Thiel v. Taurus Drilling Ltd. 1980-II

Decision Date23 December 1985
Docket NumberNo. 84-352,84-352
Citation42 St.Rep. 1520,710 P.2d 33,218 Mont. 201
Parties, Blue Sky L. Rep. P 72,301 John L. THIEL and Kathryn M. Thiel, husband & wife, Plaintiffs, v. TAURUS DRILLING LIMITED 1980-II, a Colorado limited partnership; Nathan J. Emory; D.A. Davidson & Company, a Mont. corp.; Donald E. Metler; J. Joe Mena; John D. Pruit; Gayle S. Higbee; Jon Marchi; Joseph R. Soloman; and Robert W. Petersen, Defendants.
CourtMontana Supreme Court

Hendrickson & Everson, Jim Ragain argued, Billings, for plaintiffs.

Hooks & Budewitz, Patrick F. Hooks argued, Townsend, and Dorsey & Whitney, Edward J. Pluimer argued, Minneapolis, Minn., Stephen Bell, of Dorsey & Whitney, Great Falls, for D.A. Davidson, Jon Marchi, and Robert Peterson.

Anderson, Brown, Gerbase, Cebull & Jones, Steven J. Harman, Billings, Richard Vermiere, Head & Moye, Denver, Colo. and Hibbs, Sweeney, Colberg & Koessler, Maurice R. Colberg, Jr., Billings, for Taurus Drilling, Nathan Emory, Donald Metler, J. Joe Mena, John Pruit, Gayle Higbee, and Joseph Soloman.

Turner C. Graybill, Great Falls, amicus curiae, for plaintiffs in US Dist. Ct. Nos. cv-84-17-gf, cv-84-18-gf, cv-84-19-gf & cv-84-20-gf.

Michael Mulroney, Helena, amicus curiae, for plaintiffs in 47714, 47715, 47716 in L & C County Dist. Ct.

Thomas F. Dowling, Helena, amicus curiae, for plaintiffs in 50566, 50534 and CV-82-246-H.

J. Kim Schulke, Helena, G. Dalthorp and P. Habein, Billings, Charles Wake, Lewis, D'Amato, Brisbois & Bisgaard, Los Angeles, Cal., amicus curiae, for Donald Jackson, Kimble, MacMichael, Jackson & Upton.

Boone, Karlberg & Haddon, Sam E. Haddon, Missoula, amicus curiae, for Boettcher & Co., Dain Bosworth, Edward Jones & Co., Merrill Lynch, Pierce, Fenner & Smith & Piper, Jaffray & Hopwood, Inc.

WEBER, Justice.

The United States District Court for the District of Montana has certified the following question to this Court:

What statute or statutes of limitation apply to civil actions brought pursuant to Sec. 30-10-307, MCA, of the Securities Act of Montana?

Based upon the pleadings in this case, we hold that the 8-year limitation period contained in Sec. 27-2-202(1), MCA, applies.

On September 16, 1980, plaintiffs John L. Thiel and Kathryn M. Thiel purchased two limited partnership units in Taurus Drilling Limited 1980-II, a Colorado limited partnership organized to explore and drill for oil and gas. Plaintiffs purchased the Taurus partnership units by paying $10,000 in cash and posting a letter of credit for $46,000.

Approximately 2 years later on October 15, 1982, plaintiffs filed a complaint for rescission of their purchase. The complaint alleged inter alia that the offer and sale of the partnership units violated the Securities Act of Montana. Count I of the complaint alleged failure to comply with the securities registration requirements of Secs. 30-10-202 and -205, MCA. Count II alleged the making of material misrepresentations or omissions of material fact in connection with the sale of securities in violation of Sec. 30-10-301(1), MCA. Count III alleged negligence and breach of fiduciary duties by the broker defendants. Count IV alleged negligence, breach of contract and breach of fiduciary duties of the non-broker defendants.

As remedies for the statutory violations alleged in Counts I and II of their complaint, plaintiffs claimed that they were entitled, under Sec. 30-10-307, MCA, to rescind their purchase and recover the consideration paid for the security, interest and attorney fees. Defendants filed a motion to dismiss Counts I and II on the grounds that the 2-year statute of limitation in Sec. 27-2-211(1)(c), MCA, barred claims based on liabilities created by statute.

United States District Court Chief Judge Battin held that the 2-year limitation applied to the securities registration claim and dismissed Count I of the complaint. Defendants filed a motion for clarification or further consideration, seeking to have Count II dismissed as well. Plaintiffs asserted that the 8-year limitation of Sec. 27-2-202(1), MCA, applied to both counts. They requested certification of the issue to this Court.

The federal court certified the question and this Court heard oral argument on which statute or statutes of limitation apply to actions brought pursuant to Sec. 30-10-307, MCA, the civil enforcement provision of the Securities Act of Montana?


