Baltrusch v. Baltrusch
| Decision Date | 07 March 2006 |
| Docket Number | No. 04-827.,04-827. |
| Citation | 331 Mont. 281,130 P.3d 1267,2006 MT 51 |
| Court | Montana Supreme Court |
| Parties | William BALTRUSCH and Baltrusch Land & Cattle Company, Plaintiffs and Appellants, v. Otto BALTRUSCH, Jr., and Frances Baltrusch, Husband and Wife, Defendants and Respondents. |
K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana, for Appellants.
James A. Patten, Patten, Peterman, Bekkedahl & Green, Billings, Montana, for Respondents.
¶ 1 William Baltrusch and Baltrusch Land & Cattle Company (William, collectively) sued his brother and business partner Otto Baltrusch, Jr. (Otto) and Otto's wife Frances Baltrusch (Frances) to recover Partnership funds allegedly misappropriated by Otto and Frances for their personal use. The District Court granted Otto and Frances's motion for summary judgment, reasoning that William's claims are barred by the doctrines of collateral estoppel and res judicata. William now appeals the District Court's dismissal of his claims against Frances. We affirm.
¶ 2 The issue presented is whether the District Court erred when it concluded that the doctrines of res judicata and collateral estoppel preclude William from pursuing his claims against Frances.
¶ 3 This feud between two brothers and erstwhile business partners has been languishing in the courts of Montana for nearly fourteen years now. Sometime around 1940, William and Otto went into business together and formed the Baltrusch Land & Cattle Company, a general partnership (the Partnership). Over the years, the Partnership fared quite well financially and expanded into several other businesses. Beneath the surface of this profitable venture, however, a tempest brewed. The trouble surfaced in 1992 when William initially filed a complaint against Otto, seeking damages and an accounting for Otto's alleged misappropriation of Partnership assets. Frances was never joined as a party to this initial cause of action.
¶ 4 The first of two trials in the initial cause of action occurred in December 1999. In the pretrial order, William contended that Otto had misappropriated property of the Partnership to the benefit of members of his family (including, presumably, Frances) and asked the court to order Otto to repay "all sums he owes the partnership arising from and out of the violation of his obligations to the partnership. . . ." William further contended that "Otto has done, caused to be done, or allowed to be done the following": "caused personal obligations to be paid by the partnership" including for utilities, groceries, telephone, fuel, real estate taxes on the personal residence shared by Otto and Frances, and the expense of installing a gas line servicing their residence; "converted income of the partnership to his own use and benefit"; and used Partnership funds to pay "personal debt owed by Otto and Frances." The District Court found that Partnership funds had been used to pay for electric bills, real estate taxes and the cost of a gas line for the residence shared by Otto and Frances, their life insurance premiums, their personal vehicles, and some groceries purchased by Frances. The court ordered Otto to reimburse the Partnership for these personal expenditures. The court also determined, based on Frances's testimony that she had separated their personal credit card charges and paid them separately from the business charges, that Otto should not be chargeable for any credit card expenditures. The court did note, however, that it lacked "jurisdiction to make any determination as to amounts that are claimed to be owed . . . by . . . third parties to the brothers or the business entities." The court ordered the assets of the Partnership sold and the proceeds equally distributed, with an adjustment made — reflecting the fact that Otto had received more in the form of insurance payments and compensation — to equalize the distribution. On appeal, we affirmed the District Court. Baltrusch v. Baltrusch, 2003 MT 357, 319 Mont. 23, 83 P.3d 256. We noted that Otto had met his duty "to account for the personal credit card expenses," and that "[b]ecause William had ample opportunity to inspect the credit card invoices," the District Court properly refused to hold Otto liable for those purported personal expenses based on William's random sampling of invoices. Baltrusch, ¶ 53. In essence, we held that William's lack of diligence during discovery precluded him from bringing a claim that lacked adequate evidentiary support.
