Opinion
No. A06-2280.
Filed December 4, 2007.
Appeal from the District Court, Hennepin County, File No. 27-CV-06-7432.
John F. Bonner, III, Robyn K. Johnson, Bonner Borhart LLP, (for appellant).
John Wade Tackett, (for respondents Virginia, Matthew, and Steven R. Gerring).
Alan Miles Albrecht, Gavin, Olson Winters, Ltd., (for respondents Gerring Properties and Martin Gerring).
Thomas W. Pahl, Kelly J. Shannon, Foley Mansfield, P.L.L.P., (for respondent Steven M. Gerring).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellant Mary Jo K. Gerring challenges the judgment dismissing her claims for breach of fiduciary duty, conversion, and replevin against respondents Gerring Properties, Inc., Martin T. Gerring, Virginia Gerring, Steven M. Gerring, Mathew S. Gerring, and Steven R. Gerring. Appellant also challenges the district court's conclusion that respondents acted properly in turning over appellant's shares of stock in response to a third-party levy. Because the district court did not err in dismissing this action on the grounds of res judicata and collateral estoppel or in concluding that the third-party levy was valid, we affirm.
DECISION
On September 23, 2002, appellant's sons, Steven R. and Mathew Gerring, obtained a monetary judgment against her. As of July 31, 2003, a newly issued certificate of stock in Gerring Properties in appellant's name was being held at its office for her to pick up. The Hennepin County Sheriff executed a third-party levy on March 12, 2004 to seize the stock certificate to satisfy appellant's sons' judgment against her. Martin Gerring, secretary of Gerring Properties, turned over appellant's stock certificate to the sheriff, and on March 30, 2004, Gerring Properties notified appellant via certified mail that it no longer possessed her stock certificate. At a sheriff's sale on May 18, 2004, the stock certificate was sold to appellant's sons. Subsequently, new stock certificates were issued by Gerring Properties in the sons' names. After this involuntary transfer, appellant was no longer a shareholder of Gerring Properties.
On January 18, 2005, appellant filed an action, alleging that she had been unfairly treated as a shareholder of Gerring Properties in violation of the Minnesota Business Corporation Act (MBCA), Minn. Stat. §§ 302A.251, .361 (2004). The district court granted summary judgment in favor of respondents, and this court affirmed. Gerring v. Quality Car Wash Operations, Ltd., No. A05-2000, 2006 WL 1891919, at *4 (Minn.App. July 11, 2006) (" Gerring I").
In this action, filed on April 12, 2006, appellant alleges that respondents breached their majority-shareholder fiduciary duties to her and committed conversion and replevin because they improperly responded to a third-party levy that was addressed to "Gerring Car Wash" rather than to "Gerring Properties, Inc." The district court dismissed the current action on the grounds of res judicata and collateral estoppel but also determined that respondents had properly responded to the third-party levy.
Respondents assert that they cannot be held liable to appellant on her tort claims because they are protected as "third parties" under Minn. Stat. § 550.135, subd. 11 (2004). This argument was not raised in the district court, so it will not be considered by this court. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).
In reviewing a dismissal for failure to state a claim upon which relief can be granted under Minn. R. Civ. P. 12.02(e), this court considers whether the complaint sets forth a legally sufficient claim for relief. Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997).
I.
The application of the doctrine of res judicata to preclude a claim is a question of law subject to de novo review. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn. 2004). The application of the doctrine of collateral estoppel is a mixed question of law and fact subject to de novo review. Falgren v. State Bd. of Teaching, 545 N.W.2d 901, 905 (Minn. 1996).
A. Res Judicata
The district court did not err in dismissing this action on the ground of res judicata because the previous action involved the same set of factual circumstances and appellant had a full and fair opportunity to litigate the validity of the March 2004 levy in the first action.
Res judicata is designed to prevent the relitigation of claims and applies when a subsequent claim is based on an action previously determined, regardless of the issues raised or actually litigated in the initial action. Hauschildt, 686 N.W.2d at 840. It is also referred to as "claim preclusion." Id. at 837. Res judicata applies as an absolute bar to a subsequent claim when: (1) the prior claim involved the same set of factual circumstances; (2) the prior claim involved the same parties or their privies; (3) there was a final judgment on the merits; and (4) the estopped party had a full and fair opportunity to litigate the matter. Hauschildt, 686 N.W.2d at 840.
A party cannot avoid the application of res judicata by changing its theory of liability in a subsequent action. Porta-Mix Concrete, Inc. v. First Ins. E. Grand Forks, 512 N.W.2d 119, 122 (Minn.App. 1994), review denied (Minn. Apr. 28, 1994). Res judicata not only applies to all claims actually litigated, but to all claims that could have been litigated in the prior action. Hauschildt, 686 N.W.2d at 840. "A plaintiff may not split his cause of action and bring successive suits involving the same set of factual circumstances." Id. (quotation omitted); see Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 9 (Minn. 2002) (defining "claim" or cause of action as "group of operative facts giving rise to one or more bases for suing" (quotation omitted)). The "common test for determining whether a former judgment is a bar to a subsequent action is to inquire whether the same evidence will sustain both actions." McMenomy v. Ryden, 276 Minn. 55, 58, 148 N.W.2d 804, 807 (1967).
