Abraham v. Hull & Swingley

2020 MT 254N

Opinion

10/06/2020

DA 20-0124 Case Number: DA 20-0124

IN THE SUPREME COURT OF THE STATE OF MONTANA 2020 MT 254N

REBECCA ABRAHAM, individually and MITCHELL BRISTOW, individually, and on behalf of those similarly situated,

Plaintiffs and Appellants,

v.

MICHAEL and SHARON O’BRIEN, d/b/a MICK O’BRIEN USED CAR AND TRUCK CENTER and HULL & SWINGLEY,

Defendants and Appellees.

APPEAL FROM: District Court of the Second Judicial District, In and For the County of Butte-Silver Bow, Cause No. DV-19-222 Honorable Robert J. Whelan, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Lawrence E. Henke, David L. Vicevich, Vicevich Law, Butte, Montana

For Appellee:

Martin S. King, Worden Thane P.C., Missoula, Montana

Submitted on Briefs: September 2, 2020

Decided: October 6, 2020

Filed:

cir-641.—if __________________________________________ Clerk Justice Laurie McKinnon delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating

Rules, this case is decided by memorandum opinion, shall not be cited and does not serve

as precedent. Its case title, cause number, and disposition shall be included in this Court’s

quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

¶2 Rebecca Abraham and Mitchell Bristow (collectively, the “Plaintiffs”) appeal the

February 21, 2020 order of the Second Judicial District Court, Silver Bow County, granting

defendant Hull & Swingley’s (H&S) M. R. Civ. P. 12(b)(6) motion to dismiss their

Complaint. We address the following issues on appeal: (1) whether the District Court erred

in granting H&S’s motion to dismiss by relying on information outside of the pleadings

and without allowing the Plaintiffs notice and/or an opportunity to replead; (2) whether the

District Court erred in dismissing the Plaintiffs’ negligence claim upon determining H&S

did not owe a duty to the Plaintiffs; (3) whether the District Court erred in its application

of the discovery rule; and (4) whether the District Court erred in construing the Complaint’s

malicious prosecution and unjust enrichment claims. We affirm.

¶3 In March 2011, Abraham purchased and financed a used vehicle at Mick O’Brien’s

Used Car and Truck Center (O’Brien’s) owned by Michael and Sharon O’Brien in

Butte, Montana. At the time, Abraham signed a purchase agreement and promissory note.

In 2013, after the vehicle experienced mechanical problems, Abraham defaulted on the

loan and surrendered the vehicle to O’Briens with a balance of $1,058 owed. Abraham

2 was later sued by H&S on behalf of O’Briens in Silver Bow County Justice Court to collect

the balance owed. H&S obtained a $1,559 judgment against Abraham in Justice Court.

¶4 In January 2012, Bristow also purchased and financed a used vehicle at O’Brien’s,

at which time he signed a purchase agreement and promissory note. In 2015, after his

vehicle experienced mechanical failure, Bristow defaulted on his loan and surrendered the

vehicle to O’Brien’s with a balance of $2,000 owed. H&S sued Bristow in Justice Court

to collect the balance owed. H&S obtained a $3,623.55 judgment against Bristow in

Justice Court.

¶5 Each of the promissory notes signed by the Plaintiffs contained the following

provision: “I understand that I am responsible for any remaining balance. I further

understand and agree to pay any reasonable collection fees and attorney fees if my account

is placed in collection for non-payment.”

¶6 On July 23, 2019, Abraham and Bristow filed a class action lawsuit against

O’Brien’s and H&S, asserting the entities engaged in “a combined effort (an obvious

conspiracy) . . . to repeatedly sell, repossess, and re-sell autos to low income,

unsophisticated consumers, and then subsequently pursue those consumers for amounts

that often exceed the total value of the original purchase price . . . .” The Complaint alleged

against H&S claims of negligence, violation of the Montana Consumer Protection Act,

§§ 30-14-101, MCA, et seq. (MCPA), malicious prosecution, unjust enrichment and

disgorgement, preliminary and permanent injunctive relief, and attorney fees and costs. On

3 August 13, 2019, the Plaintiffs filed copies of their purchase agreements and promissory

notes with O’Brien’s as exhibits to be incorporated into the Complaint.

