Court Opinion

ID: 3191057
Source: CourtListenerOpinion
Date Created: 2016-04-04 07:05:44.605579+00
Date Added: 2024-06-11T12:24:20.812947
License: Public Domain

FOURTH DIVISION
                                BARNES, P. J.,
                            RAY and MCMILLIAN, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                    March 23, 2016

In the Court of Appeals of Georgia
 A15A2336. ALR OGLETHORPE, LLC et al. v. HENDERSON et al.

      BARNES, Presiding Judge.

      This suit arose after ALR Oglethorpe, LLC, bought two parcels of land and

then discovered after the closing that one of the parcels was still burdened by a

recorded access easement. ALR and five individuals who had invested in related

limited liability companies1 (collectively, ALR) sued C. Gerald Henderson, Title

Resources Corp. – Savannah, and Title Resources Corporation (collectively,

Henderson) for professional negligence in preparing the title examination and

abstract. The trial court granted Henderson’s motion to dismiss, finding that the

statute of limitation had run before suit was filed and also finding that the suit was

barred by the doctrine of res judicata. ALR appeals, and because we agree that the

suit was barred by the doctrine of collateral estoppel, we affirm.

      1
        The individual investors are Jules Paderewski, Bernard Portman, Charles
Idleson, Cora Bett Thomas, and Allison Stanley as the executor of Danny Stanley’s
estate.
       The parties do not dispute the underlying facts pertinent to this appeal. ALR

retained the law firm Coleman Talley LLP to perform a title search on two contiguous

tracts of land along the south bank of the Savannah River for a development project

known as the Savannah River Landing. Coleman Talley asked Fidelity National

Insurance Company to prepare a title commitment for the properties, and Fidelity

hired an attorney, R. E. Hodges, to prepare a title abstract. Hodges then hired

Henderson, whose abstract revealed the existence of an access easement across one

of the tracts but failed to identify all of the parties benefitted by the easement across

the tract.

       Fidelity listed the access easement on a schedule of exceptions included with

the title commitment, and Coleman Talley drafted an agreement to terminate the

easements signed only by the benefitted parties who were identified in the title

abstract. Fidelity then removed the exception to the title commitment and the property

sales closed in May 2006.

       In fall 2007, the individual investors loaned $4.2 million to Oglethorpe

Landings Holdings, LLC, which was ALR’s sole member. The money was intended

to be a short-term bridge loan for development costs until other financing could be

arranged. But when ALR presented a proposed subdivision plat to the Savannah

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Metropolitan Planning Commission, a contiguous property owner objected because

the proposed plat provided no means of access to that owner’s property, which was

still benefitted by a recorded easement over property now owned by ALR. As ALR

said in its complaint, the still-existing “easement rights prohibited the approval of the

subdivision map, and therefore brought the entire Savannah River Landings project

to a halt.” Lacking an approved subdivision plat, ALR had difficulty marketing the

project.

      ALR alleged in its complaint that the individual investors learned of the

easement issue in January 2008. The title insurance company Fidelity negotiated the

termination of the remaining easement rights, which were relinquished in June 2008.

The Savannah River Landing project ultimately failed, and multiple suits against

various parties were filed, transferred, dismissed and reinstated. Some of the suits

overlapped, with claims against some defendants proceeding in two courts

simultaneously.

      For example, in September 2009 in the State Court of Chatham County, ALR

sued Coleman Talley for malpractice and sued the property sellers for failing to

disclose the outstanding easement. The sellers filed a third-party complaint against

the title insurance company, which filed and then dismissed a fourth-party complaint

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against R. E. Hodges, Jr., LLC, the company it hired to prepare the title abstract. ALR

filed its own complaint against Hodges as a fourth-party defendant, and Hodges was

served on November 16, 2010.

      Hodges moved to dismiss ALR’s claim against him, arguing that he had

performed the title abstract before March 2006, and therefore the four-year statute of

limitation had expired at least by March 2010. On January 24, 2012, the Chatham

County court granted Hodges’ motion to dismiss, holding that the statute of limitation

had expired before Hodges was sued.

