                              No.     95-432
           IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1996

KENNETH GORDON,
          Plaintiff and Appellant,
     v.
DONALD E. "GENE" HEDMAN and
HEDMAN, HILEMAN & LACOSTA,
          Defendants and Respondents




APPEAL FROM:      District Court of the Eleventh Judicial District,
                  In and for the County of Flathead,
                  The Honorable Ted 0. Lympus, Judge presiding.


COUNSEL OF RECORD:
          For Appellant:
                  Sara R. Sexe, Jason G. Dykstra, Marra, Wenz, Johnson
                  & Hopkins, Great Falls, Montana
          For Respondent:
                  Tracy Axelberg, Axelberg & Kalkstein, Missoula,
                  Montana


                                    Submitted on Briefs:   March 2, 1996
                                                Decided:   June 25, 1996
Filed:
Justice William E. Hunt, Sr. delivered the Opinion of the Court.

      Appellant,       Kenneth Gordon, filed a complaint in the Eleventh
Judicial        District    Court,   Flathead   County,   alleging    professional

malpractice by respondent and his law firm.                 Respondent    filed   a
motion to dismiss which the District Court granted.                      Appellant
appeals that decision.

      We reverse and remand.

      We restate the dispositive issues as follows:
         1.    Did the District Court err in ruling that absent a

relationship of subrogation, Home Insurance Company was unable to

substitute itself as the real party in interest pursuant to Rule

17(a),        M.R.Civ.P.?

         2. Did the District Court err in dismissing the action for
failure to state a claim upon which relief could be granted?

                                        FACTS

         The     facts and     allegations as     set     forth in    appellant's

complaint are as follows: All parties to this action are residents

of Flathead County, Montana.            Appellant and respondent began their

attorney-client relationship in the fall of 1990 when respondent

agreed to         represent    appellant    in an action arising from the

termination of appellant's disability benefits from the Anaconda

Aluminum/ARC0 Long-Term Disability Plan.

      Appellant's complaint alleges that respondent failed to timely

or properly pursue an action for breach of fiduciary duty by Thomas

L.   Jacobs, the administrator of the disability plan.               The complaint

asserts that, although respondent did file an action on behalf of

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appellant,     it was filed after the time allowed by the applicable
statute   of    limitations.            Moreover,    the complaint alleges that
respondent improperly filed in State District Court, rather than in
Federal District Court,           and that respondent failed to invoke the
appropriate sections of the Employees Retirement Income Security
Act (ERISA),        29 U.S.C. 5 1001, et seq.         Appellant asserts that this
claim, if       successful,       would have provided certain                 equitable,
remedial, and legal remedies.
       The complaint further alleges that, because of the attorney-
client relationship, respondent had a duty to represent appellant
with   the     reasonable       care,      skill and diligence possessed and
exercised      by    an   ordinary      attorney    under    similar     circumstances.
Appellant asserts that respondent breached his professional duty by
failing to adequately represent appellant's interests and that,
consequently,        appellant suffered damages.
       In May 1995, respondent filed a motion to dismiss appellant's
complaint.          In his brief in support of the motion, respondent
alleges     that      appellant    had made similar claims in an earlier
proceeding against another attorney who had represented appellant.
Respondent      attached a        copy     of the compliant.              According to
respondent,         that action was ultimately settled and dismissed with
prejudice.          Respondent contends that as part of the settlement,
appellant signed a release by which he unconditionally assigned any
and all claims he had against respondent and the respondent law
firm to        the     Home     Insurance     Company,       the      first   attorney's
malpractice          carrier.        The    issue of        whether     a professional

                                              3
negligence claim can be assigned is not raised by the parties or

addressed by this Court.
      Respondent alleges the proper plaintiff is Home Insurance

Company as the purported assignee of any rights held by appellant

and   that, accordingly, appellant does not have standing to pursue

this claim and the complaint should be dismissed.

      Moreover,        respondent    argues       that,   even if appellant could

proceed,       he had signed an unequivocal                release of any and all

damages.       Therefore,      appellant had nothing to assign to the Home

Insurance       Company        for   the     purpose      of    future     action    and,

accordingly,         the complaint- failed to state a claim upon which

relief could be granted.

