Hughes v. Salo

NO. 82-297

I N THE SUPREME COURT OF THE STATE O F MONTANA

1983

J O H N C . HUGHES, i n h i s c a p a c i t y a s
A d m i n s t r a t i v e Manager o f W e s t e r n
Conference o f Teamsters Pension T r u s t Fund,

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

VS.

G. K. SALO, I n d i v i d u a l l y , and d/b/a
G. K. SALO TEXACO,

Defendant and Respondent.

Appeal from: D i s t r i c t C o u r t o f t h e Second J u d i c i a l D i s t r i c t ,
I n a n d f o r t h e C o u n t y o f S i l v e r Bow
Honorable Arnold Olsen, Judge p r e s i d i n g .

Counsel of Record:

For Appellant:

B e r g , C o i l , S t o k e s , & T o l l e f s e n , Bozeman, Montana
M i c h a e l C . C o i l a r g u e d a n d Don H a y e s a r g u e d , B o z e m a n ,
Montana

For Respondent :

C o r e t t e , S m i t h , Pohlman & A l l e n , B u t t e , Montana
Gregory C . B l a c k a r g u e d , B u t t e , Montana

Submitted: January 1 4 , 1983

~ ~ ~ i d February
e d : 2 4 , 1983

Filed:
FEB 2 4 I983

- -
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff appeals from an adverse judgment in the Second
Judicial District Court, Silver Bow County, in this action to
collect allegedly delinquent pension fund contributions from
defendant. The District Court held that this action was
barred by the doctrine of merger, the rule against splitting
causes of action, and by this Court's holding in an earlier
case, as well as by a previous stipulated dismissal with
prejudice of plaintiff's attempt to enforce a Colorado
judgment involving the same alleged delinquency. We reverse
the District Court and remand this cause, for consideration
on the merits, with such further proceedings as the District
Court shall find to be necessary.
In 1973, defendant Salo, owner of G. K. Salo Texaco, in
Butte, Montana, entered into a labor agreement with the
Teamsters Union, agreeing to make certain pension fund
contributions for the period from May 1, 1973 to April 30,
1976. He signed a second similar agreement in June of 1976
for the period from May 1, 1976 to April 30, 1979. Monthly
payments of pension fund contributions were to be mailed to
Colorado. Defendant was domiciled in Montana, and had no
other connection with Colorado.
In October of 1978, the Teamsters Pension Fund filed a
complaint in District Court in Denver, Colorado, alleging
that Salo was delinquent in making the agreed upon
contributions for the period between January 1, 1974 and July
31, 1977. Summons was served on Salo in Butte, Montana on
October 13, 1978. Salo neither answered nor appeared in
court. He did not challenge the jurisdiction of the Colorado
court, which, on May 18, 1979, entered a default judgment
against him, nunc pro tunc, January 12, 1979.
 On May 25, 1979, the Teamsters Union Pension Fund filed
an amended complaint in the District Court of Silver Bow
County, seeking enforcement of the Colorado judgment. (Cause
64227). Defendant answered, admitting that the default
judgment had been obtained, but denying the authority of the
Colorado court to render its judgment, for reasons
unconnected with the issues discussed herein.
On March 31, 1980, defendant moved the District Court
for summary judgment, pointing out that this Court's just-
released decision in May v. Figgins (1980) Mont . I

607 P.2d 1132, 37 St.Rep. 493, governed the enforcement

action against Salo. The motion was accompanied by an
affidavit from Salo to the effect that, except for sending
the monthly checks to Colorado, he had no contact with the
state, and had "never waived his rights as to Colorado
jurisdiction." On April 23, 1980, the parties stipulated
that the District Court might dismiss the enforcement action

with prejudice and award defendant's attorney fees of $800.
This was done. No explanation is included in the stipulation
or the order of dismissal; and counsel now disaqree in their
recollection whether the dismissal was specifically intended
to prevent or permit a subsequent action on the underlying
alleged obligation.
On July 18, 1980, plaintiff filed the present action in
the District Court, seeking payment of allegedly delinquent
pension fund contributions for the period covered by the
Colorado judgment (Jan. 1, 1974 through July 31, 1977) as
well as for the period from August 1, 1977 through April.
1978. Defendant in his answer, asserted that this action was
precluded by the stipulated dismissal of the enforcement
action. Defendant's subsequent motion for summary judgment,
based upon his assertion that this action is barred by the
doctrine of merger and the rule against splitting causes of
action, was denied on the grounds that "the plaintiff's cause
was not heretofor heard nor decided upon the merits."
The case was heard by the District Court, sitting
without a jury, on December 2, 1981. Judgment was entered
for defendant May 11, 1982. The District Court concluded
that this action was barred by: 1) the laws set forth in the
May v. Figqins decision in this Court, under which the
Colorado judgment pertinent to this action was "void and
ineffective"; 2) the doctrine of merger; 3) the rule against
splitting causes of action; and 4) the stipulated dismissal
with prejudice of the original action to enforce the Colorado
judgment. Attorney's fees in the amount of $4,500 were
awarded defendant. Plaintiff appeals.
Plaintiff raises a number of issues, but we find the
following to be dispositive:
1. Whether, under May v. Fiqgins, the Colorado judgment
was void, or merely unenforceable.
2. Whether the stipulated dismissal with prejudice of
the action to enforce the Co1ora.d.o judgment amounted to a
judgment on the merits of the underlying obligation.
3. Whether the doctrine of merger and the rule against
splitting causes of action bar this action.
I.

