Hara v. Reichert ( 2014 )


Menu:
  •                          Nebraska Advance Sheets
    HARA v. REICHERT	577
    Cite as 
    287 Neb. 577
    after July 1, sustained a motion to transfer him to a youth
    rehabilitation and treatment center. For the same reasons set
    forth in In re Interest of Marcella G., we affirm the decision
    of the juvenile court.
    Affirmed.
    Sherry Hara, appellant, v.
    Russell R eichert, appellee.
    ___ N.W.2d ___
    Filed March 7, 2014.     No. S-13-073.
    1.	 Judgments: Res Judicata: Collateral Estoppel: Appeal and Error. The appli-
    cability of claim and issue preclusion is a question of law. On a question of law,
    an appellate court reaches a conclusion independent of the court below.
    2.	 Judgments: Res Judicata. Claim preclusion bars the relitigation of a claim
    that has been directly addressed or necessarily included in a former adjudica-
    tion if (1) the former judgment was rendered by a court of competent jurisdic-
    tion, (2) the former judgment was a final judgment, (3) the former judgment
    was on the merits, and (4) the same parties or their privies were involved in
    both actions.
    3.	 Res Judicata. Claim preclusion bars relitigation not only of those matters actu-
    ally litigated, but also of those matters which might have been litigated in the
    prior action.
    4.	 ____. Claim preclusion rests on the necessity to terminate litigation and on the
    belief that a person should not be vexed twice for the same cause.
    5.	 Judgments: Collateral Estoppel. Issue preclusion bars the relitigation of a
    finally determined issue that a party had a prior opportunity to fully and fairly
    litigate. Issue preclusion applies where (1) an identical issue was decided in a
    prior action, (2) the prior action resulted in a final judgment on the merits, (3)
    the party against whom the doctrine is to be applied was a party or was in priv-
    ity with a party to the prior action, and (4) there was an opportunity to fully and
    fairly litigate the issue in the prior action.
    6.	 Collateral Estoppel. Issue preclusion applies only to issues actually litigated.
    7.	 ____. Issue preclusion protects litigants from relitigating an identical issue with
    a party or his privy and promotes judicial economy by preventing needless
    litigation.
    8.	 Res Judicata: Collateral Estoppel. While the doctrines of claim and issue pre-
    clusion are similar and serve similar purposes, they are distinct.
    9.	 Small Claims Court: Judgments. A small claims court judgment is in fact
    a “judgment.”
    10.	 Small Claims Court. The purpose of small claims court is to provide a prompt
    and just determination in an action involving small amounts while expending a
    minimum amount of resources.
    Nebraska Advance Sheets
    578	287 NEBRASKA REPORTS
    11.	 Small Claims Court: Res Judicata. Claim preclusion applies to small claims
    court judgments.
    Appeal from the District Court for Scotts Bluff County: Leo
    Dobrovolny, Judge. Affirmed.
    Todd Morten, of Island & Huff, P.C., L.L.O., for appellant.
    Robert M. Brenner, of Robert M. Brenner Law Office, for
    appellee.
    Heavican, C.J., Wright, Connolly, Stephan, McCormack,
    Miller-Lerman, and Cassel, JJ.
    Connolly, J.
    Sherry Hara filed a complaint for declaratory judgment
    alleging that money she had received from Russell Reichert
    was a gift and not a loan. Based on a prior small claims court
    judgment, the district court concluded that Hara’s action was
    barred by both claim preclusion and issue preclusion and dis-
    missed her complaint. Because we determine that claim preclu-
    sion applies and its elements are met, we affirm.
    BACKGROUND
    Reichert originally sued Hara in Dundy County Small
    Claims Court for $3,500. Reichert claimed that he had loaned
    Hara $4,000 to help her buy a car. At the time of the transac-
    tion, Reichert and Hara were dating. Hara did not deny receiv-
    ing the money, but she claimed that Reichert had given her
    the money as a gift. After a bench trial, the small claims court
    found that the transaction was a loan and entered judgment
    for Reichert.
    Hara appealed the small claims court judgment to the
    county court for Dundy County. While the appeal was pend-
    ing, Hara filed a complaint for declaratory judgment in the
    Scotts Bluff County Court, seeking a declaration that the
    $4,000 was a gift rather than a loan and for the court to find
    that the small claims court judgment “[had] been satisfied in
    full.” Hara later dismissed her pending appeal, apparently for
    financial reasons. Reichert moved to dismiss Hara’s complaint
    in the Scotts Bluff County Court, which the court granted.
    Hara then filed a complaint for declaratory judgment in the
    Nebraska Advance Sheets
    HARA v. REICHERT	579
    Cite as 
    287 Neb. 577
    district court for Scotts Bluff County, again seeking a declara-
    tion that the $4,000 was a gift rather than a loan and for the
    court to find that the small claims court judgment “[had] been
    satisfied in full.”
    Reichert again moved to dismiss Hara’s complaint, which
    the court granted. The court reasoned that both claim preclu-
    sion and issue preclusion applied and barred Hara’s action.
    The court recognized that Henriksen v. Gleason1 stated that,
    given the procedural differences in small claims court, “it is
    inappropriate to give any issue preclusive effect to any small
    claims court judgment in a later proceeding brought in county
    or district court.”2 But the court found Henriksen distinguish-
    able because the claim here was the exact same claim and
    Henriksen made that statement only as to issue preclusion, not
    claim preclusion. The court also reasoned that if Henriksen
    were read broadly, then “within the statute of limitations for
    the particular cause of action, a successful litigant in small
    claims [court] could not rely on [that court’s] judgment.” The
    court dismissed Hara’s complaint, and she appealed.
    ASSIGNMENT OF ERROR
    Hara assigns, restated, that the district court erred in con-
    cluding that her complaint was barred by both claim preclusion
    and issue preclusion.
    STANDARD OF REVIEW
    [1] The applicability of claim and issue preclusion is a ques-
    tion of law.3 On a question of law, we reach a conclusion inde-
    pendent of the court below.4
    ANALYSIS
    Relying on Henriksen,5 Hara argues that a small claims
    court judgment cannot be given any preclusive effect, under
    1
    Henriksen v. Gleason, 
    263 Neb. 840
    , 
    643 N.W.2d 652
    (2002).
    2
    
