Kabatnik v. Westminster Co. , 63 N.C. App. 708 ( 1983 )

306 S.E.2d 513 (1983)

Jaroslav J. KABATNIK
v.
WESTMINSTER COMPANY.

No. 8218SC553.

Court of Appeals of North Carolina.

September 6, 1983.

Turner, Rollins, Rollins & Clark by Clyde T. Rollins, Greensboro, for plaintiff-appellant.

Smith, Patterson, Follin, Curtis, James & Harkavy by Norman B. Smith, Greensboro, for defendant-appellee.

JOHNSON, Judge.

The question presented by this appeal is whether the trial court's grant of defendant's motion for directed verdict on the grounds of res judicata and collateral estoppel was proper. The court's ruling was based on the prior action of Simkins v. Kabatnik, which involved an agreement that was similar to the contract in this case in several respects: (1) it involved the rendering of architectural services by Kabatnik; (2) it involved the same construction project; (3) it contained a provision for the reimbursement of Simkins by Kabatnik for architectural advancements. Simkins v. Kabatnik involved work done by Kabatnik from June 1972 until June 1975. While the Simkins v. Kabatnik action was never tried, it was conclusively settled by the voluntary dismissal with prejudice of all claims involved in the action.

The present action involves a written contract between Kabatnik and Westminster Company. The work that is the basis of Kabatnik's claim was begun in 1975 and completed in 1979. Plaintiff argues that neither res judicata nor collateral estoppel apply in this case. Plaintiff contends that neither the issue nor the parties in the prior action are sufficiently identical with the issue and parties in the present case to bar plaintiff's assertion of his claim. Defendant argues that the voluntary dismissal with prejudice of Kabatnik's counterclaim in the prior action bars Kabatnik from asserting his present claim. Defendant contends that the claim asserted here by Kabatnik could and should have been asserted in the prior action and that Kabatnik's failure to do so estops him from asserting it here.

Although it is not clear from either the briefs or the records, the $7,700 amount in controversy here is apparently derived from the $7,700 paid by Simkins to Kabatnik in satisfaction of Kabatnik's counterclaim, as alleged in Simkins' initial affirmative defense in the prior action. Although again it is not clear from the records or briefs, defendant apparently interprets this payment as an advancement by Simkins to Kabatnik for which Simkins is entitled to reimbursement under the contract between Kabatnik and Westminister. In addition, defendant apparently interprets the dismissal of the prior action as conclusive of the rights of the parties to this action with regard to the contract in this action and asserts it as a bar to plaintiff's present claim.

The principles of law that control the question raised by this appeal are well established in North Carolina. A final judgment, rendered on the merits by a court of competent jurisdiction, is conclusive as to the issues raised therein with respect to the parties and those in privity with them and constitutes a bar to all subsequent actions involving the same issues and parties. Masters v. Dunstan, 256 N.C. 520, 124 S.E.2d 574 (1962); Gaithers Corp. v. Skinner, 241 N.C. 532, 85 S.E.2d 909 (1955). In order for res judicata to apply, there must have been a prior adjudication on the merits of an action involving the same parties and issues as the action in which the defense of res judicata is asserted. King v. Grindstaff, 284 N.C. 348, 200 S.E.2d 799 (1973); Teague v. Alexander, 38 N.C.App. 332, 247 S.E.2d 775 (1978), disc. rev. denied, 296 N.C. 414, 251 S.E.2d 473 (1979). Strict identity of issues, however, is not absolutely required and the doctrine of res judicata has been accordingly expanded to apply to those issues which could have been raised in the prior action, but were not. Gaithers Corp. v. Skinner, supra. Res judicata will apply regardless of any differences in the manner in which the claims are asserted.

[U]nder application of the rule precluding subsequent litigation of the same cause of action, a party defendant who interposes only a part of a claim by way of recoupment, setoff, or counterclaim is ordinarily barred from recovering the balance in a subsequent action.

Id. 241 N.C. at 536, 85 S.E.2d at 911. For purposes of res judicata, a voluntary dismissal with prejudice is an adjudication on the merits in favor of the opposing party. Barnes v. McGee, 21 N.C.App. 287, 204 S.E.2d 203 (1974).

Applying these principles to the case before us, it is clear that there is not sufficient identity of issues for res judicata to apply. Assuming that there is privity or even identity between Simkins and Westminster, the claim asserted by Kabatnik here arises under a separate state of facts from those that gave rise to the counterclaim in the prior action. The only affect that the prior action could reasonably have on the present one is merely that of a case law interpretation of the contract, but that question was never reached in the prior action. Rather, the prior action determined only that Simkins' claim for reimbursement had no merit and that Kabatnik's counterclaim for compensation had no merit. See Barnes v. McGee, supra. The agreement in the prior action and the contract here, while similar, are not the same. Work under the former was completed and the prior claim mature before work under the latter had even begun. The present claim did not mature until 1979, almost four years after the first claim.

Moreover, there is no evidence in the record that Simkins had made any claim for an offset against the amount allegedly owed to Kabatnik under the contract. While the evidence does show that Kabatnik received $7,700 from Simkins, there is no evidence that this amount is an advancement to be offset against plaintiff's present claim against defendant. We fail to see how the prior action is res judicata or collateral estoppel with respect to any of the questions or issues in the present case. The order appealed from must, therefore, be reversed and the cause remanded for appropriate further proceedings in the trial court.

Reversed and remanded.

HILL and PHILLIPS, JJ., concur.