Ali Baba Co., Inc. v. Wilco, Inc., 83-793.

• Decision Date: 10 October 1984
• Docket Number: No. 83-793.,83-793.
• Citation: 482 A.2d 418
• Parties: ALI BABA CO., INC., Appellant, v. WILCO, INC., et al., Appellees.
• Court: D.C. Court of Appeals

482 A.2d 418

ALI BABA CO., INC., Appellant, v. WILCO, INC., et al., Appellees.

No. 83-793.

District of Columbia Court of Appeals.

Argued June 7, 1984.

Decided October 10, 1984.

Rex K. Nelson, Washington, D.C., for appellant.

Bernard A. Gray, Sr., Washington, D.C., for appellees.

Before FERREN and ROGERS, Associate Judges, and REILLY, Chief Judge, Retired.

ROGERS, Associate Judge:

Appellant contends that the trial court erred in ruling that appellees were not collaterally estopped from raising the same defenses in this suit to collect a deficiency on a note as they had raised in a prior landlord and tenant action for possession in which summary judgment was granted against appellees after they had interposed a plea of title. We agree that appellant can properly assert a claim of nonmutual offensive collateral estoppel. Accordingly, we reverse the judgment for appellees and remand this case to the trial court with instructions to enter a judgment for appellant.¹

I.

This litigation arises out of the purchase by appellees (WILCO) on September 14, 1978, of 2014 Rhode Island Avenue, N.E., a commercial property. To finance the purchase, WILCO, Inc., with Mr. and Mrs. Wilson as personal guarantors (as president and secretary of the corporation and individually), executed three deeds of trust and trust notes: the first for $37,000, the second for $10,300, and the third for $5,000. The purchaser of the second trust note, Edgar M. Levy, seeks through appellant (Ali Baba) to collect the amount of the deficiency left on the note after the foreclosure and sale of the property.

Ali Baba filed a complaint against WILCO on November 16, 1979, seeking $6863.77 plus interest and costs (including $604.55 in foreclosure costs), and attorneys fees and suit costs. The complaint alleged that WILCO had defaulted in its payments on the note and, pursuant to lawful notice, the trustees had foreclosed and sold the premises on June 5, 1979, for $2500, subject to the first trust. In its answer, WILCO claimed that Ali Baba was the alter ego of the lender and/or Edgar M. Levy, who had wrongfully substituted trustees on the note, and that it did not owe the deficiency judgment. WILCO sought recoupment of all interest paid, asserting that the interest on the note violated the usury laws (D.C. Code § 28-3301 (1973 ed.), and the loan contract was void because Ali Baba had failed to comply with money lending laws (5Q D.C.R.R. § 1.1, et seq. (1970) and D.C. Code § 26-601, et seq. (1973 ed.)). WILCO also filed a counterclaim for a money judgment for wrongful foreclosure equal to all the sums paid on the contract, and demanded a jury trial. Ali Baba answered the counterclaim, asserting the inapplicability of the usury laws and denying that it was engaged in the business, of lending money in the District of Columbia and that WILCO was entitled to recoupment or any other relief.²

On September 28, 1982, with leave of court, Ali Baba amended its answer to the counterclaim to raise the issues of res judicata and collateral estoppel as a result of two previously litigated and judicially determined cases: Aladdin v. WILCO, L & T 85085-79 (for possession of the Rhode Island Avenue property) and WILCO v. Aladdin, Civil Action 7136-79 (for a temporary restraining order to halt the foreclosure sale of the Rhode Island Avenue property). The trial court ruled that the prior litigation did not have res judicata or collateral estoppel effect on WILCO's counterclaim. A jury returned a verdict for WILCO on May 10, 1983, and by order of May 15, 1983, the trial court ruled that the jury had found that Ali Baba had wrongfully substituted trustees on the deed of trust and that the trustees had breached their duty to WILCO. In the order, the court also dismissed the complaint with prejudice, and set aside the foreclosure sale of the Rhode Island Avenue property.

Ali Baba filed a motion for judgment notwithstanding the verdict, Super.Ct. Civ.R. 50, on the ground that WILCO was collaterally estopped to relitigate the issue of substitution of trustees in the instant case since that issue was litigated in the prior Aladdin lawsuit against WILCO for possession of the Rhode Island Avenue property (L & T No. 85085-79).³ Ali Baba argued that the answer and plea of title by WILCO in the Aladdin lawsuit had raised four defenses (wrongful substitution of trustees, inadequate foreclosure price, usurious loan and unlicensed lending), and caused the case to be certified to the Assignment Commissioner for trial by jury, in accordance with L & T Rule 5(c),⁴ on December 11, 1979. Thereafter, on February 14, 1980, Aladdin filed a motion for summary judgment, which was granted after a hearing on March 14, 1980, by the judge sitting in the Landlord and Tenant Branch, and that judgment was, Ali Baba argued, binding and final since WILCO did not appeal it. WILCO filed an opposition, contending that the Aladdin judgment was a final determination only on the issue of possession because the case was never certified to the Civil Division for trial pursuant to L & T Rule 5(c); rather it was inadvertently sent to the Civil Assignment Office under L & T Rule 6⁵ for the purpose of handling the jury trial demand, and thus the Civil Division never gained jurisdiction and the judge sitting in the Landlord and Tenant Branch lacked jurisdiction over plea of title. The trial court denied the motion.

II.

The general rule of collateral estoppel⁶ is stated in the RESTATEMENT (SECOND) OF JUDGMENTS § 27:

When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.⁷

Offensive use of collateral estoppel arises when a plaintiff seeks to estop a defendant from relitigating the issues which the defendant previously litigated and lost against another plaintiff.⁸ Parkland Hosiery Co., Inc. v. Shore, supra note 7, 439 U.S. at 329, 99 S.Ct. at 650. An issue is actually litigated when it "is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined. . . . An issue may be submitted and determined on a motion to dismiss for failure to state a claim, a motion for judgment on the pleadings, a motion for summary judgment (see Illustration 10), . . . or their equivalents. . . ." RESTATEMENT (SECOND) OF JUDGMENTS § 27(d).

Our review of the record indicates that the defenses which WILCO raised in its plea of title and litigated in the Aladdin case are the same defenses raised in the instant suit. Because the doctrine of offensive collateral estoppel presents issues relating to the potential unfairness to a defendant, and since a non-party to the first action is raising the claim, we endorse the approach enunciated by the Supreme Court in Parklane. There the Court concluded that "the preferable approach for dealing with these problems in federal courts is not to preclude the use of offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied." Parklane Hosiery Co. v. Shore, supra note 7, 439 U.S. at 331, 99 S.Ct. at 651. See Ross v. Lawson, 395 A.2d 54, 56-57 (D.C. 1978) (collateral estoppel may be applied offensively against a defendant in a civil suit for assault where the defendant has previously been convicted of assault in a criminal trial).

The trial court in the instant case ruled that the prior summary judgment granted in favor of Aladdin and against WILCO did not have collateral estoppel effect because the issues contested in defense had never been actually presented to a trier of fact and the order in that case was confined to a determination of entitlement to possession as between Aladdin and WILCO.⁹ The trial court erred insofar as its ruling was premised on the legal conclusion that the prior summary judgment was not a decision on the merits.

A summary judgment, of course, is a decision on the merits of the case. Thus, a Rule 56 motion will be granted on the basis of former adjudication when an earlier summary judgment has disposed of the same issues between sufficiently related parties.

10A C. WRIGHT, A. MILLER & M. KANE, FEDERAL PRACTICE & PROCEDURE: Civil 2d § 2735 (2d ed. 1983); see also, Jackson v. District of Columbia, supra note 7, 412 A.2d 948 (collateral estoppel applied to preclude plaintiffs from relitigating issues raised in prior suit which ended in summary judgment granted against them). However, a remand is unnecessary since there is sufficient evidence in the record for us to make the determination. We agree with the analysis of the doctrine of collateral estoppel described by the Supreme Court in Parklane, and as explicated further herein hold, upon a review of the record, that there is no reason not to allow collateral estoppel to apply. See Parklane Hosiery Co., Inc. v. Shore, supra note 7, 439 U.S at 331-32, 99 S.Ct. at 651-52 ("In the present case, however, none of the circumstances that might justify reluctance to allow the offensive use of collateral estoppel is present"); Goldkind v. Snider Bros., Inc., supra note 6, 467 A.2d 468.

As enunciated in Parklane, the factors to be applied as a matter of law by the trial court require it to determine whether it would be fair to apply the doctrine against the defendant and whether the defendant had a full and fair opportunity to litigate the issue. These factors are:

(1) whether the first suit was for a trivial amount while the second was for a large amount;

(2) whether the party asserting the estoppel could have effected joinder between himself and his present adversary, but did not do so;

(3) whether the estoppel is based on one of conflicting judgments, another of which is in defendant's favor;

(4) whether there are significantly different procedural advantages available to the defendant in the second suit which could...