Janet Freels v. James F. Koches and Sunset Builders, Inc. , 94 N.E.3d 339 ( 2018 )

FILED
Feb 06 2018, 9:25 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Christopher P. Phillips Steven Knecht
Phillips Law Office P.C. Vonderheide & Knecht, P.C.
Monticello, Indiana Lafayette, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Janet Freels, February 6, 2018
Appellant-Plaintiff, Court of Appeals Case No.
91A02-1708-PL-1988
v. Appeal from the White Superior
Court
James F. Koches and Sunset The Honorable Robert B. Mrzlack,
Builders, Inc., Judge
Appellee-Defendant. Trial Court Cause No.
91D01-1703-PL-11
Najam, Judge.
Statement of the Case
[1] Janet Freels appeals the trial court’s dismissal of her complaint against James F.
Koches and Sunset Builders, Inc. (collectively, “Sunset”). Freels raises a single
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 1 of 9
issue for our review, namely, whether the trial court erred when it dismissed her
complaint pursuant to the doctrine of res judicata. 1 We affirm.
Facts and Procedural History
[2] In February of 2016, Freels filed a small-claims action against Sunset. In her
notice of claim, Freels alleged that Sunset had failed to properly perform certain
construction work on her home, which resulted in water damage and mold.
Freels sought damages in the amount of $6,000. After a fact-finding hearing, in
May the small claims court ruled in favor of Sunset on Freels’ claim. Freels did
not appeal that judgment.
[3] In March of 2017, Freels filed a complaint against Sunset in the White Superior
Court. In that complaint, Freels alleged that Sunset’s “poor workmanship” in
its construction on her home resulted in “more than $30,000.00” in damages to
Freels. Appellant’s App. Vol. 2 at 9-10. Freels also alleged that Sunset’s
actions amounted to fraud and conversion, and that she was additionally
entitled punitive damages, treble damages, and attorney’s fees.
[4] Sunset moved to dismiss Freels’ March 2017 complaint in the trial court on the
grounds that her complaint was barred by the doctrine of res judicata. Sunset
1
Freels’ brief and construction of the record on appeal conflate her appeal from the trial court’s final
judgment in 91D01-1703-PL-11 with her appeal from the small claims court’s simultaneous denial of her
motion for relief from judgment in 91D01-1602-SC-82. But Freels has not requested that this Court
consolidate those two proceedings and judgments into one appeal. As such, we have separately addressed
each appeal and have partitioned our review of the record and the briefs accordingly. We also note that
Freels’ appendix on appeal does not include the trial court’s chronological case summary, which is contrary
to Indiana Appellate Rule 50(A)(2)(a).
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 2 of 9
attached to its motion Freels’ February 2016 notice of claim in the small claims
court as well as that court’s judgment on her claim. Freels responded to
Sunset’s motion to dismiss, and the trial court held a hearing. Thereafter, the
trial court granted Sunset’s motion to dismiss based on res judicata. This
appeal ensued.
Discussion and Decision
[5] Freels appeals the trial court’s judgment to dismiss her complaint pursuant to
the doctrine of res judicata. We review de novo the trial court’s ruling on a
motion to dismiss under Indiana Trial Rule 12(B)(6). Caesars Riverboat Casino,
LLC v. Kephart, 934 N.E.2d 1120, 1122 (Ind. 2010). “Such a motion tests the
legal sufficiency of a claim, not the facts supporting it.” Id. “Viewing the
complaint in the light most favorable to the non-moving party, we must
determine whether the complaint states any facts on which the trial court could
have granted relief.” Id. “If a complaint states a set of facts that, even if true,
would not support the relief requested, we will affirm the dismissal.” McPeek v.
McCardle, 888 N.E.2d 171, 174 (Ind. 2008). We may affirm the grant of a
motion to dismiss if it is sustainable on any theory. Id.
[6] The trial court here dismissed Freels’ complaint under the doctrine of res
judicata. As we have explained:
The principle of res judicata is divided into two branches: claim
preclusion and issue preclusion.
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 3 of 9
The first of these branches, claim preclusion, applies where a
final judgment on the merits has been rendered and acts as a
complete bar to a subsequent action on the same issue or claim
between those parties and their privies. When claim preclusion
applies, all matters that were or might have been litigated are
deemed conclusively decided by the judgment in the prior action.
