author: JUSTICE REGNIER

text:
    CARL WEISSMAN & SONS, INC., a Montana Corporation, Plaintiff and Respondent, v. D & L THOMAS EQUIPMENT CORPORATION, a Corporation, Defendant and Appellant.
    No. 97-513.
    Submitted on Briefs April, 9, 1998.
    Rehearing Denied September 17, 1998.
    Decided August 25, 1998.
    1998 MT 213.
    55 St.Rep. 896.
    290 Mont. 433.
    963 P.2d 1263.

      For Appellant: Robert J. Emmons, Emmons & Sullivan, Great Falls.
    For Respondent: Robert B. Pfennigs; Jardine, Stephenson, Blewett & Weaver, PC.; Great Falls.
   JUSTICE REGNIER

delivered the opinion of the Court.

¶1 On November 29,1991, Carl Weissman & Sons, Inc. (CWS), filed suit in the Eighth Judicial District Court, Cascade County, against D&L Thomas Equipment Corporation (D&L) to collect delinquent lease payments owed to it under an equipment rental agreement. D&L appeals from the findings of fact, conclusions of law, and order, and the amended judgment entered by the District Court after a bench trial. We affirm.

¶2 The following issues are on appeal:

¶3 1. Did the District Court err in concluding there was sufficient consideration in the contract between the parties?

¶4 2. Did the District Court err in concluding that the Agreement was not mutually canceled and rescinded by the parties?

¶5 3. Did the District Court err in concluding that CWS did not violate § 70-8-101, MCA (1989)?

¶6 4. Did the District Court err in concluding that CWS had not misrepresented the condition of the drill?

¶7 5. Did the District Court abuse its discretion in excluding certain testimony regarding D&L’s failure to make a lease payment to CWS?

¶8 6. Did the District Court err in granting sanctions to the plaintiff?

FACTUAL AND PROCEDURAL BACKGROUND

¶9 In February 1990, D&L initiated discussions with CWS over the proposed leasing of an Atlas-Copco Roc 712 rock drill. At the time, both D&L and CWS were distributors of Atlas-Copco drilling and mining equipment. The negotiations were conducted by Robert Cozad, branch manager of D&L in Tucson, Arizona, and James Richey, the CWS branch manger in Bozeman, Montana.

¶10 D&L had three rock drilling machines in Tucson, but all were leased out and it needed an additional machine to lease to one of its customers, namely the Ashton Company. A written agreement was entered into between Richey of CWS and Cozad of D&L to lease the rock drill for three months, beginning March 1,1990, and ending May 31,1990. Payments were $7600 per month. The first payment was to be paid in advance and payments were to be made thereafter on the second of April and on the second of May.

¶ 11 Cozad asserts that when he discussed the drill with Richey before it was shipped to Tucson, Richey represented that the drill was “like new” and had “very few hours on it.” Richey testified that the drill had been purchased new by CWS four months before March 1, 1990. CWS asserts that it did a service and maintenance check on the drill prior to shipping.

¶ 12 The drill was shipped from Bozeman on March 1,1990, and arrived in Tucson on March 3,1990. Cozad inspected the drill and sent it on to Mammoth, Arizona, for the Ashton job. D&L asserts that it began having problems with the drill immediately upon arrival.

¶ 13 Critical to the written agreement between the parties is Paragraph 7. This paragraph required D&L to inspect the drill within ten days of receipt and unless within such time period D&L gave notice to CWS specifying any defects, the drill would be conclusively presumed to have been accepted by D&L in its then condition. The agreement further provides, at Paragraph 26, that all notices must be in writing and served by certified mail. Since the drill was received by D&L on March 3,1990, Paragraph 7 would require that written notice of any defects should have been given to CWS prior to March 14,1990. There are no allegations that D&L notified CWS in writing of any defects or problems with the drill prior to March 14,1990. Paragraph 7 also provides that following the ten-day period, the lessee shall bear the expense of any necessary repairs, maintenance, and replacements for the drill. By D&L’s own evidence, any repairs made by D&L were made subsequent to the ten-day inspection period.

¶14 Cozad testified that he could not recall the exact dates that he contacted Richey concerning problems with the drill. However, his telephone records establish several calls to Richey between March 5, 1990, and March 22, 1990. Richey recalled the telephone calls, but contends they pertained to matters unrelated to the drill. More importantly, Richey testified that the first time he was told by Cozad that there were any problems with the drill was on March 22,1990. He stated that Cozad telephoned him and that he then sent a fax to Cozad telling him not to return the drill because it might be diverted to another location. D&L alleges that Richey could not have sent the fax in response to the telephone call of March 22,1990, because D&L’s telephone records establish that the fax was sent before the telephone call. There is nothing in the record that clearly established that D&L gave notice of any problems with the drill any earlier than March 22,1990.

¶15 The parties hotly dispute the impact of Richey’s March 22,1990, fax. Cozad testified that he interpreted the fax as a cancellation of the written agreement. Richey alleges that he did not regard his fax of March 22, 1990, as canceling the agreement.

¶16 In May 1990, while D&L still possessed the drill, CWS and Cozad began negotiations for a new six-month lease for the drill. Although CWS had not received any of the payments due under the March 1 agreement, CWS was willing to consider a new agreement as long as it included a firm commitment by D&L to buy the drill. However, the negotiations broke down and CWS demanded the return of the drill. Subsequently, D&L paid for its use of the drill during the month of June, but has never paid for any rent for the months of March, April, and May.

¶17 During these negotiations, D&L subleased the drill to Spirit Drilling Co. in California. Spirit reported no problems with the drill and it was returned to CWS at the end of June.

¶18 On November 29,1991, CWS filed suit in the Eighth Judicial District Court, Cascade County, against D&L to collect the delinquent lease payments owed under the March 1,1990, Agreement. Curiously, on January 21, 1992, D&L filed an answer denying any knowledge of the Agreement. D&L claimed that the first time it saw the Agreement was when it was served with the complaint and further maintained that the purported signature on the document was made by someone without authority to bind D&L.

¶19 Until November 1993, D&L continued to deny, both in its pleadings and in its responses to written discovery requests, any knowledge of the Agreement. However, faced with CWS’s motion for summary judgment, D&L finally admitted full knowledge of the Agreement, admitted that its agent had authority to execute the Agreement on D&L’s behalf and moved to amend its answer. On February 24,1994, the District Court allowed D&L to file an amended answer. On that day, D&L filed an amended answer and counterclaim.

¶20 On November 19,1993, CWS moved for sanctions, arguing that D&L had attempted to mislead, delay, and hinder the prosecution of CWS’s complaint. On December 5,1994, the District Court awarded CWS $4,904.25 for attorney fees and $2,500 as sanctions for D&L’s initial answer to the complaint and interrogatory answers that denied the Agreement and Cozad’s authority to sign the lease for D&L. The Court notes that the original answer was filed and the responses to discovery were served before D&L retained its current counsel, Robert J. Emmons.

¶21 The case proceeded to a bench trial on March 18,1996. On April 25,1996, the District Court filed its findings of fact, conclusions of law, and order, entering judgment in favor of CWS in the amount of $56,577.54. Thereafter, D&L filed several post-trial motions concerning the interest rate to be used in calculating the delinquency charge included in the judgment award. The parties stipulated to the entry of an amended judgment in the amount of $48,312.54. This amended judgment was filed on August 13,1997.

¶22 On September 2,1997, D&L filed its notice of appeal from the amended judgment.

ISSUE 1

¶23 Did the District Court err in concluding there was sufficient consideration in the contract between the parties?

¶24 D&L argues failure of consideration results in an invalid contract. D&L asserts that CWS’s consideration amounted to a drill that was operative only five hours after it was placed in operation on the Ashton job. D&L alleges that there was failure of consideration on CWS’s part because the drill malfunctioned and overheated. Therefore, D&L argues that CWS’s failure of consideration renders the contract unenforceable.

¶25 The standard of review of a district court’s conclusions of law is whether the court’s interpretation of the law is correct. Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686.

¶26 A basic principle of contract law, of course, is that there must be consideration in order to have a valid contract. Section 28-2-102(4), MCA; Boise Cascade Corp. v. First Security Bank of Anaconda (1979), 183 Mont. 378, 391, 600 P.2d 173, 181. The equipment rental agreement of March 1, 1990, creates a presumption of consideration between D&L and CWS. See § 28-2-804, MCA. Under § 28-2-805, MCA, D&L bears the burden of proof in seeking to invalidate the agreement for failure of consideration.

¶27 The District Court concluded that D&L did not meet its burden at trial. We agree. Under the agreement, D&L agreed to lease a rock drill from CWS for three months beginning March 1,1990, and ending May 31,1990. Moreover, under Paragraph 7 of the Agreement, D&L is conclusively presumed to have accepted the drill in its condition upon receipt if D&L did not give CWS notice of any defects within ten days of receipt. Paragraph 7 states:

Repairs. Lessor shall not be obligated to make any repairs or replacements and Lessee shall not incur for Lessor’s account or liability any expense therefor without Lessor’s prior written consent. Lessee shall inspect the equipment within ten (10) days after its receipt: unless within said time Lessee notified Lessor, stating the details of any defects. Lessee shall be conclusively presumed to have accepted the equipment in its then condition. Thereafter Lessee shall effect and bear the expense of all necessary repairs, maintenance and replacements, using only genuine parts of the manufacturer of the leased equipment, and Lessee assumes all risk of injury or loss to the equipment during the term of this lease or any extension thereof, however caused. Lessee agrees to service equipment in accordance with good operating practice and to protect the same from the weather.

