Whitaker v. Bank of Newport

• Decision Date: 09 July 1992
• Citation: 836 P.2d 695,313 Or. 450
• Parties: John A. WHITAKER and Sally Whitaker, husband and wife, Petitioners on Review, and Rodney P. Everhart, their attorney, Appellant-Cross-Respondent, v. The BANK OF NEWPORT, a banking institution, Respondent, and Thiel Creek Development Company, a corporation, and Gary V. Diers, Respondents on Review. CC 88-1891; CA A50177; SC S37191.
• Court: Oregon Supreme Court

Page 695

836 P.2d 695

313 Or. 450

John A. WHITAKER and Sally Whitaker, husband and wife Petitioners on Review and Rodney P. Everhart, their attorney, Appellant-Cross-Respondent, v. The BANK OF NEWPORT, a banking institution, Respondent and Thiel Creek Development Company, a corporation, and Gary V Diers, Respondents on Review.

CC 88-1891; CA A50177; SC S37191.

Supreme Court of Oregon, In Banc.

Argued and Submitted Oct. 11, 1990.

Decided July 9, 1992.

Michael E. Swaim, of Swaim & Betterton, P.C., Salem, argued the cause and filed the petition for petitioners on review.

J. Phillip Holcomb, Portland, argued the cause for respondents on review.

GILLETTE, Justice.

The issue in this case is whether plaintiffs' claim against defendants for "conspiracy" is barred on the ground of claim preclusion. The trial court concluded that it was and granted defendants' motion for summary judgment. The Court of Appeals affirmed. Whitaker v. Bank of Newport, 101 Or.App. 327, 790 P.2d 1170 (1990). We also affirm.

On review of defendants' summary judgment motion, we review the facts in the light most favorable to plaintiffs, the persons against whom summary judgment was granted. Computer Concepts, Inc. v. Brandt, 310 Or. 706, 709, 801 P.2d 800 (1990). Plaintiffs pleaded the following facts in their complaint: They entered into a written agreement to exchange real property with defendant Thiel Creek Development Company (Company). Defendant Gary Diers was an officer of Company. The agreement provided that plaintiffs would construct buildings on the property that they received and that Company would make periodic cash advances to cover the cost of construction as it progressed.

Plaintiffs commenced construction. Company made periodic payments until late August, 1987, when it abruptly stopped paying. Plaintiffs informed their bank, defendant Bank of Newport (Bank), of their agreement with Company and of Company's cessation of payments. Plaintiffs told Bank that Company's failure to pay had caused them financial difficulties, because they lacked funds to pay their accrued construction costs and costs that they would incur in weatherizing the buildings against the winter rains.

In early September, 1987, Bank proposed a lending agreement to plaintiffs. Plaintiffs found that agreement unacceptable and instead asked Bank to lend them $60,000 to pay their accrued costs. A few weeks later, Bank proposed another agreement, which also was unacceptable to plaintiffs. Plaintiffs contend that the effect of the second proposed agreement would have been to vary the terms of their agreement with Company in a manner that was extremely advantageous to Company and Bank and disadvantageous to plaintiffs. Plaintiffs allege that Bank attempted to force them to accept that proposal, but that plaintiffs refused.

Plaintiffs then filed an action (Whitaker I ) against Company and Diers, seeking a declaratory judgment as to the parties' rights under the contract, specific performance, and injunctive relief. Later, plaintiffs amended the complaint to request rescission of the contract and a money judgment.

In the amended complaint in Whitaker I, plaintiffs alleged some of the same facts that are alleged in the complaint in the present case, viz., the facts about the contract and its breach by Company and Diers. Additionally, plaintiffs alleged that Company and Diers assured plaintiffs that they timely would make payments, but never paid.

On the date set for trial in Whitaker I, the parties settled the case, with Company agreeing to pay the full contract price. ¹ Thereafter, plaintiffs moved the court for an order dismissing Whitaker I with prejudice, because defendants had paid the amount that plaintiffs had demanded. The court entered an order dismissing the action with prejudice.

Several months later, plaintiffs brought the present action (Whitaker II ) against Bank, Company, and Diers. Their complaint contained three claims for relief. The first two claims prayed for relief against Bank for intentional infliction of emotional distress and for breach of fiduciary duty. Those claims are not at issue here. ²

Plaintiffs' third claim for relief is entitled "conspiracy." It alleges that Diers, Bank, and Company entered into a conspiracy to vary the terms of the agreement between plaintiffs and Company. Plaintiffs contend that this conduct was "outrageous" and caused them "extreme emotional distress." Plaintiffs seek damages for their alleged emotional distress, as well as punitive damages.

