Title: Dakota Title & Escrow v. World-Wide Steel Systems

State: nebraska

Issuer: Nebraska Supreme Court

Document:

471 N.W.2d 430 (1991) 238 Neb. 519 DAKOTA TITLE & ESCROW CO., Appellee, v. WORLD-WIDE STEEL SYSTEMS, INC., a Nebraska Corporation, et al., Appellees, Everlasting Golden Rule Church, a Missouri Corporation, Appellant. No. 89-202. Supreme Court of Nebraska. July 5, 1991. *431 Michael M. O'Brien, of Matthews & Cannon, P.C., Omaha, for appellant. Michael McCormack, of McCormack, Cooney, Mooney, Hillman & Elder, Omaha, for appellee Dakota Title. HASTINGS, C.J., BOSLAUGH, WHITE, CAPORALE, SHANAHAN, and FAHRNBRUCH, JJ. FAHRNBRUCH, Justice. The Everlasting Golden Rule Church, a Missouri nonprofit corporation, appeals a default judgment entered against it in favor of Dakota Title & Escrow Co. because *432 Golden Rule's corporate president failed to appear for a deposition. In its defense, Golden Rule argues that its president, Kelly Green, was not served with a subpoena and that, in any event, he was only a nonparty witness. Because Dakota could have raised the underlying question involved in this case in prior litigation between the same parties, see Everlasting Golden Rule Ch. v. Dakota Title, 230 Neb. 590, 432 N.W.2d 803 (1988) (Everlasting I), this action is barred by the doctrine of res judicata. Therefore, we vacate the default judgment entered by the district court for Sarpy County and remand the cause to that court with direction to dismiss the action. The history of the dispute between the parties is found in Everlasting I, supra, which reads in part: On the same day, Gullett's attorney also filed a praecipe for a "writ of execution and levy upon all funds held by Dakota Title & Escrow Company Company [sic], of Kelly Green, under an Escrow *433 Agreement dated August 31, 1983, to satisfy plaintiff's judgment in the amount of $300.00." Everlasting I, supra at 591-93, 432 N.W.2d at 804-05. The district court for Douglas County granted summary judgment in favor of Golden Rule. On December 16, 1988, this court affirmed the judgment of the trial court, which held that the case referred to in the smaller writ was actually the case referred to in the escrow agreement. Payment of the $16,000 was therefore not made in accordance with a proper court order of the district court for Sarpy County for the action filed at docket 54, page 187, cited in the agreement. Prior to this court's affirmance in Everlasting I, Dakota filed this declaratory judgment action in the district court for Sarpy County on January 6, 1988. Dakota sought to "pierce the corporate veil" of Golden Rule and World-Wide Steel Systems, Inc., as to the transaction leading up to the judgment in Everlasting I. Dakota wanted to show that Golden Rule and World-Wide were alter egos of one another, so that the Gullett action against World-Wide was the same as an action against Golden Rule. In essence, Dakota is arguing that it is subrogated to the rights of Clifford Gullett and therefore became a creditor of World-Wide and that because World-Wide is the alter ego of Golden Rule, Dakota is also a creditor of Golden Rule. The district court for Sarpy County first entered a default judgment against World-Wide in June 1988 for failing to file an answer. World-Wide was a Nebraska corporation which was dissolved in 1986 for failure to pay taxes. A subpoena was issued for Green, and service was attempted at his last known *434 address in Sarpy County. The subpoena was returned marked "not found." The record indicates Green disappeared and resided in Mexico for 1½ to 2 years prior to January 1989, when Green was ordered to appear. Following the failure of Green, as president of Golden Rule, to appear for his deposition as ordered by the court, the answer of Golden Rule was stricken and default judgment was entered against Golden Rule and in favor of Dakota as a sanction, pursuant to Neb.Ct.R. of Discovery 37(b)(2) (rev. 1989). In entering the default judgments against Golden Rule and World-Wide, the district court found that they were alter egos of each other and that the Gullett judgment against World-Wide was also a judgment against Golden Rule. In essence, the court found that the transfer of the real property from World-Wide to the church was an effort to defraud World-Wide's creditors. Dakota then filed a petition for further relief to determine who was entitled to the proceeds of the supersedeas bond filed in Everlasting I, which bond was held by Rudy Tesar, clerk of the district court for Douglas County. Tesar and Golden Rule's attorneys were added as defendants to this action in an effort to resolve the interests in the bond. This court need not reach the merits of the appeal in this case because the claim of Dakota is precluded under the doctrine of res judicata. Res judicata bars relitigation not only of those matters actually litigated, but also of those which might have been litigated in an earlier proceeding. Blazek v. City of Omaha, 232 Neb. 562, 441 N.W.2d 205 (1989); Pflasterer v. Koliopoulos, 213 Neb. 330, 328 N.W.2d 789 (1983). Under res