Loney v. Milodragovich, Dale & Dye, P.C.

• Decision Date: 31 October 1995
• Docket Number: No. 95-195,95-195
• Citation: 273 Mont. 506,905 P.2d 158
• Parties: Cleve LONEY, Plaintiff and Appellant, v. MILODRAGOVICH, DALE & DYE, P.C., Defendant and Respondent.
• Court: Montana Supreme Court

Page 158

905 P.2d 158

273 Mont. 506

Cleve LONEY, Plaintiff and Appellant, v. MILODRAGOVICH, DALE & DYE, P.C., Defendant and Respondent.

No. 95-195.

Supreme Court of Montana.

Submitted on Briefs Sept. 13, 1995.

Decided Oct. 31, 1995.

Antonia P. Marra; Bell & Marra, Great Falls, for Appellant.

Jon R. Binney; Milodragovich, Dale, Steinbrenner & Binney, Missoula, for Respondent.

GRAY, Justice.

Cleve Loney (Loney) appeals from an order of the Fourth Judicial District Court, Missoula County, dismissing his complaint for failure to state a claim upon which relief could be granted. We affirm.

The issue on appeal is whether the District Court erred in dismissing Loney's complaint pursuant to Rule 12(b)(6), M.R.Civ.P., on the basis that his claim is barred by the doctrine of res judicata.

The law firm of Milodragovich, Dale and Dye, P.C. (the Firm) represented Loney in bankruptcy proceedings. In April of 1991, the Firm filed an action to recover unpaid attorney's fees from Loney. Loney failed to answer the complaint and a default judgment in the amount of $7,626.42 was entered against him in September of 1991.

In October of 1994, Loney filed a complaint against the Firm requesting that the District Court declare the default judgment void and unenforceable because the debt had been discharged in bankruptcy. The Firm moved to dismiss the complaint pursuant to Rule 12(b)(6), M.R.Civ.P. After considering the parties' pleadings and briefs, the District Court concluded that Loney's failure to affirmatively plead discharge in bankruptcy pursuant to Rule 8(c), M.R.Civ.P., during the Firm's action against him constituted a waiver of that defense. The court further concluded that Loney's claim against the Firm was barred by the doctrine of res judicata and, on that basis, dismissed Loney's complaint for failure to state a claim upon which relief could be granted. Loney appeals.

Did the District Court err in dismissing Loney's complaint pursuant to Rule 12(b)(6), M.R.Civ.P., on the basis that his claim is barred by the doctrine of res judicata?

In evaluating a Rule 12(b)(6) motion to dismiss, courts are required to construe a complaint in the light most favorable to the plaintiff. A complaint should not be dismissed unless it appears that the plaintiff is not entitled to relief under any set of facts which could proved in support of the claim. Boreen v. Christensen (1994), 267 Mont. 405, 408, 884 P.2d 761, 762 (citation omitted). The District Court's determination that Loney's complaint failed to state a claim upon which relief could be granted, on the basis that it was barred by the doctrine of res judicata, is a conclusion of law. See Boreen, 884 P.2d at 762. We review a district court's conclusions of law to determine whether the interpretation of the law is correct. Boreen, 884 P.2d at 762 (citation omitted).

The doctrine of res judicata prevents a party from relitigating a matter that the party has already had an opportunity to litigate. Greenwood v. Steve Nelson Trucking, Inc. (1995), 270 Mont. 216, 219, 890 P.2d 765, 767 (citation omitted). It is based on the public policy that there must be some end to litigation. Wellman v. Wellman (1983), 205 Mont. 504, 508, 668 P.2d 1060, 1062. A claim is res judicata when four criteria are met: the parties or their privies are the same; the subject matter of the claim is the same; the issues are the same and relate to the same subject matter; and the capacities of the persons are the same in reference to the subject matter and the issues. Greenwood, 890 P.2d at 767 (citation omitted).

Loney does not dispute that three of the four res judicata criteria are satisfied in this case. The parties are the same in both actions; the Firm sued Loney in the earlier proceeding and Loney sued the Firm in the present action. The subject matter is also the same; both actions are based on the unpaid attorney's fees the Firm is attempting to collect from Loney. The capacity of the parties involved has not changed in relation to the subject matter and the issues in the litigation.

Loney argues, however, that the issue in the present action is not the same as the issue resolved by the 1991 default judgment against him and, therefore, that his action against the Firm is not barred by the doctrine of res judicata. He contends that the issues are different in that the 1991 default judgment determined the amount of unpaid attorney's fees, while the issue in his action against the Firm is the voidness of that judgment based on the prior bankruptcy court order discharging his debts.

While it is true that the specific issue of whether the unpaid attorney's fees were discharged in bankruptcy was not litigated in the Firm's action against Loney, the doctrine of res judicata bars not only issues which were previously litigated, but also issues which could have been litigated in the prior proceeding. See State ex rel. Harlem Irrigation Dist. v. Montana Seventeenth Judicial Dist. Court (1995), 271 Mont. 129, 135, 894 P.2d 943, 946 (citation omitted). Whether the unpaid attorney's fees were discharged in bankruptcy is inseparable from the issue presented in the prior proceeding, namely, whether Loney owed the Firm attorney's fees. The fact that Loney did not answer the Firm's complaint and, as a result, that a default judgment was entered against him does not negate the fact that he had an opportunity to litigate the issue. See Greenwood, 890 P.2d at 767.

Moreover, Rule 8(c), M.R.Civ.P., required Loney to plead discharge in bankruptcy as an affirmative defense to the Firm's complaint in the prior proceeding. We consistently have stated that failure to affirmatively plead a defense set forth in Rule 8(c) generally results in a waiver of that defense. See, e.g., Brown v. Ehlert (1992), 255 Mont. 140, 146, 841 P.2d 510, 514; Nimmick v. Hart (1991), 248 Mont. 1, 8, 808 P.2d 481, 486; Pracht v. Rollins (1989), 239 Mont. 62, 68, 779 P.2d 57, 61; Taylor v. Dep't of Fish, Wildlife & Parks, State of Montana (1983), 205 Mont. 85, 96, 666 P.2d 1228, 1233. Thus, in addition to having the opportunity to litigate this issue in the earlier proceeding, Loney was required to raise the matter of discharge in bankruptcy by Rule 8(c), M.R.Civ.P., or waive the defense.

We conclude that the issue presented in this action is the same as the issue resolved by the 1991 default judgment against Loney. Having determined that all four criteria...