Opinion ID: 2631202
Heading Depth: 2
Heading Rank: 2

Heading: additional contract damages

Text: ¶ 32 We next address Neways's argument that the court of appeals erred by failing to address the issue raised on appeal of whether res judicata prevents Macris from pursuing additional contract damages in the present action Macris II. ¶ 33 In the proceeding below, the court of appeals determined that the claim preclusion branch of the doctrine of res judicata did not bar Macris's claims for fraudulent transfer, successor liability, and alter ego. The court of appeals, however, did not address the issue of whether res judicata prevents Macris from pursuing additional contract damages not recovered in Macris I through the above-named claims. Resolution of the first issue does not resolve the second. ¶ 34 As noted above, there are two branches of res judicata, claim preclusion and issue preclusionalso known as collateral estoppel. See Swainston v. Intermountain Health Care, 766 P.2d 1059, 1061 (Utah 1988). The basic difference between the two branches of res judicata is simply put: while claim preclusion applies to whole claims, whether litigated or not, and prevents parties from relitigating the same claim in a second suit, 18 James Wm. Moore, Moore's Federal Practice § 131.13[1] (Matthew Bender, 3d ed.2000) (emphasis added), issue preclusion, or collateral estoppel, arises from a different cause of action and prevents parties or their privies from relitigating particular issues that have been contested and resolved. Id.; see also Schaer v. State, 657 P.2d 1337, 1340 (Utah 1983); Searle Bros. v. Searle, 588 P.2d 689, 690 (Utah 1978). Thus, it is important to recognize that although the doctrines of [claim preclusion] and [issue preclusion] are closely related, they are usually mutually exclusive. Schaer, 657 P.2d at 1340. ¶ 35 Accordingly, the court of appeals' determination that Macris's claims are not barred by claim preclusion does not preclude a determination that Macris is prevented by the doctrine of issue preclusion or collateral estoppel from seeking additional contract damages arising out of Macris I through its claims for fraudulent transfer, successor liability, and alter ego. We agree with Neways, therefore, that the court of appeals did err in failing to decide whether res judicata prevents Macris from seeking additional contract damages in Macris II. ¶ 36 Because the court of appeals did not address this issue, we could remand the matter to the court of appeals for consideration. However, the issue has been argued and briefed by both parties on certiorari, and therefore, we are able to dispose of this issue ourselves, and we elect to do so. See State v. Brooks, 908 P.2d 856, 861 (Utah 1995). We thus turn our attention to the merits of Neways's argument that Macris is precluded by res judicata, more specifically the issue preclusion branch of res judicata, [7] from pursuing additional contract damages in this case. ¶ 37 We apply a four-part test to determine whether the doctrine of issue preclusion is applicable: First, the issue challenged must be identical in the previous action and in the case at hand. Second, the issue must have been decided in a final judgment on the merits in the previous action. Third, the issue must have been competently, fully, and fairly litigated in the previous action. Fourth, the party against whom collateral estoppel is invoked in the current action must have been either a party or privy to a party in the previous action. Jones, Waldo, Holbrook & McDonough v. Dawson, 923 P.2d 1366, 1370 (Utah 1996); see also Swainston, 766 P.2d at 1061. All four elements must be present for issue preclusion to apply. See Jones, Waldo, Holbrook & McDonough, 923 P.2d at 1370. Macris does not argue that there is no identity of issues for collateral estoppel purposes. Therefore, our analysis focuses on the second, third, and fourth elements. We address each element in turn.
¶ 38 The second element outlined above requires that the issue sought to be litigated in the present action must have been decided in a final judgment on the merits in the previous action. See id. Macris does not argue that the judgment entered in Macris I was not a final judgment on the merits. Therefore, our analysis, with respect to the second element outlined above, focuses on whether the issue raised in the present case was actually asserted and tried in the prior proceeding. Int'l Res. v. Dunfield, 599 P.2d 515, 517 (Utah 1979). ¶ 39 In Macris I, the trial court determined that a valid distributorship agreement existed between Macris and Images, that Images breached the Agreement, and that Macris was entitled to damages as a result of that breach. Accordingly, the trial court awarded Macris damages in the amounts Images stipulated that it should have paid Macris for subsequent months, from March 1991 through August 31, 1992, the date on which Images ceased doing business as a multilevel marketing company. In Macris II, Macris sought to litigate whether it was entitled to additional contract damages not recovered in Macris I arising after the date Images transferred its assets to Neways. ¶ 40 Macris argues that because the trial court limited its award of damages to August 31, 1992, the issue of Macris's entitlement to damages accruing after August 31, 1992, was never actually litigated or decided in Macris I. Clearly, if an issue is actually raised by proper pleadings and treated as an issue in a case, it is conclusively determined by the first judgment. See Int'l Res., 599 P.2d at 517. However, the preclusive effects of the doctrine of collateral estoppel go further. The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in a former action is applicable to all matters essentially connected with the subject matter of the litigation. This application of the general rule extends to questions necessarily involved in an issue ... although no specific finding may have been made in reference to that matter, and although such matters were not directly referred to in the pleadings. 