¶28 On appeal, D&L does not argue that it gave CWS proper notice of any problems with the drill in the time period provided under Paragraph 7. In fact, in its brief, D&L states “D&L never gave CWS written notice of any defects in the drill within ten days from March 3, 1990, when the drill was delivered.” Instead, D&L contends that it verbally notified CWS of problems with the drill. CWS disputes these contentions.

¶29 Under Paragraph 7 of the Agreement, D&L is presumed to have accepted the drill in its condition upon receipt if D&L did not give CWS notice within ten days of receipt. The District Court found that D&L did not notify CWS about any problem with the drill within ten days of receipt. Therefore, this Court cannot conclude that the contract fails for lack of consideration.

ISSUE 2

¶30 Did the District Court err in concluding that the Agreement was not mutually canceled and rescinded by the parties?

¶31 D&L argues that the parties canceled and rescinded the Agreement because the drill was inoperative due to overheating. D&L’s argument for rescission is based on a fax sent by Richey to Cozad dated March 22,. 1990. The fax states in relevant part:

Bob, Please do not send our ROC 712 back until we advise. We are now in discussions with Atlas Copco. The machine may be diverted to another location. Sorry the machine didn’t work out.

¶32 The District Court concluded that this fax could not be interpreted as indicating that the Agreement between the parties was indeed canceled. We review a district court’s conclusions of law to determine whether the court’s interpretation of the law is correct. Carbon County, 271 Mont. at 469, 898 P.2d at 686.

¶33 Rescission of a contract can be undertaken only under certain circumstances. Section 28-2-1711, MCA, states that “[a] party to a contract may rescind the same in the following cases only:... (5) if all the other parties consent.” Moreover, mutual cancellation “must be clearly expressed and shown, and acts and conduct of the parties to be sufficient must be clear, convincing and inconsistent with the existence of the contract.” West River Equipment Co. v. Holzworth Construction Co. (1959), 134 Mont. 582, 587, 335 P.2d 298, 301-02.

¶34 We agree with the District Court that the fax and the actions of both D&L and CWS do not amount to a clear expression of the intent necessary to establish rescission. In fact, a seven page fax sent by Abe Moreno (Cozad’s replacement in Arizona) indicated that he “will make every effort to get Carl Weissman & Sons their entitled monies.” We conclude that the District Court did not err in determining that the March 1,1990, Agreement was mutually rescinded.

ISSUE 3

¶35 Did the District Court err by concluding that CWS did not violate § 70-8-101, MCA (1989)?

¶36 D&L argues that the District Court erred by failing to conclude that CWS violated § 70-8-101, MCA (1989), because the drill was delivered in a condition not fit for the purpose for which it was intended. Section 70-8-101, MCA (1989), provided:

One who lets personal property must deliver it to the hirer, secure his quiet enj oyment thereof against all lawful claimants, put it into a condition fit for the purpose for which he lets it, and repair all deteriorations thereof not occasioned by the fault of the hirer and not the natural result of its use.

¶37 CWS counters by arguing that in order for it to have violated the statute, the District Court first had to find that the drill was not in a condition fit for the purpose for which it was intended. CWS contends that the drill left Bozeman in a like-new condition. Moreover, CWS argues that under Paragraph 7 of the Agreement, D&L was required to inspect the drill and provide written notice of any defects within ten days of delivery.

¶38 The District Court concluded that since D&L did not object to the condition of the drill pursuant to the terms of Paragraph 7 of the Agreement, D&L is presumed to have accepted the drill in its condition upon receipt. As noted above, this Court reviews a district court’s conclusions of law to determine whether the court’s interpretation of the law is correct. Carbon County, 271 Mont. at 469, 898 P.2d at 686.

¶39 We conclude that the District Court was correct in holding that D&L’s § 70-8-101, MCA (1989), claim was without merit. As discussed above, the Agreement between the parties is a valid contract. Under Paragraph 16 of the Agreement, the parties waived all warranties. Therefore, D&L waived any benefits provided by § 70-8-101, MCA (1989). Furthermore, by not objecting to the drill’s condition pursuant to Paragraph 7 of the Agreement, D&L is presumed to have accepted the drill in a condition fit for the purpose which D&L intended.

ISSUE 4

¶40 Did the District Court err in concluding that CWS had not misrepresented the condition of the drill?

¶41 D&L argues that CWS negligently misrepresented the condition of the drill which was a breach of the agreement. D&L alleges that Richey told Cozad that the drill was in like-new condition before delivering it. However, because the drill became inoperative due to overheating soon after delivery, D&L argues that there was a negligent misrepresentation about the condition of the drill which was breach of the agreement.

¶42 As discussed above, Paragraph 7 of the Agreement required D&L to give notice of any defects with the drill within ten days of receipt. If D&L did not give CWS notice, D&L is presumed to have accepted the drill in its condition.

¶43 The District Court found there was no evidence that D&L gave any notice to CWS about any defects with the drill within ten days of receipt. Furthermore, the court stated that even if CWS had misrepresented the condition of the drill, pursuant to Paragraph 7 of the Agreement, D&L was required to assess the condition of the drill upon receipt and not rely upon previous representations by CWS. We review a district court’s conclusions of law to determine whether the court’s interpretation of the law is correct. Carbon County, 271 Mont. at 469, 898 P.2d at 686.

¶44 We conclude that the District Court did not err in concluding that CWS did not breach the Agreement by misrepresenting the condition of the drill. Under Paragraph 7 of the Agreement, D&L should have given notice to CWS within ten days if there were any problems with the drill, including if the drill was not in the condition D&L expected during negotiations.

ISSUE 5

¶45 Did the District Court abuse its discretion in excluding certain testimony regarding D&L’s failure to make a lease payment to CWS?

¶46 We review evidentiary rulings by the district court to determine whether the district court abused its discretion. State v. Passama (1993), 261 Mont. 338, 341, 863 P.2d 378, 380. The district court has broad discretion to determine whether evidence is relevant and admissible, and absent a showing of abuse of discretion, the trial court’s determination will not be overturned. Passama, 261 Mont. at 341, 863 P.2d at 380.

¶47 At trial, D&L offered testimony by David Thomas to establish the reason why D&L did not pay CWS. Thomas testified that he did not pay because Bob Cozad told him that the drill did not work. CWS objected to this testimony as hearsay because it believed D&L offered the statement as proof the drill failed to operate properly. The District Court sustained CWS’s objections and ordered the testimony to be stricken from the record.

¶48 On appeal, D&L argues, as it did at trial, that the testimony was offered to show “the frame of mind of the witness as to why payment wasn’t paid.” D&L contends that the testimony was not offered as evidence to establish the drill did not work. Instead, D&L asserts the testimony was submitted to show why Thomas did not make any of the lease payments.

¶49 CWS responds that Thomas’s testimony was hearsay and should have been excluded. However, CWS states that if the District Court erred in striking this testimony, the error was not prejudicial but was harmless.

¶50 We agree with D&L that the testimony of Thomas was not hearsay under Rule 801(c), M.R.Evid., and “offered in evidence to prove the truth of the matter asserted.” However, we determine that the error was harmless. In its brief, D&L states that this “error is not critical to overturn the judgment.” D&L further states that the excluded evidence was not important because “[ejvidence that the drill did not work was established by Cozad’s own testimony.”

¶51 We have previously held that when a party offers evidence that is improperly excluded by a district court in one circumstance and then offered by the same party and properly admitted by the court in another circumstance, no prejudice would result from the exclusion of the evidence that was ultimately admitted. See Niemen v. Howell (1988), 234 Mont. 471, 764 P.2d 854. In this case, D&L was able to submit evidence regarding the problems with the drill through Cozad. Therefore, we conclude that the substantial rights of D&L were not adversely affected by the District Court striking Thomas’s testimony from the record.

ISSUE 6

¶52 Did the District Court err in granting sanctions to the plaintiff?

¶53 We review a district court’s conclusions regarding Rule 11, M.R.Civ.P, sanctions for abuse of discretion. Wise v. Sebena (1991), 248 Mont. 32, 38, 808 P.2d 494, 498. Our standard of review of sanctions imposed under Rule 37, M.R.Civ.P., is whether the district court abused its discretion. First Bank (N.A.) — Billings v. Heidema (1986), 219 Mont. 373, 375, 711 P.2d 1384, 1386.

¶54 D&L asks this Court to vacate the award of $7,404.25 in sanctions and attorney fees to CWS by the District Court if we conclude that there was a failure of consideration and the parties mutually canceled and rescinded the March 1,1990, lease. As discussed above, the lease is a valid enforceable agreement between CWS and D&L and does not fail for a lack of consideration. Under the circumstances, the award of sanctions was not an abuse of discretion.

¶55 Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, HUNT and LEAPHART concur. 1


source: Caselaw Access Project

author: CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    WILLIAM LEE JONES, individually, and d/b/a JONES EQUIPMENT and JONES EQUIPMENT, INC., Plaintiffs and Respondents, v. GARY ARNOLD, Defendant and Appellant.
    No. 98-041.
    Submitted on Briefs July 29, 1998.
    Decided August 25, 1998.
    1998 MT 214.
    55 St.Rep. 901.
    290 Mont. 444.
    963 P.2d 1269.
    For Appellant: Raymond P. Tipp, Tipp & Buley, P.C., Missoula.
    For Respondents: Don Torgenrud, Attorney at Law, St. Ignatius.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court'

¶1 William Lee Jones, Jones Equipment and Jones Equipment, Inc. (collectively, Jones) brought this action to renew a judgment entered against Gary Arnold (Arnold). The Fourth Judicial District Court, Missoula County, entered summary judgment in favor of Jones, and Arnold appeals. We affirm the decision of the District Court.

