OLYMPIC COAST INV. INC. v. Wright

• Decision Date: 18 January 2005
• Docket Number: No. 03-217.,03-217.
• Citation: 325 Mont. 307,2005 MT 4,105 P.3d 743
• Parties: OLYMPIC COAST INVESTMENT INC., a Washington Corp., Plaintiff and Respondent, v. Larry D. WRIGHT, a/k/a L.D. Wright, a/k/a Lawrence D. Wright and Ann Marie Wright, a/k/a Ann M. Wright; Valley County Abstract Company, Inc., a Montana Corporation; St. Marie Condominium Association, et al., Defendants and Appellants.
• Court: Montana Supreme Court

105 P.3d 743

2005 MT 4

325 Mont. 307

OLYMPIC COAST INVESTMENT INC., a Washington Corp., Plaintiff and Respondent, v. Larry D. WRIGHT, a/k/a L.D. Wright, a/k/a Lawrence D. Wright and Ann Marie Wright, a/k/a Ann M. Wright; Valley County Abstract Company, Inc., a Montana Corporation; St. Marie Condominium Association, et al., Defendants and Appellants.

No. 03-217.

Supreme Court of Montana.

Submitted on Briefs November 13, 2003.

Decided January 18, 2005.

For Appellants: Gary S. Deschenes, Deschenes Law Office, Great Falls, Montana (Attorney for Appellants Larry and Ann Marie Wright).

For Respondent: Quentin M. Rhoades, Sullivan, Tabaracci, & Rhoades, P.C., Missoula, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Appellants Larry D. Wright, et al., (Wrights), appeal the grant of summary judgment entered by the Seventeenth Judicial District, Valley County for the Respondents, Olympic Coast Investment, Inc., (Olympic). We affirm.

¶ 2 We restate the sole issue on appeal as follows:

¶ 3 Whether the District Court erred in granting Olympic's Motion for Summary Judgment after determining Wrights' claims were barred by res judicata.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 4 This matter was submitted to the District Court and to this Court with an agreed Statement of Facts which we reiterate and elaborate on below.

¶ 5 Wrights are residents of the State of Montana, presently residing in Cascade County, Montana. Olympic is an investment company incorporated and registered in the State of Washington. In December of 1996, Wrights approached Olympic about securing loans for commercial construction projects, including building or improving condominiums and hotels, throughout the State of Montana.

¶ 6 In December of 1996, Wrights executed and delivered a promissory note to Olympic in the principle sum of $910,000 (Note 1), with interest payable at the rate of 12 percent per annum. Under Note 1, the net disbursement of proceeds in the sum of $346,390 was wired directly to Wrights' bank account in Great Falls. Additionally, a Montana Trust Indenture was executed on December 11, 1996. Wrights have not made all the payments due under Note 1. ¶ 7 In October of 1997, Wrights executed and delivered a second promissory note to Olympic in the principle sum of $695,000. The second promissory note was subsequently refinanced in December of 1997, with Wrights executing and delivering to Olympic a promissory note in the sum of $1,220,000 (Note 2), also payable at the rate of 12 percent per annum. A Montana Trust Indenture was again executed, this time in connection with Note 2 on January 7, 1998. Wrights obtained the net proceeds under Note 2 by Federal Express. Wrights have not made all the payments due under Note 2.

¶ 8 Finally, in June of 1998, Wrights executed and delivered to Olympic a third promissory note in the sum of $3,550,000 (Note 3) with interest payable at the rate of 13 percent per annum. Wrights obtained the net proceeds from Note 3 at the offices of an escrow and closing agent in the State of Washington. Wrights have not made all the payments due under Note 3.

¶ 9 Each of the three promissory notes (the Notes) executed and delivered by Wrights to Olympic contain a promise to repay the principle sum as well as a condition securing the loan by a deed of trust. Although the Notes provided the deeds of trust were made within the State of Montana pursuant to the Small Tract Financing Act of Montana (see §§ 71-1-301-321, MCA), they also included a choice of law provision dictating their construal under Washington State law.

¶ 10 When Wrights were unable to meet their obligations under the Notes, Olympic filed a complaint in Cascade County on December 16, 1999, seeking collection of debt on the Notes and foreclosure of real property. Wrights then sought the protections afforded by the Bankruptcy Code by filing a voluntary Chapter 11 Bankruptcy Petition in the United States Bankruptcy Court, District of Montana on December 17, 1999.

¶ 11 Olympic initiated adversary proceedings pursuant to 28 U.S.C. § 2201 in the Bankruptcy Court against Wrights on April 11, 2000. Olympic sought declaratory relief relative to the obligations owed by Wrights to Olympic arising from the Notes. Wrights filed an answer to Olympic's complaint in Bankruptcy Court denying each of the allegations set forth therein. Wrights also filed a counterclaim for damages claiming the interest rate charged by Olympic under each of the Notes was usurious and prompted by fraud under the laws of the State of Montana. Thereafter, Olympic filed a Motion for Partial Summary Judgment on August 8, 2000, requesting that the Bankruptcy Court adjudicate Wrights' counterclaim under the laws of the State of Washington, rather than the laws of the State of Montana. The Bankruptcy Court denied Olympic's Motion on September 7, 2000.

