Opinion ID: 2230384
Heading Depth: 1
Heading Rank: 12

Heading: William Street

Text: Prior to trial, defendants filed a motion for partial summary judgment with respect to the claim of Street. A hearing on the motion was held, at which time evidence was received in support of and in resistance to the motion. For reasons which are not entirely clear from the record, the court did not rule on the motion prior to trial. After the trial was concluded, but before the court announced its decision, the motion was renewed and another hearing was held, at which time the court received additional evidence on the motion, including Street's trial testimony. In its subsequent order setting forth its decision following trial, the district court sustained the motion for partial summary judgment after determining that Street's claim was barred by res judicata and collateral estoppel, because the facts and issues previously litigated in Street's bankruptcy were identical to the facts and issues of this case. Street cross-appeals from the order granting partial summary judgment which resulted in the dismissal of his claim. Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Olson v. Le Mars Mut. Ins. Co., 269 Neb. 800, 696 N.W.2d 453 (2005); Johnson v. United States Fidelity & Guar. Co., 269 Neb. 731, 696 N.W.2d 431 (2005). The applicability of the doctrines of res judicata and collateral estoppel is a question of law. Moyer v. Nebraska City Airport Auth., 265 Neb. 201, 655 N.W.2d 855 (2003); Billingsley v. BFM Liquor Mgmt., 264 Neb. 56, 645 N.W.2d 791 (2002). On questions of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below. Billingsley, supra . The record reflects that in 1998, Street and his wife filed an adversary proceeding complaint against Mid America in their chapter 13 bankruptcy action pending in the U.S. Bankruptcy Court for the District of Nebraska. The complaint generally alleged that the transfer of ownership of the Streets' residence to Mid America was for less than a reasonable [sic] equivalent value for the property transferred and was thus fraudulent pursuant to 11 U.S.C. § 548 (2000) and should be avoided. Mid America moved for summary judgment, arguing that the Streets lacked standing under 11 U.S.C. § 522(h) (2000) to bring the action. In support of its motion, Mid America offered the affidavit of Hollingshead, in which she averred that the Streets agreed to sell their property for the total sum, including assumed mortgages, of $48,468.48. In opposition, Street offered his affidavit in which he averred that he did not realize that he may have transferred the real property to Mid-America and that Mid America told him that they would stop the foreclosure[, that] the payments would be made to Mid-America[, and] that the payment due in June of 1998 would be paid at the end of the loan. Street also averred that [a]t the time of the sale [he was] handed paperwork and told to sign it and that he had no choice regarding signing the paperwork nor was the paperwork explained to him. Street's wife offered a similar affidavit. Pursuant to 11 U.S.C. § 522(h), a debtor in a bankruptcy proceeding may avoid a transfer of property if, inter alia, the trustee could avoid the transfer under 11 U.S.C. § 548 but declines to do so. See, generally, In re Merrifield, 214 B.R. 362 (8th Cir. BAP 1997). A trustee may avoid a transfer under 11 U.S.C. § 548 if the debtor voluntarily or involuntarily received less than a reasonably equivalent value in exchange for such transfer or obligation and meets certain other criteria. Courts have interpreted 11 U.S.C. § 522 as imposing only limited avoidance powers on debtors, as the code generally entrusts such powers to the bankruptcy trustee. See In re Merrifield, supra . Specifically, a five-part test has been utilized to determine whether a debtor may personally exercise avoidance powers under § 522(h). In re Merrifield, supra . Relevant to this case is the initial requirement that the debtor must demonstrate that the transfer of property was involuntary. See id. at 365. If such a showing is lacking, the debtor lacks standing to bring the action. Id. In Street's bankruptcy proceeding, the bankruptcy court entered an order awarding summary judgment in favor of Mid America. The court determined that Mid America had made a prima facie showing that the transfer was voluntary, and that [t]he affidavits submitted by the [Streets] do not contain any assertions of facts from