ISSUE

¶2 The issue in this case is whether the District Court erred by granting summary judgment on the issue of whether § 27-2-201(1), MCA, precludes a creditor from seeking the renewal and extension of a judgment beyond the original statutory ten-year limitation period.

BACKGROUND

¶3 On March 10, 1986, in the Fourth Judicial District Court, Missoula County, Jones obtained a money judgment against Arnold in the amount of $32,695.00. On February 7,1996, Jones filed a complaint before that same court to renew the March 10,1986 judgment and extend it for an additional ten years pursuant to § 27-2-201(1), MCA. Upon cross motions for summary judgment, the District Court granted summary judgment in favor of Jones, holding that the action to renew the judgment was properly brought, that the complaint filed by Jones satisfied the necessary procedural requirements for obtaining a new judgment on the existing judgment, and that Jones was entitled to relief as a matter of law. The District Court subsequently entered summary judgment against Arnold renewing the prior judgment and extending its life for an additional ten years.

DISCUSSION

¶4 Did the District Court err in granting, summary judgment on the issue of whether § 27-2-201(1), MCA, precluded a creditor from seeking the renewal and extension of a judgment beyond the original statutory ten-year limitation period?

¶5 Under Rule 56(c), M.R.Civ.R, summary judgment shall be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Conclusions of law made by the trial court are reviewable by this Court de novo. Public Employees’ Ass’n v. Department of Transp., 1998 MT 17, ¶ 8, [287 Mont. 229], 954 P.2d 21, ¶ 8.

¶6 Section 27-2-201(1), MCA, reads in pertinent part: “[T]he period prescribed for the commencement of an action upon a judgment or decree of any court of record of the United States or of any state within the United States is within 10 years.” It is Arnold’s contention that an “action on a judgment” as that term is used in § 27-2-201(1), MCA, is limited to those ancillary actions which are specifically defined elsewhere in the Code. These actions include an action to transfer judgment to another venue, an action to obtain a writ of execution, an action to extend a judgment lien beyond its statutory six-year life, commencement of proceedings in aid of execution of the judgment, and commencement of contempt proceedings. Arnold argues that an action to extend the life of a judgment is not an action specifically provided for in the Code, nor is it contemplated within the language of § 27-2-201(1), MCA, because it does not share the collection and enforcement function of the other ancillary actions. Furthermore, Arnold argues, there is a dearth of case law in which the right to seek an extension of a judgment is established or recognized.

¶7 We disagree with Arnold’s contention that the law of Montana does not provide for a cause of action to renew a judgment and extend its life beyond the ten-year statute of limitations period. To the contrary, several of the prior decisions of this Court cited by Arnold clearly recognize the right of a creditor to seek a judgment on a prior judgment in order to extend the effectiveness of the original judgment beyond the statutorily defined limitations period. In Welch v. Huber (1993), 262 Mont. 114, 116, 862 P.2d 1180, 1181, this Court stated: “A judgment creditor may file an action to extend a district court’s judgment beyond its initial ten-year duration; the judgment cannot be extended past ten years by ex parte motion ...” (Emphasis added.) This same conclusion was reiterated by the Court two years later:

[W]hile a judgment cannot be extended past 10 years by ex parte motion, nevertheless, a judgment creditor may file an action to extend a district court’s judgment beyond its initial 10-year duration. [Citation omitted.] In other words, enforcement of a judgment is barred by § 27-2-201(1), MCA, after the judgment’s 10-year duration has expired. [Citation omitted.] If before that 10-year duration expires the judgment creditor desires to extend the judgment past 10 years, then he must file a separate action on the existing judgment and obtain a new judgment.

Jones v. Arnold (1995), 272 Mont. 317, 327, 900 P.2d 917, 924.

¶8 The result reached by the Court in both Welch and Jones is wholly consistent with the historical development of the enforcement of the statutory limitations period against a judgment creditor seeking renewal of a judgment of record. The right of revivor of a dormant judgment was recognized at common law through the procedural mechanism of a writ of scire facias. Although the merger of the courts of law and equity resulted in the abolition of this ancient form of pleading, the cause of action was nonetheless perpetuated under Montana’s earliest codified versions of the rules of civil procedure, which also codified a limitations period on the life of a judgment. See Haupt v. Burton (1898), 21 Mont. 572, 55 P. 110 (under the Code of Civil Procedure set forth in the Compiled Statutes of 1887 a judgment could be revived either by filing a motion or by filing a complaint seeking the remedy of revivor, provided that the action was commenced within the six-year statute of limitations period). The early Court determined that the statutory remedies related to the execution of a judgment were cumulative and did not preclude an action for the extension of the life of a judgment. Lindsay Great Falls Co. v. McKinney Motor Co. (1927), 79 Mont. 136, 143, 255 P. 25, 28. Although later versions of the Code extended the limitations period for the life of a judgment from six to ten years, the Court maintained its conclusion that an “action for revival or renewal may he brought as a matter of right within ten years.” State v. Hart Refineries (1939), 109 Mont. 140, 142, 92 P.2d 766, 768.

¶9 If the earlier versions of the statutory limitations periods, which are virtually identical in language to the current version of § 27-2-201(1), MCA, did not operate to eviscerate the right of a judgment creditor to seek renewal and extension of a judgment, it would be difficult to reconcile why we should now determine that such a right no longer exists by operation of § 27-2-201(1), MCA, as it is currently in force. Given the consistency and longevity of the Court’s recognition of this cause of action, we reject Arnold’s arguments regarding the vitiating effect § 27-2-201(1), MCA, on Jones’ right to seek an extension of his judgment.

¶10 Because the District Court’s summary judgment is consistent with the rules for extending the legal life of a judgment as set forth in both Welch and Jones, we hold that the District Court did not err in granting summary judgment with regard to Jones’ right to bring an action to renew the prior money judgment entered against Arnold.

¶11 Affirmed.

JUSTICES LEAPHART, NELSON, REGNIER and HUNT concur.


text:
    JAKE and ESTHER FRANK d/b/a ROCKING J. RANCH, Plaintiffs and Appellants, v. NEV HARDING, Defendant and Respondent.
    No. 98-247.
    Decided September 1, 1998.
    1998 MT 215.
    55 St.Rep. 903.
    290 Mont. 448.
    965 P.2d 254.
   OPINION AND ORDER

¶1 Nev Harding (Harding), the respondent in this appeal, has moved this Court to strike Exhibits A through D attached to the opening brief of the appellants Jake and Esther Frank (the Franks), d/b/a Rocking J Ranch. Pursuant to our order of August 18,1998, the Franks have responded. They oppose Harding’s motion and move that the Exhibits at issue be judicially noticed. For the reasons stated below, we grant Harding’s motion, in part, and deny the Franks’ motion.

¶2 The case underlying this appeal was brought in the Thirteenth Judicial District Court, Carbon County, by the Franks against Harding; they sought judgment for amounts allegedly owed them by Harding and relief from threats allegedly leveled by him against them. Harding did not timely answer the complaint and the Franks obtained entry of his default, followed by a default judgment. Thereafter, Harding moved to set the default judgment aside. The District Court held a hearing on the motion and Harding presented evidence surrounding the circumstances of his failure to answer the complaint timely. The court did not allow the Franks to present evidence, but did allow their counsel to make an offer of proof as to the testimony he would have offered. The court granted Harding’s motion to set aside the default judgment and the Franks timely filed a notice of appeal. The sole issue raised on appeal is whether the District Court erred in granting Harding’s motion to set aside.

¶3 The Franks’ opening brief on appeal was filed on June 23,1998. Attached thereto are Exhibits A, C and D, all of which are newspaper articles. Exhibit B, also attached, is the process server’s proof of service with narrative statement attached. Harding moves to strike all four of the referenced Exhibits — together with all statements and arguments based thereon in the Franks’ opening brief — on the grounds that they are not part of the record on appeal and are included for the improper purpose of prejudicing this Court against him. We observe at the outset that Exhibit B, the process server’s proof of service and attached statement are of record — having been filed February 11, 1998 — and we do not discuss that Exhibit further.

¶4 The Franks respond, first, that the newspaper articles are attached to allow this Court “to evaluate the parties to this appeal.” In this regard, we need observe only that the issue on appeal — whether the trial court erred in setting aside the default judgment — obviously does not require this Court to “evaluate the parties;” it requires us only to apply the law in determining whether the District Court erred in setting aside the default judgment. Exhibits A, C and D are totally and entirely irrelevant to our consideration of that issue and it is clear that counsel can only have attached Exhibits A, C and D for an improper purpose.

¶5 Relying on Matter of Establishment & Org. of Ward Irr. Dist. (1985), 216 Mont. 315, 321, 701 P.2d 721, 726, the Franks also contend that it is permissible to “supplement” the record on appeal with judicially recognizable material and that the articles are proper subjects for judicial notice. Ward Irr. Dist. is readily distinguishable, however, on several grounds. First, we considered the survey descriptions and maps at issue there under the express authority of the Commission Comments to Rule 201(b), M.R.Evid., which permit judicial notice of “published maps or charts.” Second, the Montana Water Code specifically provided that, in the water rights adjudication process, maps and descriptions were acceptable articles of evidence to prove a water right. Ward Irr. Dist., 216 Mont. at 321, 701 P.2d at 726. In the present case, neither of those bases is even arguably present and, indeed, the Franks’ counsel makes no effort to argue that the newspaper articles are judicially recognizable under Rule 201(b), M.R.Evid. Furthermore, the alleged “facts” contained within the newspaper articles are, as noted above, totally irrelevant to the issue raised for our consideration in this appeal.

