Strekal v. Espe

Decision Date16 December 2004
Docket NumberNo. 02CA2168.,02CA2168.
Citation114 P.3d 67
PartiesJohn STREKAL, Plaintiff-Appellant, v. Dwight E. ESPE and Dorothy B. Espe, Defendants-Appellees.
CourtColorado Court of Appeals

Certiorari Denied June 27, 2005.1

Cameron W. Tyler & Associates, P.C., Cameron W. Tyler, Boulder, Colorado, for Plaintiff-Appellant.

Karsh, Fulton, Gabler & Joseph, P.C., Seymour Joseph, Ivan M. Call, Denver, Colorado, for Defendants-Appellees.

Opinion by Judge RUSSEL.

Plaintiff, John Strekal, appeals the trial court's order granting summary judgment in favor of defendants, Dwight E. and Dorothy B. Espe. We affirm, although on grounds different from those relied on by the trial court.

According to the complaint, Strekal and his wife bought a house from Lee Crow in 1994, taking title in joint tenancy. In January 1996, Strekal's wife died, leaving Strekal the sole owner. In November 1996, Crow convinced Strekal to convey the property to her, promising that she would correct defects in the title and then reconvey the property to Strekal.

Crow did not reconvey the property. Instead, she forcibly evicted Strekal and kept his personal belongings. Crow later conveyed the house to David Masters.

In March 1999, Strekal filed suit against Crow, seeking money damages for fraud. Strekal did not name Masters, who then owned the property, as a defendant. The court entered default judgment against Crow, awarding Strekal $84,000 as compensation for the loss of the house and an additional sum for the loss of his personal property.

In October 1999, Strekal filed the present action, seeking the return of the house. As defendants, Strekal named Crow, Masters, and two lenders: Pacific Rim Financial Service, which had acquired a deed of trust from Masters, and Utah Mortgage Center, Inc., which later acquired the assets of Pacific Rim. Strekal also recorded a notice of lis pendens on the property.

In November 1999, Utah Mortgage acquired title by foreclosing on the Masters deed of trust.

In May 2000, Utah Mortgage sold the house to Dwight and Dorothy Espe. The court allowed Strekal to amend his complaint to name the Espes as defendants.

In November 2000, the court dismissed Strekal's action against the lenders for failure to state a claim and awarded attorney fees against Strekal and his lawyers. A division of this court affirmed the award of attorney fees against the lawyers. Underhill & Underhill, P.C. v. Pacific Rim Fin. Serv., (Colo.App. No. 01CA2090, Jan. 30, 2003), 2003 WL 194922 (not published pursuant to C.A.R. 35(f)). Another division affirmed the judgment in favor of the lenders and the award of attorney fees against Strekal. Strekal v. Pacific Rim Fin. Serv., (Colo.App. No. 01CA1847, May 1, 2003), 2003 WL 1995928 (not published pursuant to C.A.R. 35(f)) (Strekal I).

After the dismissal of Strekal's claims against the lenders, this action proceeded against the Espes. Strekal claimed that he could recover the house under Colorado's stolen property statute, § 18-4-405, C.R.S. 2004. The Espes moved for summary judgment, arguing that Strekal's claim was barred by res judicata and the statute of limitations. In a separate motion, the Espes argued that Strekal could not recover the house because the stolen property statute does not apply when the underlying theft is accomplished by fraud or deception.

The trial court granted summary judgment on the basis of res judicata. It did not address the statute of limitations or the scope of the stolen property statute.

Strekal now appeals from the order granting summary judgment. We review de novo, using the same standards that govern the trial court's determination. We will uphold an order granting summary judgment only if the pleadings and supporting documents demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); Aspen Wilderness Workshop, Inc. v. Colo. Water Conservation Bd., 901 P.2d 1251, 1256 (Colo.1995).

I. Res Judicata

Strekal contends that res judicata does not bar the present action. We agree.

Res judicata is the doctrine of claim preclusion. Byrd v. People, 58 P.3d 50, 53 n. 3 (Colo.2002). The doctrine bars claims that were litigated, or could have been litigated, in an earlier action that resulted in a final judgment on the merits. Pomeroy v. Waitkus, 183 Colo. 344, 350, 517 P.2d 396, 399 (1973). Under this doctrine, a final judgment is considered conclusive in any subsequent litigation that involves (1) the same claim for relief, (2) the same subject matter, and (3) the same parties or those in privity with them. Foley Custom Homes, Inc. v. Flater, 888 P.2d 363, 364 (Colo.App.1994).

Strekal resists claim preclusion on the ground that the Espes were not parties to the first action. This argument requires us to consider the concept of privity, for claim preclusion is not limited to cases in which the parties are identical; it also may be invoked by and against those in privity with the parties. See Pomeroy v. Waitkus, supra, 183 Colo. at 350, 517 P.2d at 399

(doctrine "requires an identity of parties or their privies").

