Federal Ins. Co. v. Murray

• Decision Date: 30 August 1990
• Docket Number: No. C-1-89-535.,C-1-89-535.
• Parties: FEDERAL INSURANCE COMPANY, Plaintiff, v. Robert E. MURRAY, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

744 F. Supp. 176

FEDERAL INSURANCE COMPANY, Plaintiff, v. Robert E. MURRAY, et al., Defendants.

No. C-1-89-535.

United States District Court, S.D. Ohio, W.D.

August 30, 1990.

John Petro, Columbus, Ohio, for plaintiff.

Michael Maundrell, Sylvan Reisenfeld, Cincinnati, Ohio, for defendants.

ORDER

CARL B. RUBIN, District Judge.

This matter is before the Court on defendant Fifth Third Bank's (Fifth Third) motion to dismiss (Doc. No. 16). Fifth Third contends that this action is barred by the doctrine of res judicata and seeks dismissal pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. Plaintiff Federal Insurance Company (FIC) has filed an opposing memorandum (Doc. No. 17) and Fifth Third has replied. (Doc. No. 18).

FIC brought this diversity action against defendants Robert E. Murray, the president of Becker Electric Company ("Becker"), James W. Thompson, an attorney, and Thompson's law firm, Thompson & Co., L.P.A. ("T & C") alleging inter alia breach of contract and unjust enrichment. Fifth Third was added as a party-defendant to this action by Order of this Court. (Doc. No. 13). The amended complaint charges that on November 20, 1984, Becker, as principal, and FIC, as surety, executed and delivered to the State of Ohio, a bid guaranty and contract bond in connection with a contract for electrical work to be performed at the Chillicothe Correctional Institution. On March 26, 1986, the State paid Becker a partial payment in the amount of $632,670.23 for work done pursuant to the Chillicothe contract. Allegedly, Murray, Thompson, and T & C took possession of this payment, deposited it in T & C's Trust/Escrow Account at The Huntington National Bank and paid Murray $100,000.00 and Thompson and/or T & C $12,375.78, respectively, from the payment. The remaining sum of $520,294.45 was deposited in Becker's account at Fifth Third and immediately taken by Fifth Third to offset outstanding loans owed by Becker to Fifth Third. A second payment made by the State pursuant to the Chillicothe contract was also deposited in Becker's account at Fifth Third and offset as well.

In April, 1986, Becker abandoned performance on the Chillicothe project. As Becker's surety, FIC completed Becker's contractual obligations, paid Becker's job creditors, and sustained a loss in excess of $1,100,000.00. FIC sued Fifth Third in August, 1986 to recover those payments which were made by the State, deposited in the Becker account, and offset by Fifth Third. Upon review of the district court's findings, the Court of Appeals for the Sixth Circuit held that:

We conclude that an express trust was formed by the contract between Becker and the State. Since Ohio follows the "equitable rule" on the issue of whether the Bank could offset the money in Becker's account which Becker held in trust, the Bank was precluded from offsetting the deposits representing progress payments. Federal, subrogated to the rights of the subcontractors who were the beneficiaries of the money Becker held in trust, is therefore entitled to the two deposits.

Federal Ins. Co. v. Fifth Third Bank, 867 F.2d 330, 334 (6th Cir.1989), titled for purposes hereinafter as "FIC I".

In this action, FIC seeks to recover $112,375.78, or that portion of the first partial payment made by the State pursuant to the Chillicothe contract and paid over to defendants Murray, Thompson and T & C. During the course of this litigation, FIC contends that it learned for the first time that Murray paid Fifth Third the $100,000.00 he received from this partial payment, thereby obtaining a release from his personal liability on loan obligations to the bank. FIC filed an amended complaint alleging that Fifth Third wrongfully took possession of that sum. At issue is whether the previous litigation between FIC and Fifth Third for wrongful offset bars this suit between the same parties.

The Applicability of Res Judicata

FIC I was a suit brought in federal court and therefore the federal rule of res judicata determines whether it should bar this litigation.¹ Matter of Energy Co-op., Inc., 814 F.2d 1226, 1230 (7th Cir.), cert. denied, 484 U.S. 928, 108 S.Ct. 294, 98 L.Ed.2d 254 (1987) citing Restatement (Second) Of Judgments § 87 (1982); 18 Wright, A. Miller, E. Cooper, Federal Practice and Procedure § 4466 (1981); see also Shaver v. F.W. Woolworth Co., 840 F.2d 1361, 1364 (7th Cir.), cert. denied, 488 U.S. 856, 109 S.Ct. 145, 102 L.Ed.2d 117 (1988); Cemer v. Marathon Oil Co., 583 F.2d 830, 832 (6th Cir.1978). The doctrine of res judicata as articulated by the Court of Appeals for the Sixth Circuit provides that a prior judgment bars an action if (1) the parties are identical in both actions; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) a final judgment on the merits was entered; and (4) both cases involve the same cause of action. King v. South Cent. Bell Telephone & Telegraph, 790 F.2d 524 (6th Cir.1986). FIC does not contest that the same parties litigated FIC I nor that a final judgment on the merits was rendered by a court of...