Collateral Estoppel and Res Judicata--res judicata--claim preclusion--compulsory
counterclaims--opportunity to assert in appeal from magistrate's judgment
The trial court did not err by granting defendants' renewed motions for directed verdict on
the retaliatory eviction and unfair trade practices claims in a second action based on res judicata
after a summary ejectment proceeding, because: (1) plaintiffs should have asserted their rights in
the summary ejectment proceeding by way of a compulsory counterclaim since the determinative
question in both actions is whether plaintiffs breached their respective lease agreements making
defendants' termination of the lease agreements valid; and (2) even though plaintiffs could not
have asserted this action as a compulsory counterclaim to the summary ejectment proceeding
while it was before the magistrate since plaintiffs seek damages in excess of the $3,000
jurisdictional amount in small claims actions under N.C.G.S. § 7A-210(1), plaintiffs had the
opportunity to file retaliatory eviction as a counterclaim under N.C.G.S. § 1A-1, Rule 13 in an
appeal from the magistrate's judgment. N.C.G.S. § 7A-219.
John E. Tate, Jr. for the plaintiff-appellants.
Prince, Youngblood & Massagee, by Boyd B. Massagee, Jr., for
the defendant-appellees.
LEWIS, Judge.
Effective appellate review of this case was made more
difficult by the filing of an incomplete record on appeal. The
parties' exhibits, which were necessary to an understanding of
appellants' assignments of error, were not included in the record
in this case. The Rules of Appellate Procedure require appellants
to present complete records as necessary to understand the errors
assigned. N.C.R. App. P. 9(a)(1)(e),(j). We could have dismissed
this appeal for failure to comply with the Rules of AppellateProcedure. N.C.R. App. P. 25(b); 34(b)(1). However, we waived the
violation pursuant to Appellate Rule 2, obtaining most of these
documents through numerous contacts with counsel by the Clerk of
this Court. We caution all appellants in the future to be more
diligent in complying with the Rules of Appellate Procedure.
Plaintiff Edwin Fickley ("Fickley") and plaintiffs Donald and
Coral Smith ("the Smiths") purchased double wide manufactured homes
from defendant Greystone Enterprises, Inc. ("Greystone") in 1992
and 1988, respectively. Fickley and the Smiths leased lots for
their manufactured homes in Greystone Subdivision, a residential
rental community owned by Greystone. Both lease agreements
provided that "[i]tems excluded and forbidden from Greystone
[subdivision] shall include . . . 'For Sale,' 'For Rent' and other
signs used for advertising purposes." Fickley and the Smiths
subsequently placed "For Sale" signs on their respective leased
premises, and defendants terminated both leases. When the
plaintiffs failed to vacate the respective premises, on 25 May
1993, Greystone instituted two summary ejectment proceedings
against them. On 3 June 1993 the magistrate entered a judgment for
summary eviction in both proceedings.
Neither Fickley nor the Smiths properly perfected an appealfor de novo review in district court from the magistrate
's
judgment. Instead, plaintiffs instituted this action for damages
("second action") on 27 November 1996 in superior court against
Greystone, David Osteen, president of Greytone, and Connie Osteen,
vice-president of Greystone, ultimately asserting claims for
retaliatory eviction and unfair trade practices. Specifically,plaintiffs alleged defendants evicted them as a result of
"animosity" arising from plaintiffs' participation in the Greystone
subdivision homeowners' association and for placing "For Sale"
signs on their leased premises. In their answer, defendants
asserted as affirmative defenses that the claims in the second
action were compulsory counterclaims under Rule 13(a) and thus
barred by the doctrine of res judicata.
At trial, the court submitted the retaliatory eviction and
unfair trade practices claims to the jury, which was unable to
reach a unanimous verdict. The court declared a mistrial and
subsequently conducted a hearing on defendant's renewed motion for
directed verdict, which the court granted. Plaintiffs appeal.
Plaintiffs contend the trial court erred in granting
defendants' renewed motion for directed verdict on the basis that
sufficient evidence supported each claim. Defendants maintain the
court properly dismissed plaintiffs' claims since, pursuant to
their asserted affirmative defenses, the claim for retaliatory
eviction was a compulsory counterclaim which should have been
asserted in the prior summary ejectment proceeding. Defendants
argue plaintiffs are thereby precluded by the doctrine of res
judicata from asserting either of the claims in the second action.
We agree.
