Industrial Park Corp. v. U.S.I.F. Palo Verde Corp.

• Decision Date: 23 March 1976
• Docket Number: No. 1,CA-CIV,1
• Citation: 26 Ariz.App. 204,547 P.2d 56
• Parties: INDUSTRIAL PARK CORPORATION, a California Corporation, and F.M. McCown, Appellants, v. U.S.I.F. PALO VERDE CORPORATION, an Arizona Corporation, et al., Appellees. 2637.
• Court: Arizona Court of Appeals

Page 56

547 P.2d 56

26 Ariz.App. 204

INDUSTRIAL PARK CORPORATION, a California Corporation, and F.M. McCown, Appellants, v. U.S.I.F. PALO VERDE CORPORATION, an Arizona Corporation, et al., Appellees.

No. 1 CA-CIV 2637.

Court of Appeals of Arizona, Division 1, Department B.

March 23, 1976.

Leibsohn, Eaton, Gooding & Romley, P.C., by Joe M. Romley, Phoenix, for appellants. ^*

Sullivan, Mahoney & Tang, by William P. Mahoney, Jr., Phoenix, for appellees.

OPINION

SCHROEDER, Judge.

The issues in this case concern the extent to which the appellants are bound under principles of res judicata or collateral estoppel by a judgment entered in previous litigation between appellant Industrial Park Corporation (hereafter 'Industrial Park') and appellee U.S.IF. Palo Verde Corporation (hereafter 'U.S.I.F.'). The prior judgment was affirmed by this Court. Industrial Park Corporation v. U.S.I.F. Palo Verde Corporation, 19 Ariz.App. 342, 507 P.2d 681 (1973).

The trial court in this action entered summary judgment against both appellants who were plaintiffs below, based upon defendant's contention that the action was barred by the prior litigation. We hold that this judgment must be affirmed with respect to appellant Industrial Park, which was an actual party to the prior litigation. However, the judgment against appellant McCown, who is the principal stockholder of Industrial Park but who was not an actual party to the prior action, must be reversed.

This case, like the prior action, arose from a series of transactions entered into in 1969 between Industrial Park and U.S.I.F. By written instruments, Industrial Park agreed to sell certain industrial property to U.S.I.F., and U.S.I.F. in turn agreed that the property would be leased back to Industrial Park. Industrial Park, which was required to pay substantial rent to U.S.I.F., fell in arrears on rental payments, and U.S.I.F. brought the prior action, denominated as a forcible detainer action, against Industrial Park. In the course of that litigation, U.S.I.F. and Industrial Park entered into a written stipulation, and the court entered judgment incorporating that stipulation. In material part, the stipulated judgment provided that U.S.I.F. would have possession of the real estate, that Industrial Park would pay in installments approximately $60,000 as damages to U.S.I.F., and that the parties waived any other claims with respect to the written sale and leaseback agreements. Industrial Park failed to make timely installment payments on the judgment, and U.S.I.F. then accelerated the judgment and executed upon it.

Industrial Park, after retaining different counsel, then appealed the earlier judgment to this Court, which affirmed in Industrial Park Corporation v. U.S.I.F. Palo Verde Corporation, supra. In that earlier appeal, Industrial Park argued that the trial court was without jurisdiction to enter the stipulated judgment which provided for damages, and thus went beyond the scope of matters to be litigated in a forcible detainer action. In affirming the consent judgment, this Court in essence held that where the parties stipulated to relief broader than that normally encompassed in a forcible detainer action, the court had jurisdiction to consider and enter the judgment:

'We agree with appellee's contention that the mere labeling of a particular action does not necessarily foreclose or limit the Superior Court's capacity to hear a stipulation by the parties concerning a matter which the Constitution and laws of Arizona specifically empower it to entertain. Further, though the action in forcible detainer deals essentially with the issue of possession, Heywood v. Ziol, 91 Ariz. 309, 372 P.2d 200 (1962), we find that there is nothing which specifically limits it to that adjudication where both parties stipulated to broader relief. Cf. Arizona Rules of Civil Procedure, Rule 15(b), 16 A.R.S.' (19 Ariz.App. at 345, 507 P.2d at 684).

This Court also approved the acceleration of the debt and U.S.I.F.'s execution on it.