      Following the submission of the motion to dismiss, appellant

filed two ratifications of the present action pursuant to Rule

17(a),     M.R.Civ.P.        The law firm that first represented appellant

and      the   Home     Insurance        Company     filed     documents     reflecting

ratification      of    the    action    brought     by   appellant.       Both   parties

agreed to be bound by the result.
         Following submission of the ratifications, the District Court

granted respondent's motion to dismiss.                      In the order, the court

found that the release appellant signed in conjunction with the

settlement      of     the    earlier-     lawsuit   did not create a right of

subrogation in Home Insurance Company.                       Absent   subrogation,     the

court concluded that "the                substitution/ratification         provision    of

Rule 17(a)"       did not apply.         Moreover, the District Court concluded




                                              4
that appellant could not state a claim upon which relief could have

been granted.
      Appellant    appeals.

                                   ISSUE ONE

      Did    the   District     court   err    in    ruling   that   absent   a

relationship of subrogation that Home Insurance Company was unable

to substitute itself as the real party in interest pursuant to Rule

17 (a) , M.R.Civ.P.?
         An action must be prosecuted by the real party in interest.

Rule 17(a), M.R.Civ.P.         Rule 17 also provides that no action will

be   dismissed     until   a   reasonable     time   has   been   allowed   for

ratification, substitution or joinder of the real party.               The rule

reads,    in part, as follows:

      Rule 17(a). Real party in interest. Every action shall
      be prosecuted in the name of the real party in interest.
      A personal representative, guardian, bailee, trustee of
      an express trust, a party with whom or in whose name a
      contract has been made-for the benefit of another, or a
      party authorized by statute may sue in that person's own
      name without joining the party for whose benefit the
      action is brought; . . . No action shall be dismissed on
      the ground that it is not prosecuted in the name of the
      real party in interest until a reasonable time has been
      allowed after objection for ratification of commencement
      of the action by, or joinder, or substitution of, the
      real party in interest; and such ratification, joinder,
      or substitution, shall have the same effect as if the
      action had been commenced in the name of the real party
      in interest.


The rule was intended to protect individuals from harassment and

multiple suits by persons not bound by the claim.                 See 6 Wright,

Miller and Kane, Federal Practice and Procedure 51543 (1990).



                                        5
        Here,      respondent      correctly     objected    to    appellant's       role   as

plaintiff.         Following respondent's objection, Bothe & Lauridsen and
the Home Insurance Company both executed ratifications of Gordon's

action.      These documents were submitted prior to the court's ruling

on respondent's motion to dismiss.                   In the order dismissing the

complaint,         the court         concluded that neither               substitution or

ratification of             this     action    was possible under Rule                17 (a) ,
M.R.Civ.P.,         because of the nature of the relationship between

appellant and the insurance company.

        Appellant         argues     that the District Court erred in this

conclusion.          In support of his argument, appellant refers to the

last sentence of Rule 17(a),                    M.R.Civ.P.:       'I No   action shall be
dismissed             .    until a reasonable         time   has been allowed after

objection for ratification . . . "                   Appellant contends that Rule

17 (a) , M.R.Civ.P., was satisfied because the purported real party
in     interest,          Home     Insurance     Company,     ratified        the    action.

Furthermore, appellant argues that a decision regarding the method

of compliance with Rule 17(a), M.R.Civ.P., rests solely with the

real    party.      In support of this argument, appellant cites State ex.

rel. Nawd's T.V. v. District Court (1975), 168 Mont. 456, 543 P.Zd

1336.

        In    Nawd's, the plaintiff sought a writ of supervisory control

after        the    district        court      had   issued       an      order     requiring

"substitution         and        joinder"   of the plaintiff's             insurer    in the

action.         We held that Rule 17(a), M.R.Civ.P., "plainly provides

that a reasonable time will be given to allow the real party in

                                                6
interest to bind himself to the suit by ratification, joinder, or

substitution."    Nawd's, 543 P.2d at 1339 (emphasis omitted).