    Id. at 845,
    643 N.W.2d at 657.
    3
    See Eicher v. Mid America Fin. Invest. Corp., 
    270 Neb. 370
    , 
    702 N.W.2d 792
    (2005).
    4
    See, e.g., In re Interest of S.C., 
    283 Neb. 294
    , 
    810 N.W.2d 699
    (2012).
    5
    Henriksen, supra note 1.
    Nebraska Advance Sheets
    580	287 NEBRASKA REPORTS
    either claim preclusion or issue preclusion, because of the
    procedural limitations of small claims court. We agree that
    under Henriksen, issue preclusion does not apply to small
    claims court judgments, and that the district court therefore
    erred in concluding that issue preclusion barred Hara’s suit.
    But Henriksen speaks only to issue preclusion and not claim
    preclusion. Because claim preclusion applies to small claims
    court judgments, and because all of its elements are met here,
    we affirm the district court’s dismissal.
    P rinciples of P reclusion
    In the past, we have referred to claim preclusion and issue
    preclusion as res judicata and collateral estoppel.6 Courts and
    commentators have moved away from that terminology and
    now use the terms claim preclusion and issue preclusion.7 Put
    simply, they are more clear and descriptive.8
    [2-4] Claim preclusion bars the relitigation of a claim that
    has been directly addressed or necessarily included in a for-
    mer adjudication if (1) the former judgment was rendered by
    a court of competent jurisdiction, (2) the former judgment was
    a final judgment, (3) the former judgment was on the merits,
    and (4) the same parties or their privies were involved in both
    actions.9 The doctrine bars relitigation not only of those mat-
    ters actually litigated, but also of those matters which might
    have been litigated in the prior action.10 The doctrine rests on
    6
    See, e.g., Kiplinger v. Nebraska Dept. of Nat. Resources, 
    282 Neb. 237
    ,
    
