First Bank, (N.A.) Western Montana Missoula v. District Court for Fourth Judicial Dist.

• Decision Date: 11 May 1987
• Docket Number: No. 86-431,86-431
• Citation: 226 Mont. 515,737 P.2d 1132,44 St.Rep. 861
• Parties: FIRST BANK, (N.A.) WESTERN MONTANA, MISSOULA, a National Banking Assoc., and Dan Simpkins, Relators, v. DISTRICT COURT FOR the FOURTH JUDICIAL DISTRICT of the State of Montana, in and for the County of Missoula and the Hon. Douglas Harkin, Presiding Judge, Respondents.
• Court: Montana Supreme Court

Page 1132

737 P.2d 1132

226 Mont. 515

FIRST BANK, (N.A.) WESTERN MONTANA, MISSOULA, a National

Banking Assoc., and Dan Simpkins, Relators, v. DISTRICT COURT FOR the FOURTH JUDICIAL DISTRICT of the State

of Montana, in and for the County of Missoula and

the Hon. Douglas Harkin, Presiding

Judge, Respondents.

No. 86-431.

Supreme Court of Montana.

Submitted March 18, 1987.

Decided May 11, 1987.

Garlington, Lohn & Robinson, George Goodrich, Missoula, argued, for relators.

Small, Hatch, Doubek & Pyfer, John Doubek, Helena, argued, for respondents.

SHEEHY, Justice.

This is an original proceeding. Applicants seek a writ of supervisory control vacating the Fourth Judicial District's denial of First Bank's motion to dismiss an action filed by Bessie, Lee and Rick Stott and All West Equipment, plaintiffs in the court below. The Stotts filed their action alleging fraud, misrepresentation and breach of the duty of good faith and fair dealing against First Bank. First Bank filed a motion to dismiss on the grounds that the Stotts' action was barred by the doctrine of res judicata, the compulsory counterclaim rule, and the statute of limitations. The District Court denied First Bank's motion to dismiss. We grant applicant's request for supervisory control, vacate the order denying the motion to dismiss and hereby enter an order granting the motion to dismiss.

In June, 1982, First Bank Western Montana, Missoula, loaned to plaintiffs All West Equipment and Lee Stott (individually) $68,732.30, due in September, 1982. On the same day, First Bank loaned $21,566.63 to All West Equipment. The second loan was due December 15, 1982. The Stotts defaulted on both of these notes. Bessie and Lee Stott were guarantors of the debts of All West Equipment. In their complaint, the Stotts claim that Rick Stott was also an owner of All West Equipment. Possession of the collateral was turned over to First Bank, by a written instrument dated October 20, 1982 and signed by Rick Stott on behalf of All West Equipment. The collateral was eventually sold by First Bank.

On January 7, 1983, First Bank filed a complaint, in the Fourth Judicial District Court, against All West Equipment and Lee and Bessie Stott, to collect deficiencies owing after sale of the collateral under the promissory notes and guaranty. The Stotts and All West, through another attorney than their present counsel, filed an answer which included the two following affirmative defenses:

First Affirmative Defense

As and for a separate and affirmative defense to Count One of Plaintiff's complaint, said defendants allege that plaintiff sold or liquidated certain property of defendants as collateral, not in accordance with the requirements of Section 30-9-504(1) and 30-9-504(3) MCA and in this respect allege that plaintiff conducted the sale not in a commercially reasonably manner considering the time and place of sale, the type of equipment being sold, the lack of preparation of the equipment before the sale, the sale of the equipment at amounts substantially below market value. That the plaintiff's agent led defendants to believe that by not opposing the sale the defendants would not be liable for any deficiency and defendants relying on that promise did not at that time oppose the manner of the sale.

Second Affirmative Defense

As and for a second and affirmative defense to Count Two of Plaintiff's complaint defendant alleges that plaintiff sold the collateral not in a commercially reasonable manner considering lack of notice of sale, time and place of sale, sale to Plaintiff at less than market value, and the promise by Plaintiff's agent that defendant would be "protected" from any deficiency.

The matters between First Bank and All West and the Stotts were settled without trial and a stipulation and order of dismissal with prejudice was filed on January 4, 1985.

Ten months later, on October 1985, the Stotts and All West Equipment, with different counsel, filed a complaint in the Fourth Judicial District against First Bank alleging fraud, misrepresentation, and breach of the duty of good faith and fair dealing on the part of First Bank in making the loans to them and in obtaining their signature for the release of collateral.

The Stotts also alleged that the collateral was sold without commercially reasonable preparation and that the bank violated the requirements set out in Sec. 30-9-504, MCA (concerning the secured party's right to dispose of collateral after default.)

