i n t e r r o g a t o r i e s o r i n any a f f i d a v i t p r o p e r l y b e f o r e t h e c o u r t a t t h e t i m e summary judgment was g r a n t e d . The a l l e g a t i o n , t h e r e f o r e , w i l l n o t be c o n s i d e r e d on a p p e a l a s a b a s i s f o r r e v e r s i n g t h e D i s -trict Court's ruling.

I n p a s s i n g , w e acknowledge t h a t a p p e l l a n t a t t e m p t s t o s u p p o r t t h i s i s s u e on i t s motion t o v a c a t e w i t h a n a f f i d a v i t and copy of a "demand" s e r v e d on r e s p o n d e n t . Appellant, however, f a i l e d t o n o t e t h e motion f o r any c o n s i d e r a t i o n o r adjudication; f u r t h e r , it has f a i l e d t o demonstrate t h a t t h i s i n f o r m a t i o n was u n a v a i l a b l e p r i o r t o t h e D i s t r i c t C o u r t ' s g r a n t i n g o f t h e summary judgment.

Upon r e v i e w i n g t h e s u b m i t t e d r e c o r d p r o p e r l y b e f o r e t h e C o u r t , even i n a l i g h t most f a v o r a b l e t o a p p e l l a n t , w e must c o n c l u d e t h a t a p p e l l a n t ' s c a u s e of a c t i o n a c c r u e d p r i o r t o o r on May 29, 1974, t h e d a t e of t h e a l l e g e d improper s a l e . C o n s e q u e n t l y , f o u r y e a r s e x p i r e d between a c c r u a l and commencement of t h e a c t i o n .

S e c t i o n 27-2-207, MCA, p r o v i d e s :

"Tort a c t i o n s involving property. Within 2 y e a r s i s t h e p e r i o d p r e s c r i b e d f o r t h e com- mencement of a n a c t i o n f o r :

" (2) t a k i n g , d e t a i n i n g , o r i n j u r i n g any goods o r chattels, including actions f o r the specific r e c o v e r y of p e r s o n a l p r o p e r t y ; "

C l e a r l y , a p p e l l a n t ' s c l a i m sounding i n t o r t i s b a r r e d by t h i s two-year s t a t u t e of l i m i t a t i o n .

I t c o u l d b e a r g u e d t h a t s e c t i o n 27-2-204, MCA ( s t a t u t e of l i m i t a t i o n f o r g e n e r a l t o r t a c t i o n s ) , i s a p p l i c a b l e . However, t h i s s e c t i o n o n l y e x t e n d s t h e l i m i t a t i o n t o t h r e e y e a r s , and, t h u s , a p p e l l a n t ' s a c t i o n i s s t i l l p r o p e r l y barred.

I n r e g a r d t o a p p e l l a n t ' s c l a i m of c o n s t r u c t i v e t r u s t , t h e a l l e g e d o b l i g a t i o n ( t h a t respondent held the i n s u l a t i o n o r p r o c e e d s t h e r e f r o m i n t r u s t ) i s one i m p l i e d by law and n o t founded upon a w r i t t e n i n s t r u m e n t . A s t o such a n i m -p l i e d o b l i g a t i o n , s e c t i o n 27-2-202 ( 3 ) , MCA, p r o v i d e s :

" A c t i o n s based - c o n t r a c t - o t h e r o b l i g a t i o n . on or ...

" ( 3 ) The p e r i o d p r e s c r i b e d f o r t h e commencement of a n a c t i o n upon a n o b l i g a t i o n o r l i a b i l i t y , o t h e r than a c o n t r a c t , account, o r promise, n o t founded upon a n i n s t r u m e n t i n w r i t i n g i s w i t h i n 3 years.

T h e r e f o r e , a p p e l l a n t ' s c l a i m under a t h e o r y of c o n s t r u c t i v e t r u s t i s a l s o barred.

A s t o t h e c l a i m f o r p u n i t i v e damages, s i n c e t h e underl y i n g c a u s e o f a c t i o n i s b a r r e d , t h e r e c o v e r y of exemplary damages i s b a r r e d a s w e l l .

The d e c i s i o n of t h e D i s t r i c t C o u r t t h a t a p p e l l a n t ' s a c t i o n i s b a r r e d by a p p l i c a b l e s t a t u t e s of l i m i t a t i o n i s p r o p e r a s based upon t h e r e c o r d s u b m i t t e d a t t h e t i m e of i t s ruling. The summary judgment i s a f f i r m e d . W e concur: - Chief ~ u k t i c e

Justices 4 a&, /

T h i s c a u s e was s u b m i t t e d p r i o r t o J a n u a r y 5 , 1 9 8 1 .