Court Opinion

ID: 4215354
Source: CourtListenerOpinion
Date Created: 2017-10-27 04:11:14.820528+00
Date Added: 2024-06-11T14:41:57.004039
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

LINDA BASS,                                                          UNPUBLISHED
                                                                     October 26, 2017
               Plaintiff-Appellant,

v                                                                    No. 332217
                                                                     Oakland Circuit Court
KEVIN J. PETERS and SERAFINI                                         LC No. 2015-150655-NM
MICHALOWSKI DERKACZ & ASSOCIATES,
PC,

               Defendants-Appellees.

Before: GLEICHER, P.J., and M. J. KELLY and SHAPIRO, JJ.

PER CURIAM.

      Plaintiff appeals from the trial court’s dismissal of her case on the grounds of res judicata.
Because we agree that res judicata does not apply in the circumstances presented, we reverse and
remand.1

        Defendants represented plaintiff in post-divorce litigation seeking, inter alia, a change in
parenting time and modification of child support. After the litigation was concluded, plaintiff
failed to pay an outstanding bill. Defendants filed a collection suit in the 48th district court
against her on or about September 21, 2015. Plaintiff failed to answer the complaint. On
November 11, 2015, defendants filed a default and default judgment request with the clerk of the
court. Because plaintiff had not appeared in the district court action and because the district
court complaint was for a sum certain, defendants were not required to file a motion for default

1
  We review de novo a trial court’s grant of summary disposition under MCR 2.116(C)(7).
Washington v Sinai Hosp of Greater Detroit, 478 Mich. 412, 417; 733 NW2d 755 (2007). A trial
court should grant summary disposition under MCR 2.116(C)(7) where res judicata bars the
plaintiff’s claims. Schwartz v Flint, 187 Mich. App. 191, 194; 466 NW2d 357 (1991). When
reviewing a grant of summary disposition under MCR 2.116(C)(7), this Court must consider the
pleadings, depositions, affidavits, and any other evidence in favor of the party opposing the
motion. Herman v Detroit, 261 Mich. App. 141, 143-144; 680 NW2d 71 (2004). We also review
de novo the issue of whether res judicata bars a claim. Washington, 478 Mich. at 417.

                                                -1-
judgment with the court, and the default judgment was entered by the clerk. MCR 2.603(2). The
default and the default judgment were both entered by the clerk on the same date, November 20,
2015.

        On December 17, 2015, plaintiff filed a complaint for legal malpractice against
defendants. The suit alleged that defendants failed to conduct necessary discovery or retain an
expert to determine and demonstrate the extent of her ex-husband’s income and assets, and that
defendants recommended that she agree to a settlement under which child support would be non-
modifiable thereafter.2 In lieu of filing an answer, defendants filed a motion to dismiss claiming
that the district court’s collection suit, in which it had obtained a default judgment, constituted
res judicata as to all claims arising out of their representation of plaintiff in the post-judgment
motion. The trial court agreed and dismissed the case on this basis.

       As a general rule, res judicata requires establishing three elements: “(1) the first action
was decided on the merits, (2) the matter contested in the second action was or could have been
resolved in the first, and (3) both actions involve the same parties or their privies.” Sewell v
Clean Cut Mgt, Inc, 463 Mich. 569, 575; 621 NW2d 222 (2001), quoting Dart v Dart, 460 Mich.
573, 586; 597 NW2d 82 (1999). Michigan has adopted the “transactional” view of res judicata
and so the question is not whether the evidence in the two claims would be identical, but rather,
whether the parties, exercising reasonable diligence, could have raised every claim arising from
the same transaction, but did not. Adair v State, 470 Mich. 105, 121; 680 NW2d 386 (2004).

       The purpose of this common law doctrine is to “relieve the parties of the cost and
vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent
decisions, encourage reliance on adjudication.” Allen v McCurry, 449 U.S. 90, 94; 101 S. Ct. 411;
66 L. Ed. 2d 308 (1980). “For the sake of repose, res judicata shields the fraud and cheat as well
as the honest person. It therefore is to be invoked only after careful inquiry [as to whether
foreclosing plaintiff’s case would protect] the interests served by res judicata.” Brown v Felsen,
442 U.S. 127, 132; 99 S. Ct. 2205; 60 L. Ed. 2d 767 (1979). “The burden of establishing the
applicability of res judicata is on the party asserting the doctrine.” Richards v Tibaldi, 272 Mich
App 522, 531; 726 NW2d 770 (2006).