¶6 Finally, the Franks argue — relying on 29 Am. Jur. 2d Evidence § 88 (1994) — that “[n]ewspaper articles and television stories are regularly judicially noticed by federal courts.” While it is true that § 88 cites to two federal district court cases wherein newspaper articles apparently have been judicially noticed, the section also cites to a federal circuit court of appeals case refusing to take judicial notice of the truth of a newspaper article. Thus, § 88 can hardly be said to support the Franks’ assertion that federal courts “regularly” take judicial notice of newspaper articles. Moreover, Rule 201(b), M.R.Evid., is applicable here.

¶7 In summary, it is clear that Exhibits A, C and D are improperly attached to the Franks’ brief. Nor is it conceivable that the Franks’ counsel, an attorney with some 15 years’ experience in the practice of law, did not recognize the impropriety of attaching such nonrecord and totally irrelevant matters to his clients’ brief on appeal. In this regard, we long have cautioned counsel about such practices, stating, for example, that “ ‘[w]e strongly condemn this practice by counsel for appellants [of attempting to introduce extraneous evidence by the ‘back door’ via attachment as appendices to their brief] and use this occasion to warn other parties to future appeals that this practice will not be tolerated.’ ” See Downs v. Smyk (1979), 185 Mont. 16, 25, 604 P.2d 307, 312 (quoting Farmers State Bank of Conrad v. Iverson (1973), 162 Mont. 130, 133-34, 509 P.2d 839, 841). This practice wastes the time and resources of both opposing counsel and this Court and, had Harding requested sanctions in this regard, they likely would have been granted.

¶8 The Court having fully considered the matters before it,

¶9 IT IS ORDERED that Harding’s motion to strike Exhibits A, C and D to the Franks’ opening brief is GRANTED and we will not consider those Exhibits or any statements or argument in the Franks’ opening brief which rely on those Exhibits; and

¶10 IT IS ORDERED that the Franks’ motion for judicial notice of Exhibits A, C and D is DENIED.

¶ 11 The Clerk is directed to mail a true copy of this Order to counsel of record for the parties.

¶12 DATED this 1st day of September, 1998.

/S/J.A.TURNAGE

/S/ KARLA M. GRAY

/S/ W. WILLIAM LEAPHART

/S/JAMES C. NELSON

/S/ JIM REGNIER


author: CHIEF JUSTICE TURNAGE JUSTICE HUNT JUSTICE TRIEWEILER:

text:
    FIVE U’S, INCORPORATED, Plaintiff and Appellant, v. BURGER KING CORPORATION, BURGER KING OPERATING LIMITED PARTNERSHIP, and QSC, II, INC., Defendants and Respondents.
    No. 97-649.
    Submitted on Briefs July 16, 1998.
    Decided September 3, 1998.
    1998 MT 216.
    55 St.Rep. 906.
    290 Mont. 452.
    962 P.2d 1218.

      For Appellant: Andrew J. Utick, Utick & Grosfield, Helena.
    For Respondents: J. Robert Planalp, Landoe, Brown, Planalp & Braaksma, Bozeman; Gary L. Walton, Poore, Roth & Robinson, Butte; Stuart L. Kellner, Hughes, Kellner, Sullivan & Alke, Helena.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

¶1 This is an action for damages for the negligent destruction of a Burger King restaurant by fire. Five U’s, Incorporated, appeals from a summary judgment of the First Judicial District Court, Lewis and Clark County, in favor of defendants Burger King Corporation (BKC) and Burger King Operating Limited Partnership (BKOLP). We affirm.

¶2 The issues are:

¶3 1. Whether the District Court erred in granting summary judgment with respect to the claim for damages for the destruction of the restaurant building by fire; and

¶4 2. Whether the court erred in granting summary judgment with respect to the claim for damages for loss of rentals while the restaurant was being rebuilt.

¶5 Five U’s is a Montana corporation which owns the real property and building used as the Burger King restaurant in Helena, Montana. Five U’s leased the property and building to BKC, a Florida corporation. Their lease agreement required BKC to maintain fire and casualty insurance on the property. Under the agreement, Five U’s was required to rebuild in the event of fire or other casualty.

¶6 In February 1986, BKC assigned its interest in the lease to BKOLP. A franchisee, QSC, subleased the property and owned the restaurant equipment. Under the sublease, QSC assumed responsibility to insure the restaurant against fire and other casualties.

¶7 On June 26, 1992, a grease fire destroyed the Helena Burger King restaurant. Following the fire, QSC and Five U’s agreed to distribute the $408,500 in insurance proceeds first to Five U’s to allow it to rebuild, with the remaining balance to QSC to allow it to acquire new restaurant equipment. The restaurant reopened on December 12,1992.

¶8 Although the cost of rebuilding the restaurant was covered by the fire insurance, Five U’s nevertheless filed this tort action in June 1994 to recover the cost of removing and replacing the Burger King building and the rental income lost while the restaurant was being rebuilt. The District Court granted summary judgment in favor of BKC and BKOLP. The court also granted partial summary judgment in favor of QSC, leaving as the only issue for trial whether Five U’s was entitled to lost rentals from QSC. When Five U’s later agreed to dismiss QSC from the suit, summary judgment became final. Five U’s appeals.

Standard of Review

¶9 Under Rule 56(c), M.R.Civ.R, summary judgment shall be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” This Court uses de novo review to determine whether a trial court correctly granted summary judgment. Public Employees’Ass’n v. Dept. of Transp., 1998 MT 17, ¶8, 954 P.2d 21, ¶8.

Issue 1

¶ 10 Did the District Court err in granting summary judgment with respect to the claim for damages for the destruction of the restaurant building by fire?

¶11 The lease agreement between Five U’s and BKC required BKC, as the lessee, to keep the building insured “for the benefit of Lessor and Lessee” against loss or damage by fire. Under its sublease, QSC undertook this responsibility to provide fire insurance. The District Court ruled that the insurance proceeds paid to Five U’s from the policy purchased by QSC were paid on behalf of all of the defendants, due to the nature of their relationship. The court further ruled that having been fully compensated by insurance, Five U’s is not entitled, as a matter of law, to be compensated a second time for the same loss. The court stated, “Montana courts have consistently held that when a plaintiff has been fully compensated for his injury, he is not entitled to an additional damage award under any legal theory.” The court cited as authority for this principle Boyken v. Steele (1993), 256 Mont. 419, 847 P.2d 282, and State ex rel., Deere & Co. v. District Court (1986), 224 Mont. 384, 730 P.2d 396.

¶12 Five U’s contends that the District Court was in error because Boyken and Deere involved joint tortfeasors and limited their holdings to liability as between joint tortfeasors. The effect of insurance reimbursement under a contract obligation was not an issue in either case. Five U’s is correct that, in its statement quoted above, the District Court extended the holdings of Boyken and Deere.

¶13 In entering summary judgment, the District Court also cited Publix Theatres Corporation v. Powell (Tex. 1934), 71 S.W.2d 237, as persuasive authority. In that case, lessee Powell negligently caused a fire which destroyed lessor Publix Theatres Corporation’s building. After receiving payment from Powell’s insurance company for the market value of the building, Publix sued Powell for his negligence in allowing the building to catch on fire. The court rejected Publix’s contention that it should be allowed to recover from Powell despite having received full compensation from the insurance company. In its reasoning, the court stated:

When so destroyed, lessor’s loss was the value of the destroyed property — that was his interest in the insurance and when paid, of course, satisfied the loss, if the loss equalled or was less than the amount of insurance. To permit the lessor to keep the insurance money, in such a case, and then collect from the tenant, would be a double recovery not sanctioned by law. If the fire resulted from the tenant’s negligence, the tenant is liable for the result of that negligence, but, when he has provided for the resulting damages, either by payment himself or by payment through an insuring company, he has satisfied the claim of the damaged party.

Publix, 71 S.W.2d at 241. Like the building owner in Publix, Five U’s has been fully reimbursed for the cost of replacing the building destroyed in the fire.

¶14 Although Five U’s criticizes Publix as dated, the reasoning set forth therein remains sound. The Restatement (Second) of Torts § 920A(1)(1977), states, “A payment made by a tortfeasor or by a person acting for him to a person whom he has injured is credited against his tort liability, as are payments made by another who is, or believes he is, subject to the same tort liability.” The first comment to this Restatement section explains:

Payments by or for defendant. If a tort defendant makes a payment toward his tort liability, it of course has the effect of reducing that liability. This is also true of payments made under an insurance policy that is maintained by the defendant, whether made under a liability provision or without regard to liability, as under a medical-payments clause. This is true also of a payment by another tortfeasor of an amount for which he is liable jointly with the defendant or even by one who is not actually liable to the plaintiff if he is seeking to extinguish or reduce the obligation.

Restatement (Second) of Torts § 920A(1), cmt. a (1977).

¶ 15 Five U’s asserts that comment a to § 920A does not apply to this case. Instead, it argues that comment b, concerning the collateral source rule, controls. That comment states:

Benefits from collateral sources. Payments made or benefits conferred by other sources are known as collateral-source benefits. They do not have the effect of reducing the recovery against the defendant. The injured party’s net loss may have been reduced correspondingly, and to the extent that the defendant is required to pay the total amount there may be a double compensation for a part of the plaintiff’s injury. But it is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor. If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance or by making advantageous employment arrangements, the law allows him to keep it for himself.

Restatement (Second) of Torts § 920A, cmt. b (1977).

