Melbourn v. Benham, 12591

• Decision Date: 21 May 1980
• Docket Number: No. 12591,12591
• Citation: 292 N.W.2d 335
• Parties: Barbara A. MELBOURN, d/b/a Melbourn's Florist, Plaintiff and Appellant, v. James BENHAM and Rita Benham, d/b/a Sunshine Realty, Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 335

292 N.W.2d 335

Barbara A. MELBOURN, d/b/a Melbourn's Florist, Plaintiff and Appellant, v. James BENHAM and Rita Benham, d/b/a Sunshine Realty,

Defendants and Appellees.

No. 12591.

Supreme Court of South Dakota.

Argued Sept. 12, 1979.

Decided May 21, 1980.

Charles Rick Johnson of Johnson, Johnson & Eklund, Gregory, for plaintiff and appellant.

Robert C. Riter, Jr. of Riter, Mayer, Hofer & Riter, Pierre, for defendants and appellees.

DAVIS, Circuit Judge.

The complaint of the plaintiff and appellant, Barbara Melbourn, alleging breach of agency and fiduciary obligations by the Benhams in their capacity as real estate agents for Melbourn, prays for judgment of damages totaling $11,630.00. The Benhams counterclaimed, seeking some $5,225.00, plus interest, representing a commission alleged to be due them as the result of a listing contract entered into between Melbourn as seller and the Benhams as listing brokers for the sale of Melbourn's floral business.

The trial court concluded that plaintiff's cause of action as well as the Benhams' counterclaim hinged on but one material fact, whether the contract of sale entered into between Melbourn, as seller, and Blaseg and West, as buyers of the floral business, was valid and enforceable. Finding that the issue had been determined unfavorably to plaintiff in prior litigation, the trial court granted summary judgment in favor of the Benhams dismissing plaintiff's complaint and granting the Benhams' counterclaim. The validity of that conclusion constitutes the issue presented by this appeal. We reverse and remand.

In August of 1975, Mrs. Melbourn signed a real estate listing agreement with the Benhams. The Benhams were thereby given a listing to sell Mrs. Melbourn's floral shop, "Melbourn's Florist," for a sale price of $150,000.00. The contract provided for a 5% commission to the Benhams in the event of a sale at the listed price "or for any price and terms I (we) may agree to accept . . . .

In January of 1976 an offer and agreement to purchase was entered into between Melbourn as seller and Kathy Blaseg and Catherine West as the buyers. This sales contract provided that the total sale price was to be $135,000.00, based in part upon inventory valued on the date of the contract at $46,930.00. The contract provided that the inventory figure was to be finally adjusted on the date of closing. Two thousand dollars earnest money was paid by the buyers to the Benhams, who to date still hold this money in a trust account.

At the time of closing, Blaseg and West valued the remaining inventory at $16,480.00, which resulted in a reduction of the total purchase price to $104,500.00. Mrs. Melbourn refused to close, insisting that the purchase price was $135,000.00.

This dispute gave rise to litigation between Blaseg and West and Mrs. Melbourn whereby Blaseg and West sought recovery for some $73,000.00 damages on a theory of breach of the sales contract. Upon a jury trial, a verdict was returned in favor of Blaseg and West in the amount of $11,630.35. No appeal was taken from that judgment. The entire record from that case was included as part of the settled record in this action. However, the record does not include the trial transcript.

Mrs. Melbourn admits in her brief that the West action collaterally estops her from raising two issues: (1) whether the sales contract between Melbourn and Blaseg and West was valid and enforceable, and (2) whether Mrs. Melbourn breached that sales contract. Both issues were answered in the affirmative in the West action. Mrs. Melbourn was a party to that action and is therefore collaterally estopped from relitigating those two issues. Peterson v. Nebraska Natural Gas Co., 204 Neb. 136, 281 N.W.2d 525 (1979); Gottschalk v. South Dakota Real Estate Commission, 264 N.W.2d 905 (S.D.1978); Keith v. Willers Truck Service, Inc., 64 S.D. 274, 266 N.W. 256 (1936).

