Court Opinion

ID: 878580
Source: CourtListenerOpinion
Date Created: 2013-06-04 22:45:52.354838+00
Date Added: 2024-06-11T12:53:51.312672
License: Public Domain

No.    83-194

                    I N THE SUPREME COURT O THE STATE O MONTANA
                                           F           F

                                                     1984

K L Y J . BRAULT,
 EL

                                   Plaintiff     and A p p e l l a n t ,

RICHARD D L SMITH, ALICE SMITH,
              AE
E N G I N E REBUILDERS, I N C . , a Mont.
c o r p . , W.D. HIRST, JAI4ES H. SADLER,
& MISSOULA BANK O MONTANA,
                      F

                                   D e f e n d a n t s and Respondents.

APPEAL F O :
        R M           D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t ,
                      I n and f o r t h e County o f M i s s o u l a ,
                      The Honorable John S. Henson, J u d g e p r e s i d i n g .

COUNSEL O F RECORD:

         For A p p e l l a n t :

                      Raymond W.        B r a u l t , H e l e n a , Montana

         F o r Respondents:

                      D a t s o p o u l o s , MacDonald & L i n d ; Ronald B . IilacDonald,
                      M i s s o u l a , Montana (Smith & Engine R e b u i l d e r s )
                      P a t t e r s o n , M a r s i l l o , Tornabene & S c h u y l e r ; John D o s t a l ,
                      M i s s o u l a , Montana ( H i r s t )
                      Worden, Thane & I l a i n e s ; P a t r i c l c G . F r a n k , M i s s o u l a ,
                      Montana (Bank o f Montana)

                                              S u b m i t t e d on B r i e f s :   December 2 2 ,   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 defen-
dants    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..oselyheld 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 respon-
dents 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 dis-
missed 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 judi-
cata, 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 defen-
dant 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 con-
clusion that such damages are not actionable in that they
arose from a judicial complaint clothed with absolute privi-
lege.      Appellant has confined his argument before this Court
to libel and slander damages flowing from the letter alleged-
ly 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 defama-
tion.      Section 2 7 - 1 - 8 0 4 ( 2 ) ,   MCA.   As to damage claims flowing
from any publications collateral to the complaint, the doc-
trine 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 judica-
ta, including collateral estoppel, on numerous occasions.      In
Gessel T r .   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 ques-
               tions 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 vernacu-
lar 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 jurisdic-
              tion 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 ~ . 2 d929, 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.ain 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 litiga-
tion, the shareholders are privies of the corporation for
purposes of res judicata.
        The other criteria for application of res judicata set
forth in - are met in this case.
         Fox                              The subject matter of the
counterclaim in Engine Rebuilders was           the filing of the
original complaint and collateral publications of the penden-
cy 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 identi-
cal.    As this Court noted in - identitv of issues is an
                               Fox,
important criteria for purposes of res judicata.            Among the-
primary 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 involun-
tary dismissal is an adjudication on the merits by the ex-
press 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 p a r t y   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 crite-
ria for application of res judicata are fully satisfied and
appellant is barred from relitigating claims of libel, slan-
der 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.           Conse-
quently, 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 proceed-
ing.    Prosser, - - Torts, 4th Ed., 857 (1971).
                 Law of                                      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 construc-
tion 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.er-
a1 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 at-
             tachment 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 damag-
             es, 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 W ,do
                                     $, m
                                   Chief Jugtice '

We concur: