Bahler v. Fletcher

• Decision Date: 04 November 1970
• Citation: 474 P.2d 329,257 Or. 1,91 Adv.Sh. 21
• Parties: Al C. BAHLER aka Alfred C. Bahler and Roselle Bahler, dba A. R. John Construction, Appellants and Cross-Respondents, v. John H. FLETCHER and Hazel Joy R. Fletcher, Respondents and Cross-Appellants.
• Court: Oregon Supreme Court

Page 329

474 P.2d 329

257 Or. 1

Al C. BAHLER aka Alfred C. Bahler and Roselle Bahler, dba A R. John Construction, Appellants and Cross-Respondents, v. John H. FLETCHER and Hazel Joy R. Fletcher, Respondents and Cross-Appellants.

Supreme Court of Oregon, In Banc.

Argued and Submitted March 4, 1970.

Decided Sept. 11, 1970.

Rehearing Denied Nov. 4, 1970.

Donald H. Joyce, Portland, argued the cause and filed briefs for appellants and cross-respondents.

John J. Haugh, Portland, argued the cause for respondents and cross-appellants. With him on the brief were Pozzi, Wilson & Atchison, Portland.

Before PERRY, ^* C.J., and McALLISTER, SLOAN, O'CONNELL, DENECKE, HOLMAN, and TONGUE, JJ.

HOLMAN, Justice.

This is an appeal by plaintiffs from a decree of the trial court denying foreclosure of a trust deed.

Plaintiffs contracted with defendants to remodel defendants' residence. An agreement was executed by defendants which required them to pay plaintiffs the contract price for the work in monthly installments. At the completion of the work, defendants executed a trust deed to secure the performance of their agreement to pay. Plaintiffs had a financing agreement with Alcoa Credit Company (Alcoa). They assigned their beneficial interest in the contract and trust deed to Alcoa, and Alcoa then paid them the contract price.

Plaintiffs agreed in their financing arrangement with Alcoa that, insofar as contracts transferred to Alcoa were concerned, all goods furnished to the customer would be of merchantable quality and fit for their intended purpose, and all services rendered would be performed in a good and workmanlike manner. The agreement also provided that Alcoa could insist that plaintiffs rescind any such transfer of any contract which plaintiffs had not so performed.

When defendants refused to make the payments required of them under the contract, Alcoa brought an action against plaintiffs to recover its money. Alcoa contended plaintiffs had not performed the work for defendants in a workmanlike manner. The judge in that case found for Alcoa and held that 'the Fletcher job was not done in accordance with accepted practices and in substantial respects was not done in a workmanlike manner. The work was not performed as contracted * * *.' As a result of this determination, the contract and trust deed were transferred back to the plaintiffs and Alcoa recovered the sum it had paid plaintiffs therefor. Plaintiffs then commenced the present proceeding to foreclose the trust deed.

In this case plaintiffs do not seek recovery for the reasonable value of the materials and services furnished to defendants. They seek to recover upon the contract and to enforce the trust deed which secures the payments that defendants were to make pursuant to the contract. They cannot recover in Quantum meruit on a cause of action which is based solely on a specific contract. Flaherty v. Bookhultz et al, 207 Or. 462, 483, 291 P.2d 221, 297 P.2d 856 (1956); Williams v. Ledbetter, 132 Or. 145, 150, 285 P. 214 (1930). They are not entitled to recover upon the contract unless they have substantially performed it. If they are not entitled to recover upon the contract, they cannot enforce the trust deed which secures defendants' performance of their obligations thereunder.

It is defendants' contention that the holding of the trial judge in the provious litigation between plaintiffs and Alcoa, to the effect that plaintiffs had not performed the work in a workmanlike manner, is binding upon the plaintiffs in this case in accordance with the doctrine of collateral estoppel. Therefore, defendants claim that plaintiffs are not entitled to recover on the contract nor to foreclosure of the trust deed. The trial judge held that the plaintiffs were so precluded. By use of the term 'collateral estoppel,' we intend to refer to the rule preventing relitigation of a Particular issue or determinative fact which was necessary to the prior decision of a Different cause of action as compared with 'res judicata' which usually refers to the rule preventing relitigation of the Same cause of action.

