No. 02-492

IN THE SUPREME COURT OF THE STATE OF MONTANA

2003 MT 142N

POSITIVE SYSTEMS, INC., a Colorado corporation,

Plaintiff and Respondent,

v.

KEVIN E. SPRY,

Defendant and Appellant.

APPEAL FROM: District Court of the Eleventh Judicial District,

In and for the County of Flathead, Cause No. DV-00-640A,

The Honorable Ted O. Lympus, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Kevin E. Spry (pro se), San Luis Obispo, California

For Respondent:

Randall S. Ogle, Ogle & Worm, PLLP, Kalispell, Montana

Submitted on Briefs: December 27, 2002

 Decided: May 20, 2003

Filed:

__________________________________________

Clerk
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Justice Jim Regnier delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal

Operating Rules, the following decision shall not be cited as precedent but shall be filed as

a public document with the Clerk of the Supreme Court and shall be reported by case title,

Supreme Court cause number, and result to the State Reporter Publishing Company and to

West Group in the quarterly table of noncitable cases issued by this Court.

¶2 Appellant Kevin Spry, appearing pro se, appeals from the judgment entered by the

Eleventh Judicial District Court, Flathead County, in favor of Respondent Positive Systems.

We affirm.

¶3 We address the following issues on appeal:

¶4 1. Should the District Court have dismissed this action as res judicata?

¶5 2. Did the District Court err when it entered judgment against Spry in his individual

capacity?

¶6 3. Did the District Court abuse its discretion when it awarded full damages to

Positive Systems?

BACKGROUND

¶7 On February 16, 1999, Crop Image, a California corporation managed by Spry,

entered into a purchase agreement with Positive Systems. Therein, Crop Image agreed to

purchase a power storage unit from Positive Systems for $41,675. The agreement called for

a fifty percent down payment prior to the unit’s delivery. Following receipt of the down
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payment and delivery of the unit, an argument ensued between the parties regarding the

equipment’s operation and payment owing.

¶8 In June 2000, Spry, appearing pro se on behalf of himself and Crop Image, filed a

breach of contract action against Positive Systems in the California Superior Court. Positive

Systems had the case removed to federal court. On December 8, 2000, the United States

District Court for the Northern District of California, San Jose Division, granted Positive

Systems’ motion to dismiss the action with prejudice.

¶9 On December 18, 2000, Positive Systems filed a complaint with the District Court

against “Kevin E. Spry and Robert Shore d/b/a Crop Image, and Arroyo Ventures, Inc., a

California corporation,” to recover the balance of the purchase price owing under the

purchase agreement, plus an additional late penalty. Positive Systems filed an amended

complaint on May 3, 2001, to include additional allegations with respect to Shore and Arroyo

Ventures. On April 12, 2002, Positive Systems, Shore, and Arroyo Ventures participated in

a settlement conference–Spry declined to participate. It appears from the record that the

participating parties agreed to settle the relevant disputes.

¶10 On May 29, 2002, the District Court presided over a non-jury trial on the remaining

claims between Positive Systems and Spry. Spry failed to appear at the non-jury trial, in

person or through counsel. The District Court found that Spry “filed an Answer to the

Complaint herein, but has failed to act any further in this action.” The court entered

judgment against Spry in the amount of $20,184.90, with interest, and ordered Spry to pay
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Positive Systems’ costs. Spry filed a notice of appeal from the District Court’s judgment on

July 15, 2002.

STANDARD OF REVIEW

¶11 We review a district court’s findings of fact to determine whether they are clearly

erroneous and its conclusions of law to determine whether they are correct. Daines v. Knight

(1995), 269 Mont. 320, 324, 888 P.2d 904, 906; Carbon County v. Union Reserve Coal Co.,

Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686. We review a district court’s award of

damages to determine whether the district court abused its discretion. H-D Irrigating v.

Kimble Properties, 2000 MT 212, ¶ 16, 301 Mont. 34, ¶ 16, 8 P.3d 95, ¶ 16.

DISCUSSION

ISSUE ONE

¶12 Should the District Court have dismissed this action as res judicata?

¶13 Spry insists that Positive Systems was required by the Federal Rules of Civil

Procedure to raise its present breach of contract claim as a compulsory counterclaim before

the federal court in the prior proceedings. Since Positive Systems did not raise the issues in

the prior action, Spry argues that the doctrine of res judicata should have precluded the

District Court from considering the issues presented sub judice.

¶14 Rule 8(c), M.R.Civ.P., provides, “[i]n pleading to a preceding pleading, a party shall

set forth affirmatively . . . res judicata . . . and any other matter constituting an avoidance or

affirmative defense.” We have consistently stated that the failure to affirmatively plead a
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defense set forth in Rule 8(c), M.R.Civ.P., generally results in a waiver of that defense. See

Nitzel v. Wickman (1997), 283 Mont. 304, 312, 940 P.2d 451, 456.

