Opinion ID: 2496255
Heading Depth: 1
Heading Rank: 6

Heading: Claim or Defense Preclusion

Text: Although Cash Express did not use the term claim preclusion in its argument to this Court, claim preclusion is inherent in that portion of the judgment of the trial court holding that Knight and Lyons had admitted that their debts were valid by virtue of accepting a default judgment, which default judgment is determinative of the issues presented in the complaint on which it is based, both in the action in which it is taken and in all subsequent actions. State Farm Mut. Auto. Ins. Co. v. Day, 414 So.2d 105, 106 (Ala. Civ.App.1982). The trial court similarly held that Richard's consent judgment constituted her agreement that her debt was valid and that she may not now claim that the debt is invalid. The traditional res judicata case (frequently referred to as a claim preclusion) involves prior litigation between a plaintiff and a defendant, which is decided on the merits by a court of competent jurisdiction, and then a subsequent attempt by the prior plaintiff to relitigate the same cause of action against the same defendant, or perhaps to relitigate a different claim not previously litigated but which arises out of the same evidence. Alabama law is well settled that this will not be allowed. A valid, final judgment on the merits of the claim extinguishes the claim. If the plaintiff won, the claim is merged into the judgment; if the defendant won, the plaintiff is barred from relitigating any matter which could have been litigated in the prior action. Lesley v. City of Montgomery, [485 So.2d 1088 (Ala.1986) ]; Ozley v. Guthrie, [372 So.2d 860 (Ala. 1979) ]; Wheeler v. First Alabama Bank of Birmingham, [364 So.2d 1190 (Ala. 1978) ]; McGruder v. B & L Construction, Inc., [331 So.2d 257 (Ala.1976) ]. Likewise, under res judicata we have consistently rejected an attempt by a former defendant to relitigate issues that were, or could have been, raised in prior litigation that ended in a valid adjudication by a court of competent jurisdiction. Educators' Investment Corp. of Alabama, Inc. v. Autrey, [383 So.2d 536 (Ala.1980)]; A.B.C. Truck Lines, Inc. v. Kenemer, [247 Ala. 543, 25 So.2d 511 (1946) ]. Whisman v. Alabama Power Co., 512 So.2d 78, 81 (Ala.1987). In the trial court, Cash Express made its prima facie case for a dismissal or a summary judgment by producing evidence indicating that the Martins could not be class representatives and that Knight, Lyons, and Richard did not qualify as class members because they had accepted default or consent judgments in earlier actions involving Cash Express. Cash Express had presented testimony and documentary evidence regarding the existence of those judgments. At that point, the burden shifted to the plaintiffs to create a material issue of fact to preclude a summary judgment. In their response to Cash Express's motion for a summary judgment, the plaintiffs argued that the actions that resulted in the judgments against Knight, Lyons, and Richard did not litigate the legality of the payday loans. Citing Byrd v. Fowler, 50 Ala.App. 596, 281 So.2d 647, 651 (Ala. Civ.App.1973), which quoted 50 C.J.S. Judgments § 687, they argued that unless a defendant asserts a counter-claim or set off, res judicata applies only as `to any matter actually at issue and determined in the former action. . . .' Cash Express's motion cited State Farm Mutual Insurance Co. v. Day, 414 So.2d 105, 106 (Ala. Civ.App. 1982), for the principle that [a] default judgment is determinative of the issues presented in the complaint on which it is based, both in the action in which it is taken and in all subsequent actions. Cash Express also quoted 10A Charles Alan Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure § 2684 (3d ed.1998), for the proposition that when a judgment by default is entered, it generally is treated as conclusive and final adjudication of the issues necessary to justify the relief awarded and is given the same effect as between the parties as a judgment rendered after a trial on the merits. (Emphasis added.) The language quoted by Cash Express from Wright's treatise addresses the issue-preclusion effect of a default judgment entered pursuant to Rule 55, Ala. R. Civ. P. The next sentence in the treatise refers to the claim or defense preclusion aspect of res judicata with which we are faced here: The claim-preclusion and issue-preclusion ramifications of a default judgment are discussed in detail elsewhere in this Treatise. A footnote references § 4442, which was cited by the trial court in its order. `Valid default judgments establish claim and defense preclusion in the same way as litigated judgments, and are equally entitled to enforcement in other jurisdictions.' Wright, Miller & Kane, Federal Practice and Procedure, Civil 3d § 4442, p. 236. Accordingly, Mr. Knight and Mr. Lyons are bound by the terms of their default judgments and cannot now claim that the debt that they admitted was valid and due to be paid is now invalid. Wright's treatise distinguishes the effect of a default judgment as to issue preclusion versus claim or defense preclusion: Judgment by default commands the full effects of claim and defense preclusion. Judgment by default in the technical sense that the issues have not been litigated does not warrant issue preclusion for the very reason that the issues have not been litigated or decided. 18A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4442 (2d ed.2002). Under Alabama caselaw, we look not only to those claims or defenses that were raised, but also to those that could have been raised. A.B.C. Truck Lines, Inc. v. Kenemer, 247 Ala. 543, 547, 25 So.2d 511, 514 (1946) (There is a good exposition of the doctrine in 2nd Black on Judgments, where it is first noted that `it is a general rule that a valid judgment for the plaintiff definitely and finally negatives every defense that might and should have been raised against the action; and this is true, not only with respect to further or supplementary proceedings in the same cause, but for the purposes of every subsequent suit between the same parties, whether founded upon the same or a different cause of action. A party cannot relitigate matters which he might have interposed, but failed to do, in a prior action between the same parties or their privies in reference to the same subject-matter. . . .' 2nd Black on Judgments, § 754.); Ashurst v. Preferred Life Assurance Soc'y of Montgomery, 282 Ala. 119, 129-30, 209 So.2d 403, 411-12 (1968) (We have a number of cases which, in effect, hold that the doctrine of res judicata is far broader than the determination of the question directly involved in the prior action, and the prior judgment extends to all questions falling within the scope of the original action, and which could have been presented by exercising due diligence, and extends to both the claim and the defense.); and Owen v. Miller, 414 So.2d 889, 890 (Ala.1981) (Furthermore, if plaintiff wins, defendant is barred from raising any defense that could have been litigated in the former action, regardless of whether it was actually litigated, if the matter constitutes a ground for an action against plaintiff. (paraphrasing Restatement (Second) of Judgments )). Knight, Lyons, and Richard could have asserted the defense of illegality of the loan as a defense to the prior actions against them by Cash Express; they are now precluded from using those same available defenses as the basis of a cause of action against the former plaintiff in those actions. On appeal the plaintiffs argue that claim or defense preclusion should not prevent Knight, Lyons, and Richard from pursuing their claims against Cash Express because they each had multiple loan transactions with Cash Express and the default judgments and consent judgment addressed only one loan transaction of each plaintiff. However, Cash Express shows that this argument was not made in the trial court. This Court cannot consider arguments raised for the first time on appeal; rather, our review is restricted to the evidence and arguments considered by the trial court. Andrews v. Merritt Oil Co., 612 So.2d 409, 410 (Ala.1992). Therefore, the trial court's judgment as to this issue is due to be affirmed.