Appellant does not dispute that there was a final judgment on the merits in the prior action or that the two actions involve substantially the same parties. Appellant argues instead that the facts giving rise to the claims in the two actions are distinct in both time and substance. Appellant alleges that she was not afforded a full and fair opportunity to litigate the validity of the levy in the first action because she was not aware of its wording until after the first lawsuit was filed.
Appellant does not challenge any actions that occurred after her first lawsuit was dismissed. Both lawsuits involve the same set of facts surrounding appellant's loss of stock. Appellant filed the first action in January 2005. The levy, execution, and sale challenged in the current action occurred in the spring of 2004. The record establishes that appellant: (1) challenged her sons' claim that resulted in the 2002 judgment against her; (2) was officially notified by Gerring Properties on March 30, 2004 that the sheriff had executed a levy on her shares; and (3) was aware of the May 2004 sheriff's sale before it occurred. Therefore, appellant could have challenged the validity of the levy, execution, and sale when she brought her initial lawsuit in January 2005. The same group of operative facts is involved here, and appellant may not change her theory of liability in a subsequent action. See Porta-Mix Concrete, 512 N.W.2d at 122.
Appellant argued all the same facts at issue here when she opposed respondents' motion for summary judgment in the first action, although she did not plead the same facts in both complaints.
The evidence that would have sustained appellant's first action is the same evidence that appellant would be required to prove in this action. In the first action, appellant had to prove ownership of shares of stock in Gerring Properties in order to raise a claim under the MBCA; she therefore needed to prove that the levy, execution, and subsequent sale were improper.
The question of whether an estopped party had a full and fair opportunity to litigate a matter focuses on "whether there were significant procedural limitations in the prior proceeding, whether the party had the incentive to litigate fully the issue, or whether effective litigation was limited by the nature or relationship of the parties." State v. Joseph, 636 N.W.2d 322, 328 (Minn. 2001). Nothing in the record indicates that appellant was prevented from fully litigating all claims in the first lawsuit. Appellant knew about the levy before filing the first lawsuit, could have obtained a copy of it, and could have challenged its validity in her first complaint. B. Collateral Estoppel
Appellant was not permitted to amend her complaint in the first action because the district court had already granted summary judgment in favor of respondents.
The district court did not err in determining that collateral estoppel also barred appellant's second action. Collateral estoppel applies to specific legal issues that have been adjudicated and is also known as "issue preclusion." Hauschildt, 686 N.W.2d at 837. For collateral estoppel to apply, all of the following elements must be met: (1) the issue must be identical to one in a prior adjudication; (2) there must have been a final judgment on the merits in the prior adjudication; (3) the estopped party must have been a party or was in privity with a party to the prior adjudication; and (4) the estopped party must have been given a full and fair opportunity to be heard on the adjudicated issue. Id. The issue in the litigation in question must have been necessary and essential to the resulting judgment in the prior action. Id.
In her first complaint, appellant alleged violation of the MBCA. In her second complaint, appellant alleged breach of fiduciary duty under the MBCA, conversion, and replevin. Appellant now argues that the issues in the two lawsuits are not identical. But appellant lacked standing to allege a claim under the MBCA because she was no longer a shareholder of Gerring Properties. Gerring I, 2006 WL 1891919, at *4. Because appellant does not have standing to assert claims under the MBCA, there can be no new issues to litigate under the MBCA.
Appellant now alleges conversion and replevin as to the validity of the involuntary transfer of her stock. The validity of the involuntary transfer was already determined in the first action and was a "necessary and essential" issue to the judgment. Id. The district court did not err in determining that appellant's second suit failed to state a claim for conversion and replevin because both claims were barred by collateral estoppel.
II.
Appellant challenges the validity of the third-party levy because it was addressed to "Gerring Car Wash" instead of "Gerring Properties, Inc." Minn. Stat. § 550.135, subd. 2 (2004) states in relevant part: "Other personal property shall be levied on by leaving a copy of the writ of execution and a notice specifying the property levied on, with the person holding it. . . . or, if stock or interest in stock of a corporation, with its president, secretary, treasurer, cashier, officer, or managing agent."
The district court did not err in determining that the levy was valid under the requirements of Minn. Stat. § 550.135, subd. 2. The levy was directed to "Gerring Car Wash, 1405 Wayzata Blvd. E., Wayzata, MN 55391-1949" and specified that the sheriff levy upon the interest of appellant "Mary Jo K. Gerring." The levy also stated that the sheriff should obtain the "Stock Certificate Share No. 10 for 10 Shares Issued 7-31-2003 belonging to the above named defendant. . . ." The sheriff executed the levy by obtaining appellant's shares of stock from Martin Gerring, the secretary of Gerring Properties.
The Gerrings run a business commonly referred to as the "Gerring Car Wash" through Gerring Properties, Inc. Both have the same address. Although the levy was directed to "Gerring Car Wash," it did not appear to create any confusion as to whom it was directed. The record makes clear that appellant owed her sons money and that appellant's shares of stock in Gerring Properties were turned over and sold as a result of the levy. The fact that the business name on the levy was not technically correct does not make the levy invalid under Minn. Stat. § 550.135, subd. 2. The levy adequately described the property to be turned over and was left with the proper person; thus the requirements of Minn. Stat. § 550.135, subd. 2 were met.