      The Chatham County court subsequently granted summary judgment to the

property sellers in October 2012, who were the only defendants residing in Chatham

County, and the case was transferred to the State Court of Fulton County, one of

Coleman Talley’s counties of residence.2 ALR appealed the grant of summary

judgment to the property sellers, and this court affirmed that judgment without

opinion in ALR v. Peeples, 334 Ga. App. ___ (Case Number A15A1358, decided

Nov. 20, 2015). Appeals

      2
       The record in Court of Appeals Case Number A15A1358 includes a consent
order issued in October 2014 by the Fulton County trial court dismissing with
prejudice ALR’s claims against Coleman Talley.

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       Meanwhile, on January 6, 2012, ALR filed another suit in Chatham County

against Coleman Talley and Henderson, which is before us in this appeal. ALR

attached expert affidavits to its complaint, averring that the law firm had ethical

conflicts related to its representation of the individual plaintiffs and that all of the

defendants had breached the applicable standard of care in failing to discover and

disclose the easement that still burdened the property after ALR bought it. ALR

alleged that it lost potential sales as a result of its failure to gain the city’s approval

of its development plan due to the then-existing easement rights burdening one of the

two tracts.

       As previously mentioned, Henderson moved to dismiss the claims against him,

arguing that the four-year statute of limitation began to run on the claim when the title

examination was completed, which was at the latest March 2006. Therefore, under

any set of facts as pled, he asserted, the suit filed in January 2012 was time-barred.

He also argued that the allegations against him were res judicata based on the

previous Chatham County case alleging malpractice against Hodges based on the

same title examination and abstract as the current case.

       In February 2015, ALR filed a motion seeking permission to add itself as an

additional plaintiff in its capacity as Coleman Talley’s assignee. ALR represented that

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it had settled its claims against Coleman Talley in September 2014 and had taken an

assignment of the firm’s claims against Henderson. Henderson subsequently

consented to the motion to add ALR in its capacity as assignee of Coleman Talley’s

claims.

       In June 2015, the trial court issued the order now on appeal, granting

Henderson’s motion to dismiss the initial claims of ALR, although not dismissing

ALR’s claims against Henderson in its capacity “as assignees of Coleman Talley,

LLP, and its insurer,” which were not the subject of the motion to dismiss. The trial

court found that the suit involved a title examination that took place at least by March

20, 2006, when Coleman Talley prepared an agreement terminating the easement

rights of the benefitted parties listed in the title abstract, that the applicable statute of

limitation was four years, and that the statute of limitation expired no later than

March 20, 2010, long before this suit was filed. The court also found that the claims

against Henderson were barred by the doctrine of res judicata, based on the previous

suit against the property sellers and the adjudication on the merits of ALR’s claims

against Hodges.

       1. ALR asserts on appeal that the trial court erred in granting Henderson’s

motion to dismiss based on the doctrine of res judicata. While we conclude that res

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judicata does not apply here, collateral estoppel does, and thus we affirm the trial

court under the “right for any reason” rule.

      The law of res judicata and collateral estoppel is somewhat confusing,
      primarily due to our failure to clearly and consistently distinguish the
      two separate doctrines. The former, also known as claim preclusion,
      requires a plaintiff to bring all his claims against a party (or its privies)
      arising out of a particular set of circumstances in one action; while the
      latter, sometimes called issue preclusion, prevents relitigation of an
      issue already litigated by the parties (or their privies). In other words,
      under the doctrine of res judicata, a judgment on the merits in a prior
      suit bars a second suit involving the same parties or their privies based
      on the same cause of action. Under the doctrine of collateral estoppel,
      on the other hand, the second action is upon a different cause of action
      and the judgment in the prior suit precludes relitigation of issues
      actually litigated and necessary to the outcome of the first action.

Sorrells Constr. v. Chandler Armentrout & Roebuck, PC, 214 Ga. App. 193, 193-194

(1) (447 SE2d 101) (1994). See also OCGA § 9-12-40; Karan, Inc. v. Auto-Owners

Ins. Co., 280 Ga. 545, 546 (629 SE2d 260) (2006). “[U]nlike res judicata, collateral

estoppel does not require identity of the claim — so long as the issue was determined

in the previous action and there is identity of the parties, that issue may not be

re-litigated, even as part of a different claim.” (Citation and punctuation omitted.)

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Body of Christ Overcoming Church of God, Inc. v. Brinson, 287 Ga. 485, 486 (696

SE2d 667) (2010).