However, Mrs. Melbourn argues that res judicata does not completely bar this action which is based upon the listing agreement and the obligations flowing from agent to principal, rather than the sales contract which formed the basis of the cause of action in the earlier West suit. Further, Mrs. Melbourn asserts that even though collaterally estopped as to the two issues noted above, genuine issues of material fact exist under the allegations of the complaint.

The Benhams argue that both the doctrines of collateral estoppel and res judicata apply to bar the Melbourn suit. It is clear from the memorandum opinion and judgment entered by the trial court, however, that the decision was based upon an application of the doctrine of collateral estoppel. The trial court held that the jury findings in the prior action were binding upon Mrs. Melbourn. Since the West action determined that a valid sales contract existed and Mrs. Melbourn had breached the contract, the trial court found there remained no genuine issues of material fact and dismissed Mrs. Melbourn's complaint.

The trial judge correctly determined that res judicata does not apply to this action. The landmark case in South Dakota jurisprudence on the subject of res judicata is Keith v. Willers Truck Service, Inc., supra. In discussing whether a prior suit was res judicata as to the issue of the defendant's negligence, the Court formulated the following rule:

(F)irst, a final judgment or decree of a court of competent jurisdiction upon the merits is a bar to any future action between the same parties or their privies upon the same cause of action so long as it remains unreversed; and, second, a point which was actually and directly in issue in a former action and was there judicially passed upon and determined by a domestic court of competent jurisdiction cannot be drawn in question in any future action between the same parties or their privies whether the cause of action in the two actions be identical or different.

64 S.D. at 276, 266 N.W. at 257-258.

Although the Court did not draw a distinction between the doctrines of res judicata and collateral estoppel, it later noted in Gottschalk v. South Dakota Real Estate Commission, supra:

The second principle of res judicata described in the Keith v. Willers Truck Service, supra, and Golden v. Oahe Enterprises, Inc., supra, cases is quite often identified as "collateral estoppel."

264 N.W.2d at 908.

Res judicata bars a later suit that attempts to relitigate the same cause of action by the parties or one of the parties in privity to a party in the earlier suit. Collateral estoppel bars not the cause of action, but rather, relitigation of an essential fact or issue involved in the earlier suit.

In Golden v. Oahe Enterprises, Inc., 240 N.W.2d 102 (S.D.1976), it was said that for purposes of res judicata, a cause of action is comprised of the facts which establish the right a party seeks to enforce through litigation. Citing Hanson v. Hunt Oil Company, 505 F.2d 1237 (8th Cir. 1974), the Court held that in determining whether a cause of action is the same, one has to determine whether the wrong for which redress is sought is the same for both actions.

Applying the foregoing principles, it is clear the prior West suit is not res judicata as to the present Melbourn action. Blaseg and West, as buyers, sought redress for the breach of a sales contract entered into between themselves and Mrs. Melbourn. In this present action, Mrs. Melbourn brings suit against her agents, the Benhams, for breach of their agency obligations as established by the listing agreement entered into by them with Mrs. Melbourn. The wrong for which redress was sought in the West suit is not the same as the wrong for which redress is sought by Mrs. Melbourn in the present action.

Appellant admits in her brief that the jury decision in the West case collaterally estops her insofar as the issues of that case are concerned. The question, then, is whether any genuine issues of material fact remain, thereby precluding summary judgment against Mrs. Melbourn. Further, do any genuine issues of material fact remain precluding summary judgment in favor of the Benhams on their counterclaim.

A solution to these questions requires a determination of the precise issues settled in the West action and a similar determination as to the essential facts raised by the Melbourn complaint and the Benhams' counterclaim.

Both parties agree that the West action determined that a valid sales contract existed between Mrs. Melbourn and Blaseg and West. Both agree the jury found Mrs. Melbourn breached that contract.

In addition, the court's instructions 9 and 10 show that the jury in the West action also rejected Mrs. Melbourn's defense of mistake of fact as to what the term "inventory" meant as used in the sales contract. ¹

The Benhams argue that the validity of the sales contract having been established and Mrs. Melbourn's defense having been rejected, summary judgment as to their counterclaim was proper under either a res judicata or collateral estoppel doctrine.

Res judicata is inapplicable on the...