Board of County Road Com'rs for County of Eaton v. Schultz

• Decision Date: 17 May 1994
• Docket Number: Docket No. 141588
• Citation: 205 Mich.App. 371,521 N.W.2d 847
• Parties: BOARD OF COUNTY ROAD COMMISSIONERS FOR THE COUNTY OF EATON, Plaintiffs-Appellants, v. Darrell M. SCHULTZ, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 847

521 N.W.2d 847

205 Mich.App. 371

BOARD OF COUNTY ROAD COMMISSIONERS FOR THE COUNTY OF EATON, Plaintiffs-Appellants, v. Darrell M. SCHULTZ, Defendant-Appellee.

Docket No. 141588.

Court of Appeals of Michigan.

Submitted Dec. 7, 1993, at Lansing.

Decided May 17, 1994, at 9:20 A.M.

Released for Publication July 18, 1994.

Foster, Swift, Collins & Smith, P.C., by Webb A. Smith and Frank A. Fleischmann, Lansing, for plaintiff.

UAW-GM Legal Services Plan, by Karen T. Nichols, Philadelphia, PA, for defendant.

Before TAYLOR, P.J., and REILLY and TALBOT, ^* JJ.

PER CURIAM.

Plaintiffs appeal as of right the May 21, 1991 circuit court order granting summary disposition to defendant Schultz pursuant to MCR 2.116(C)(4) (subject matter jurisdiction), (C)(7) (suit barred by res judicata), and (C)(8) (failure to state a claim upon which relief may be granted). We reverse and remand for reinstatement of plaintiff road commissioners' breach of contract action.

The facts are essentially undisputed. On June 3, 1988, defendant Schultz filed a negligence suit in district court against plaintiff road commissioners for injuries his horse sustained as a result of its stepping into a hole in a culvert. On September 21, 1988, the parties stipulated to dismiss the negligence suit. The stipulation contains the following language:

NOW COME the parties by their respective counsel and hereby stipulate and agree, that in exchange for not pursuing Plaintiff [defendant Schultz herein] for costs, Plaintiff has agreed to dismiss with prejudice and without cost his claims against Board of County Road Commissioners of the County of Eaton.

Accordingly, Schultz's suit was dismissed with prejudice. Thereafter, Schultz filed another suit in district court against the road commissioners alleging that the hole in the culvert constituted an "intrusive nuisance." The commissioners moved for summary disposition on the ground that the suit was barred by the doctrine of res judicata. When the court denied that motion, the commissioners moved for summary disposition for failure to state a claim in avoidance of governmental immunity, which the district court granted, and Schultz's "intrusive nuisance" suit was dismissed.

Then the road commissioners filed a complaint against Schultz in circuit court for breach of contract, seeking recovery of the costs incurred in having to defend the initial suit as well as the subsequent one. Schultz moved for summary disposition, claiming that the court lacked subject matter jurisdiction, that the suit was barred because of res judicata, and that the commissioners had failed to state a claim. The court granted the motion on all of the above-stated grounds. It is from the May 21, 1991, order granting summary disposition that the commissioners now appeal.

Plaintiff commissioners first argue that the trial court erred in granting summary disposition under MCR 2.116(C)(4). We agree. In granting the motion, the court did not specifically address the question of whether it had subject matter jurisdiction. ¹ Whether subject matter jurisdiction exists is a question of law for the court. Dep't of Natural Resources v. Holloway Construction Co., 191 Mich.App. 704, 705, 478 N.W.2d 677 (1991). The question is reviewed de novo in this Court. Id. To the extent that the court granted the motion under MCR 2.116(C)(4), that ruling was erroneous. ²

There is nothing in the facts of this case, the statutes, or the case law presented by Schultz that precludes the circuit court from exercising jurisdiction over the commissioners' action. The claim was for breach of contract, and the alleged damages exceeded $10,000. The circuit court is the court of general jurisdiction in this state and its jurisdiction was not expressly preempted by the jurisdiction of another court. Accordingly, the claim was properly filed in circuit court. See M.C.L. § 600.605; M.S.A. § 27A.605; Bowie v. Arder, 441 Mich. 23, 36-38, 490 N.W.2d 568 (1992).

Plaintiff commissioners also argue that the court erred in granting summary disposition under MCR 2.116(C)(7) based upon principles of res judicata and collateral estoppel. We agree.

