Rosa v. CWJ Contractors, Ltd.

• Citation: 664 P.2d 745,4 Haw.App. 210
• Decision Date: 18 May 1983
• Docket Number: No. 8584,8584
• Parties: Hiram ROSA and Myrna L. Rosa, Plaintiffs-Appellees, v. CWJ CONTRACTORS, LTD., doing business as Solar Hawaii, CWJ Corporation, Ltd., and Hawaiian Leasing Co., Inc., Defendants-Appellants.
• Court: Court of Appeals of Hawai'i

Page 745

664 P.2d 745

4 Haw.App. 210

Hiram ROSA and Myrna L. Rosa, Plaintiffs-Appellees, v. CWJ CONTRACTORS, LTD., doing business as Solar Hawaii, CWJ

Corporation, Ltd., and Hawaiian Leasing Co., Inc.,

Defendants-Appellants.

No. 8584.

Intermediate Court of Appeals of Hawai'i.

May 18, 1983.

Syllabus by the Court

1. A motion to dismiss for failure to state a claim upon which relief can be granted shall be treated as a motion for summary judgment when matters outside the pleadings are presented to and not excluded by the court in making its decision.

2. Unverified representations made in oral argument are not considered matters outside the pleadings that convert a motion to dismiss into a motion for summary judgment.

3. Collateral estoppel is a preclusionary rule within the res judicata doctrine. It precludes the relitigation of a fact or issue which was previously determined in a prior suit on a different claim. In this jurisdiction, a stranger to the prior suit may defensively utilize collateral estoppel.

4. In the defensive use of collateral estoppel, the plaintiff, having lost in the first suit, remains the same but different defendants are involved in the second suit. It is not applicable in a situation where the plaintiff prevailed in the first suit.

5. Summary judgment is proper only when there is no genuine issue of material fact and the movant is entitled to a judgment as a matter of law.

6. A type of equitable estoppel known as judicial estoppel precludes a party from assuming inconsistent positions in the course of the same judicial proceeding. Judicial estoppel does not preclude a party from stating inconsistent claims or defenses within a single action. However, a party is precluded from subsequently repudiating a theory of action accepted and acted upon by the court.

7. Under offensive collateral estoppel, the defendant who lost in the first suit remains the same, but a different plaintiff is involved in the second suit. It is inapplicable where a different defendant is being sued in the second suit by the same plaintiff in both the first and second suit.

Philip D. Bogetto, Honolulu, for defendants-appellants.

Dean T. Nagamine, Honolulu (Bert T. Kobayashi, Jr. and John T. Komeiji, Honolulu, on the brief; Kobayashi, Watanabe, Sugita & Kawashima, Honolulu, of counsel), for plaintiffs-appellees.

Before BURNS, C.J., and HEEN and TANAKA, JJ.

TANAKA, Judge.

Defendant CWJ Contractors, Ltd. (Contractors) appeals the denial of its motion to dismiss and the granting of a summary judgment in favor of plaintiffs Hiram Rosa and Myrna L. Rosa (the Rosas). The appeal presents for our review the oft litigated issues involving the applicability of the res judicata and equitable estoppel doctrines. We affirm in part and reverse in part.

Prior to the commencement of this action (Civil No. 60612), the Rosas had filed a suit (Civil No. 57737) and obtained a judgment therein against CWJ Corporation, Ltd. (Corporation). ¹ The judgment awarded damages for breach of contract for the purchase and installation of a solar water heating system and for deceptive business practice under Hawaii Revised Statutes (HRS) §§ 480-1, -2, and -3 (1976). ²

This action, filed on February 14, 1980, is based on the same factual situation involved in Civil No. 57737. Count I of the complaint alleged that (1) the Rosas obtained a judgment in Civil No. 57737 against Corporation, dba Solar Hawaii; (2) defendant Corporation fraudulently transferred "the entire stock and equity ownership" of Contractors to defendant Hawaiian Leasing Co., Inc.; and (3) such transfer was made "to avoid payment of the Judgment entered in Civil No. 57737." Count II alleged a tortious breach of a contract (the same contract involved in Civil No. 57737) by Contractors, dba Solar Hawaii. Finally, count III alleged deceptive business practice by Contractors in violation of HRS §§ 480-1, -2, and -3.

On April 14, 1980, Contractors moved to dismiss counts II and III, claiming that res judicata was an effective defense since all issues in those counts had been litigated and decided on the merits in Civil No. 57737. The motion was granted on May 21, 1980. However, upon a motion for reconsideration, the trial court denied Contractors' motion to dismiss counts II and III on July 1, 1980.

On April 7, 1981, the Rosas filed a motion for summary judgment on counts II and III. They argued that the doctrine of res judicata could be offensively used when the issues were identical. On December 17, 1981, the Rosas' motion was granted. ³ Contractors ⁴ appealed. ⁵

I.

