96-657
No. 96-657
IN THE SUPREME COURT OF THE STATE OF MONTANA
1997
EDWARD C. PETERS,
Plaintiff and Respondent,
v.
STATE OF MONTANA,
Defendant and Appellant.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Thomas McKittrick, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael T. McCabe, Lieutenant Colonel, MTARNG, Helena, Montana
For Respondent:
Lawrence A. Anderson, Great Falls, Montana
For Amicus Curiae:
Kelly A. Jenkins, PERD, Helena, Montana
Submitted on Briefs: May 22, 1997
Decided: November 7, 1997
Filed:
__________________________________________
Clerk
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Justice William E. Hunt delivered the Opinion of the Court.
Defendant, State of Montana (State), appeals from an order of the Eighth
Judicial
District Court, Cascade County, granting Plaintiffþs Motion To Enforce Judgment. We
affirm.
We state the issues on appeal as follows:
1. Did the District Court err in ruling that the Stateþs set-off claim was
barred as
a compulsory counterclaim under Rule 13(a), M.R.Civ.P.?
2. Did the District Court err in finding that the Stateþs Department of
Military
Affairs (DMA) and its Public Employeesþ Retirement System (PERS) were the same
party for purposes of this action?
3. Did the District Court err when it ordered the State to pay Peters his full
settlement as written in the partiesþ Consent Judgment, without any set-off for PERS
claims?
BACKGROUND
This case is the latest in a series of disputes between the firefighters
employed by
the Montana Air National Guard (Guard) in Great Falls, Montana, and the State of
Montana. From 1974 until his termination in 1990, the respondent in this case,
Edward
C. Peters (Peters), worked as a firefighter for the Guard. During this time, the
firefighters twice sued the State for unpaid overtime, and prevailed on both
actions. See
Stimac v. State (1991), 248 Mont. 412, 812 P.2d 1246 (settlement reached); and Tefft
v. State (1995), 271 Mont. 82, 894 P.2d 317 (holding that under the federal Fair
Labor
Standards Act (FLSA), the State was required to pay the firefighters for overtime at
the
overtime rate). To circumvent its obligation to pay the firefighters overtime in
the future,
the DMA sought an exemption from the Stateþs pay matrix under õ 2-18-103(6), MCA,
which excludes members of the militia. See Tefft, 894 P.2d at 321. The State
granted
the exemption, and classified the firefighters as "Militia Protective Services."
Thereafter,
in order to qualify for the exemption, the DMA made membership in the Guard a
condition of employment for firefighters.
Joseph M. McKamey, a fellow firefighter of Peters, then filed suit against the
State
alleging that the DMAþs policy, making membership in the Guard a condition of
employment, violated the Equal Protection Clause of the Montana and United States
Constitutions. See McKamey v. State (1994), 268 Mont. 137, 885 P.2d 515.
On December 31, 1990, during the pendency of the Tefft and McKamey
decisions, the DMA fired Peters because he was no longer a member of the Guard. On
January 1, 1991, Peters began drawing retirement benefits from his pension with the
Stateþs PERS. On November 5, 1991, Peters filed suit against the State alleging the
same
claim as that in McKamey, that the DMAþs policy, requiring firefighters to be members
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of the Guard, was discriminatory. Petersþ complaint sought the following relief:
reinstatement of his employment; lost wages and employment benefits for the period of
termination; liquidated damages under the provisions of the FLSA; and attorneyþs fees
and costs.
On December 8, 1993, the district court decided Tefft in favor of the
firefighters.
In awarding the firefighters their overtime pay, the court held that the DMAþs
exemption
from the state pay matrix was a "blatant subterfuge" created in bad faith to avoid
paying
the firefighters overtime under the provisions of the FLSA. On February 4, 1994, the
district court decided McKamey, also in favor of the firefighter. The district
court held
that the DMAþs policy, mandatory membership in the Guard as a condition of
employment, was unconstitutional as it violated equal protection standards under the
Montana and United States Constitutions. We affirmed both cases on appeal. See
Tefft,
894 P.2d at 323; McKamey, 885 P.2d at 522.
Based on the Tefft and McKamey decisions, on December 21, 1994, the District
Court granted Petersþ motion for partial summary judgment on the issue of
liability. The
parties then settled on the amount of damages. On March 9, 1995, the District Court
entered a Consent Judgment which provided Peters the following:
