Court Opinion

ID: 4767170
Source: CourtListenerOpinion
Date Created: 2021-08-17 23:10:40.917646+00
Date Added: 2024-06-11T08:09:19.042097
License: Public Domain

08/17/2021

                                           DA 20-0179
                                                                                        Case Number: DA 20-0179

              IN THE SUPREME COURT OF THE STATE OF MONTANA
                                          2021 MT 207N

THORCO, INC.,

               Plaintiff and Appellant,

         v.

WHITEFISH CREDIT UNION, and JOHN DOES 1-10,

               Defendants and Appellees.

APPEAL FROM:           District Court of the Eleventh Judicial District,
                       In and For the County of Flathead, Cause No. DV-19-534B
                       Honorable Robert B. Allison, Presiding Judge

COUNSEL OF RECORD:

                For Appellant:

                       Nathan G. Wagner, Sullivan, Wagner & Lyons, PLLC, Missoula, Montana

                For Appellees:

                       Sean S. Frampton, Frampton Purdy Law Firm, Whitefish, Montana

                                                   Submitted on Briefs: November 4, 2020

                                                             Decided: August 17, 2021

Filed:

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                       __________________________________________
                                         Clerk
Justice James Jeremiah Shea delivered the Opinion of the Court.

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

Rules, this case is decided by memorandum opinion, shall not be cited and does not serve

as precedent. Its case title, cause number, and disposition shall be included in this Court’s

quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

¶2     Thorco, Inc. appeals from the order of the Eleventh Judicial District Court, Flathead

County, barring it from asserting claims under the doctrines of claim preclusion and

issue preclusion and ruling that Thorco was a vexatious litigant. We restate and address

the following issues on appeal: (1) whether the District Court erred in applying claim

preclusion and issue preclusion to Thorco’s claims; and (2) whether the District Court

abused its discretion in ruling that Thorco was a vexatious litigant. We affirm.

¶3     Thorco is an entity owned and controlled by Dennis and Donna Thornton. In 2009,

Whitefish Credit Union (WCU) loaned $3.3 million to Thorco to subdivide and develop

two parcels of land in Flathead County. The loan was secured by liens against the property,

and the Thorntons personally guaranteed the loan. This is the third appeal from the

Thorntons or Thorco arising from WCU’s attempt to foreclose on its security.

¶4     The District Court granted summary judgment in favor of WCU as to all claims.

The Thorntons appealed and we affirmed the District Court’s summary judgment in favor

of WCU and its denial of the Thornton’s motion to file an amended complaint.

Thornton v. WCU, 2019 MT 138N, 396 Mont. 549, 455 P.3d 435.

¶5     Fifteen days after we affirmed the District Court’s summary judgment ruling in

favor of WCU, the Thorntons, on behalf of Thorco, initiated Cause No. DV-19-534B by

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refiling a complaint substantively similar to the previous action. Thorco also recorded a

lis pendens to prevent WCU from selling the property. WCU moved to dismiss the

complaint and moved to have Thorco declared a vexatious litigant. After WCU moved to

dismiss, Thorco amended its complaint without seeking leave of the court.

¶6     The District Court granted WCU’s motion to dismiss and declared Thorco a

vexatious litigant.     The District Court entered a pre-filing and pre-recording order,

subsequently amended, that restricted Thorco, Dennis Thornton, Donna Thornton, or any

person acting on their behalf from filing any document in the case, without first obtaining

leave from the District Court.1 The District Court also ordered:

       [N]o document submitted for filing or recording with the Flathead County
       Clerk and Recorder by Thorco, Inc., Dennis Thornton, Donna Thornton or
       by any person on behalf of any of the same, for recording against the property
       [that is the subject of this litigation] shall not be of any force or effect unless
       the recording of the same is accompanied by an order of this Court expressly
       authorizing the recording of such document(s).

(Original emphasis omitted).