Prior to this Court's decision in the earlier case, Industrial Park and Mr. McCown filed this action against U.S.I.F. and corporations affiliated with it. Plaintiffs sought rescission or reformation of the sale and leaseback agreements, and damages. Mr. McCown's action for damages to his personal finances arises from his personal obligation on the mortgage of the real property, although the exact nature of these obligations is unclear from the record. After this Court's opinion was handed down, defendants moved for summary judgment on the ground that the previous litigation precluded the plaintiffs from maintaining this action. The court below granted the motion and dismissed the case. Plaintiffs now appeal to this Court.

Resolution of this appeal requires the application of principles of res judicata and collateral estoppel, or issue preclusion. Our Supreme Court has explained the basic principle of res judicata as follows:

'Briefly stated, the doctrine of res judicata is that an existing final judgment rendered upon the merits, without fraud or collusion, by a court of competent jurisdiction, is conclusive as to every point decided therein and also as to every point raised by the record which could have been decided, with respect to the parties and their privies, in all other actions in the same or any other judicial tribunal of concurrent jurisdiction.' Hoff v. City of Mesa, 86 Ariz. 259, 261, 344 P.2d 1013 at 1014 (1959).

The United States Supreme Court has described the distinction between res judicata and collateral estoppel in the following terms:

'The basic distinction between the doctrines of Res judicata and collateral estoppel, as those terms are used in this case, has frequently been emphasized. Thus, under the doctrine of Res judicata, a judgment 'on the merits' in a prior suit involving the same parties or their privies bars the second suit based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, such a judgment precludes relitigation of issues actually litigated and determined in the prior suit, regardless of whether it was based on the same cause of action as the second suit.' Lawlor v. National Screen Service Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 867, 99 L.Ed. 1122 (1955).

In deciding the extent to which this action is barred by the previous litigation, we must look both to the degree of identity of the parties and to the degree of identity of the issues in the two actions. Since U.S.I.F. and Industrial Park were both actual parties to the prior litigation, we first examine the correctness of the judgment entered below in favor of U.S.I.F. and against Industrial Park.

Appellants' position is that while both U.S.I.F. and Industrial Park were parties to the prior action, the causes of action in the two cases are totally different. The prior case was a forcible detainer action, which by its nature is limited to summary disposition of the question of possession, while the instant case relates to the validity of the entire sale and leaseback transaction. Therefore, argue appellants, U.S.I.F. cannot be precluded from litigating other issues involving the sale and leaseback.

Appellees' initial response is that, since the parties agreed to the entry of judgment in the prior action not merely with respect to possession but also with respect to damages, the action was not a forcible detainer action, and was transformed into an ordinary civil action. Therefore, under applicable law, Industrial Park is barred as to any matters which it could have raised in that litigation. ¹

We cannot agree with this contention. The prior action was denominated a forcible detainer, and the defendant in that action, Industrial Park, could not as a matter of right have raised any issues other than issues relating to possession. A.R.S. § 12--1177; Olds Bros. Lumber Co. v. Rushing, 64 Ariz. 199, 167 P.2d 394 (1946); Gangadean v. Erickson, 17 Ariz.App. 131, 495 P.2d 1338 (1972). This Court's prior opinion properly held that the trial court had jurisdiction to enter judgment on other matters only so long as the parties had stipulated to the entry of such judgment. That is a far cry from holding that the defendant was required in the first instance to plead all of its claims against the plaintiff or forever be barred by collateral estoppel from litigating those matters.

However, appellees further argue that res judicata bars the claim of Industrial Park here because in the prior litigation, Industrial Park actually stipulated to the entry of a judgment which expressly waived all of Industrial Park's claims with respect to these transactions. The waiver reads as follows:

'6. The parties heretofore waive any and all demands, claims and litigation incident thereto, arising from any obligations incident to the lease agreement and any other written agreements between the parties excepting the within agreement and this Judgment.'

The prior judgment thus did in fact determine all of the rights of U.S.I.F. and Industrial Park with respect to the sale and leaseback agreements. We, therefore, agree with appellees that the consent judgment containing this express waiver is res judicata and bars Industrial Park from maintaining the instant claims against U.S.I.F. ²

Since we hold that the claims of Industrial Park against U.S.I.F. are...