1. Reinstatement to his employment as if not terminated;
2. Lost wages of $82,171;
3. Lost annual leave and sick leave benefits;
4. PERS contributions that the DMA would have made had Peters not been
terminated; and
5. Attorneyþs fees and costs of suit.
Representatives from the DMA and the PERS met to compute the amount of PERS
contributions the DMA was to make toward Petersþ pension. At that time, PERS
informed the DMA that Peters was retired and that he had been collecting retirement
benefits since January of 1991. PERS informed the DMA that because Peters would be
reinstated to his employment as if never fired, DMA would have to reimburse PERS for
the amount of retirement benefits Peters had collected, from the time he was fired
until
his reinstatement, plus the amount of PERS assessments which would have been deducted
from Petersþ regular paychecks had he not been fired, a total sum of $35,970.46. The
PERS reasoned that Peters could not be retired and employed at the same time. PERS
suggested that the DMA raise this money by deducting it from Petersþ settlement
fund.
The DMA took PERSþs suggestion and, after explaining the situation to Peters,
demanded
that his damage award be offset by $35,970.46. The DMA then paid $100,000 into
escrow pending Petersþ assent to these terms.
Meanwhile, Peters had elected to stay retired rather than be reinstated in his
employment. PERS refused to make any further retirement payments to Peters until it
received reimbursement for the $35, 970.46, either from the DMA or from Peters.
Peters then filed a Motion To Enforce Judgment on May 10, 1996. On June 18,
1996, the District Court held a hearing on the motion, and on September 20, 1996, the
District Court entered its Memorandum and Order in favor of Peters. The District
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Court
ruled that the Stateþs set-off claim was barred as a compulsory counterclaim under
Rule
13(a) M.R.Civ.P.; that both the DMA and the PERS were bound to the Consent
Judgment because they were the same party, collectively known as "State of Montana;"
and that the State was required to pay Peters his full settlement as written in the
partiesþ
Consent Judgment, without any set-off for PERS retirement benefits already received.
The State appeals this ruling. The DMA has appeared for the State, and the PERS has
filed an amicus curiae brief with the Court.
DISCUSSION
The standard of review of a district courtþs conclusions of law is whether the
courtþs interpretation of the law is correct. Welch v. Huber (1993), 262 Mont. 114,
116,
862 P.2d 1180, 1181.
Issue 1
Did the District Court err in ruling that the Stateþs set-off claim was barred
as a
compulsory counterclaim under Rule 13(a), M.R.Civ.P.?
Rule 13(a), M.R.Civ.P., provides in pertinent part:
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 partyþs claim . . . .
The purpose of Rule 13(a) is "to bring all logically related claims into a single
litigation,
thereby avoiding a multiplicity of suits." Julian v. Mattson (1985), 219 Mont. 145,
148,
710 P.2d 707, 709. Our analysis of whether the District Court correctly applied Rule
13(a) depends first, on what exactly comprises the "transaction or occurrence" in
this
case, and second, on whether the Stateþs set-off claim arose out of this transaction
or
occurrence.
In determining what constitutes the "transaction" in this case, the State urges
this
Court to go back to the days of code pleading and apply the narrowest of
interpretations
to the term. The State cites Kauffman v. Cooper (1909), 39 Mont. 146, 155-56, 101 P.
969, 972, for the rule that a transaction is comprised of only that which appears
affirmatively in the complaint. Under the rule of Kauffman, the State argues that
the
transaction in the instant case is only what appears on Petersþ complaint; the anti-
discrimination claim and damages. The State argues that because Peters failed to
specifically plead for retention of his retirement benefits as part of the damage
award, the
Stateþs set-off claim for recoupment of these benefits falls outside the litigated
transaction.
We disagree with the Stateþs interpretation of "transaction." Kauffman is
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inapposite as that case interpreted õõ 6540, 6541, and 6547 of the Revised Codes of
Montana. These code sections are superseded by Rule 13(a), M.R.Civ.P., adopted by
the Montana Legislature in 1961. Since the adoption of Rule 13(a), we have
consistently
applied a broader interpretation of the term "transaction."
In Julian, we defined "transaction" as:
that combination of acts and events, circumstances and defaults, which,
viewed in one aspect, results in the plaintiffþs right of action, and viewed
in another aspect, results in the defendantþs right of action, and it applies
to any dealings of the parties resulting in wrong, without regard to whether
the wrong be done by violence, neglect or breach of contract.
Julian, 710 P.2d at 710 (citations omitted).
Similarly, in First Bank v. Fourth Judicial Dist. Court (1987), 226 Mont. 515,
737
P.2d 1132, 1136, we adopted the United States Supreme Courtþs logical relationship
test
in interpreting "transaction:"
þTransactionþ 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 . . . 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.
