Opinion
NO. 2013-CA-000537-MR
12-05-2014
THOMAS BORNTRAEGER APPELLANT v. DONALD M. CLAYTON APPELLEE
BRIEF FOR APPELLANT: Galen L. Clark Louisville, Kentucky NO BRIEF FOR APPELLEE
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE FREDERIC COWAN, JUDGE
ACTION NO. 10-CI-003598
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; CAPERTON AND VANMETER, JUDGES. VANMETER, JUDGE: Thomas Borntraeger appeals from the February 18, 2013, order of the Jefferson Circuit Court granting Donald Clayton's motion to dismiss Borntraeger's civil action. For the following reasons, we affirm.
Prior to the initiation of this lawsuit, the parties were engaged in litigation concerning their respective membership interests in Reserve Estates, LLC. In the previous action, Clayton brought suit against Borntraeger in Oldham Circuit Court claiming: Count I (unlawful distributions/misappropriation of company funds); Count II (judicial dissolution of the company); Count III (injunctive relief requesting access to corporate records and inclusion of Clayton on company bank accounts); and Count IV (rescission of sale of Reserve Estates Lot 14). Borntraeger did not assert any counterclaims in response. Ultimately, the parties resolved that lawsuit by way of an Agreed Order entered on March 27, 2009, which dissolved Reserve Estates, LLC; addressed various other issues regarding distribution of property and collection of assets; and dismissed the case as settled. The Agreed Order expressly dismissed with prejudice all claims in that action as "settled and paid in full."
In May 2010, Borntraeger filed the present suit against Clayton in Jefferson Circuit Court alleging: Count I (breach of the Agreed Order); Count II (violations of Reserve Estates, LLC's Operating Agreement); Count III (taking of company property in violation of Operating Agreement); Count IV (failure to repay a loan to the company); and Count V (taking of Borntraeger's personal property). Clayton's answer and counterclaim did not assert any affirmative defenses.
In February 2011, Clayton filed a motion to dismiss the lawsuit on grounds of lack of jurisdiction, improper venue, and res judicata. Borntraeger filed an amended complaint, to which Clayton responded by renewing his motion to dismiss. The circuit court referred the motion to dismiss to the Master Commissioner, who recommended dismissal based on res judicata. The circuit court then entered an order granting Clayton's motion to dismiss. Borntraeger now appeals.
On appeal, Borntraeger presents both procedural and substantive bases in support of his argument that the circuit court erred by granting Clayton's motion to dismiss. Procedurally, Borntraeger maintains that Clayton's assertion of res judicata as a defense through the filing of a motion to dismiss pursuant to CR 12.02, as opposed to asserting it in his answer as an affirmative defense under CR 8.03, resulted in his waiving res judicata as a defense. Substantively, Borntraeger asserts that his claims are not identical to those addressed in the earlier action; specifically, his claim for breach of the Agreed Order cannot be barred by res judicata since that claim did not ripen until after entry of the Agreed Order. In this vein, he contends his ability to bring the breach of contract claim in the original action was impossible.
Kentucky Rules of Civil Procedure.
As an initial matter, we note that Clayton did not file a brief with this court. Upon a party's failure to file an appellate brief within the time allowed, this court may: "(i) accept the appellant's statement of the facts and issues as correct; (ii) reverse the judgment if appellant's brief reasonably appears to sustain such action; or (iii) regard the appellee's failure as a confession of error and reverse the judgment without considering the merits of the case." CR 76.12(8)(c). Since the issues in this case are fairly straightforward, and the record is not unduly cumbersome, we decline to simply accept Borntraeger's statement of the facts as correct and/or reverse the judgment without considering the merits of the case. Furthermore, a review of the record and applicable case law does not sustain a reversal of the judgment, despite Clayton's failure to file an appellate brief. We therefore exercise our discretion under CR 76.12(8)(c) to review the merits of this case. However, our decision is in no way an endorsement of an appellee's decision not to file a brief. In the majority of cases, a just and fair resolution of the case requires a presentation on behalf of both Appellant and Appellee of the issues at hand and the applicable legal authority.
Moving on to the procedural disposition of the instant case, Borntraeger asserts that Clayton waived the defense of res judicata by not asserting it as an affirmative defense in his answer as required under CR 8.03, which states, in pertinent part:
In pleading to a preceding pleading, a party shall set forth affirmatively accord and satisfaction, arbitration and award, assumption of risk, contributory negligence, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense.(emphasis added).
CR 12.02, addressing defenses and objections, provides in part:
Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: (a) lack of jurisdiction over the subject matter, (b) lack of jurisdiction over the person, (c)
improper venue, (d) insufficiency of process, (e) insufficiency of service of process, (f) failure to state a claim upon which relief can be granted, and (g) failure to join a party under Rule 19.(emphasis added).
