No. 89-507 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1990 

ROBERT C. TURTAINEN and 

MAR1 G. TURTAINEN, 

Plaintiffs and Appellants, 

-vsH . RANDOLPH POULSEN, 

Defendant and Respondent. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Jeffrey Sherlock, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

Stephen R. McCue, Harrison Loendorf & Poston, 

'? 

. .J Helena, Montana 

(. .I1 

'- -I For Respondent: 

Dale E. Reagor, Luxan & Murfitt, Helena, Montana 

Submitted on Briefs: March 29, 1990 

Filed: 

Decided: May 22, 1990 D 
Justice John Conway Harrison delivered the Opinion of the Court. 

This case is an appeal from a grant of summary judgment by the I 

First Judicial District Court, Lewis and Clark County, ~onta'na, in 

a real estate contract dispute. We affirm. 

Appellants raise two issues for review: 

1. id the District Court err in finding appellants1 claims 

barred by the doctrine of res judicata and the compulsory 

counterclaim rule? 

2. Were appellants not required to assert their counterclaims 

for fraud and other related causes of action in respondent's 

earlier injunction action because the District Court proceeded with 

the injunction action on a summary basis? 

On September 28, 1984, appellants purchased a lot in Mountain 

Heritage Tracts, Lewis and Clark County, from respondent who owned 

and lived on an adjoining lot. Respondent conveyed the property 

to appellants by warranty deed which included a number of 

restrictive covenants. On June 21, 1985, respondent filed a 

lawsuit against appellants seeking through an injunction to enforce 

the restrictive covenants. Specifically, respondent sought an 

injunction forbidding appellants from living on the premises in a 

trailer for a period in excess of twelve months and from engaging 

in certain nuisance-type activities such as leaving garbage on the 

premises and racing up and down the property with a motorcycle. 

At trial, the only issue before the court related to the trailer 
which the court decided in respondentls favor by issuing the 

requested injunction. 

On September 16, 1986, appellants sued respondent over the 

September 28, 1984 contract for sale of the property. Appellants 

alleged that respondent had made various false representations to 

them that induced them to enter into the contract. The most 

harmful alleged misrepresentations were the following: (1) a 

representation that appellants could live in a trailer on the 

premises for an indefinite time; (2) that appellants were not 

informed of the presence of buried utility lines on their land; 

(3) appellants were told that an access road did not encroach on 

their land; (4) that the water system serving the land would be 

owned by a non-profit corporation; and (5) that the property was 

approved for FHA financing. Appellants1 complaint alleged that 

respondent's false representations constituted fraud, unfair 

business practices, constructive fraud, negligent misrepresentation, breach of warranty of habitability and fitness for a 

particular purpose and breach of the implied covenant of good faith 

and fair dealing. 

Respondent moved for summary judgment arguing essentially that 

the previous lawsuit barred appellants1 claims, either through the 

doctrine of res judicata or the compulsory counterclaim rule. The 

District Court agreed. It found that the trailer issue was res 

judicata because whether the appellants could live on the premises 

in a trailer was specifically litigated in the previous lawsuit. 
Further, the District Court ruled that appellants1 other claims 

were barred by the compulsory counterclaim rule because those 

claims were logically related to the contract for sale of the land 

which formed the basis of the previous lawsuit between the parties. 

Rule 13 (a), of Montana Rules of Civil Procedure governs 

compulsory counterclaims. In pertinent part Rule 13(a) provides: 

A pleading shall state as a counterclaim any 

claim which at the time of serving the 

pleading the pleader has against any opposing 

party, if it arises out of the transaction or 

occurrence that is the subject matter of the 

opposing party's claim . . . 

Rule 13(a)'s mandate regarding compulsory counterclaims avoids 

needless multiplicity of suits. The rule "insures that only one 

judicial proceeding is required to settle all matters determinable 

by the facts or law and to bring all logically related claims into 

a single litigati~n.~~ First Bank v. Fourth Judicial Dist. Court 

(1987), 226 Mont. 515, 521, 737 P.2d 1132, 1135-36, citing Julian 

v. Mattson (1985), 219 Mont. 145, 148, 710 P.2d 707, 709. 

Appellants contend that the instant action does not arise out 

of the same transaction or occurrence as the previous lawsuit 

because the previous lawsuit related to appellants1 conduct after 

the parties entered into the contract for sale of the property. 

The instant action, however, relates to respondent's conduct prior 

to the contract. Thus, appellants assert that the claims do not 

arise from the same aggregate of operative facts necessary to 

satisfy the logical relationship test. See Springs v. First Nat'l 
Bank of Cut Bank (D. Mont. 1986), 647 F.Supp. 1394. We disagree. 

