Tuttle v. Olds

2007 UT App 10, 155 P.3d 893, 569 Utah Adv. Rep. 10, 2007 Utah App. LEXIS 8, 2007 WL 64123

• Court: Court of Appeals of Utah
• Decided: January 11, 2007
• Docket: 20060364-CA
• Status: Published

Opinions

OPINION

BENCH, Presiding Judge:

T1 William J. Tuttle, Charlene W. Tuttle, J. Kenton Tuttle, and Lori M. Tuttle (Plaintiffs) appeal the trial court's granting of a judgment on the pleadings in favor of Jerry Olds, Utah State Engineer; the Utah Department of Natural Resources; and Terry Monroe (Defendants). We reverse in part and affirm in part.

BACKGROUND

{2 This controversy arises from Defendants' discovery that Plaintiffs were irrigating land with more water than their certificated water rights permitted. Plaintiffs owned approximately 1700 acres of farmland (the Property) in the Pahvant Valley (the Valley). In 1994, Defendants created a groundwater management plan after a federal study revealed a significant overdraft of water in the Valley. The groundwater management plan called for Defendants to conduct a survey (the Survey) comparing the actual irrigated acreage in the Valley with the acreage that should be irrigated based on the water rights of the Valley's farmers, including Plaintiffs. Defendants sought to discover and stop any illegal watering in order to restore the Valley's groundwater to expected levels.

T3 The management plan included procedures for notifying landowners of illegal watering by letters warning recipients to stop the illegal usage. Because several of their neighbors had received these letters, Plaintiffs became concerned and visited the regional office of the Utah Division of Water Rights, where they inquired about the legality of their current water usage. An unidentified employee directed Plaintiffs to a map of the Valley on the office wall, indicating that the usage in the lands shaded red had been deemed illegal; Plaintiffs' farms were not shaded red. Then, in 1996, Defendants sent a letter to all landowners in the Valley stating that the acreage survey was complete, that all illegal water users had been notified by letter, and that all irrigated lands were now covered by valid water rights.

T4 In 1998, Plaintiffs decided to sell the Property, and began negotiations with the Ellsworths, who were potential buyers. During these negotiations Plaintiffs received a letter from Defendants expressing concern about a diesel-powered well on the Property for which no water rights could be identified. Apparently, this well was not detected during the Survey. Despite this 1998 letter, Plaintiffs used the 1996 letter from Defendants to indicate to the Ellsworths that the Property had sufficient water rights. Plaintiffs sold the Property to the Ellsworths in 1999. Later, after Defendants notified the Ellsworths about the lack of water rights associated with the diesel-powered well, the Elisworths filed suit against Plaintiffs in federal court. The Ellsworths sought damages for the decrease in the Property's value as a result of the inability to legally irrigate the Property to the extent represented by Plaintiffs. On April 30, 2003, the Ellsworths won a federal judgment against Plaintiffs for approximately $1,400,000.

T5 On April 28, 2004, Plaintiffs filed a notice of claim against Defendants, and thereafter filed suit in district court. Without filing an answer to the complaint, Defendants filed a motion to dismiss Plaintiffs' claims pursuant to rule 12(b)(6) of the Utah Rules of Civil Procedure. Both parties filed memoranda and exhibits with the court pri- or to a hearing on the motion. After the hearing, the trial court granted Defendants' motion, but referred to it as a rule 12(c) judgment on the pleadings. Plaintiffs now appeal.