¶7 On September 12, 2019, H&S filed a motion to dismiss the Plaintiffs’ claims against

them. H&S also filed a motion requesting the District Court take judicial notice of the

records in the Justice Court collection actions pursuant to M. R. Evid. 201 and 202. On

October 7, 2019, the Plaintiffs filed a brief opposing H&S’s motion to dismiss, but did not

oppose H&S’s motion for judicial notice of the Justice Court collection action records. The

Plaintiffs later filed their own motion for the District Court to take judicial notice of the

Justice Court collection action records. On February 21, 2020, the District Court granted

H&S’s motion and dismissed the Plaintiffs’ claims against H&S with prejudice. The

Plaintiffs appeal.

¶8 We review de novo a district court’s ruling on a M. R. Civ. P. 12(b)(6) motion to

dismiss for failure to state a claim for which relief can be granted. Cowan v. Cowan,

2004 MT 97, ¶ 10, 321 Mont. 13, 89 P.3d 6. “The determination that a complaint fails to

state a claim is a conclusion of law that we review to determine whether the court’s

interpretation of the law is correct.” Cowan, ¶ 10. We will affirm a district court’s

dismissal if we “conclude the non-moving party would not be entitled to relief based on

any set of facts that could be proven to support the claim.” Renenger v. State,

2018 MT 228, ¶ 5, 392 Mont. 495, 426 P.3d 559.

¶9 The Plaintiffs first argue the District Court erred in granting H&S’s motion to

dismiss by relying on information outside of the pleadings, specifically the filings in their

4 respective Justice Court collection actions, without allowing the Plaintiffs notice and/or an

opportunity to replead.

¶10 “The only relevant document when considering a motion to dismiss is the complaint

and any documents it incorporates by reference.” Cowan, ¶ 11 (citing City of Cut Bank v.

Tom Patrick Constr., Inc., 1998 MT 219, ¶ 20, 290 Mont. 470, 963 P.2d 1283). A court

must generally view the complaint in a light most favorable to the plaintiff, taking as true

all allegations of fact therein. Renenger, ¶ 5. If matters outside the pleadings are presented

to and not excluded by the court on a motion to dismiss, the motion must be treated as one

for summary judgment under M. R. Civ. P. 56. M. R. Civ. P. 12(d); Powell v. Salvation

Army, 287 Mont. 99, 103, 951 P.2d 1352, 1354 (1997). In such cases, “[a]ll parties must

be given a reasonable opportunity to present all the material that is pertinent to the motion.”

M. R. Civ. P. 12(d).

¶11 The same day H&S filed its motion to dismiss, it requested the District Court take

judicial notice of all filings in the Justice Court actions. The Plaintiffs did not oppose this

request and made a similar request of the District Court in both their brief opposing H&S’s

motion to dismiss and later by their own motion. “We have repeatedly held that we will

not put a trial court in error for a ruling or procedure in which a party acquiesced or

participated.” State v. Cybulski, 2009 MT 70, ¶ 61, 349 Mont. 429, 204 P.3d 7. As such,

the District Court did not err in relying on the filings of the Justice Court collection actions

in dismissing the Plaintiffs’ claims against H&S.

5 ¶12 We similarly decline to fault the District Court for dismissing the Plaintiffs’ claims

with prejudice. Generally, a district court should “freely” allow a plaintiff to cure

deficiencies in a pleading “when justice so requires.” M. R. Civ. P. 15(a)(2). Our review

of the record reveals that the Plaintiffs did not request leave to amend or submit any

proposed amendments during the proceedings on the motion to dismiss. The District Court

did not err in dismissing the Plaintiff’s claims against H&S with prejudice.

¶13 Second, the Plaintiffs argue the District Court erred in dismissing the Plaintiffs’

negligence claim upon determining H&S did not owe the Plaintiffs’ a duty.

¶14 To state a cause of action for negligence, a plaintiff must plead four essential

elements: (1) duty; (2) breach; (3) causation; and, (4) damages. See Fisher v. Swift Transp.

Co., 2008 MT 105, ¶ 13, 342 Mont. 335, 181 P.3d 601. “Without duty, and a breach of

that duty, no negligence can exist.” Fisher, ¶ 13. The existence of a legal duty is a question

of law. Rhode v. Adams, 1998 MT 73, ¶ 9, 288 Mont. 278, 957 P.2d 1124.

