Opinion
No. C8-98-2338.
Filed June 1, 1999.
Appeal from the District Court, Ramsey County, File No. C7-98-00284.
Todd F. Bassinger, (for appellant)
William I. Kampf, Nathan T. Riordan, and Jan Stuurmans, (for respondent)
Considered and decided by Shumaker, Presiding Judge, Randall, Judge, and Harten, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellant challenges adverse summary judgment in this action for dissolution of a partnership and account reconciliation. Appellant asserts that the district court erred in determining that his claims are barred by the doctrine of res judicata. We reverse and remand.
FACTS
In 1986, appellant Victor Stein and respondent Thomond O'Brien formed Kellogg Cedar Limited Partnership (the partnership) for the purpose of acquiring, holding, and operating a St. Paul office building and parking lot. Both Stein and O'Brien served as general and limited partners, and both held an equal interest in the partnership. In 1996, Stein brought an action against O'Brien alleging that O'Brien had breached his contractual and fiduciary duties by failing to contribute one-half of the capital for the partnership operations and that O'Brien had been unjustly enriched. The district court granted summary judgment to O'Brien and dismissed Stein's complaint with prejudice. The decision was appealed, and we affirmed. Stein v. O'Brien , 565 N.W.2d 472 (Minn.App. 1997) ( Stein I ).
In Stein I , this court determined that Stein did not have standing to maintain his claims against O'Brien because there had not been an accounting or settlement of partnership affairs. Id. at 474. This court went on to state that even if Stein did have standing, his claims would fail because he had not stated a claim on which relief could be granted. Id. In so concluding, we determined that the partnership agreement did not require the general parties to contribute equally and noted that the agreement stated that in order to require additional capital contributions, 60% of the general partnership interest must vote in favor of the contributions. Id. We also stated that we would not conclude that O'Brien had fiduciary duties arising from the partnership agreement and determined that Stein's unjust enrichment claim, a claim in equity, failed because there was a governing partnership contract. Id. at 474-75.
The partnership was dissolved in October 1997. Stein then commenced the present action, petitioning for dissolution of the partnership and account reconciliation. Stein moved for partial summary judgment on the issue of liability for contributions to the partnership. O'Brien moved for summary judgment based on res judicata and/or collateral estoppel. The district court ordered partial summary judgment in favor of O'Brien and dismissed count two of Stein's complaint, which requested a partnership accounting and reconciliation of accounts. The district court concluded that Stein was barred from "seeking from defendant O'Brien as part of the accounting, monies to match Stein's capital contributions made after the initial capital contribution." The district court stated in its memorandum, "Since [Stein's] legal right to the excess capital contributions has already been decided the doctrine of res judicata bars further litigation." (Citation omitted.) Final judgment was entered to permit immediate appeal.
DECISION
On appeal from summary judgment, a reviewing court determines whether there are any genuine issues of material fact and whether the district court erred in applying the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990). The appellate court "must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo , 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
The parties agree that there are no disputed facts. The only issue is whether res judicata bars Stein's claim. Whether res judicata applies is a question of law reviewed de novo on appeal. Hennepin County v. Hanneman , 472 N.W.2d 149, 152 (Minn.App. 1991), review denied (Minn. Aug. 29, 1991).
There are two forms of res judicata: merger or bar (claim preclusion) and collateral estoppel (issue preclusion). Hauser v. Mealey , 263 N.W.2d 803, 806 (Minn. 1978). Here, both parties have tailored their arguments to address the claim preclusion aspect of res judicata. Claim preclusion (often referred to as simply "res judicata") requires: "(1) a final judgment on the merits, (2) a second suit involving the same cause of action, and (3) identical parties or parties in privity." In re Trusts Created by Hormel , 543 N.W.2d 668, 671 (Minn.App. 1996) (citation omitted). A subsequent suit based on the same cause of action is barred "both as to matters actually litigated and as to other claims or defenses that might have been litigated." Roseberg v. Steen , 363 N.W.2d 102, 105 (Minn.App. 1985).
Stein first asserts that there was not a final judgment on the merits in Stein I . As Stein points out, this court concluded in Stein I that Stein did not have standing to bring his claims because the partnership was ongoing. See Sundberg v. Abbott , 423 N.W.2d 686, 688 (Minn.App. 1988), review denied (June 29, 1988) (noting agreement with respondents' assertion that res judicata would be inapplicable if earlier decision was based on lack of standing).
This court did not limit its decision in Stein I to determining standing. Instead, we stated, "Even if we were to conclude that Stein has standing, he fails to state a claim on which relief may be granted." Stein I , 565 N.W.2d at 474; see Wandersee v. Brellenthin Chevrolet Co. , 258 Minn. 19, 28, 102 N.W.2d 514, 520 (1960) (stating where court bases decision on two issues although case could have been disposed of by deciding only one issue, decision is binding on both issues). Most importantly, however, the district court in Stein I , dismissed the complaint with prejudice. A case dismissed with prejudice, even on nonsubstantive grounds, is an adjudication on the merits. Johnson v. Hunter , 447 N.W.2d 871, 873 (Minn. 1989). Thus, because this court affirmed the district court's decision dismissing Stein's complaint with prejudice in Stein I , there was an adjudication on the merits.
Stein also asserts that the parties in this case are not the same as the parties in Stein I . It is true that Stein and O'Brien were the parties in Stein I , while in this case the parties are Stein, O'Brien, and the partnership. Despite this, the partnership was a party in privity with Stein and O'Brien, as O'Brien and Stein owned the entire partnership. See 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) ("'Privies' to a judgment are those who are so connected with the parties in estate or in blood or in law as to be identified with them in interest, and consequently to be affected with them by the litigation." (quotation omitted)).
Stein further argues that this case does not involve the same cause of action as Stein I . He explains that in the prior action he asserted breach of contract and fiduciary duties claims and asserted that O'Brien had been unjustly enriched, while in this action he asserts that he is entitled to an accounting and reconciliation of the partnership's accounts. He argues that the claim he raises in this action was not available to him during the prior litigation as the partnership was ongoing. He emphasizes that res judicata does not prevent a party from asserting rights that accrue after judgment is entered in a prior case. See Sonsteby v. Hagen , 289 N.W.2d 171, 172 (Minn. 1980) (holding judgment in prior case is not res judicata as to any claim for subsequent conduct).
As Stein notes, in Stein I he could not have raised the issue he has asserted in this action by merely amending his Stein I complaint. Instead, the parties would have had to first commence partnership dissolution proceedings. The cause of action in this case arose after the dissolution and it relies on the dissolution provisions of the partnership agreement, rather than the agreement's provisions for an ongoing partnership. See Hormel , 543 N.W.2d at 673 ("A prior judgment may not preclude subsequent litigation if the facts have changed."). This court specifically stated in Stein I , "We express no opinion on what claims might or might not be available to Stein in a dissolution proceeding." Stein I , 565 N.W.2d at 475. Thus, the claim in this case did not arise from the same cause of action as Stein I . See Sundberg II , 423 N.W.2d at 690 (stating "cause of action is a situation or a state of facts which entitles a party to sustain an action and gives him the right to seek a judicial remedy" (citation omitted)).
Although there was a final judgment on the merits in Stein I and identical parties or parties in privity were involved in both cases, Stein's claim in this case does not involve the same cause of action as in Stein I . Because it does not involve the same cause of action, the district court erred in concluding that res judicata barred Stein's claim. We express no opinion on the merits of Stein's claim.