judicata, "[a] defendant... may not relitigate a defense, which was available but not raised in a prior action, by making it the basis of a claim in a subsequent action against the original plaintiff which if successful would nullify the initial judgment." Henry v. Farmer City State Bank, 808 F.2d 1228, 1234 (7th Cir.1986). See, Blazek, supra (original defendant could have raised questions of ordinance validity as a defense to the relief requested and obtained by the original plaintiff in the prior action); Island v. Board, 69 Ohio St.2d 241, 431 N.E.2d 672 (1982) (if an original defendant previously neglected to assert a particular defense, that defendant is precluded from raising it subsequently by virtue of the existence of the judgment rendered in the former action). It is clear that Dakota could have raised the defense of Golden Rule and World-Wide being alter egos of each other in Everlasting I. This court takes judicial notice of the petition in Everlasting I, filed on February 8, 1985, and Dakota's answer, filed on August 13, 1985, both of which are contained in the transcript filed in this court in Everlasting I. (The Supreme Court may examine and take judicial notice of its own proceedings and judgment where certain aspects of the controversy have previously been considered and determined, in cases which are interwoven and interdependent. State v. Meis, 233 Neb. 355, 445 N.W.2d 610 (1989). Judicial notice of facts reflected in the court's records is subject to the doctrine of res judicata. See Gottsch v. Bank of Stapleton, 235 Neb. 816, 458 N.W.2d 443 (1990).) In its answer, Dakota acknowledged an awareness of Kelly Green as president of both Golden Rule and World-Wide. Dakota alleged in its defense in the earlier case that the corporations were partners in the purchase of the real estate which gave rise to the escrow agreement. More importantly, the petition in the Gullett action, filed April 19, 1983, and specifically described in the escrow agreement, "alleged generally that World-Wide is a mere facade for the personal dealings of Green and that in an effort to hinder his creditors, Green transferred the property (the property described in the escrow agreement) from World-Wide to the church [Golden Rule] with the intent to hinder, delay, and defraud the creditors of World-Wide and Green." Everlasting I, supra, 230 Neb. at 592, 432 N.W.2d at 804. An appellate court is not precluded from raising the issue of res judicata sua sponte, although it is infrequently done. See, Nash v. Bowen, 869 F.2d 675 *435 (2d Cir.1989) (even though a trial court does not rule on a question of res judicata, an appellate court is not precluded from doing so); Nilsen v. City of Moss Point, Miss., 701 F.2d 556 (5th Cir.1983) (where a cause of action could have been brought in a prior suit but was not because of unexplained dilatoriness, appellate court can properly raise question of res judicata sua sponte); Taxation With Representation of Wash. v. Regan, 676 F.2d 715 (D.C.Cir.1982) (MacKinnon, J., dissenting), rev'd on other grounds 461 U.S. 540, 103 S. Ct. 1997, 76 L. Ed. 2d 129 (1983) (appellate court could have raised issue of res judicata requiring remand but instead chose to address merits); Robertson v. Interstate Securities Company, 435 F.2d 784 (8th Cir.1971) (appellate court may raise question of res judicata sua sponte); Wilson v. United States, 166 F.2d 527 (8th Cir.1948) (record disclosed two prior orders overruling identical motions from which no appeal was taken; thus appellate court applied res judicata). See, also, Hinkle v. Tri-State Transit, Inc., 21 Ill.App.3d 134, 315 N.E.2d 289 (1974) (issue on appeal barred by collateral estoppel after settlement between the parties while case was on appeal; order to show cause why appeal should not be dismissed was issued). But cf. Carbonell v. Louisiana Dept. of Health & Human Resources, 772 F.2d 185 (5th Cir.1985) (appellate court should only raise question of res judicata for the first time on appeal when affirming the trial court decision below or in situations in which all relevant data and legal records are before the court and comity, continuity in the law, or essential justice demand its use). Res judicata is grounded upon (1) public policy and necessity to end litigation and (2) the hardship imposed upon a person by being vexed twice for the same cause of action. Farmers State Bank v. Germer, 231 Neb. 572, 437 N.W.2d 463 (1989). Allowing a court to raise the issue of res judicata sua sponte is fully consistent with the policy of avoiding unnecessary judicial waste. United States v. Sioux Nation of Indians, 448 U.S. 371, 100 S. Ct. 2716, 65 L. Ed. 2d 844 (1980) (Rehnquist, J., dissenting). Since the claims raised here could have been raised in Everlasting I, supra, where Dakota had a full and fair opportunity to litigate the action, we vacate the default judgment entered by the district court for Sarpy County and remand the cause to the trial court with direction to dismiss the cause. REVERSED AND REMANDED WITH DIRECTION TO DISMISS. GRANT, J., not participating.