ISSUES AND STANDARD OF REVIEW

16 Plaintiffs claim that the trial court's reference to the motion as one for judgment on the pleadings, as well as its failures to exclude matters outside the pleadings and to properly convert the motion into one for summary judgment, warrant reversal. See Utah R. Civ. P. 12%M)-(c). "If a court does not exclude material outside the pleadings and fails to convert a rule 12(b)(6) motion to one for summary judgment, it is reversible error unless the dismissal can be justified without considering the outside documents." Oakwood Vill., L.L.C,. v. Albertsons, Inc., 2004 UT 101, 112, 104 P.3d 1226. The propriety of a dismissal under rule 12(b)(6) is a question of law we review for correctness. See Whipple v. American Fork Irrigation Co., 910 P.2d 1218, 1220 (Utah 1996). Rule 12(b)(6) dismissals are appropriate only where the court concludes that the plaintiff has failed to state a claim upon which relief can be granted, after accepting all the factual allegations made in the complaint as true and drawing all reasonable inferences in a light most favorable to the plaintiff. See id.

ANALYSIS

I. Procedural Issues

T7 Plaintiffs claim that the trial court should be reversed for treating Defendants' rule 12(b)(6) motion to dismiss as a rule 12(c) motion for judgment on the pleadings. See Utah R. Civ. P. 12(c). In its order granting the motion, the trial court referred to the motion as one for a judgment on the pleadings, despite a reminder from Defendants that their motion was one to dismiss under 12(b)(6). Because Defendants never filed an answer to the complaint, the pleadings were not closed at the time the trial court granted the so-called judgment on the pleadings. A motion for a judgment on the pleadings cannot be made, let alone granted, prior to the closing of the pleadings. See id. (stating that 12(c) motions are to be made after the pleadings have been closed). We will therefore review the trial court's decision as if it had correctly referred to the granted motion as one for dismissal under rule 12(b)(6).¹

18 Plaintiffs claim that, in dismissing the case, the trial court improperly considered material outside the pleadings. If a court considers material outside the pleadings in deciding a rule 12(b)(6) motion to dismiss, the court must convert the motion into one for summary judgment. See Utah R. Civ. P. 12(b). This rule 12(b) conversion process includes giving the parties reasonable notice and opportunity to submit all pertinent summary judgment materials for the court's consideration. See id.; Heberson v. Willowcreek Plaza, 923 P.2d 1389, 1391 (Utah 1996); Strand v. Associated Students of Univ. of Utah, 561 P.2d 191, 198 (Utah 1977). The notice and opportunity to submit requirements are especially important with respect to the party against whom judgment is entered. See Strand, 561 P.2d at 198 (stating that the opportunity for the non-moving party to submit rule 56 material is particularly important). Our rules provide that complaints and answers constitute pleadings. See Utah R. Civ. P. 7(a) (Gineluding replies to counterclaims and answers to cross-claims, as well as third-party complaints and answers, within the definition of pleadings). A matter outside the pleadings "include[s] any written or oral evidence ... which ... substantiates] ... and does not merely reiterate what is said in the pleadings." Oakwood Vill, 2004 UT 101 at 112, 104 P.3d 1226 (second, third, and fourth alterations in original) (quotations and citation omitted).

19 Attached to their memorandum in support of their motion to dismiss, Defendants included copies of the federal judgment in the previous action between the Ells-worths and Plaintiffs Defendants argue that these materials should be considered part of the pleadings because they merely provide context for Plaintiffs' references to the federal matter in the complaint.. See id. Our review of the complaint, however, reveals that Plaintiffs refer to the federal matter only with regard to the damages sought, and do not otherwise rely on the findings of the federal court in forming their causes of action. By attaching the federal judgment material to their memorandum, Defendants did not "merely reiterate what [was] said in the pleadings." Id. (quotations and citation omitted). The trial court failed to expressly exclude this extrancous material, and the record shows that the parties discussed the federal judgment at the hearing. Because Defendants' memorandum and attachments do not constitute pleadings under rule 7(a), the trial court should have converted the motion into one for summary judgment pursuant to rule 12(b). See Utah R. Civ. P. 12(b).

T 10 The trial court failed to give the parties reasonable notice or opportunity to submit other rule 56 materials before granting the motion. See Utah R. Civ. P. 56. Neither party knew until the end of the hearing that the trial court would grant what it termed a motion for judgment on the pleadings. Because the trial court failed to properly convert Defendants rule 12(b)(6) motion into one for summary judgment, we must reverse the trial court's dismissal unless, without considering material outside the complaint, we conclude that Plaintiffs have failed to state a claim upon which relief can be granted. See Oakwood Vill., 2004 UT 101 at T 12, 104 P.3d 1226.