¶7     We review a district court’s application of the doctrines of claim preclusion or issue

preclusion de novo. Denturist Ass’n of Mont. v. State, 2016 MT 119, ¶ 8, 383 Mont. 391,

372 P.3d 466. An order declaring a party a vexatious litigant is reviewed for an abuse of

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  Thorco complains on appeal that “[t]he Pre-Filing Order is . . . not narrowly tailored so as to limit
pro se filings, but rather is extremely broad, and purports to affect non-parties and Thorco’s
attorneys, who have not been found to have done anything improper.” (original italics omitted).
Thorco’s point is somewhat puzzling. First, Thorco’s attorneys would only be filing documents
in the case as Thorco’s counsel, and there is no question the District Court has jurisdiction over
the parties to the action. Second, to the extent the Pre-Filing Order “purports to affect non-parties,”
as Thorco complains, non-parties—vexatious or not—would have no right to file anything in the
case without obtaining leave of the court in any event. (original italics omitted).
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discretion. Belanus v. Potter, 2017 MT 95, ¶ 15, 387 Mont. 298, 394 P.3d 906 (citing

Boushie v. Windsor, 2014 MT 153, ¶ 8, 375 Mont. 301, 328 P.3d 631).

¶8     “The related common law doctrines of issue preclusion and claim preclusion (also

known as collateral estoppel and res judicata, respectively) exist to preclude future

litigation of a final judgment.” Reisbeck v. Farmers Ins. Exch., 2020 MT 171, ¶ 13,

400 Mont. 345, 467 P.3d 557. “Issue preclusion bars the same parties or their privies from

relitigating issues in a second suit that is based upon a different cause of action.”

Reisbeck, ¶ 14 (quotations and emphasis omitted). A matter is barred by issue preclusion

when the following elements are met:

       (1)    the issue decided in the prior adjudication is identical to the issue
              raised in the action in question;
       (2)    a final judgment on the merits has been issued in the prior
              adjudication;
       (3)    the party against whom preclusion is now asserted was a party or in
              privity with the party to the prior adjudication; and
       (4)    the party against whom preclusion is now asserted was afforded a
              full and fair opportunity to litigate the issue which may be barred.

Reisbeck, ¶ 14 (citing Denturist, ¶ 12). All elements of issue preclusion must be satisfied

for the doctrine to apply. Gibbs v. Altenhofen, 2014 MT 200, ¶ 21, 376 Mont. 61,

330 P.3d 458.

¶9     Claim preclusion “bars a second suit involving the same parties or their privies

based on the same cause of action.” Denturist, ¶ 11. Claim preclusion requires all the

following elements to be met:

       (1)    the parties or their privies are the same;
       (2)    the subject matter of the present and past actions is the same;
       (3)    the issues are the same and relate to the same subject matter;

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       (4)    the capacities of the parties are the same to the subject matter and
              issues between them; and
       (5)    a final judgment on the merits has been entered in an earlier action.

Touris v. Flathead County, 2011 MT 165, ¶ 13, 361 Mont. 172, 258 P.3d 1.

¶10    The District Court correctly held Thorco’s claims arising under the renewed option

agreement (Count III) and the breach of implied covenant of good faith and fair dealing

(Count IV) are barred by claim preclusion. (1) The parties are the same as the prior actions

as Thorco was a party in DV-12-174B and in privity with the Thorntons in DV-18-336D;

(2) the Thorntons/Thorco had an opportunity to litigate breach of the renewed option

agreement and breach of the implied covenant of good faith and fair dealing in both

previous suits and did not do so; (3) the issues relate to the same subject matter regarding

the secured loan from WCU that was not paid back and a failed settlement agreement;

(4) the parties litigated claims in an identical capacity against the same defendant, WCU;

and (5) a final judgment was entered in DV-12-174B upon voluntary dismissal of the action

with prejudice and in DV-18-336D when summary judgment was entered by the

District Court and affirmed by this Court. Touris, ¶ 15 (voluntary dismissal of an action

with prejudice constitutes a final judgment on the merits); Mills v. Lincoln Cty.,

262 Mont. 283, 286, 864 P.2d 1265, 1267 (1993) (summary judgment is, for purposes of

claim preclusion, a final judgment on the merits).