¶16 The collateral source rule states that benefits received by a plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer. Tribby v. Northwestern Bank of Great Falls (1985), 217 Mont. 196, 209, 704 P.2d 409, 417. Five U’s asserts that when the collateral source rule is correctly applied to the facts of this case, it should be allowed a double recovery. It reasons that payment under the fire insurance policy was not made toward anyone’s tort liability, but toward contract liability. Five U’s further alleges that it was “responsible for” the fire insurance “by making an advantageous lease arrangement whereby the franchisee ... paid the fire insurance premium as additional rent for the premises.”

¶17 In that allegation, Five U’s is totally off the mark. Five U’s was no more “responsible for” fire insurance on the Burger King restaurant property under this lease than it was for making rental payments to itself.

¶18 Moreover, payment for the insurance policy was not wholly independent of and collateral to BKC and BKOLP. QSC purchased fire insurance for the Burger King restaurant pursuant to its assumption of BKC’s duty to provide such insurance under the lease with Five U’s. Although Five U’s consented to BKC’s assignment of the lease to BKOLP and the sublease to QSC, Five U’s did not thereby release BKC from its lease obligations, including the purchase of fire insurance. If fire insurance was inadequate or lacking, Five U’s would assuredly have wanted to hold both BKC and its assignee BKOLP liable for breach of the lease provision requiring BKC to keep the building insured.

¶ 19 We conclude that the payment to Five U’s under insurance purchased by alleged cotortfeasor QSC should be credited against the tort liability of BKC and BKOLP. We therefore hold that the District Court did not err in granting summary judgment for BKC and BKOLP on the claim for damages for destruction of the Burger King restaurant by fire.

Issue 2

¶20 Did the court err in granting summary judgment with respect to the claim for damages for loss of rentals while the restaurant was being rebuilt?

¶21 The lease contract between Five U’s and BKC provided:

If during the term of this lease the building, improvements in or appurtenant to the demised premises shall be destroyed or damaged by fire, storm, lightning, earthquake or other casualty, rental shall abate in such proportion as use of the premises by Lessee has been destroyed, and Lessor shall restore premises to substantially the same condition as before damage as speedily as practical; whereupon, full rental shall commence.

Paragraph 12, Agreement to Build and Lease.

¶22 Five U’s argues that the measure of damages in this tort action is not limited by the terms of the lease contract. It cites Miller v. Fallon County (1986), 222 Mont. 214, 721 P.2d 342, for the proposition that a party cannot contractually exculpate itself from liability for willful or negligent violation of legal duties.

¶23 In Miller, the plaintiff had waived, in writing, all claims for liability of the company in whose vehicle she was subsequently injured while a passenger. This Court determined that the waiver agreement violated the policy of the law and therefore could not be relied upon. In other words, the contract was declared invalid as an illegal contract. In the present case, as the District Court noted, the contract does not seek to exculpate BKC from all liability for negligence; it simply includes a rent abatement clause for periods during which the building is rendered unusable. There is no provision which violates the policy of the law.

¶24 When the language of a legal contract is clear and unambiguous on its face, it is the duty of the courts to enforce the contract as the parties intended. First Sec. Bank v. Vander Pas (1991), 250 Mont. 148, 153, 818 P.2d 384, 387. Here, Paragraph 12 of the lease makes no distinction as to the cause of a fire, and therefore requires rent to abate regardless of whether the fire was caused by events unrelated to BKC or by BKC’s negligence. Five U’s may not circumvent the intent of the contract by suing BKC and BKOLP in negligence to recover rent for the period for which the lease clearly provided that rent was to abate.

¶25 We conclude that the lease should be enforced as written, abating rental payments when use of the premises has been destroyed. We hold that the District Court did not err in granting summary judgment to BKC and BKOLP with respect to the claim for damages for loss of rent payments while the restaurant was being rebuilt.

¶26 We affirm the decision of the District Court.

JUSTICES NELSON, REGNIER and GRAY concur.

JUSTICE LEAPHART did not participate.

JUSTICE HUNT

specially concurs and dissents.

¶27 I concur in the Court’s opinion on issue one. I dissent from that opinion on issue two. The Court has mixed apples and oranges in analyzing this issue. Appellant’s complaint asserts negligence on the part of Respondents for the destruction of its property and seeks to recover the lost rental, or use value, of the property for which it was denied during the period of re-construction. An action to recover loss of use is a tort and is governed by tort law. In focusing on the rent abatement clause of the parties’ contract, and concluding that it precluded Appellant’s recovery of loss of use, the majority erroneously used contract law to decide Appellant’s tort claim. The rent abatement clause of the contract is irrelevant in deciding Appellant’s entitlement to loss of use. Had Appellant sought damages under a breach of contract theory, then the rent abatement clause would be relevant.

¶28 Section 27-1-317, MCA, prescribes the damages recoverable in a tort action. That statute provides:

For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.

Because Appellant brought this action in tort, I would reverse the decision of the District Court on issue two and remand for further findings concerning the reasonable use value of the property during the period of re-construction to which Appellant would be entitled pursuant to § 27-1-317, MCA. I dissent from our failure to do so.

JUSTICE TRIEWEILER:

I join in the concurring and dissenting opinion of Justice Hunt.


author: JUSTICE GRAY

text:
    RON and SHARON NASON, d/b/a PLEASANT VIEW TRAILER COURT, Plaintiffs, Respondents and Cross-Appellants, v. KENNETH E. LEISTIKO and DAVINE S. GRESHAM, a/k/a DAVINE S. LEISTIKO, Defendants, Appellants and Cross-Respondents.
    No. 98-088.
    Submitted on Briefs June 11, 1998.
    Rehearing Denied September 17, 1998.
    Decided September 3, 1998.
    1998 MT 217.
    55 St.Rep. 910.
    290 Mont. 460.
    963 P.2d 1279.

      For Appellants: John J. Oitzinger, Attorney at Law, Helena.
    For Respondents: James A. Rice, Jr.; Jackson & Rice, Helena; James T. Harrison, Jr.; Harrison, Loendorf, Poston & Duncan, Helena.
   JUSTICE GRAY

delivered the Opinion of the Court.

¶1 Kenneth E. and Davine S. Leistiko (the Leistikos) appeal from the judgment entered by the First Judicial District Court, Lewis and Clark County, on its Findings of Fact, Conclusions of Law and Order granting Ron and Sharon Nason (the Nasons) possession of Lot Kin the Nasons’ trailer court, ordering the Leistikos to remove their trailer from the lot, and awarding costs and attorney’s fees to the Nasons. The Leistikos raise the following issues on appeal:

¶2 1. Were the Nasons’ written notices of the Leistikos’ noncompliance with the rental agreement materially defective?

¶3 2. Did the District Court err in concluding that the Nasons were not required to accept the Leistikos’ tender of the past-due rent?

¶4 The Nasons raise two issues on cross-appeal. In addition, they contend that the Leistikos failed to timely raise the issue of defective notices of noncompliance in the District Court and, as a result, failed to preserve this issue for appeal. Moreover, the Nasons request the withdrawal of their cross-appeal in the event we decline to address the merits of the Leistikos’ appeal.

¶5 For the reasons discussed below, we conclude that the Leistikos did not timely raise the issue of whether the notices of noncompliance were defective in the District Court and that issue is not properly before us. Moreover, we conclude that the Leistikos’ second issue is premised on their succeeding on the first issue. Consequently, we do not address the merits of the Leistikos’ issues on appeal, we deem the Nasons’ cross-appeal withdrawn and we affirm the District Court.

BACKGROUND

¶6 The Nasons own the Pleasant View Trailer Court located in Lewis and Clark County, Montana. In May of 1994, the Leistikos purchased a mobile home situated on Lot K of the Nasons’ trailer court. When the Leistikos moved into the mobile home, they signed a rental agreement for the lot space.

¶7 On October 18,1996, the Nasons sent the Leistikos three notices stating that the Leistikos were not in compliance with the rental agreement. The first notice related to rent which allegedly was past due and requested payment of the amount due within 15 days. The second notice related to an addition to the Leistikos’ mobile home which purportedly violated county spacing regulations and requested the Leistikos to either remove or modify the addition within 14 days. The third notice stated that the mobile home’s porch addition was built over the septic tank, impaired access to the tank and must be removed within 3 days. The Leistikos did not timely correct any of the noncompliances set forth in the notices and, on November 4,1996, the Nasons’ attorney advised the Leistikos in writing that the rental agreement was terminated. Thereafter, the Leistikos tendered payment of $ 110 for the past-due rent, but the Nasons refused to accept it.

¶8 The Nasons subsequently filed an action in Lewis and Clark County Justice Court alleging that the Leistikos had breached the rental agreement; they sought to evict the Leistikos from the trailer court. The Leistikos answered the complaint, raised eight affirmative defenses and asserted seven counterclaims against the Nasons. They also moved to have the case removed to the District Court because the damages requested in their counterclaims exceeded the Justice Court’s jurisdictional limit. The Nasons did not oppose the motion and the Justice Court ordered the case removed to the District Court.

¶9 The District Court bifurcated the Leistikos’ counterclaims from the Nasons’ eviction action and held a bench trial on the eviction-related issues. Thereafter, it issued its Findings of Fact, Conclusions of Law and Order, concluding that the Leistikos had breached the rental agreement by not paying the past-due rent, after repeated requests for payment, but had not otherwise breached the rental agreement. It ordered the Leistikos to remove their mobile home from the trailer court lot within 20 days of the date of the judgment. Judgment was entered accordingly and stayed pending the Leistikos’ appeal and the Nasons’ cross-appeal.

DISCUSSION

¶10 1. Were the Nasons’ written notices of the Leistikos’ noncompliance with the rental agreement materially defective?

