No. 88-544 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1990 

EVELYN SMITH, f/k/a EVELYN LOONEY, 

Plaintiff and Appellant, 

-vsROBERT SCHWEIGERT, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable Michael Keedy, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Richard DeJana, Kalispell, Montana 

For Respondent: 

James C. Rartlett; Hash, OIBri.en & Bartlett, Kalispell, 

Montana 

Submitted on Briefs: Nov. 21, 1989 

trzrz Decided: January 10, 1990 =I 

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Justice R. C. McDonough delivered the Opinion of the Court. 

Evelyn Smith (Evelyn) appeals from an order of the 

Eleventh Judicial District granting summary judgment to 

respondent, Robert Schweigert (Schweigert). We reverse and 

remand. 

Schweigert raises numerous issues for review, including 

timeliness of the appeal, mootness and the validity of the 

contract for deed. These arguments are without merit; 

accordingly we decline to address them. Therefore the sole 

issue on appeal is: 

Whether Schweigert is barred, through the doctrine of 

collateral estoppel, from reopening a previous judgment of 

the District Court which determined that a lending agreement 

evidenced by a warranty deed and contract for deed was an 

equitable mortgage. 

Dan and Evelyn Looney, husband and wife, were the owners 

as joint tenants, of a certain piece of land. On May 1, 

1981, Schweigert and Dan Looney entered into a Memorandum of 

Intent. The purpose of this memo was to evidence an intent 

on the part of Dan Looney and Schweigert to enter into a 

Contract for Deed covering the land. Apparently Schweigert 

had constructed a building on such property owned by Looneys, 

and as a result Looneys owed him money. The pertinent 

portions of the memorandum of intent are as follows: 
WHEREAS, Buyer [Dan Looney] is presently the 

owner of certain real property located at 271 

Riverside Drive, Kalispell, which is the location 

of Buyer's business known as "Anvil Welding", and 

Seller [Schweigert] has done certain construction 

upon said property for the benefit of Buyer; and 

WHEREAS, Seller has invested certain money in 

said property for the benefit of Buyer, and the 

parties are interested in securing that interest 

for the benefit of Seller; and 

WHEREAS, both parties are working diligently 

with the staff and officers of the First 

Northwestern National Bank of Kalispell, 

hereinafter referred to as "bank", in order to 

secure financing involving the property in 

question, 

3. That this agreement is entered into by 

both parties freely and voluntarily, with the 

understanding that it is intended to facilitate the 

completion of the financing arrangement with the 

bank, and further, it is understood and agreed that 

this agreement may be specifically enforced by 

either party in the event of controversy. 

In order to secure the debt, the Looneys conveyed the 

property by warranty deed to Schweigert. The Contract for 

Deed was entered into with Schweigert as seller and the 

Looneys as buyers. Upon payment of the money owed as per 

contract for deed Schweigert would convey the property back 

to the Looneys. In case of failure on the part of the 

Looneys to comply with the contract, a quitclaim deed was 

placed in escrow to be delivered to Schweigert upon such 

default and proper notice. The Contract for Deed was 

executed and signed by both husband a.nd wife on May 6, 1981.. 
In 1982, the Looneys were divorced. The property settlement 

agreement divided the property into two parcels. ~ccording 

to the agreement, Evelyn retained the portion of property 

upon which the family home was situated and Dan Looney 

received the portion upon which his business was located. 

The agreement also provided that Dan would pay the contract 

for deed debt. 

Dan Looney defaulted on his payments. Schweigert gave 

notice of default to the Looneys and exercised his rights 

under the contract, and obtained and recorded the quitclaim 

deed covering the property held in escrow with the County 

Clerk and Recorder on June 28, 1985. Dan Looney alone filed 

a lawsuit against Schweigert on July 8, 1985. In the 

lawsuit, he maintained that because the warranty deed and 

Contract for Deed were executed to secure a debt, an 

equitable mortgage resulted. Consequently, he asserted that 

Schweigert would have to foreclose on the property as a 

mortgage and as a result he, Looney, would be entitled to a 

one-year right of redemption. For reference, see S 71-1-107, 

MCA, which provides as follows: 

Transfers of interest. (1) Every transfer of 

an interest in property, other than in trust, made 

only as a security for the performance of another 

act is to be deemed a mortgage, except when in the 

case of personal property it is accompanied by 

actual change cf possession, in which case it 1s 

deemed a pledge. 
(2) The fact that a transfer was made subject 

to defeasance on a condition may, for the purpose 

of showing such transfer to be a mortgage, be 

proved (except as against a subsequent purchaser or 

encumbrancer for value and without notice), though 

the fact does not appear by the terms of the 

instrument. 

In order to expedite the matter, Schweigert moved for 

s.ummary judgment consenting to Looney's equitable mortgage 

assertion and asked the court to have the sheriff sell the 

property and to grant Looney a one-year right of redemption 

from the sheriff's sale. The judgment was entered and the 

sale took place. Schweigert bid in full the amount of the 

debt or contract purchase price then due, and Looney did not 

redeem within the one-year time period. On March 31, 1988, a 

Sheriff's Deed was issued in favor of Schweigert. 

In the meantime on May 13, 1986, Evelyn filed a document 

entitled "Notice of Failure to Foreclose" which stated that 

the Decree of Foreclosure had no effect on her rights to the 

real property, because she was not named as a party in the 

foreclosure action. According to her theory, the foreclosure 

action only affected her ex-husband's interest. Since her 

right had not been validly foreclosed, she was still entitled 

to her interest in the property. Based upon this theory, she 

filed a complaint against Schweigert, seeking partition of 

her interest in the land. 

