State of Ohio v. Peterson, Lowry, Rall, Barber & Ross, 77-1374

Citation585 F.2d 454
Decision Date07 November 1978
Docket NumberNo. 77-1374,77-1374
PartiesFed. Sec. L. Rep. P 96,582 STATE OF OHIO, Plaintiff-Appellant, v. PETERSON, LOWRY, RALL, BARBER & ROSS, et al., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

J. Vernon Patrick, Jr., Birmingham, Ala. (Richard North Patterson, Berkowitz, Lefkovits & Patrick, Birmingham, Ala., Eugene F. McShane, Chief, Sp. Litigation Section, Columbus, Ohio, Harry L. Hobson, Luke J. Danielson and Miles M. Gersh, Holland &amp Hart, Denver, Colo., on brief), for plaintiff-appellant.

Robert H. Wheeler, Chicago, Ill. (Donald J. McLachlan, Thomas G. Ryan, Chicago, Ill., of counsel: Isham, Lincoln & Beale, Chicago, Ill., and Jeffrey A. Hyman, Denver, Colo., on brief), for all defendants-appellants except Timothy G. Lowry.

Raymond J. Connell, Denver, Colo. (Donald M. Haskell and Gerald M. Miller, Chicago, Ill., of counsel: Haskell & Perrin, Chicago, Ill., and Yegge, Hall & Evans, Denver, Colo., on brief), for defendant-appellee, Timothy G. Lowry.

Before McWILLIAMS, BARRETT and McKAY, Circuit Judges.

McWILLIAMS, Circuit Judge.

This is an appeal by the plaintiff from an order of the trial court granting the defendants' motions to dismiss for failure to state a claim and entering judgment dismissing the cause of action. The basis for the trial court's action was that the applicable statute of limitations barred the action. The plaintiff now appeals the dismissal order. We reverse.

On October 7, 1976, the State of Ohio brought an action in the United States District Court for the District of Colorado against a Chicago, Illinois law firm and the individual members thereof, that firm being outside counsel for King Resources Company. Ohio alleged in its complaint that on April 17, 1970, it purchased a promissory note of King Resources Company in the amount of $3,000,000, and that on May 1, 1970, it purchased a second promissory note in the amount of $5,000,000 of King Resources Company. The gist of the claim was that in connection with Ohio's purchase of these two notes, the defendants had misrepresented the financial standing of King Resources Company, and that Ohio had relied on such representations to its detriment. There were additional allegations that the defendants, or certain of them, had concealed their "violative conduct" to the end that Ohio had not discovered such until within the year next preceding the filing of the complaint. Jurisdiction was based on Section 22(a) of the Securities Act of 1933, as amended, 15 U.S.C. § 77v(a), Section 27 of the Securities Exchange Act of 1934, as amended, 15 U.S.C. § 78aa and upon the principles of pendent jurisdiction.

The defendants filed motions to dismiss based on a failure to state a claim upon which relief could be granted. Specifically, the motions to dismiss stated, Inter alia, that the cause of action was barred by the applicable statute of limitations. * The motion pointed out that Ohio purchased the two promissory notes of King Resources Company in April and May, 1970, and had not brought the present action until October 7, 1976.

The defendants' motions to dismiss were not supported by any affidavits. However, the defendants did file a memorandum brief in support of their motions to dismiss, and attached to such memorandum a copy of a complaint filed by Ohio in the United States District Court for the Southern District of Ohio on April 17, 1972. This complaint pled a cause of action based on Ohio's purchase of the same two promissory notes of King Resources Company which form the basis for the present proceeding. The action in the Southern District of Ohio was against one Crofters and others, and the defendants in the present proceeding were not defendants in the Ohio proceeding.

Pursuant to order of court, the State of Ohio thereafter filed a memorandum in opposition to the motions to dismiss. In its memorandum Ohio stated that it was treating the defendants' motions to dismiss as being just that, i. e., motions to dismiss and not as motions for summary judgment. In resisting the defendants' motion to dismiss, it was Ohio's basic position, as pled in its complaint, that it had not learned of the involvement of the present defendants until the year next preceding the commencement of the present action.

The trial court, acting on the basis of the motions to dismiss and the memoranda in support of, and in opposition to, such motions, granted the motions and dismissed the action. In thus acting, the trial court held that the 3-year statute of limitations had run and that there had been no equitable tolling of the statute since "plaintiffs' failure to sue the defendant-partnership in a more timely fashion is due to a clear lack of diligence." In this connection the trial court in its dismissal order made reference to the complaint filed by Ohio in the Southern District of Ohio on April 17, 1972, which, as indicated, had been attached by the defendants in the present proceeding to their memorandum in support of their motions to dismiss. The trial court recognized that such attachment concerned matter "outside the pleadings," but added that Ohio had "responded" to such in its memorandum. It would appear that in reaching the conclusion that the statute of limitations had run, the trial court attached considerable importance to the fact that Ohio, in 1972, had brought suit in connection with the same promissory notes which formed the basis for the present action.

The State of Ohio later filed a timely motion to reconsider, pointing out, Inter alia, that it had at all times treated the defendants' motions to dismiss as being only that, and it had not understood that they were to be treated as motions for summary judgment. In this latter regard Ohio noted that in dismissing the action the trial court went beyond the allegations in the complaint, and "looked elsewhere" in reaching its conclusion. This motion for reconsideration was denied, and the present appeal followed.

The several motions to dismiss filed by the defendants in the instant case were filed pursuant to Fed.R.Civ.P. 12(b). The specific matter urged as ground for dismissal was that Ohio's complaint failed to state a claim upon which relief could be granted because the action was barred by the statute of limitations. In this connection Rule 12(b) provides, in part, as follows:

If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and...

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