Situ v. Smole

• Decision Date: 12 February 2013
• Docket Number: No. DA 12–0329.,DA 12–0329.
• Citation: 303 P.3d 747,369 Mont. 1
• Parties: MING DA SITU and Pei Shu Zhou, Plaintiffs and Appellants, v. H. Douglas SMOLE, as successor trustee of the Lois M. Murphy revocable trust, Defendant and Appellee.
• Court: Montana Supreme Court

369 Mont. 1

303 P.3d 747

MING DA SITU and Pei Shu Zhou, Plaintiffs and Appellants,

v.H. Douglas SMOLE, as successor trustee of the Lois M. Murphy revocable trust, Defendant and Appellee.

No. DA 12–0329.

Supreme Court of Montana.

Submitted on Briefs Dec. 19, 2012.

Decided Feb. 12, 2013.

For Appellants: R.J. “Jim” Sewell, Jr., Scott H. Clement, Smith Law Firm, P.C., Helena, Montana.

For Appellee: Scott M. Svee, Jackson, Murdo & Grant, P.C., Helena, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

[369 Mont. 2]¶ 1 Ming Da Situ and Pei Shu Zhou (collectively “Situs”) appeal from an order and judgment of the First Judicial District Court, Lewis and Clark County, dismissing Situs' breach of lease claim on statute of limitation grounds and granting judgment in favor of Lois M. Murphy ¹ (Murphy). We affirm.

ISSUES

¶ 2 Situs raise the following two issues on appeal:

¶ 3 1. Did the District Court err in granting Murphy's motion to dismiss in light of Situs' presentation of facts to demonstrate that the statute of limitations had not expired, as well as facts to demonstrate that Murphy should have been estopped from claiming the statute of limitations as a defense?

¶ 4 2. Did the District Court improperly consider matters outside the pleadings in ruling on Murphy's motion to dismiss, and fail to provide proper notice and an opportunity for the Situs to present all pertinent materials pursuant to a M.R. Civ. P. 56 motion for summary judgment?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 On or about October 14, 1989, the Situs acquired the assets of a restaurant located at 1306 Euclid Avenue, in Helena, Montana. The real property on which the restaurant building was located was and continues to be owned by Murphy. Situs and Murphy entered into a Memorandum of Agreement (the “Lease”) dated October 4, 1989, that granted Situs a ten-year lease of Murphy's real property on which the building was situated. The Lease required Situs to make monthly payments of $175 to Murphy. The Lease granted Situs the option to purchase Murphy's real property at the October 3, 1999 expiration of the Lease. The relevant provision of the Lease provided as follows:

IT IS FURTHER AGREED, that at the expiration of the full term of the within lease agreement, [Situs] shall have, and are hereby granted, an option to purchase from [Murphy] the land which is the subject matter of this lease, at a price mutually agreeable to the parties, it being understood and agreed that in the event that the parties hereto find themselves unable to reach agreement as to the fair value of said land (exclusive of improvements other than paving) at the date of exercise of said option, that parties shall hire mutually acceptable independent qualified appraisers at mutual expense, to evaluate said land, and it is understood and agreed that the parties hereto shall accept said appraisal as fully determinative of the purchase price to be paid.

¶ 6 Situs claimed that they provided written notice to Murphy of their interest in purchasing the property, although the date of such notice was not provided. Situs alleged that Murphy agreed to the appointment of an independent appraiser on September 28, 2000, but Murphy never followed through in procuring an appraisal.

¶ 7 Situs continued to pay Murphy $175 per month until April 2008. In April 2008, Murphy sent Situs a written notice that the monthly rental rate would increase to $650 per month beginning May 1, 2008. Situs ignored this notice and continued to pay $175 per month through March 2009. Murphy served Situs with written notice of tenancy termination dated March 31, 2009. The notice demanded unpaid rent in the amount of $5,700, which represented the difference between the $650 monthly payment demanded by Murphy and the $175 monthly payments made by Situs over the course of the preceding year. Situs continued to send monthly payments of $175 to Murphy through August 2009. Murphy rejected all of Situs monthly payments that occurred after Murphy sent notice of tenancy termination.

¶ 8 On August 17, 2009, Situs filed a complaint in District Court requesting a declaratory judgment and order requiring Murphy to select an independent appraiser and sell the property. In addition, Situs sought damages for loss of prospective sales from their restaurant business allegedly caused by Murphy's breach of the Lease, together with costs and attorney fees. Murphy filed an answer on September 4, 2009, which included a counterclaim for unlawful detainer. Murphy also filed a motion to dismiss the complaint pursuant to M.R. Civ. P. 12(b)(6) arguing that the applicable statute of limitations had expired. On July 22, 2010, the District Court dismissed Situs' complaint on statute of limitations grounds. Situs attempted to appeal the District Court's dismissal of their complaint to this Court, but their appeal was dismissed because Murphy's counterclaim was still pending in District Court.