Res judicata bars a subsequent action between the same parties when the essential facts or evidence are identical. Jones v. State Farm Mutual Auto. Ins. Co., 202 Mich.App. 393, 401, 509 N.W.2d 829 (1993). This doctrine requires that: (1) the first action be decided on the merits, (2) the matter contested in the second case was or could have been resolved in the first, and (3) both actions involve the same parties or their privies. Schwartz v. Flint, 187 Mich.App. 191, 194, 466 N.W.2d 357 (1991), lv. and reconsideration den. 439 Mich. 867 (1991), cert. den. --- U.S. ----, 112 S.Ct. 1562, 118 L.Ed.2d 209 (1992). For purposes of our analysis, the "first" case is Schwartz's intrusive nuisance suit against the road commissioners, and the "second" case is the road commissioners' breach of contract action against Schwartz. It is apparent that the road commissioners' breach of contract action was not and could not have been decided in Schwartz's intrusive nuisance suit because the same evidence would not sustain both actions. Jones, supra. Only if the road commissioners had opted to bring a counterclaim on breach of contract grounds in the intrusive nuisance case would the breach of contract issue have arisen, and then only as a counterclaim. The most that was decided in the intrusive nuisance suit concerning the parties' stipulation was that the stipulation did not operate as a release, and so was an unsuccessful defense for the road commission.

To treat the defense of release as identical to an action for breach of contract for purposes of res judicata, as Schultz would have us do, overlooks their fundamental differences. Causes of action and defenses are not interchangeable. Here, for example, the fact of a breach and the question of damages are irrelevant in the release defense. We conclude that res judicata does not bar the road commissioners' breach of contract action.

Nor does the doctrine of collateral estoppel operate to bar the road commission's suit. For collateral estoppel to apply, the ultimate issue to be concluded in the second action must be the same as that involved in the first. Detroit v. Qualls, 434 Mich. 340, 357, 454 N.W.2d 374 (1990), reh. den. 434 Mich. 1213 (1990). The issues must be identical, and not merely similar, Wilcox v. Sealey, 132 Mich.App. 38, 47, 346 N.W.2d 889 (1984), and the ultimate issues must have been both actually and necessarily litigated. Qualls, supra. To be necessarily determined in the first action, the issue must have been essential to the resulting judgment; a finding upon which the judgment did not depend cannot support collateral estoppel. Id.; People v. Gates, 434 Mich. 146, 158, 452 N.W.2d 627 (1990), cert. den. 497 U.S. 1004, 110 S.Ct. 3238, 111 L.Ed.2d 749 (1990); Jackson District Library v. Jackson County # 2, 146 Mich.App. 412, 422, 380 N.W.2d 116 (1985), rev'd on other grounds 428 Mich. 371, 408 N.W.2d 801 (1987). Collateral estoppel does not bar the road commissioners' breach of contract suit because any question of the effect of the stipulation upon which this suit is based was not essential to the governmental immunity-based judgment; the judgment of dismissal on grounds of governmental immunity did not depend on any findings concerning the effect of the stipulation.

To hold differently would be to establish a policy that when a party loses on one defense (release) but ultimately is successful on another (governmental immunity), that party is nevertheless obligated to appeal the unfavorable disposition, despite having prevailed, in order to avoid being bound by it in subsequent proceedings. This is an ill-advised policy, and one that is inconsistent with the doctrines of both res judicata and collateral estoppel. Res judicata is designed to relieve parties of multiple litigation, conserve judicial resources, and encourage reliance on adjudication, Qualls, supra, 434 Mich. at 357 n. 30, 454 N.W.2d 374. Collateral estoppel is designed to avoid relitigation of claims, and to prevent vexation, confusion, chaos and the inefficient use of judicial resources, Ozark v. Kais, 184 Mich.App. 302, 307, 457 N.W.2d 145 (1990); Bhama v. Bhama, 169 Mich.App. 73, 81, 425 N.W.2d 733 (1988). Requiring the prevailing party to appeal unfavorable rulings would foster excessive litigation, vexation, and waste judicial resources, and we decline to do it. Here, the intrusive nuisance judgment was grounded in governmental immunity, so the road commissioners, having prevailed, had no incentive and no obligation to appeal the court's decision on the release issue in order to preserve a separate, albeit related, action arising from the stipulation. ³

The trial court also granted summary disposition under MCR 2.116(C)(8). A motion for summary disposition under this rule is designed to test the legal sufficiency of a claim, and its focus is solely on the pleadings and inferences that may reasonably be drawn therefrom. Marcelletti v. Bathani, 198 Mich.App. 655, 658, 500 N.W.2d 124 (1993), lv. den. 443 Mich. 860, 505 N.W.2d 582 (1993). The motion should be granted only where the claim is so clearly unenforceable that no amount of factual development could justify a right to recovery. Id.

In this case, Schultz claimed that no cause of action for breach of contract could be stated because a stipulation was not a contract, stressing that, unlike a traditional contract, a stipulation needs the express consent and approval of a court in order to take effect. The trial court agreed and granted the motion.

While it is true that there are characteristics unique to trial stipulations, the conclusion that they are not contracts or that no claim for breach lies does not necessarily follow as a matter of law. Stipulations have been defined as follows:

A "stipulation," ... is an agreement,...