Loney v. Milodragovich, Dale & Dye, P.C.

No. 95-195
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995

CLEVE LONEY,
Plaintiff and Appellant,
v.

MILODRAGOVICH, DALE & DYE, P.C.,
Defendant and Respondent.

APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable John S. Henson, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Antonia P. Marra; Bell & Marra, Great Falls,
Montana

For Respondent:
Jon R. Binney; Milodragovich, Dale, Steinbrenner
& Binney, Missoula, Montana

Submitted on Briefs: September 13, 1995
Decided: October 31, 1995
Filed:
Justice Karla M. Gray delivered the Opinion of the Court.

Cleve Loney (Loney) appeals from an order of the Fourth
Judicial District Court, Missoula County, dismissing his complaint

for failure to state a claim upon which relief could be granted.

We affirm.

The issue on appeal is whether the District Court erred in

dismissing Loney's complaint pursuant to Rule 12(b) (6), M.R.Civ.P.,

on the basis that his claim is barred by the doctrine of res

judicata.

The law firm of Milodragovich, Dale and Dye, P.C. (the Firm)
represented Loney in bankruptcy proceedings. In April of 1991, the
Firm filed an action to recover unpaid attorney's fees from Loney.

Loney failed to answer the complaint and a default judgment in the

amount of $7,626.42 was entered against him in September of 1991.

In October of 1994, Loney filed a complaint against the Firm

requesting that the District Court declare the default judgment

void and unenforceable because the debt had been discharged in

bankruptcy. The Firm moved to dismiss the complaint pursuant to

Rule 12(b) (6), M.R.Civ.P. After considering the parties' pleadings

and briefs, the District Court concluded that Loney's failure to

affirmatively plead discharge in bankruptcy pursuant to Rule 8(c),

M.R.Civ.P., during the Firm's action against him constituted a

waiver of that defense. The court further concluded that Loney's
claim against the Firm was barred by the doctrine of res judicata

and, on that basis, dismissed Loney's complaint for failure to

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state a claim upon which relief could be granted. Loney appeals.
Did the District court err in dismissing Loney's
complaint pursuant to Rule 12(b)(6), M.R.Civ.P., on the
basis that his claim is barred by the doctrine of res
judicata?

In evaluating a Rule 12(b)(6) motion to dismiss, courts are

required to construe a complaint in the light most favorable to the

plaintiff. A complaint should not be dismissed unless it appears

that the plaintiff is not entitled to relief under any set of facts

which could proved in support of the claim. Boreen v. Christensen

(X994), 267 Mont. 405, 408, 884 P.2d 761, 762 (citation omitted).

The District Court's determination that Loney's complaint failed to

state a claim upon which relief could be granted, on the basis that

it was barred by the doctrine of res judicata, is a conclusion of

law. See Boreen, 884 P.2d at 762. We review a district court's

conclusions of law to determine whether the interpretation of the

law is correct. Boreen, 884 P.2d at 762 (citation omitted).

The doctrine of res judicata prevents a party from re-

litigating a matter that the party has already had an opportunity

to litigate. Greenwood v. Steve Nelson Trucking, Inc. (Mont.

19951, 890 P.Zd 765, 767, 52 St.Rep. 151, 152 (citation omitted).

It is based on the public policy that there must be some end to

litigation. Wellman v. Wellman (1983), 205 Mont. 504, 508, 668

P.2d 1060, 1062. A claim is res judicata when four criteria are

met: the parties or their privies are the same; the subject matter

of the claim is the same; the issues are the same and relate to

the same subject matter; and the capacities of the persons are the
same in reference to the subject matter and the issues. Greenwood,

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890 P.2d at 767 (citation omitted).
Loney does not dispute that three of the four res judicata
criteria are satisfied in this case. The parties are the same in
both actions; the Firm sued Loney in the earlier proceeding and
Loney sued the Firm in the present action. The subject matter is
also the same; both actions are based on the unpaid attorney's fees
the Firm is attempting to collect from Loney. The capacity of the
parties involved has not changed in relation to the subject matter
and the issues in the litigation.
Loney argues, however, that the issue in the present action is
not the same as the issue resolved by the 1991 default judgment
against him and, therefore, that his action against the Firm is not
barred by the doctrine of res judicata. He contends that the
issues are different in that the 1991 default judgment determined
the amount of unpaid attorney's fees, while the issue in his action
against the Firm is the voidness of that judgment based on the
prior bankruptcy court order discharging his debts.
While it is true that the specific issue of whether the unpaid
attorney's fees were discharged in bankruptcy was not litigated in
the Firm's action against Loney, the doctrine of res judicata bars
not only issues which were previously litigated, but also issues
which could have been litigated in the prior proceeding. & State
ex rel. Harlem Irrigation Dist. v. Montana Seventeenth Judicial
Dist. Court (Mont. 1995), 894 P.2d 943, 946, 52 St.Rep. 364, 366
(citation omitted). Whether the unpaid attorney's fees were
discharged in bankruptcy is inseparable from the issue presented in