46 Am.Jur.2d Judgments § 545. It follows, therefore, that a party cannot by negligence or design withhold issues and litigate them in separate actions. If the second action involves an issue as to which the judgment in a prior action is a conclusive adjudication, the estoppel, so far as that issue is concerned, extends to every matter which was or might have been urged to sustain or defeat the determination actually made. See id. ¶ 41 The issue of damages resulting from Images's 1991 breach of contract was decided in Macris I. Moreover, the effect of the trial court's award of damages in Macris I embodied all damages: past, present, and prospective. The Restatement supports this view, reasoning: Typically, even when the injury caused by an actionable wrong extends into the future and will be felt beyond the date of judgment, the damages awarded by the judgment are nevertheless supposed to embody the money equivalent of the entire injury. Accordingly, if a plaintiff who has recovered a judgment against a defendant in a certain amount becomes dissatisfied with his recovery and commences a second action to obtain increased damages, the court will hold him precluded; his claim has been merged in the judgment and may not be split. It is immaterial that in trying the first action he was not in possession of enough information about the damages, past or prospective, or that the damages turned out in fact to be unexpectedly large and in excess of the judgment. Restatement (Second) of Judgments § 25 cmt. c (1982) (emphasis added). Moreover, the trial court made no finding that its award of damages in Macris I was not final. Therefore, because the trial court's award of damages in Macris I was a conclusive adjudication on the issue of damages resulting from Images's 1991 breach of the autoqualification agreement, the issue of damages accruing after August 1992 was connected to the subject matter and necessarily decided in Macris I. ¶ 42 Macris further argues that because the issue of contract damages was decided by stipulation, it was not actually litigated and decided for collateral estoppel purposes. ¶ 43 An issue determined by stipulation rather than judicial resolution is binding in a subsequent action if the parties manifested an intention to that effect. See, e.g., 18 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4443, at 382 (1981) (Issue preclusion does not attach unless it is clearly shown that the parties intended that the issue be foreclosed in other litigation.); 18 James Wm. Moore, Moore's Federal Practice § 132.03[2][h][ii] (Matthew Bender, 3d ed. 2000) ([S]tipulation may be binding in a subsequent action ... if the parties ... manifested an intention to that effect.). In this case, Macris does not argue that the stipulation concerning contract damages was not binding in general; rather, Macris argues that the stipulation was not binding as to damages accruing after August 31, 1992, the date on which Images transferred its assets to Neways. However, if the stipulation is meant to be final as to some damages but not final as to other damages, it must say so. Our review of the record in this case, however, evidences no such intention. Moreover, the trial court made no finding that its damages awardwhich was based on the parties stipulationwas not final as to all damages. Therefore, we find that the stipulation in this case has res judicata effect.
¶ 44 In reference to the third element outlined above, we must determine whether the issue in the first case [was] competently, fully, and fairly litigated. See Swainston, 766 P.2d at 1061 (citations omitted). Macris argues that the issue of contract damages accruing after August 31, 1992, was not competently, fully and fairly litigated because Neways's fraudulent takeover of Images's business prevented Macris from litigating such damages. However, the record clearly establishes that Macris was aware of Images's transfer of its assets to Neways almost a year before Macris filed its last pleading in Macris I and two and one-half years before the trial. During this two- and one-half-year period, Macris enjoyed ample opportunity to conduct unimpeded discovery and to fully develop its claim for damages by examining Neways's financial records. Had Macris conducted discovery concerning future damages, it surely could have included that evidence in the figures presented to the trial court. Thus, it seems fair to state that Macris had a full and fair opportunity to litigate the issue of damages accruing after August 31, 1992, in the prior adjudication.
¶ 45 Finally, the fourth element of the test outlined above also permits the application of collateral estoppel in this case. Unlike the doctrine of claim preclusion, issue preclusion does not require that  both cases . . . involve the same parties or their privies. Madsen, 769 P.2d 245, 247 (Utah 1988) (emphasis added). Rather, issue preclusion applies even if only the party against whom the [doctrine] is asserted [was] a party or in privity with a party to the prior adjudication. Swainston, 766 P.2d at 1061; see also Wilde v. Mid-Century Ins. Co., 635 P.2d 417, 419 (Utah 1981) ([m]utuality of parties is no longer essential for collateral estoppel purposes). In this case, although Neways was a nonparty to Macris I, the party against whom the doctrine of collateral estoppel is asserted is Macris. It is clear that Macris & Associates, the plaintiff herein, is the same party as Macris & Associates, the plaintiff in Macris I. Therefore, the party against whom the doctrine is assertedMacriswas a party to the prior adjudication. ¶ 46 On the basis of the foregoing, it is clear that all of the requirements of collateral estoppel have been satisfied. Consequently, Macris is precluded from relitigating the issue of damages arising from Images's breach of the distributorship agreement in this case.