First Bank, 737 P.2d at 1136 (citing Moore v. New York Cotton Exchange (1926), 270
U.S. 593, 610, 46 S.Ct. 367, 371, 70 L.Ed. 750, 757). In First Bank, we held that
belated claims of creditor misconduct were barred as compulsory counterclaims because
they arose out of the transaction involving the bankþs foreclosure suit. First
Bank, 737
P.2d at 1136. In reaching our conclusion, we reasoned that "the factual history of
the
complaint is the same as the history alluded to in the [belated claims]" and that
there was
a "logical relationship" between the bankþs foreclosure complaint and the claims of
creditor misconduct. First Bank, 737 P.2d at 1136.
In Turtainen v. Poulsen (1990), 243 Mont. 355, 792 P.2d 1089, we expressed the
logical relationship test in terms of whether the belated claim "arose out of the
same
aggregate of operative facts" that gave rise to the underlying claim. Turtainen,
792 P.2d
at 1091. In that case, we held that belated claims for fraud and enforcement of
restrictive
covenants "arose out of the same aggregate of operative facts, the creation and
execution
of the contract for sale of land . . . ." Turtainen, 792 P.2d at 1091.
Applying the logical relationship test to the instant case, we determine that
the
Stateþs set-off claim against Peters arose out of the same transaction as Petersþ
FLSA
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claim against the State. The underlying "transaction" in both cases is the unlawful
termination of Petersþ employment and the damages resulting therefrom. We agree with
Peters that the unlawful termination of his employment set in motion all the events
resulting both in his FLSA claim and the Stateþs set-off claim. The claims are
logically
related because they arose out of the same aggregate of operative facts.
Amicus argues that we need not reach the "same transaction" analysis, because
the
facts giving rise to the Stateþs set-off claim did not exist "at the time of
pleading" as
required by Rule 13(a). Amicus cites a federal case, Burlington Northern R.R. Co.
v.
Strong (7th Cir. 1990), 907 F.2d 707, for the rule that a claim is not a compulsory
counterclaim if it did not exist until the conclusion of the first suit. Strong,
907 F.2d at
712. Although Amicus is silent as to which facts did not exist at the time of
pleading,
it appears that Amicus is referring to the fact that the DMA did not know of Petersþ
retirement status until after signing the Consent Judgment. That argument is
unpersuasive. The existence of a fact and a partyþs knowledge of that fact are two
different things. Petersþ retirement status was a fact that existed at the time of
pleading.
That the DMA had no knowledge of that fact is of no consequence here. Indeed, we
see
no reason why the DMAþs investigation and discovery did not reveal the fact of
Petersþ
retirement status.
Both the State and Amicus make much of the equities of the parties resulting
from
the District Courtþs enforcement order. The State and Amicus argue that it is
fundamentally unfair for Peters to receive both retirement benefits and PERS
contributions for the same time period; that Peters, by definition, cannot be
"retired" and
an "active member" at the same time. We emphasize that the issue presented, whether
Rule 13(a) bars the Stateþs set-off claim, is strictly procedural. Our holding does
not
address the merits of whether Peters is entitled to both retirement benefits and PERS
contributions for the same period. Likewise, our holding does not address the
merits of
from whom PERS is to receive reimbursement for the depletion of its trust fund.
Those
questions are not part of this action.
Having determined that the Stateþs set-off claim arose out of the same
transaction
as Petersþ claim, and given the policy of judicial economy underlying Rule 13(a), we
conclude that the District Court did not err in ruling that the Stateþs set-off
claim was
barred as a compulsory counterclaim under Rule 13(a).
Issue 2
Did the District Court err in finding that the DMA and the PERS were the same
party for purposes of this action?
In its Order of September 20, 1996, enforcing the partiesþ Consent Judgment, the
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District Court stated the following:
[N]either PERS or DMA want to bear the financial consequences (lost
pension assessments and premature pension payout) caused when Plaintiff
was wrongfully fired. Instead of resolving this dispute between themselves,
the agencies seek to pass their expense along to the Plaintiff. They do this
by treating PERS as an independent party . . . .
The State of Montana (not just DMA) is the Defendant and the
judgment obligor in this case. Both PERS and DMA are state agencies,
and accordingly are bound by the Stateþs position . . . . [citations omitted]
DMA and PERS are one party for the purposes of this lawsuit. The fact
that the $36,000 recoupment claim originated with PERS and not with
DMA makes no difference in assessing whether [the set-off] claim is barred
. . . .