First Bank responded by filing a motion to dismiss on the grounds that the Stotts' action was barred by the doctrine of res judicata, the compulsory counterclaim rule and the statute of limitations. By order dated March 19, 1986, the District Court denied First Bank's Motion.

In doing so, the District Court hinted that it saw a possible additional unresolved issue, suggesting that the order of dismissal with prejudice might have been an intended consent judgment. The court explained:

Because of the limited scope of the court's discretion when ruling on a motion to dismiss, construing the complaint in the light most favorable to Plaintiffs would require that there was an express or implied understanding that an action such as the present action was exempt from the judgment in the prior lawsuit.

First Bank disputes this holding, raising four issues:

1. Whether res judicata bars the Stotts' claims.

2. Whether the claims the Stotts' have against First Bank were compulsory counterclaims in a prior action and are barred.

3. Whether the District Court erred in concluding that the prior action was resolved by a consent judgment.

4. Whether the statute of limitations bars the Stotts' claims.

Notably absent from discussion in the parties' briefs is the issue of this Court's jurisdiction for granting supervisory control on an interlocutory order. No Rule 54 certification has been obtained. There is simply a denial of a motion to dismiss. As such, it is not an appealable final order within the terms of Rule 1 of the Montana Rules of Appellate Procedure. This Court will nonetheless accept jurisdiction to protect First Bank from participating in needless litigation, a purpose for which a writ of supervisory control is intended: "... it is in the nature of a summary appeal--a shortcut--to control the course of litigation in the trial court ... and may be employed to prevent extended and needless litigation." State ex rel. Buttrey Foods, Inc. v. District Court (1966), 148 Mont. 350, 354, 420 P.2d 845, 847. State ex rel. Regis v. District Court (1936), 102 Mont. 74, 77, 55 P.2d 1295, 1297.

The bank's central argument in this application is that the Stotts are barred from bringing any action against it regarding the promissory notes and guaranty because the Stotts' claim is res judicata. The bank explains that all the issues raised by the Stotts in their action against the bank were raised in the Stotts' affirmative defenses in the original default action brought by the bank. The bank claims that the Stotts explicitly raised the following issues by their affirmative defenses:

1. That the sale and liquidation of collateral violated Sec. 30-9-504, MCA, concerning the secured party's right to dispose of collateral after default.

2. That the sale and liquidation of collateral was not conducted in a commercially reasonable manner.

3. That the bank and its agent, Dan Simpkins, misrepresented facts when the Stotts gave their consent for the sale of the collateral.

4. That the Stotts relied on the alleged misrepresentations in consenting to the sale of the collateral.

5. That the bank and its agents promised the Stotts that they would be protected from any deficiency.

6. That the collateral was sold for less than market value.

The bank maintains that these are the same allegations which the Stotts' are pleading in their present action, with the exception that in the second action, the Stotts' allege that the bank persuaded them to place their business with it.

The doctrine of res judicata is firmly established to stand for the proposition that a party should not be able to relitigate a matter that that party has already had the opportunity to litigate, and the public policy that there must be some end to litigation. Wellman v. Wellman (1982), 198 Mont. 42, 643 P.2d 573.

Once there has been full opportunity to present an issue for judicial decision in a Wellman, 198 Mont. at 45-46, 643 P.2d at 575. See Brault v. Smith (Mont.1984), 679 P.2d 236, 41 St.Rep. 527.

given proceeding ... the determination of the [226 Mont. 520] court in that proceeding must be accorded finality as to all issues raised or which fairly could have been raised, else judgments might be attacked piecemeal and without end. (Citation omitted.)

The Stotts were given the opportunity to litigate the issues raised in their complaint, but agreed to stipulate for a dismissal with prejudice. The effect of a stipulation is the same as a judgment on the merits. Accordingly, a dismissal with prejudice is res judicata as to every issue raised in the pleadings. City of Havre v. District Court (1980), 187 Mont. 181, 609 P.2d 275; cert. denied Boucher v. City of Havre (1980), 449 U.S. 875, 101 S.Ct. 219, 66 L.Ed.2d 97; Schillinger v. Brewer (Mont.1985), 697 P.2d 919, 42 St.Rep. 408.

This Court has summarized the necessary criteria for applying the doctrine of res judicata as follows:

... four criteria exist in Montana law which must be met before a plea of res judicata can be sustained. These criteria are: (1) the parties or their privies must be the same; (2) the subject matter of the action must be the same; (3) the issues must be the same, and must relate to the same subject matter; and (4) the capacities of the persons must be the same in reference to the subject matter and to the issues between them.

Smith v. County of Musselshell (1970), 155 Mont. 376, 378, 472 P.2d 878, 880. See also S.W. Company v. John Wight, Inc. (1978), 179 Mont. 392, 587 P.2d...