The following four requirements must be satisfied for claim
preclusion to apply as a bar to a subsequent action: (1) the
former judgment must have been rendered by a court of
competent jurisdiction; (2) the former judgment must have been
rendered on the merits; (3) the matter now in issue was, or could
have been, determined in the prior action; and (4) the
controversy adjudicated in the former action must have been
between the parties to the present suit or their privies.
The second branch of the principle of res judicata is issue
preclusion, also known as collateral estoppel. Issue preclusion
bars the subsequent litigation of a fact or issue that was
necessarily adjudicated in a former lawsuit if the same fact or
issue is presented in the subsequent lawsuit. If issue preclusion
applies, the former adjudication is conclusive in the subsequent
action, even if the actions are based on different claims. The
former adjudication is conclusive only as to those issues that
were actually litigated and determined therein. Thus, issue
preclusion does not extend to matters that were not expressly
adjudicated and can be inferred only by argument. In
determining whether issue preclusion is applicable, a court must
engage in a two-part analysis: (1) whether the party in the prior
action had a full and fair opportunity to litigate the issue, and (2)
whether it is otherwise unfair to apply issue preclusion given the
facts of the particular case. The non-exhaustive factors to be
considered by the trial court in deciding whether to apply issue
preclusion include: (1) privity, (2) the defendant’s incentive to
litigate the prior action, and (3) the ability of the plaintiff to have
joined the prior action.
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 4 of 9
Angelopoulos v. Angelopoulos, 2 N.E.3d 688, 696 (Ind. Ct. App. 2013), trans.
denied. There is no dispute in the instant appeal that the trial court’s application
of res judicata here was under the “branch” of claim preclusion.
[7] Also relevant to this appeal is Indiana Small Claims Rule 11(F). That Rule
states that a judgment of a small claims court “shall be res judicata only as to
the amount involved in the particular action and shall not be considered an
adjudication of any fact at issue in any other action or court.” Ind. Small
Claims Rule 11(F). “In other words, Smalls Claims Rule 11(F) prohibits the
application of issue preclusion based on a small claims judgment, but [it] does
not prohibit claim preclusion.” Geico Ins. Co. v. Graham, 14 N.E.3d 854, 860
(Ind. Ct. App. 2014) (discussing In re Ault, 728 N.E.2d 869, 872 (Ind. 2000)).
[8] On appeal, Freels asserts that the trial court erred for three reasons when it
dismissed her complaint. First, Freels contends that her complaint in the trial
court alleged new claims against Sunset and, as such, res judicata does not
apply to those new claims. Similarly, Freels’ second argument is that the trial
court erred in dismissing her complaint because, at the time of the small-claims
proceedings, she “had no idea that additional areas were damaged” and that
“the actual damage caused . . . was in excess of $30,000.00.” Appellant’s Br. at
9.
[9] In support of those two arguments, Freels relies exclusively on this Court’s
opinion in Biggs v. Marsh. In Biggs, we held that two prospective homebuyers’
failed suit for specific performance against a homeowner on their apparent
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 5 of 9
purchase agreement did not preclude the buyers from later bringing suit against
the owner for fraudulent misrepresentation. 446 N.E.2d 977, 982 (Ind. Ct.
App. 1983). In particular, we held that “[t]he evidence to establish the material
elements of a fraudulent misrepresentation of an existing fact reasonably relied
upon by the [buyers] to their detriment differs substantially from the evidence
necessary to sustain” their claim for specific performance. Id.
[10] But we have since clarified our holding in Biggs. As we more recently stated:
Hilliard would have us follow Biggs and take a literal
interpretation of the identical evidence test, which has since been
called into question by the Seventh Circuit. In Atkins v. Hancock
County Sheriff’s Merit Board, the Seventh Circuit noted that
Indiana follows the identical evidence test, as is outlined in Biggs.
910 F.2d 403, 405 (7th Cir. 1990). The court went on to say
“[u]nderstood literally, that approach would confine a plea of res
judicata to cases in which the claim in plaintiff’s second suit was
identical to the claim in his first, and would invite piecemeal
litigation with a vengeance. We have not thought that Indiana
intended to confine res judicata so narrowly . . . .” Id. Hilliard’s
argument is centered around the idea that we should apply the
literal interpretation of this test; she contends that some evidence
necessary to adjudicate her second set of claims was not before
the trial court in her first set of claims, preventing the invocation
of res judicata. However, we find this argument unpersuasive.
