Opinion ID: 1665709
Heading Depth: 2
Heading Rank: 2

Heading: Issues Essential to the Federal Judgment

Text: Next, we must address the question of whether the federal court's findings regarding fraud in the transaction were essential to its judgment. Under state law, collateral estoppel only precludes the relitigation of identical issues of fact or law which were actually litigated and essential to the prior judgment. Tarter, 744 S.W.2d at 927; Van Dyke v. Boswell, O'Toole, Davis & Pickering, 697 S.W.2d 381, 384 (Tex. 1985). The Restatement (Second) of Judgments § 27, comment (i) (1982) provides in part, If a judgment of a court of first instance is based on determinations of two issues, either of which standing independently would be sufficient to support the result, the judgment is not conclusive with respect to either issue standing alone. The rationale for this rule is that a determination in the alternative may not have been as rigorously considered as it would have been if necessary to the result, and the losing party may be dissuaded from appealing one determination because of the likelihood that the other will be upheld. Id. In FDIC v. Eagle , the court found that neither First Midland nor its president, Charles Fraser, fraudulently induced Eagle and its partners to enter into the sale-leaseback transaction or execute the promissory notes in issue. 664 F.Supp. at 1045. The court also indicated, however, that the FDIC had a defense to these fraud claims because the FDIC did not have actual knowledge of the fraud at the time it entered into the purchase and assumption agreement. Id. at 1037. The court stated, [I]f the Court had to, the Court would find that the FDIC did not have actual knowledge of conduct or communications that would give rise to a finding of fraud. Id. at 1045-46. [6] The statement of the federal court regarding FDIC's knowledge of any fraud, viewed in the context of the entire opinion, does not constitute an alternative holding so as to prevent its holding on the fraud claims from having preclusive effect. While this alternative reasoning may have had some adverse effect on defendants' desire to appeal the judgment, it is clear that the federal court rigorously considered defendants' claims of fraudulent inducement, carefully reviewing each contention. Id. at 1037-45. Therefore, applying state law to the circumstances of this case, we hold that the defendants' claims of fraudulent inducement were actually tried in the federal court and that the court's findings on fraudulent inducement were essential to its judgment for the purposes of preclusion by collateral estoppel. The same result would be reached under federal law. For collateral estoppel to bar relitigation of an issue, that issue must have been necessarily determined in the prior litigation. United States v. Garza, 754 F.2d 1202, 1209 (5th Cir.1985); Hicks, 662 F.2d at 1168. Nevertheless, except in very unusual cases, the abandonment of estoppel for the reason that a prior judgment rests on multiple grounds is inconsistent with the general rule in federal courts that a party is only entitled to one full and fair opportunity to litigate an issue. IB Moore's Federal Practice 110.443[5.-2] (1988). While the Fifth Circuit has adopted the reasoning of the Restatement (Second) of Judgments § 27 comment (i), it did so only in the context of offensive collateral estoppel. Hicks, 662 F.2d at 1169-70. Because this case only involves the defensive use of collateral estoppel, and because we have found the findings of the federal court in FDIC v. Eagle to be essential to that judgment and rigorously considered by that court, we hold that under federal law the alternative findings of the federal court do not preclude the application of collateral estoppel in the present litigation.