¶15 In his answer to Positive Systems’ complaint, Spry stated “Defendant alleges the

following additional reasons that plaintiff is not entitled to recover anything: 1. There exists

pending legal proceedings filed on June 9, 2000, by the Defendant against the Plaintiff in this

matter . . . .” After filing his answer, aside from a Notice of Service with respect to

discovery answers and the Notice of Appeal, Spry did not file any documents with the

District Court or appear before the court in any capacity throughout the proceedings. 

¶16 The mere allusion to “pending legal proceedings,” without mention of the

ramifications of such proceedings, does not rise to the level of an affirmatively pled

avoidance or affirmative defense, as contemplated in Rule 8(c), M.R.Civ.P. As indicated

above, the District Court record is devoid of any further affirmative res judicata assertion or

argument in favor of its preservation. We hold that the District Court did not err when it

adjudicated the matter on the merits as Spry failed to raise the affirmative defense of res

judicata.

ISSUE TWO

¶17 Did the District Court err when it entered judgment against Spry in his individual

capacity?

¶18 Spry insists that he executed the purchase agreement on behalf of a limited liability

company, Crop Image. As such, Spry argues that he cannot be held individually liable for

the debts of the organization, pursuant to § 35-8-304, MCA.
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¶19 The purchase agreement entered into evidence indicates that Spry executed the

agreement as “Crop Image, By: K. E. Spry, Title: Manager.” The agreement does not

indicate that Crop Image is a limited liability company, corporation, or any other limited

liability entity. In its complaint, Positive Systems averred:

Plaintiff is informed and believes that Defendants, Robert Shore and Arroyo

Ventures, Inc., were owners of Crop Image when the Purchase Agreement

dated February 16, 1999, between Positive Systems, Inc., and Crop Image was

executed and that obligations and commitments of Crop Image, including the

Purchase Agreement which is the subject of this action, are binding upon all

Defendants herein.

In his answer, Spry responded that “Defendant admits that all of the statements of the

complaint are factual except” select factual accounts. None of Spry’s exceptions challenged

the individual liability concept posed in Positive Systems’ complaint.

¶20 Spry did not submit § 35-8-304, MCA, or any other similar authority to the District

Court in support of his immunity from individual liability theory submitted on appeal. In

fact, as stated by the District Court, “Spry filed an Answer to the Complaint herein, but has

failed to act any further in this action.” This Court has consistently held that we will not

consider issues raised for the first time on appeal. In re T.E., 2002 MT 195, ¶ 20, 311 Mont.

148, ¶ 20, 54 P.3d 38, ¶ 20. In order to preserve a claim or objection for appeal, an appellant

must first raise that specific claim or objection in the district court. In re T.E., ¶ 20. By

failing to raise the issue of individual liability before the District Court, Spry has not

preserved the issue for appeal. For the foregoing reasons, we hold that the District Court did

not err when it entered judgment against Spry in his individual capacity.
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ISSUE THREE

¶21 Did the District Court abuse its discretion when it awarded full damages to Positive

Systems?

¶22 Spry argues that Positive Systems maintained possession of the subject property at all

times during the pendency of the proceedings. Spry suggests that Positive Systems has

agreed to repair and sell the equipment, “hence they are not entitled to full recovery of

damages.” Further, Spry contends that Positive Systems entered into a settlement agreement

with Shore and Arroyo Ventures. As such, the District Court should not have permitted

Positive Systems to recover full damages against Spry.

¶23 Spry insists that “[t]he trial court was not provided all the facts, therefore, the findings

of facts and the conclusion of law prepared by Positive Systems were wrong and

misleading.” By his own admission, the District Court was not presented with the facts that

Spry relies upon on appeal. However, it is a fundamental principle of trial law that the trier

of fact must confine his, her, or its decision to the evidence in the record. See DeCelles v.

State Through Dept. of Hwys. (1990), 243 Mont. 422, 429, 795 P.2d 419, 423 (Sheehy, J.,

dissenting). Likewise, this Court’s review of allegations on direct appeal is confined to the

record. State v. Bradley (1993), 262 Mont. 194, 199, 864 P.2d 787, 791.

¶24 Again, Spry filed an answer to Positive Systems’ complaint but did not further appear

personally or submit any other pleadings, affidavits, or evidence on his behalf. Spry did not

participate in the settlement conference, pretrial conference, or the non-jury trial. Positive

Systems submitted the only evidence at trial relevant to the issues presented on appeal. That
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evidence includes the purchase agreement, testimony that Positive Systems dealt personally

with Spry, that Positive Systems delivered the equipment in question to Spry, that Spry paid

one-half of the purchase price, and that Positive Systems did not receive the balance of the

purchase price. The District Court received no evidence regarding the settlement agreement

or disposition of the subject property primarily because Spry neglected to appear.

¶25 Based on the record before us, we cannot conclude that the District Court’s findings

of fact are clearly erroneous or that its conclusions of law are incorrect. Further, the record

does not suggest that the District Court abused its discretion when it awarded the damages

it did to Positive Systems.

¶26 Affirmed.

/S/ JIM REGNIER

We Concur:

/S/ PATRICIA COTTER

/S/ W. WILLIAM LEAPHART

/S/ JIM RICE