Cruz v. Benine, 98SC244.

• Decision Date: 13 September 1999
• Docket Number: No. 98SC244.,98SC244.
• Citation: 984 P.2d 1173
• Parties: Bryon CRUZ, Cruz Enterprises, a Colorado General Partnership, and Dorothy F. Cruz, Petitioners, v. Jim BENINE, Harold Nelson, Mary Nelson, and Empire Enterprises Unlimited, Respondents.
• Court: Colorado Supreme Court

984 P.2d 1173

Bryon CRUZ, Cruz Enterprises, a Colorado General Partnership, and Dorothy F. Cruz, Petitioners, v. Jim BENINE, Harold Nelson, Mary Nelson, and Empire Enterprises Unlimited, Respondents.

No. 98SC244.

Supreme Court of Colorado, En Banc.

September 13, 1999.

William C. Danks, Denver, Colorado, Attorney for Petitioners.

Markusson, Green & Jarvis, P.C., James K. Green, Denver, Colorado, Attorneys for Respondents.

Justice RICE delivered the Opinion of the Court.

The petitioners, Dorothy Cruz, Bryon Cruz, and Cruz Enterprises, ask us to overturn a court of appeals decision affirming the dismissal of the instant action against Jim Benine, Harold Nelson, Mary Nelson, and Empire Enterprises Unlimited (Empire), a limited partnership, on the grounds that it is barred by the doctrine of res judicata, or claim preclusion. See Cruz v. Benine, No. 96CA1683, slip op. (Colo.App. Dec. 4, 1997) (not selected for publication). While the petitioners acknowledge that a prior lawsuit involving the same factual circumstances and nearly identical claims for relief ended in a settlement, they emphasize the fact that the instant case includes several additional parties who were not privy to the settlement of the first action. As such, they argue that the Uniform Contribution Among Tortfeasors Act, sections 13-50.5-101 to -106, 5 C.R.S. (1998) ("UCATA"), which allows parties to a prior action to file subsequent claims against joint tortfeasors, supercedes the common law doctrine of claim preclusion. As we agree with the petitioners insofar as they contend that claim preclusion does not bar the instant action against the two respondents who were not party to the first action, we reverse the court of appeals' dismissal of the petitioners' action against Mary Nelson and Jim Benine. However, we affirm the court of appeals' dismissal of Bryon Cruz's and Cruz Enterprises' claims against Harold Nelson and Empire because we find Bryon Cruz and Cruz Enterprises to be in privity with Dorothy Cruz for purposes of claim preclusion. Further, we reverse the attorney's fees award, and remand to the court of appeals with directions to return this case to the trial court for further proceedings consistent with this opinion.

I. FACTS

Dorothy Cruz and Bryon Cruz are partners in a general partnership, Cruz Enterprises. Dorothy Cruz holds an eighty percent share in Cruz Enterprises, and her son, Bryon Cruz, holds the remaining twenty percent share. Beginning on July 1, 1985, Cruz Enterprises entered into an agreement to lease the Best Western Rambler Restaurant and Lounge from Empire. Respondents Harold and Mary Nelson are partners in Empire, which is a limited partnership. At the time of the events, which formed the cause of action herein, respondent Jim Benine was an Empire employee. Benine managed the Best Western motel that was located on property adjoining the restaurant and that was owned and operated by Empire.

The respondents allegedly conspired to discourage potential customers, primarily motel patrons, from eating at the petitioners' restaurant, particularly during the two years immediately preceding the expiration of the restaurant lease on July 1, 1995. The respondents allegedly sought to drive the petitioners out of business. The petitioners vacated the premises at the expiration of the lease agreement. After the petitioners' departure, respondent Benine acquired ownership of the restaurant from Empire.

The foregoing facts gave rise to two separate civil actions, 95CV66 and 96CV51. The first action, 95CV66, brought by "Dorothy Cruz d/b/a Cruz Enterprises" as the plaintiff against Harold Nelson and Empire as defendants, included claims of outrageous conduct, interference with lease rights, slander, and tortious/intentional interference with business.

Before trial, the defendants Empire and Harold Nelson made an "offer to settle all claims among them and plaintiff" for the amount of $20,000. The offer was accepted and judgment entered pursuant to section 13-17-202, 5 C.R.S. (1998). However, after the settlement offer had been accepted, but prior to its payment, the defendants Enterprise and Harold Nelson sought to include a global release which would have included not only the named parties, but also "their partners, principals, agents, employees, [and] membership organizations" in the proposed settlement. Their proposal was rejected, and, pursuant to the initial agreement, judgment was satisfied by payment of $20,000 to Dorothy Cruz. The only documentation of the settlement agreement in the record is Dorothy Cruz's acknowledgment of the receipt of $20,000 "in full and complete satisfaction of judgment entered in this matter."

Alleging the same facts and raising nearly identical claims for relief, petitioners Bryon Cruz, Dorothy Cruz, and Cruz Enterprises subsequently brought suit against Jim Benine, Harold Nelson, Mary Nelson, and Empire in action 96CV51. The complaint explicitly stated that Dorothy Cruz "makes no claim" against the defendants with whom she had settled in the prior case.

Despite the foregoing disclaimer, the trial court held that, in light of the statutory settlement in the previous action, the doctrine of claim preclusion barred the instant suit. Accordingly, the trial court granted the respondents' motion for summary judgment and dismissed the instant case. Moreover, due to its finding that the "[petitioners'] complaint [was] completely lacking in justification," the trial court awarded attorney's fees against both the petitioners and their counsel in the amount of $5,073.67. Notably, the trial court held no hearing regarding the issue of attorney's fees before making the foregoing award.

The court of appeals affirmed the trial court's dismissal on the basis of claim preclusion, concluding that under principles of partnership and agency law the parties to the first action and the parties to the instant case were in privity. The court of appeals reversed the order assessing attorney's fees against the petitioners, in their individual capacity, and remanded the cause for further proceedings after finding that the petitioners were entitled to a hearing to determine the appropriate amount of such fees. See §§ 13-17-102, -103, 5 C.R.S. (1998). Regarding the attorney's fees assessed against the petitioners' counsel, however, the court of appeals ruled that it lacked jurisdiction to review the trial court's award of attorney's fees because the petitioners' counsel had not filed a separate notice of appeal. This appeal followed.

II. CLAIM PRECLUSION

The doctrine of claim preclusion operates as a bar to a second action on the same claims litigated in a prior proceeding. See City & County of Denver v. Consolidated Ditches Co. of Dist. No. 2, 807 P.2d 23, 32 (Colo.1991); Salida Sch. Dist. R-32-J v. Morrison, 732 P.2d 1160, 1163 (Colo.1987) (noting that claim preclusion serves to "relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication"). This doctrine requires the presence of four elements: (1) finality of the first judgment, (2) identity of subject matter, (3) identity of claims for relief, and (4) identity or privity between parties to the actions. See, e.g., S.O.V. v. People in Interest of M.C., 914 P.2d 355, 358 (Colo.1996); City & County of Denver v. Block 173 Assocs., 814 P.2d 824, 830 (Colo. 1991); Pomeroy v. Waitkus, 183 Colo. 344, 349-50, 517 P.2d 396, 399 (1973) (noting that claim preclusion binds parties to the action and persons in privity with such parties). Notably, the doctrine not only bars litigation of issues actually decided, but also any issues that could have been raised in the first proceeding but were not. See Block 173 Assocs., 814 P.2d at 830; Pomeroy, 183 Colo. at 350, 517 P.2d at 399. Unlike issue preclusion, claim preclusion does not require actual litigation. See S.O.V., 914 P.2d at 358-59.

The fourth and final element of claim preclusion, that the parties be the same as those in the first action or persons in privity with them, recognizes the potential for the blending of separate claims "if the second plaintiff stands in such a relationship to the first suit or the parties to the first suit as to justify claim preclusion." 18 Charles Alan Wright, Federal Practice and Procedure § 4407 n. 8 (1981). "Privity between a party and a non-party requires both a `substantial identity of interests' and a `working or functional relationship ... in which the interests of the non-party are presented and protected by the party in the litigation.'" S.O.V., 914 P.2d at 360 (quoting Public Serv. Co. of Colo. v. Osmose Wood Preserving, Inc., 813 P.2d 785, 787 (Colo.App.1991) (holding further that privity exists in circumstances where the non-party is "virtually represented" in litigation)).

Applying these principles, the court of appeals held that this lawsuit was barred by the doctrine of claim preclusion. Specifically, the court of appeals found no real dispute as to the existence of the first three elements of claim preclusion in the instant case: finality of the first judgment, identity of subject matter, and identity of claims for relief. The court of appeals then turned to the fourth element of claim preclusion—whether there was identity or privity between the parties to the two actions. The petitioners in the instant case are not identical to the plaintiff in the first action, since the first action did not name Bryon Cruz or Cruz Enterprises as plaintiffs. Similarly, the respondents in the instant case are not identical to the defendants in the first action, since the first action did not name Mary Nelson or Jim Benine as defendants. Therefore, the court of appeals focused its analysis on whether a privity relationship existed among Dorothy Cruz, and Bryon Cruz and Cruz Enterprises on the one hand, and on whether a privity relationship existed among Harold Nelson and...