Company and Diers moved for summary judgment on the third claim for relief on the ground that the action against them was barred by the doctrine of claim preclusion. The trial court granted the motion for summary judgment, finding that there was no genuine issue as to any material fact and that defendants were entitled to judgment as a matter of law. The court then entered judgment pursuant to ORCP 67 B. On plaintiffs' appeal, the Court of Appeals affirmed.

We consider both the relevant statute and common law concerning claim preclusion. See Van De Hey v. U.S. National Bank, 313 Or. 86, 90, 829 P.2d 695 (1992) (the doctrine of claim preclusion has developed in this state as both statutory and common law, and both are viable). ORS 43.130, the statute concerning claim preclusion, provides in part:

"The effect of a judgment, decree or final order in an action, suit or proceeding before a court or judge of this state or of the United States, having jurisdiction is as follows:

" * * * * *

"(2) * * * [T]he judgment, decree or order is, in respect to the matter directly determined, conclusive between the parties * * * litigating for the same thing, under the same title and in the same capacity."

Plaintiffs do not dispute that the settlement and consequent judgment dismissing with prejudice the claims in Whitaker I was a final judgment in a proceeding before a court having jurisdiction. ORS 43.130(2). They dispute whether the present case concerns the "matter directly determined" in the earlier case. We agree that the case does not concern such matters--neither the allegations nor the settlement in Whitaker I involved any activities in which Bank participated. ORS 43.130(2) is not implicated here.

The common law doctrine of claim preclusion is broader. It prohibits a plaintiff who has prosecuted an action against a defendant and obtained a final judgment from prosecuting another action against the same defendant

" '[w]here the claim in the second action is * * * based on the same factual transaction that was at issue in the first, seeks a remedy additional or alternative to the one sought earlier, and is of such a nature as could have been joined in the first action.' Rennie v. Freeway Transport, 294 Or. 319, 323, 656 P.2d 919 (1982)."

Van De Hey v. U.S. National Bank, supra, 313 Or. at 91, 829 P.2d 695 (quoting Drews v. EBI Companies, 310 Or. 134, 140, 795 P.2d 531 (1990)). Plaintiffs do not dispute that, in Whitaker II, they seek a remedy that is additional to the one sought in Whitaker I or that they could have joined the claim in Whitaker II in the first action. ³ The sole issue, then, is whether the claim in Whitaker II is based on the same factual transaction as the claims in Whitaker I.

The "same factual transaction" can be either a single transaction or a connected series of transactions. Drews v. EBI Companies, supra, 310 Or. at 141, 795 P.2d 531 (quoting Rennie v. Freeway Transport, supra, 294 Or. at 324, 656 P.2d 919). There are two transactions involved here: (1) the breach of the contract and (2) the conspiracy to force plaintiffs into a subsequent agreement that effectively would alter the terms of the contract. We must determine whether those transactions are a "connected series."

In Troutman v. Erlandson, 287 Or. 187, 205-10, 598 P.2d 1211 (1979), this court applied criteria from the Restatement (Second) of Judgments § 24 in determining what factual groupings constitute a connected series of transactions for claim preclusion purposes:

" '(2) [W]hat groupings constitute a 'series', are to be determined pragmatically, giving weight to such considerations such as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage.' " ⁴

The Court stated:

" 'When a defendant is accused of successive but nearly simultaneous acts, or acts which though occurring over a period of time were substantially of the same sort and similarly motivated, fairness to the defendant as well as the public convenience may require that they be dealt with in the same action. The events constitute but one transaction or a connected series.' "

Troutman v. Erlandson, supra, 287 Or. at 205-07, 598 P.2d 1211 (quoting Restatement (Second) of Judgments § 24, comment d ). (Emphasis supplied.) While not necessarily intended, either by the authors of the Restatement (Second) of Judgments or by this court, to be a complete list, the criteria described in Troutman do serve as a template against which most cases involving claim preclusion readily can be measured. Applying those criteria to this case, although the issue is a relatively close one, the claims in Whitaker I and Whitaker II are based on a connected series of transactions and should have been brought in the same proceeding.

A discussion of each of the pertinent criteria from Troutman illustrates how the issue should be addressed:

1. Time. Time is a significant factor in such an inquiry. Obviously, enough events to give rise to the second claim must have occurred before the first claim is brought so that the party against whom preclusion is asserted could have combined his or her later claims with the earlier ones. The more closely connected or overlapping, the stronger the argument that preclusion should apply.

The facts alleged in Whitaker I and...