Moore v. Nissan Motor Acceptance Corp.

WILNER, J. The ultimate issue before us is whether the Circuit Court for Baltimore County erred in dismissing appellant’s complaint on the ground that it was barred by res judicata. We shall conclude that it did and shall therefore reverse the judgment. BACKGROUND In July, 1995, appellant Agnes Moore purchased a Nissan Altima and financed it through a retail installment contract that was assigned by the seller to appellee, Nissan Motor Acceptance Corporation (NMAC). Under the contract, Moore agreed to make 60 monthly payments of $353.

The contract provided that the creditor’s rights were subject to the applicable law of Maryland. In the Spring and summer of 1998, Moore fell behind in her monthly payments, and, in August of that year, NMAC repossessed the car. Md.Code, § 12-1021(e) of the Commercial Law Article, requires a creditor, within five days after repossessing proper ⁵⁶⁰ ty, to deliver personally or send by certified mail to the borrower written notice stating (1) the right of the borrower to redeem the property and the amount payable; (2) the rights of the borrower as to resale and his/her liability for a deficiency; and (3) the location where the property is stored and the address where payment may be made. Moore claimed that she never received that notice.

The car was sold for $5,200, leaving a deficiency (including cost of sale) of $4,628. NMAC filed suit against Moore in the District Court to collect that deficiency, plus interest and attorneys’ fees. Moore defended on the ground that she never received the required notice. Section 12-1018(2) of the Commercial Law Article provides that, except for a bona fide error of computation, if a creditor violates “any provision of this subtitle,” which would include § 12-1021, the creditor may collect only the principal amount of the loan and may not collect any interest, costs, fees, or other charges with respect to the loan.

The issue at trial came down to whether the notice required by § 12-1021(e) had been sent. A financial services manager for NMAC testified that the notice was sent by certified mail, and he produced a document, referred to as a “receipt,” purportedly establishing that fact. The document was not stamped by the post office, however, and apparently did not contain appellant’s signature. There was some evidence that the document was prepared by NMAC and “scanned” before presentation to the post office, leading Moore to argue that the receipt did not establish that notice had actually been sent.

The witness conceded that he did not personally mail the notice. As noted, Moore flatly denied ever having received the notice. The District Court, at least inferentially, concluded that the notice was sent, as it ruled that NMAC had complied with the requirements of the Commercial Code. It therefore entered judgment in favor of NMAC.

The Circuit Court for Baltimore County, on Moore’s appeal, reversed the District Court judgment, holding that the unstamped receipt did not suffice to establish an actual mailing ⁵⁶¹ of the notice. Noting that NMAC had not produced a return receipt containing Moore’s signature, it concluded that NMAC had presented no evidence that the required notice was sent. Eleven months later, Moore sued NMAC and its attorneys for $100,000 and $25,000, respectively. Count I, against NMAC, was based solely on its failure to give the statutory notice.

The three counts against the lawyers alleged false and misleading misrepresentations. Moore eventually dismissed the lawyer-defendants and, in an amended complaint, reduced her claim for damages to $25,000. The allegations against NMAC were, at best, scant. Moore alleged that she was entitled to recover any loss sustained by reason of NMAC’s failure to provide the required notice and that she “has sustained and will continue to sustain damages.” NMAC moved to dismiss the complaint on the ground of res judicata — that Moore’s action rested entirely on whether NMAC had provided the requisite notice, which was decided in the earlier case and could not be relitigated.

NMAC relied on Singer v. Steven Kokes, Inc., 39 Md.App. 180 , 384 A.2d 463 (1978) for that proposition. Moore responded that the case was controlled not by Singer , but by Rowland v. Harrison, 320 Md. 223 , 577 A.2d 51 (1990). The court agreed with NMAC that Singer was controlling and dismissed the complaint. Moore appealed, and we granted certiorari prior to proceedings in the Court of Special Appeals in order to determine the extent to which the pronouncements made by the Court of Special Appeals in Singer remain applicable in light of Rowland .

The issue, in a nutshell, is whether a party, who (1) is sued as a defendant, (2) successfully raises a particular defense that defeats all or part of the plaintiffs claim, but (3) does not file a counterclaim seeking affirmative relief based on that defense, may, in a subsequent action, sue as a plaintiff on the basis of that defense. DISCUSSION Singer arose out of a construction dispute. The Singers had contracted with Kokes for the construction of a house. When ⁵⁶² the house , was completed, the Singers took possession but refused to release the final draw on the construction loan.

Kokes filed a mechanic’s lien and an action to enforce it. In defense of that action, the Singers alleged certain defects in the construction and Kokes’s failure to complete the project on time. The court rejected the timeliness of completion defense but awarded a credit against the lien of $1,850 by reason of the construction defects asserted by the Singers. Thereafter, the Singers sued Kokes for negligence and breach of warranty based on 141 other defective items, of which they claimed they were unaware at the time of the mechanic’s lien action.

The Circuit Court granted summary judgment to Kokes based on res judicata, and the Court of Special Appeals affirmed. The appellate court explained that the doctrine of res judi-cata embodied two branches — direct estoppel and collateral estoppel. Direct estoppel, it said, prevents the relitigation of all matters that were raised or that could have been raised in a prior action between the same parties on the same cause of action. Collateral estoppel, on the other hand, applies where the second suit is based on a different cause of action and serves to bar the relitigation of only those issues actually decided in the first action.

One aspect of direct estoppel, the court concluded, was that “a party must raise all defenses he has to a cause of action and once that action is concluded he cannot use a defensive matter as a basis for relief in a subsequent action between the parties.” Singer, 39 Md.App. at 182 , 384 A.2d at 465 . The court noted that, if a matter is “not in the nature of a defense but constitutes a counterclaim, the general rule is that the party is not required to assert the claim unless the subject matter is such an integral part of the issue being litigated that a judgment would necessarily negate the existence of facts essential to its maintenance.” Id., at 182-83 , 384 A.2d at 465 . In the particular case, the court concluded that the two actions were not different but the same. The nature of the credit the Singers asserted in the mechanic’s lien case “was based on the same breach of warranty that serves as the basis for the present litigation.” Id, at 183, 384 A.2d at 466 .

The ⁵⁶³ court rejected, factually, the assertion that the Singers were unaware of the additional defects at the time of the mechanic’s lien case, noting that they had resided in the house for over eleven months prior to the filing of that action. Rowland v. Harrison arose from a dispute between a horse-owner and a veterinarian. In June, 1986, Rowland sent her horse to Harrison’s farm to be boarded and treated for a vaginal infection. While at the farm, the horse contracted colic which, according to Rowland, Harrison failed to treat.

After Rowland removed the horse, it collapsed from the effect of the disease and, as a result of Harrison’s further failure to respond to calls for assistance, it had to be destroyed. Rowland refused to pay for the professional and boarding services performed by Harrison. In September, 1987, Harrison sued Rowland in the District Court for the value of those services — $1,215. Rowland removed the case to the Circuit Court for a jury trial and defended on the ground of breach of contract in the care of the horse and professional malpractice.

She also filed a separate action for malpractice and moved either to stay the debt case or to consolidate the two cases. Upon the denial of that motion, Rowland filed a counterclaim in the debt action, asserting the same claim embodied in her malpractice action. When the court denied her request for postponement or severance, based on her inability at the time to present her defense, she moved to dismiss the counterclaim without prejudice, which the court granted. On the limited evidence presented, the court, acting