which the trier of fact could, if a trial was necessary, determine that the execution and delivery of the warranty deed was anything other than a voluntary action by the [Streets]. Therefore, the [Streets] do not meet the Merrifield test and they do not have standing to bring this action. The doctrine of res judicata, or claim preclusion, bars the relitigation of a matter that has been directly addressed or necessarily included in a former adjudication if (1) the former judgment was rendered by a court of competent jurisdiction, (2) the former judgment was a final judgment, (3) the former judgment was on the merits, and (4) the same parties or their privies were involved in both actions. Billingsley v. BFM Liquor Mgmt., 264 Neb. 56, 645 N.W.2d 791 (2002); Lincoln Lumber Co. v. Fowler, 248 Neb. 221, 533 N.W.2d 898 (1995). The doctrine bars relitigation not only of those matters actually litigated, but also of those matters which might have been litigated in the prior action. Lincoln Lumber Co., supra . The doctrine rests on the necessity to terminate litigation and on the belief that a person should not be vexed twice for the same cause. Id. In order to constitute a bar to a subsequent action under the doctrine of res judicata, a judgment in a prior action must be on the merits in that action. See, Billingsley, supra ; Gruber v. Gruber, 261 Neb. 914, 626 N.W.2d 582 (2001). A determination by a federal court that a party lacks standing to bring an action is not `on the merits' of the underlying substantive claim for purposes of claim preclusion. McCarney v. Ford Motor Co., 657 F.2d 230, 234 (8th Cir.1981). Here, the bankruptcy court determined that Street lacked standing under federal bankruptcy law, and it therefore did not reach the merits of his fraudulent conveyance claim against Mid America. Because there was no prior judgment on the merits, we conclude that Street's claim in this action is not barred by the doctrine of res judicata. Under the doctrine of collateral estoppel, or issue preclusion, when an issue of ultimate fact has been determined by a final judgment, that issue cannot again be litigated between the same parties in a future lawsuit. Woodward v. Andersen, 261 Neb. 980, 627 N.W.2d 742 (2001); In re Estate of Wagner, 246 Neb. 625, 522 N.W.2d 159 (1994). See, also, Billingsley, supra . There are four conditions that must exist for the doctrine of collateral estoppel to apply: (1) The identical issue was decided in a prior action, (2) there was a judgment on the merits which was final, (3) the party against whom the rule is applied was a party or in privity with a party to the prior action, and (4) there was an opportunity to fully and fairly litigate the issue in the prior action. Woodward, supra . In determining whether issues in a prior and subsequent action are identical, we are guided by the following test: A former verdict and judgment are conclusive only as to the facts directly in issue, and do not extend to facts which may be in controversy, but which rest on evidence and are merely collateral. It must appear that the matter set up as a bar was in issue in the former case. The test as to whether the former judgment is a bar generally is, whether or not the same evidence will sustain both the present and the former action. ... [Where] different proof is required, a judgment in ... [the former action] is no bar to [the subsequent action.] (Citations omitted.) Suhr v. City of Scribner, 207 Neb. 24, 27-28, 295 N.W.2d 302, 304 (1980). See, also, In re Interest of Marcus W. et al., 11 Neb.App. 313, 649 N.W.2d 899 (2002). The issue addressed by the bankruptcy court was whether Street's transfer of his property to Mid America was involuntary. Although some of the evidence related to whether there was collusion involved, the issue of whether the transfer was involuntary for purposes of standing under the federal Bankruptcy Act does not equate with the issue of whether the transfer was induced by fraudulent representations on the part of Mid America, Bloemer, or Hollingshead. That precise issue was neither presented nor resolved in the bankruptcy litigation. Accordingly, the doctrine of collateral estoppel is inapplicable. Because Street's claim in this case was not barred by the judgment in the prior bankruptcy action under the doctrines of either res judicata or collateral estoppel, the district court erred in granting the motion for partial summary judgment dismissing his claim.