         This Court reviewed the question of whether a district court

had the discretion to decide which method a real party had to use

in order to bind itself to litigation under Rule 17(a), M.R.Civ.P.

In   that    decision,     the parties       included fully and partially

subrogated insurance carriers, and this Court held that partially

subrogated insurance carriers had the option of choosing the method

of ratification.         Nawd's,   543 P.2d at 1339.

         In this case,      the District Court concluded that despite
appellant's     efforts to create a right of subrogation through

assignment,     appellant and the Home Insurance Company were not in

the position of subrogor to subrogee, and, therefore, the action

was not amenable to substitution or ratification pursuant to Rule

17(a),     M.R.Civ.P.,     citing to State ex. Rel. Slovak v. District

Court (1975), 166 Mont. 485, 534 P.2d 850. Consequently, the court

granted respondent's motion, and dismissed appellant's complaint.

      According to the release document, appellant assigned all of

his interest in the present action to Home Insurance Company,

Bothe,     and Bothe and Lauridsen as part of the settlement in the

earlier lawsuit.         Since appellant had assigned his entire claim to

the Home Insurance Company,           this Court agrees with the District

Court that appellant had no claim to file.             Absent a claim to file,

Home Insurance does not have a claim to ratify.
         However, just because Home Insurance Company may not be able

to ratify the current action does not mean it cannot substitute


                                         7
itself as the real party           in interest pursuant to Rule 17(a),
M.R.Civ.P.       The rule provides that no action shall be dismissed on
the ground that it is not prosecuted in the name of the real party

in    interest    until a     reasonable time has been allowed after
objection for ratification of commencement of the action by, or

joinder,      or substitution of,       the real party in interest.            Rule

17 (a) ,   M.R.Civ.P.,    does not distinguish between the party who has

obtained an interest in an action through subrogation and the party

who has obtained an interest through assignment by contract.

        The plain language of Rule        17(a),   M.R.Civ.P., gives the real
party in interest the option of binding itself to litigation by

"ratification, joinder, or substitution." State ex. rel. Bohrer v.

District Court (1976), 171 Mont. 116, 118, 556 P.2d 899, 900.

Although the real party in interest did not have the option of

ratification as the assignee of plaintiff's claim, the role of the
district court is to make sure that one of these methods has been

adhered to after an objection has been made under Rule 17.                  Bohrer,

556 P.2d at 900.         Once the objection to appellant as plaintiff was

made,      the real party had the option of binding itself to the suit

through      substitution.    Bohrer,    556 P.2d at 900.

        Following Home Insurance Company's attempt at ratification,

the     court   simply   granted   respondent's    motion   to   dismiss.      Home

Insurance Company was not given an opportunity to substitute itself

as the real party in interest.                Accordingly, we reverse the

District Court in order to allow the real party in interest a



                                          8
reasonable time in which to substitute itself as the real party in

the present action.

                                   ISSUE TWO

        Did the District Court err in dismissing this action for

failure to state a claim upon which relief could be granted?

        In the present action, the court looked to documents outside

of the original pleadings.         By doing so, the court constructively

converted respondent's motion to dismiss into a motion for summary

judgment without notice.        See Rule 12(b) (6), M.R.Civ.P. This Court
has consistently held that it is incumbent upon a district court to

give parties formal notice of a conversion to summary judgment.

Gebhardt v. D.A. Davidson & Co.          (198X),    203 Mont. 384, 661 P.2d

855.     After a party has been notified of the court's intentions,

the parties then have a reasonable opportunity to present all

material made pertinent to such a motion.             State ex rel. Dept. of

H.   & E. S. v. City of Livingston (19761, 169 Mont. 431, 435, 548

P.2d 155, 157.

        However,   since we are reversing in order to allow the real

party    in   interest   the   opportunity   for   substitution,   the   court's

error in failing to notify the parties of its intent to convert the

Rule 12(b) (61,     M.R.C~V.P. motion to one for summary judgment is

harmless error.




We Concur:


          Chief Justice
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