No. 83-194 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1984 

KELLY J. BRAULT, 

Plaintiff and Appellant, 

RICHARD DALE SMITH, ALICE SMITH, 

ENGINE REBUILDERS, INC., a Mont. 

corp., W.D. HIRST, JAI4ES H. SADLER, 

& MISSOULA BANK OF MONTANA, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Fourth Judicial District, 

In and for the County of Missoula, 

The Honorable John S. Henson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Raymond W. Brault , Helena, Montana 

For Respondents: 

Datsopoulos, MacDonald & Lind; Ronald B. IilacDonald, 

Missoula, Montana (Smith & Engine Rebuilders) 

Patterson, Marsillo, Tornabene & Schuyler; John Dostal, 

Missoula, Montana (Hirst) 

Worden, Thane & Ilaines; Patriclc G. Frank, Missoula, 

Montana (Bank of Montana) 

Submitted on Briefs: December 22, 1983 

Decided: March 29, 1984 

Filed: MAR ? ;( 1984 
- 

Mr. Chief Justice Frank I. Ha-swell delivered the Opinion of 

the Court. 

Appel-lant Kelly Brault filed a complaint on May 9, 

1980, in the Missoula County District Court alleging libel, 

slander, contract losses and abuse of process. The defendants in that action, Richard. and Alice Smith, Engine 

Rebuilders, Inc., W. D. Hirst, James Sadler and the Missoula 

Rank of Montana (hereinafter referred. to as respondents) 

filed motions to dismiss. After oral argument the District 

Court issued an order of di-smissal from which Kelly Brault 

appeals. 

The allegations in appellant's complaint concerned a 

prior suit filed in the Missoula County District Court in 

April 1974. See Engine Rebuilders v. Seven Seas 

Import-Export (Mont. 1980), 615 P.2d 871, 37 St.Rep. 1406. 

This prior action arose from a contract entered into by Seven 

Seas Import-Export & Mercantile, Inc. (hereinafter Seven 

Seas), and Engine Rebuilders, Inc. The contract provided 

that Seven Seas would construct a commercial garage for 

Engine Rebuilders. When financial problems prevented Seven 

Seas from timely completing the building, Engine Rebuilders 

filed suit alleging defendant Seven Seas had misappropriated 

monies from a trust fund esta.blished for the purpose of 

construction. 

Seven Seas at the time of the contract and lawsuit was 

a cl..osely held corporation consisting of Raymond Brault and 

his family. The plaintiff and appellant in the present 

action, Kelly Brault, is the son of R.aymond Brault and was a 

shareholder of Seven Seas in 1974. Kelly Brault at the time 

Engine Rebuilders was filed. was a minor and upon motion of 
i 

his attorney, father and codefendant, was dismissed from that 

action. 

Raymond Brault was adjudicated bankrupt in California 

in March 1977. On January 18, 1978, Raymond Brault and Seven 

Seas filed an amended answer to the original complaint, 

countercl-aim, and third-party claim against the same respondents listed in this cause of action. Respondents Alice and 

Dick Smith were the primary shareholders of Engine 

Rebuilders, Mr. Sadler and Mr. Hirst, their counsel of 

record, and the Missoula bank was the lending institution 

involved in the building construction. 

The counterclaim brought by Raymond Brault and Seven 

Seas alleged essentially the same cause of actions brought by 

shareholder Kelly Brault in the present action: libel., 

slander, contractual interference, conspiracy, negligence and 

conversion. On September 14, 1979, the District Court dismissed these counterclaims of Seven Seas on the basis of the 

relevant statute of limitations. This Court affirmed. 

Engine Rebuilders, supra. 

Having attained the age of majority, Kelly Brault filed 

the present lawsuit as a former shareholder of Seven Seas. 

Defendants' motion to dismiss was granted by the Missoula 

County District Court on various grounds including res judicata, collateral estoppel, privilege and failure to state a 

claim upon which relief can be granted. 

Basing our decision primarily on the doctrine of res 

judicata, we affirm the dismissal of appellant's complaint. 

I 

The allegations of Kelly Brault all stem from actions 

surrounding the filing of the 1974 lawsuit by Engine 
1L 

Rebuilders. The appellant was originally named as a defendant in that suit which charged the Braults personally and 

doing business as Seven Seas with fraudulently appropriating 

construction funds for personal use. Specifically in this 

appeal, Kelly Brault contends that respondents sent a letter 

to a potential Wyoming customer explaining the pending suit 

in Montana, thereby causing contractual interference with the 

customer. Additionall-y, Kelly Brault argues the business 

reputation of the company was damaged when notice of the 

lawsuit was published in a local credit bureau's "green 

sheet. " 

Appellant argues that his damages in the present suit 

are personal in nature and therefore distinguishable from the 

damages litigated by his father and Seven Seas in the prior 

suit. However, on closer examination, appellant's claimed 

injuries, particularly those arising from the alleged damage 

to the good will of Seven Seas and contractual interference, 

are indistinguishable from any other shareholder's injury. 

