Court Opinion

ID: 9376573
Source: CourtListenerOpinion
Date Created: 2023-03-03 06:05:20.209339+00
Date Added: 2024-06-11T17:17:07.534568
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                            COURT OF APPEALS

KEEPER OF THE WORD FOUNDATION, and                                   UNPUBLISHED
GREGORY J. REED & ASSOCIATES, PC,                                    March 2, 2023

               Plaintiffs-Appellants,

V                                                                    No. 361154
                                                                     Wayne Circuit Court
FIRST INDEPENDENCE BANK,                                             LC No. 21-017337-CB

               Defendant-Appellee.

Before: K. F. KELLY, P.J., and MURRAY and SWARTZLE, JJ.

PER CURIAM.

        Plaintiffs appeal by right an order of the circuit court granting summary disposition to
defendant. The trial court determined that plaintiffs’ claims were barred as a matter of law because
they were previously adjudicated to a final judgment by the district court. We reverse and remand
for further proceedings.

                                        I. BACKGROUND

        In December 2019, plaintiffs filed suit against defendant in the district court, alleging
breach of contract and conversion for mismanaging plaintiff Keeper of the Word Foundation’s
$5,000 certificate of deposit (CD) and plaintiff Gregory J. Reed & Associates, PC’s account.
Plaintiffs alleged that Reed & Associates deposited its funds with defendant, and that plaintiff
Keeper of the Word purchased a CD in 2005 from defendant. Plaintiffs claimed that defendant
closed the Keeper of the Word’s account after it matured one year after purchase and “refused to
pay and redeem the CD” in 2018. Plaintiffs further alleged that Reed & Associates deposited
$53,651 in an interest on lawyers’ trust account (IOLTA), and defendant made false entries and
material errors regarding the account and “refused to account for all the money deposited.” The
suit was dismissed with prejudice after the district court granted defendant’s motion for summary
disposition according to MCR 2.116(C)(2) (insufficient process) because plaintiffs failed to serve
defendant and MCR 2.116(C)(4) (lack of subject-matter jurisdiction) as damages sought were
greater than $25,000.

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        In December 2021, plaintiffs filed a complaint in the circuit court for breach of contract,
“falsely recorded entry documents,” and conversion, again alleging that defendant had mis-
managed the CD and IOLTA account. Defendant moved for summary disposition, pursuant to
MCR 2.116(C)(7), arguing that the claims in plaintiffs’ complaint “were already adjudicated by
order of dismissal, in the prior 36th District Court lawsuit.” At a motion hearing, the trial court
noted that the previous complaint and the instant one were “substantially identical,” and reasoned
that “the current suit is simply the re-filing of a prior claim that was dismissed by the prior court
with prejudice and constitute[d] an improper collateral attack on the prior court’s ruling.” The
trial court granted defendant’s motion for summary disposition and dismissed the complaint.

        On appeal, plaintiffs argue that the trial court erred by granting summary disposition to
defendant because the district court and circuit court complaints were not identical, and
alternatively, because the district court did not issue a decision on the merits of plaintiffs’
allegations when it dismissed the suit for lack of jurisdiction. We hold that the district court
dismissed that case for lack of subject-matter jurisdiction, that such a dismissal was not a decision
on the merits, and therefore res judicata did not bar the circuit court action.

                                 II. STANDARDS OF REVIEW

       A trial court’s determination that res judicata prevented a subsequent suit is a question of
law that this Court reviews de novo. Stoudemire v Stoudemire, 248 Mich App 325, 332; 639
NW2d 274 (2001). In considering a motion under MCR 2.116(C)(7), the trial court should
consider all affidavits, pleadings, and other documentary evidence, construing them in the light
most favorable to the nonmoving party. Alcona Co v Wolverine Environmental Prod, Inc, 233
Mich App 238, 246; 590 NW2d 586 (1998).

                                       III. RES JUDICATA

        “Under the doctrine of res judicata, ‘a final judgment rendered by a court of competent
jurisdiction on the merits is conclusive as to the rights of the parties and their privies, and, as to
them, constitutes an absolute bar to a subsequent action involving the same claim, demand or cause
of action.’ ” Wayne Co v Detroit, 233 Mich App 275, 277; 590 NW2d 619 (1998), quoting Black’s
Law Dictionary (6th ed, 1990), p 1305. The purpose of the doctrine is to prevent multiple suits
from litigating the same cause of action. Washington v Sinai Hosp of Greater Detroit, 478 Mich
412, 418; 733 NW2d 755 (2007) (citation omitted). Res Judicata bars a second action when “ ‘(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.’ ” Verbrugghe v Select Specialty Hosp-Macomb Co, Inc (On Remand), 279 Mich App
741, 744; 760 NW2d 583 (2008), quoting Dart v Dart, 460 Mich 573, 586; 597 NW2d 82 (1999).
Michigan courts apply the doctrine broadly to bar not only claims already litigated, “but also every

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claim arising from the same transaction that the parties, exercising reasonable diligence, could
have raised but did not.” Adair v State, 470 Mich 105, 121; 680 NW2d 386 (2004).1

        In the circuit court case, plaintiffs alleged breach of contract, false recorded-entry
documents, and conversion on the basis that defendant refused to account for, and otherwise
mismanaged, the same $5,000 CD and $53,651 IOLTA account as those here at issue. The trial
court stated that plaintiffs’ district court “suit was dismissed with prejudice, and this Court lacks
authority to rule otherwise,” that the prior claim was not distinguishable from the instant one
“simply because in the current suit Plaintiffs seek relief on different theories of liability,” and
concluded that the complaint was precluded and so dismissed according to MCR 2.116(C)(7).

