No. 86-431 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

FIRST BANK, (N.A.) WESTERN MONTANA, 

MISSOULA, a National Banking Assoc., 

and DAN SIMPKINS, 

Relators, 

-VSDISTRICT COURT FOR THE FOURTH JUDICIAL 

DISTRICT OF THE STATE OF MONTANA, in 

and for the County of Missoula and the 

Hon. Douglas Harkin, Presiding Judge. 

Respondents. 

ORIGINAL PROCEEDING : 

COUNSEL OF RECORD: 

For Relators: 

Garlington, Lohn & Robinson; George Goodrich argued, 

Missoula, Montana 

For Respondent: 

Small, Hatch, Doubek & Pyfer; John Doubek argued, 

Helena, Montana 

Submitted: March 15, 1987 

Decided: May 11, 1987 

Filed: !JAY 1 1. 1987 

Clerk 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

This is an original proceeding. Applicants seek a writ 

of supervisory control vacating the Fourth Judicial 

District's denial of First Bank's motion to dismiss an action 

filed by Bessie, Lee and Rick Stott and All West Equipment, 

plaintiffs in the court below. The Stotts filed their action 

alleging fraud, misrepresentation and breach of the duty of 

good faith and fair dealing against First Bank. First Bank 

filed a motion to dismiss on the grounds that the Stotts' 

action was barred by the doctrine of - res judicata, the 

compulsory counterclaim rule, and the statute of limitations. 

The District Court denied First Bank's motion to dismiss. We 

grant applicant's request for supervisory control, vacate the 

order denying the motion to dismiss and hereby enter an order 

granting the motion to dismiss. 

In June, 1982, First Rank Western Montana, Missoula, 

loaned to plaintiffs All West Equipment and Lee Stott 

(individually) $68,732.30, due in September, 1982. On the 

same day, First Bank loaned $21,566.63 to All West Equipment. 

The second loan was due December 15, 1982. The Stotts 

defaulted on both of these notes. Bessie and Lee Stott were 

guarantors of the debts of All West Equipment. In their 

complaint, the Stotts claim that Rick Stott was also an owner 

of All West Equipment. Possession of the collateral was 

turned over to First Bank, by a written instrument dated 

October 20, 1982 and signed by Rick Stott on behalf of All 

West Equipment. The collateral was eventually sold by First 

Bank. 

On January 7, 1983, First Bank filed a complaint, in the 

Fourth Judicial District Court, against All West Equipment 

and Lee and Bessie Stott, to collect deficiencies owing after 
sale of the collateral under the promissory notes and 

guaranty. The Stotts and All West, through another attorney 

than their present counsel, filed an answer which included 

the two following affirmative defenses: 

First Affirmative Defense 

As and for a separate and affirmative defense to 

Count One of Plaintiff's complaint, said defendants 

allege that plaintiff sold or liquidated certain 

property of defendants as collateral, not in 

accordance with the requirements of Section 

30-9-504 (1) and 30-9-504 (3) MCA and in this respect 

allege that plaintiff conducted the sale not in a 

commercially reasonably manner considering the time 

and place of sale, the type of equipment being 

sold, the lack of preparation of the equipment 

before the sale, the sale of the equipment at 

amounts substantially below market value. That the 

plaintiff's agent led defendants to believe that by 

not opposing the sale the defendants would not be 

liable for any deficiency and defendants relying on 

that promise did not at that time oppose the manner 

of the sale. 

Second Affirmative Defense 

As and for a second and affirmative defense to 

Count Two of Plaintiff's complaint defendant 

alleges that plaintiff sold the collateral not in a 

commercially reasonable manner considering lack of 

notice of sale, time and place of sale, sale to 

Plaintiff at less than market value, and the 

promise by Plaintiff's agent that defendant would 

be "protected" from any deficiency. 

The matters between First Bank and All West and the 

Stotts were settled without trial and a stipulation and order 

of dismissal with prejudice was filed on January 4, 1985. 

Ten months later, on October 1985, the Stotts and All 

West Equipment, with different counsel, filed a complaint in 

the Fourth Judicial District against First Bank alleging 

fraud, misrepresentation, and breach of the duty of good 

faith and fair dealing on the part of First Bank in making 
the loans to them and in obtaining their signature for the 

release of collateral. 

The Stotts also alleged that the collateral was sold 

without commercially reasonable preparation and that the bank 

violated the requirements set out in S 30-9-504, MCA 

(concerning the secured party's right to dispose of 

collateral after default.) 