¶11    The District Court did not err in determining Thorco’s claims based on the

settlement agreement (Count I) were barred by issue preclusion. (1) Thorco’s claim is

based on WCU failing to deposit the executed documents in an escrow account—an issue

resolved in DV-18-336D and affirmed on appeal by this Court; (2) final judgment was

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entered in favor of WCU by the District Court in DV-18-336D, and affirmed by this Court;

(3) as the sole shareholders of Thorco, the Thorntons are in privity with Thorco, see Adams

v. Two Rivers Apts., LLLP, 2019 MT 157, ¶ 13, 396 Mont. 315, 444 P.3d 415 (quotations

omitted) (“Privity exists where two parties are so closely aligned in interest that one is the

virtual representative of the other.”); and (4) the party against whom preclusion is asserted,

Thorco, was afforded a full and fair opportunity to litigate the issue through the Thorntons,

as sole shareholders of the corporation. See Adams, ¶ 13.

¶12    All elements of claim preclusion and issue preclusion being satisfied, the

District Court correctly granted WCU’s motion to dismiss.

¶13    The District Court did not abuse its discretion by declaring Thorco a vexatious

litigant and imposing a pre-filing and pre-recording order.

¶14    Although Montana does not have a statute authorizing the imposition of sanctions

upon vexatious litigants, our common law has developed such authority.                 Stokes v.

First Am. Title Co. of Mont., Inc. 2017 MT 275, ¶ 4, 389 Mont. 245, 406 P.3d 439 (citing

Motta v. Granite Cty. Comm’rs, 2013 MT 172, ¶¶ 19-23, 370 Mont. 469, 304 P.3d 720).

A five-factor test is utilized to determine whether a pre-filing order is justified:

       (1) the litigant’s history of litigation and, in particular, whether it has
           entailed vexatious, harassing, or duplicative lawsuits;
       (2) the litigant’s motive in pursuing the litigation; e.g., whether the litigant
           has an objective, good faith expectation of prevailing;
       (3) whether the litigant is represented by counsel;
       (4) whether the litigant has caused needless expense to other parties or has
           posed an unnecessary burden on the courts and court personnel; and
       (5) whether other sanctions would be adequate to protect the courts and
           other parties.

Stokes, ¶ 4.

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¶15    The District Court substantively analyzed each Stokes factor. The District Court

noted that Thorco and the Thorntons filed duplicative lawsuits, filed and then dismissed

multiple bankruptcies for the purpose of manipulating the litigation, lacked good faith in

pursuing litigation, and were represented by “many counsel” throughout the litigation,

including their bankruptcies and their appeals to this Court. The District Court noted that

the litigation has caused needless expense and unnecessary burdens on the judicial system,

“particularly where the same parties are doing the relitigating and one keeps winning while

the other keeps losing.” Having conscientiously gone through the history of this saga and

analyzing each of the first four Stokes criteria, the District Court concluded that no other

sanction “other than a declaration of vexatious litigant with pre-filing and [pre-]recording

orders would be adequate at this time to protect the Court, WCU and the integrity of the

process.”

¶16    The District Court did not act arbitrarily or without conscientious judgment in

declaring Thorco a vexatious litigant.

¶17    We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our

Internal Operating Rules, which provides for memorandum opinions. This appeal presents

no constitutional issues, no issues of first impression, and does not establish new precedent

or modify existing precedent. Affirmed.

                                          /S/ JAMES JEREMIAH SHEA

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We Concur:

/S/ MIKE McGRATH
/S/ LAURIE McKINNON
/S/ BETH BAKER
/S/ DIRK M. SANDEFUR

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