¶ 5 While the appeal of the first trial in the initial cause of action was pending, a second trial was held in July 2003 to resolve alleged misappropriations and violations of the court's judgment and order that had occurred subsequent to the first trial. Prior to this hearing, William filed a motion to consolidate the initial cause of action with the present suit, which he had filed against Otto and Frances in 2000. Despite William's argument at the hearing on this motion that his initial suit against Otto and the subsequent suit against Otto and Frances "involve exactly the same facts, and the only question on that would be what participation did Frances have," the court denied his motion to consolidate.1
¶ 6 The pretrial order for the second trial indicates that William contended that Otto violated his fiduciary duty and his duty of loyalty by misappropriating funds to his own use and to the benefit of family members, including Frances, and commingled Partnership funds with his own. William further contended that "Otto has tortiously done, caused to be done, or allowed to be done the following": paid personal expenses, such as utilities, groceries, fuel and telephone, with Partnership funds; converted Partnership income and funds to his own benefit; conspired to utilize Partnership funds to pay for personal expenses; and "withdrawn funds from the Partnership that could have been utilized to pay debts owed" by the Partnership. Although conceding that the court ordered that such claims against Frances be tried in the present case, William then contended that "[m]any, if not all of the foregoing actions were taken or accomplished by Otto in concert with, and by conspiring with his wife, Frances." William also asserted that Otto and Frances have continued to charge personal expenses to the Partnership and pay for them with Partnership funds and that this constitutes conversion of Partnership funds and property as well as constructive fraud, if not fraud. William claimed that Otto is liable to the Partnership for "any sums that have been expended by the Partnership for the benefit of Frances," and requested that the court impose a constructive trust on the assets of Otto and Frances to enable the Partnership to recoup its losses, including those funds misappropriated or converted by Otto in concert with Frances. Nevertheless, William sought to recover for all of the purported misappropriations and conversions — whether accomplished by Otto directly or by Frances — by way of an "equalizing distribution" of Partnership funds to William before Otto receives any further distributions from the liquidation of the Partnership.
¶ 7 Although the pendency of various motions prevented entry of final judgment for the July 2003 trial, the court issued its judgment and order on November 1, 2004. The court found that "there is no equitable reason to impose a constructive trust on any of [Otto's] assets," because Otto's assets would suffice to satisfy any judgment in favor of William. The court found that William failed to prove the extent of personal expenditures charged by Otto to business credit cards. Finally, the court treated Otto's draws on his Partnership account as "compensation" and ordered Otto to make a lump payment to the Partnership in order to equalize the discrepant "compensation" received by him and William.
¶ 8 All of the foregoing describes just the decadal litigation that preceded the case now before us. Meanwhile, immediately following the first trial, William apparently determined that he should seek relief against Frances, and he filed a complaint against Otto and Frances in the present case. In his amended complaint, filed in September 2002, William alleges that Frances "was a signatory to the Partnership checks utilized to pay various. . . personal expenses of Otto and/or Frances, which both knew were not properly chargeable to, nor payable by the Partnership." (Emphasis added.) William further alleges that "Otto, with the assistance and the complicity of Frances, have [sic] continued to pay personal expenses with Partnership funds," in breach of his duties to the Partnership. The amended complaint then alleges six distinct claims: breach of contract; fraud and deceit; conversion; conspiracy; complaint for accounting; and constructive trust. The breach of contract claim seeks judgment solely against Otto. The fraud and deceit claim refers to the acts listed above and avers that these acts of "Otto and Frances" constitute fraud, constructive fraud or deceit and seeks judgment against Otto and Frances jointly and severally. The conversion claim likewise references the above mentioned acts, alleges that "Otto and Frances converted personal property of the Partnership," and requests joint and several relief. The conspiracy claim refers to the same acts, asserts that Otto and Frances "conspired together with the intent to injure William and the Partnership," and in furtherance of the conspiracy, "paid a variety of their personal expenses with Partnership funds and utilized Partnership assets for their personal purposes," including the purchase of personal vehicles, and seeks judgment against Otto and Frances. The accounting claim seeks "an accounting from Otto and Frances for their use of Partnership funds and...
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