Stern v. Whitlatch & Co.

• Decision Date: 06 October 1993
• Docket Number: No. 16126,16126
• Citation: 91 Ohio App.3d 32,631 N.E.2d 680
• Parties: STERN et al., Appellants, v. WHITLATCH & COMPANY et al., Appellees. *
• Court: Ohio Court of Appeals

Page 32

91 Ohio App.3d 32

631 N.E.2d 680

STERN et al., Appellants, v. WHITLATCH & COMPANY et al., Appellees. ^*

No. 16126.

Court of Appeals of Ohio, Ninth District, Summit County.

Decided Oct. 6, 1993.

John E. Duda, Cleveland, for appellants.

Mark C. Pirozzi, Twinsburg, for appellees.

BAIRD, Judge.

This cause comes before the court upon the appeal of Curt and Hildegard Stern from a judgment in the Summit County Court of Common Pleas granting a motion to dismiss filed by appellees, Whitlatch & Company and William Whitlatch, and awarding attorney fees to the appellees. We affirm the trial court's granting of the motion to dismiss, but reverse the trial court's awarding of attorney fees.

Litigation between the parties began in March 1990 when Whitlatch & Co. filed a breach of contract action against the Sterns. This action sought $3,000 held in escrow by the Sterns, pending satisfactory completion of a condominium in Twinsburg, Ohio. In response, the Sterns filed a counterclaim, seeking damages of $880,000 for unworkmanlike construction of the condominium.

In 1990, the Sterns voluntarily dismissed the counterclaim and refiled nearly identical claims in federal district court. In April 1991, the district court dismissed the action and stated that it was exercising discretionary abstention to avoid duplicative litigation and that all of the Sterns' claims were properly part of the original common pleas case. This decision was appealed, and the federal circuit court affirmed the district court's decision.

Despite the district court's holding, the Sterns never refiled the counterclaims in the original lawsuit. The original claim proceeded to trial, and the jury found that the Sterns owed Whitlatch & Co. $3,000, as the condominium was constructed in a workmanlike manner. This court affirmed that decision in all material respects in Whitlatch & Co. v. Stern (Aug. 19, 1992), Summit App. No. 15345, unreported, 1992 WL 205071. ¹

On April 8, 1992, the Sterns filed a complaint against Whitlatch & Co. and William Whitlatch. Upon a motion to dismiss, the court found that the complaint stemmed from the same contract for the purchase of the condominium and dismissed the case based upon res judicata and collateral estoppel. The court also granted appellees' motion to tax attorney fees as court costs.

It is from this order that the Sterns now appeal, asserting five assignments of error.

Assignments of Error

"I. The trial court erroneously dismissed the Sterns' causes of actions as compulsory counterclaims--the counterclaims in the earlier suit had been voluntarily dismissed without prejudice and, as a result, could be refiled in a subsequent action."

"III. The trial court erroneously dismissed the Sterns' breach of contract action--the issues involved in the present suit were not determined in the earlier suit and, as a result, are not barred by res judicata (claim preclusion) or collateral estoppel (issue preclusion)."

Appellants argue that, assuming the claims filed in the third lawsuit were compulsory counterclaims, they had been filed and then dismissed without prejudice and, therefore, could be filed again in a later action. Appellants also allege that, as the first action was brought against Whitlatch & Co. and the third action was brought against Whitlatch & Co. and William Whitlatch, the third action was not barred as to William Whitlatch.

A brief review of the claims filed in each action is in order. The four counterclaims filed by the Sterns in the first action included claims for breach of contract, slander of title based on the filing of a fraudulent mechanics' lien, equitable relief to avoid the mechanics' lien, and damages and repairs to streets and other condominiums in the development. The district court case included the same four claims, plus a claim for misrepresentation on the disclosure statement involved in the sale of the condominium and a claim for outrage based upon a collection suit filed by Whitlatch & Co. for release of the escrowed funds. The final lawsuit alleged all of these claims, plus a new claim for slander of title based upon the filing of a fraudulent judgment lien.

We find that the claims for breach of contract, slander of title based upon the filing of a fraudulent mechanics' lien, equitable relief to void the mechanics' lien, damages to the streets and other condominiums, and the misleading disclosure statement were compulsory counterclaims to the first lawsuit because they all arose out of the same transaction which was the subject matter of that case. Civ.R. 13(A). As such, the Sterns were barred from bringing the claims again, and the trial court properly dismissed these claims. Geauga Truck & Implement Co. v. Juskiewicz (1984), 9 Ohio St.3d 12, 14, 9 OBR 61, 62-63, 457 N.E.2d 827, 828-829.

The appellants argue, however, that, even assuming that the claims were compulsory counterclaims, they were not barred from asserting them in the later action because they were raised in the first action and then voluntarily dismissed without prejudice. Appellants claim that, although Civ.R. 13(A) required them to file the compulsory counterclaims in the first action, Civ.R. 41(A) and Civ.R. 41(C) allowed them to dismiss the action without prejudice. The Sterns argue that, as the claims were dismissed without prejudice, they could refile them in the later lawsuit. They contend that the requirements of Civ.R. 13(A) are met upon the mere filing of the compulsory counterclaims, because the opposing party is then put on notice of the claims. The appellants cite Beta II, Inc. v. Fed. Ins. Co. (Aug. 15, 1984), Hamilton App. No. C-830779, unreported, 1984 WL 6951, as support for their argument that compulsory counterclaims which are filed, but then later dismissed, may be brought again in a later lawsuit.

We note that Beta II stated only that the court was "not prepared to state * * * that there are no circumstances under which a party who has voluntarily dismissed his compulsory counterclaims without prejudice in a prior action cannot later proceed in a second action on the same claim."

Furthermore, we find that, under the circumstances of this case, appellants could not refile the compulsory counterclaims after they had voluntarily dismissed them in the first lawsuit. Civ.R. 13(A) bars the later filing of compulsory counterclaims which were not set forth in the first lawsuit. Quintus v. McClure (1987), 41 Ohio App.3d 402, 403, 536 N.E.2d 22, 23-24. Although appellants did file the counterclaims in the first lawsuit, the claims were later dismissed. Allowing the claims to be once again filed in a later lawsuit runs afoul of the purpose of the rule, that is, to promote the resolution of all claims arising from the same occurrence or transaction as that involved in the original claim. Lenihan v. Shumaker (May 6, 1987), Summit App. No. 12814, unreported, at 3, 1987 WL 10916.

Appellants also claim that they were not barred from bringing these claims against William Whitlatch because he was not a party to the first lawsuit. We find, however, that the claims are barred under principles of collateral estoppel. The doctrine of collateral estoppel, which is part of the general theory of res judicata, was set forth in Norwood v. McDonald (1943), 142 Ohio St. 299, 27 O.O. 240, 52 N.E.2d 67, paragraph three of the syllabus:

"A point or a fact which was actually and directly in issue in a former action and was there passed upon and determined by a court of competent jurisdiction may not 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." See, also, Walden v. State (1989), 47 Ohio St.3d 47, 51, 547 N.E.2d 962, 965-966; Goodson v. McDonough Power Equip., Inc. (1983), 2 Ohio St.3d 193,...