               Filed 7/30/19 by Clerk of Supreme Court
                      IN THE SUPREME COURT
                     STATE OF NORTH DAKOTA


                                 2019 ND 200


Great West Casualty Company,                              Plaintiff and Appellant

      v.

Butler Machinery Company,                                Defendant and Appellee


                                 No. 20180375


       Appeal from the District Court of Burleigh County, South Central Judicial
District, the Honorable John W. Grinsteiner, Judge.

      REVERSED AND REMANDED.

      Opinion of the Court by Crothers, Justice.

      Laura C. Ringsak, Bismarck, ND, for plaintiff and appellant.

      Sean F. Marrin, Grand Forks, ND, for defendant and appellee.
        Great West Casualty Company v. Butler Machinery Company
                                   No. 20180375


       Crothers, Justice.
[¶1]   Great West Casualty Company appeals from a judgment of dismissal with
prejudice. We reverse and remand.


                                          I
[¶2]   Bad Habit Trucking LLC owned a 1996 Peterbilt truck. Great West Casualty
Company insured the truck for Bad Habit Trucking. Dusty Weinreis is a member of
Bad Habit Trucking LLC. Weinreis took the truck to Butler Machinery Company for
service work. The truck was destroyed by fire after the service work was completed
but before Weinreis paid for the services. Great West paid Bad Habit Trucking
$85,000 for the loss of the truck in accordance with the insurance policy.
[¶3]   In November 2017 Butler sued Weinreis in small claims court for $9,100.94
for the unpaid service work. Weinreis counterclaimed in small claims court for the
statutory maximum, $15,000, alleging loss of use of the truck, lost profits, cost to
repair and replace the truck, and loss of personal property. Prior to the small claims
hearing Butler moved to dismiss the case without prejudice. Weinreis resisted the
motion, and a small claims hearing took place on April 5, 2018. The court awarded
Butler $8,041.57 for the unpaid service work and awarded Weinreis $15,000 for lost
profits. Offsetting the recoveries resulted in a net award to Weinreis of $6,958.43.
[¶4]   In June 2018 Great West sued Butler in district court for $81,753.32 for the
loss of the truck plus interest and costs. Butler moved to dismiss under N.D.R.Civ.P.
12(b)(6), arguing the case was fully decided in small claims court when Weinreis sued
Butler for loss of the truck. The district court granted Butler’s motion to dismiss
because the issue stemmed from the same transaction or occurrence, and found Great
West should have filed a claim for damages in the small claims action. Great West
moved to reconsider on the basis that Weinreis was the defendant in the small claims

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action, not Great West or Bad Habit Trucking. Great West argued privity did not
exist between Weinreis in his personal capacity and Great West as the insurance
company for Bad Habit Trucking. The district court denied the motion to reconsider.


                                           II
[¶5]   A motion to dismiss under N.D.R.Civ.P. 12(b)(6) tests the legal sufficiency of
the claim presented in the complaint. Nandan, LLP v. City of Fargo, 2015 ND 37,
¶ 11, 858 N.W.2d 892. On appeal “we construe the complaint in the light most
favorable to the plaintiff and accept as true the well-pleaded allegations in the
complaint.” Id. (quoting Brandvold v. Lewis & Clark Pub. Sch. Dist. No. 161,
2011 ND 185, ¶ 6, 803 N.W.2d 827). We review de novo the district court’s decision
granting a motion to dismiss under N.D.R.Civ.P. 12(b)(6). Nandan, at ¶ 11. A
motion to dismiss under N.D.R.Civ.P. 12(b)(6) is based on the pleadings, and “[i]f . . .
matters outside the pleadings are presented to and not excluded by the district court,
the motion [must be] treated as a motion for summary judgment under N.D.R.Civ.P.
56.” Mills v. City of Grand Forks, 2012 ND 56, ¶ 7, 813 N.W.2d 574 (quoting Zutz
v. Kamrowski, 2010 ND 155, ¶ 8, 787 N.W.2d 286).
[¶6]   In dismissing Great West’s claims, the district court did not test the legal
sufficiency of the claims presented in the pleadings under N.D.R.Civ.P. 12(b)(6). The
district court considered the entire record when it made the decision to dismiss Great
West’s claim: “having reviewed the briefs, exhibits, and affidavits, if any, submitted
and the entire file herein concerning the motion, and having heard the arguments of
counsel, if any, and being fully advised in the matter, it is ordered . . .” Due to the
scope of the district court’s review, this Court is required to review the order as a
granted motion for summary judgment.
[¶7]   The standard of review of a district court’s decision to grant summary
judgment is well established:
       “[Summary judgment] is a procedural device for the prompt resolution
       of a controversy on the merits without a trial if there are no genuine
       issues of material fact or inferences that can reasonably be drawn from

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       undisputed facts, or if the only issues to be resolved are questions of
       law. A party moving for summary judgment has the burden of showing
       there are no genuine issues of material fact and the moving party is
       entitled to judgment as a matter of law. In determining whether
       summary judgment was appropriately granted, we must view the
       evidence in the light most favorable to the party opposing the motion,
       and that party will be given the benefit of all favorable inferences
       which can reasonably be drawn from the record. On appeal, this Court
       decides whether the information available to the district court precluded
       the existence of a genuine issue of material fact and entitled the moving
       party to judgment as a matter of law. Whether the district court
       properly granted summary judgment is a question of law which we
       review de novo on the entire record.”
Krenz v. XTO Energy, Inc., 2017 ND 19, ¶ 17, 890 N.W.2d 222 (quoting Riverwood
Commercial Park v. Standard Oil Co., 2011 ND 95, ¶ 6, 797 N.W.2d 770).
“Summary judgment is inappropriate if neither party is entitled to judgment as a
matter of law or if reasonable differences of opinion exist as to the inferences to be
drawn from the undisputed facts.” Markgraf v. Welker, 2015 ND 303, ¶ 10,
873 N.W.2d 26 (quoting Northern Oil & Gas, Inc. v. Creighton, 2013 ND 73, ¶ 11,
830 N.W.2d 556). This Court has explained that “[d]eciding an issue on summary
judgment is not appropriate if the court must draw inferences or make findings on
disputed facts.” Creighton, at ¶ 20. “The district court may not weigh the evidence,
determine credibility, or attempt to discern the truth of the matter when ruling on a
motion for summary judgment.” Farmers Union Oil Co. of Garrison v. Smetana,
2009 ND 74, ¶ 10, 764 N.W.2d 665.