Plaintiffs contend the trial court erred in applying the doctrine of collateral estoppel because defendants were not parties to the first case nor were they in privity with Alcoa. Contrary to a strained contention by defendants, they were not in privity with Alcoa. They had no relation with Alcoa and no interest in whether Alcoa recovered its money from plaintiffs. However, the principal issue in the present case is identical with an issue decided in the prior case to which plaintiffs were parties. See Burnett v. Western Pac. Ins. Co., 90 Adv.Sh. 1233, 1240, 469 P.2d 602 (1970); State v. George, 253 Or. 458, 461--462, 455 P.2d 609 (1969); State of Oregon v. Dewey, 206 Or. 496, 508, 292 P.2d 799 (1956). The ultimate issue in the first case was whether plaintiffs had breached their financing agreement with Alcoa. In order to determine that issue, it was necessary to decide whether plaintiffs substantially performed their agreement with defendants. The court in the first case found that they had not.

The law of most jurisdictions and of Oregon is in conformance with plaintiffs' contention; and, if this court's decisions are left unchanged, collateral estoppel can have no application to the present case. Wolff v. Du Puis, 233 Or. 317, 378 P.2d 707 (1963); Raz v. Mills, 233 Or. 452, 454, 378 P.2d 959 (1963); ALI Restatement, Judgments § 93 (1942). For a compilation of cases, See 23 A.L.R.2d 710 (1952). The reason given in support of the rule holding that collateral estoppel may be asserted only by a party or by one in privity with a party to the first case is that due process prevents a third party from being bound by the results of that litigation because he did not have his day in court; and, since he is not bound by the adjudication, it is unfair to allow him to assert it against one who was a party. The necessity that both be bound is referred to as mutuality. See Raz v. Mills, Supra at 454, 378 P.2d 959. The estoppel is not mutual unless the one taking advantage of the earlier litigation would have been bound by it had it been decided to the contrary.

It is difficult to find many authorities who unqualifiedly support the reasoning behind the requirement of mutuality. Many support the results of the rule to which there are certain recognized exceptions not applicable to the facts of this case. Application of the rule brings about the proper results in some cases through happenstance and inadvertence and not because mutuality is theoretically appropriate to a determination of whether collateral estoppel is properly applied in a given instance.

The doctrine of judicial finality, of which collateral estoppel is a part, is based upon two considerations. First, the protection of private litigants against the harassing necessity of litigating more than once the same issue or cause of action; and, second, the protection of the public's interest in preventing relitigation of matters once decided. ¹ The first consideration has no application to the facts of this case because the person who has previously litigated the issue and who is desirous of the opportunity of doing so again is not seeking protection from the harassment of continuous litigation. Also, the person who is attempting to assert the previous determination has not previously litigated the issue and is asking that he not be required to litigate it at all.

The public's interest in minimizing relitigation of an issue once decided is subservient only to the requirement that a party be given a full, complete, and fair opportunity to litigate any issue upon which his rights depend. Whether a person has been given such a previous opportunity to litigate the issue has little to do with whether or not his adversary, who is seeking to assert the bar of collateral estoppel, is bound by the previous litigation. The irrelevance of mutuality to the application or non-application of collateral estoppel is described by Justice Traynor in Bernhard v. Bank of America, 19 Cal.2d 807, 122 P.2d 892 (1942):

'The criteria for determining who may assert a plea of res judicata differ fundamentally from the criteria for determining against whom a plea of res judicata may be asserted. The requirements of due process of law forbid the assertion of a plea of res judicata against a party unless he was bound by the earlier litigation in which the matter was decided (citing cases). He is bound by that litigatin only if he has been a party thereto or in privity with a party thereto. * * * There is no compelling reason, however, for requiring that the party asserting the plea of res judicata must have been a party, or in privity with a party, to the earlier litigation.

'No satisfactory rationalization has been advanced for the requirement of mutuality. Just why a party who was not bound by a previous action should be precluded from asserting it as res judicata against a party who was bound by it is difficult to comprehend * * *.' 122 P.2d at 894--895.

In a somewhat different context, Jeremy Bentham made the following appropriate comment concerning mutuality:

'* * * There is reason for saying that a man shall not lose his cause in consequence of the verdict given in a former proceeding to which he was not a party; but there is no reason whatever for saying that he shall not lose his cause in consequence of the verdict in a proceeding to which he Was a party, merely because his adversary was not * * *.' 3 Bentham, Rationale of Judicial Evidence 579 (1827), reprinted in 7 Works of Jeremy Bentham 171 (Bowring ed. 1843).

The requirement of mutuality has been further analyzed as follows:

'* * * Mutuality rests on a simplistic concept of equality that would deny to one party an appropriate right or remedy because the corresponding right or remedy is not available to, or appropriate for, his adversary * * *.

'Mutuality as a doctrine for...