In concluding that PERS and DMA were one party, the District Court relied upon a
United States Supreme Court case wherein the Court held that because privity exists
between agents of the same government, a judgment against one agent is binding on
the
others. Sunshine Anthracite Coal Co. v. Adkins (1940), 310 U.S. 381, 402-403, 60
S.Ct. 907, 917, 84 L.Ed. 1263, 1276.
The State argues that the District Court erred when it concluded that DMA and
PERS were one party. As support for its argument, the State cites two companion
cases
where this Court recognized the separateness of state agencies for purposes of suing
one
another. See Board of Regents v. Judge (1975), 168 Mont. 433, 543 P.2d 1323; State
ex rel. Judge v. Legislative Fin. Comm. (1975), 168 Mont. 470, 543 P.2d 1317.
Likewise, Amicus assigns error to the courtþs conclusion, arguing that it ignores the
constitutionally imposed fiduciary duty of the PERS Board not to encumber, divert, or
reduce the pension trust assets. See Art. VIII, Sec. 15, Mont. Const.
Both arguments are without merit. The cases cited by the State do not apply in
the instant case because PERS and DMA are not suing one another. Rather, the two
agencies are trying to recoup Petersþ retirement benefits from Peters. The District
Courtþs reliance on Sunshine Anthracite Coal Co. was proper. The State was the named
Defendant on all the pleadings and the named party to the Consent Judgment. Thus,
the
judgment against the State is binding on the PERS and the DMA. Similarly, Amicusþ
contention is without merit because there is nothing in the District Courtþs order
requiring
the PERS Board to deplete the pension trust assets. The effect of the courtþs
order was
not that the PERS will not be reimbursed the $35,970.46. Rather, the effect of the
courtþs order was simply that reimbursement of the sum must come from someone other
than Peters. Upon the foregoing, we hold the District Court did not err in
concluding
that PERS and DMA were one party.
Issue 3
Did the District Court err when it ordered the State to pay Peters his full
settlement as written in the partiesþ Consent Judgment, without any set-off for PERS
claims?
The State argues that the District Courtþs enforcement order improperly amended
the Consent Judgment. Specifically, the State contends that by refusing its
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$35,970.46
set-off claim, the District Court added new relief not contained in the terms of the
Consent Judgment, and substantially altered the rights of the parties as originally
determined. The State relies on State ex rel. Vaughn v. District Court (1941), 111
Mont.
552, 111 P.2d 810, for the rule that a court may amend or modify a judgment to remedy
an error or to clarify an ambiguity, but a court is without jurisdiction to
substantially alter
the rights of parties as originally determined. Vaughn, 111 P.2d at 811.
The State also argues that the District Courtþs enforcement order violated
Montanaþs parol evidence rule, õ 28-2-905, MCA, which states in relevant part:
Whenever the terms of an agreement have been reduced to writing . . . it
is to be considered as containing all those terms. Therefore, there can be
. . . no evidence of the terms of the agreement other than the contents of
the writing . . . .
The State argues that the District Court violated this rule by imposing on the State
the
"additional" obligation of paying Petersþ retirement benefits.
Peters argues that the parol evidence rule is precisely the reason why the
courtþs
enforcement order is not in error. Peters contends that the court followed the parol
evidence rule by refusing to make the Stateþs belated set-off claim part of the
original
Consent Judgment. Peters also argues that in strictly construing the terms of the
Consent
Judgment as written, the court followed general principles of contract law. See
Hohensee
v. Chemodurow (1970), 155 Mont. 288, 293, 470 P.2d 965, 967 ("It is not the province
of courts to make contracts for parties sui juris, but rather to interpret and
enforce them
. . . in accordance with their terms.") (citation omitted).
We agree with Peters. The Stateþs argument that the District Court amended the
original judgment is without merit. In ordering the State to pay Peters all of his
pension
benefits "as if he were not terminated," the District Court simply followed basic
principles of contract law by enforcing the terms of the original Consent Judgment as
written. In ordering that the Stateþs set-off claim was barred by Rule 13(a), the
District
Court complied with the parol evidence rule by refusing to consider a term not
contemplated in the original Consent Judgment. We conclude that the District Court
did
not err when it ordered the State to pay Peters his full settlement without any set-
off for
PERS claims.
Upon the foregoing, the District Courtþs enforcement order is affirmed.
/S/ WILLIAM E. HUNT, SR.
We Concur:
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/S/ TERRY N. TRIEWEILER
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ KARLA M. GRAY
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