Opinion
No. 106,125.
2012-11-2
LAURENCE M. JARVIS, CHARTERED, a Kansas Professional Corp., Appellant, v. BANK OF BLUE VALLEY, Appellee.
Appeal from Johnson District Court; Kevin P. Moriarty, Judge. Linus L. Baker, of Stilwell, for appellant. Stewart M. Stein, Michele M. O'Malley, and Megan McCurdy, of Stinson Morrison Hecker, LLP, of Kansas City, Missouri, for appellee.
Appeal from Johnson District Court; Kevin P. Moriarty, Judge.
Linus L. Baker, of Stilwell, for appellant. Stewart M. Stein, Michele M. O'Malley, and Megan McCurdy, of Stinson Morrison Hecker, LLP, of Kansas City, Missouri, for appellee.
Before GREEN, P.J., MARQUARDT, J., and BRAZIL, S.J.
MEMORANDUM OPINION
PER CURIAM.
Laurence M. Jarvis, Chartered (Jarvis), a Kansas professional corporation, appeals the district court's decision on remand granting Bank of Blue Valley's motion for summary judgment. He argues the court erred in granting the Bank's motion for summary judgment based upon res judicata. We affirm.
Even though this appeal involves litigation filed as a Chapter 60 proceeding in Johnson County District Court by Jarvis, against the Bank, this case began as an identical lawsuit in a Chapter 61 limited action.
On December 29, 2008, Jarvis filed a Chapter 61 action, No. 08 LA 17913 ( Jarvis I ), against the Bank alleging bailment. Jarvis claimed that on behalf of another individual he borrowed $75,000 from the Bank on May 31, 1991. As collateral, the Bank took possession of a $100,000 certificate of deposit. A security agreement, dated May 31, 1991, recorded the Bank's security interest in Jarvis' CD. Jarvis claimed both parties agreed that (1) the Bank would return the CD, including any corresponding interest it earned while being held, to Jarvis once the loan was repaid, (2) the Bank could use the CD and any interest to satisfy the remaining balance of the loan if the loan went into default, and (3) the CD would remain as collateral if the loan was renewed or extended. Jarvis claims that since the loan matured on June 13, 1992, he made repeated inquiries about the return of the collateral, and the bank not only failed to return any of it, but the Bank also notified him that it could not find any record of the loan or CD.
In response to the Jarvis I petition, the Bank filed a motion to dismiss under K.S.A. 60–208(c) and K.S.A. 60–212(b)(6) on February 4, 2009, arguing that the petition failed to state a claim due to the applicable statute of limitations. Jarvis failed to appear at the February 27, 2009, motion hearing. The magistrate granted the Bank's motion and filed the journal entry of dismissal on March 5, 2009.
On April 24, 2009, Jarvis filed a Chapter 60 action, No. 09 CV 3700 ( Jarvis II ), based on the same underlying financial transaction or CD in Jarvis I. The Jarvis II “PETITION FOR MONETARY DAMAGES” had the caption, “This is a refiling of 08–LA–17913(Jarvis I) under CH. 61.” (Emphasis added.) In addition to alleging bailment again, Jarvis alleged breach of contract and unjust enrichment. Jarvis also sought an accounting of the CD and requested the district court impose a constructive trust on any money owed to him and held by the Bank.
On June 1, 2009, the Bank filed a motion to dismiss Jarvis II under K.S.A. 60–212(b)(6), arguing that various statutes of limitations and the application of res judicata precluded recovery. At a subsequent evidentiary hearing on July 16, 2009, the district court elected to treat the Jarvis II petition as a de novo appeal from the magistrate and concluded that the doctrine of laches and applicable statutes of limitations barred Jarvis from bringing a claim against the Bank. Jarvis appealed the dismissal.
On September 3, 2010, this court reversed and remanded, finding that the district court made inadequate factual findings regarding the loan and the CD to support its application of the various statutes of limitations and that it had erred in applying the doctrine of laches. Jarvis v. Bank of Blue Valley, No. 103,056, 2010 WL 3564753, at *2–*4 (Kan.App.2010) (unpublished opinion) ( Jarvis III ). This court also noted: “[W]e express confusion as to why the district court treated the case as a timely appeal not subject to the principle of res judicata. We suggest that there should be clarification of this matter on remand before proceeding to a determination on the merits.” 2010 WL 3564753, at*3.