¶15 The Plaintiffs argue on appeal that H&S owed a duty to them because H&S’s

conduct went “beyond legal representation” by morphing from “counsel to collection

agent, which eliminates the one-on-one litigant protections available under Rhode.” In

Rhode, we held an attorney in an adversarial context does not owe a duty to a non-client

because imposition of such a duty would inhibit the attorney’s ability to

“vigorously advocate his or her client’s interests in litigation . . . .” Rhode, ¶¶ 21-23.

¶16 The Plaintiffs’ Complaint alleges H&S was hired by O’Brien’s as attorneys to file

the collection actions against the Plaintiffs in Justice Court. H&S functioned as an

6 advocate of O’Brien’s throughout the adversarial Justice Court proceedings and therefore

owed no duty to the Plaintiffs arising from the filing of the collection actions, pursuant to

Rhode. Because the Plaintiffs were unable to sufficiently plead all elements of a cause of

action for negligence, we affirm the District Court’s dismissal of the claim against H&S.

¶17 Third, the Plaintiffs argue that the District Court erred in its application of the

discovery rule. The District Court determined the discovery rule did not apply to toll the

applicable statute of limitations, and dismissed the Plaintiffs’ claim that H&S violated the

MCPA when it pursued collection of the deficiency while adding a “pecuniary award.”

¶18 A claim brought under the MCPA is ordinarily subject to a two-year statute of

limitations. See § 27-2-211(1)(c), MCA (“Within 2 years is the period prescribed for the

commencement of an action upon . . . a liability created by statute other than: (i) a penalty

or forfeiture; or (ii) a statutory debt created by the payment of public assistance.”). A claim

not brought within this period of limitation is generally barred. See Norbeck v.

Flathead Cty., 2019 MT 84, ¶ 18, 395 Mont. 294, 438 P.3d 811. The limitations period

begins to run when the claim accrues, meaning that “all elements of the claim or cause

exist.” Norbeck, ¶ 18 (quotations omitted). “It is ‘not necessary to know the total extent

of damages that an act causes to begin the running of the statute of limitations.’”

Norbeck, ¶ 24 (quoting E.W. v. D.C.H., 231 Mont. 481, 487, 754 P.2d 817, 820 (1988)).

¶19 Under the discovery rule, the limitations period

does not begin to run until the injured party discovers the facts constituting the claim or, in the exercise of due diligence, should have discovered the facts constituting the claim if the facts constituting the claim are by their

7 nature concealed or self-concealing or a defendant has taken action preventing [the] plaintiff from discovering the facts.

Norbeck, ¶ 19. The discovery rule is an exception to the general rule that “[t]he fact that a

party does not know that he or she has a claim, whether because he or she is unaware of

the facts or unaware of his or her legal rights, is usually not sufficient to delay the

beginning” of the applicable statute of limitations period. Christian v. Atl. Richfield Co.,

2015 MT 255, ¶ 61, 380 Mont. 495, 358 P.3d 131.

¶20 The Plaintiffs assert on appeal that the limitations period did not begin running until

July 2017 and December 2018, respectively, when H&S “initiated its part of the scheme

and seized [the Plaintiffs’] bank accounts” to satisfy the Justice Court judgments.

We disagree.

¶21 Upon execution of the purchase agreements and promissory notes, the Plaintiffs

agreed and understood that in the event of their default they would be subject to collection

for the remaining balance on their accounts and any reasonable fees and costs. Following

the Plaintiffs’ defaults, the Plaintiffs should have become aware of the facts forming the

basis of their MCPA claim against H&S when they were served with the Justice Court

collection action summons and complaints in 2014 and 2016, respectively. The fact that

the Plaintiffs were unaware of their legal rights or the extent of their damages at the time

of service is insufficient to delay commencement of the limitations period.

See Norbeck, ¶ 18. Furthermore, H&S’s conduct in initiating the Justice Court proceedings

against the Plaintiffs is not by its nature a concealed or self-concealing act, nor an act

preventing the discoverability of an injury or its cause, that would implicate the discovery 8 rule and toll the two-year statute of limitations. The Plaintiffs’ Complaint, filed July of

2019, falls outside the two-year period. The District Court did not err in its application of

the discovery rule in dismissing the Plaintiffs’ MCPA claims.

¶22 Lastly, the Plaintiffs argue the District Court erred in construing the malicious

prosecution and unjust enrichment claims in the Complaint. To state a cause of action for

malicious prosecution, a plaintiff must plead all of the following elements:

(1) a judicial proceeding was commenced and prosecuted against the plaintiff; (2) the defendant was responsible for instigating, prosecuting or continuing the proceeding; (3) the defendant acted without probable cause; (4) the defendant was actuated by malice; (5) the judicial proceeding terminated favorably for plaintiff; and (6) the plaintiff sustained damages.