The legislature adopted the Securities Act of Montana in 1961. Sec. 2, Ch. 251, L. 1961. The Act contained substantial provisions from the Uniform Securities Act promulgated by the Conference of Commissioners on Uniform State Laws. Some variations were made in order to accommodate the Uniform Act to situations peculiar to Montana.

The original Securities Act of Montana contained a 5-year limitation on criminal prosecutions and a 2-year limitation on private enforcement of civil liabilities. Sections 15-2021(1) and 15-2022(3), R.C.M. 1947. The 1981 Montana Legislature extended the limitation on criminal prosecutions from 5-years to 8 years after the alleged violation, or within 1 year after the date the commissioner or prosecuting officer becomes aware of the violation. Section 30-10-306(1), MCA.

In 1967, the legislature eliminated the 2-year statute of limitation on civil enforcement of the Act. No limitation period was substituted when the "two (2) years after the contract of sale" language was deleted from Sec. 15-2022(3), R.C.M. 1947. The federal court has asked us to explore the outer limits of this statutory black hole.


The judicial function in construing and applying statutes is to effect the intention of the legislature. In determining legislative intent, the Court looks first to the plain meaning of the words used in the statute. If intent cannot be determined from the content of the statute, we examine the legislative history. Dorn v. Bd. of Trust. of Billings Sch. Dist. (Mont.1983), 661 P.2d 426, 430, 40 St.Rep. 348, 352.

In this case, the legislature omitted the specific 2-year-from-sale limitation without substituting a different period of limitation. Thus, the Court's primary tool for ascertaining legislative intent, i.e., the "plain meaning" of the words used in the statute, is of no assistance. We must turn to the legislative history.

In 1967, Representatives James, Nutting and Cox introduced House Bill No. 515, entitled "An Act Amending Section 15-2022, R.C.M. 1947, Relating to Civil Remedies Afforded Purchasers of Securities Sold in Violation of the Securities Act of Montana; Providing for a Cause of Action to Be Brought Within Two (2) Years after Discovery of Violation." House Bill 515 proposed to amend Sec. 15-2022(3), R.C.M. as follows ... No person may sue under this section more than two (2) years after the discovery of a violation of the provisions of this act ....

The rest of the language in the bill is identical to that in the original statute.

The House Judiciary Committee discussed H.B. 515 on February 1, 1967. Committee Minutes sparsely report that:

HB 515 was discussed. Mrs. James, chief sponsor, could not appear. Testifying as a proponent was: Harry H. Jones, Investment Department, State Auditor's Office, Helena, Montana.

... [actions on other bills]

HB 515: Hall moved it DO PASS, AS AMENDED, which amendment would strike the provision of actions having to be brought within 2 years and the one making the bill effective immediately, and the motion carried. Hall also moved that the amendment be adopted, which also carried.

Although the Committee Minutes indicate that Harry Jones of the State Auditor's Office spoke as a proponent of the bill, there is no evidence as to what Mr. Jones said. No one spoke in opposition. There was no record why Rep. Hall moved to strike the "2 years from discovery" limitation or why the original "2 years from sale" limitation was deleted.

House Bill 515 passed both houses in this amended form and was signed into law by the Governor in 1967. The current civil liabilities provision, Sec. 30-10-307, MCA, contains no time limitation.


Since neither the plain meaning of the statute nor the legislative history sheds any light on the legislature's intent in deleting the original limitation, we look next to the circumstances surrounding the change in the law.

In 1964, the Administrator of the Seattle Regional Office of the Securities and Exchange Commission published an article that sharply criticized both the federal and state statutes of limitation in civil cases.

Both acts provide for a very short statute of limitations. In fact, this period is so short as to negate much of the benefit designed to accrue to investors. The Montana Act provides a two-year period from date of sale. The Federal Act provides for only one year from date of sale for violations of the registration requirements. In the case of fraud the Federal Act extends this period to one year from discovery, with a maximum of three years. The Montana Act makes no such distinction.

This short statute of limitations provided by the acts unquestionably precludes effective use of the civil liabilities provisions by purchasers....

Newton, A Look at the Montana Securities Act and Its Relation to the Federal Securities Act, 26 Mont.L.Rev. 31, 51 (1964). Plaintiffs and several amici curiae contend that the Montana Legislature deleted the 2-year limitation in response to such criticism. Defendants assert that plaintiffs' idea that the 2-year limitation was under siege is historical fiction.

Nothing in the legislative minutes indicates that any committee or individual referred to Mr. Newton's article in discussing the change in the law. We draw no conclusion from the fact that this article existed prior to the legislature's amendment of the statute.

The legislature is presumed to have full knowledge of existing laws. Department of Revenue v. Burlington Northern, Inc. (1976), 169 Mont. 202, 211, 545 P.2d 1083,...

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