      (a) Issue preclusion. ALR argues that res judicata does not apply to bar its

claim in this case because its causes of action are not identical in both cases. The

prior case alleged only professional malpractice, and this case also alleges negligent

misrepresentation and breach of contract.

      As to the professional malpractice claim, the causes of action are obviously

identical. ALR is correct, however, that the causes of action in both cases are not

identical,”and that, strictly speaking, the doctrine of res judicata does not apply.”

Body of Christ, 287 Ga. at 487. “The fact that the subject matter of different lawsuits

may be linked factually does not mean that they are the same ‘cause’ within the

meaning of OCGA § 9-12-40. For that doctrine to act as a bar, the cause of action in

each suit must be identical.” (Citation and punctuation omitted.) Morrison v.

Morrison, 284 Ga. 112, 115 (3) (663 SE2d 714) (2008).

      But “the rule with reference to the doctrine of estoppel by judgment[, or

collateral estoppel,] is somewhat different, in that there can be an estoppel by

judgment whenever there has been litigation between the same parties, even though

based upon a different cause of action, as to such matters only as were necessarily or

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actually adjudicated in the former litigation.” House v. Benton, 42 Ga. App. 97, 97-98

(155 SE 47) (1930). See also Boozer v. Higdon, 252 Ga. 276, 278 (1) (313 SE2d 100)

(1984).

      The trial court in this case, which also heard and decided the prior case, noted

that the claims in both cases relied “on precisely the same title examination as

Plaintiffs relied on in the first action against defendant R.E. Hodges, Jr., LLC.” The

current litigation, although framed to include different causes of action, can only

survive if the claim against Henderson falls within the statute of limitation, and that

question is determined by Henderson’s relationship with Hodges. In the previous

litigation, the court determined that the action against Hodges was barred by the

running of the statute of limitation. “This litigation therefore involves [a

determinative] issue that had been resolved on the merits in prior litigation, satisfying

one aspect of collateral estoppel.” Body of Christ, 287 Ga. at 487.

      (b) Identity of parties. ALR argues that Hodges and Henderson were not privies

merely because they were both parties to a contract, contending that “their interests

in this litigation and the [p]rior [a]ction completely diverge” because each could

blame the other for defects in the title abstract. Whether Henderson and Hodges are

privies is a more difficult issue than whether the other two requirements for applying

                                           9
res judicata are met, because usually parties are in privy with each other because both

represent rights to the same property. See Dalton Paving & Constr. v. South Green

Constr. of Ga., 284 Ga. App. 506, 508 (643 SE2d 754) (2007) (“[T]he term privity

denot[es] mutual or successive relationship to the same rights of property.”) But that

is a simplistic view of the doctrine of privity, which is broader than simply whether

parties share a property interest.

      “A privy is generally defined as one who is represented at trial and who is in

law so connected with a party to the judgment as to have such an identity of interest

that the party to the judgment represented the same legal right.” (Citation and

punctuation omitted.) Brown & Williamson Tobacco Corp. v. Gault, 280 Ga. 420, 421

(1) (627 SE2d 549) (2006) (addressing res judicata bar). “There is no definition of

‘privity’ which can be automatically applied to all cases involving the doctrines of res

judicata and collateral estoppel, since privity depends upon the circumstances. Privity

may … be established if the party to the first suit represented the interests of the party

to the second suit.” (Citations and punctuation omitted.) Id. at 422 (1).

      In its complaint, ALR contended that Coleman Talley sought a title

commitment from Fidelity National Insurance Company, that Fidelity retained

Hodges to provide the necessary title abstract, and that Hodges in turn retained

                                           10
Henderson to prepare the title abstract. Thus, ALR contended that the chain of

responsibility for failing to prepare a proper title abstract flowed from Coleman

Talley to Fidelity National to Hodges to Henderson. ALR was aligned against Hodges

in the prior case and is aligned against Henderson in this case. In its statute of

limitation argument, ALR contends that the six-year statute for written contracts for

professional services might apply in this case based on “the business relationship

between R. E. Hodges, Fidelity National, and the Henderson [d]efendants.” ALR

further argues that “[d]iscovery could disclose the existence of a written agreement”

for professional services to which ALR was a third-party beneficiary. In other words,

Henderson’s liability could flow from a written contract with Hodges, if one existed,

because Hodges hired Henderson to prepare the title abstract.

