1. Appeal and Error--appealability--summary judgment--res judicata--substantial
right
The denial of a motion for summary judgment on the basis of res judicata affects a
substantial right and entitles a party to an immediate appeal.
2. Collateral estoppel and res judicata--claims precluded--issues precluded
Res judicata precludes a second suit involving the same claim between the same parties
or those in privity with them when there has been a final judgment on the merits in a prior action
in a court of competent jurisdiction. A judgment operates as an estoppel not only as to all
matters actually determined or litigated in the proceeding, but also as to all relevant and material
matters within the scope of the proceeding which the parties, in the exercise of reasonable
diligence, could and should have brought forward for determination.
3. Collateral estoppel and res judicata--new or different grounds for relief--
malpractice--fraud
The trial court erred by failing to grant summary judgment for defendants based on the
doctrine of res judicata. Plaintiff's first action alleged legal malpractice and his second action
alleged fraud because defendants failed to inform him that he had no claim in his discrimination
lawsuit. Except in special circumstances, res judicata may not be avoided by shifting legal
theories or by asserting a new or different ground for relief because a party is required to bring
forth the whole case at one time and will not be permitted to split the claim or divide the grounds
for recovery. While fraud may not be in the nature of legal malpractice under the relevant
statute of limitations, the substance of the two claims in the instant case are so intertwined that
they are essentially the same claim under different legal theories.
Appeal by defendants from judgment entered 9 July 1998 by
Judge James U. Downs in Mecklenburg County Superior Court. Heard
in the Court of Appeals 22 April 1999.
Jerry D. Jordan for plaintiff-appellee.
Poyner & Spruill, L.L.P., by E. Fitzgerald Parnell, III and
Parmele P. Calame, for defendant-appellants.
HUNTER, Judge.
James M. Little (“plaintiff”) is a former employee of the
United States Postal Service (“Postal Service”). In February
1993, some time after retiring from his position, plaintiff
retained defendant Helms, Cannon, Hamel and Henderson (“Helms
Cannon”) to represent him in the prosecution of a discrimination
and a retaliation claim against the Postal Service. On behalf of
plaintiff, Helms Cannon filed a lawsuit (“discrimination
lawsuit”) on 12 March 1993 in the United States District Court
for the Western District of North Carolina alleging that the
Postal Service “conspir[ed] to harass, discriminate, and
retaliate against [him] in order to deprive [him] of his civil
rights, to frustrate [him] in his job and render [him] totally
ineffective, to undermine [his] authority, and to prevent [his]
advancement in the Postal Service, and destroy [his] career with
the Postal Service.” The discrimination lawsuit was dismissed
pursuant to defendants' motion on 27 June 1994 in a memorandum of
decision and order by United States District Court Judge Robert
D. Potter, on the grounds that it was barred by the relevant
statute of limitations and the doctrine of sovereign immunity. Plaintiff filed a lawsuit (“Case I”) against Helms Cannon on
25 July 1996 in which he alleged that it was negligent in its
representation of him in the discrimination lawsuit. Helms
Cannon was granted summary judgment on 18 September 1997, and the
plaintiff did not appeal.
Plaintiff filed the present case “Case II”) on 22 September
1997 jointly and severally against William B. Hamel, an attorney
with Helms Cannon, and Helms Cannon (collectively “defendants”),
alleging they committed fraud by failing to inform plaintiff that
he had no claim in the discrimination lawsuit under the relevant
statute of limitations and the doctrine of sovereign immunity.
Defendants' motion for summary judgment was denied by Judge Downs
on 9 July 1998. Defendants appeal.
Defendants contend that the trial court committed error by
failing to grant summary judgment based on the doctrine of res
judicata.
[1]The denial of a motion for summary judgment is not
immediately appealable unless it affects a substantial right.
N.C. Gen. Stat. § 7A-27 (1995). The denial of a motion for
summary judgment on the basis of res judicata affects a
substantial right and thus, entitles a party to an immediate
appeal. Bockweg v. Anderson, 333 N.C. 486, 428 S.E.2d 157
(1993). Therefore, defendants' appeal is properly before thisCourt.
