MING DA SITU and PEI SHU ZHOU, Plaintiffs and Appellants, v. H. DOUGLAS SMOLE, as successor trustee of the LOIS M. MURPHY revocable trust, Defendant and Appellee.
No. DA 12-0329.
Supreme Court of Montana
Submitted on Briefs December 19, 2012. Decided February 12, 2013.
2013 MT 33 | 369 Mont. 1 | 303 P.3d 747
For Appellee: Scott M. Svee, Jackson, Murdo & Grant, P.C., Helena.
JUSTICE COTTER delivered the Opinion of the Court.
¶1 Ming Da Situ and Pei Shu Zhou (collectively “Situs“) appeal from an order and judgment of the First Judicial District Court, Lewis and Clark County, dismissing Situs’ breach of lease claim on statute of limitation grounds and granting judgment in favor of Lois M. Murphy1 (Murphy). We affirm.
ISSUES
¶2 Situs raise the following two issues on appeal:
¶3 1. Did the District Court err in granting Murphy‘s motion to dismiss in light of Situs’ presentation of facts to demonstrate that the statute of limitations had not expired, as well as facts to demonstrate that Murphy should have been estopped from claiming the statute of limitations as a defense?
¶4 2. Did the District Court improperly consider matters outside the pleadings in ruling on Murphy‘s motion to dismiss, and fail to provide proper notice and an opportunity for the Situs to present all pеrtinent
FACTUAL AND PROCEDURAL BACKGROUND
¶5 On or about October 14, 1989, the Situs acquired the assets of a restaurant located at 1306 Euclid Avenue, in Helena, Montana. The real property on which the restaurant building was located was and continues to be owned by Murphy. Situs and Murphy entered into a Memorandum of Agreement (the “Lease“) dated October 4, 1989, that granted Situs a ten-year lease of Murphy‘s real property on which the building was situated. The Lease required Situs to make monthly payments of $175 to Murphy. The Lease granted Situs the option to purchase Murphy‘s real property at the October 3, 1999 expiration of the Lease. The relevant provision of the Lease provided as follows:
IT IS FURTHER AGREED, that at the expiration of the full term of the within lease agreement, [Situs] shall have, and are hereby granted, an option to purchase from [Murphy] the land which is the subject matter of this lease, at а price mutually agreeable to the parties, it being understood and agreed that in the event that the parties hereto find themselves unable to reach agreement as to the fair value of said land (exclusive of improvements other than paving) at the date of exercise of said option, that parties shall hire mutually acceptable independent qualified appraisers at mutual expense, to evaluate said land, and it is understood and agreed that the parties hereto shall accept said appraisal as fully determinative of the purchase price to be paid.
¶6 Situs claimed that they provided written notice to Murphy of their interest in purchasing the property, although the date of such notice was not provided. Situs alleged that Murphy agreed to the appointment of an independent apрraiser on September 28, 2000, but Murphy never followed through in procuring an appraisal.
¶7 Situs continued to pay Murphy $175 per month until April 2008. In April 2008, Murphy sent Situs a written notice that the monthly rental rate would increase to $650 per month beginning May 1, 2008. Situs ignored this notice and continued to pay $175 per month through March 2009. Murphy served Situs with written notice of tenancy termination dated March 31, 2009. The notice demanded unpaid rent in the amount of $5,700, which represented the difference between the $650 monthly payment demanded by Murphy and the $175 monthly payments made by Situs over the course of the preceding year. Situs
¶8 On August 17, 2009, Situs filed a complaint in District Court requesting a declaratory judgment and order requiring Murphy to select an independent apрraiser and sell the property. In addition, Situs sought damages for loss of prospective sales from their restaurant business allegedly caused by Murphy‘s breach of the Lease, together with costs and attorney fees. Murphy filed an answer on September 4, 2009, which included a counterclaim for unlawful detainer. Murphy also filed a motion to dismiss the complaint pursuant to
¶9 On April 14, 2011, Murphy filed a motion for summary judgment on her counterclaim for unlawful detainer. The District Court held oral argument on the motion for summary judgment on August 9, 2011, and granted summary judgment in favor of Murphy in an order dated January 19, 2012. The District Cоurt determined that Murphy was entitled to recover the requested rent, trebled for any amounts due after May 1, 2009. The District Court also ordered Situs to vacate the property within 30 days. A subsequent April 26, 2012 order granted Situs an additional 60 days to vacate the property. On May 30, 2012, the District Court entered a final judgment requiring Situs to remove all of their property from Murphy‘s lot by June 25, 2012, and awarding Murphy $5,700 in unpaid rent and trebled rent totaling $66,300 for all rent due after May 1, 2009.
¶10 Situs ask the Court to vacate the grant of summary judgment on Murphy‘s unlawful detainer counterclaim should the Court determine that the District Court erred in granting Murphy‘s motion to dismiss, but they do not directly challenge any of the District Court‘s conclusions regarding Murphy‘s counterclaim on appeal. Rather, their appeal is limited to a review of the District Court‘s decision to dismiss the Situs’ complaint on statute of limitations grounds.
STANDARDS OF REVIEW
¶11 We review de novo a district court‘s ruling on a motion to dismiss for failure to state a claim pursuant to
DISCUSSION
¶12 Did the District Court err in granting Murphy‘s motion to dismiss in light of Situs’ presentation of sufficient facts to demonstrate that the statute of limitations had not expired, as well as facts to demonstrate that Murphy should have bеen estopped from claiming the statute of limitations as a defense?
¶13 A motion to dismiss under
¶14 The District Court determined that under Situs’ version of the facts as alleged in the complaint, their claims would be barred by the statute of limitations. The District Court relied on
¶16 Wright involved a claim for spеcific performance by a buyer under an oral contract for the sale of real estate. The agreement to sell the property was made in 1898, and the lawsuit was commenced over thirteen years later, in 1911. Wright, 47 Mont. at 108, 130 P. at 969. The buyer possessed and improved the property during this thirteen-year period. Wright, 47 Mont. at 106, 130 P. at 968. The Court cited to the general rule that specific performance will be ordered in cases where the buyer takеs possession and makes improvements with the seller‘s knowledge or consent. Wright, 47 Mont. at 108, 130 P. at 969. The Court determined that “where the vendee has made repeated efforts to pay, and stands ready, able and willing to pay, the vendor is placed in the same position as though payment had been made; that is to say, he holds the legal title in trust for the vendee.” Wright, 47 Mont. at 108, 130 P. at 969. Under this theory, the Court held that the statute of limitations does not commence to run until thе vendor has in some manner disavowed his trust. Wright, 47 Mont. at 109, 130 P. at 969.
¶17 We find Wright distinguishable from the instant case in several important ways. First, the Lease merely granted Situs an option to purchase the real property, with the terms of the deal to be settled at a later date only if the option was exercised. This stands in contrast to Wright, where all that remained under the agreement was the exchange of money for title. Under these facts, it cannot be said that Murрhy held title to the real property in trust for Situs. Second, Situs were not standing ready to tender a previously agreed-upon sum which Murphy expressly rejected. Situs failed to timely complete the steps needed to arrive at a fair market price or timely commence an action to protect their rights. Third, Situs possessed the real estate under a lease, unlike in Wright, where the possession of the land was pursuant to a сontract for purchase. The factual and legal distinctions between Wright and the instant case render it unpersuasive.
¶18 More recent decisions from this Court are instructive. In Nevala v. McKay, 178 Mont. 327, 583 P.2d 1065 (1978), the lessor agreed to lease a parcel of ranch land to lessee from 1964 to 1971, and the lease was to continue thereafter on a year-to-year basis unless terminated by one of the parties. The lease also granted the lessee a right of first refusal if the lessor decided to sеll the land. Nevala, 178 Mont. at 328-29, 583 P.2d at 1066. Instead of executing written one-year extensions, the parties wrote a three-year handwritten extension of the lease to December 1, 1974, by writing on the back of the original lease. Nevala, 178 Mont. at 329, 583 P.2d at 1066. After 1974, the Nevalas stayed on the farm until 1975 with no written lease extensions. Nevala, 178 Mont. at 329, 583 P.2d at 1066. In September 1975, the lessor offered to sell the land to the lessee, but before the lessee obtained financing and tendered the purchase money, the lessоr sold the land to a third party. Nevala, 178 Mont. at 329, 583 P.2d at 1067. The lessee sought specific performance of the right of first refusal contained in the lease. Nevala, 178 Mont. at 330, 583 P.2d at 1067.
¶19 We held that the lessee was a holdover tenant when he attempted to assert his right of first refusal, and as such, the lessee had no right to exercise the right of first refusal. Nevala, 178 Mont. at 332, 583 P.2d at 1068. This Court recognized that “a few jurisdictions have allowed holdover tenants to exercise an option to purchase or right of first refusal during the holdover period, but by far the greater weight of authority is that such option or right cannot be exercised by a lessee holding over after the expiration of the lease.” Nevala, 178 Mont. at 332, 583 P.2d at 1068. In reaching its conclusion, the Court rejected the lessee‘s contention that every provision of an expired lease is extended into a holdover period based on the language of
If a lessee of real property rеmains in possession thereof after the expiration of the hiring, and the lessor accepts a rent from him, the parties are presumed to have renewed the hiring on the same terms and for the same time, not exceeding one month, when the rent is payable monthly, nor in any case one year.
The Court also relied on Miller v. Meredith, 149 Mont. 125, 423 P.2d 595 (1967) (overruled on other grounds by Rasmussen v. Lee, 276 Mont. 84, 916 P.2d 98 (1996)), in which we explicitly held that an option to purchase does not carry over into a holdover tenancy becausе2 the lease and the option are distinct agreements.
¶21 As discussed in Nevala and Miller, the option to purchase in the Lease is a covenant which is separate from and independent of the Lease. The option to purchase was not a term of the tenancy. Therefore, the option to purchase does not extend throughout the pеndency of the holdover tenancy and cannot be exercised at any point later than granted by the Lease.
If a lessee of real property leased under an arrangement not governed by Title 70, chapter 24, remains in possession of the property after the expiration of the hiring and the lessor accepts rent from the lessee, the parties are presumed to have renewed the hiring on the same terms and for the same time, not exceeding 1 month when the rent is payable monthly, or in any case 1 year.
The option to purchase accrued at the termination of the Lease on October 3, 1999. While a reasonable period of time must be granted to Situs to exercise the option, the contractual basis for the option to purchase does not extend indefinitely through a holdover period. Pursuant to
¶22 According to the allegations in the complaint, Situs exercised their right to purchase the real estate from Murphy by written notice. The parties were initially unable to agree on a purchase price. Situs allege that Murphy agreed to appoint an appraiser to determine the fair market value of the property on September 28, 2000. However, Murphy did not follow through and no appraisal was performed. Pursuant to
Where a right exists but a demand is necessary to entitle a person to maintain an action, the time within which the aсtion must be commenced must be computed from the time when the demand is made, except where the right grows out of the receipt or detention of money or property by an agent, trustee, attorney, or other person acting in a fiduciary capacity, the time must be computed from the time when the person having the right to make the demand has actual knowledge of the facts upon which that right depends.
¶23 Relying on
¶24 Situs also argue that Murphy should be equitably estopped from claiming protection under the statute of limitations. Situs assert that Murphy initially acquiesced when Situs attempted to exercise the option, and that Murphy‘s ensuing silence in response to their efforts to get an appraisal induced the Situs intо believing that Murphy did not intend to repudiate the contract.
¶25 To succeed on an equitable estoppel claim, a party must prove the following six elements: (1) the existence of conduct, acts, language, or silence amounting to a representation or concealment of material facts; (2) the party estopped must have knowledge of these facts at the time of the representation or concealment, or the circumstances must be
¶26 We conclude that the doctrine of equitable estoppel has no application under the facts presented here. We have previously determined that Situs did not need to wait until Murphy expressly repudiated the option before commencing an action to enforce the option. This Court has held that estoppel arises “when a party through its acts, conduct, or acquiescence, has caused another party in good faith to change its position for the worse.” Selley v. Liberty Northwest Ins. Corp., 2000 MT 76, ¶ 9, 299 Mont. 127, 998 P.2d 156. We also observed in Selley that the doctrine is intended “to prevent one party from unconscionably taking advantage of a wrong while asserting a strict legal right, and will be invoked wherе justice, honesty, and fair dealing are promoted.” Selley, ¶ 11 (internal quotations marks omitted). It cannot reasonably be argued that by invoking the statute of limitations after eight years, Murphy acted unconscionably or unjustly, or that Situs were lulled for that long into changing their position for the worse. Situs had eight years to file an action on the contract. We will not fault Murphy for Situs’ failure to act within that time period.
¶27 We hold that Situs have failed to demonstrate a set of facts that would enable them to equitably estop Murphy from raising her statute of limitations defense.
¶28 Did the District Court improperly consider matters outside the pleadings in ruling on Murphy‘s motion to dismiss, and fail to provide proper notice and an opportunity for the Situs to present all pertinent materials pursuant to a
¶29 When presented with a Rule 12(b)(6) motion to dismiss, a district court has the discretion to consider matters presented to it that are outside of the pleadings, but if it chooses to do so, it must treat the motion as one for summary judgment under
¶30 Situs assert that the District Court improperly considered matters beyond the scope of the motion to dismiss because its order dismissing Situs’ claims referenced a fact outside the pleadings in a footnote. The footnote in question reads as follows:
The complaint indicates the rent change was March 2009, while an unsigned letter with a handwritten date of April 1, 2008 included within exhibit 1 to Plaintiff‘s response to the motion to dismiss states that the rent increase was to begin May 1, 2008.
The datе the rent increased had no bearing on the District Court‘s analysis of the statute of limitations. The footnote merely noted the inconsistencies within Situs’ own filings. The District Court‘s inclusion of this fact in a footnote does not convert the motion to dismiss into a motion for summary judgment, and therefore did not deprive Situs of an opportunity to present additional materials for the District Court‘s consideration. We hold that the District Court did not improperly consider matters outside the pleadings in reaching its decision to dismiss Situs’ complaint pursuant to Rule 12(b)(6).
CONCLUSION
¶31 For the foregoing reasons, we affirm the District Court‘s dismissal of Situs’ complaint.
CHIEF JUSTICE MCGRATH, JUSTICES BAKER, WHEAT and RICE concur.