General Constructors, Inc. v. Chewculator, Inc.

• Decision Date: 05 April 2001
• Docket Number: No. 00-075.,00-075.
• Citation: 21 P.3d 604,2001 MT 54,304 Mont. 319
• Parties: GENERAL CONSTRUCTORS, INC., a Montana Corporation, Plaintiff and Appellant, v. CHEWCULATOR, INC., a Montana Corporation, and Carl Seifert, Individually, Defendants and Respondents.
• Court: Montana Supreme Court

21 P.3d 604

2001 MT 54

304 Mont. 319

GENERAL CONSTRUCTORS, INC., a Montana Corporation, Plaintiff and Appellant, v. CHEWCULATOR, INC., a Montana Corporation, and Carl Seifert, Individually, Defendants and Respondents.

No. 00-075.

Supreme Court of Montana.

Submitted on Briefs June 29, 2000.

Decided April 5, 2001.

John H. Gilliam, Skjelset & Gilliam, Missoula, MT, for Appellant.

F.L. Ingraham, Ingraham Law Office, Ronan, MT, (Chewculator, Inc.); Matthew H. O'Neill, French, Mercer, Grainey & O'Neill, Polson, MT, (Carl Seifert), for Respondents.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Plaintiff General Constructors, Inc. (GCI), appeals from an order dismissing its claim entered by the Twentieth Judicial District Court, Lake County, in favor of the Defendants Chewculator, Inc. (Chewculator) and Carl Seifert (Seifert), individually, pursuant to the Defendants' motion to dismiss for lack of subject matter jurisdiction.

¶ 2 We affirm.

¶ 3 GCI raises the following issue:

Did the District Court err in finding it lacked subject matter jurisdiction over a breach of contract dispute between two Montana corporations, and a non-Indian minority shareholder of one of the corporations, for work performed within the boundaries of the Flathead Reservation?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 This dispute arose from a 1993 construction project on the Pablo Dam located in Lake County, and within the boundaries of the Flathead Indian Reservation.

¶ 5 The project bid specifications, published by the Confederated Salish and Kootenai Tribes (hereinafter CSKT) included a provision requiring that all contractors and subcontractors must adhere to a tribal policy "to expand the opportunities for tribal members and Indian-owned businesses to receive preference in employment, subcontracts, and the procurement of equipment and supplies, in connection with work to be performed under this contract." The CSKT project rules also stated that the foregoing requirement "shall apply to bidders, the Contractor, and subcontractors at any tier, regardless of their status as a non-Indian Business, an Indian-owned business, or a CSKT business."

¶ 6 CSKT awarded Dick Anderson Construction, a Montana corporation, the general contract in July 1993. Dick Anderson Construction then solicited bids for a subcontract to haul and screen gravel. GCI claims that it submitted the low bid, but the subcontract was awarded to Chewculator based on its claimed preference as an Indian-owned business. GCI does not dispute the fact that Chewculator's majority shareholder is Tina Marie Dupuis Walton, who is a Consolidated Salish and Kootenai tribal member. Carl Seifert, who formed the corporation in 1982 for the purported purpose of manufacturing and distributing novelty items, transferred a majority share interest to Walton in 1993.¹

¶ 7 On October 1, 1993, GCI entered into a subcontract with Chewculator pursuant to Chewculator's contract with Dick Anderson Construction. GCI agreed to screen the gravel for the Pablo Dam project. GCI allegedly completed performance under the contract, and neither Chewculator nor Seifert paid the final bill of $16,000 submitted by GCI. Chewculator generally alleged that GCI failed to perform in accordance with contract specifications, causing both it and Dick Anderson Construction to incur damages, and therefore withheld final payment on the contract.

¶ 8 On August 17, 1994, GCI filed an amended complaint in this matter, alleging breach of contract against Chewculator and Seifert, individually, and claiming damages in the amount of $16,800. Under Count II, GCI acknowledged that prior to entering the contract with Chewculator, Seifert informed GCI of Chewculator's preference with CSKT. GCI claimed Seifert had nevertheless agreed to personally guarantee payment under the subcontract.

¶ 9 On June 19, 1995, the District Court entered an order in favor of Seifert, ostensibly dismissing him, individually, from this matter under the personal guarantee claim based on a parol evidence ruling.

¶ 10 GCI moved in July of 1995 for a leave to amend its complaint again. In the second amended complaint dated July 14, 1995, GCI specifically alleged that due to Chewculator's and Seifert's commission of fraud in falsely claiming Chewculator was an Indian-owned business, GCI had been damaged in that it had not been awarded the subcontract with Dick Anderson Construction. Thus, GCI drew Seifert, individually, back into the controversy under this allegation. Under a separate count, GCI for the first time also claimed that Dick Anderson Construction had been negligent in not investigating Chewculator's status as an Indian-owned business prior to awarding it the subcontract over GCI, and in turn this alleged negligence had caused GCI to incur damage.