Applying a practical interpretation of the identical evidence test,
the claims at issue in the present case could have been
adjudicated in the first case. Even though individual pieces of
evidence may differ between the two sets of claims, . . . the same
general evidence would be used to adjudicate all of Hilliard’s
claims . . . . Furthermore, all of this evidence was available from the
beginning of this litigation; Hilliard’s claims all sought the same
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 6 of 9
ultimate relief and there is no claim in the second case that could
not have been adjudicated in the first case. All of the legal
theories of relief she puts forth in both sets of claims should have
been adjudicated at once. Choosing to withhold evidence and
theories of relief should not be the basis for allowing Hilliard
another “bite at the apple.”
Furthermore, we reject Hilliard’s argument because it was the
conscious decision of her and her husband not to set forth all of
the evidence and legal theories they had. A party cannot fail to
introduce evidence in the first case and then later claim that the
excluded evidence is necessary for the second case, barring res
judicata under the identical evidence rule. “[A] party who
neglects to put in the evidence that would support the withheld
legal theory cannot later point to its own omission as justification
for filing another suit. Such an approach would gut the rules of
preclusion.” Wabash Valley Power Ass’n v. Rural Electrification
Admin., 903 F.2d 445, 456 (7th Cir. 1990) (internal citations
omitted). Allowing Hilliard’s claims to continue would be
allowing her the possibility of endless litigation over the life
insurance policies—as long as she withheld some piece of
evidence or some legal theory, she could attempt to litigate her
claims again until she got a ruling in her favor. This would
completely eviscerate the doctrine of res judicata.
Hilliard v. Jacobs, 957 N.E.2d 1043, 1047-48 (Ind. Ct. App. 2011) (emphasis
added; alterations original to Hilliard), trans. denied.
[11] We agree with Hilliard and conclude that, here, Freels’ additional claims and
damages could have been, and should have been, litigated in her first action.
See id.; see also Angelopoulos, 2 N.E.3d at 696 (claim preclusion prohibits the
subsequent litigation of any matter that “was, or could have been, determined in
the prior action”) (emphasis added). Indeed, Freels’ argument here is that this
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 7 of 9
Court should apply a literal reading of Biggs, which we have already plainly
rejected. Hilliard, 957 N.E.2d at 1047-48. As such, we likewise reject Freels’
argument.
[12] Moreover, Freels’ argument that she “had no idea” about the full nature and
extent her claims against Sunset or her damages at the time of the small-claims
action is beside the point. The question is not whether Freels had actual
knowledge of that information at the time she filed her notice of claim in the
small claims court, but, rather, whether a reasonably prudent person who had
the means of that knowledge at hand would have ascertained it. Cf. Keybank
Nat’l Ass’n v. NBD Bank, 699 N.E.2d 322, 327 (Ind. Ct. App. 1998) (discussing
actual notice and inquiry notice). Nothing about the facts alleged in Freels’
subsequent action in the White Superior Court demonstrates that the “new”
information relied upon was unavailable to her at the time she filed her action
in the small claims court. Rather, the underlying facts demonstrate that both
litigations are “essentially the same.” Becker v. State, 992 N.E.2d 697, 700 (Ind.
2013). As such, Freels’ second action is barred under the doctrine of claim
preclusion.
[13] Freels’ third argument is that, due to the informal nature of small-claims
proceedings, res judicata simply “should not apply” to them. Appellant’s Br. at
10. Our Supreme Court disagrees. In In re Ault, the Court held that res
judicata—specifically, claim preclusion—attaches to the judgments of our small
claims courts. 728 N.E.2d at 872 (discussing Cook v. Wozniak, 500 N.E.2d 231,
233 (Ind. 1987)). Freels’ argument on this issue would also have us disregard
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 8 of 9
Small Claims Rule 11(F), which, as we explained in Geico, means that claim
preclusion applies to the judgments of our small claims courts. Geico, 14
N.E.3d at 860. Accordingly, we reject Freels’ broad assertion that the
informality of small-claims proceedings prohibits the application of res judicata
here.
[14] In sum, we decline Freels’ request to apply a literal reading of Biggs. Instead,
we follow this Court’s subsequent clarification of Biggs in Hilliard. We also
decline Freels’ request to exempt small-claims proceedings from the doctrine of
res judicata. Thus, we affirm the trial court’s dismissal of Freels’ complaint.
[15] Affirmed.
Mathias, J., and Barnes, J., concur.
Court of Appeals of Indiana | Opinion 91A02-1708-PL-1988 | February 6, 2018 Page 9 of 9