Svoboda v. Trane Co.

• Decision Date: 21 January 1980
• Docket Number: No. 79-122-C(3).,79-122-C(3).
• Citation: 495 F. Supp. 367
• Parties: Michael F. SVOBODA, Plaintiff, v. The TRANE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

495 F. Supp. 367

Michael F. SVOBODA, Plaintiff, v. The TRANE COMPANY, Defendant.

No. 79-122-C(3).

United States District Court, E. D. Missouri, E. D.

November 16, 1979.

On Motions to Set Aside Order and Leave to File Amended Complaint January 21, 1980.

John S. Sandberg, St. Louis, Mo., James D. Edgar, Webster Groves, Mo., for plaintiff.

Robert M. Lucy, Thomas C. Walsh, Terrence J. O'Toole, St. Louis, Mo., for defendant.

MEMORANDUM

FILIPPINE, District Judge.

This matter is before the Court on the defendant's motion for partial summary judgment. The plaintiff's complaint alleges that defendant has failed to pay plaintiff certain commissions which defendant owes him as a result of work performed under an oral employment contract, entered into in March, 1972. Under the contract, which plaintiff alleges was negotiated on defendant's behalf by its alleged agent, Tri-City Trane Air Conditioning Company (hereinafter Tri-City), doing business in Sullivan County, Tennessee, plaintiff was to sell residential and commercial heating and air conditioning equipment. Plaintiff seeks $10,100 in unpaid commissions, with interest thereon, for sales projects which were completed in 1974.

Defendant's motion for summary judgment seeks to limit the amount at issue to $1,700. The basis of defendant's motion involves a brief history of the relationship between plaintiff and Tri-City. Plaintiff left the employ of Tri-City in December, 1973, and moved to Virginia. In December, 1974, plaintiff brought suit against Tri-City in Tennessee state court, alleging an oral employment contract with Tri-City, entered into on or about March 1, 1972, under which Tri-City was to pay plaintiff certain commissions on his sales of heating and air-conditioning products. Plaintiff's complaint enumerated ten projects on which his sales work had been completed as of December, 1973, when he left Tri-City's employ, and for which commissions were allegedly due. Plaintiff sought $13,245 in unpaid commissions and wages.

Tri-City's answer (which was apparently never filed) admitted that it had an oral employment contract with plaintiff, dating from around March, 1972, and agreed basically with the rates of commission alleged. However, it contended that a final accounting on certain of the projects was not possible because Tri-City had not yet completed its work, and that plaintiff had been overpaid for two other projects. As to the remaining projects Tri-City claimed that plaintiff was not entitled to the full commission because he had not completed his duties before leaving Tri-City.

At this juncture an accounting firm was retained to try to resolve the dispute over the amount of commissions due. Plaintiff's deposition, at 141, 148. The accounting firm, after an examination of Tri-City's books and the projects in question, arrived at a figure with which plaintiff disagreed. Plaintiff's deposition, at 149. The lawsuit thereafter languished, and is still pending on the court records, no order of dismissal or final judgment having been entered.

In early 1977, Tri-City filed a petition for arrangement under Chapter XI of the Bankruptcy Act^* in the United States District Court for the Eastern District of Tennessee. Plaintiff's attorney submitted a proof of claim in that proceeding on May 17, 1977, in the amount of $13,245, for "unpaid wages and commissions owed the claimant as an employee of the bankrupt." Tri-City filed an objection on June 15, 1977, to plaintiff's claim, admitting that it owed the plaintiff $1,700 only, as ascertained by the auditing firm. The District Court, by order dated August 29, 1977, allowed the plaintiff's claim in the amount of $1,700 on the basis that "an audit of the debtor's records shows that the debtor owes only $1,700.00 to the creditor." The Order recited that a hearing on the claim had been scheduled for July 11, 1977; that notice of the hearing and Tri-City's objections had been given to the plaintiff's attorney; that the debtor had appeared for the hearing; and that plaintiff's attorney had informed the debtor's attorney that he would not appear and resist the objection.

Defendant in the instant action, while resolutely denying that it had any agency relationship with Tri-City, has moved for partial summary judgment on the basis that the partial disallowance of plaintiff's claim in the Chapter XI proceeding is res judicata or that the disallowance operates as a collateral estoppel to plaintiff's effort to recover more than $1,700 in this action. Defendant has filed duly certified copies of the proof of claim, the objection, and the Court's Order. Plaintiff, in reply, has argued that the doctrine of res judicata does not apply and that he may not be estopped from litigating the issue anew in this lawsuit because he did not have a full and fair opportunity to be heard on the merits of his claim in the bankruptcy proceeding. Plaintiff was apparently living in St. Louis, Missouri, at the time the Chapter XI proceeding was initiated. He argues that he lacked the ability and incentive to conduct the litigation in the bankruptcy court.