¶ 11 The District Court granted GCI's motion for leave to file the second amended complaint on October 11, 1996. The amended complaint was filed on October 15, 1996.

¶ 12 GCI moved yet again for a leave to amend its complaint on April 8, 1997. Under Count III, GCI specifically and in more detail alleged that Chewculator's purported status as an Indian-owned business was fraudulent. Under Count IV, GCI also pursued a cause of action against Chewculator and Seifert under the designation of "PIERCING THE CORPORATE VEIL." Further, the proposed amended complaint named as additional defendants Glacier Sand & Gravel (a business owned by Seifert), Seifert Construction, Randy and Tina Walton (d/b/a Walton Construction), L.A. Construction, Inc., and "John Does 1-5."

¶ 13 In the face of the foregoing motion for leave to amend the complaint a third time, the Defendants moved to dismiss, claiming in part that the District Court lacked subject matter jurisdiction. The Defendants contended that the CSKT tribal court, not the Twentieth Judicial District Court, had proper subject matter jurisdiction. Specifically, Chewculator contended that Tina Walton, a tribal member, was the majority shareholder in Chewculator, and therefore Chewculator was an Indian-owned corporation over which the District Court lacked jurisdiction. GCI countered that Chewculator was in fact the alter ego of Seifert, who transferred 51 percent of Chewculator's stock to Walton for the sole purpose of fraudulently gaining preference under CSKT's project guidelines.

¶ 14 The District Court entered its order granting the Defendants' motion to dismiss on November 15, 1999. After reciting the general rules for determining subject matter jurisdiction in cases such as this—involving a civil matter arising on tribal lands—the court reached its ultimate determination on two grounds. The court determined that the CSKT tribal court has "sole jurisdiction to hear all commercial disputes which arise on the reservation and involve a tribal defendant." Thus, the court determined that whether or not Chewculator was, in fact, an Indian-owned business, was a matter that must properly be addressed by the tribal court. The court then determined that any allegation of fraud or impropriety concerning CSKT's policy for giving preference to Indian-owned businesses "necessarily implicates tribal self-government."

¶ 15 The District Court concluded that it lacked subject matter jurisdiction, and granted the Defendants' motion to dismiss. GCI appealed.

STANDARD OF REVIEW

¶ 16 When deciding a motion to dismiss based on lack of subject matter jurisdiction, a trial court must determine whether the complaint states facts that, if true, would vest the court with subject matter jurisdiction. Liberty Northwest Ins. Corp. v. State Compensation Ins. Fund, 1998 MT 169, ¶ 7, 289 Mont. 475, ¶ 7, 962 P.2d 1167, ¶ 7. A court's determination that it lacks subject matter jurisdiction is a conclusion of law which we review to determine whether the court's interpretation of the law is correct. In re McGurran, 1999 MT 192, ¶ 7, 295 Mont. 357, ¶ 7, 983 P.2d 968, ¶ 7 (citation omitted).

¶ 17 Motions to dismiss should be construed in a light most favorable to the non-moving party and should not be granted unless it appears beyond a doubt that the non-moving party can prove no set of facts in support of its claim which would entitle it to relief. Stenstrom v. State (1996), 280 Mont. 321, 325, 930 P.2d 650, 652.

ISSUE RAISED

Did the District Court err in finding it lacked subject matter jurisdiction over a breach of contract dispute between two Montana corporations, and a non-Indian minority shareholder of one of the corporations, for work performed within the boundaries of the Flathead Reservation?

¶ 18 GCI raises the foregoing issue in light of its contention that in order to hold Seifert personally liable for Chewculator's debt, it seeks to pierce Chewculator's corporate veil due to fraud allegedly committed by Seifert against CSKT.

DISCUSSION

¶ 19 GCI argues that a corporation, even if Indian-owned, is neither an "Indian" nor a "tribal member" for the purpose of determining subject matter jurisdiction. It has long been the rule in Montana, GCI contends, that a corporation is not a person. GCI contends, therefore, that the finding by the District Court that Chewculator's Indian-ownership was relevant was the court's "first fundamental flaw."

¶ 20 On appeal, GCI insists that this dispute involves nothing more than one Montana corporation bringing a claim for money damages against another Montana corporation, and that the proper resolution of this dispute should inevitably allow GCI to avail itself to the personal assets of Seifert, a non-tribal member. Thus, this is "a dispute between non-Indians" that "does not call into question any tribal act." GCI does not contest, however, that this dispute involves transactions taking place solely within the exterior boundaries of the Flathead Indian Reservation.

¶ 21 GCI directs this Court's attention to a fairly thorough and accurate recital of federal law on the subject of tribal sovereignty and state court...