JENNI ADAMS and her minor children DILLON THOMAS, DENVER THOMAS and KENNEDY ADAMS; KAREN DEWALT and her minor children KEENAN DEWALT, TREVOR WOLFF and OSCAR WOLFF; SHAWNA RICH; RYAN HOSTETLER and his minor children JESSY HOSTETLER and DEMON HOSTETLER; BONNIE FOSTER and her minor children AYDEN RAEL and SHAUNA RAEL; MARK BITTERMAN; FRANK THOLT; KRYSTAL CHATTERLEY and her minor children LILLIE RAEDEL and ARIANA CHATTERLEY; JAROD DANIELS and his minor children SHAYNNE FIXEL, JESSE DANIELS and TANNER DANIELS; DEBRA MOORE; LESHA WHITE and her minor children DARYL WHITE and LESHA WHITE and PSALMS WHITE, Plaintiffs,
TWO RIVERS APARTMENTS, LLLP, HRC TWO RIVERS, LLC, HRC COTTAGES INC., THE RICHMAN GROUP, USA INTERNATIONAL HOUSING TAX CREDIT FUND and JOHN DOES 1-5, Defendants. HRC TWO RIVERS, LLC., HRC COTTAGE INC., USA INSTITUTIONAL TWO RIVERS, LLC., Third-Party Plaintiffs and Appellants,
AULTCO CONSTRUCTION, INC., Respondent, Third Party Defendant, Appellee and Cross Appellant.
Submitted on Briefs: May 15, 2019
FROM: District Court of the Fourth Judicial District, In and
For the County of Missoula, Cause No. DV-18-39 Honorable
Robert L. Deschamps, III, Presiding Judge
Appellants: Michael O'Brien, St. Peter Law Office, PC,
Appellee: Christopher W. Froines, Froines Law Office, PC,
HRC Two Rivers LLC and HRC Cottages Inc. (collectively the
"General Partners") appeal the Fourth Judicial
District Court, Missoula County, order dismissing their
Third-Party Complaint against Aultco Construction Inc. as
barred by the principles of res judicata and collateral
estoppel. The General Partners assert that a prior suit by
their partnership entity does not preclude the General
Partners from pursuing their claims against Aultco. We
AND FACTUAL BACKGROUND
Two Rivers Apartments LLLP (Two Rivers Apartments) contracted
with Aultco Construction Inc. (Aultco) to build an eight-plex
apartment building in St. Regis. HRC Two Rivers LLC and HRC
Cottages Inc. are general partners of Two Rivers Apartments.
USA Institutional Two Rivers LLC is a limited partner of Two
Rivers Apartments. In 2015, Two Rivers Apartments filed suit
against Aultco, alleging negligent construction resulting in
mold in the attic of the apartments (the "Two Rivers
case"). After two years, the parties signed a mutual
release and settlement agreement and agreed to dismiss with
prejudice. The District Court so ordered.
The apartment tenants then filed suit against Two Rivers
Apartments and the General Partners, alleging that Two Rivers
Apartments failed to give them the statutorily required
disclosure of mold testing and its results. The General
Partners filed a Third-Party Complaint against Aultco for
contribution and indemnity if the General Partners were found
liable for damages caused by Aultco's negligent conduct.
Aultco moved to dismiss the Third-Party Complaint based on
res judicata. The District Court granted Aultco's motion
on the grounds of either res judicata or collateral estoppel.
Reasoning that Aultco's negligence in this case has been
litigated, settled, and dismissed with prejudice, and
considering that the entities are so intertwined as
effectively to be one, the court held that res judicata and
collateral estoppel had been satisfied.
We review de novo a district court's ruling on a M. R.
Civ. P. 12(b)(6) motion to dismiss. W. Sec. Bank v. Eide
Bailly, LLP, 2010 MT 291, ¶ 18, 359 Mont. 34, 249
P.3d 35. We also review de novo a district court's
interpretation and application of a statute; the court's
application of claim preclusion or issue preclusion is a
question of law that we review for correctness. Brilz v.
Metro. Gen. Ins. Co., 2012 MT 184, ¶ 13, 366 Mont.
78, 285 P.3d 494.
The District Court concluded that, because of their interest
in Two Rivers Apartments, the General Partners had the
opportunity to be included as plaintiffs in the Two Rivers
case but chose not to be. The court reasoned that the
President of both Two Rivers Apartments and of each of the
General Partners, Jim Morton, testified in his deposition
that he was the person who made the decision to bring the
previous lawsuit against Aultco-choosing whom to include as
parties in the original suit but providing no explanation why
the General Partners were not named. The District Court
concluded further that the General Partners "are so
intertwined with Two Rivers [Apartments] as to be the same
entity." Because "[t]he matter of Aultco's
negligence in ...