[2]The doctrines of res judicata (claim preclusion) and
collateral estoppel (issue preclusion) are companion doctrines
which have been developed by the Courts “for the dual purposes of
protecting litigants from the burden of relitigating previously
decided matters and promoting judicial economy by preventing
needless litigation.” Bockweg, 333 N.C. at 491, 428 S.E.2d at
161. Res judicata precludes a second suit involving the same
claim between the same parties or those in privity with them when
there has been a final judgment on the merits in a prior action
in a court of competent jurisdiction. Northwestern Financial
Group v. County of Gaston, 110 N.C. App. 531, 536, 430 S.E.2d
689, 692-93 (1993). A judgment operates as an estoppel not only
as to all matters actually determined or litigated in the
proceeding, “but also as to all relevant and material matters
within the scope of the proceeding which the parties, in the
exercise of reasonable diligence, could and should have brought
forward for determination.” Rodgers Builders v. McQueen, 76 N.C.
App. 16, 22, 331 S.E.2d 726, 730 (1985).
[3]In the present case, this Court must determine if the
judgment in Case I precludes the present case. It is clear that
Case I was brought before a court of competent jurisdiction and
that a final judgment on the merits was obtained by the entry ofsummary judgment. It is also clear that identical parties are
involved. Case I was brought by the plaintiff against Helms
Cannon. There is a difference in the present case in that
William B. Hamel is a defendant; however, Hamel is quite
obviously in “privity with” Helms Cannon since he is an attorney
with the firm (and was at the time Case I was filed) and the suit
concerns his representation of the plaintiff. Therefore, the
only issue before this Court is whether or not the plaintiff has
brought the same claim herein as he brought in Case I and, if
not, whether the claim being brought here could and should have
been brought in Case I.
Plaintiff filed Case I alleging malpractice by defendant law
firm in the discrimination lawsuit. Therefore, using reasonable
diligence, the law firm should have brought forth any claim
relating to defendants' representation of plaintiff in the
discrimination lawsuit. Nevertheless, plaintiff has filed the
present case based on defendants' alleged fraud related to the
discrimination lawsuit, asserting that because fraud and
malpractice are separate and distinct causes of action for
purposes of statute of limitations, Sharpe v. Teague, 113 N.C.
App. 589, 439 S.E.2d 792 (1994), they are therefore separate and
distinct for purposes of res judicata.
In Sharpe, plaintiff sued defendant law firm for negligence,breach of contract, fraud and breach of fiduciary duty.
Defendant contended that all actions were in the nature of legal
malpractice and therefore one statute of limitations applied.
This Court disagreed, stating: “[f]raud by an attorney . . . is
not within the scope of 'professional services' as that term is
used in N.C. Gen. Stat. § 1-15(c), and thus cannot be
'malpractice' within the meaning of the statute.” Sharpe at 592,
439 S.E.2d at 794.
While fraud may not be in the nature of legal malpractice
under the relevant statute of limitations, the causes of action
in Sharpe were all based on the same relevant facts, i.e., the
defendants' representation of the plaintiff. The plaintiff in
Sharpe brought all claims related to defendants' representation
of her within the same suit. This Court has held:
A party is required to bring forth the whole
case at one time and will not be permitted to
split the claim or divide the grounds for
recovery; thus, a party will not be
permitted, except in special circumstances,
to reopen the subject of the arbitration or
litigation with respect to matters which
might have been brought forward in the
previous proceeding.
Rodgers, 76 N.C. App. at 23, 331 S.E.2d at 730. “The defense of
res judicata may not be avoided by shifting legal theories or
asserting a new or different ground for relief.” Id. at 30, 331
S.E.2d at 735. In his complaint in the present case, plaintiff addresses
defendants' alleged fraud as inducing him to pay the defendants a
retainer and incur costs and expenses as a result of the
representation of him. He also claims that defendants “ignored
the existence of barriers to successful litigation” in their
prior representation of him. It is obvious that the substance of
the present claims are so intertwined with a cause of action for
legal malpractice that they are, essentially, the same claim
under different legal theories. The present claims would also
have been material and relevant to the claims in Case I.
Even if defendants concealed from plaintiff that certain
rules barred his discrimination lawsuit, plaintiff was informed
of their applicability to that suit and therefore the potential
fraud of defendants by the order of the United States District
Court dismissing the case on 27 June 1994. Plaintiff cannot deny
notice of the order since he referenced and included it as an
exhibit to his complaint in Case I. Therefore, his assertion
that he did not have knowledge of the potential fraud at the time
Case I was adjudicated is unconvincing.
Plaintiff, with knowledge at the time Case I was adjudicated
of all potential claims stemming from defendants' representation
of him, has failed to show any special circumstances warranting
an exception to the Rodgers rule of res judicata. We thereforehold that plaintiff's cause of action is barred. Accordingly, we
reverse and remand to the trial court to enter an order granting
summary judgment to defendants.
Reversed and remanded.
Judges WYNN and WALKER concur.
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