Plainly, both lawsuits arose out of the same aggregate of 

operative facts, the creation and execution of the contract for 

sale of land from-respondent to appellants. The respondent filed 

the initial suit to enforce the contract. The timing of the 

disputed conduct in the first suit does not overshadow the fact 

that the sale of the property constitutes the underlying 

transaction which generated the dispute. At that time, appellants 

should have counterclaimed any claim they had concerning alleged 

misrepresentations respondent made that led to the creation and 

execution of the contract. 

Appellants mistakenly rely on Citizens State Bank v. Duus 

(1969) , 154 Mont. 18, 459 P. 2d 696, as support for their contention 

that these two lawsuits relate to different transactions, or in 

other words that the appellantst claims were permissive counterclaims in relation to the first lawsuit. However, Citizens State 

Bank readily distinguishes itself from the instant case. In ruling 

that the counterclaim at issue in Citizens State Bank was permissive we stated: 

This rendition illustrates that the claim 

and counterclaim involved different contracts, 

entered into at different dates between different parties, and further that the chattel 

mortgage securing the notes in the original 

action covered personal property located in 

Hamilton, Montana, whereas the real estate 

mortgage covered real property located in 

Darby, Montana. The original action was for 
non-payments of promissory notes and to foreclose a chattel mortgage while the crosscomplaint and counterclaim was an action in 

tort. The measure of computation of damages 

thus, would be materially different. Obviously neither the issues of fact or law are the 

same and further, the same evidence would not 

support or refute defendants' claim and counterclaim. Thus, the counterclaim cannot be 

said to arise out of the transaction or occurrence surrounding plaintiff's claim based on 

the two promissory notes and chattel mortgage. 

Citizens State Bank, 459 P.2d at 702. To the contrary, the claims 

in the instant case and the claims in the previous lawsuit relate 

to the creation and execution of a single contract relating to the 

same property and involving the same parties. 

Although appellants argue that the two lawsuits require 

different proof, identical evidence is not required for compulsory 

counterclaims. First State Bank, 737 P. 2d at 1136. All that is 

required is that the claims be logically related. Appellants' 

claims logically relate to respondent's claims because they arise 

out of a single transaction, the sale of land. 

Appellants further contend, citing Citizens State Bank as 

authority, that a counterclaim for legal relief can not be compulsory if the plajntiff's suit seeks equitable relief, as did 

respondent's initial lawsuit. Citizens State Bank does not support 

that contention. At most, Citizens State Bank stands for the 

proposition that defendants who interpose a permissive counterclaim for legal relief into an equitable suit are not entitled to 

a jury trial on the permissive counterclaim. Rule 13, M.R.Civ.P. 
makes no distinction between legal and equitable counterclaims or 

suits, but only between compulsory and permissive counterclaims. 

The general rule mandated by Rule 13 (a), M.R.Civ.P. is that if a 

defendant's counterclaim is compulsory it must be pled regardless 

of whether the plaintiff's suit is legal or equitable in nature. 

If not pled, the compulsory counterclaim will be barred. 

Next, appellants assert that their claim regarding FHA financing did not exist at the time they filed their answer in the 

initial suit, on July 24, 1985. They argue that they did not 

verify that FHA financing was unavailable until 1986. The District 

Court specifically noted that appellants' interrogatory answers 

revealed that they had been turned down for FHA financing in May 

and June of 1985. Thus, appellants had notice prior to filing 

their answer that problems with FHA financing existed. Interrogatory answers reveal that appellants were also turned down for 

FHA financing in 1986 and in 1987. However, appellants do not 

argue that the District Court erroneously determined that they had 

knowledge of problems with FHA financing prior to filing their 

answer. Thus we reject appellants1 contention. We hold that Rule 

13(a), M.R.Civ.P. bars appellants' nontrailer-related claims 

because the claims are compulsory and should have been pled in the 

initial suit. 

Appellants also assert that the District Court erred in 

finding that appellants1 claim regarding the trailer was res 

judicata. We disagree. 
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 

o~portunitv to litigate, and the public policy 

that there must be some end to litigation. 

(Citation omitted; emphasis in original.) 

First Bank, 737 P.2d at 1134. The following four criteria must be 

met before the res judicata doctrine will apply: 

(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. 

First Bank, 737 P.2d at 1135. 

Appellants contend that the issue relating to the trailer is 

different in the instant case than the issue litigated earlier. 