First Bank responded by filing a motion to dismiss on 

the grounds that the Stotts' action was barred by the 

doctrine of - res judicata, the compulsory counterclaim rule 

and the statute of limitations. By order dated March 19, 

1986, the District Court denied First Bank's Motion. 

In doing so, the District Court hinted that it saw a 

possible additional unresolved issue, suggesting that the 

order of dismissal with prejudice might have been an intended 

consent judgment. The court explained: 

Because of the limited scope of the court's 

discretion when ruling on a motion to dismiss, 

construing the complaint in the light most 

favorable to Plaintiffs would require that there 

was an express or implied understanding that an 

action such as the present action was exempt from 

the judgment in the prior lawsuit. 

First Bank disputes this holding, raising four issues: 

1. Whether res judicata bars the Stotts' claims. 

2. Whether the claims the Stotts' have against First 

Bank were compulsory counterclaims in a prior action and are 

barred. 

3. Whether the District Court erred in concluding that 

the prior action was resolved by a consent judgment. 

4. Whether the statute of limitations bars the Stotts' 

claims. 

Notably absent from discussion in the parties' briefs is 

the issue of this Court's jurisdiction for granting 

supervisory control on an interlocutory order. No Rule 54 
certification has been obtained. There is simply a denial of 

a motion to dismiss. As such, it is not an appealable final 

order within the terms of Rule 1 of the Montana Rules of 

Appellate Procedure. This Court will nonetheless accept 

jurisdiction to protect First Bank from participating in 

needless litigation, a purpose for which a writ of 

supervisory control is intended: " . . . it is in the nature 

of a summary appeal--a shortcut--to control the course of 

litigation in the trial court . . . and may be employed to 

prevent extended and needless litigation." State ex rel. 

Buttrey Foods, Inc. v. District Court (1966), 148 Mont. 350, 

354, 420 P.2d 845, 847. State ex rel. Regis v. District 

Court (1936), 102 Mont. 74, 77, 55 P.2d 1295, 1297. 

The bank's central argument in this application is that 

the Stotts are barred from bringing any action against it 

regarding the promissory notes and guaranty because the 

Stotts' claim is - res judicata. The bank explains that all 

the issues raised by the Stotts in their action against the 

bank were raised in the Stotts' affirmative defenses in the 

original default action brought by the bank. The bank claims 

that the Stotts explicitly raised the following issues by 

their affirmative defenses: 

1. That the sale and liquidation of collateral violated 

§ 30-9-504, MCA, concerning the secured party's right to 

dispose of collateral after default. 

2. That the sale and liquidation of collateral was not 

conducted in a commercially reasonable manner. 

3. That the bank and its agent, Dan Simpkins, 

misrepresented facts when the Stotts gave their consent 

for the sale of the collateral. 

4. That the Stotts relied on the alleged 

misrepresentations in consenting to the sale of the 

collateral. 
5. That the bank and its agents promised the Stotts 

that they would be protected from any deficiency. 

6. That the collateral was sold for less than market. 

value. 

The bank maintains that these are the same allegations which 

the Stotts' are pleading in their present action, with the 

exception that in the second action, the Stotts' allege that 

the bank persuaded them to place their business with it. 

The doctrine of - res judicata is firmly established to 

stand for the proposition that a party should not be able t.o 

relitigate a matter that that party has already had the 

opportunity to litigate, and the public policy that there 

must be some end to litigation. Wellman v. Wellman (1982) , 

198 Mont. 42, 643 P.2d 573. 

Once there has been full opportunity to present an 

issue for judicial decision in a given 

proceeding . . . the determination of the court in 

that proceeding must be accorded finality as to all. 

issues raised or which fairly could have been 

raised, else judgments might he attacked piecemeal 

and without end. (Citation omitted.) 

Wellman, 198 Mont at 45-46, 643 P.2d at 575. See Brault v. 

Smith (Mont. 1984), 679 P.2d 236, 41 St.Rep. 527 

The Stotts were given the opportunity to litigate the 

issues raised in their complaint, but agreed to stipulate for 

a dismissal with prejudice. The effect of a stipulation is 

the same as a judgment on the merits. Accordingly, a 

dismissal with prejudice is res judicata as to every issue 

raised in the pleadings. City of Havre v. District Court 

(1980), 187 Mont. 181, 609 P.2d 275; cert.denied Boucher v. 

City of Havre (1980), 449 U.S. 875, 101 S.Ct. 219, 66 L.Ed.2d 

97; Schillinger v. Brewer (Mont. 1985), 697 P.2d 919, 42 

St.Rep. 408. 