Where a defendant establishes an affirmative defense as a
matter of law, there are no issues to submit to a jury and a
plaintiff has no right to recover. Directing a verdict for the
defendant in such a situation is appropriate. Goodwin v. InvestorsLife Insurance Co. of North America, 332 N.C. 326, 329, 419 S.E.2d
766, 768 (1992). Under the doctrine of res judicata:
Where a second action or proceeding is between
the same parties as the first action or
proceeding, the judgment in the former action
or proceeding is conclusive in the latter not
only as to all matters actually litigated and
determined, but also as to all matters which
could properly have been litigated and
determined in the former action or proceeding.
Young v. Young, 21 N.C. App. 424, 204 S.E.2d 711 (1974) (citations
omitted).
We conclude plaintiffs should have asserted their rights in
the summary ejectment proceeding by way of a compulsory
counterclaim. Generally, a counterclaim is compulsory if "it
arises out of the transaction or occurrence that is the subject
matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot
acquire jurisdiction." N.C.R. Civ. P. 13(a). To determine whether
a claim arises out of the same transaction or occurrence as a prior
claim, the court must consider: "(1) whether the issues of fact
and law are largely the same; (2) whether substantially the same
evidence is involved in each action; and (3) whether there is a
logical relationship between the two actions." Cloer v. Smith, 132
N.C. App. 569, 574, 512 S.E.2d 779, 782 (1999) (quoting Brooks v.
Rogers, 82 N.C. App. 502, 507-08, 346 S.E.2d 677, 681 (1986)).
Here, the action for summary ejectment was based on the
assertion that plaintiffs violated the terms of their respective
lease agreements with Greystone. The second action is based on
allegations that defendants terminated their lease agreements inretaliation for certain of plaintiffs' actions and exercised the
remedy of summary ejectment in an effort to deprive plaintiffs of
their investment. Although in the second action Fickley and the
Smiths seek damages, and in the summary ejectment action,
defendants sought injunctive relief, the determinative question in
both actions is whether Fickley and the Smiths breached their
respective lease agreements, making defendants' termination of the
lease agreements valid. Because the issues of fact and law are
largely the same, substantially the same evidence is involved in
both and the actions are logically related, the second action was
a compulsory counterclaim in the summary ejectment action filed by
defendants. See also Cloer, 132 N.C. App. at 574, 512 S.E.2d at
782.
In the second action, however, plaintiffs seek damages in
excess of $10,000, which exceeds the $3,000 jurisdictional amount
in small claims actions pursuant to the provisions of N.C. Gen.
Stat. § 7A-210(1) at the time the second action was filed.
Accordingly, plaintiffs could not have asserted this action as a
compulsory counterclaim to the summary ejectment proceeding while
it was before the magistrate. N.C. Gen. Stat. § 7A-219 (1999) ("No
counterclaim . . . which would make the amount in controversy
exceed the jurisdictional amount established by G.S. 7A-210(1) is
permissible in a small claim action assigned to a magistrate.")
Instead, plaintiffs were required to file the action, if at all, in
an appeal from the magistrate's decision to the district court.
N.C. Gen. Stat. § 7A-220 (1999) ("On appeal from the judgment ofthe magistrate for a trial de novo before a district judge
, the
judge shall allow appropriate counterclaims . . . ."); see also
Cloer, 132 N.C. App. at 574-75, 512 S.E.2d at 782-83 (counterclaim
for an amount in excess of $10,000 would have been properly filed
on appeal from the judgment of a magistrate to district court).
Rule 13 requires a party to assert as a counterclaim any claim
arising out of the same transaction or occurrence as the pending
action, "at peril of being barred" from asserting the claim in a
separate action. Comment, N.C.R. Civ. P. 13 (1999). Because
plaintiffs had the opportunity to file retaliatory eviction as a
counterclaim in an appeal from the magistrate's judgment, the
doctrine of res judicata barred plaintiffs from asserting either
the underlying retaliatory eviction claim or the unfair trade
practices claim in the second action. See, e.g., Furr v. Noland,
103 N.C. App. 279, 281, 404 S.E.2d 885, 886 (1991).
In their remaining assignments of error, plaintiffs contend
the court erred in refusing to submit several issues to the jury.
However, by directing a verdict in favor of defendants, the action
was completely removed from the jury's consideration. Plaintiffs'
contentions surrounding the court's refusal to submit issues to the
jury are thereby rendered moot, and we will not address them.
Affirmed.
Judges WALKER and HUNTER concur.
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