        Historically, res judicata has generally been employed to bar a prior plaintiff (or its privy)
from filing a second suit against the same defendant (or its privy). E.g. Senior Accountants,
Analysts and Appraisers Ass’n v Detroit, 60 Mich. App. 606; 231 NW2d 479 (1975); 187 Mich
App 191; 466 NW2d 357 (1991); Sherrell v Bugaski, 169 Mich. App. 10; 425 NW2d 707 (1988);
Svitojus v Kurant, 293 Mich. 291; 292 N.W. 637 (1940); Northwest Home Owners Ass’n v Detroit,
298 Mich. 622; 299 N.W. 740 (1941). The purposes of res judicata, just reviewed, clearly apply in
that setting. A party bringing a lawsuit has the obligation to raise all related claims at that time.
To conclude the litigation and then file a new suit based on the same transaction greatly increases
the cost to counsel and to the court, and risks the imposition of inconsistent decisions.

2
  Nothing other than plaintiff’s complaint has been provided to us regarding the nature of this
suit and we make no comment on its merits.

                                                 -2-
         In the instant case, defendants do not assert that plaintiff previously filed suit against
them. Rather, they assert that by failing to file her malpractice suit as a counterclaim to their
district court collection action, she has lost the opportunity to do so. Defendants argue that we
should apply the transactional test so broadly as to construe the entire course of an attorney-
client relationship to be subsumed in the failure of plaintiff to pay a bill. We decline to do so,
and note the long-standing precedent on this question.

        In Leslie v Mollica, 236 Mich. 610; 211 N.W. 267 (1926), the Supreme Court addressed
precisely this question. It held that when a professional, (in Leslie it was a physician), files a
collection case against a former client, the client is not required to plead her malpractice claim at
that time and may do so later without being barred by res judicata. Id. at 615. According to the
Court, “[T]he actions, one by the physician for services and the other by the patient for
malpractice, are independent and remain so unless and until the patient, when sued for services,
injects the issue of malpractice, either to defeat the claim or to obtain damages by way of
recoupment or counterclaim.” Id. The Court went on to explain that a client sued for payment
has a choice: she may bring a counterclaim to the collection case in which case res judicata will
apply to any later filed suit for malpractice,3 or she may choose not to defend or counterclaim on
the basis of malpractice in which case res judicata does not bar a later malpractice suit. Id. at
616-617. Leslie stated unequivocally, “We do not adopt the rule requiring the patient to make
the defense of malpractice in justice’s court when sued by the physician for services.” Id. at 616.

        Although decided many years ago, the Leslie decision remains good law. It has been
regularly cited, including several times since 2000.4

        Similarly, in Van Pembrook v Zero Mfg Co, 146 Mich. App. 87, 91-92; 380 NW2d 60
(1985), the parties had a contractual-sales-representative relationship that went sour. Defendant
filed a suit seeking payment of sums due based on the agreement, and a consent judgment was
entered. Id. at 92. Later, plaintiff filed suit alleging a wide range of claims involving fraud and
breach of contract. Defendant argued that res judicata should bar the suit since plaintiff could
have raised them in the prior case. Id. at 100. We rejected this argument despite reiterating that
“Michigan applies the doctrine of res judicata broadly so as to include not only points upon
which the court was actually required by the parties to adjudicate but also to include ‘every
point which properly belonged to the subject of litigation, and which the parties, exercising
reasonable diligence, might have brought forward at that time.’ ” Id. at 100-101 (citation
omitted). We concluded:

3
    As was the case in Leslie.
4
 Bloch v Bloch, unpublished opinion per curiam of the Court of Appeals, issued September 2,
2010 (Docket No. 290086); Griffin v Reznick, unpublished opinion of the United States District
Court of the Western District of Michigan, issued October 28, 2008 (Docket No. 1:08-cv-50);
Pinnacle Underwriting v Goetz, unpublished opinion per curiam of the Court of Appeals, issued
May 31, 2005 (Docket No. 260400); Rochlen v Landau, unpublished opinion per curiam of the
Court of Appeals, issued March 1, 2005 (Docket No. 249908).

