Singer v. Steven Kokes, Inc.

• Decision Date: 12 April 1978
• Docket Number: No. 707,707
• Citation: 384 A.2d 463,39 Md.App. 180
• Parties: Sheldon J. SINGER et ux. v. STEVEN KOKES, INC.
• Court: Court of Special Appeals of Maryland

Page 180

39 Md.App. 180

384 A.2d 463

Sheldon J. SINGER et ux. v. STEVEN KOKES, INC.

No. 707.

Court of Special Appeals of Maryland.

April 12, 1978.

Ellis J. Koch, Upper Marlboro, with whom were O'Malley, Miles, Farrington & McCarthy, Upper Marlboro, on the brief, for appellants.

David Macdonald, Silver Spring, for appellee.

Argued before GILBERT, C. J., and THOMPSON and MOORE, JJ.

THOMPSON, Judge.

In October of 1973, the appellants, Sheldon J. Singer and his wife, Irene (the Singers) contracted with the appellee, Steven Kokes, Inc. (Kokes) to construct a house in Potomac, Maryland. ¹ Dissatisfied after the house was completed, the Singers instituted this suit in the Circuit Court for Montgomery County claiming Kokes failed to construct the house within the time specified, and the construction was defective. The declaration consisted of one count based on breach of warranty and another based on negligence. Kokes responded to the declaration by filing a general issue plea and a motion for summary judgment on the grounds that the action was barred by res judicata. Judge Ralph G. Shure granted the motion and the Singers appeal arguing: (1) res judicata was inapplicable because the prior suit involved a different cause of action, (2) the defects that constitute the basis of the present suit were unknown at the time of the prior action, and (3) the trial judge erred in awarding attorney's fees to Kokes under Md. Rule 604. ²

The prior litigation that forms the basis for the claim of res judicata involves a suit, instituted by Kokes, to foreclose a mechanic's lien after the Singers refused to release the final draw on the mortgage. As a credit against the lien, the Singers alleged that there were a number of defects in the house and that it was not completed in the specified time. Although the latter claim was rejected by the court, a total of $1,849.96 was allowed as a credit against the lien for various defects. In the process of deciding the matter the court noted the Singers had literally moved in on top of the builder and had constantly harassed Kokes with changes and complaints. Subsequently, on October 1, 1975, less than three months after the suit was completed, the Singers wrote Kokes claiming another 141 defects existed in the house.

I The Bar of Res Judicata

(a) Identity of the Two Causes of Action

In arguing their suit is not barred by res judicata the first contention raised by the Singers is that the two causes of action are different. The argument made in support of this proposition reflects a fundamental misunderstanding of the doctrine of res judicata and is without merit.

The doctrine of res judicata consists of two branches: direct estoppel and collateral estoppel. Direct estoppel prevents the relitigation of all matters which were raised or could have been raised in a prior action between the same parties on the same cause of action. Collateral estoppel, on the other hand, applies where a second suit between the same parties is based on a different cause of action and operates as a bar to those issues actually decided in the prior action. Cook v. State, 281 Md. 665, 381 A.2d 671, 673 (1978); MPC, Inc. v. Kenny, 279 Md. 29, 32, 367 A.2d 486, 489 (1977); Felger v. Nichols, 35 Md.App. 182, 183-184, 370 A.2d 141, 142-143 (1977).

One aspect of direct estoppel is that a party must raise all defenses he has to a cause of action and once that action is concluded he cannot use a defensive matter as a basis for relief in a subsequent action between the parties. Ashman v. Ashman, 201 Md. 445, 450-451, 94 A.2d 257 (1953). If a matter is not in the nature of a defense but constitutes a counterclaim, the general rule is that the party is not required to assert the claim unless the subject matter is such an integral part of the issue being litigated that a judgment would necessarily negate the existence of facts essential to its maintenance. See Maxcy v. Twilley, 289 Ala. 681, 271 So.2d 243, 245 (1972); Meyer v. Vance, 406 P.2d 996, 1001 (Okl.1965); Gwynn v. Wilhelm, 226 Or. 606, 360 P.2d 312, 314 (1961). Once a counterclaim is actually interposed, however, direct estoppel prevents a subsequent suit based on the counterclaim. Hersh v. Allnutt, 252 Md. 513, 518, 250 A.2d 629, 632 (1969). See Levy v. Business Adjustment Service, Inc., 522 P.2d 1239 (Colo.App.1974); Burka v. Seidenberg, 108 A.2d 159, 160 (D.C.Mun.App.1954); Dowling v. Pound, 214 Ga. 298, 104 S.E.2d 465, 467 (1958); Rothstein v. First National Bank, 141 Ga.App. 526, 233 S.E.2d 802 (1977); Simmons v. Mutual Benefit Health and Accident Association, 186 Neb. 26, 180 N.W.2d 672, 675-676 (1970).