Contractors contends that (1) the Rosas seek to relitigate the identical issues litigated and determined by the judgment in Civil No. 57737; (2) the doctrine of res judicata bars the Rosas' new action (counts II and III of Civil No. 60612); and (3) consequently, the trial court ⁶ erred in denying its motion to dismiss. We disagree.

A.

Under certain circumstances, "a motion to dismiss may be treated as one for summary judgment." Au v. Au, 63 Haw. 210, 212, 626 P.2d 173, 176 (1981). See also Gonsalves v. First Insurance Co., 55 Haw. 155, 516 P.2d 720 (1973); Bright v. American Society of Composers, Authors & Publishers, 2 Haw.App. 471, 634 P.2d 427 (1981). Thus, at the outset, we must determine whether this appeal involves a motion to dismiss or a motion for summary judgment.

Contractors' motion to dismiss was made pursuant to Rule 12(b)(6), Hawaii Rules of Civil Procedure (HRCP) (1981) ⁷. An affidavit of Contractors' counsel was attached to the motion. Also, the record reveals that the trial court considered representations of fact outside the pleadings made by the Rosas' counsel during argument at the hearing on the motion for reconsideration. ⁸

A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted shall be treated as a Rule 56, HRCP, motion for summary judgment when "matters outside the pleading" are presented to and not excluded by the court in making its decision on the motion. Rule 12(b), HRCP. ⁹

However, unverified representations made in oral argument are not considered "matters outside the pleading" that convert a motion to dismiss into a motion for summary judgment. 5 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1366 (1969); Au v. Au, supra. On the other hand, the presence of an appropriate affidavit with the motion to dismiss may trigger a conversion. Gonsalves v. First Insurance Co., supra; Baldeviso v. Thompson, 54 Haw. 125, 504 P.2d 1217 (1972); Bright v. American Society of Composers, Authors & Publishers, supra; Ailetcher v. Beneficial Finance Co., 2 Haw.App. 301, 632 P.2d 1071 (1981).

The affidavit involved in this case presented no material facts that were not alleged, explicitly or by necessary inference, in the memorandum also attached to the motion or that conflicted in any way with allegations of facts made by both counsel. Cf. Terry v. Pearlman, 42 F.R.D. 335 (D.Mass.1967) (affidavit reiterated complaint and did not convert a motion to dismiss into a motion for summary judgment). Consequently, the affidavit was not sufficient to convert the motion to dismiss into a motion for summary judgment. Thus, our review on appeal is that of a motion to dismiss.

B.

A Rule 12(b)(6), HRCP, dismissal is warranted only if the claim is "clearly without any merit; and this want of merit may consist in an absence of law to support a claim of the sort made, or of facts sufficient to make a good claim, or in the disclosure of some fact which will necessarily defeat the claim." 2A J. Moore & J. Lucas, Moore's Federal Practice p 12.08, at 2271 (2d ed. 1982).

Contractors contends that res judicata applies to the instant case and would require the dismissal of counts II and III. Contractors argues that the plaintiffs, facts and causes of action are the same in both Civil No. 57737 and the present case. Thus, collateral estoppel would bar this repetitious lawsuit against Contractors, a stranger to the prior litigation.

Collateral estoppel is a preclusionary rule within the res judicata doctrine. Collateral estoppel or issue preclusion "precludes the relitigation of a fact or issue which was previously determined in a prior suit on a different claim." Ellis v. Crockett, 51 Haw. 45, 55, 451 P.2d 814, 822 (1969); Silver v. Queen's Hospital, 63 Haw. 430, 436, 629 P.2d 1116, 1121 (1981). Traditionally, mutuality requires a party raising this defense to be a party or privy to the prior action. See Annot., 31 A.L.R.3d 1044, 1059-64 (1970). In Hawaii, however, this rule of mutuality has been abandoned in the defensive use of collateral estoppel. Morneau v. Stark Enterprises, Ltd., 56 Haw. 420, 539 P.2d 472 (1975); Ellis v. Crockett, supra. Thus, a stranger to the suit may defensively utilize collateral estoppel.

In the instant case, Contractors raised the adjudicated issues of breach of contract, negligence and deceptive business practice in Civil No. 57737 as a defense in Civil No. 60612. However, this case does not fit squarely into what is defined as the defensive use of collateral estoppel.

Under a defensive use of the doctrine, a stranger relies upon a former judgment as conclusively establishing in his favor an issue which he must prove as an element of his defense, using the judgment as a "shield." For example, A sues B and A loses; A sues C; C attempts to bar A's suit by reliance on the former judgment. In the defensive use of collateral estoppel, the plaintiff, having lost in the first suit, remains the same but different defendants are involved in the second suit. Annot., 31 A.L.R. 3d 1044 (1970); Note, The Impacts of Defensive and Offensive Assertion of Collateral Estoppel by a Nonparty, 35 Geo.Wash.L.Rev. 1010 (1967). However, unlike the example given above, the Rosas are plaintiffs who won in the first case. ¹⁰

The policy basis for defensive collateral estoppel is that the plaintiff had the opportunity to litigate the...