Title: Wells v. Davis

State: kansas

Issuer: Kansas Supreme Court

Document:

226 Kan. 586 (1979)
603 P.2d 180
MARION L. WELLS, Appellant,
v.
A.V. DAVIS and PAULINE DAVIS, and DAVIS VAN AND STORAGE, INC., A Kansas Corporation, Appellee.
No. 49,716

Supreme Court of Kansas.
Opinion filed December 1, 1979.
Michael E. Whitsitt, of Overland Park, was on the brief for the appellant.
Kim Daniel Richey, of Prairie Village, was on the brief for the appellees.
The opinion of the court was delivered by
HERD, J.:
This is an action by plaintiff-appellant Marion L. Wells, against defendants-appellees A.V. Davis and Pauline Davis and Davis Van and Storage, Inc. Wells obtained a judgment against Davis Van Lines, Inc. in a prior action and now seeks to have that judgment satisfied in this suit. Defendants-appellees filed a motion to dismiss the action and that motion was sustained by the trial court. Wells appeals. We reverse the trial court.
It is essential to an understanding of the instant case that the parties and issues in the first action be reviewed. To that end, we present the facts in Case No. 65,735 in the District Court of Johnson County, Kansas. On July 16, 1976, Wells sued Davis Van Lines, Inc. and A.V. Davis for wages he had earned as a truck driver for Davis Van Lines, Inc. The petition in that case alleged four grounds for recovery, but only the first two were litigated: *587 against Davis Van Lines, Inc. for failure to pay wages under a contract of employment, invoking penalties under K.S.A. 44-315(a) and (b); against A.V. Davis personally, for failure to pay wages under a contract of employment, invoking penalties under K.S.A. 44-315(a) and (b); against A.V. Davis, alleging Davis Van Lines, Inc. was the alter ego of Davis, its principal stockholder; and against both A.V. Davis and Davis Van Lines, Inc., alleging fraud for issuing checks which were returned marked insufficient funds. Wells recovered a judgment in the amount of $28,229.53 against Davis Van Lines, Inc. based upon the first allegation against the company. A.V. Davis was personally absolved of liability. No appeal was taken.
Thereafter, Wells attempted to satisfy his judgment but was unsuccessful due to the insolvency of Davis Van Lines, Inc. While attempting to collect from Davis Van Lines, Inc., Wells discovered Davis and his wife also owned Davis Van and Storage, Inc., which was solvent. On January 3, 1977, Wells brought the instant action against A.V. and Pauline Davis, later amended to include Davis Van and Storage, Inc., alleging its assets and that of Davis Van Lines, Inc. were commingled and that both were the alter egos of A.V. and Pauline Davis. The amended petition also alleged A.V. and Pauline Davis were liquidating the assets of both companies and that they personally depleted the assets of Davis Van Lines, Inc. and put those assets in Davis Van and Storage, Inc. to avoid the creditors of Davis Van Lines, Inc. Wells then made the following allegation:
Defendants moved to dismiss the action on the theories of res judicata and collateral estoppel. The motion was sustained and this appeal followed.
K.S.A. 17-7101(b) is determinative of the allegation against A.V. and Pauline Davis. The statute provides:
*588 Appellant obtained a judgment against Davis Van Lines, Inc. on November 15, 1976; execution was issued and returned unsatisfied. A.V. Davis and Pauline Davis are both stockholders and directors of Davis Van Lines, Inc. Wells obviously has a cause of action against both A.V. and Pauline Davis under the statute unless his premature joinder of A.V. Davis in the first suit would preclude further action against him. We do not believe the premature joinder of Davis affects plaintiff's rights because the allegations against Davis were not adjudicated. No reason was given by the trial court for the failure to adjudicate that issue. We hold res judicata and collateral estoppel are not bars to this action against A.V. Davis and Pauline Davis pursuant to the provisions of K.S.A. 17-7101(b).
With regard to Davis Van and Storage Co., Inc., Wells alleges A.V. Davis and Pauline Davis are the directors, principal stockholders and alter egos of that corporation. He further alleges:
In Hutchinson Nat'l Bank & Trust Co. v. English, 209 Kan. 127, 130, 495 P.2d 1011 (1972), we stated:
One of the requirements for invoking res judicata or collateral estoppel is the existence of parties who are the same or in privity with one another. Williams v. Evans, 220 Kan. 394, 396, 552 P.2d 876 (1976). Davis Van and Storage was not a party to the first action and is not in privity with the parties to the first action. The existence of privity depends upon the circumstances of each case. A privy is:
See also Goetz v. Board of Trustees, 203 Kan. 340, 454 P.2d 481 (1969). Davis Van and Storage, Inc. derived no interest from Davis Van Lines which could cause it to be in privity with Davis Van Lines. The use of collateral estoppel also requires the issue brought against the parties in the second suit must have been adjudicated in the first action even though the claim is different. Williams v. Evans, 220 Kan. at 396. Res judicata requires, in addition to identity of the parties, that the claim or cause be *590 identical. Goetz v. Board of Trustees, 203 Kan. at 349. Neither plaintiff's allegation of alter ego nor the party Davis Van and Storage, Inc. was a part of the first action. Therefore, neither res judicata nor collateral estoppel is available as a defense to an action against Davis Van and Storage, Co., Inc.
The trial court held although Davis Van and Storage, Inc. was not a party to the first action, plaintiff's second suit against the company was barred by res judicata and collateral estoppel because the "plaintiff could have and should have litigated a theory of alter ego or piercing the corporate veil" against Davis Van and Storage, Inc. in the first action. The transcript indicates the trial court believed Davis Van and Storage, Inc. should have been named as a party to the first action. K.S.A. 60-219(a) states:
Davis Van and Storage, Inc. was not a contingently necessary party to the first action. Marion Wells first sued Davis Van Lines, Inc. as an employee of that company. The suit was for failure to pay wages he had earned as a truck driver for the company. There is no reason complete relief could not have been accorded Wells from a suit against Davis Van Lines, Inc. He had no prior knowledge of the company's insolvency. Wells was not an employee of Davis Van and Storage, Inc. That company would not have been a proper party to the wage suit.
We hold appellant correctly proceeded against A.V. Davis, Pauline Davis, and Davis Van and Storage, Inc. The judgment of the trial court is reversed and remanded for further proceedings consistent with this opinion.
MILLER and HOLMES, JJ., dissenting.