¶11 The Leistikos argue that the Nasons’ eviction action should have been dismissed because the noncompliance notices were defective in failing to adequately specify the acts and omissions which constituted noncompliance, as required by § 70-24-422, MCA. In response, the Nasons raise the threshold questions of whether the Leistikos timely raised the issue regarding defective notices in the District Court and, consequently, whether that issue is properly before us. It is well-established that we will not address issues on appeal which were not properly raised in the district court. See, e.g, Nitzel v. Wickman (1997), 283 Mont. 304, 313, 940 P.2d 451, 456. As a result, it is necessary to resolve the Nasons’ threshold questions at the outset.

¶12 Relying on Marsh v. Overland (1995), 274 Mont. 21, 905 P.2d 1088, the Nasons argue that, because the Leistikos did not raise the issue of whether the noncompliance notices were defective until their post-trial brief and proposed findings of fact, conclusions of law and order, they did not timely raise the issue in the District Court and cannot now appeal on that basis. They further point out that the District Court did not address this issue in its Findings of Fact, Conclusions of Law and Order.

¶13 In Marsh, the plaintiff attempted to argue on appeal an issue raised in the district court only in his post-hearing memorandum and not addressed in the district court’s order. The plaintiff had not raised the issue in his complaint, did not address the issue at the district court hearing and did not move to amend his complaint to conform to any evidence presented relating to the issue. We held that, under those circumstances, the issue had not been timely raised in the district court and could not be raised on appeal. Marsh, 274 Mont. at 29, 905 P.2d at 1093.

¶14 The Leistikos concede that they did not present any argument in the District Court regarding the sufficiency of the noncompliance notices until their post-trial submissions to the court. They contend, however, that the sufficiency of the notices was controverted in the pleadings and, therefore, effectively raised as an issue prior to the bench trial.

¶15 Paragraph 5 of the Nasons’ complaint alleged that

[o]n or about October 18,1996, Plaintiffs gave written notice, sent by certified mail, to Defendants of three violations of the terms of the rental agreement, including failure to pay the increased rate of rent after proper notice, and two notices regarding the placement of additions on Defendants’ mobile home which violated spacing requirements of the court and of state law. A copy of the three notices sent to the Defendants are attached hereto as Exhibits B, C, and D.

Each of the appended notices stated that it was given in compliance with § 70-24-422, MCA, which requires that the notice specify the acts and omissions constituting the breach of a rental agreement. See § 70-24-422(1), MCA. The Leistikos answered the allegations in Paragraph 5 by stating that they “deny the allegations of Paragraph 5 except admit they received copies of the items attached as Exhibits B, C, and D to the complaint.” They also alleged, as an affirmative defense, that they had paid or tendered all amounts due under the rental agreement. Relying on Montana Metal Buildings, Inc. v. Shapiro (1997), 283 Mont. 471, 942 P.2d 694, the Leistikos contend that the denial and affirmative allegation in their answer timely put the sufficiency of the noncompliance notices at issue and adequately preserved that issue for appeal.

¶16 In Montana Metal Buildings, the plaintiff alleged in its complaint that the defendant owed it a specific amount of money as reflected in invoices appended to the complaint. In his answer, the defendant specifically denied that he owed plaintiff the amount stated in the appended invoices and affirmatively alleged that he owed no money to the plaintiff. Montana Metal Buildings, 283 Mont. at 475, 942 P.2d at 697. The district court granted summary judgment to the plaintiff, concluding that no genuine issues of material fact existed with regard to the defendant’s liability for the amounts listed in the complaint. Montana Metal Buildings, 283 Mont. at 474, 942 P.2d at 696. We reversed on appeal, concluding that the defendant’s denial and affirmative allegation effectively controverted the factual allega-

tions in the complaint, putting those allegations in issue, and created genuine issues of material fact which put the plaintiff to its proof. Montana Metal Buildings, 283 Mont. at 475-76, 942 P.2d at 697.

¶17 Here, however, the Leistikos did not specifically deny that the notices complied with § 70-24-422, MCA. Nor did they affirmatively assert that the notices were defective in failing to sufficiently describe the acts or omissions constituting breaches of the rental agreement. The Leistikos merely denied the factual allegations contained in Paragraph 5 of the complaint which, as set forth above, related to the circumstances surrounding the giving of the notices of noncompliance. Furthermore, while their affirmative allegation that they had paid or tendered the past-due rent controverted any allegation that they had breached the rental agreement in that regard, it did not equate to an allegation that the related notice of noncompliance insufficiently specified the act or omission constituting the breach. Thus, the Leistikos’ answer did not specifically controvert the statutory sufficiency of the notices in the same manner that the defendant in Montana Metal Buildings specifically put into issue the amount of money alleged to be owed. See Montana Metal Buildings, 283 Mont. at 475, 942 P.2d at 697. We conclude that Montana Metal Buildings is distinguishable from the present case and does not support the Leistikos’ assertion that they raised the sufficiency of the noncompliance notices in their answer to the complaint.

¶ 18 We concluded in Marsh that where a party fails to raise an issue in the pleadings, does not present argument on the issue during the hearing on the merits of the case, does not move to amend the pleadings to conform to any evidence presented and raises the issue for the first time in a post-hearing memorandum which the district court does not address in its order, the issue has not been timely raised and may not be raised on appeal. Marsh, 274 Mont. at 29, 905 P.2d at 1093. The same circumstances are before us in the present case. The Leistikos did not controvert the sufficiency of the noncompliance notices in their answer and they concede that they did not argue or otherwise raise the issue of whether the noncompliance notices sufficiently specified the acts or omissions constituting the breach of the rental agreement until their post-trial submissions to the District Court. Nor did they move to amend the pleadings to conform to any evidence which may have been presented at trial regarding this issue. Finally, the District Court did not address the Leistikos’ argument in this regard in its Findings of Fact, Conclusions of Law and Order. We conclude that the Leistikos failed to timely raise this issue in the District Court and, therefore, cannot raise the issue on appeal. See Marsh, 274 Mont. at 29, 905 P.2d at 1093. Thus, we decline to address whether the notices of noncompliance were sufficient under § 70-24-422, MCA. ¶19 2. Did the District Court err in concluding that the Nasons were not required to accept the Leistikos’ tender of the past-due rent?

¶20 The District Court concluded that the Leistikos’ November 11,1996, tender of $110 for the past-due rent was made subsequent to the termination of the rental agreement and, as a result, that the Nasons were not required to accept the tender. The Leistikos argue that the District Court erred in this regard because the notices were statutorily defective and did not operate to terminate the rental agreement. With the rental agreement still in effect, then, they contend that the Nasons were required to accept their tender of payment.

¶21 The problem with the Leistikos’ arguments under this issue is that they are premised on a conclusion that the notices were defective. We declined to address whether the notices were defective above, on the basis that the issue was not properly raised in the District Court. Thus, since the necessary predicate to the Leistikos’ arguments in this issue — namely, a conclusion that the notices were defective — does not exist, we need not address this issue further.

¶22 The Nasons request that they be allowed to withdraw their cross-appeal in the event we decline to address the merits of the Leistikos’ appeal. On the basis of our discussion of the Leistikos’ issues on appeal, we deem the Nasons’ cross-appeal withdrawn.

¶23 As a final matter, the Nasons request an award of attorney’s fees and costs on appeal. Section 70-24-442(1), MCA, authorizes an award of attorney’s fees and costs to the prevailing party in an action on a rental agreement. Here, the Nasons prevailed and the District Court awarded them costs and reasonable attorney’s fees pursuant to the statute. The Nasons have incurred further attorney’s fees and costs in successfully defending this appeal and awarding such fees and costs on appeal is consistent with the District Court’s award. See Marsh, 274 Mont. at 30, 905 P.2d at 1093. Therefore, we conclude that the Nasons are entitled to an award of costs and reasonable attorney’s fees incurred as a result of this appeal.

¶24 Affirmed and remanded for a determination of reasonable attorney’s fees and costs incurred on appeal.

CHIEF JUSTICE TURNAGE, JUSTICES NELSON, REGNIER and TRIEWEILER concur.


author: JUSTICE LEAPHART

text:
    MICKY HAWMAN, Petitioner and Appellant, v. STATE OF MONTANA, ex rel., DARRELL E. BECKSTROM, Chief DRIVER IMPROVEMENT BUREAU, Respondent and Respondent.
    No. 97-638.
    Submitted on Briefs July 23, 1998.
    Decided September 3, 1998.
    1998 MT 218.
    55 St.Rep. 913.
    290 Mont. 467.
    963 P.2d 1288.
    For Appellant: Brad L. Amdorfer; Arndorfer Law Firm, Billings.

      For Respondent: Hon. Joseph P. Mazurek, Attorney General, Jennifer Anders, Ass’t Attorney General, Helena; Gary R. Thomas; Thomas Law Office, Red Lodge.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

¶ 1 Appellant Micky Hawman was arrested for driving under the influence of alcohol on November 21, 1996. The arresting officer read him the implied consent law. Hawman refused to take a breath test and his license was seized pursuant to § 61-8-402(4), MCA. The following evening, the officer gave Mr. Hawman notification of the suspension of his driving license privileges. The officer did not issue a five-day driving permit under § 61-8-402(5), MCA.

¶2 Hawman filed a petition in District Court pursuant to § 61-8-403, MCA. The District Court denied his petition and he appealed to this Court. We affirm the decision of the District Court.