II. Negligence Claim

111 Plaintiffs argue that the trial court erred by finding that Plaintiffs' negligence claim was time barred because Plaintiffs failed to file a timely notice of claim against Defendants See Utah Code Ann. § 63-300-402 (2004)² A claim against a governmental entity or employee is barred unless a notice of claim is filed "within one year after the claim arises." Id. "The general rule regarding statutes of limitations is that the limitation period begins to run when the last event necessary to complete the cause of action occurs." Sevy v. Security Title Co., 902 P.2d 629, 634 (Utah 1995). "However, the law does not recognize an inchoate wrong, and therefore, until there is actual loss or damage resulting to the interests of another, a claim for negligence is not actionable." Seale v. Gowans, 923 P.2d 1861, 1864 (Utah 1996) (quotations and citations omitted). "[Allthough 'there exists a possibility, even a probability, of future harm, it is not enough to sustain a claim, and plaintiff must wait until some harm manifests itself"" pulos v. McFarland & Hullinger, LLC,, 2006 UT App 352, T 16, 145 P.3d 1157 (quoting Seale, 923 P.2d at 1364).

12 Until the federal judgment was entered, Plaintiffs did not have a claim of negligence against Defendants because Plaintiffs had not suffered any actual harm or damages. Defendants argue that Plaintiffs suffered harm when they were first notified about the problems concerning the diesel well because the Property was instantly devalued, or that Plaintiffs suffered harm when the Ellsworths filed suit in federal court. Neither of these events, however, constitute an actual loss. See Seale, 928 P.2d at 1864. While either event may present the possibility, if not the probability of loss, our cases require more to trigger a claim of negligence. Only after the federal judgment was entered did Plaintiffs suffer an actual loss. We therefore hold, as a matter of law, that Plaintiffs filed a timely notice of claim in compliance with Utah Code section 68-80d-402.

113 Because we hold that Plaintiffs filed a timely notice of claim, we must now address whether the complaint itself states a claim for negligence in order to determine if the dismissal can be justified without considering matters outside the complaint. See Oakwood Vill, L.L.C,. v. Albertsons, Inc., 2004 UT 101, 104 P.3d 1226. On appeal, Plaintiffs specifically challenge the trial court's ruling that Defendants did not owe a duty to Plaintiffs to perform the Survey with reasonable care.

114 A rule 12(b)(6) motion to dismiss is not an opportunity for the trial court to decide the merits of a case: "Rule 12(b)(6) concerns the sufficiency of the pleadings, not the underlying merits of a particular case." Alvarez v. Galetka, 983 P.2d 987, 989 (Utah 1997). A reviewing court is "obliged to construe the complaint in a light most favorable to the plaintiff and to indulge all reasonable inferences in its favor" Heiner v. S.J. Groves & Sons Co., 790 P.2d 107, 109 (Utah Ct.App.1990). Reviewing courts may only affirm a rule 12(b)(6) dismissal if "it appears to a certainty that the plaintiff would not be entitled to relief under any state of facts which could be proved in support of its claims." Id. Rule 12(b)(6) dismissals are proper, for example, when the plaintiff has complained of negligence, but no factual situation could possibly create a legal duty of care between the defendant and plaintiff. See generally Ramsey v. Hancock, 2008 UT App 319, 79 P.3d 423 (affirming because a bank did not owe a duty of reasonable care to the noncustomer plaintiff whose signature was forged by a third party); Doe v. Corporation of the President of the Church of Jesus Christ of Latter-day Saints, 2004 UT App 274, 98 P.3d 429 (holding that a 12(b)(6) dismissal was proper because the Church could never owe a duty to warn the plaintiff about a priest's prior child sexual abuse).