"Privity" means that a nonparty is related to a case in such a way that he or she should be regarded as a party. Pub. Serv. Co. v. Osmose Wood Preserving, Inc., 813 P.2d 785, 788 (Colo.App.1991); see Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 58 F.3d 616, 619 (Fed.Cir.1995)

. Courts find privity when there is (1) a substantial identity of interests between the party and the nonparty and (2) a working or functional relationship in which the party presents and protects the nonparty's interests in litigation. S.O.V. v., People in Interest of M.C., 914 P.2d 355, 360 (Colo.1996).

Courts often find privity between a party and its successor in interest to property affected by a lawsuit. As a rule, courts find privity in this relationship only if the lawsuit is filed before the property changes hands. If the property is transferred first, there is no privity because the party has no interest in the outcome of the lawsuit and has no reason to defend its successor's interests. See Restatement (Second) of Judgments § 44 cmt. f (1982) (successor is not bound if he acquired his interest before the action was commenced).

Divisions of this court have applied this rule in earlier cases. See Bankers & Shippers Ins. Co. v. Curtis, Inc., 42 Colo.App. 399, 400-01, 598 P.2d 520, 521 (1979)

(case remanded to determine whether nonparty acquired its interest by subrogation before commencement of the first lawsuit); Webster v. Kautz, 22 Colo.App. 111, 118, 123 P. 139, 142 (1912) (because the note was assigned before commencement of the first action, nonparty is "not concluded by the judgment in that action by reason of privity"). And this rule is consistently applied in other jurisdictions. See Laster v. Am. Nat'l Fire Ins. Co., 775 F.Supp. 985, 989 (N.D.Tex.1991),

aff'd, 966 F.2d 676 (5th Cir.1992); Sun Valley Land & Minerals, Inc. v. Burt, 123 Idaho 862, 853 P.2d 607, 614 (Idaho Ct.App.1993); In re Estate of Beason, 248 Kan. 803, 811 P.2d 848, 855 (1991); Bismarck Pub. Sch. Dist. No. 1 v. Hirsch, 136 N.W.2d 449, 451-53 (N.D.1965) (discussing rule); Gerke v. Burton Enters., Inc., 97 Or.App. 629, 776 P.2d 879, 880 (1989).

More recently, a division of this court found privity where a nonparty acquired its interest before the first lawsuit was commenced. See Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., 97 P.3d 215 (Colo. App.2003)

(cert. granted Sept. 7, 2004). But Argus does not represent a departure from the settled rule regarding successors in interest. Rather, privity resulted there from a combination of circumstances: (1) the nonparty and the parties were related corporate entities; (2) the nonparty acquired its interest as an agent for one of the parties; (3) the parties purported to represent themselves and their "successors in interest"; and (4) the nonparty failed to show that its interests were not adequately represented.

Properly viewed, Argus simply evidences that privity exists when the nonparty's interests are actually represented in the first action. Other courts have reached similar conclusions where the party and the nonparty are related corporate entities. See Mars Inc. v. Nippon Conlux, supra (absent a legally distinct basis for recovery against corporate parent, final judgment against wholly owned subsidiary results in claim preclusion); Futura Dev. Corp. v. Centex Corp., 761 F.2d 33 (1st Cir.1985) (under res judicata statute, prior contract action against corporate subsidiary protects corporate parent against claim for fraud).

After examining the record, we find no support for the trial court's conclusion that the Espes are in privity with Crow. The Espes are not in privity as Crow's successors because Crow sold the house before Strekal commenced his first lawsuit.

We therefore conclude that the trial court erred in granting summary judgment on the basis of res judicata. See, e.g., Breaux v. Avondale Indus., Inc., 842 So.2d 1115, 1120-23 (La.Ct.App.2003)

(worker's suit against suppliers of asbestos did not preclude claims against employers and other suppliers); Carris v. John R. Thomas & Assocs., P.C., 896 P.2d 522, 527 (Okla.1995) (builder's contract action against client did not preclude a later action against the architect for negligence and fraud).

II. Stolen Property and the Recording Act

Arguing in the alternative, the Espes contend that summary judgment was proper because one cannot bring an action to recover property under § 18-4-405 when the underlying theft was accomplished by fraud or deception.

Although the Espes raised this argument in the trial court, they did so only shortly before the court ruled on summary judgment. Consequently, Strekal did not respond to this argument in the trial court, and the court did not consider it. Nevertheless, we may address it here. See Dandridge v. Williams, 397 U.S. 471, 475 n. 6, 90 S.Ct. 1153, 1156...

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