This Court has summarized the necessary criteria for 

applying the doctrine of res judicata - as follows: 
. . . four criteria exist in Montana law which 

must be met before a plea of res judicata can be 

sustained. These criteria are: (1) the parties 

or their privies must he 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. 

Smith v. County of Musselshell (1970), 155 Mont. 376, 378, 

472 P.2d 878, 880. See also S.W. Company v. John Wight, Inc. 

(1978), 179 Mont. 392, 587 P.2d 348 and Fox v. 7L Bar Ranch 

Co. (1982), 198 Mont. 201, 645 P.2d 929. 

Each of the four criteria is met in this case. The 

Stotts, of course, assert that the opposite is true, but 

present no argument to support the assertion other than to 

contend that the parties in the two actions are not the same. 

Neither their son Rick nor Dan Simpkins, the bank officer, 

were named in the first action, they assert. The bank 

responds, and we agree, that while Rick Stott was not named 

in the first action, he was in privity with the parties, as 

he had signed the agreement for voluntary possession of the 

collateral for All West Equipment. Further, Dan Simpkins was 

also in privity for purposes of the original action, as he 

was an officer and agent of the bank. As used here, privity 

implies a connection, mutuality of will or an interaction of 

the parties. State ex rel. Buttrey Foods, Inc. v. District 

Court (1966), 148 Mont at 353, 420 P.2d at 847. Clearly, 

this is established for the purposes of meeting the first 

criterion. 

We see no difficulty in reaching the same conclusion 

about the remaining three criteria. The subject matter of 

the answer and affirmative defenses are the same as those 

raised in the present action, i.e. , First Bank's conduct in 

obtaining the release and sale of the collateral. The issues 
raised by the Stotts in their answer to the bank's collection 

suit are the same as the issues raised in the present action, 

although the Stotts' complaint sets forth the factual 

allegations in more detail. Finally, the capacities of the 

people and parties involved have not changed in the way they 

relate to the subject matter and issues between them. The 

criteria for application of res judicata are fully satisfied. 

The next issue raised is whether the Stotts' second 

action is also barred by Rule 13(a) of M.R.Civ.P. concerning 

compulsory counterclaims. 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 

and does not require for its adjudication the 

presence of third parties of whom the court cannot 

acquire jurisdiction . . .. 

The purpose of this statute is to avoid multiplicity of suits 

by requiring the parties to adjust in one action their 

various differences growing out of any given transaction. 

Fredrichsen v. Cobb (1929), 84 Mont. 238, 275 P. 267. his 

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 litigation. 

Julian v. Mattson (Mont. 1985), 710 P.2d 707, 42 St.Rep. 

1908. 

Since a claim which "arises out of the transaction or 

occurrence that is the subject matter of the opposing party's 

claim" must be pleaded or is barred, it is important to 

understand what the quoted phrase means. The United States 

Supreme Court defined "transaction" as follows: 

'Transaction1 is a word of flexible meaning. It 

may comprehend a series of many occurrence, 

depending not so much upon the immediateness of 

their connection as upon their logical 

relationship . . . It is the one circumstance 
without which neither party would have found it 

necessary to seek relief. Essential facts alleged 

by appellant enter into and constitute in part the 

cause of action set forth in the counterclaim. 

That they are not precisely identical, or that the 

counterclaim embraces additional 

allegations . . . does not matter. To hold 

otherwise would be to rob this branch of the rule 

of all serviceable meaning, since the facts relied 

upon by the plaintiff rarely, if ever, are, in all 

particulars, the same as those constituting the 

defendant's counterclaim. 

Moore v. New York Cotton Exchange (1926), 270 U.S. 593, 610, 

46 S.Ct. 367, 371, 70 L.Ed. 750, 757; Julian v. Mattson, 

supra. 

Rule 13(a) was adopted in this state in 1961 on the same 

basis as the federal Rules of Civil Procedure (5 12, Ch. 13, 

Laws of Montana (1961)). Long before, however, under 

statutes, we recognized that a defendant who failed to raise 

a counterclaim to a complaint could not thereafter maintain a 

second action against the plaintiff. Frederichsen v. Cobb 

(1929), 84 Mont. 238, 275 P. 267. 