    803 N.W.2d 28
    (2011), disapproved in part on other grounds, Banks v.
    Heineman, 
    286 Neb. 390
    , 
    837 N.W.2d 70
    (2013); Eicher, supra note 3; In
    re Estate of Wagner, 
    246 Neb. 625
    , 
    522 N.W.2d 159
    (1994).
    7
    See, e.g., Taylor v. Sturgell, 
    553 U.S. 880
    , 
    128 S. Ct. 2161
    , 
    171 L. Ed. 2d
    155 (2008); Restatement (Second) of Judgments ch. 3 (1982); John P.
    Lenich, Nebraska Civil Procedure § 8:3 (2008); Christopher Klein et al.,
    Principles of Preclusion and Estoppel in Bankruptcy Cases, 79 Am. Bankr.
    L.J. 839 (2005).
    8
    See, e.g., Taylor, supra note 7; Klein et al., supra note 7.
    9
    See Eicher, supra note 3.
    10
    See 
    id. Nebraska Advance
    Sheets
    HARA v. REICHERT	581
    Cite as 
    287 Neb. 577
    the necessity to terminate litigation and on the belief that a per-
    son should not be vexed twice for the same cause.11
    [5-7] Issue preclusion bars the relitigation of a finally deter-
    mined issue that a party had a prior opportunity to fully and
    fairly litigate.12 Issue preclusion applies where (1) an identical
    issue was decided in a prior action, (2) the prior action resulted
    in a final judgment on the merits, (3) the party against whom
    the doctrine is to be applied was a party or was in privity with
    a party to the prior action, and (4) there was an opportunity
    to fully and fairly litigate the issue in the prior action.13 Issue
    preclusion applies only to issues actually litigated.14 Issue pre-
    clusion protects litigants from relitigating an identical issue
    with a party or his privy and promotes judicial economy by
    preventing needless litigation.15
    [8] While the doctrines are similar and serve similar pur-
    poses, they are distinct.16 A close examination of their ele-
    ments shows this to be true. Claim preclusion looks to the
    entire cause of action as opposed to a single issue. Claim pre-
    clusion does not require a full and fair opportunity to litigate,
    whereas issue preclusion does. Claim preclusion bars litiga-
    tion of matters not actually litigated, whereas issue preclusion
    applies only to issues actually litigated. Claim preclusion also
    applies only between the parties (or their privies) who were
    11
    See 
    id. 12 See
    In re Margaret Mastny Revocable Trust, 
    281 Neb. 188
    , 
    794 N.W.2d 700
    (2011).
    13
    See 
    id. 14 See,
    Bobby v. Bies, 
    556 U.S. 825
    , 
    129 S. Ct. 2145
    , 
    173 L. Ed. 2d 1173
          (2009); Peterson v. The Nebraska Nat. Gas Co., 
    204 Neb. 136
    , 
    281 N.W.2d 525
    (1979); Schneider v. Lambert, 
    19 Neb. Ct. App. 271
    , 
    809 N.W.2d 515
    (2011); Restatement, supra note 7, § 27; Lenich, supra note 7.
    15
    See, e.g., Parklane Hosiery Co. v. Shore, 
    439 U.S. 322
    , 
    99 S. Ct. 645
    , 
    58 L. Ed. 2d 552
    (1979); Thomas Lakes Owners Assn. v. Riley, 
    9 Neb. Ct. App. 359
    , 
    612 N.W.2d 529
    (2000).
    16
    See, e.g., Billingsley v. BFM Liquor Mgmt., 
    264 Neb. 56
    , 
    645 N.W.2d 791
          (2002). See, also, Restatement, supra note 7, §§ 17 through 29; Lenich,
    supra note 7; 50 C.J.S. Judgments § 928 (2009).
    Nebraska Advance Sheets
    582	287 NEBRASKA REPORTS
    involved in the prior action,17 while issue preclusion may
    be used by a nonparty in a later action, either offensively
    or defensively.18
    An example of the doctrines and how they might interact in
    a hypothetical situation might be helpful. Take, for example,
    a car (driven by Adam), which collides with two other cars
    (driven by Brody and Carl). Brody sues Adam, on a theory
    of negligence, for damage to his car. Adam denies that he
    was negligent. A jury finds otherwise and final judgment is
