Reeves v. Wimberly

• Decision Date: 28 April 1988
• Docket Number: No. 10027,10027
• Citation: 1988 NMCA 38,107 N.M. 231,755 P.2d 75
• Parties: Minnie REEVES, Plaintiff-Appellant, v. James L. WIMBERLY, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

Page 75

755 P.2d 75

107 N.M. 231

Minnie REEVES, Plaintiff-Appellant, v. James L. WIMBERLY, Defendant-Appellee.

No. 10027

Court of Appeals of New Mexico.

April 28, 1988.

[107 N.M. 232] Richard A. Hawthorne, Ruidoso, for plaintiff-appellant.

S. Thomas Overstreet, S. Thomas Overstreet, P.C., Alamogordo, for defendant-appellee.

OPINION

DONNELLY, Chief Judge.

Plaintiff Minnie Reeves appeals from a judgment and order of the district court granting defendant James L. Wimberly's motion to dismiss and motion for summary judgment. On appeal, Reeves raises the following issues: (1) whether sufficient privity exists between a lessor and a lessee to permit application of collateral estoppel to bar relitigation of the issue of a lease extension; and (2) whether Reeves' complaint properly alleged a cause of action against Wimberly for conspiracy to defraud. We affirm.

Reeves leased a trailer court and residential property located in Lincoln County from Ira J. Miller. By exercising certain lease options and entering into a series of supplemental letter agreements, Reeves extended the lease until September 30, 1985. Thereafter, a dispute arose between Reeves and Miller as to whether the parties agreed to extend the terms of the lease. Reeves claimed that Miller agreed to a two-year extension of the lease, so that the lease would finally expire in 1987. Reeves further alleged that, after the extension had been agreed upon, Wimberly approached her and agreed to purchase her leasehold interest in the land for $35,000. Reeves contends that despite this agreement, Wimberly and Miller met and agreed that Wimberly would lease the premises from Miller commencing October 1, 1985. Reeves asserts that the latter agreement was reached despite Miller's prior agreement to extend Reeves' lease until 1987, and in contravention of Wimberly's agreement that he would purchase her leasehold interest.

When Reeves' lease expired in 1985, she refused to surrender the premises and Miller filed an action in forcible entry and unlawful detainer. Miller prevailed in that action; the district court found that negotiations between Miller and Reeves never culminated in an agreement to extend the lease to 1987. The district court also awarded Miller damages and possession of the property.

In April of 1986, Reeves filed suit in the present action against both Miller and Wimberly, alleging that they conspired to defraud her and that because she had relied upon their oral representations, she had not obtained a written extension of her lease. In response, both Miller and Wimberly filed motions to dismiss and for summary judgment.

The district court granted Miller's motion for summary judgment based on the defense of res judicata and collateral estoppel. Wimberly was granted summary judgment for the following reasons: Reeves' asserted cause of action depended upon a factual determination that Miller agreed to a valid extension of the lease; the district court in the prior action determined that there had been no lease extension, and because Wimberly was in privity with Miller, collateral estoppel prevented relitigation of that issue. Alternatively, the district court determined that the complaint failed to state a claim upon which relief could be granted.

APPLICATION OF COLLATERAL ESTOPPEL

Reeves contends that the trial court erred in applying the doctrine of collateral estoppel. Collateral estoppel works to bar the relitigation of ultimate facts or issues actually and necessarily decided in the prior suit by a valid and final judgment. Torres v. Village of Capitan, 92 N.M. 64, 582 P.2d 1277 (1978); City of Santa Fe v. Velarde, 90 N.M. 444, 564 P.2d 1326 (1977). The purpose of collateral estoppel is to prevent endless relitigation of the same issues under the guise of different causes of action. Adams v. United Steelworkers of Am., 97 N.M. 369, 640 P.2d 475 (1982); Torres v. Village of Capitan. Traditionally, in order for collateral estoppel to exist, there must be two different causes of action in which an ultimate issue or fact actually and necessarily decided in the previous litigation is found to constitute a conclusive bar to the parties and their privies in the subsequent cause of action. Torres v. Village of Capitan; City of Santa Fe v. Velarde. The reason for requiring the same parties is the doctrine of mutuality. The doctrine of mutuality prevents a litigant from invoking the conclusive effect of a judgment unless he would have been bound in the event that the judgment had been decided adversely. Edwards v. First Federal Savings & Loan Ass'n, 102 N.M. 396, 696 P.2d 484 (Ct.App.1985).

