Estate of Brown v. Bank of Piedmont

• Decision Date: 18 January 1989
• Docket Number: No. 15717,15717
• Citation: 763 S.W.2d 719
• Parties: ESTATE OF Jess BROWN, Deceased, Plaintiff-Appellant, v. BANK OF PIEDMONT and Cindy J. Wilson, Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 719

763 S.W.2d 719

ESTATE OF Jess BROWN, Deceased, Plaintiff-Appellant, v. BANK OF PIEDMONT and Cindy J. Wilson, Defendants-Respondents.

No. 15717.

Missouri Court of Appeals,

Southern District,

Division Two.

Jan. 18, 1989.

Randy P. Schuller, Hackworth and Schuller, Piedmont, for plaintiff-appellant.

Robert M. Ramshur, Ramshur and Goforth, Piedmont, for defendants-respondents.

HOGAN, Judge.

In this action plaintiff Sharon Beardon, as Public Administrator of Wayne County, sought a declaration of the rights and interests of the parties in and to a parcel of real estate located in Wayne County, Missouri. The appeal is here on an agreed statement of fact in lieu of a transcript, as provided by Rule 81.13, V.A.M.R. and therefore the only question before us is whether the trial court drew the proper conclusion from the facts stipulated. State ex rel. Ciba Pharmaceutical Products, Inc. v. State Tax Commission, 382 S.W.2d 645, 651 (Mo.banc 1964); Surface v. Ranger Insurance Company, 526 S.W.2d 44, 45 (Mo.App.1975).

Plaintiff Sharon Beardon is, apparently, the administrator of the Estate of Jess Brown, deceased. The real property here involved has been mortgaged to the defendant Bank of Piedmont by a statutory deed of trust executed by Gary Brown and Donna Brown, his wife, as security for a loan. Defendant Cindy Wilson is trustee for the Bank of Piedmont.

The facts stipulated are:

"1. That Plaintiff is a decedent's estate pending in Wayne County Circuit Court, Probate Division.

2. That Defendant, Bank of Piedmont, is a Missouri Banking Corporation authorized to do business and doing business in the City of Piedmont, County of Wayne, State of Missouri, and that Defendant, Cindy J. Wilson, is a resident of Wayne County, Missouri.

3. That on the 15th day of April, 1983, Jess Brown conveyed to Gary Brown and Donna Brown, his wife ... certain real estate located in Wayne County, Missouri, to wit:

[Here a metes and bounds description of a small tract of realty is set out].

4. That on the 11th day of May, 1983, the said Jess Brown died.

5. That on the 30th day of August, 1983, the said Gary Brown and Donna Brown, his wife, secured a loan at Defendant, Bank of Piedmont, and secured the same with a deed of trust on the above described real estate (along with other lands).

6. That the proceeds of the loan above mentioned were not expended upon the property described in paragraph three (3) above.

7. That said deed of trust was duly recorded in the Wayne County Land Records in Book 307 at Page 23.

8. That subsequently, by Judgment dated October 22, 1985, the above described deed from Jess Brown to Gary Brown and Donna Brown, his wife, was set aside, with said Judgment being upheld by the Missouri Court of Appeals Opinion dated January 5, 1987. [The court's opinion is reported sub nom Estate of Brown v. Brown, 722 S.W.2d 345 (Mo.App.1987).]

9. That the said deed of trust of Defendant, Bank of Piedmont, is unsatisfied and still exists as a lien on said real estate in the Wayne County Land Records.

10. That Defendants, Bank of Piedmont and Cindy J. Wilson, Trustee, were not parties to the prior action described in paragraph seven (7) above.

11. That it is agreed that the matter can be submitted to the Court upon this Stipulation of Facts and the Briefs of the parties." (Emphasis supplied).

After hearing argument, the trial court entered judgment finding all issues tendered in favor of the defendants and against the plaintiff.

The defendants pleaded, in very general terms, that they were not and should not be bound by the judgment in the action setting aside the deed from Jess Brown, deceased, to Gary and Donna Brown, because they were not parties to the prior action. Given fair intendment, the allegations of the defendants' answer are sufficient to invoke the familiar principle that in civil actions, application of the doctrine of res judicata is generally limited to a former judgment in an action between the same parties, or between those in privity with them. See State v. Bradley, 361 Mo. 267, 273, 234 S.W.2d 556, 558 (1950).

The concept of res judicata or former adjudication is in a state of evolution. Even the terminology of the doctrine is changing, and varies from case to case. We do not propose to discuss the doctrine of res judicata at length; we undertake only to apply the rules of former adjudication, as we understand them, to this case. ¹ As a starting point, we quote from Oates v. Safeco Ins. Co. of America, 583 S.W.2d 713, 719 (Mo.banc 1979):

" Traditionally, res judicata (claim preclusion) precludes the same parties from relitigating the same cause of action whereas collateral estoppel (issue preclusion) precluded the same parties from relitigating issues which had been previously adjudicated....

The concept of collateral estoppel has been extended, allowing strangers to the prior suit to assert collateral estoppel against parties to the prior suit to bar relitigation of issues previously adjudicated. This extension of the concept of collateral estoppel removes the requirement of mutuality of estoppel which required that the party asserting the estoppel also be bound by the estoppel. See, Bernhard v. Bank of Am. Nat. Trust & Sav. Ass'n., 19 Cal.2d 807, 122 P.2d 892 (1942); Blonder-Tongue Laboratories, Inc. v. University of Ill. Found., 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971); LaRose v. Casey, 570 S.W.2d 746, 749-750 (Mo.App.1978).

[10, 11] As of 1976, most commentators listed Missouri among the states which strictly adhered to the requirement of mutuality of estoppel.... This court has not expressly abolished the requirement of mutuality but has allowed defensive use of issue preclusion by a stranger to the prior suit against a party to the prior suit. See, Arata v. Monsanto Chemical Co., 351 S.W.2d 717 (Mo.1961). The Missouri Court of Appeals, Western District, has, however, expressly abolished the requirement of mutuality of estoppel and adopted the Bernhard Doctrine from Bernhard v. Bank of Am. Nat. Trust & Sav. Assn., supra: LaRose v. Casey, supra, at 749-750. ² The Bernhard Doctrine requires a case-by-case, issue-by-issue review of the appropriateness of the application of collateral estoppel by a stranger to the prior suit. The court in reviewing whether the application of collateral estoppel is appropriate should consider: (1) whether the issue decided in the prior adjudication was identical with the issue presented in the present action; (2) whether the prior adjudication resulted in a judgment on the merits; and (3) whether the party against whom collateral estoppel is asserted was a party or is in privity with a party to the prior adjudication.... Most courts have added a fourth factor to the three enunciated ... in the Bernhard case: whether the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior suit.... Fairness is the overriding consideration in determining whether or not to apply the Doctrine of Mutuality...."

The plaintiff argues that although the defendants were not named parties to the prior suit, "it does not necessarily follow that they are not bound by the judgment." Plaintiff argues that the doctrine of "virtual representation," applied by this court in Sierk v. Reynolds, 484 S.W.2d 675 (Mo.App.1972), should apply here. It is further argued that the defendants should be bound by the result in the first action because a mortgagor and his mortgagee are in privity. We cannot agree with either argument advanced by the plaintiff.

In Sierk v. Reynolds, 484 S.W.2d 675, the city of Springfield undertook to issue special tax bills to defray the cost of constructing sanitary sewers. Several landowners in the sewer district sought to enjoin issuance of the special tax bills but suffered an adverse result in the trial court. The tax bills were assigned, suit was brought by the assignee and judgment was had by the assignee. The defendant appealed. This court held that the defendants, against whom the special assessment was levied, were bound by the judgment in the injunction suit under the doctrine of "virtual representation." Sierk v. Reynolds, 484 S.W.2d at 679. In support of our conclusion, we cited Drainage Dist. No. 1 Reformed v. Matthews, 361 Mo. 286, 302-303, 234 S.W.2d 567, 573 (1950), as follows:

" 'In the absence of fraud or collusion a judgment for or against a municipal corporation, county, town, school or irrigation district, or other local government agency or district, or a board of officers properly representing it, is binding and conclusive on all residents, citizens and taxpayers in respect to matters adjudicated which are of general or public interest such as questions relating to public property, contracts or other obligations. The rule is frequently applied to judgments rendered in an action between certain residents or taxpayers and a municipality, county or district or board or officer representing it, it being held that all other citizens and taxpayers similarly situated are represented in the litigation and bound by the judgment in the absence of fraud or collusion. The rule is applicable to persons who have notice of the suit and even to persons without actual notice of the suit.' " (Emphasis added).

The court further noted in the same case, 361 Mo. at 304, 234 S.W.2d at 574, that:

"Privity connotes those who are in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right; and where this identity of interest is found to exist, all are alike concluded and bound by the judgment."

It has been noted by modern commentators that the doctrine of "virtual representation" is in fact very narrow; it has been applied in the federal courts to foreclose successive taxpayer suits challenging the same tax levy, as in the Sierk case, but its application has otherwise been very limited. See 18...