    entered against Adam. Brody cannot later maintain a separate
    suit, on the same facts, for additional damage to items in his
    car’s trunk. Claim preclusion would bar the suit. Now Carl
    sues Adam, also on a theory of negligence, for damage to his
    car. Claim preclusion would not apply, because Carl was not
    involved in the prior adjudication. But assuming the same
    essential facts, issue preclusion would prevent Adam from
    contesting his negligence; that issue was actually and finally
    decided in the prior suit between Adam and Brody.
    P reclusion for Small Claims
    Court Judgments
    Hara’s argument—that neither claim preclusion nor issue
    preclusion applies to a small claims court judgment—rests
    entirely on Henriksen v. Gleason.19 In that case, Jim Gleason
    sued Greg Henriksen in small claims court for failing to pay
    money under a contract. The small claims court entered a
    default judgment for Gleason, and Henriksen later satisfied the
    judgment. Henriksen then sued Gleason in county court alleg-
    ing that, basically, Gleason’s performance under the contract
    was deficient. Although Gleason argued that the prior judgment
    had a preclusive effect, the county court disagreed and found
    for Henriksen.20
    17
    See, Eicher, supra note 3; 47 Am. Jur. 2d Judgments § 577 (2006); 50
    C.J.S., supra note 16.
    18
    See, JED Constr. Co., Inc. v. Lilly, 
    208 Neb. 607
    , 
    305 N.W.2d 1
    (1981);
    Peterson, supra note 14; Thomas Lakes Owners Assn., supra note 15. See,
    also, 50 C.J.S., supra note 16, § 1098.
    19
    Henriksen, supra note 1.
    20
    See 
    id. Nebraska Advance
    Sheets
    HARA v. REICHERT	583
    Cite as 
    287 Neb. 577
    On appeal, we noted that issue preclusion “should not apply
    when a new determination of the issue is warranted by differ-
    ences in the quality or extensiveness of the procedures fol-
    lowed in the two courts or by factors relating to the allocation
    of jurisdiction between them.”21 We then explained:
    Proceedings in small claims courts are conducted on
    a very informal basis, with a minimum of procedural
    requirements. . . . For example, the jurisdiction of small
    claims court is currently limited to those cases where the
    amount in controversy does not exceed $2,400, . . . par-
    ties are not represented by counsel, . . . matters are tried
    without a jury, . . . few formal pleadings are required, . . .
    and the formal rules of evidence do not apply. . . . The
    setting in small claims court affords parties the oppor-
    tunity to obtain a prompt and just determination in an
    action involving small amounts while expending a mini-
    mum amount of resources. This setting is vastly different
    from the relatively more complex and time-consuming
    litigation that occurs in county or district courts. Given
    these procedural differences, we believe it is inappropri-
    ate to give any issue preclusive effect to any small claims
    court judgment in a later proceeding brought in county or
    district court. For that reason, the county court was not
    barred from litigating the issue of Gleason’s performance
    under the contract.22
    Based on Henriksen, Hara argues that the prior small claims
    court judgment cannot be given any preclusive effect, under
    either claim preclusion or issue preclusion.
    But Henriksen held only that issue preclusion did not apply
    to small claims court judgments. This is apparent from its
    language and reasoning. For example, Henriksen repeatedly
    stated that it was inappropriate to give a small claims court
    judgment any “issue preclusive effect,”23 and after emphasiz-
    ing the procedural limitations of small claims court, Henriksen
    21
    
