Lee v. Hall
| Decision Date | 14 March 1990 |
| Docket Number | No. 89-171-II,89-171-II |
| Citation | 790 S.W.2d 293 |
| Parties | William S. LEE, Plaintiff/Appellant, v. Von HALL, Brenda Hall, and Mid-South Bank & Trust Company, Defendants/Appellees. 790 S.W.2d 293 |
| Court | Tennessee Court of Appeals |
James W. Dempster, McMinnville, Robert J. Batson, Jr., Chattanooga, for plaintiff/appellant.
Robert W. Newman, McMinnville, for defendants/appellees Von Hall and Brenda Hall.
Thomas O. Bratcher, McMinnville, for defendant/appellee Mid-South Bank & Trust Co.
This appeal involves the res judicata effect of a judgment defining the rights and liabilities of the co-makers of a promissory note. The co-maker who paid the note when it became due filed an action in the Chancery Court for Warren County based on an earlier judgment that both parties were liable on the note. The trial court heard the case without a jury and held that, notwithstanding its earlier judgment, the co-maker who paid the note was not entitled to contribution from the other co-maker. The paying co-maker has appealed, asserting that the trial court's first judgment should have foreclosed the contribution question.
William S. Lee owns a grocery business in McMinnville known as JEBS. In late 1986, Mr. Lee decided to let one of his employees, Von Hall, buy into the business. The two men agreed that they would form either a partnership or a corporation, and Mr. Hall agreed that he would execute a $150,000 note as consideration for his interest in the business.
Mr. Hall never executed the note. However, on December 9, 1986, before their corporation or partnership could be formed, Mr. Lee and Mr. Hall borrowed $50,000 from the Mid-South Bank & Trust Company ("Mid-South") to obtain additional merchandise for the Christmas season. They signed the note as co-makers and secured it by pledging JEBS' inventory and by obtaining their wives' personal guaranties.
The business arrangement was short-lived. Mr. Lee and Mr. Hall had several disagreements, and Mr. Hall left the store in May, 1987. Shortly thereafter, Mr. Lee sued Mr. Hall to establish their respective liabilities in the failed venture. On August 27, 1987, the trial court entered an order finding that the contemplated partnership or corporation was never formed and that both Mr. Hall and his wife were liable "as signers" on the Mid-South note. See Lee v. Hall, No. 4342 (Order filed August 27, 1987). Neither Mr. Hall nor his wife appealed from this decision.
Mid-South demanded payment from Mr. Hall and Mr. Lee when the note came due in December, 1987. Mr. Hall refused to pay the note until the bank exhausted the other collateral for the loan. Mr. Lee filed a second action seeking to establish Mr. Hall's liability on the note. He also paid the entire amount due on the note into court and requested the trial court to require contribution from Mr. Hall for his share of the debt. The trial court ordered the money to be paid over to Mid-South but declined to require contribution from Mr. Hall because it concluded that Mr. Hall was not liable on the note until after JEBS' inventory was used to satisfy the note.
Mr. Lee's primary contention is that the doctrine of res judicata should have prevented Mr. Hall from relitigating the question of his liability on the Mid-South note. We agree. The judgment in the first suit between the parties foreclosed this issue.
The doctrine of res judicata bars a second suit between the same parties on the same cause of action with regard to all issues that were or could have been litigated in the former suit. Massengill v. Scott, 738 S.W.2d 629, 631 (Tenn.1987); Gibson Lumber Co. v. Neely Coble Co., 651 S.W.2d 232, 233-34 (Tenn.Ct.App.1983). It is based on the public policy favoring finality in litigation and does not depend upon correctness or fairness, as long as the underlying judgment is valid. Moulton v. Ford Motor Co., 533 S.W.2d 295, 296 (Tenn.1976); State of Tennessee Dept. of Human Servs. v. Gouvitsa, 735 S.W.2d 452, 457 (Tenn.Ct.App.1987).
In order to be successful, a party asserting a res judicata defense must demonstrate: (1) that the underlying judgment was rendered by a court of competent jurisdiction; (2) that the same parties were involved in both suits; (3) that the same cause of action was involved in both suits; and (4) that the underlying judgment was on the merits. Hutcheson v. TVA, 604 F.Supp. 543, 550 (M.D.Tenn.1985); 22 Tenn.Juris. Res Judicata Secs. 8-11 (1985).
All the ingredients for a successful res judicata defense are present in this case. The trial court had jurisdiction over Mr. Lee's first suit against Mr. Hall. See Tenn.Code Ann. Secs. 16-11-102, 16-10-106 (1980). Both cases involved the same parties and the same issue--Mr. Hall's liability of the Mid-South note. Finally, the trial court rendered a final judgment on the merits from which no appeal was taken.
Mr. Hall insists, however, that the trial court's judgment in the underlying case was ambiguous and that the judgment in the second suit merely clarified the first judgment. The record does not bear Mr. Hall out. The trial court held in its first judgment that Mr. Hall and his wife were liable to Mid-South "as signers" of the note. In ruling from the bench, the trial judge told Mr. Hall's lawyer that Mr. Hall would be entitled to contribution from Mr. Lee if Mr. Hall were required to pay the note. 1 This colloquy establishes that, in addition to the parties' liability to Mid-South, the issue of the parties' contribution rights were actually raised and disposed of in the first case. Thus, the entry of the underlying judgment precluded the relitigation of the issue. 2
Mr. Lee also takes issue with the trial court's decision to release the judgment lien for the "discovery court reporting expenses" he incurred in the...
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