In his complaint appellant pled mental anguish, mental 

suffering and reduced enjoyment of life. However, on appeal, 

appellant has apparently conceded the District Court's conclusion that such damages are not actionable in that they 

arose from a judicial complaint clothed with absolute privilege. Appellant has confined his argument before this Court 

to libel and slander damages flowing from the letter allegedly sent to the Wyoming customer of Seven Seas. Nonetheless, 

we affirm the District Court order of dismissal rul-ing the 

original complaint privileged and finding no personal defamation. Section 27-1-804(2), MCA. As to damage claims flowing 

from any publications collateral to the complaint, the doctrine of res judicata precludes recovery. 
The basic proposition embraced by the doctrine of res 

judicata has always remained the same: a party should not be 

able to relitigate a matter he or she has already had an 

opportunity to litigate. This policy reflects the notion 

that a lawsuit should. not only bring justice to the aggrieved 

parties but provide a. final resolution of the controversy. 

Wellman v. Wellman (Mont. 1982), 643 P.2d 573, 39 St.Rep. 

This Court has enunciated the principles of res judicata, including collateral estoppel, on numerous occasions. In 

Gessel Tr. Jones (1967), 149 Mont. 418, 421, 427 P.2d 295, 

296, we noted: 

". . . res judicata bars the same parties 

from relitiga-ting the same cause of 

action while collateral. estoppel bars the 

same parties from relitigating issues 

which were decided with respect to a 

different cause of action [citation 

omitted]. The bar that arises from 

collateral estoppel extends to all questions essential to the judgment a-nd 

actively determined by a prior valid 

iudgment [citation omitted]." 

Res judicata technically only pertains to situations where a 

cause of action or claim has been previously litigated. For 

this reason, it is referred to in contemporary legal vernacular as claim preclusion. Its counterpart where a specific 

issue has been litigated is collateral estoppel or issue 

preclusion. Both concepts are intermixed in this appeal; the 

doctrine of res judicata will be used in its broader sense, 

as a col-lective term, encompassing both issue and claim 

preclusion. 

A decade after Gessel in Meagher County Newlan Creek 

Water District v. Walter (1976), 169 Mont. 358, 361, 547 P.2d 

850, 852, we recognized that issue or claim preclusion was 
a.pplicable to not only the parties to the prior action but 

their privies: 

'I. . . The doctrine of res judicata 

states that a final judgment on the 

merits by a court of competent jurisdiction is conclusive as to causes of action 

or issues thereby litigated, as to the 

parties and. their privies . . ." 

In Fox v. 7L Bar Ranch Co. (Mont. 1982), 645 ~.2d 929, 39 

St.Rep. 862, this Court summarized the necessary criteria for 

applying the doctrine of res judicata. These criteria are: 

(1) the parties or privies must be the same; (2) the subject 

matter of the action must be the same; (3) the issues must be 

the same and relate to the same subject matter; and (4) the 

capacities of the persons must be the same in relation to the 

subject matter and issues between them. 

Appellant's strongest argument against application of 

res judica.t.a in this suit is that the parties are not the 

same. Kelly Brault was dismissed from the original suit. 

This argument must fail, however, because Kelly Brault, as a 

shareholder, was a privy to the corporate party Seven Seas in 

Engine Rebuilders. A privy is broadly defined as one who has 

an interest in an action. Black's Law Dictionary, 5th Ed. at 

1077 (1979). In reference to a judgment it applies to one 

whose interest has been legally represented at trial. 46 

Arn.Jur.2d Judqments, S 532 at 686. Kelly Brault without a 

doubt had an interest in the previous action. He was a 

shareholder in a closely-held family corporation involved in 

a suit over property of the corporation. Seven Seas through 

its counsel, appell-ant's father, represented the interests of 

its shareholders including Kelly Brault. 

Other jurisdictions have found privity to exist between 

a corporation and its shareholders and a decree against the 
corporation conclusive on its shareholders. The only caution 

expressed by these courts is that the prior action must be 

adversary in nature--that is, no collusion can exist between 

the opposing party and the corporation representing the 

shareholder. Gagnon Co. v. Nevada Desert Inn (1955), 45 

Cal.2d 448, 289 P.2d 466; Ballas v. Caldis (1968), 167 Colo. 

248, 447 P.2d 224; Meeker v. Walker (1969), 80 N.M. 280, 454 

P.2d 762. Here, where there was no evidence of collusion 

between Seven Seas and Engine Rebuilders in the prior litigation, the shareholders are privies of the corporation for 

purposes of res judicata. 