                                          III
[¶8]   Great West argues the district court erred in granting Butler’s motion because
Great West did not receive an opportunity to assert a claim in the small claims action.
Butler argues the claim was properly dismissed and privity exists between Great West
and Weinreis. The dispositive issue in this case is whether the small claims action
between Weinreis and Butler bars Great West’s claims against Butler under the
principle of res judicata.       Res judicata is an affirmative defense.           See

                                          3
N.D.R.Civ.P. 8(c).
[¶9]   Res judicata describes several doctrines, including merger, bar, collateral
estoppel, and preclusion.         Hofsommer v. Hofsommer Excavating, Inc.,
488 N.W.2d 380, 383 (N.D. 1992). These doctrines promote finality and judicial
efficiency by requiring disputes to be resolved through the minimum amount of
adjudication. Id. Claim preclusion is the doctrine that prohibits relitigation of claims
that were raised or could have been raised in a prior action between the same parties
or their privies and which was resolved by a previous final judgment. Mills v. City
of Grand Forks, 2012 ND 56, ¶ 8, 813 N.W.2d 574. Whether res judicata precludes
a claim is a question of law, fully reviewable on appeal. Peacock v. Sundre Twp.,
372 N.W.2d 877, 879 (N.D. 1985).
[¶10] Under res judicata, only parties or their privies may take advantage or be
bound by a previous judgment.         Hofsommer v. Hofsommer Excavating, Inc.,
488 N.W.2d 380, 384 (N.D. 1992). Generally, privity exists if a person is “so
identified in interest with another that he represents the same legal right.” Id.
Fundamental fairness underlies the determination of privity. Bismarck Public School
Dist. No. 1 v. Hirsch, 136 N.W.2d 449, 453 (N.D. 1965). This Court has stated:
       “The strict rule that a judgment is operative, under the doctrine of res
       judicata, only in regard to parties and privies, is sometimes expanded
       to include as parties, or privies, a person who is not technically a party
       to a judgment, or in privity with him, but who is, nevertheless,
       connected with it by his interest in the prior litigation and by his right
       to participate therein, at least where such right is actively exercised by
       prosecution of the action, employment of counsel, control of the
       defense, filing of an answer, payment of expenses or costs of the action,
       the taking of an appeal, or the doing of such other acts as are generally
       done by parties.”
Stetson v. Investors Oil, Inc., 176 N.W.2d 643, 651 (N.D. 1970).
[¶11] The district court dismissed Great West’s claim because Great West did not
participate or assert claims in the small claims case:
               “Defendant Butler Machinery Company’s Motion is, in all
       things, GRANTED. A Counterclaim was already asserted by Plaintiff’s
       insured in the earlier Small Claims Case. Under well settled North

                                           4
         Dakota authority and the relevant North Dakota Rules of Civil
         Procedure, Plaintiff’s additional claim (Counterclaim) for damages
         should have been brought in the Small Claims Court case. It was not.
         In fact, Plaintiff had the opportunity to have the Small Claims Court
         action dismissed without prejudice so that all claims could be asserted
         in district court, but Plaintiff objected. Plaintiff’s request for relief
         arises out of the same occurrence that has already been adjudicated in
         Morton County Small Claims Court.”
[¶12] Butler chose to pursue a small claims action against Weinreis in his personal
capacity and did not sue Bad Habit Trucking for unpaid service work. Great West
and Bad Habit Trucking were not parties in the small claims action, and Great West
did not participate in any aspects of the litigation. Great West did not control the
defense, file answers, pay for costs, or take actions generally reserved for the parties.
The record indicates Great West was unaware of the small claims action so that it
could have protected its interests by pressing for removal to the district court to
pursue monetary amounts exceeding the statutory limits set on small claims actions.
[¶13] The district court used the term “plaintiff” to describe Weinreis, Bad Habit
Trucking, and Great West, but the question remains whether privity existed between
Great West and Weinreis. The district court labeled Weinreis as the insured party
when it granted the motion to dismiss. However, the check from Great West for the
loss of the truck was made payable only to Bad Habit Trucking. While an insurance
company and its insured are often privies, in this case the district court made findings
on a disputed fact when it extended privity from insurance company through the
insured limited liability corporation to a member of the corporation. Viewing the
evidence in the light most favorable to Great West, a reasonable difference of opinion
exists in whether Great West and Weinreis are privies and neither party is entitled to
judgment as a matter of law. The district court erred in dismissing Great West’s
claim.     We reverse the order dismissing the action and remand for further
proceedings.
                                            IV
[¶14] The district court’s judgment of dismissal with prejudice is reversed and the


                                            5
case is remanded for further proceedings.
[¶15] Daniel J. Crothers
      Jerod E. Tufte
      Jon J. Jensen
      Lisa Fair McEvers
      Gerald W. VandeWalle, C.J.




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