¶3 Under Montana law, a person is considered to have given consent to a test of his/her blood or breath for purposes of determining the presence of alcohol or drugs in the body. Section 61-8-402(1), MCA. Refusal to take the requested test results in immediate seizure of the person’s license. The license is then suspended for a specified period of time. Sections 61-8-402(4) and (6), MCA. Hawman relies on the provisions of subsection (5), which provide: “Upon seizure of a driver’s license, the peace officer shall issue, on behalf of the department, a temporary driving permit, which is valid for 5 days following the date of issuance and shall provide the driver with written notice of the license suspension or revocation and the right to a hearing provided in 61-8-403.” Section 61-8-402(5), MCA. It is undisputed that the peace officer did not issue Hawman a temporary driving permit. As a consequence of that omission, Hawman contends that he is entitled to have his license reinstated.

¶4 If an individual believes that the officer lacked statutory authority to request the test in the first instance, he may challenge the license suspension in district court. See § 61-8-403, MCA. The scope of a hearing under § 61-8-403, MCA, is limited to the following issues:

(4)(a) The court shall take testimony and examine the facts of the case, except that the issues are limited to whether:
(i) a peace officer had reasonable grounds to believe that the person had been driving or was in actual physical control of a vehicle upon ways of this state open to the public while under the influence of alcohol, drugs, or a combination of the two and the person was placed under arrest for violation of 61-8-401;
(ii) the person is under the age of 21 and was placed under arrest for a violation of 61-8-410;
(iii) the officer had probable cause to believe that the person was driving or in actual physical control of a vehicle in violation of 61-8-401 and the person was involved in a motor vehicle accident or collision resulting in property damage, bodily injury, or death; and
(iv) the person refused to submit to one or more tests designated by the officer.

Section 61-8-403(4)(a), MCA (emphasis added).

¶5 Subsection (4)(b) then goes on to provide that “[biased on the above issues and no others, the court shall determine whether the petitioner is entitled to a license or whether the petitioner’s license is subject to suspension or revocation.” Section 61-8-403(4)(b), MCA.

¶6 Although Hawman filed a petition under § 61-8-403, MCA, he did not raise any of the issues enumerated by the statute. Rather, Hawman alleged that the arresting officer failed to issue him a temporary driving permit and requested that his license be reinstated as a remedy for that omission. The District Court recognized that its scope of review was limited by the express provisions of § 61-8-403, MCA, and refused to consider the officer’s failure to issue a temporary permit as a basis for reinstating Hawman’s license.

¶7 We have strictly construed the provisions of § 61-8-403(4)(a), MCA, and have held that the Legislature clearly intended to limit the issues that a court may consider on appeal pursuant to that statute. In Blake v. State (1987), 226 Mont. 193, 735 P.2d 262, we held that the trial court could not consider the issue of hardship as a mitigating factor in granting a restricted or probationary license. See also Thompson v. Department of Justice (1994), 264 Mont. 372, 871 P.2d 1333. The District Court correctly concluded that it had no jurisdiction under § 61-8-403, MCA, to consider issues other than those specifically listed in the statute. Without addressing the question of whether some other legal remedy may be available to Hawman, we hold that an appeal under § 61-8-403, MCA, does not allow for reinstatement of a driver’s license due to the officer’s failure to issue a temporary license under § 61-8-402(5), MCA.

¶8 Affirmed.

JUSTICES GRAY, NELSON, REGNIER and TRIEWEILER concur.


author: JUSTICE LEAPHART JUSTICE GRAY,

text:
    CITY OF CUT BANK, STATE OF MONTANA, Plaintiff and Appellant, v. TOM PATRICK CONSTRUCTION, INC., Defendant and Respondent.
    No. 97-718.
    Submitted on Briefs May 28, 1998.
    Decided September 3, 1998.
    1998 MT 219.
    55 St.Rep. 915.
    290 Mont. 470.
    963 P.2d 1283.

      For Appellant: Robert G. Olson; Frisbee, Moore & Olson, Cut Bank.
    For Respondent: Brian Lilletvedt; Bosch, Kuhr, Dugdale, Martin & Kaze, Havre.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

¶1 City of Cut Bank (Cut Bank) appeals from the decision of the Ninth Judicial District Court, Glacier County, dismissing with prejudice Cut Bank’s complaint based upon the United States Supreme Court’s decision in Doctor’s Associates, Inc. v. Casarotto (1996), 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (Casarotto). More specifically, the District Court determined that the transaction between Cut Bank and Tom Patrick Construction (Tom Patrick), which is the basis of the current action, involved interstate commerce and thus must be arbitrated pursuant to the Federal Arbitration Act (FAA). We reverse and remand.

Factual and Procedural Background

¶2 Cut Bank entered into a construction contract with Tom Patrick on November 16,1993. The contract required Tom Patrick to replace a water line in Bum Coulee, construct an access road and stabilize the surrounding coulee and ditch areas. Tom Patrick completed the first two stages — replacing the water line and constructing the access road. Cut Bank, however, contends that the riprap materials used by Tom Patrick in the stabilization stage of the construction were insufficient to complete the project to specifications.

¶3 Cut Bank made several requests that Tom Patrick complete the project in accordance with the contract but eventually hired the services of another contractor to complete the project according to specifications. Completion of the project was more costly than the original contract price. Cut Bank refused to the make final payment due to Tom Patrick under the contract and refused to surrender Tom Patrick’s bond and performance bond.

¶4 As a result, Tom Patrick served Cut Bank with a notice of intent to arbitrate the dispute. Cut Bank objected to arbitration proceedings, asserting that no valid contract for arbitration existed because the construction contract did not comply with § 27-5-114(4), MCA (1993), which required that notice that a contract is subj ect to arbitration be typed in underlined capital letters on the front page of the contract. Cut Bank filed a complaint in District Court seeking a stay of arbitration. Tom Patrick dismissed the arbitration proceedings and requested that the District Court stay further proceedings pending the resolution of the challenge to § 27-5-114, MCA, in Casarotto. The District Court granted the stay.

¶5 The United States Supreme Court issued its decision in Casarotto (1996), 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902, determining that §27-5-114(4), MCA, was preempted by the FAA. Thereafter, Tom Patrick moved to dismiss Cut Bank’s complaint for failure to state a cause of action. Cut Bank responded that the FAA was not applicable to the construction contract because the contract did not involve interstate commerce. The District Court, citing Casarotto, dismissed Cut Bank’s complaint with prejudice. Cut Bank appeals to this Court presenting three issues for review. We determine that the issue of whether the complaint alleges an underlying contract involving interstate commerce is dispositive and therefore do not reach the remaining issues.

Standard of Review

¶6 Our standard of review of district court rulings on motions to dismiss under Rule 12(b)(6), M.R.Civ.P, is set forth in Willson v. Taylor (1981), 194 Mont. 123, 634 P.2d 1180:

A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. A motion to dismiss under Rule 12(b)(6), M.R.Civ.P., has the effect of admitting all well-pleaded allegations in the complaint. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true.

Willson, 194 Mont. at 126, 634 P.2d at 1182 (citations omitted). The District Court’s determination that Cut Bank’s complaint failed to state a claim is a conclusion of law. Our standard of review of the trial court’s conclusions of law is whether the tribunal’s interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

Discussion

¶7 Congress, in enacting the FAA, sought to foreclose state legislative attempts to undercut the enforceability of arbitration agreements. The United States Supreme Court has explained that § 2 of the FAA reflects a strong national policy favoring arbitration agreements. Perry v. Thomas (1987), 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426. As a result of this strong policy, agreements to arbitrate will be upheld under the FAA unless the agreement is not part of a contract evidencing interstate commerce or is revocable “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

¶8 Recognizing that many contracts provide little warning to parties that a contract is subject to arbitration, the Montana legislature enacted § 27-5-114(4), MCA. That section required that notice that a contract was subject to arbitration be printed in capitalized underlined print on the front of the contract. In so providing, the legislature sought to ensure that parties to a contract were aware, when they signed a contract subject to an arbitration clause, that they were waiving their constitutional right to access the courts. The legislature sought to prevent parties from waiving that right without their full knowledge.

¶9 Specifically, § 27-5-114(4), MCA, stated that “notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters on the first page of the contract; and unless such notice is displayed thereon, the contract may not be subject to arbitration.” This section (since repealed) was in effect in November 1993, at the time that Cut Bank entered into the construction contract with Tom Patrick. The construction contract did not comply with the notice requirement of § 27-5-114(4), MCA. Rather, Section 16.1, located in the Standard General Conditions on page 110 of the Contract Documents, stated that “[a]ll claims, disputes and other matters in question between [Cut Bank] and [Tom Patrick] arising out of or relating to the Contract Documents or the breach thereof... will be decided by arbitration ....’’At the District Court, Cut Bank contended that this provision does not comply with the requirements of § 27-5-114(4), MCA, therefore that the agreement to arbitrate is not enforceable. Tom Patrick, on the other hand, maintained that this action is controlled by the United States Supreme Court’s decision in Casarotto.

¶10 The United States Supreme Court, in Casarotto, held that Montana’s first-page notice requirement found at § 27-5-114(4), MCA, conflicted with the FAA and was therefore preempted by the federal law. Specifically, the Supreme Court explained that “[cjourts may not... invalidate arbitration agreements under state laws applicable only to arbitration provisions.” Casarotto, 116 S.Ct. at 1656. Instead, the arbitration provisions must be treated like any other contract and may only be invalidated “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

¶11 Cut Bank asserts that this action is distinguishable from Casarotto because the transaction in this case does not involve interstate commerce. Specifically, Cut Bank maintains that this case is purely local, that it does not involve interstate commerce, and therefore that the FAA does not apply. Accordingly, the sole issue presented to this Court is whether the complaint alleges a contract involving interstate commerce, thereby invoking the FAA, or whether the contract is purely local and outside the purview of the FAA.