¶ 12 On October 11 and 12, 2000, the Bankruptcy Court held trial on the adversary complaint. Both parties appeared with counsel, witnesses were presented and evidence on the issue of usury was offered by both parties. Following the trial, the Bankruptcy Court issued its Findings of Fact, Conclusions of Law and Order on December 14, 2000, entering judgment in favor of Olympic and against Wrights. Applying Montana law, the court determined the Notes were valid, enforceable and unaffected by usury or fraud.

¶ 13 Wrights timely appealed the Bankruptcy Court Judgment to the United States Bankruptcy Appellate Panel (BAP) and Olympic cross-appealed the application of Montana law, rather than Washington law.

¶ 14 During the appeal to the BAP, Olympic moved the Bankruptcy Court to lift the automatic stay freezing Wrights' assets. The court lifted the stay and certain portions of Wrights' property were sold. After the sale, Wrights made a Motion to Dismiss their Chapter 11 case, stating that with the forced sale of their assets, they were no longer able to put together a feasible reorganization plan as necessitated under the Bankruptcy Act. The court granted Wrights' Motion to Dismiss the bankruptcy claim several days before the scheduled oral argument on the BAP appeal.

¶ 15 The Wrights eventually moved to dismiss their BAP appeal and Olympic's cross-appeal, contending their dismissal of the Chapter 11 case automatically mooted the controversy presented by the adversary proceeding. Although the BAP noted and honored Wrights' request to abandon their proceedings, it proceeded with oral argument, reasoning since Olympic did not abandon its cross-appeal, the controversy was still justiciable.

¶ 16 The BAP issued an unpublished Memorandum Opinion on October 9, 2001. In its Opinion, the BAP held the dismissal of the underlying Chapter 11 case did not moot the adversary proceedings as the appeal was not from an "objection to claim" proceeding, but rather from a "not so closely related" declaratory judgment proceeding "litigated through complete trial to judgment by parties who had the incentive to raise every possible matter."

¶ 17 After dismissal of the bankruptcy claim, Olympic moved for summary judgment in the District Court proceeding, asserting the binding effect of the Bankruptcy Court holding and res judicata. Wrights failed to appear and summary judgment was entered. Subsequently, on Motion made under Rule 60(b), the Order of Summary Judgment was set aside. Thereafter, Wrights moved to amend their answer to allege usury and the "one-action rule" as affirmative defenses.

¶ 18 Ultimately, the District Court entered an Order granting Olympic's Motion for Summary Judgment. The court concluded that the judgment entered in the Bankruptcy Court met all four of the criteria for the application of res judicata, and that Wrights' claims were barred under the doctrine. It then determined that Olympic was entitled to judgment on the Notes and for foreclosure. It rejected the motion to amend the answer as moot. This appeal follows. Notably, Wrights do not appeal from the District Court's dismissal of their "one-action rule" affirmative defense.

STANDARD OF REVIEW

¶ 19 We review a district court's grant of summary judgment de novo, applying the same evaluation under Rule 56, M.R.Civ.P., as the district court. Glacier Tennis Club at the Summit, LLC v. Treweek Constr. Co., Inc., 2004 MT 70, ¶ 21, 320 Mont. 351, ¶ 21, 87 P.3d 431, ¶ 21 (citations omitted). Rule 56(c), M.R.Civ.P., provides summary judgment should result where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Motarie v. Northern Montana Joint Refuse Disposal District (1995), 274 Mont. 239, 242, 907 P.2d 154, 156 (citations omitted). We look to the pleadings, depositions, answers to interrogatories, admissions on file and affidavits to determine the existence or nonexistence of genuine issues of material fact. Krebs v. Ryan Oldsmobile (1992), 255 Mont. 291, 294, 843 P.2d 312, 314 (citations omitted).

¶ 20 A party seeking summary judgment has the burden of establishing a complete absence of any genuine factual issues. Motarie, 274 Mont. at 242, 907 P.2d at 156 (citations omitted). In light of the pleadings and the evidence before the court, there must be no material issue of fact remaining which would entitle a nonmoving party to recover. Motarie, 274 Mont. at 242, 907 P.2d at 156 (citations omitted). Once the moving party has met its burden, the opposing party must present material and substantial evidence, rather than mere conclusory or speculative statements, to raise a genuine issue of material fact. Motarie, 274 Mont. at 242, 907 P.2d at 156 (citations omitted). Once it is established no genuine issues of material fact exist, the district court must then determine whether the moving party is entitled to judgment as a matter of law, and this Court reviews that judgment to determine whether the district court erred. Glacier Tennis Club, ¶ 21.

DISCUSSION

¶ 21 Whether the District Court erred in...