The first lawsuit decided the issue of whether respondent made any 

representations regarding covenant no. 9, the trailer covenant, 

that constituted a waiver or estoppel of his right to enforce the 

contract. However, in the instant case the different issue is 

whether respondent defrauded appellants by exercising his legal 

right to enforce covenant no. 9 after representing to them prior 

to the sale that he would not do so. We fail to see a meaningful 

distinction between the two llissues.w The second issue is merely 

another way of focussing on alleged statements respondent made 

prior to the sale regarding how long appellants could occupy a 

trailer on the property. The first lawsuit resolved that exact 

issue in respondent's favor. If appellants did not raise some 
particular claim for damages regarding the trailer dispute in the 

first lawsuit, they cannot do so now because they clearly had an 

opportunity to do so at that time. We hold that appellants' claim 

regarding the trailer is res judicata. 

Appellantst second issue apparently relates to an exception 

to Rule 13(a), M.R.Civ.P. which appellants argue applies when the 

District Court proceeds on a summary basis in the initial suit. 

We will not address this issue. Appellants did not raise this 

issue before the District Court and we will not consider the issue 

for the first time on appeal. Wyman v. DuBray Land Realty (1988), 

231 Mont. 294, 299, 752 P.2d 196, 200. 

We affirm the District Court. 

Justices 
Justice John C. Sheehy, concurring specially: 

When this State in 1961 adopted its Rules of Civil Procedure 

to comport with the Federal Rules of Civil Procedure, it adopted 

the advances that had been made in procedure in the federal system 

to that time. 

One of the casualties in the adoption of our Rules of Civil 

Procedure was the change of perception of the right to a 

counterclaim. Under former statutes, a counterclaim was defined 

as one which tended, in some way, to diminish or defeat the 

plaintiff's recovery. See section 9138, R.C.M. (1935). Because 

of that definition, this Court denied a counterclaim in CookReynolds Company v. Wilson (1923), 67 Mont. 147, 150, 214 P. 1104, 

where plaintiff brought action to enjoin the defendant from 

interfering with plaintiff's harvesting operations, the defendant 

answered, claiming a share of the crop according to the terms of 

a contract constituting a counterclaim for the value of his share. 

Because of the counterclaim definition, this Court held the 

counterclaim was not allowable for two reasons, one, the action 

being for an injunction and the counterclaim seeking an affirmative 

judgment, the counterclaim did not in any matter tend to diminish 

or defeat plaintiff's recovery; and two, the cause of action which 

defendant attempted to make the basis of the counterclaim was not 

in existence at the time of the commencement of the action. 

What Poulsen got in the first action brought in Lewis and 

Clark County was an injunction restraining the plaintiffs from 

certain activities on the described real property. The claims the 

plaintiffs now attempt to assert in their independent action would 

not tend to defeat or diminish, in some instances, the injunction 

obtained in the first action. Nevertheless, because compulsory 

counterclaims must now be pleaded under our present Rules of Civil 

Procedure, even though an injunctive order is here involved, the 

plaintiffs should have counterclaimed for all causes of action then 
in existence arising out of the same occurrence or transaction. 

On another matter, I trust that the reader will not take the 

dicta in the majority opinion regarding Citizens State Bank v. Duus 

(1969), 154 Mont. 18, 459 P.2d 696, as anything more than dicta. 

In a proper case, I am not sure that the holding in Citizens State 

Bank respected the right to a jury trial is now in accord with the 

state of the law. The distinction between legal and equitable 

causes of action has been abolished in this State and any cause of 

action, legal or equitable, is now denominated a llclaimll against 

which a compulsory or permissive counterclaim may be made. The 

right of trial by jury is under our State Constitution inviolate, 

and if a counterclaim comprised a cause of action which would 

formerly entitle the counterclaimant to a jury trial, the 

counterclaimant cannot be deprived of that right because the 

counterclaim is against a cause which formerly was recognized in 

equity. The federal cases conclude that there is no waiver of a 

jury trial even when a permissive counterclaim is filed. ThermoStitch, Inc. v. Chim-Cord Processing Corp. (5th Cir. 1961), 294 

F.2d 486. In any event, the right to a jury trial can be preserved 

under Rule 13(i) of the Montana Rules of Civil Procedure, whereby 

the Court can order separate trials of any claims, cross-claims, 

or counterclaims. Thus, the right to a jury trial can be 

preserved. 

-I 4. p, Justice 

I agree with and join in the special concurrence of Justice 

Sheehy . / 

Justice