         Plaintiffs argue that the trial court erred by finding that its claims were previously litigated
on the grounds that the instant complaint presented new claims “of intentional misrepresentation,
false record entries, of unjust enrichment, violation of their 14th Amendment rights, negligence
and breaches of the Michigan bank code.” Plaintiffs assert that “[t]he claims must be identical not
‘substantially’ the same to apply res judicata,” citing Sewell v Clean Cut Mgt, Inc, 463 Mich 569,
575; 621 NW2d 222 (2001) (“Res judicata bars a subsequent action between the same parties when
the evidence or essential facts are identical.”). However, again, “Res judicata bars every claim
arising from the same transaction that the parties, exercising reasonable diligence, could have
raised but did not.” Adair, 470 Mich at 123. Even though plaintiffs may “raise new theories of
liability,” a suit is barred when “proof of the same facts or evidence as required to sustain the
previous action is necessary” to maintain the subsequent suit. Jones v State Farm Mut Auto Ins
Co, 202 Mich App 393, 401-402; 509 NW2d 829 (1993). “[T]he determinative question is whether
the claims in the instant case arose as part of the same transaction as did the claims” in the previous
case. Adair, 470 Mich at 125.

        Plaintiffs do not dispute that the same facts regarding the alleged mismanagement of two
accounts with defendant form the basis of the complaints. Plaintiffs’ adding a claim involving
false entries in his account in violation of the Banking Code2 did not expand the pertinent factual
allegations. For these reasons, the trial court did not err by determining that “the matter contested
in the second action was or could have been resolved in the first,” and “both actions involve the
same parties or their privies.” See Verbrugghe, 279 Mich App at 744.

       We disagree, however, with the trial court’s conclusion that the district court matter was
decided on the merits. “ ‘[A] court speaks through its written orders and judgments.’ ” In re
Baham, 331 Mich App 737, 747 n 6; 954 NW2d 529 (2020), quoting In re Contempt of Henry,
282 Mich App 656, 678; 765 NW2d 44 (2009). Here, the district court order indicates that the
matter was dismissed because defendant was not served, and the court lacked subject matter

1
  Michigan utilizes a “transactional approach,” meaning that whether claims arose from the same
transaction depends on the facts involved, regardless of variations in the relief requested, or in the
evidence needed to support the claims. Adair, 470 Mich at 124.
2
    MCL 487.11101 et seq.

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jurisdiction.3 A court that has decided that it lacks jurisdiction over the subject matter of a claim
is prevented from reaching the merits of the claim, and that outcome does not preclude subsequent
litigation of that claim in a competent forum. Estes v Titus, 481 Mich 573, 585-586; 751 NW2d
493 (2008); In re Quinney’s Estate, 287 Mich 329, 338-339; 283 NW 559 (1939) (“While a
dismissal on the ground the court has no jurisdiction of the subject matter is a conclusive
determination of want of jurisdiction, it is no adjudication of the merits and will not bar another
action for the same cause.”); MCR 2.504(B)(3) (“Unless the court otherwise specifies in its order
for dismissal, a dismissal under this subrule or a dismissal not provided for in this rule, other than
a dismissal for lack of jurisdiction or for failure to join a party under MCR 2.205, operates as an
adjudication on the merits.”).4 Because the district court’s dismissal of plaintiffs’ previous
complaint under MCR 2.116(C)(4) for lack of subject matter jurisdiction did not constitute a prior
decision on the merits, the trial court erred by granting defendant’s motion for summary disposition
on the basis of a prior adjudication.

       Reversed and remanded for further proceedings. We do not retain jurisdiction.

                                                              /s/ Kirsten Frank Kelly
                                                              /s/ Christopher M. Murray
                                                              /s/ Brock A. Swartzle

3
  A box on the order also indicates the dismissal was because there was no cause of action, but the
reasons given by the court in the order did not pertain to the viability of any cause of action.
4
  When a court lacks jurisdiction, “no matter what formalities may have been taken by the trial
court, the action thereof is void because of its want of jurisdiction, and consequently its
proceedings may be questioned collaterally as well as directly.” Jackson City Bank & Trust Co v
Fredrick, 271 Mich 538, 544; 260 NW 908 (1935). For this reason, any grounds for dismissal a
court puts forward as an alternative to lack of jurisdiction—such as lack of service or no cause of
action—is of no judicial authority unless it is later determined that the court had jurisdiction.
Enforcing the district court’s dismissal for lack of subject matter jurisdiction does not constitute a
collateral attack on that prior judgment.

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