In May v. Figgins, the Western Conference of Teamsters
Pension Fund, through its Deputy Administrator, Robert May,
sued in Montana to enforce a Colorado default judgment
against a Montana road contractor, Willie Figgins. Fiqgins'
only contact with Colorado was the deposit by mail of 35
checks containing pension fund contributions, in the
Teamsters' Denver bank. The Montana court denied Figgins'
motion for summary judgment, which was based on Figgins'
assertion that Colorado lacked personal jurisdiction over
him. The District Court held for the plaintiff, and Figgins
appealed. This Court reversed, holding that, under Colorado
law and the due process clause of the fourteenth amendment of
the United States Constitution, Figgins did not have the
"minimum contacts" with Colorado required under International
Shoe Co. v. State of Washington (1945) 326 U.S. 310, 66 S.Ct.
154, 90 L.Ed. 95, to give the forum state personal
jurisdiction over a nonresident. This Court also noted:
I1 1
. . .
where defendant's contacts with the state
are not sufficient to satisfy traditional notions
of fair play and substantial justice, in personam
jurisdiction may not be secured over him through
long-arm service.' 2 Moore's Federal Practice
84.41-1[1] at 4-414, citing Hanson v. Denckla
(1958) 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d
1283." May v. Figgins, Mont. at , 607 P.2d
at 1136, 37 St.Rep. at 497.
Finally, May v. Figgins held that the contractual provisions
purporting to waive in personam jurisdiction were
unreasonable and unenforceable, and concluded that Figgins'
had not clearly and knowingly waived his due process rights,
and so was not subject to the jurisdiction of the Colorado
courts. Mont. at , 607 P.2d at 1138-39, 37 St.Rep.
at 501.
In the present case, Salo's contacts with Colorado were
no greater than Figgins': Salo did not reside or do business

or advertise or solicit business in Colorado; his only
contact with that forum was mailing checks to a Colorado
bank. Moreover, Salo, like Figgins, did not appear in the
Colorado action to contest either jurisdiction or the alleged
obligation; judgment was entered against him by default. The
contracts, and the agreements incorporated by reference in
the contracts, are the same as those this Court found
insufficient to waive due process rights in - Figgins.
v.
There can be no doubt that, under the rule established in
May v. Figgins, the Colorado court lacked personal
jurisdiction over defendant Salo.
Plaintiff in this action has never disputed the
application of May v. Figgins to the Colorado judgment
against Salo. Defendant's motion for summary judgment of the
enforcement action was based upon May v. Figgins, and was
accompanied by an affidavit from Salo establishing that the
payments made by check were Salo's sole contact with
Colorado. During the present action, defendant a,nd plaintiff
both stated that the dismissal with prejudice of the
enforcement action was brought about because of the parties'
recognition that the Colorado judgment was invalid and
unenforceable. Plaintiff also brought the record of the
enforcement action to the attention of the District Court.
Defendant proposed that the District Court find the Colorado
judgment to be "void and ineffective" under May - Figgins,
v.
which it did.
Defendant now argues that, because neither the pleadings
as defined in Rule 7(a), M.R.Civ.P., nor the stipulated
dismissal, explicitly indicated that the Colorado judgment
was unenforceable for lack of personal jurisdiction, it was
still a "valid judgment" at the time the present action was
filed, for purposes of barring this action under the doctrine
or merger and the rule against splitting causes of action.
(See below) We disagree.
Plaintiff disregards the hoary but still viable decision
of the United States Supreme Court in Pennoyer v. Neff (1878)
95 1 . . 714, 24 L.Ed. 565.
JS Although the rigid conclusion in
Pennoyer v. Neff, that a tribunal's authority is restricted
to its territorial limits, has yielded to the more flexible
due process requirements set forth in International Shoe,
supra, the effect of rendering a personal judgment without -
in
personam jurisdiction remains the same. In the recent case
of World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S.
286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490, 497, the
Supreme Court stated:

"The Due Process Clause of the Fourteenth Amendment
limits the power of a state court to render a valid
personal judgment against a nonresident defendant.
Kulko v. ~aliforniaSuperior Court, 436 U.S. 84,
91, 98S.ct. 1-690. 1696, 56 L.Ed.2d 132 (1978)- - ~,-
, A
judgment rendered' - violation - - process -
'udgment in of due is
- -in the renderlYg State - --- - entitled -u
loid - - --
- - - -I,- - and - not
is -- - - -- -
--'- '---
r\

full faith and credit elsewhere. Pennoyer - - v. Neff,
95 U.S. 7 1 4 7 3 2 - 3 3 , 24 L.Ed. 565 (1878). (Emphasis
added) .
See also Scoles and Hay, Conflict of Laws 937 (1982);
Goodrich, Handbook of the Conflict of Laws
Restatement (Second) of Conflict of Laws S24 (e)(1971) .
Russell Weintraub, in his Commentary on the Conflict - -
of Laws
(2d ed. 1980) , states at pp. 95-96:
"If a court acts beyond the scope of its
constitutiona.lly circumscribed jurisdiction, its
adjudication is a violation of due process. The
judgment is invalid in the state in which rendered
and no court sitting in a sister state is either
required or permitted to give the invalid judgment
full faith and credit. If a court purports, for
example, to make a judgment personally binding on a
defendant over whom it does not have constitutional
judicial jurisdiction, the defendant may ignore the
proceedings, even if he has notice of them, and
then step in to make a collateral attack on the
judgment as a violation of due process if an
attempt is made to enforce the judgement against
him. This attack may be made either in the state
in which the judgment has been rendered or in a
sister state."
In the present case, defendant was served with a summons
in Butte, Montana; upon his failure to appear, the Colorado
court entered a default judgment against him. When plaintiff
attempted to enforce the judgment in Montana, defendant
attacked the Colorado judgment by motion for summary
judgment. That the stipulated dismissal with prejudice of
the enforcement action was the result of both parties'
awareness of the unenforceability of the Colorado judgment is
crystal-clear; indeed both parties admit it. Yet defendant
now argues, in effect, that because plaintiff failed, in its
own enforcement action, to obtain a judicial decree that
Colorado lacked jurisdiction over defendant and the Colorado
judgment was therefore invalid, that judgment remained
"valid". This conclusion is simply not consistent with the
law, or, indeed, with any reasonable procedural requirement.
Montana has long recognized that the judgment of a court
acting without jurisdiction is invalid from its inception.
In Barnes v. Montana Lumber and Hardware, Co. (1923) 67 Mont.
481, 487, 216 P. 335, 337, we stated:
"Where a court has jurisdiction, it has a right to
decide every question which occurs in the cause;
and whether its decision be correct or otherwise
its judgment, until reversed, is regarded as
binding in every other court. But, if it act
without authority, its judgments and orders are
regarded as nullities. They are not voidable, but
simply void; and form no bar to a recovery sou ht
--%I
even prior to a reversal, in opposition to them.
(Emphasis added).
See also World-Wide Volkswagen Corp., supra.
We hold that the Colorado judgment was void from its
inception, as violative of defendant's due process rights; it
was rendered by a court without personal jurisdiction over
defendant. Despite the fact that its invalidity was not
explicitly recognized until the judgment herein appealed, the
Colorado judgment was a nullity and could not serve as a bar
to the present action.

Defendant argues that the stipulated dismissal with
prejudice of the enforcement action amounted to a judgment on
the merits of the underlying alleged obligation. We do not
agree. In State ex rel. City of Havre v. District Court
(1980) Mont . , 609 P.2d 275, 278, 37 St.Rep. 552, 555,
we stated:
 II I . . .
[A] judgment or decree of dismissal with
prejudice is as conclusive of the rights of the
parties as if the suit had been prosecuted to a
final adjudication adverse to the plaintiff.'
"Therefore, a stipulation of dismissal with
prejudice of a defendant is tantamount to a
judgment on the merits; and accordingly, - - asuch
dismissal with prejudice is res judicata as - to
every issue reasonably raised by the pleadings.
. . . This Court will look at the dismissal with
prejudice on its face, and will not look behind the
words 'with prejudice.'" (Emphasis added. )
In the case at bar, neither the pleadings as defined in
Rule 7 (a), M.R.Civ.P., nor the stipulations and accompanying
dismissal with prejudice, made reference to or "reasonably
raised" any issue regarding the merits of the underlying
obligation. Nor is it the function of a court, when
considering an action to enforce a judgment rendered in a
sister state, to reconsider the merits of the original
action; that is a matter for direct appeal from the original
forum. See Restatement (Second) Conflict of Laws S106
comment (a) (1971).
The record here discloses that Cause 64227 was purely an
action to enforce; the stipulated dismissal with prejudice
was not a judgment on the merits of the underlying
obligation, and hence, does not bar the present action.