The other criteria for application of res judicata set 

forth in - Fox are met in this case. The subject matter of the 

counterclaim in Engine Rebuilders was the filing of the 

original complaint and collateral publications of the pendency of the lawsuit. Kelly Brault's present lawsuit flows from 

the same set of facts and circumstances. Damages claimed in 

both suits stem from the alleged malignment of Seven Seas' 

business name. The issues raised in both suits are identical. As this Court noted in - Fox, identitv of issues is an 

important criteria for purposes of res judicata. Among theprimary issues raised in Engine Rebuil-ders was whether Seven 

Seas could maintain claims for libel, slander and contractual 

interference. These claims are identical to those raised by 

appellant. The claims were dismissed in the prior suit 

because the statute of limitations had run. Such an involuntary dismissal is an adjudication on the merits by the express language of Rule 41(b), M.R.Civ.P.: " . . . a dismissal 

under this subdivision and any dismissal not provided for in 

this rule, other than a dismissal for lack of jurisdiction or 
failure to join a party under Rule 1-9, operates as an 

adjudication on the merits." 

Finally, under Fox, the capacities of the persons must 

be the same in relation to the subject matter and issues 

between them. As we have noted, appellant claims damages 

that arise from his former capacity as a shareholder of Seven 

Seas. The corporation litigated identical claims, in an 

identical capacity, against the same defendants. The criteria for application of res judicata are fully satisfied and 

appellant is barred from relitigating claims of libel, slander and contract interference. 

Derivative actions by shareholders are authorized by 

the Montana Rules of Civil Procedure. However, before a 

shareholder may maintain such action, the corporation must 

have failed to enforce the right. Rule 23.1, M.R.Civ.P. 

Here there was an attempt by Seven Seas to bring action on 

the alleged defamation and contractual interference. Consequently, any subsequent derivative a-ction by a shareholder is 

precluded. 

311 

As a final matter we address appellant's contention 

that the District Court erroneously dismissed his claim of 

abuse of process. Essential to proof of abuse of process is 

(1) an ulterior purpose and (2) a willful act in the use of 

the process not proper in the regular conduct of the proceeding. Prosser, Law -- of Torts, 4th Ed., 857 (1971). While we 

have not previously had an opportunity to recognize these 

elements, numerous jurisdictions have so held. See for 

example, Barquis v. Merchants Collection Association of 

Oakland (1972), 101 Ca1,Rptr. 745, 496 P.2d 817. 
Appellant failed in his original complaj-nt to clearly 

set forth an ulterior motive on the part of respondents. 

More importantly, no a.llegations were made that the process 

was used for an improper purpose. Engine Rebuilders in the 

original suit attempted to recover sums lost on the construction project. Pressins valid legal claims to their regular 

conclusion, even with an ulterior motive, does not by itself 

constitute abuse of process. Farmers Gin Company v. Ward 

(1964), 73 N.M. 405, 407, 389 P.2d 9, 11. 

For a defendant to claim abuse of process, there must 

be an attempt by the plaintiff to use process to coerce the 

d.efendant to do some collateral thing which he could not be 

legally and regularly compelled to do. Crease v. Pleasant 

Grove City (1974), 30 Utah 2d 451, 519 P.2d 888; Batten v. 

Abrams (1981), 28 Wash.App. 737, 626 P.2d 984. For example, 

in Hopper v. Drysdale (D. Mont. 1981), 524 F.Supp. 1039, 

defendant attorneys noticed and took pl.aintiffls deposition 

with the ulterior motive of having him present in Gallatin 

County so he could be served and arrested on an outstanding 

contempt order issued in an unrelated proceeding. The fed.era1 court held that these facts, if proven, would constitute 

the tort of abuse of process as the process was put to a use 

perverted beyond its intended purpose. 

Here there was no such perversion. Collection of 

damages resulting from a partially performed construction 

contract is a proper purpose and use of process. The mere 

fact that the suit had some collateral effect on the conduct 

of the parties does not constitute abuse of process. Crease, 

supra. 

Appel.lantls reliance on Hayes v. Union Mercantile Co. 

(1902), 27 Mont. 264, 70 P. 975, is misplaced. There this 
Court held that one can recover for wrongful and malicious 

attachment when carried out without probable cause. Such 

circumstances are not present in the case at bar. Appellant 

is directed, however, to dictum in Hayes in which the court 

did address an analogous factual situation: 

'I. . . If one rightfully and lawfully 

cause an attachment to be levied upon the 

property of a person in business, one 

naturally expects the fact of such attachment to be published to the business 

world, and that the credit of the person 

attached, if he have any, may be injured; 

but such a person is not liable in damages, for he has the right to levy the 

attachment to secure an honest debt. ... " 27 Mont. at 275, 70 P. at 979. 

For the foregoing reasons, appellant has fa.iled to establish 

a cause of action for abuse of process. 

The District Court's dismissal of appellant's complaint 

is affirmed. 

s/&J $, Wm ,do 

Chief Jugtice ' 

We concur: