Federal Deposit Ins. Corp. v. Eckhardt
| Decision Date | 19 October 1982 |
| Docket Number | No. 81-3536,81-3536 |
| Citation | 691 F.2d 245 |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, v. Robert G. ECKHARDT, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Roberta K. Spurgeon, James A. Smith, Squire, Sanders & Dempsey, Cleveland, Ohio, Edward J. Brzytwa, Frank L. Skillern, Jr., Myers N. Fisher, Thomas C. Bahlo, Federal Deposit Ins. Corp., Washington, D. C., for plaintiff-appellant.
Burt Fulton, Charles Kampinski, Cleveland, Ohio, for defendants-appellees.
Before MERRITT, Circuit Judge, and PHILLIPS and CELEBREZZE, Senior Circuit Judges.
This is an appeal from a summary judgment entered in favor of the defendants on grounds of res judicata. The appellant FDIC brought this action to enforce an agreement between the defendants and a bank whose assets it had acquired. The FDIC had brought a previous action in the Court of Common Pleas of Cuyahoga County, Ohio, against these same defendants to foreclose a mortgage. Since both the present action and the mortgage foreclosure action involved the same underlying debt, and since the Ohio State court action was decided in favor of the defendants, the district court held that the present action was barred by the doctrine of res judicata. We reverse and remand for further proceedings.
On November 5, 1974, the Northern Ohio Bank (the Bank) loaned $55,000 to Joseph E. Wurstner, Inc. (Wurstner). Appellee Robert G. Eckhardt was the president of Wurstner. On that same day, Mr. Eckhardt and his wife, Joanne, also a codefendant, signed a standard Bank form entitled "Agreement To Be Bound." Basically, this document provided that the Eckhardts would be personally and primarily obligated to pay "any and all loans (then) made or (thereafter) to be made" to Wurstner by the Bank. The loan to Wurstner was evidenced by a promissory note signed by Robert Eckhardt on behalf of Wurstner.
In addition, the Eckhardts signed a real estate mortgage for their residential property with the Bank as mortgagee. The mortgage agreement was signed on November 5, 1974, and was recorded on December 12. However, the Eckhardts did not sign a promissory note in their individual capacity as stated in the mortgage agreement. The only promissory note that was signed was the note executed by Mr. Eckhardt on behalf of Wurstner.
In February 1975, appellant FDIC was appointed receiver for the assets of the Bank. When Wurstner defaulted on the loan, the FDIC recovered a judgment on the promissory note against Wurstner for $60,641.49 ($55,000 plus interest).
After the FDIC had failed to realize any recovery from the judgment against Wurstner, it brought an action in the Court of Common Pleas of Cuyahoga County, Ohio, to foreclose on the mortgage signed by the Eckhardts. The Ohio State Court entered judgment in favor of the Eckhardts. The State court found that, contrary to the terms of the mortgage document, the Eckhardts never executed a promissory note for $55,000 individually. Therefore, the court held that there was no consideration for the mortgage. The State court rendered judgment for the defendant Eckhardts on June 20, 1978.
The FDIC then brought the present action in the district court. Jurisdiction was based upon 12 U.S.C. § 1819. In this action the FDIC seeks to enforce the terms of the "Agreement To Be Bound" described above and to recover a judgment against the Eckhardts personally in the amount of the judgment against Wurstner, plus interest.
In separate answers, the Eckhardts set forth several affirmative defenses, including the defenses of res judicata and collateral estoppel based upon the prior State court judgment in favor of the defendants. The Eckhardts and FDIC both filed motions for summary judgment.
The district court granted summary judgment for the defendants and dismissed the FDIC's complaint with prejudice. The court held that the doctrine of res judicata prohibited the FDIC from maintaining the present action on the Agreement To Be Bound because a recovery based upon the Agreement and a recovery based upon the mortgage were "two different means to the same end, rather than distinctly separate causes of action." Relying upon the Restatement of Judgments § 65(1) (1942), and Cemer v. Marathon Oil Co., 583 F.2d 830 (6th Cir. 1978), the district court held that the FDIC had a choice of remedies which it should have pursued simultaneously in the Ohio State court action, and that "(i)t would be unfair to the defendants" to allow the FDIC to bring a separate action based upon the Agreement To Be Bound. From this ruling the FDIC appeals.
The parties agree that the law of Ohio controls on the question of what res judicata effect should be given the prior judgment in the Court of Common Pleas of Cuyahoga County, Ohio. To support its assertion that Ohio law controls, FDIC cites Wright v. Georgia Railroad & Banking Co., 216 U.S. 420, 30 S.Ct. 242, 54 L.Ed. 544 (1910); and Union Planters' Bank v. Memphis, 189 U.S. 71, 23 S.Ct. 604, 47 L.Ed. 712 (1903).
FDIC also relies upon the language of 28 U.S.C. § 1738, implementing the Full Faith And Credit Clause of Article IV, § 1 of the United States Constitution. This statute provides that state judgments "shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory, or Possession from which they are taken." (Emphasis added.) Some commentators and courts have stated that a federal court sometimes may apply a federal rule of res judicata and give a greater preclusive effect to a state court judgment than accorded by the state's law. Lynn Carol Fashions, Inc. v. Cranston Print Works, Co., 453 F.2d 1177 (3rd Cir. 1972); Hyman v. Regenstein, 258 F.2d 502 (5th Cir. 1958), cert. denied, 359 U.S. 913, 79 S.Ct. 589, 3 L.Ed.2d 575 (1959); In re Transocean Tender Offer Securities Litigation, 455 F.Supp. 999 (N.D.Ill.1978); Eisel v. Columbia Packing Co., 181 F.Supp. 298 (D.Mass.1960); Vestal, Res Judicata Preclusion By Judgment: The Law Applied in Federal Courts, 66 Mich.L.Rev. 1723, 1726, 1728 (1968); Carrington, Collateral Estoppel and Foreign Judgments, 24 Ohio St.L.J. 381 (1963); Comment, Res Judicata in the Federal Courts: Application of Federal or State Law: Possible Differences Between the Two, 51 Cornell L.Q. 96 (1965); 68 Colum.L.Rev. 1590 (1968); Restatement (Second) of Judgments § 134, comment g at 80-81 (Tent. Draft No. 7, 1980). See generally Annotation, State of Federal Law as Governing Applicability of Doctrine of Res Judicata or Collateral Estoppel in Federal Court Action, 19 A.L.R.Fed. 709 (1974).
It appears that the emerging rule is that the preclusive effect of a valid judgment is to be determined by the law of the system which rendered the judgment. See Degnan, Federalized Res Judicata, 85 Yale L.J. 741, 773 (1976); Restatement (Second) of Conflict of Laws, § 95, comment g (1969). See also General Foods Corp. v. Massachusetts Dept. of Public Health, 648 F.2d 784, 786-87 (1st Cir. 1981).
Whether a federal rule of res judicata should ever be applied to determine the preclusive effect of a state court judgment on issues of state law need not be decided in the present case. We agree with the parties that Ohio law of res judicata applies here.
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...by Judgment: The Law Applied in Federal Courts, 66 Mich.L.Rev. 1723, 1736-39 (1968), and other references cited in FDIC v. Eckhardt, 691 F.2d 245, 247 (6th Cir.1982). A federal court does not undermine the authority of a state's courts when it holds that a state judgment bars a federal suit......
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...a final judgment on the merits. Norwood v. McDonald, 142 Ohio St. 299, 305, 52 N.E.2d 67, 71 (1943); see Federal Deposit Insurance Corp. v. Eckhardt, 691 F.2d 245, 247 (6th Cir.1982). Ohio rules which determine whether a dismissal should be treated as "on the merits" track the codified Fede......
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Brennan v. EMDE Medical Research, Inc.
...principles to determine the extent to which the earlier state judgment bars subsequent litigation. Id., citing FDIC v. Eckhardt, 691 F.2d 245, 247-48 (6th Cir.1982). The Court also found that many states include the concept of "jurisdictional competency" within their preclusion principles. ......
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...state preclusion principles to determine the extent to which an earlier state judgment bars subsequent litigation. Cf. FDIC v. Eckhardt, 691 F.2d 245, 247-248 (CA6 1982) (applying state law to determine preclusive effect on claim within concurrent jurisdiction of state and federal courts). ......