Schweigert answered the complaint and maintained that 

her interest had been extinguished when he exercised his 
rights under the Contract for Deed. He asserted that when he 

foreclosed on Looney's interest, he treated it as a mortgage 

only to prevent delay and litigation. Therefore, that action 

had no effect upon Evelyn's interest, which had previously 

been extinguished. He counterclaimed and sought to have 

Evelyn removed from the property. 

These facts and arguments were presented in motions for 

summary j-udgment to the trial court. The trial court found 

in favor of Schweigert and ordered Evelyn to vacate the 

property. This appeal followed. 

Evelyn argues that Schweigert is barred from foreclosing 

on her interest in the property. She maintains that when 

Schweigert elected to foreclose as a mortgage and bid in the 

sheriff's sale the full amount due him, he concl~usively 

adjudicated all his interests involved. Therefore he cannot 

extinguish her interest through the provisions of the 

contract for deed. She bases her argument upon the doctrine 

of collateral estoppel. 

Collateral estoppel is a form of res judicata. Quite 

simply, the doctrine "precl.udes relitigation of issues 

actually litigated and determined in a prior suit." Lawlor 

v. ~ational Screen service (1955), 349 U.S. 322, 75 S.Ct. 

865, 99 L.Ed 1122. It differs from res judicata, in that res 

judicata bars the same parties from relitigating the same 

cause of action, while collateral estoppel bars the same 
parties, or their privies, from relitigating issues which 

have been decided with respect to a different cause of 

action. Brault v. Smith (1984), 209 Mont. 21, 679 P.2d 236. 

The doctrine has three elements: 

1. The issue has been decided in a prior 

adjudication and is identical to the one presented. 

2. A final judgment on the merits was issued. 

3. The party against whom the plea is asserted was 

a party or privity to the party in the prior 

adjudication. 

In Re the ~arriage of Stout (1985), 216 Mont. 342, 701 ~.2d 

Evelyn asserts, and we agree, that each of these 

elements are established by the facts now before us. In 

regard to the first element, we note that the controversy 

here is identical to that adjudicated in the laws-uit filed by 

Dan Looney against Schweigert. Dan Looney brought suit 

against Schweigert claiming that the contractual arrangement, 

as evidenced by the contract for deed, was actually an 

equitable mortgage. He, therefore, maintained that he was 

entitled to a one year period of redemption. Schweigert, for 

whatever reason, agreed with this assertion. He moved for 

summary judgment and sought to foreclose upon the property as 

a mortgage. The lower court granted this motion. In 

granting the motion the court formally adjudicated the 

controversy. Casad, Res ~udicata S 4-10 (1976). 
In the present case, Schweigert seeks to advance the 

same argument--that the arrangement is a valid contractual 

obligation and is not an equitable mortgage. This assertion, 

however, was previously adjudicated in the lawsuit with Dan 

Looney. Hence, the first element is satisfied. 

The second element requires that the judgment be based 

upon the merits of the controversy. A valid and final 

personal judgment on the merits precludes a later suit on the 

same claim or cause of action. his preclusive effect is 

applicable to the elements asserted in the first suit as well 

as to all elements which could have been asserted. The 

policy behind this principle, often referred to as "bar," is 

to deter the splitting of a single cause of action into more 

than one lawsuit. Casad, Res ~udicata 5 4-1 (1976). 

In order to decide whether a judgment is "on the merits" 

one must determine if it conclusively adjudicates the 

substantive validity of the claim. The claim now before us 

was determined through summary judgment in the previous suit. 

Summary judgment is only granted when there is no genuine 

issue of material fact and the moving party is entitled to 

judgment as a matter of law. Rule 56(c), M.R.civ.P. Such a 

judgment is on the merits because it conclusively determines 

a legal issue which is presented by the facts of the case. 

Therefore, the granting of the motion will serve to bar a 

later suit on the same cause of action. 
The final issue requires that the party against whom the 

plea is asserted was a party or privity to the party in the 

prior adjudication. In this case, as in the prior 

adjudication, Schweigert is the defendant. Thus the third 

element is satisfied and the determination in the prior 

lawsuit estops him from further argument on the issue of the 

existence of an equitable mortgage. 

Each of the elements of collateral estoppel is 

satisfied. The lower court, however, refused to apply the 

doctrine to the facts of the case. It instead held that 

Evelyn was equitably estopped from contesting the validity of 

the foreclosure action. We disagree with the lower court's 

ruling. Evelyn was not a party nor is there any evidence to 

support any theory of estoppel against her. The fact that 

Evelyn was not a direct party precludes the action from 

having any binding effect upon her, and the judgment 

originally rendered is final. Moore v. capital Gas Corp. 

(1945), 117 Mont. 148, 158 P.2d 302. 

The principles upon which the Anglo-legal system is 

based require a finality to all judicial decisions. Parties 

should not be allowed to litigate the same matter over and 

over again. One fair day in court is enough. Mr. Schv~eigert 

was accorded his day in court and the matter was decided. 

Therefore, he cannot at this late date, contest that valid 

judgment. See generally Casad, Res ~udicata (1976). 
In light of these principles, ~chweigert cannot now 

attempt to foreclose Evelyn's interest through the provisions 

of the contract for deed. He foreclosed upon the mortgage, 

his debt was merged into the judgment, and thro-ugh the 

sheriff's sale the judgment and debt against the Looneys were 

satisfied. He and Evelyn are now cotenants in the subject 

property. The instant case arose through her complaint 

seeking partition. We must therefore remand this case to the 

~istrict Court for further proceedings consistent wi.th this 

opinion. 

We Concur: / 

7 / Ch'ief Justice /7