We agree with plaintiff that the doctrine of res judicata is not applicable to this case. One of the essential requisites for the applicability of the doctrine is that the parties to the second action be the same as, or in privity with, the parties to the first action. Walter E. Heller & Co. v. Cox, 343 F.Supp. 519, 524 (S.D.N.Y.1972), aff'd 486 F.2d 1398 (2d Cir.), cert. denied 414 U.S. 827, 94 S.Ct. 46, 38 L.Ed.2d 61 (1973). Defendant argues that its alleged principal-agent relationship with Tri-City satisfies the requirement of privity. We cannot agree. Tri-City and the defendant did not, under the actual or apparent agency theory of plaintiff's complaint, have a concurrent or successive relationship to the same right of property nor did they represent the interests of the same person. Such are the traditional parameters of privity. See 1B Moore's Federal Practice, ¶ 0.4111.

"The general rule is that no privity arises from concurrent relationship to the same duty or liability."

Id. at ¶ 0.4112.

Although the relationship of principal-agent is usually considered sufficient to permit a defense based on a prior judgment exonerating the other member of the agency relationship, id., such a defensive use is allowed because the plaintiff is presumed to have had the "full and fair opportunity" to litigate the issue in the first suit. In such circumstances, there is no need to deny the benefits of a prior judgment to one who would not have been bound by it. James Talcott, Inc. v. Allahabad Bank, Ltd., 444 F.2d 451 (5th Cir.) cert. denied 404 U.S. 940, 92 S.Ct. 280, 30 L.Ed.2d 253 (1971).

Having made the determination that the plaintiff's prior opportunity to litigate the issue is key, we have entered the realm of collateral estoppel. The requirements for the application of the doctrine of collateral estoppel have been defined in the Eighth Circuit as the following:

(1) there must be an identity of issues;

(2) there must have been a final judgment on the merits;

(3) the estopped party must have been a party to the prior action, or in privity with a party; and

(4) the estopped party must have had the full and fair opportunity to be heard in the prior action.

Oldham v. Pritchett, 599 F.2d 274, 279 (8th Cir. 1979).

The plaintiff does not seriously dispute the presence in the instant case of the first three of these factors. Plaintiff was obviously a party to the Chapter XI proceedings. As to the identity of issues, plaintiff's answers to defendant's interrogatories show that he is claiming commissions for the same ten projects which were listed in plaintiff's complaint in Tennessee state court, and which obviously formed the basis for the proof of claim since plaintiff sought $13,245 for wages and commissions in both proceedings in Tennessee.

As to the existence of a final judgment on the merits of plaintiff's claim, the law is settled that the allowance or disallowance of a claim in a bankruptcy proceeding is entitled to the same conclusive effect as the judgments of other courts. Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966); United States v. Estes, 448 F.Supp. 971 (N.D.Tex.1978); Walter E. Heller & Co., supra. The fact that the judgment was rendered after a hearing at which plaintiff and his attorney chose not to appear, and thus that it may be likened to a default judgment, does not affect the conclusive nature of the judgment. "A judgment of a court having jurisdiction of the parties and of the subject-matter operates as res judicata, in the absence of fraud or collusion, even if obtained upon a default." Riehle v. Margolies, 279 U.S. 218, 225, 49 S.Ct. 310, 313, 73 L.Ed. 669 (1929). Moreover, the plaintiff's proof of claim in the Chapter XI proceeding constituted "prima facie evidence of the validity and amount of the claim," Rules Bankr.Proc. Rules 301(b), 11-33(a), 11 U.S.C.A., which Tri-City rebutted with the auditor's report. Thus, the traditional hesitancy to use a true default judgment as collateral estoppel is inappropriate here, where each side has introduced proof on the adjudicated issue.

Plaintiff has not alleged that fraud or collusion tainted the district court's order. Plaintiff does not recall signing the proof of claim, plaintiff's deposition at 152, but the claimant's signature is not required on the proof of claim form. Rules Bankr.Proc. Rules 11-33(a), 301(a), 11 U.S.C.A. Plaintiff has not stated that the attorney who submitted the claim, the same who filed plaintiff's complaint in Tennessee state court, was not authorized to do so. It does not appear from the order itself that notice of the hearing was sent to the plaintiff, and the applicable rules require such notice, Rules Bankr.Proc. Rules 11-33(e), 306(c), 11 U.S.C.A., but this Court will not assume that the district court did not provide such notice. Moreover, even if plaintiff himself...