                                                -3-
                The [prior] action . . . was instituted by defendant to recover sums due
         and owing on a promissory note and by virtue of plaintiff’s account for goods sold
         by defendant to plaintiff pursuant to the sales agency agreement. The action in
         the present case is premised upon breach of the sales agreement by virtue of the
         defendant’s misrepresentation as to the quality of the goods sold. These causes of
         action are distinct in subject matter and require entirely different set of proofs.
         [Van Pembrook, 146 Mich. App. at 101.]

        In the instant case, defendants correctly cite MCR 2.203(A) and (E)5 for the proposition
that Michigan is a compulsory joinder state. Thus, when a party files a claim or counterclaim,
she must join all her claims that arise out of the same transaction and occurrence. That does not
mean, however, that Michigan is a compulsory counterclaim state. In Salem Indus, Inc v
Mooney Process Equip Co, 175 Mich. App. 213, 215-216; 437 NW2d 641 (1988), we explicitly
rejected defendants’ position, holding that MCR 2.203(E) “is permissive, as opposed to
compulsory” and “allows a party the option to maintain its counterclaim in a separate
independent action.”

         Defendants do not rebut Leslie, Van Pembrook, or Salem Industries, other than to argue
that these cases are no longer good law because Michigan now applies the transactional test.
However, the transactional test was adopted in 1980 in Goss v Monroe Auto Equip Co, 409 Mich.
147, 160; 294 NW2d 165 (1980), well before the decisions in Van Pembrook and Salem. And
defendants cite no cases that indicate that the Supreme Court has abandoned the long-standing
rule articulated in Leslie.6

5
    MCR 2.203 provides in relevant part:
                 (A) Compulsory Joinder. In a pleading that states a claim against an
         opposing party, the pleader must join every claim that the pleader has against that
         opposing party at the time of serving the pleading, if it arises out of the
         transaction or occurrence that is the subject matter of the action and does not
         require for its adjudication the presence of third parties over whom the court
         cannot acquire jurisdiction.

                                              * * *

                 (E) Time for Filing Counterclaim or Cross-Claim. A counterclaim or
         cross-claim must be filed with the answer or filed as an amendment in the manner
         provided by MCR 2.118. If a motion to amend to state a counterclaim or cross-
         claim is denied, the litigation of that claim in another action is not precluded
         unless the court specifies otherwise.
6
  Plaintiff cites several Court of Appeals cases involving summary eviction proceedings.
Plaintiff seeks to rely on those cases because res judicata was held not to apply to later actions.
Defendants respond by pointing out that the summary eviction statute specifically limits the
preclusive effect of such an action. We find little guidance in these cases as they turn on a

                                                 -4-
        The cases cited by defendants do not support the claim of res judicata in this case. First,
in most of the cited cases, the application of res judicata was directed at the plaintiff, or his privy,
from the prior case. In Wayne Co v Detroit, 233 Mich. App. 275; 590 NW2d 619 (1998), the
doctrine was applied so as to bar a municipality from again litigating whether a tax exemption
applied to a particular property where the precise question had been heard and determined by the
Tax Tribunal in a prior tax year. In Adair, 470 Mich. at 121-122, the Supreme Court concluded
that the Headlee Amendment complaint had been brought by parties in privity with the plaintiffs
in a prior case that raised primarily the same claims.7

        Defendants also rely on Sprague v Buhagiar, 213 Mich. App. 310; 539 NW2d 587 (1995),
but it is also distinguishable and has a unique history. In that case, plaintiff and defendant
entered into a land contract for defendant to purchase six rental units. Id. at 312. After plaintiff
took possession, she learned that two of the units had been condemned by the city. Id. She

specific statute and not on the common law of res judicata. Accordingly, we do not rely on
them.
7
    The Adair Court noted:
         In [the prior case] we resolved the question of the state’s ability under Headlee to
         reduce funding [to schools], in the circumstances there presented, for existing
         programs.

                                                * * *

         [T]he statutory and regulatory requirements complained of in this case, and
         alleged to be “new” or “increased” activities since Headlee was enacted, existed
         during the pendency of [the prior case]. Moreover, the requirements, like those in
         [the prior case], have been imposed by the Legislature and executive bodies on
         local school districts for the purpose of providing public education. Thus, they
         are related to one another in time, space [and] origin. [Adair, 470 Mich. at 121,
         125 (quotation marks omitted) (second alteration in original).]