¶12 The District Court stated, in its order dismissing Cut Bank’s complaint, that “from a review of the undisputed facts,... this matter ... involve[s] interstate commerce.” As explained above, a motion to dismiss the complaint for failure to state a claim has the effect of admitting all well-pleaded allegations in the complaint. The complaint is construed in the light most favorable to the plaintiff and all allegations of fact contained in the complaint are taken as true. Willson, 194 Mont. at 126, 634 P.2d at 1182.

¶13 Cut Bank’s complaint alleges that it is a municipal corporation created and existing pursuant to the laws of the State of Montana, that Tom Patrick is a corporation organized and doing business in Montana, and that the contract entered into by the parties involved work to be performed in Montana. Since the District Court’s order does not specify the basis for its conclusion that the matter involved interstate commerce, we cannot determine the District Court’s underlying rationale. In any event, we review a district court’s conclusions of law to determine whether the court correctly interpreted the law. A review of the complaint, when viewed in the light most favorable to Cut Bank, reveals that the construction contract as alleged in the complaint was a local transaction that did not involve interstate commerce. The District Court incorrectly dismissed Cut Bank’s complaint pursuant to Casarotto.

¶ 14 Pursuant to the Commerce Clause of the United States Constitution, Congress has the power to regulate commerce among the states. U.S. Const, art. I, § 8, cl. 3. In United States v. Lopez (1995), 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626, the United States Supreme Court explained that there are three broad categories of activities that Congress can regulate pursuant to its commerce power: the use of channels of interstate commerce, the regulation and protection of the instrumentalities of interstate commerce, and those activities having a substantial relation to interstate commerce. Lopez, 514 U.S. at 558-59, 115 S.Ct. 1624. The construction contract at issue in this case does not entail use of the channels of interstate commerce nor regulation and protection of the instrumentalities of interstate commerce. Thus, unless the contract has a substantial relation to interstate commerce, it is not regulated by federal law.

¶15 The Court in Lopez further clarified that, with respect to the third category, the proper test for determining whether an activity has a substantial relation to interstate commerce requires an analysis of whether the regulated activity “substantially affects” interstate commerce. Lopez, 514 U.S. at 559, 115 S.Ct. 1624. The Court explained that there are no precise formulations; rather, the question of congressional power under the Commerce Clause is “necessarily one of degree.” Lopez, 514 U.S. at 566-67. In determining the degree of power Congress sought to exercise over a particular activity, the Supreme Court looks to the language of the congressional act. Most statutes passed by Congress which seek authority pursuant to its Commerce power include a jurisdictional element prescribing such power. The jurisdictional element found in § 2 of the FAA, which was absent from the relevant statute in Lopez, ensures a case by case inquiry of whether the activity is one “involving [interstate] commerce.” 9 U.S.C. § 2.

¶16 Specifically, the jurisdictional element of § 2 of the FAA allows Congress to regulate contracts “evidencing a transaction involving commerce.” 9 U.S.C. § 2. In Allied-Bruce Terminex Co. v. Dobson (1995), 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753, the Supreme Court concluded “that the word ‘involving’ is broad and is indeed the functional equivalent of the word ‘affecting.’ ” Allied-Bruce, 513 U.S. at 273-74, 115 S.Ct. 834. As a result, the Supreme Court determined that in enacting the FAA, Congress intended to exercise its powers under the Commerce Clause to the fullest Allied-Bruce, 513 U.S. at 277, 115 S.Ct. 834.

¶17 In addition, in Allied-Bruce, the Supreme Court clarified that in determining whether a particular transaction falls within the ambit of § 2 of the FAA, the transaction must “in fact” involve interstate commerce. Allied-Bruce, 513 U.S. at 281, 115 S.Ct. 834. In so holding, the Supreme Court specifically rejected a test that focused on the understanding of the parties that a transaction involves interstate commerce. Allied-Bruce, 513 U.S. at 281, 115 S.Ct. 834. The parties in Allied-Bruce did not contest that the transaction in that case in fact involved interstate commerce. Likewise, in Casarotto, the parties did not contest that the franchise agreement involved interstate commerce. See Casarotto v. Lombardi (1995), 274 Mont. 3, 8, 901 P.2d 596, 598 (indicating that we assumed in that decision that the transaction with which we were concerned involved interstate commerce). In the case at bar, however, the central issue is whether the construction contract involved interstate commerce.

¶18 Cut Bank maintains, as it did in its complaint, that it is amunicipal corporation created and existing pursuant to the laws of the State of Montana. Tom Patrick is a corporation chartered in the State of Montana with its principal place of business in Havre, Hill County, Montana. Delta Engineering, the other main party to the construction contract, is an engineering firm organized in Montana with its principal place of business in Great Falls, Cascade County, Montana. The construction contract called for work to be performed in Bum Coulee, Montana. All phases of the construction were to occur within the confines of Glacier County, Montana.

¶19 In support of its argument that the construction contract involved interstate commerce, Tom Patrick maintains that it was required per the contract to purchase liability insurance which it obtained from Safeco at its area office in Spokane, Washington. In addition, Tom Patrick contends that it purchased performance and payment bonds from National American Insurance Co., located in Boulder, Colorado. Finally, Tom Patrick states that it purchased materials out of state for delivery to Montana.

¶20 Tom Patrick’s contentions all raise matters outside of the pleadings. In dismissing the complaint, the court was responding to Tom Patrick’s motion to dismiss for failure to state a claim upon which relief could be granted under Rule 12(b), M.R.Civ.P. There is no indication in the record that the District Court gave notice that it would consider matters outside the pleadings, thereby converting the Rule 12 motion to a Rule 56 motion for summary judgment. Accordingly, we accept the court’s order at face value; that is, that it concluded, based upon the allegations in the complaint and on the information in the attached documents, that the transaction involved interstate commerce and thus the United States Supreme Court’s holding in Casarotto was controlling. In ruling on a Rule 12 motion to dismiss, the only relevant document is the complaint and any documents it incorporates by reference. Although the attached contract documents required Tom Patrick to purchase insurance and bonds, neither the complaint nor the attached contracts required Tom Patrick to purchase bonds or insurance out of state. As to the purchase of materials out of state, that too is a matter outside the pleadings. Furthermore, we must assume that the court’s decision was not premised on this assertion of fact since it was not undisputed. Cut Bank contends that the materials were purchased from Montana firms and transported by a Montana trucking firm. Even if the court had converted the motion to a Rule 56 motion and considered matters outside the pleadings, it could not issue a summary judgment based upon such disputed facts.

¶21 This case was in the pleading stage with only a complaint filed. The District Court order, dismissing Cut Bank’s complaint for failure to state a claim, presents no analysis or reasoning in support of its conclusion that this action involves interstate commerce. This Court, after reviewing the pleadings and briefs before it, concludes that the construction contract as alleged in the complaint was a local transaction, not involving interstate commerce, and therefore we hold that the District Court erred when, relying on Casarotto, it dismissed the complaint for failure to state a claim under Rule 12, M.R.Civ.P. We reverse and remand.

CHIEF JUSTICE TURNAGE, JUSTICES NELSON and TRIEWEILER concur.

JUSTICE GRAY,

specially concurring.

¶22 I concur in the entirety of the Court’s opinion on the narrow issue of whether the District Court erred in dismissing Cut Bank’s complaint, pursuant to Rule 12(b)(6), M.R.Civ.P, for failure to state a claim. I write separately to briefly address another matter raised by Tom Patrick.

¶23 In addition to its contentions on the Rule 12(b)(6) issue addressed by the Court, Tom Patrick argues that Cut Bank should be bound by the contract it prepared, which requires submission of disputes to arbitration. The Court does not address this argument, and properly so, since the issue before us involves only Rule 12(b)(6) and, in resolving that issue, we look only to the allegations of the complaint. The question of whether Cut Bank can be held to the provisions of the contract it purportedly prepared and presented to Tom Patrick for execution simply does not fall within the issue presently before us and, therefore, that question is premature at this time. In my view, Tom Patrick can still raise that question via an affirmative defense, a motion for summary judgment or in some other context on remand.

      . See, e.g., Heart of Atlanta Motel, Inc. v. United States (1964), 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (Congress possessed ample power under Commerce Clause to enact provisions of Civil Rights Act of 1964 precluding discrimination in public accommodations).

      . See, e.g., Southern Ry. Co. v. United States (1911), 222 U.S. 20, 32 S.Ct. 2, 56 L.Ed. 72 (Congress had the power, under the Commerce Clause of the United States Constitution, to require, as it did in Safety Appliance Act March 2,1893, c. 196, 27 Stat. 531, as amended by Act March 2, 1903, c. 976, 32 Stat. 943, 45 U.S.C.A. S 1 et seq., that all locomotives, cars, and similar vehicles used on any railway engaged in interstate commerce shall be equipped with certain designated safety appliances, regardless of whether such vehicles are used in moving intrastate or interstate traffic).

      . Nonetheless, the Supreme Court noted that in addition to the multistate nature of Terminex and Allied-Bruce, the termite-treating and house-repairing material used by Allied-Bruce was supplied from another state. Allied-Bruce, 513 U.S. at 282, 115 S.Ct. 834. At least one court has characterized the Supreme Court’s notation of Terminex’s multi-state nature and the fact that material used by Allied-Bruce came from outside the state as sufficient evidence that the contract involved interstate commerce. United States v. Harrington (D.C. Cir. 1997), 108 F.3d 1460, 1466. We focus, however, on the fact that the parties in Allied-Bruce did not contest that the contract involved interstate commerce.