The District Court concluded that the present action was
barred by the doctrine of merger, i .e. , that I [t]
' he alleged
debt for said time period was reduced to judgment in
Colorado, and the debt for that time period is merged in said
Judgment." The court further concluded that, since the cause
of action for the second time period (August 1, 1977 through
April, 1978 - raised only in the present action) had accrued
prior to the time the original action was filed in Colorado
and reduced to judgment, plaintiff was barred, by the rule
against splitting causes of action, from maintaining the
present action insofar as it relates to that time period.
Plaintiff maintains that because the Colorado judgment is
invalid, neither rule can be applied as a bar to this action.
Both the rule against splitting causes of action and the
doctrine of merger are inextricably related to the principles
of res judicata; and the application of either to bar a
subsequent action depends upon the existence of a "valid and
final" prior judgment. As was stated in ~ e r v i nV. F.T.C. (D.
C. Cir. 1978), 591 F.2d 821, 830:

"Principles of res judicata prevent relitigation
not only on the grounds or theories actually
advanced, but also on those which could have been
advanced in the prior litigation. Restatement of
Judgments §§ 62, 63 (1942); Restatement (Second) of
Judgments SS 61, 61.1 (Tent.Draft No. 1, 1973;) 1B
Moore's Federal Practice ¶0.405[1] at 621-22 (2d
ed. 1974)."
In Montana v. United States (1979) 440 U.S. 147, 153, 99
S.Ct. 970, 973, 59 L.Ed.2d 210, 216-17, the United States
Supreme Court said:
"A fundamental precept of common-law adjudication,
embodied in [the doctrine of] . ..res judicata,
is that a 'right, question or fact distinctly put
in issue and directly determined by a court of
competent jurisdiction ...
cannot be disputed in
a subsequent suit between the same parties or their
privies ...
' Southern Pacific R . Co. v. United
States, 168 U.S. 1, 48-49 (1897). Under res
judicata, a final judgment on the merits bars
further claims by parties or their privies based on
the same cause of action. Cromwell v. Countv of
*
Sac, 94 U.S. 351, 352 (1877); Lawlor v. National
Screen Service Corp., 349 U.S. 322, 326 (1955); 1B
J. Moore, Federal Practice ¶0.405[11, pp. 621-624
(2d ed. 1974) (hereinafter 1B Moore) ; Restatement
(Second) of Judgments S 47 (Tent. Draft No. 1, Mar.
28, 1973) (merger); id., S 48 (bar) ."
(emphasis
added)
See also Gallagher v. Frye (9th Cir. 1980), 631 F.2d 127,
129, wherein the Court of Appeals recognized and discussed:
It .
the general Restatement principles
prohibiting the splitting of causes of action and
barring subsequent suits based on the same
transaction or series of transactions previously
litigated. Restatement of Judgments SS61-62
(1942); Restatement (Second) of Judgments SS
61-61.1 (Tent.Draft No. 5, 1978)."
 The Tentative Draft of the Restatement (Second) of
Judgments, referred to in the above cases, was made official
in 1980, and the pertinent section, Section 24 provides, as
did the Tentative Draft:
"(1) When a valid and final judgment rendered in
an action extinguishes the plaintiff's claim
pursuant to the rules of merger or bar (see 55 18,
19), the claim extinguished includes all rights of
the plaintiff to remedies against the defendant
with respect to all or any part of the transaction,
or series of connected transactions, out of which
the action arose.
11
. . .
I
' (Emphasis added. ) Restatement (Second)
of Judgments S24 (1980).
Clearly this provision covers both the doctrine of merger and
the rule against splitting causes of action. Likewise 518 of
the Second Restatement of Judgments (1980) requires a "valid
and final" judgment before the general rule of merger can be
applied to bar a subsequent action.
We have held that the Colorado judgment against Salo was
void from its inception, under the due process clause, for
lack of - personam jurisdiction over defendant Salo.
in We now
hold that because no valid and final judgment existed, the
cause of action was not res judicata, and the District Court
improperly applied the doctrine of merger and the rule
against splitting causes of action to bar the present action.
Reversed, and remanded to the District Court for
consideration on the merits, and for such further proceedings

w-
as the District Court shall find to be necessary.

Justic
We concur:

A
Chief Just$cer
L. 9 -
Mr. Justice Frank B , Morrison, Jr,, deeming himself
disqualified, did not participate in this decision.