It is also worth noting that the Adair case involved unique circumstances as the state was facing
the possibility of repeated Headlee suits regarding school funding each time a new regulation
was issued. The Court observed that a failure to apply res judicata would
         allow each individual taxpayer in the state a chance to bring a separate suit
         alleging similar, but not identical, claims. It is, in short, an invitation to a total
         paralysis of government, both state and local, as it would deprive state and local
         officials, as well as citizens, of the ability to know with finality what the law is.
         Such an approach would surely bring the Headlee protections into disrepute and
         thus jeopardize them. We decline to convert Headlee into such a Frankenstein
         monster . . . . [Adair, 470 Mich. at 126-127.]

Obviously, none of these concerns are relevant here.

                                                  -5-
stopped making monthly payments on the land contract, and defendant filed for summary
possession in the district court. Id. Plaintiff did not respond to that suit, and the district court
issued an order of possession to defendant. Id. Later, the plaintiff (the prior defendant) filed suit
in circuit court seeking rescission of the land contract due to fraudulent inducement. Id.
Defendant filed a motion for dismissal based on res judicata, which was denied, and the matter
proceeded to trial at which plaintiff prevailed. Id. at 312-313. Defendant appealed arguing the
trial court should have granted the pre-trial motion based on res judicata. Id. at 313. Noting that
the fraud claim could have been raised in a counterclaim to the summary possession proceeding,
the Sprague panel concluded that “under the state’s broad rule of res judicata, plaintiff’s claims
are barred.” Id.

        Sprague is distinguishable because the claim for possession asserted a right under
contract to the return of the property. Whether or not that contract was valid was squarely at
issue, and plaintiff (then defendant), failed to raise it. Thus, there was a judgment that defendant
was, pursuant to the contract, entitled to possession of the property. In the instant case, there is
no challenge to the fact that plaintiff and defendants had a contract for services. It is not a claim
for breach of contract or rescission of contract; it is a tort claim in which the existence and nature
of the parties’ contract is not at issue. The contract makes no promises other than for legal
services. Plaintiff does not contest that legal services were provided pursuant to that contract;
instead she claims that defendants committed malpractice, an action that is judged not by
contract but by the standard of care that applies to all attorneys similarly situated.

        We also note that the viability of Sprague is subject to questioning. Just a few months
before it was issued, our Court published Bd of Co Rd Comm’rs for the Co of Eaton v Schultz,
205 Mich. App. 371; 205 NW2d 371 (1994), where plaintiff road commission sued an individual,
and the suit was dismissed by the trial court because the individual previously filed suits relating
to the condition of the roadway. Id. at 373-374. The first case was dismissed with prejudice
pursuant to stipulation in exchange for foregoing costs. Id. at 374. Later the plaintiff filed suit
based on a nuisance theory, and the commission raised the defense of release and res judicata.
Id. The trial court denied that motion, and the suit was later dismissed on other grounds. Id.
The Commission then filed suit against the individual asserting breach of contract for having not
adhered to the stipulation to dismiss and alleging that they were now entitled to costs on the first
case as well as the third. Id. The trial court concluded that the Commission’s suit was barred by
res judicata because it had been raised as a defense in the intrusive nuisance case and had been
decided against the Commission. Id. This Court disagreed:

               For purposes of our analysis, the “first” case is Schwartz’s intrusive
       nuisance suit against the road commissioners, and the “second” case is the road
       commissioners’ breach of contract action against Schwartz. It is apparent that the
       road commissioners’ breach of contract action was not and could not have been
       decided in Schwartz’s intrusive nuisance suit because the same evidence would
       not sustain both actions. Only if the road commissioners had opted to bring a
       counterclaim on breach of contract grounds in the intrusive nuisance case would
       the breach of contract issue have arisen, and then only as a counterclaim. The
       most that was decided in the intrusive nuisance suit concerning the parties’
       stipulation was that the stipulation did not operate as a release, and so was an
       unsuccessful defense for the road commission.

                                                 -6-
               To treat the defense of release as identical to an action for breach of
       contract for purposes of res judicata, as Schultz would have us do, overlooks their
       fundamental differences. Causes of action and defenses are not interchangeable.
       Here, for example, the fact of a breach and the question of damages are irrelevant
       in the release defense. We conclude that res judicata does not bar the road
       commissioners’ breach of contract action. [Schultz, 205 Mich. App. at 376
       (citation omitted).]

Schultz held that a former defendant is not barred from filing suit against the former plaintiff
where the prior case was irrelevant to what must be determined in the new case, and that
litigation of a defense in a prior case does not necessarily bar subsequent litigation in which that
defense is relevant to or even the basis for the claim brought by the former defendant. Id. at 376.