The doctrine of collateral estoppel or issue preclusion differs from res judicata. Torres v. Village of Capitan. Collateral estoppel applies to identical issues in two suits where the same parties or parties in privity are involved in both actions even though the subject matter in the second action differs from the first. Id.

The doctrine of collateral estoppel, similar to res judicata, is a measure grounded upon enforcement of judicial economy and designed to bar relitigation of ultimate facts or issues actually and necessarily decided in a prior suit in which the decision is final. Silva v. State, 106 N.M. 472, 745 P.2d 380 (1987); International Paper Co. v. Farrar, 102 N.M. 739, 700 P.2d 642 (1985). In order to invoke collateral estoppel a party must establish the existence of four elements: (1) the parties are the same or in privity with the parties in the original action; (2) the subject matter or cause of action in the two suits are different; (3) the ultimate facts or issues were actually litigated; and (4) the issue was necessarily determined. International Paper Co. v. Farrar; Torres v. Village of Capitan.

Reeves argues that Wimberly is not in privity with Miller and therefore should be precluded from asserting the bar of the prior judgment defensively against Reeves. Reeves relies on Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979), which held that the United States was collaterally estopped from challenging a prior judgment against a contractor, in which the United States directed and financed the litigation, which had been brought by the contractor. Reeves' reliance upon Montana is misplaced. The latter case is distinguishable both factually and legally from the instant case; nothing in Montana relates to the principal issue asserted herein, i.e., whether collateral estoppel may properly be asserted by a lessee of real estate against a plaintiff who originally engaged in litigation with the lessor involving the leasehold property or related issues.

The issue of whether a lessee of realty has sufficient privity in order to assert the defense of collateral estoppel against a party who has previously litigated matters involving the right to possession of realty is a first impression issue in this jurisdiction. In Myers v. Olson, 100 N.M. 745, 676 P.2d 882 (1984), our supreme court held that a grantee in privity with a grantor of realty may assert the defense of res judicata involving a judgment in the grantor's favor, provided the judgment had been rendered prior to the conveyance of the property. Similarly, we adopt the rule that a lessee is in privity with his lessor so as to entitle the lessee to raise the defense of collateral estoppel against the plaintiff if the lessee took possession of the leasehold property after the commencement of the first suit, and with actual or constructive notice of the pendency of the initial action. See Fisher v. Space of Pensacola, Inc., 461 So.2d 790 (Ala.1984); Weston v. King, 206 Ala. 574, 90 So. 802 (1921); Missouri Pac. R.R. v. McGuire, 205 Ark. 658, 169 S.W.2d 872 (1943); see also Krasner v. Reed, 33 Ala.App. 85, 30 So.2d 731 (1947).

Our supreme court has adopted the modern view of mutuality, dispensing with the "same parties" requirement of collateral estoppel. In the case of Silva, the court held that:

[T]he doctrine of defensive collateral estoppel may be applied when a defendant seeks to preclude a plaintiff from relitigating an issue the plaintiff has previously litigated and lost regardless of whether defendant was privy to the prior suit; and that the doctrine of offensive collateral estoppel may be applied when a plaintiff seeks to foreclose the defendant from litigating an issue the defendant has previously litigated unsuccessfully regardless of whether plaintiff was privy to the prior action.

Id. 106 N.M. at 476, 745 P.2d at 384.

Thus, the court eliminated the traditional rule that the parties must be the same or in privity if the doctrine of collateral estoppel is to apply. "In place of the traditional rule, New Mexico now applies the modern rule typified by Parklane Hosiery v. Shore [439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) ]." M.E. Occhialino, Walden's Civil Procedure in New Mexico, Res Judicata and Collateral Estoppel at 12-40 (2d ed. 1988); Silva v. State. Collateral estoppel may now be used to preclude relitigation of an issue if the party against whom it is to be applied was a party or in privity with a party in the earlier suit and had a...