                            No.    92-458
          IN THE SUPREME COURT OF THE STATE OF MONTANA
                                  1993



ACTION ENTERPRISES, INC.,
by and through shareholders
DUANE B. LINDEMAN and MILDRED E.
LINDEMAN, shareholders,
          Plaintiffs and Appellants,


CHARLES E. MCCALZA, shareholder,
          Defendant and Respondent.



APPEAL FROM:   District Court of the Sixth Judicial District,
               In and for the County of Park,
               The Honorable Byron L. Robb, Judge presiding.


COUNSEL OF RECORD:
          For Appellant:
               Karl Knuchel, Attorney at Law,
               Livingston, Montana
          For Respondent:
               Charles R. Cashmore, Crowley, Haughey, Hanson,
               Toole & Dietrich, Billings, Montana
Justice Terry N. Trieweiler delivered the opinion of the Court.
        This is an appeal from a decision of the District Court of the
Sixth Judicial District in Park County, Montana, which held that
plaintiffs' cause of action is barred by the three-year statute of
limitations set forth in 5 27-2-202 (3) , MCA, and granted summary
judgment in favor of defendant.       We affirm.
        The sole issue on appeal is whether the District Court erred
when it held that plaintiffs' cause of action was barred by the
statute of limitations?
        Plaintiffs Duane Lindeman and Mildred Lindeman (the Lindemans)
owned 50 percent of Action Enterprises, Inc. (the Corporation).
Charles McCalla (McCalla) and his wife, Ann McCalla, owned the
remaining 50 percent of the Corporation.
        During the course of the Corporation's operation, it borrowed
money from the First National Park Bank to build a single-family
home.     In 1981, McCalla contributed a loan of $44,263.44 to the
Corporation to pay off the bank mortgage on the single-family home.
On September 10, 1986, the Corporation sold the same home for
$45,000 and the money was deposited into the Corporation account.
     On September 15, 1986, McCalla issued a check to himself drawn
on the Corporation account in the amount of $44,263.44.          McCalla
asserted that this withdrawal was to repay himself for the money
that he loaned to the Corporation to pay off the bank mortgage. On
September     21,   1990,   the   Corporation,   by   and   through   its
shareholders, the Lindemans, filed a lawsuit against McCalla,
demanding the return of funds which the Lindemans alleged McCalla
withdrew without corporate authority.
     McCalla filed a motion for summary judgment, asserting that
the Lindemans' action was barred by the statute of limitations.
The Lindemans also filec? a motion for summary judgment.                      On
July 13, 1992, the District Court granted summary judgment in favor
of McCalla.
     In its order granting summary judgment, the District Court
explained that because the check written by McCalla constituted 'a
                                                                 l
purported obligation or liability not founded upon an instrument in
writing,"     the    three-year    statute   of      limitations      found   in
5 27-2-202(3), MCA, was applicable.           The court determined that
although the Lindemans were aware of the $44,263.44 withdrawal for
approximately four years, they failed to commence their lawsuit
within the three-year time period prescribed by 5 27-2-202(3), MCA.
Accordingly, the court concluded that the Lindemans' action was
barred by the statute of limitations and granted summary judgment
in favor of McCalla.
     On appeal, the Lindemans assert that the District Court erred
when it applied the three-year statute of limitations found in
5 27-2-202(3), MCA, to their claim against McCalla.             The Lindemans
contend   that      the   check   for   $44,263.44    written    by    McCalla
constitutes a llwriting,sl therefore, the appropriate statute of
                        and
limitations is the eight-year period found in 5 27-2-202(1), MCA.
The Lindemans maintain that because they filed their cause of
action within eight years after the svwriting'v
                                              was made, their
lawsuit is not barred by the statute of limitations, and they
should be allowed to try their case on its merits.
     Alternatively, the Lindemans assert that if the check is not
a nwriting's which constitutes a contract for purposes of the
eight-year statute of limitations, then at a minimum, the five-year
statute of limitations set forth in 5 27-2-202(2), MCA, should
apply   -   For   purposes   of   asserting   the   applicability    of
5 27-2-202 (2), MCA, the Lindemans contend that the check created an
s*accountsv
         which is not founded upon an instrument in writing: and
that the account is recoverable as an unauthorized loan from the
Corporation to McCalla.
     McCalla also challenges the statute of limitations applied by
the District Court.    He agrees with the District Court that the
Lindemans' action was barred by the statute of limitations;
however, he asserts that the lower court's application of the
three-year statute of limitations was in error.      McCalla contends
that because this case involved simple conversion, the case should
be governed by the two-year statute of limitations found at
5 27-2-207(2), MCA.    We agree with McCalla.
     When deciding which statute of limitations applies, the court
will look to the substance of the complaint. Weible v. Ronan State Bank

(1989), 238 Mont. 235, 237, 776 P.2d 837, 838. "If the gravamen of
the action rests strictly on tort theories, the statute of
limitations pertaining to torts will apply." Weible, 776 P.2d at 838.
     We conclude that when the District Court determined that the
Lindemans* action involved **a
                             purported obligation or liability not
founded upon an instrument in writing,**the lower court was in
error.   The Lindemans' complaint sets forth the Lindemans' theory
for their cause of action.        The basis of the Lindemans* suit did
not concern an "obligation or liability" incurred by McCalla, but
rather an alleged unauthorized withdrawal by McCalla of Corporation
funds.    The facts in this case are analogous to those reported in
NorthwestPlating Companyv. Hoflman (1988), 234 Mont, 360, 763 P.2d 44.

In that case, a corporation filed a lawsuit against a shareholder
for recovery of the latter's unauthorized expenditure of corporate
funds.    In Northwest Plating,   this Court held that unauthorized

corporate expenditures incurred by an employee for personal
expenses constituted the tort of conversion.        763 P.2d at 46.      In
the present case, the Corporation, by and through its shareholders,
the Lindemans, seeks to recover against McCalla for his alleged
unauthorized taking of corporate funds for his own benefit.             Like
the suit in Northwest Plating, the Lindemans* cause of action involves

an allegation of conversion.
     Section   27-2-207(2),       MCA,   sets   forth   the   statute    of
limitations for conversion.        Section 27-2-207(2), MCA, requires
that an action for *'taking, detaining, or injuring any goods or
chattels, including actions for the specific recovery of personal
property," must be commenced within two years.
     The injury in question in this case occurred on September 15,
1986, the date McCalla withdrew funds from the Corporation account.
The complaint was filed on September 21, 1990--over four years
later.    The Lindemans' 1990 claim to recover converted funds is
barred by the two-year statute of limitations.
     We   affirm   the   District   Court's   determination that   the
Lindemans' action was barred by        the statute of limitations;
however, we hold that the two-year statute of limitations for
conversion found in 5 27-2-207(2), MCA, is the appropriate statute
to apply to the facts of this case.




We concur:
                                          June 23, 1093

                             -   C

I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:


Karl Knuchel
Attorney at Law
P.O. Box 953
Livingston, MT 59047

Charles R. Cashmore
Crowley, Haughey, Hanson, Toole & Dietrich
P.O. Box 2529
Billings, MT 59103-2529


                                                    ED SMITH
                                                    CLERK OF THE SUPREME COURT
                                                    STATE OF MONTANA