        Significantly, Sprague was decided after Schultz, and so Schultz should have controlled
as binding precedent. However, Schultz was not cited in Sprague. Recently another panel of our
Court in an unpublished opinion noted this aberration stating:

               We note that the trial court did not rely on the fact that the claims had
       already been litigated in granting defendant summary disposition. Instead, the
       court relied on the fact that the claims could have been litigated in the Oakland
       County proceeding. See Sprague v Buhagiar, 213 Mich. App. 310; 539 NW2d 587
       (1995). While Sprague indeed purports to bar an action involving a counterclaim
       that could have been brought in a prior proceeding, see id. at 313, another panel of
       this Court reached a contrary conclusion in Eaton Rd Comm’rs v Schultz, 205
Mich. App. 371; 521 NW2d 847 (1994). We need not address this conflict,
       however, in light of our conclusion that plaintiff’s claims from his original
       complaint actually were litigated in the prior proceeding. While the trial court
       may have erroneously relied on the fact that the claims were not previously
       litigated but could have been litigated, we will not reverse a trial court if it
       reached the correct result for the wrong reasons. See Phinney v Perlmutter, 222
Mich. App. 513, 532; 564 NW2d 532 (1997). [Karp v Michigan Nat’l Bank,
       unpublished opinion of the Court of Appeals, issued February 27, 2001 (Docket
       No. 213703), p 8.]

Like the panel in Karp, we need not resolve the conflict between Schultz and Sprague because as
noted above, Sprague is distinguishable. However, it is clear that Sprague should be applied
with caution if at all. 8

8
  Defendants also cite two recent unpublished opinions. Pursuant to MCR 7.215(C)(1), neither
constitutes binding precedent, but we have reviewed them as persuasive authority. The first,
Stanton v Auto Owners Ins. Co., unpublished opinion of the Court of Appeals, issued October 25,
2016 (Docket Nos. 327007, 327644), is readily distinguishable. It involved a personal injury
suit. The defendant in that case filed a declaratory judgement action seeking to force his insurer
to defend him in the suit. Id. at 1. The trial court resolved the declaratory judgment action

                                                -7-
        Finally, we note generally that none of the purposes underlying res judicata apply in this
case. First, the parties are not engaged in “the cost and vexation of multiple lawsuits.” Garrett v
Washington, 314 Mich. App. 436, 447; 886 NW2d 762 (2016) (holding that application of res
judicata relieves “the parties of the costs and vexation of multiple lawsuit”). Second, the
defendants’ collection case involved no more than the filing of a complaint and entry of
judgment by the court clerk. The issue of malpractice was not litigated in any fashion nor was
defendants’ performance, whether laudatory or negligent. The only issue was whether or not
plaintiff had paid her bill, a matter that was resolved conclusively without a single court
appearance, and the entry of default and default judgment were simultaneously entered by the
clerk. Second, allowing the instant case to proceed does not require that judicial resources be
expended a second time. The collection case did not require judicial resources to be expended
on a claim or defense of malpractice; indeed, it required virtually no judicial resources at all.
Moreover, had plaintiff interposed a malpractice claim in the district court case, the collection
case, clearly one that belongs in district court, would have been transferred, along with the
counterclaim, to circuit court. MCR 4.002. Finally, there is no risk of inconsistent decisions as
the judgment in the collection case has no consequences that may prove contrary to a judgment
obtained by either party in the malpractice suit.

        We reverse the trial court’s grant of summary disposition and remand for further
proceedings. As prevailing party, appellant may tax costs. MCR 7.219(A). We do not retain
jurisdiction.

                                                             /s/ Elizabeth L. Gleicher
                                                             /s/ Michael J. Kelly
                                                             /s/ Douglas B. Shapiro

holding that the insurer had no duty to defend. Id. Later, after losing the personal injury case, he
again sued his insurer, this time for indemnification. Id. at 1-2. So while the plaintiff had
previously been a defendant in the personal injury case, his relationship to the insurer was always
that of a plaintiff, first in the declaratory judgment action and then in the damages case and the
issue was all but identical. In the second, Anderson v Buckman, MacDonald & Bauer,
unpublished opinion of the Court of Appeals, issued December 15, 2011 (Docket No. 300459),
res judicata was applied in a case very similar to the one before us, but we find its reasoning
unpersuasive for the reasons set forth in this opinion.

                                                -8-