¶ 9 On April 14, 2011, Murphy filed a motion for summary judgment on her counterclaim for unlawful detainer. The District Court held oral argument on the motion for summary judgment on August 9, 2011, and granted summary judgment in favor of Murphy in an order dated January 19, 2012. The District Court determined that Murphy was entitled to recover the requested rent, trebled for any amounts due after May 1, 2009. The District Court also ordered Situs to vacate the property within 30 days. A subsequent April 26, 2012 order granted Situs an additional 60 days to vacate the property. On May 30, 2012, the District Court entered a final judgment requiring Situs to remove all of their property from Murphy's lot by June 25, 2012, and awarding Murphy $5,700 in unpaid rent and trebled rent totaling $66,300 for all rent due after May 1, 2009.

¶ 10 Situs ask the Court to vacate the grant of summary judgment on Murphy's unlawful detainer counterclaim should the Court determine that the District Court erred in granting Murphy's motion to dismiss, but they do not directly challenge any of the District Court's conclusions regarding Murphy's counterclaim on appeal. Rather, their appeal is limited to a review of the District Court's decision to dismiss the Situs' complaint on statute of limitations grounds.

STANDARDS OF REVIEW

¶ 11 We review de novo a district court's ruling on a motion to dismiss for failure to state a claim pursuant to M.R. Civ. P. 12(b)(6). Meagher v. Butte–Silver Bow City–County, 2007 MT 129, ¶ 13, 337 Mont. 339, 160 P.3d 552;Plouffe v. State, 2003 MT 62, ¶ 8, 314 Mont. 413, 66 P.3d 316. The determination of whether a complaint states a claim is a conclusion of law, and the district court's conclusions of law are reviewed for correctness. Farmers Coop. Ass'n v. Amsden, 2007 MT 287, ¶ 9, 339 Mont. 452, 171 P.3d 684;Guest v. McLaverty, 2006 MT 150, ¶ 2, 332 Mont. 421, 138 P.3d 812.

DISCUSSION

¶ 12 Did the District Court err in granting Murphy's motion to dismiss in light of Situs' presentation of sufficient facts to demonstrate that the statute of limitations had not expired, as well as facts to demonstrate that Murphy should have been estopped from claiming the statute of limitations as a defense?

¶ 13 A motion to dismiss under M.R. Civ. P. 12(b)(6) allows the district court to examine only whether “a claim has been adequately stated in the complaint.” Meagher, ¶ 15 A motion to dismiss under M.R. Civ. P. 12(b)(6) allows the district court to examine only whether “a claim has been adequately stated in the complaint.” Meagher,¶ 15. The court is limited to an examination of the contents of the complaint in making its determination of adequacy. Meagher, ¶ 15. The effect of a Rule 12(b)(6) motion to dismiss is that all of the well-pleaded allegations in the complaint are admitted as true, and the complaint is construed in the light most favorable to the plaintiff. Amsden, ¶ 9;Plouffe, ¶ 8. Therefore, we will affirm the district court's dismissal only if we conclude that the plaintiff would not be entitled to relief based on any set of facts that could be proven to support the claim. Guest, ¶ 2;Plouffe, ¶ 8.

¶ 14 The District Court determined that under Situs' version of the facts as alleged in the complaint, their claims would be barred by the statute of limitations. The District Court relied on § 27–2–202(1), MCA, which states that the “period prescribed for the commencement of an action upon any contract, obligation, or liability founded upon an instrument in writing is within 8 years.” Since the written Lease expired in October 1999, the District Court reasoned that § 27–2–202(1), MCA, would function to bar any contract claim commenced after October 2007. Alternatively, the District Court determined that any implied contract claim would be barred by § 27–2–202(2), MCA, which provides that the “period prescribed for the commencement of an action upon a contract, account, or promise not founded on an instrument in writing is within 5 years.” The District Court concluded that the impliedly renewed lease agreement ended in October 2000, so any action commenced after October 2005 would be time-barred by this provision.

[369 Mont. 6]¶ 15 Situs argue that the District Court erred in dismissing their complaint because they effectively alleged a sufficient set of facts to state a claim. Situs maintain that Murphy's repudiation took place in November 2007, which would extend the statute of limitations until 2015. Situs rely on Wright v. Brooks, 47 Mont. 99, 130 P. 968 (1913), to support their contention that notwithstanding a specific repudiation of an obligation by a vendor, a vendee in possession is not barred from suing for specific performance by delay, as his possession is the continued assertion of his claim.

¶ 16 Wright involved a claim for specific performance by a buyer under an oral contract for the sale of real estate. The agreement to sell the property was made in 1898, and the lawsuit was commenced over thirteen years later, in...