Court Opinion

ID: 9703447
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:56:59.717995+00
Date Added: 2024-06-11T15:11:36.752266
License: Public Domain

YEAGLEY, Associate Judge, Retired,
dissenting:
I do not agree with the majority’s resolution of this case and therefore respectfully dissent. While I endorse several of the legal propositions and quotations in the opinion, as indicated herein, I find them more supportive of an affirmance than of a reversal. For example, my colleagues rely upon and quote from “the landmark case” of Cromwell v. County of Sac, 94 U.S. 351, 352-53, 24 L.Ed. 195 (1877). However, as I read it, the following quotation from that opinion seriously undercuts the holding of the majority here:
Thus, for example, a judgment rendered upon a promissory note is conclusive as to the validity of the instrument and the amount due upon it, although it be subsequently alleged that perfect defences actually existed, of which no proof was offered, such as forgery, want of consideration, or payment. If such defences were not presented in the action, and established by competent evidence, the subsequent allegation of their existence is of no legal consequence. The judgment is as conclusive, so far as future proceedings at law are concerned, as though the defences never existed. The language, therefore, which is so often used, that a judgment estops not only as to every ground of recovery or defence actually presented in the action, but also as to every ground which might have been presented, is strictly accurate, when applied to the demand or claim in controversy. Such demand or claim, having passed into judgment, cannot again be brought into litigation between the parties in proceedings at law upon any ground whatever.
While the foregoing rule would not apply where the second action between the parties is upon a different claim or demand, I do not find that to be the case here. The first action was based on the promissory notes growing out of the sale of real estate seeking foreclosure and a dollar deficiency judgment. The second action attacking the sale as fraudulent in that the property was overpriced, necessarily involved an attack on the validity of the appellants’ promise to pay and therefore went to the validity of the notes involved in the foreclosure. I do not believe we should encourage, let alone permit, the separate litigating of these two claims. The claim of fraud in the sale should have been raised in the foreclosure action.
In footnote 9 the majority recognizes that “for the purposes of res judicata, the defense of fraud is lost if it is not raised in the foreclosure action,” citing Singer v. Steven Kokes, Inc., 39 Md.App. 180, 384 A.2d 463 (1978); Pat Perusse Realty Co. v. Lingo, 249 Md. 33, 238 A.2d 100 (1968); and see Bainder v. Sound Building & Loan Association, 161 Md. 597, 158 A. 2 (1932).
I also find relevant the majority’s quoting as follows from 50 C.J.S. Judgments § 682 (1947):
Fraud by which defendant was induced to enter into a contract sued on, or otherwise tainting plaintiff’s cause of action, is a defense which must be set up when defendant has an opportunity to plead it; if it is not asserted in due time, it will be barred by the judgment, and may not be set up as a defense to a second action, or be made the basis of a subsequent suit by defendant. [Footnote omitted.]
However, the majority thereafter concludes, in effect, that such well established law is changed when Maryland’s permissive counterclaim rule is applicable. Md.R. Civ.P. 314. They reach that result by apparently assuming that the rule is applica*1092ble here and by finding that the rule not only permits the filing of any counterclaim, but that it also grants to a defendant who chooses not to raise his defense against a plaintiff the right to raise it separately as the basis of an independent cause of action even though, as here, it would have been a good defense to the original cause of action.
My colleagues cite as authority for their conclusion that “an omitted permissive counterclaim can be raised in a subsequent action,” the case of Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944). The majority quotes the Supreme Court in that case as follows:
Though Mercoid were barred in the present case from asserting any defense which might have been interposed in the earlier litigation, it would not follow that its counterclaim for damages would likewise be barred. That claim for damages is more than a defense; it is a separate statutory cause of action. The fact that it might have been asserted as a [permissible] counterclaim in the prior suit . does not mean that the failure to do so renders the prior judgment res judicata as respects it. [Id. at 671, 64 S.Ct. at 274 (citations omitted).]
I have no problem with that proposition, for it is eminently souhd, but quite mistakenly applied to our case. As the Court said, the rule applies when the claim is more than a defense and constitutes a separate cause of action. The Mid-Continent complaint was for patent infringement. The counterclaim by Mercoid referred to by the Supreme Court was for damages flowing from the misuse of the patent in violation of the antitrust laws, clearly an unrelated and separate cause of action that had nothing to do with whether Mercoid was guilty of infringement, but nonetheless a claim that could have been the basis of a counterclaim in earlier infringement litigation.
Because it was a separate cause of action, the Court held that Mercoid was not bound to raise it in the earlier action and that it was not now barred. That is not our situation and Mercoid is not authority to support the turning point in the majority opinion.
The Maryland permissive counterclaim rule does not justify the application of the Mercoid decision to our facts. That rule was never intended to apply to defenses or claims which a defendant already had a right to file. Rather, its purpose was to authorize the raising of claims of a defendant against a plaintiff that were unrelated to plaintiff’s cause of action and which, without the rule, could not be the subject of a counterclaim. These would be independent claims or causes of action growing out of a different transaction.1 There could be no other reason for the rule. It was aimed at inviting a consolidation of actions between the same parties in the interest of judicial economy. However, the majority’s enlargement of the rule and invoking it here runs counter to the aim of judicial economy by permitting separate trials of claims that should be litigated in one suit. It invites one who has a counterclaim, even if it grew out. of the same transaction, to withhold it in favor of a separate cause of action in a forum of the claimant’s choice.
The rule contains no language whatever granting permission not to file any particular counterclaim and it most certainly says nothing about permission not to file a defense or claim that grew out of and was an integral part of the same transaction upon which appellant was originally sued. The rule simply authorizes the filing as a counterclaim of any separate or independent claim that would not have been permissible before the rule, since defenses and related claims already could be asserted by counterclaim before this rule was adopted. Without the rule, separate and unrelated causes of action between the parties could not be resolved in one trial. That is all that the rule sought to accomplish.
I agree with the trial court that the permissive counterclaim rule has no bearing on this case and that plaintiffs-appellants here *1093should have asserted the fraud as a defense to the foreclosure action.2 The grounds asserted in the complaint here would have been a good defense to the foreclosure action. Furthermore, the evidence necessary to prove the allegations would have justified a judgment favorable to them in the foreclosure action.3 Having failed to do so, they are barred from raising it here as a separate cause of action. Although I would be perfectly willing to adopt or endorse the well reasoned opinion of the trial court, I would prefer predicating our ruling on direct, rather than collateral, estoppel.4
For the foregoing reasons, it seems to me we should affirm the judgment of the trial court dismissing the complaint.
I have no disagreement with the opinion of this court as to the claim in No. 13876, which involves a separate cause of action against one of the partners of the appellants for breach of fiduciary duty, which the trial court did not dismiss.

. World Wide Imported Car Co., Ltd. v. Savings Bank of Baltimore, 41 Md.App. 263, 396 A.2d 547 (1979).

.See generally World Wide Imported Car Co., Ltd. v. Savings Bank of Baltimore, supra; cf. Klein v. Whitehead, 40 Md.App. 1, 389 A.2d 374 (1978).

. Klein v. Whitehead, supra.

. World Wide v. Savings Bank of Baltimore, supra.