In response to the bank's initial action, the Stotts' 

affirmative defenses alleged violation of S 30-9-504, MCA, 

misrepresentation on the part of the bank's agent that 

induced the Stotts to give their consent for the sale of 

collateral, "promise by plaintiff's [bank's] agent that 

defendant [Stotts] would be 'protected' from any deficiency," 

and sale of the collateral as a result of these wrong doings 

for less than its market value. In their second action, the 

Stotts allege that the acts of First Rank were fraudulent, 

deceitful, wrongful, careless, reckless, wanton and 

malicious. They allege fraud and misrepresentation on the 

part of the bank in making the loans and in obtaining their 

signature to release the collateral for sale. They also 

allege violation of S 30-9-504, MCA. It is clear to this 

Court that the Stotts' answer and affirmative defenses cover 
the same ground as that addressed in their complaint. Their 

answer and affirmative defenses indicate that they had 

knowledge of all the facts necessary to raise the issues now 

in their complaint as compulsory counterclaims in the bank's 

initial action. 

While it is true that the Stotts' complaint offers 

greater detail in allegations, the factual history of the 

complaint is the same as the history alluded to in the 

affirmative defenses. The issues raised are the same. They 

both arise out of the same transaction. There is a logical 

relationship between the bank's foreclosure complaint and the 

Stotts' answer, affirmative defense and complaint alleging 

fraud, misrepresentation, bad faith and violations of 5 

30-9-504, MCA. "That they are not precisely identical or 

that the counterclaim embraces additional 

allegation . . . does not matter," the U.S. Supreme Court 

held in Moore. 

We can only conclude that the Stotts' complaint is 

barred because it arose from the same transaction alleged in 

the bank's complaint. The claims of creditor misconduct were 

compulsory counterclaims in the first action. Hence, the 

effect is the same as our finding that the Statts' complaint 

is res judicata. 

The District Court did not decide whether the Stotts' 

claims were compulsory counterclaims in the collection suit. 

Rather, the District Court concluded that the parties had 

resolved the dispute by a consent judgment (even though 

another judge called it an Order of Dismissal With 

Prejudice). Hence the District Court ruled that the Stotts' 

right to bring an action on the counterclaim was not barred 

because the parties reached a judgment by consent. 

A consent judgment is "a judgment, the provision and 

terms of which are settled and agreed to by the parties to 
the action." Black's Law Dictionary (5th ed.) at 436. A 

judgment by consent or stipulation of the parties is 

construed as a contract between them embodying the terms of 

the judgment. It operates to end all controversy between the 

parties, within the scope of the judgment. 

The Stotts cite 2 A.L.R.2d 514 for their position that 

the general rules of - res judicata do not apply 

indiscriminately to consent judgments. 

While we agree that this is true, we must point out that 

nothing in the record or in the order of dismissal with 

prejudice indicates that a consent judgment was intended. As 

we noted, a judgment by consent is contractual in nature and 

therefore it should be construed as a written contract. In 

other words, the meaning of the consent judgment is to be 

gathered from the terms of the contract and the judgment 

should not be extended beyond the clear import of the terms. 

The order of dismissal with prejudice, submitted by 

First Bank stated: 

ORDER 

PURSUANT TO WRITTEN STIPULATION by and between 

Plaintiff, FIRST BANK (N.A.) WESTERN MONTANA 

MISSOULA, and Defendants ALL WEST EQUIPMENT, LEE 

STOTT and BESSIE STOTT, through their respective 

counsel, that the above entitled action has been 

fully and finally compromised and settled upon the 

merits. 

IT IS HEREBY ORDERED, that the above entitled 

action be, and the same is, hereby dismissed, with 

prejudice, each party to bear its own costs. 

DATED this 4th day of January, 1985. 

(s/ James B. Wheelis 

(Emphasis added.) 

The Stotts assert that it was the bank's duty to specify 

in its stipulation the issues it believed were finally 

resolved, and state the specific extent it believed future 

relitigation was precluded. They argue that if the bank had 

specifically limited relitigation in the stipulation, they 
would not have agreed to the stipulation. Hence they charge 

that the bank, in order to gain the advantage, fraudulently 

concealed its intentions to preclude future litigation by 

writing the stipulation in such a way as to prevent the 

Stotts from recognizing they were signing away their rights 

to further legal action. 

The Stotts cite no evidence or authority supporting 

their assertion. Further, the difference between an order of 

dismissal with prejudice, the equivalent of a final judgment 

on the merits, and a consent judgment is clear. It is not 

reasonable to assume that the District Court confused them. 

Since we determine that the Stotts' cause of action is 

barred, there is no need to discuss the issue of the statute 

of limitations. As for the Stotts' argument that their 

allegations included negligence, bad faith, and "other 

torts," our ruling that these were compulsory counterclaims 

precludes applying the statute of limitations to them. 

Accordingly, we grant a writ of supervisory control, 

which this Opinion shall be and constitute. The cause is 

remanded to the District Court with directions to dismiss the 

complaint. -.\