    Id. at 844-45,
    643 N.W.2d at 656.
    22
    
    Id. at 845,
    643 N.W.2d at 656-57 (citations omitted).
    23
    
    Id. at 845,
    643 N.W.2d at 657-58.
    Nebraska Advance Sheets
    584	287 NEBRASKA REPORTS
    explained that “[f]or that reason, the county court was not
    barred from litigating the issue of Gleason’s performance under
    the contract.”24 Henriksen also relied heavily on § 28(3) of the
    Restatement (Second) of Judgments and its accompanying
    comment d., which pertained exclusively to issue preclusion.25
    And the only case we cited in our analysis, Flobert Industries
    v. Stuhr,26 also involved only issue preclusion.
    Henriksen did not hold that claim preclusion was inap-
    plicable to small claims court judgments. Such a holding
    would have been inconsistent with our prior case law.27 Indeed,
    Henriksen did not address claim preclusion at all, for what-
    ever reason, even though it was squarely presented by the fact
    pattern before us. Had we addressed it, we likely would have
    found that claim preclusion barred the suit.28
    [9,10] As impliedly noted, we have previously applied
    claim preclusion to a small claims court judgment.29 And, for
    several reasons, we continue to believe that claim preclusion
    is applicable to small claims court judgments. First, a small
    claims court judgment is in fact a “judgment,”30 and claim
    preclusion, a fundamental principle of the law of judgments,31
    should apply absent some persuasive reason (or reasons)
    otherwise. Second, were we not to apply claim preclusion to
    small claims court judgments, the small claims court would
    be rendered meaningless, its judgments effectively neutered,
    because any dissatisfied party could simply file a new action
    on the same claim in county or district court. This would
    24
    
    Id. at 845,
    643 N.W.2d at 657 (emphasis supplied).
    25
    See, Henriksen, supra note 1; Restatement, supra note 7, § 28(3) and
    comment d.
    26
    Flobert Industries v. Stuhr, 
    216 Neb. 389
    , 
    343 N.W.2d 917
    (1984).
    27
    See DeCosta Sporting Goods, Inc. v. Kirkland, 
    210 Neb. 815
    , 
    316 N.W.2d 772
    (1982).
    28
    See, id.; Pipe & Piling Supplies v. Betterman & Katelman, 
    8 Neb. Ct. App. 475
    , 
    596 N.W.2d 24
    (1999); Lenich, supra note 7, § 8:13.
    29
    See DeCosta Sporting Goods, Inc., supra note 27.
    30
    See Nebraska Dept. of Health & Human Servs. v. Weekley, 
    274 Neb. 516
    ,
    