Seipel v. Olympic Coast Invs., 2008 MT 237, ¶ 11, 344 Mont. 415, 188 P.3d 1027.

¶23 The Plaintiffs’ malicious prosecution claim was premised on H&S’s filing of the

Justice Court collection actions. As stated in the Plaintiffs’ Complaint, H&S obtained

monetary judgments against both Plaintiffs, therefore failing to satisfy the fifth element

required to state a cause of action for malicious prosecution. While the Plaintiffs assert in

their Complaint that “[t]he judicial proceeding would have terminated favorably for

[the Plaintiffs], but for the fraud, deception, and unfair actions by . . . [H&S],” the

District Court was not required to take this assertion as true, given that the Justice Court

adjudications resulted unfavorably for the Plaintiffs through entry of judgment against

them. See Cowan, ¶ 14 (citing Powell, 287 Mont. at 102, 951 P.2d at 1354) (a district court

construing the allegations of a plaintiff’s complaint is “under no duty to take as true legal 9 conclusions or allegations that have no factual basis or are contrary to what has already

been adjudicated.”). The District Court did not err in dismissing the Plaintiffs’ malicious

prosecution claim.

¶24 The District Court similarly correctly dismissed the Plaintiffs’ unjust enrichment

claim. Unjust enrichment is “an obligation created by law in the absence of an agreement

between the parties,” and is typically applied as an equitable remedy “when a contract in

law is implied by the facts and circumstances of the case, but no actual contract exists

between the parties.” Welu v. Twin Hearts Smiling Horses, Inc., 2016 MT 347, ¶ 33,

386 Mont. 98, 386 P.3d 937. See also Associated Mgmt. Servs. v. Ruff, 2018 MT 182, ¶ 64,

392 Mont. 139, 424 P.3d 571 (providing the purpose of unjust enrichment is to “prevent or

remedy inequitable gain by another.”). Unjust enrichment does not apply where a valid,

enforceable contract exists. Associated Mgmt., ¶ 67 (“A valid contract defines the

obligations of the parties as to matters within its scope, displacing to that extent any inquiry

into unjust enrichment.”) (quotations and original alterations omitted).

¶25 The Plaintiffs’ Complaint alleges that they entered into contracts with O’Brien’s for

the purchase and financing of their vehicles, and that H&S received a benefit by suing the

Plaintiffs in Justice Court on behalf of O’Brien’s to obtain judgments on the contracts. The

existence of these contracts necessarily precludes the Plaintiffs’ present claim for

unjust enrichment.

¶26 The Plaintiffs’ Complaint also alleges the contracts upon which the Justice Court

judgments were based were deemed “deficient,” but the District Court was not required to

10 assume this allegation as true absent an order from Justice Court setting aside the

judgments, or a reversal or modification of the judgment on appeal to district court.

See Cowan, ¶ 14 (citing Powell, 287 Mont. at 102, 951 P.2d at 1354). A justice’s court

generally has jurisdiction to enter civil judgments for damages not exceeding $12,000,

§ 3-10-301(1), MCA, and reversal or modification of such judgments may only occur

through appeal to a district court. See § 25-33-102, MCA (“Any party dissatisfied with the

judgment rendered in a civil action in a . . . justice’s court may appeal therefrom to the

district court . . . .”); § 25-33-101, MCA (providing that appeal process set forth in Title 25,

chapter 33 is the exclusive method of review of a justice’s court judgment).

“Every presumption is in favor of the correctness of the judgment. . . . And until the same

is reversed it is presumed to be a correct judicial determination of the rights of the parties.”

State ex re. McKennan v. District Court, 69 Mont. 340, 346, 222 P. 426, 428 (1924)

(citations omitted). The District Court did not err in dismissing the Plaintiffs’

unjust enrichment claim.

¶27 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our

Internal Operating Rules, which provides for memorandum opinions. In the opinion of the

Court, the case presents a question controlled by settled law or by the clear application of

applicable standards of review. Affirmed.

/S/ LAURIE McKINNON

11 We concur:

/S/ MIKE McGRATH /S/ JAMES JEREMIAH SHEA /S/ INGRID GUSTAFSON /S/ DIRK M. SANDEFUR