Court Opinion

ID: 9719244
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:46:29.097039+00
Date Added: 2024-06-11T18:24:05.429226
License: Public Domain

WUEST, Chief Justice.
Appellants, Jonas Bruntz and Betty Bruntz, et al., (collectively referred to as “Bruntz”), appeal from a summary judgment entered by the circuit court. We affirm.
Bruntz, and others, were investors in securities and promissory notes which were issued by M.J. Rutherford. M.J. Rutherford’s wife, Kathryn L. Rutherford (Kathryn), was also an investor in these notes. She was not, however, a partner with respect to her husband’s investment company. M.J. Rutherford misappropriated the funds and subsequently found himself .unable to pay his creditors. As a result he filed a Chapter 7 Bankruptcy on March 20, 1982. He was subsequently discharged of all debts by order of the bankruptcy court. Bruntz failed to timely object to this discharge.
On May 14, 1986, Bruntz filed a complaint in bankruptcy court, seeking to revoke the discharge on the grounds M.J. Rutherford fraudulently converted the *291funds given for the promissory notes. Bruntz alleged M.J. Rutherford made fraudulent misrepresentations to the bankruptcy court which led to the discharge of his debts. In addition to requesting a revocation of the discharge, Bruntz further requested that he be permitted to trace his investment monies to the assets which Kathryn now owns. A hearing was held and arguments were presented to the bankruptcy court with respect to the complaint. Subsequently, an order was entered by the bankruptcy court dismissing the complaint.
Bruntz did not appeal this order to the United States District Court. Instead, he brought an action in the state circuit court seeking to impose a constructive trust on Kathryn’s home alleging the funds given to M.J. Rutherford for the promissory notes were fraudulently converted and that these funds are traceable to Kathryn’s home. Kathryn filed a motion for summary judgment which was granted by the circuit court and this appeal followed. Although several issues have been raised on appeal, we believe the only issue which requires discussion is whether Bruntz’s action is barred by the doctrine of res judicata.
Generally, a summary judgment is looked upon with favor where no genuine issue of fact exists. Hamaker v. Kenwel-Jackson Machine, Inc., 387 N.W.2d 515, 517 (S.D.1986); SDCL 15-6-56. The burden of proof is on the moving party to show clearly that there is no genuine issue of material fact, and that he is entitled to judgment as a matter of law. Wilson v. The Great Northern Railway Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968). In the present case, the material facts were not in dispute and we believe it is clear Kathryn was entitled to judgment as a matter of law.
Having reviewed the record in this case, we hold that Bruntz’s action is barred by the doctrine of res judicata. It has been held that the doctrine of res judicata prevents readjudication in state court of all matters which were or might have been litigated in prior bankruptcy proceedings involving the same parties. Levy v. Cohen, 19 Cal.3d 165, 137 Cal.Rptr. 162, 561 P.2d 252 (1977), cert, denied, 434 U.S. 833, 98 S.Ct. 119, 54 L.Ed.2d 94 (1977); Jantzen v. Baker, 131 Wis.2d 507, 388 N.W.2d 660, 662 (App.1986). While it is true Kathryn was not a party involved, nor in privity with a party involved in the prior bankruptcy proceeding, we hold that the doctrine of res judicata may still be applied in this case to bar Bruntz’s present action against her.
Prior to our decision in Black Hills Jewelry Mfg. v. Felco Jewel Ind., 336 N.W.2d 153 (S.D.1983), a former judgment would not be given preclusive effect in a subsequent action unless the subsequent action was between the same parties or their privies. See, Melbourn v. Benham, 292 N.W.2d 335 (S.D.1980). This was generally referred to as the privity requirement. In Black Hills Jewelry, however, we eradicated the privity requirement in defensive uses of res judicata. In doing so, we stated that the doctrine of res judicata may be applied in a civil action when a new defendant affirmatively raises this defense to bar a plaintiff from reasserting the issues the plaintiff has previously litigated and lost on the merits against another defendant. Black Hills Jewelry, supra, at 159.
The record in this case reflects that Bruntz had previously litigated, against the bankruptcy trustee, the issues of whether M.J. Rutherford fraudulently converted his funds and whether he ought to be allowed to trace such funds into Kathryn’s assets. A judgment was rendered on the merits of these issues and Bruntz lost.1 Therefore, according to our decision in Black Hills Jewelry, Bruntz should not be allowed to *292try these same issues against a new defendant, namely, Kathryn. The doctrine of res judicata is being utilized here in a defensive manner, therefore Kathryn need not have been a party involved in the prior bankruptcy proceeding in order for the doctrine of res judicata to be applied in this case.
The matters which Bruntz attempted to adjudicate in the present action were previously adjudicated in the prior bankruptcy proceeding. As we have previously noted, the doctrine of res judicata prevents read-judication in state court of all matters which were previously adjudicated in a pri- or bankruptcy proceeding. Therefore, it is clear that the trial court did not err in granting summary judgment to Kathryn.
Judgment is affirmed.
MORGAN, J., concurs.
HENDERSON, J., concurs with a writing.
SABERS and MILLER, JJ., concur specially.

. Rule 41(b) of the Federal Rules of Civil Procedure, entitled "Involuntary Dismissals,” provides in pertinent part:
Unless the court in its order for dismissal otherwise specifies, a dismissal under this subsection and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits. (Emphasis added).
The involuntary dismissal entered by the bankruptcy court was not for lack of jurisdiction, improper venue, or failure to join a party. Therefore, it operates as an adjudication upon the merits.