T15 Here, Plaintiffs have alleged that Defendants were not statutorily obligated to conduct the Survey, that the Survey was not conducted with reasonable care, and that Plaintiffs' reliance on the negligent Survey resulted in a $1.4 million loss. In viewing these allegations in a light most favorable to Plaintiffs, as we must, Plaintiffs have stated a claim upon which relief could be granted.³ Plaintiffs could prove a set of facts under which Defendants could be found to have owed a duty of care to Plaintiffs and that the duty was breached, resulting in the damages claimed. We therefore reverse and remand the dismissal of Plaintiffs' negligence claim.⁴

III. Takings Claim

116 Plaintiffs contend that the trial court erred in dismissing the complaint in light of the takings claim included therein. Although water rights constitute a protecta-ble property interest, see Sigurd City v. State, 105 Utah 278, 142 P.2d 154, 157 (1943), Plaintiffs failed to allege facts from which the trial court could have determined that Defendants deprived or even sought to deprive Plaintiffs of their water rights. Defendants made no attempt to change or decrease Plaintiffs' certificated water rights, only to stop a use of water not legally covered by Plaintiffs' certificates. Defendants' letter notifying Plaintiffs of the improper water use did not deprive Plaintiffs of anything but the illegal use of water. We therefore conclude that the trial court's dismissal of Plaintiffs takings claim was not in error.

CONCLUSION

17 The trial court erroneously characterized Defendants' rule 12(b)(6) motion as one for a judgment on the pleadings, and when it should have converted the motion into one for summary judgment, the court failed to properly do so. Because Plaintiffs have stated a claim for negligence upon which relief could be granted, the dismissal of that claim cannot be justified under rule 12(b)(6).

1 18 For the foregoing reasons, we reverse in part, affirm in part, and remand.

1 . The Utah Rules of Civil Procedure contain identical provisions for converting motions under rules 12(b)(6) and 12(c) into motions for summary judgment. See Utah R. Civ. P. 12(b), (c).

Therefore, our resolution of this appeal is not dependent on our classification of the motion as one to dismiss under rule 12(b)(6).

2 . The Utah Governmental Immunity Act was repealed on July 1, 2004, and replaced by the Governmental Immunity Act of Utah on the same date. For the reader's convenience we will cite to the new provisions because the time limitations have not been altered. See Utah Code Ann. § 63-300d-402 (2004).

3 . The dissent relies on the public duty doctrine in concluding that Plaintiffs have failed to state a claim upon which relief could be granted. Specifically, the dissent asserts that the facts of the case do not fall into any of the four established exceptions to the general rule that a government agent owes no duty to private citizens. See Webb v. University of Utah, 2005 UT 80, 125, 125 P.3d 906. The dissent's position that Plaintiffs' reliance on the governmental action here was unreasonable implies that there could be a set of facts under which another plaintiff's reliance would be reasonable. Determining the reasonableness of Plaintiffs' reliance on a rule 12(b)(6) motion improperly decides the merits of Plaintiffs' claims at a point where the court should focus only on "the sufficiency of the pleadings." Alvarez v. Galetka, 933 P.2d 987, 989 (Utah 1997).

4 . In briefing, Plaintiffs have urged this court to reverse the trial court's dismissal of their negligence claim because Defendants should be equitably estopped from contradicting the statements made in the 1996 letter. At this stage of the litigation, where Defendants have not filed an answer to Plaintiffs' allegations and we seek to decide only whether Plaintiffs' complaint can survive a rule 12(b)(6) motion, we find it premature to address the affirmative defense of estop-pel. See Utah R. Civ. P. 8(c) (listing estoppel as an affirmative defense); Warren v. Papillion Sch. Dist., 199 Neb. 410, 259 N.W.2d 281, 287 (1977) (holding that estoppel does not give rise to a cause of action). The complaint makes no mention of estoppel, and since our analysis is limited to the complaint, we decline to discuss the merits of Plaintiffs' estoppel theory.