On November 9, 2010, at a K.S.A. 60–212(b)(6) motion to dismiss hearing initiated by the Bank, the parties and the district court discussed the need to address this court's direction to make the necessary findings regarding whether the principle of res judicata applied. Jarvis suggested the Bank file a motion for summary judgment so the district court could determine the facts, whereas the Bank expressed concern with the associated costs if the matter was addressed at an evidentiary hearing. The district court denied the Bank's K.S.A. 60–212(b)(6) motion and set a date for an evidentiary hearing, with the option of considering a motion for summary judgment. On January 27, 2011, the Bank filed a motion for summary judgment under K.S.A. 60–256 asking the district court to bar Jarvis' claims under the principles of res judicata and collateral estoppel. The district court heard arguments on March 15, 2011, and set the matter over to consider the parties' arguments and filings. That same day, Jarvis filed a motion seeking to set aside the March 5, 2009, journal entry of dismissal for Jarvis I.
On April 6, 2011, the district court granted the Bank's motion for summary judgment. Even though the district court found that “it is unclear whether Jarvis II was filed as a new case, or whether it was an appeal from the Chapter 61 ruling (Jarvis I),” the district court reasoned that it did not matter because either situation denied Jarvis any relief.
First, the district court ruled that if Jarvis had filed Jarvis I as a new Chapter 60 action in Jarvis II, his claims were barred by res judicata. The district court, citing Neunzig v. Seaman U.S.D. No. 345, 239 Kan. 654, 722 P.2d 569 (1986), noted that the only element of res judicata Jarvis contested was whether there was a final judgment on the merits. See 239 Kan. at 660–61 (“res judicata [claim preclusion] prevents the relitigation of claims previously litigated and contains four elements: (1) same claim; (2) same parties; (3) claims were or could have been raised; and (4) a final judgment on the merits”). The district court noted that it had already ruled that the Chapter 61 ruling in Jarvis I was adjudicated on the merits:
“Unless the court, in its order of dismissal otherwise specifies, a dismissal (other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under K.S.A. 60–219) operates as an adjudication upon the merits. K .S.A. 60–241(b)(1). See Wellsville Bank v. Sutterby, 12 Kan.App.2d 585, 592, 752 P.2d 700 (1988) (citing K.S.A. 60–241 and holding that plaintiffs claims were barred by res judicata; and that a previous dismissal ‘without an indication to the contrary’ was a dismissal on the merits); Wirt v. Esrey, 233 Kan. 300, 309, 662 P.2d 1238 (1983) (holding that ruling on parties 60–212(b)(6) motion was ‘on the merits' and that collateral attack was barred by res judicata); Netwig v. Georgia–Pacific Corp., 266 F.Supp.2d 1279, 1283–84 (2003) (holding that dismissal on limitations grounds, which did not expressly state that it was not a ruling on the merits, and did not fall into 60–241(b)(1) exceptions, was final judgment on the merits to which res judicata applied.”
Alternatively, the district court ruled that even if it considered the Jarvis II filing a timely appeal, it would not have had jurisdiction to consider the merits of such an appeal. The district court, citing Frost v. Cook, 30 Kan.App.2d 1270, 1274, 58 P.3d 112 (2002), noted that given the nature of the magistrate's ruling, its appellate review was limited to making an independent determination whether the magistrate erred in granting default judgment. The district court ruled that Jarvis' failure to file a motion to set aside Jarvis I, as required under Frost, gave it “nothing to review.”
Jarvis timely appeals.
On appeal, Jarvis maintains that the Jarvis II petition was his timely de novo appeal of the magistrate's decision in Jarvis I . From this, Jarvis argues that the district court erred in ruling that there was no reviewable issue on appeal because Jarvis I was a default judgment requiring a motion to set aside that judgment, which he did not file. As to the district court's ruling applying res judicata to Jarvis II as a Chapter 60 action instead of an appeal, Jarvis only challenges the Bank's ability to raise the issue of res judicata before the district court and does not address this specific part of the ruling granting summary judgment to the Bank. To resolve this appeal, however, we need only address the district court's ruling regarding the Bank's defense of res judicata.
When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. The district court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011).
Whether the doctrine of res judicata applies in a certain situation is an issue of law over which appellate courts exercise de novo review. Rhoten v. Dickson, 290 Kan. 92, 106, 223 P.3d 786 (2010); Knowles v. Fleetwood Motorhomes of California, Inc., 40 Kan.App.2d 573, 577, 194 P.3d (2008) (res judicata encompasses issue and claim preclusion). Finally, to the extent this appeal involves interpretation of a statute, this court has unlimited review over questions of law. Unruh v. Purina Mills, 289 Kan. 1185, 1193, 221 P.3d 1130 (2009).