The Kentucky Supreme Court has ruled that the defense of res judicata may be first asserted via a motion to dismiss in the absence of any issue of fact. Sedley v. City of W. Buechel, 461 S.W.2d 556 (Ky. 1970). See also Conner v. Patton, 2008 WL 162875, No. 2007-CA-000575-MR (Jan. 18, 2008) (holding that in the absence of an issue of fact, the circuit court properly considered the defendant's motion to dismiss based on res judicata, though the defendant did not raise it as an affirmative defense in his answer).
"Opinions that are not to be published shall not be cited or used as binding precedent in any other case in any court of this state; however, unpublished Kentucky appellate decisions, rendered after January 1, 2003, may be cited for consideration by the court if there is no published opinion that would adequately address the issue before the court." CR 76.28(4)(c). We believe the Conner case, though unpublished, addresses the very issue before us and is more on point than the cases Borntraeger cites, Indep. Order of Foresters v. Chauvin, 175 S.W.3d 610 (Ky. 2005), and Bailey v. Bailey, 231 S.W.3d 793 (Ky. App. 2007). In Chauvin, the case was before the Court on a petition for writ of prohibition, not a motion to dismiss, and the Court, with respect to res judicata, simply clarified that it, as an affirmative defense, has no jurisdictional dimension. Chauvin, 175 S.W.3d at 614. In Bailey, unlike the instant case, the defendant did not raise res judicata at any time. As a result, the Bailey court held that the circuit court's finding that the defendant had raised res judicata in his answer was incorrect, and the circuit court's sua sponte reliance on the doctrine as grounds for dismissal was erroneous. Bailey, 231 S.W.3d at 800.
In the instant case, the Master Commissioner correctly found that Borntraeger's claims arose from the same facts as the prior lawsuit. Thus, the exception set forth in Sedley applies - in the absence of an issue of fact, the defense of res judicata may be first asserted by a motion to dismiss. Sedley, 461 S.W.2d at 559. So procedurally, we believe the issue of res judicata was properly before the circuit court for consideration.
Borntraeger claims Clayton did not raise res judicata in his motion to dismiss and instead based his motion solely on lack of jurisdiction and improper venue. A review of the record reveals otherwise; Clayton clearly argued res judicata as grounds for dismissal.
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Substantively, Borntraeger maintains that res judicata does not bar his claims since his claims were not resolved in the prior lawsuit. Borntraeger emphasizes that his claim of breach of the Agreed Order was not, and could not have been, previously litigated between the parties since the breach did not occur until after entry of the Agreed Order.
The doctrine of res judicata or claim preclusion provides that a final judgment on the merits of an action precludes parties from relitigating issues that were or could have been raised in a prior action. Kane v. Magna Mixer, 71 F.3d 555, 560 (6th Cir. 1995). . . .Preferred Automotive Sales, Inc. v. DCFS USA, LLC, 625 F.Supp.2d 459, 462 (E.D. Ky. 2009) (internal footnote omitted).
In the Commonwealth of Kentucky, claim preclusion applies where there is an identity of the parties, an identity of the causes of action, and a resolution of the prior action on the merits. Yeoman v. Commonwealth, Health Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998).
Borntraeger and Clayton were both parties to the prior action and are parties to the present action; thus, the identity of the parties is the same. Furthermore, the Agreed Order they entered into in the prior action resolved that action on its merits. Hence, Borntraeger's contention that res judicata does not apply rests on the doctrine's final requirement - identity of the causes of action. Borntraeger points to the legal theories asserted by Clayton in the prior case and the theories he now advances as proof that the causes of action are not identical. Yet, "[i]n Kentucky, courts follow the Restatement's transactional approach to analyze the identity of causes of action. This approach looks beyond the legal theories asserted to see if the two claims stem from the same underlying circumstances." Id. at 462-63 (internal quotations and citations omitted).
The fact that Borntraeger is bringing claims which may or may not have been addressed in the prior action does not negate the fact that the claims arose from the same underlying circumstances and therefore should have been asserted in the earlier action. Indeed, "the plea of res judicata applies not only to the points upon which the court was required by the parties to form an opinion and pronounce judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." Id. at 463 (internal quotations and citations omitted). Borntraeger's claims stem from the same nucleus of operative facts as the prior litigation and, as the Master Commissioner found, are compulsory counterclaims under CR 13.01 which he should have raised in the prior action.
Lastly, with respect to the alleged breach of the Agreed Order, that Order dismissed the action with prejudice and stated "[t]he parties acknowledge that all claims made in this lawsuit between the parties have been settled and paid in full." Had Clayton not paid in full at that time, Borntraeger should not have entered into an Agreed Order acknowledging that he had. As it stands, the Agreed Order reflects its full performance. We fail to appreciate how a claim for breach of contract can arise from an Agreed Order indicating the contract has been fully performed.
For the foregoing reasons, we affirm the Jefferson Circuit Court's order granting Clayton's motion to dismiss.
ALL CONCUR. BRIEF FOR APPELLANT: Galen L. Clark
Louisville, Kentucky
NO BRIEF FOR APPELLEE