Kirwan & Co., P.C. v. Pelletier-Baker

Present: Carrico, C.J., Compton, Stephenson, Whiting, 1 Lacy,
Hassell, and Keenan, JJ.
KIRWAN & COMPANY, P.C.
v. Record No. 941657 OPINION BY JUSTICE HENRY H. WHITING
September 15, 1995
WILMA PELLETIER-BAKER, ETC.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Stanley P. Klein, Judge
This is an appeal from a final judgment in favor of the
defendant in an action to collect an account. The plaintiff,
Kirwan & Company, P.C. (Kirwan), claims that the circuit court
erred in sustaining a plea in bar based upon the defenses of res
judicata and collateral estoppel filed by the defendant, Wilma L.
Pelletier-Baker, also known as Wilma Pelletier (Baker). Counsel
stipulated that the evidence in support of the plea is reflected
in a written statement of facts and in the defendant's earlier-
filed motion for summary judgment with exhibits attached thereto.
In October 1989, Eckert & Taylor, Ltd., a professional
corporation engaged in the practice of public accountancy (Eckert
& Taylor), contracted with Baker to provide accounting services
under the supervision of Warren W. Taylor, Jr., a certified
public accountant, and an employee, officer, director, and
2
shareholder of Eckert & Taylor. In July 1991, Eckert & Taylor
1
Justice Whiting prepared and the Court adopted the opinion in
this case prior to the effective date of his retirement on August
12, 1995.
2
The record also indicates that on October 17, 1989, Taylor
executed another contract apparently modifying the October 7
contract. The modifications are not material to this appeal.
sued Baker to recover $79,963 in unpaid accounting fees allegedly
due under the contract.
On December 27, 1991, Taylor met with the shareholders and
president of Kirwan, another professional corporation engaged in
the practice of public accountancy, and the parties agreed that
Taylor would "join Kirwan when he left [Eckert & Taylor] on
January 1, 1992." The minutes of the meeting state that Taylor
"expects some accounts receivable which he generated as an
employee of Eckert & Taylor, Ltd. to be assigned as he directs."
The minutes also indicate that Kirwan would "accept the
assignment of various accounts receivable from Eckert & Taylor,"
which Kirwan would "collect on behalf of Taylor and apply same
towards his share of overhead and pay any balance to him as
compensation." According to the statement of facts, "[t]he
assignment [of Baker's account] to Kirwan is reflected in [the]
December 27, 1991 agreement." 3
In March 1992, Taylor became an officer and director of
Kirwan. In June 1992, Eckert & Taylor nonsuited its case against
Baker.
Alleging under oath that he was "successor-in-interest" of
Eckert & Taylor, "Warren W. Taylor, Jr., t/a Eckert & Taylor,
Ltd." sued Baker in December 1992, claiming the sum of $80,531
due "[a]s of September, 1990." Taylor's claim was based upon the
3
Baker does not question Taylor's authority on behalf of Eckert
& Taylor to assign her account to Kirwan.
-2-
same claim for unpaid accounting fees asserted in the first
action. At the trial of this case in October 1993, Taylor
testified about the damages. Upon the conclusion of Taylor's
case, the court sustained Baker's motion to strike Taylor's
evidence on the grounds that he had not "presented sufficient
evidence to allow this case to go to the jury" to (1) establish
his status as a successor in interest to Eckert and Taylor, and
(2) "sustain his burden with respect to proof of damages."
Taylor did not appeal this judgment.
In January 1994, Kirwan sued Baker asserting the same claim
of $80,531 in unpaid accounting fees. Baker filed a motion for
summary judgment "on the grounds of res judicata and collateral
estoppel." The court denied that motion on the ground that such
defenses should be raised in a plea in bar. Baker later filed
such a plea, adopting by reference "the Motion for Summary
Judgment and points and authorities in support thereof."
In its final order, the court sustained the plea in bar,
finding (1) that Taylor was in privity to Eckert & Taylor since
he was a principal in that corporation, (2) that after leaving
Eckert & Taylor, Taylor sued Baker for services he rendered to
her through Eckert & Taylor alleging that he was a successor in
interest to it, (3) that the evidence in Taylor's case was
"struck on the grounds that no damages were proven," and (4) that
Kirwan could not bring the action "alleging standing as an
assignee." Kirwan appeals.
-3-
Kirwan contends that it is not bound by the judgment adverse
to Taylor because (1) the account had been validly assigned to it
before Taylor filed his action against Baker; therefore, Kirwan,
not Taylor, was the only party who could have brought the action
against Baker after that assignment, and (2) it is not collecting
the judgment solely for Taylor's benefit. On the other hand,
Baker contends that her plea in bar was properly sustained for
either of two reasons. Either Kirwan, as Eckert & Taylor's
assignee, is bound by that judgment since Taylor was then in
privity with Eckert & Taylor or Kirwan is now in privity with
Taylor because Kirwan is collecting the account against Baker
solely for Taylor's benefit. We agree with Kirwan.
Since the claim was assigned by Eckert & Taylor to Kirwan in
December 1991, the fact that Taylor was then a principal in
Eckert & Taylor and, in the words of Baker, "has appeared three
times against Baker represented by the same lawyers in each
case," is immaterial to the issues in this case. Eckert & Taylor
was a separate legal entity from Taylor. Neither Taylor nor
Eckert & Taylor owned the claim or was in privity with Kirwan
when Taylor filed his action against Baker, a year after the
claim had been assigned to Kirwan. And Kirwan, as the assignee,
is not bound by an adverse adjudication against the assignor,
after the assignment. See Restatement (Second) of Judgments
§ 55(2) (1982) (determination of issues in action by or against
either assignor or assignee against third party not preclusive as
-4-
to the other of them unless action brought by assignor before
assignment).
Further, the fact that any amount collected from Baker will
be applied to Taylor's share of the overhead at Kirwan and the
balance paid Taylor as compensation does not affect the validity
of the assignment. The record indicates that the account was
assigned by one corporation to another, both separate legal
entities from Taylor, long before Taylor filed and tried his
individual action.
And, contrary to Baker's contention, the record does not
establish that the assignment's allocation provisions were solely
for Taylor's benefit, thus making Kirwan a mere agent and privy
of Taylor for the collection of Baker's alleged debt. Kirwan's
contractual obligation to apply part of any collection from Baker
"toward [Taylor's] share of overhead" does not establish that
Kirwan would receive no benefit from those funds. Presumably,
the overhead referred to is that which Kirwan would have incurred
after Taylor joined the firm, and the record fails to show that
Kirwan's allocation of any sums collected from Baker could not
have benefitted Kirwan. The burden of showing this lack of
benefit is upon Baker, who asserts the bar of res judicata and
collateral estoppel. Bernau v. Nealon, 219 Va. 1039, 1043, 254
S.E.2d 82, 85 (1979).
Hence, we conclude that the trial court erred in sustaining
Baker's plea in bar. Accordingly, we will reverse the judgment
-5-
of the court and remand the case for further proceedings.
Reversed and remanded.
-6-