      But regardless of whether Hodges and Henderson could conceivably be

opposing parties in a contract dispute between each other or could blame each other

for any malpractice that occurred, for purposes of this lawsuit, ALR is claiming to be

the third-party beneficiary of a possible written contract between Hodges and

Henderson, and therefore the interests of Hodges and Henderson are aligned in both

the prior litigation and the current one. Henderson’s liability is premised upon him

having a contract with Hodges, and the prior action against Hodges was dismissed

                                         11
because the statute of limitation had run before suit was filed. If Hodges is not liable

because the statute had run, then Henderson could not be liable either.

      “[I]t is not required that all the parties on the respective sides of the litigation

in the two cases shall have been identical, but it is sufficient as to identity of parties

if those by and against whom the defense of res judicata is invoked in the latter case

were real parties at interest or privies as to the controversy in the former case.”

Darling Stores Corp. v. Beatus, 199 Ga. 215 (3) (33 SE2d 701) (1945). We conclude

that, under the unique facts and circumstances present here, Hodges and Henderson

were in privity for collateral estoppel purposes. See Dalton Paving, 284 Ga. App. at

508 (developer, owners, and property manager were “in essence third party

beneficiaries of the subcontract” between plaintiff general contractor and defendant

subcontractor, who previously arbitrated claim over contract).

      (c) Adjudication on the merits. The third prerequisite for the application of the

doctrine of collateral estoppel requires that the prior claim be adjudicated on the

merits by a court of competent jurisdiction. Body of Christ, 287 Ga. at 486. The trial

court in the previous case granted Hodges’ motion to dismiss based on the expiration

of the statute of limitation. While ALR argues that this dismissal did not constitute

an adjudication on the merits, we disagree. “The statute of limitation is an affirmative

                                           12
defense which acts as a bar to recovery. Dismissal based upon the expiration of the

statute of limitation is in essence dismissal for failure to state a claim upon which

relief can be granted. A dismissal on this ground is a decision on the merits.”

(Citations omitted.) Towe v. Connors, 284 Ga. App. 320, 321 (644 SE2d 176) (2007).

      The question for collateral estoppel purposes is whether the previously litigated

issues were essential to the judgment entered in the prior action. If so, those issues

cannot be litigated again, and as discussed in Division 1 (a), if the claims in a

subsequent case rely on an issue previously decided, then the collateral estoppel bar

applies. Although we held in Black Island Homeowners Assn. v. Marra, 263 Ga. App.

559, 562-563 (2) (588 SE2d 250) (2003), that a dismissal based on the statute of

limitation did not bar a subsequent case on collateral estoppel grounds, the facts

reveal why the analysis in that case does not apply to the one at bar. In Black Island,

a prior claim against a homeowners’ association for mowing uninhabited areas in

violation of restrictive covenants was dismissed on statute of limitation grounds

because the mowing had begun more than two years before suit was filed. Id. at 561.

The trial court found that a subsequent suit to enjoin the association from mowing

was not barred by collateral estoppel, and we agreed, because “the trial court did not

need to reach the merits of the owners’ initial mowing claim in order to find that

                                          13
claim barred by the statute of limitation.” Id. at 562-563. Because “[m]owing is a

distinct, separate act that constitutes an alleged breach each time it occurs,” the statute

of limitations dismissal in the prior case did not resolve any issue essential to the

subsequent case, which was not barred by collateral estoppel. Id. at 561. In contrast,

the running of the statute of limitation is an issue essential to ALR’s claims against

Henderson in this case related to the 2006 title search.

       “No party, plaintiff or defendant, is permitted to stand his case before the court

on some of its legs, and if it falls, set it up again on the rest in a subsequent

proceeding, and thus evade the bar of the former judgment. It is the body of a case

and not certain of its limbs only, that the final judgment takes hold upon.” Perry v.

McLendon, 62 Ga. 598, 604-605 (1879). As all three prerequisites to finding this

action barred by the doctrine of collateral estoppel have been met in this case, the trial

court did not err in granting judgment to the defendants.

       2. ALR’s remaining enumeration of error regarding the trial court’s finding that

the statute of limitation had run on this claim is moot in light of our ruling in Division

1.

       Judgment affirmed. Ray and McMillian, JJ., concur in judgment only.

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