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the prior proceeding, namely, whether Lomy owed the Firm
attorney's fees. The fact that Loney did not answer the Firm's
complaint and, as a result, that a default judgment was entered
against him does not negate the fact that he had an opportunity to

litigate the issue. &g Greenwood, 890 P.2d at 767.
Moreover, Rule 8(c), M.R.Civ.P., required Loney to plead
discharge in bankruptcy as an affirmative defense to the Firm's

complaint in the prior proceeding. We consistently have stated
that failure to affirmatively plead a defense set forth in Rule

8(c) generally results in a waiver of that defense. See, E?..LL,
Brown v. Ehlert (1992), 255 Mont. 140, 146, 841 P.2d 510, 514;

Nimmick v. Hart (1991), 248 Mont. 1, 8, 808 P.2d 481, 486; Pracht

v. Rollins (1989), 239 Mont. 62, 68, 779 P.Zd 57, 61; Taylor v.
Dep't of Fish, Wildlife & Parks, State of Montana (1983), 205 Mont.

85, 96, 666 P.2d 1228, 1233. Thus, in addition to having the

opportunity to litigate this issue in the earlier proceeding, Loney

was required to raise the matter of discharge in bankruptcy by Rule

8(c), M.R.Civ.P., or waive the defense.

We conclude that the issue presented in this action is the

same as the issue resolved by the 1991 default judgment against

Loney. Having determined that all four criteria necessary for

application of res judicata are satisfied, we hold that the

District Court did not err in concluding that Loney's claim against
the Firm was barred by the doctrine of res judicata.

Loney also argues on appeal that, because the 1991 default

judgment is void, he can collaterally attack that judgment at any

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time in a motion or an independent action pursuant to Rule 60(b) (4)

and (61, M.R.Civ.P. Loney's argument mischaracterizes Rule 60(b).

A party seeking relief from a final order or judgment can file

either a motion for relief based on one of the subsections of Rule

60(b) or an independent action under the residual clause of Rule

60(b). See Brown v. Small (1992), 251 Mont. 414, 420, 825 P.2d

1209, 1213; Rule 60(b), M.R.Civ.P.

Although Loney's argument is purportedly based on Rule

60(b) (4) and (6), these subsections of Rule 60(b) are inapplicable

here because he did not seek relief from the default judgment via

a Rule 60(b) motion filed in that case. $.g.g Brown, 825 P.2d at

1213. Instead, Loney brought an independent action for relief from

the default judgment. Therefore, we examine his action under the

residual clause of Rule 60(b), M.R.Civ.P.
The residual clause of Rule 60(b), M.R.Civ.P., allows a party

to file an independent action for relief from a final judgment or

order under very limited circumstances. We recently clarified that

the available grounds for relief pursuant to the residual clause

are : lack of personal notification, fraud upon the court, or an

independent action for extrinsic fraud. In re Marriage of Miller

(Mont. 1995), __ P.2d ___, 52 St.Rep. 977, 979 (citing Salway v.

Arkava (1985), 215 Mont. 135, 695 P.2d 1302).

Loney argues that his independent action is premised on the

Firm's extrinsic fraud in failing to inform the District Court that

the contested attorney‘s fees had not been approved by the

bankruptcy court. He relies on In re Marriage of Madden (1984),

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211 Mont. 237, 683 P.2d 493. We recently overruled Marriaqe of
Madden, however, to the extent that it incorrectly characterized
intrinsic fraud as extrinsic fraud and set aside the judgment on
that basis pursuant to the residual clause of Rule 60(b),
M.R.Civ.P. Marriaqe of Miller, 52 St.Rep. at 980.
Furthermore, we note that Loney's specific extrinsic fraud
argument, that the Firm failed to disclose to the District Court
that the fees had not been approved by the bankruptcy court, is
inseparable from the issue presented in the earlier proceeding of
whether Loney owed the Firm attorney's fees and, therefore, is
inextricably intertwined with our conclusion that this issue is the
same as that resolved by the 1991 default judgment against Loney.
Under the circumstances of this case, Loney cannot circumvent the
doctrine of res judicata through reliance on the residual clause of
Rule 60(b), M.R.Civ.P.
Loney also argues, in his reply brief on appeal, that the
court lacked jurisdiction to enter the 1991 default judgment. Rule

23 (c) , M.R.App.P., requires that an appellant's reply brief be
confined to new matter raised in the respondent‘s brief; thus, an
appellant is prohibited from raising new issues in a reply brief.
See Denend v. Bradford Roofing & Insulation (1985), 218 Mont. 505,
510, 710 P.2d 61, 64. Accordingly, we will not address the merits
of an issue presented for the first time in a reply brief on
appeal.
Affirmed.
we concur:

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