    741 N.W.2d 658
    (2007).
    31
    See, generally, Restatement, supra note 7.
    Nebraska Advance Sheets
    HARA v. REICHERT	585
    Cite as 
    287 Neb. 577
    be antithetical to the small claims court’s purpose, which
    is to provide “a prompt and just determination in an action
    involving small amounts while expending a minimum amount
    of resources.”32
    Third, our statutes provide a dissatisfied party with the
    opportunity to appeal from a small claims court judgment.33
    Those statutes would also be rendered meaningless if claim
    preclusion did not apply to small claims court judgments,
    because a party would never appeal; on appeal, the reviewing
    court looks only for “error appearing on the record,”34 whereas
    in a new action, the dissatisfied party would start from scratch.
    Fourth, it is fair for the parties to be bound by the judgment of
    the small claims court when they choose to proceed there. The
    plaintiff chooses where to file his action and, if unhappy with
    the small claims court’s procedural limitations, can choose to
    file it in a court of general jurisdiction. And the defendant, if
    he does not want to proceed in small claims court, can transfer
    the case to county court.35
    [11] Other courts have similarly concluded that claim pre-
    clusion applies to small claims court judgments.36 Moreover,
    our research reveals several jurisdictions that apply claim pre-
    clusion to small claims court judgments while limiting or not
    applying issue preclusion.37 Although Hara argues otherwise,
    we see no problem with treating the doctrines differently; they
    32
    Henriksen, supra note 1, 263 Neb. at 
    845, 643 N.W.2d at 657
    . See, also,
    Neb. Rev. Stat. § 25-2806 (Reissue 2008).
    33
    See Neb. Rev. Stat. §§ 25-2728 through 25-2738 (Reissue 2008 & Cum.
    Supp. 2012) and 25-2807 (Reissue 2008).
    34
    See §§ 25-2733 and 25-2807.
    35
    See Neb. Rev. Stat. § 25-2805 (Cum. Supp. 2012).
    36
    See, e.g., Allen v. Moyer, 
    259 P.3d 1049
    (Utah 2011); Hindmarsh v. Mock,
    
    138 Idaho 92
    , 
    57 P.3d 803
    (2002); Peterson v. Newton, 
    232 Ariz. 593
    , 
    307 P.3d 1020
    (Ariz. App. 2013); Bailey v. Brewer, 
    197 Cal. App. 4th 781
    ,
    
    128 Cal. Rptr. 3d 380
    (2011); Doherty v. McMillen, 
    805 S.W.2d 361
    (Mo.
    App. 1991); Bagley v. Hughes, 
    465 N.W.2d 551
    (Iowa App. 1990). But see
    Isaac v. Truck Service, Inc., 
    253 Conn. 416
    , 
    752 A.2d 509
    (2000).
    37
    See, In re Ault, 
    728 N.E.2d 869
    (Ind. 2000); Newton, supra note 36;
    Bailey, supra note 36; Clusiau v. Clusiau Enterprises, Inc., 
    225 Ariz. 247
    ,
    
    236 P.3d 1194
    (Ariz. App. 2010); Bagley, supra note 36.
    Nebraska Advance Sheets
    586	287 NEBRASKA REPORTS
    are separate doctrines with distinct elements.38 If it were not
    clear before, we hold that claim preclusion applies to small
    claims court judgments.
    The only remaining question is whether the elements of
    claim preclusion are met here. They are. Reichert originally
    sued Hara in small claims court over the same $4,000 and
    the dispute centered on whether it was a gift or a loan; Hara
    argued, in her defense, that it was a gift. But after a trial, the
    small claims court entered judgment for Reichert, finding that
    it was a loan. Hara did not appeal from that judgment and now
    seeks to reassert that defense—that the money was a gift and
    not a loan—in a new action. This she cannot do.39 Here, we
    have a former judgment, entered by a court of competent juris-
    diction, which was final and on the merits, between the same
    parties and involving the same claim. Claim preclusion bars
    Hara’s action.
    CONCLUSION
    We conclude that claim preclusion, but not issue preclusion,
    applies to small claims court judgments. Because the elements
    of claim preclusion are satisfied here, the district court cor-
    rectly dismissed Hara’s action.
    Affirmed.
    38
    See, e.g., Billingsley, supra note 16; Restatement, supra note 7, §§ 17
    through 29; Lenich, supra note 7; 50 C.J.S., supra note 16. See, also,
    Newton, supra note 36; Doherty, supra note 36; Bagley, supra note 36.
    39
    See 50 C.J.S., supra note 16, § 1018. Cf., Dakota Title v. World-Wide Steel
    Sys., 
    238 Neb. 519
    , 
    471 N.W.2d 430
    (1991); DeCosta Sporting Goods,
    Inc., supra note 27.