Res judicata (claim preclusion) prevents relitigation when the following four conditions are satisfied: (1) same claim; (2) same parties; (3) claims were or could have been raised; and (4) a final judgment on the merits. In re Tax Appeal of Fleet, 293 Kan. 768, 777–78, 272 P.3d 583 (2012). At the outset, the question of whether the district court could apply the principle of res judicata to Jarvis II is dependent on the nature of the dismissal effected by the magistrate in Jarvis I on March 5, 2009. The nature of the magistrate's dismissal is a question of law over which an appellate court has unlimited review. See LSF Franchise REO I v. Emporia Restaurants, Inc., 283 Kan. 13, 19, 152 P.3d 34 (2007).
Jarvis does not dispute that he failed to appear at the Jarvis I February 27, 2009, K.S.A. 60–212(b)(6) motion hearing. Involuntary dismissals, such as here, are controlled by K.S.A. 60–241(b)(1) which provides in part: “Unless the dismissal order states otherwise, a dismissal under this paragraph and any dismissal not under this section, except one for lack of jurisdiction, improper venue or failure to join a party under K.S.A. 60–219, and amendments thereto, operates as an adjudication on the merits.” See K.S.A. 61–2912(f) (adopting by reference K.S.A. 60–241 in all Chapter 61 limited actions).
The Bank's Jarvis I motion to dismiss for failure to state a claim under K.S.A. 60–212(b)(6) specifically asked the magistrate to dismiss “with prejudice.” The record does not contain a transcript of the February 27, 2009, motion hearing. The Jarvis I journal entry filed on March 5, 2009, memorializing the magistrate's ruling on the motion to dismiss, however, concludes: “Defendant's Motion to Dismiss is hereby granted.” Because the journal entry, which controls, does not indicate the Chapter 61 action being dismissed without prejudice, the district court did not err in concluding that Jarvis I was a final judgment on the merits. K.S.A. 60–241(b)(1); see Wirt, 233 Kan. at 300, 309–10, 662 P.2d 1238 (1983) (A dismissal for failure to state a claim operated as an adjudication on the merits under K.S.A. 60–241(b)(1) unless the district court specified the dismissal is “without prejudice.”).
As this court noted on Jarvis' direct appeal, when Jarvis filed his Jarvis II Chapter 60 petition on April 24, 2009, 50 days after the magistrate filed the Jarvis I entry of dismissal on March 5, 2009, his petition designated “a refiling of 08–LA–17913 under Ch. 61.” K.S.A. Ch. 60 was not only consistent with the requirements in K.S.A. 60–207 to file a Chapter 60 petition but also an “identical lawsuit” as the Chapter 61 proceeding in Jarvis I. Jarvis III, 2010 WL 3564753, at *3. Nothing in the Jarvis II petition indicates that Jarvis was appealing the actual decision by the magistrate in Jarvis I granting the Bank's motion to dismiss for failure to state a claim. The record simply indicates that when Jarvis filed his Chapter 60 petition in Jarvis II, he intended the district court to decide his new petition on the merits. Accordingly, the first three conditions of res judicata (same claim, same parties, and claims were or could have been raised) are satisfied. Having already concluded that Jarvis I was a final judgment on the merits, the fourth and final condition of res judicata is also satisfied. See In re Tax Appeal of Fleet, 293 Kan. at 777–78.
Nevertheless, Jarvis claims that the Bank cannot raise the issue of res judicata on appeal. Jarvis argues that the Bank did not specifically raise res judicata before the district court at the Jarvis II evidentiary hearing and that the Bank, by agreeing with the district court's decision to treat his petition as a de novo appeal, cannot now present a “contrary litigation strategy.” Jarvis, however, fails to consider that this court reversed the district court's order in Jarvis II granting the Bank's motion to dismiss Jarvis' petition under K.S.A. 60–212(b)(6) prior to trial. Jarvis III, 2010 WL 3564753, at *4. Because the district court's actions were erroneous, this court was required to allow Jarvis to proceed in his Chapter 60 litigation. In other words, the effect of that ruling returned both parties to the same positions they were in at the time the district court granted the Bank's motion to dismiss. On remand, the parties are not precluded from raising any issue. Cf. Pizel v. Zuspann, 247 Kan. 699, 701, 803 P.2d 205 (1990). Regardless, as the district court noted, the Bank did specifically raise the issue of res judicata in its memorandum in support of its June 1, 2009, motion to dismiss under K.S.A. 60–212(b)(6).
Given that the Jarvis II petition was a refiling of the very same Chapter 61 limited action, the district court did not err in ruling that summary judgment was appropriate and the Bank was entitled to judgment as a matter of law under the principle of res judicata. To give Jarvis the ability to file a Chapter 60 action to avoid any penalty in a Chapter 61 limited action proceeding for failing to appear would frustrate the very purpose of the Small Claims Act.
Affirmed.