In alleging the two causes of action are different the Singers argue that the mechanic's lien was based on a showing of substantial compliance with the contract while their claim is based on a lack of exact compliance. ³ Because of this difference the Singers conclude the evidentiary facts necessary to establish the two causes of action are not identical. ⁴ In making this argument the Singers completely ignore the nature of the credit that they asserted against the lien. The credit was based on the same breach of warranty that serves as the basis for the present litigation. The issue was fully litigated and the Singers were awarded a credit against the lien of $1,849.96. It is obvious that the credit and the present claim are based on the same cause of action. Thus direct estoppel prevents the Singers from asserting any matter based on a breach of warranty for defective workmanship which could have been litigated in the prior suit. ⁵

(b) Lack of Knowledge

Kokes supported its motion for summary judgment by affidavit and included a partial record of the prior proceedings. Once Kokes had established sufficient grounds for invoking res judicata, the Singers, in order to avoid the entry of summary judgment, were required to show with some precision that res judicata was inapplicable. See Dietz v. Moore, 277 Md. 1, 5, 351 A.2d 428, 431 (1976); Fishman Construction Co. v. Hansen, 238 Md. 418, 422-423, 209 A.2d 605, 608 (1965). The Singers attempted to meet this requirement by filing an affidavit stating that a number of the defective items were not known when the original action was tried. The question we must now decide is whether the Singers' lack of knowledge was, by itself, sufficient to avoid summary judgment on the grounds of res judicata.

Although the general rule is that a party cannot split a cause of action, an exception exists where the party had no knowledge of the facts that form the basis of the latter suit at the time. This exception is inapplicable where the means of obtaining such knowledge existed and the knowledge could have been obtained with ordinary diligence. See Macon & Augusta R.R. Co. v. Garrard, 54 Ga. 327, 329 (1874); Wheeler Savings Bank v. Tracey, 141 Mo. 252, 42 S.W. 946, 947 (1897); Gaither Corp. v. Skinner, 241 N.C. 532, 85 S.E.2d 909, 912 (1955); Holland v. Spear & Co., 193 Misc. 524, 83 N.Y.S.2d 21, 25-26 (1948); Badger v. Badger, 69 Utah 293, 254 P. 784, 787 (1927). Hence, it would be immaterial that the Singers lacked knowledge of the defects, if such knowledge was in their means and could have been obtained through the exercise of ordinary diligence.

The Singers had resided in the house for approximately 111/2 months prior to the trial of the mechanic's lien. During the trial, they claimed a credit against the lien for 57 various items, and on October 1, 1975, less than three months after the trial had commenced, they sent Kokes a letter containing a list of 141 additional defects. Apparently every item the Singers claimed to be unaware of at the time of the trial was listed. ⁶ Under these circumstances, we hold the Singers could not avoid the entry of summary judgment by merely alleging they had no knowledge of the defects. Rather, they were required to have shown also that the defects could not have been discovered with reasonable diligence. ⁷ This they did not do.

II Award of Attorney's Fees

The final contention raised on appeal is whether the trial judge erred in awarding Kokes attorney's fees under Md. Rule 604 b. Kokes, in addition to claiming the award was proper, also alleges this appeal was taken in bad faith and requests that it be awarded additional attorney's fees under Rule 604 b.

(a) Award of Counsel Fees Below

Although counsel fees are not generally recoverable, Empire Realty Co. v. Fleisher, 269 Md. 278, 285, 305 A.2d 144, 148 (1973); Colonial Carpets, Inc. v. Carpet Fair, Inc., 36 Md.App. 583, 590, 374 A.2d 419, 423 (1977), an exception to this general rule is contained in Md. Rule 604 b which provides:

"In an action or part of an action, if the court finds that any proceeding was had (1) in bad faith, (2) without substantial justification, or (3) for purposes of delay the court shall require the moving party to pay to the adverse party the amount of the costs thereof and the reasonable expenses incurred by the adverse party in opposing such proceeding, including reasonable attorneys' fees."

Under this rule once the trial judge finds the proceedings were instituted in bad faith, without substantial justification, or for purposes of delay an award of counsel fees is mandatory. Waters v. Smith, 277 Md. 189, 197, 352 A.2d 793, 797 (1976); Colonial Carpets, Inc. v. Carpet Fair, Inc., supra, 36 Md.App. at 591, 374 A.2d at 424; Hess v. Chalmers, 33 Md.App. 541, 545, 365 A.2d 294, 296-297 (1976).

In the instant case Judge Shure found the proceedings were part of a "determined effort on the part of Mr. and Mrs. Singer, in bad faith and without justification, to harass the defendant corporation." The Singers challenge this conclusion arguing their action was supported by plausible legal arguments. We cannot agree. The arguments presented by the Singers were totally devoid of any merit and in light of the circumstances surrounding this case we see no basis for setting aside the award of...