Pat Perusse Realty Co. v. Lingo

Hammond, C. J., delivered the opinion of the Court. The Maryland Reports are a repository of many suits by real estate brokers for unpaid commissions; mostly they have turned in varying aspects on whether the broker had procured a purchaser ready, willing and able to buy. The present appeal also turns on this point, albeit in a way that has not heretofore presented itself. Ted Lingo and Elizabeth, his wife, owned their residence in Burning Tree Estates in Montgomery County.

Because their marriage was on the rocks — a divorce was in the offing — they decided to sell it. The contract they both signed provided that the broker, the appellant, Pat Perusse Realty Company (Perusse), was to receive $3,300 as a commission on the agreed sales price of $33,000. Mrs. Lingo, who had moved from Maryland to Virginia, refused to consummate the sale. The broker sued both Ted and Elizabeth in the Circuit Court for Montgomery County.

Ted was served; there were two non-ests as to Elizabeth. Perusse learned that a Maryland resident owed Elizabeth money and issued an attachment. Thereafter Perusse, having mailed to Elizabeth advices as to the pendency and trial of the suit, elected to proceed against Ted. Judge Mathias determined that there had been offered no proof that Perusse had procured a ready, willing and able buyer.

There was no appeal. Later, Perusse attempted to collect its claimed commission in the attachment against the debtor of Elizabeth. Her stated defense was res judicata on the ground that Perusse’s only claimed right to recover against her was exactly the same as had been its claimed right to recover against Ted, and since Judge Mathias had decided it had no right to recover against Ted, this conclusively determined it had no right to recover against her. ³⁵ The basic rule of res judicata is that facts or questions which were in issue in a previous action and were therein determined by a court which had jurisdiction of the parties and the subject matter are conclusively settled by a final judgment in the first case and may not again be litigated in a subsequent action between the same parties or their privies even though the subsequent suit takes a different form or is based on a different cause of action. Sterling v. Local 438, etc., 207 Md. 132 ; Snodgrass v. Stubbs, 192 Md. 287 ; De Maio v. Lumbermens Mutual, 247 Md. 30 .

A corollary of this rule has been the theory of mutuality— that estoppels must be mutual and one (as it happened a plaintiff in the second suit) who himself was not bound by the prior judgment cannot assert res judicata against him to whom it was-adverse. Groshon v. Thomas, 20 Md. 234 . The rule of mutuality always has had exceptions, modifications and extensions, as Cecil v. Cecil, 19 Md. 72, 79 , recognized. Having said in that case what Groshon repeated, that estoppels must be mutual and bind and operate on both parties and their privies to be applicable, and may be used neither by nor against strangers, the Court added: “Justice requires that every cause be once fairly and impartially tried; but the public tranquility demands that having been once so tried, all litigation of that question, and between those parties, should be closed forever.

It is also a most obvious principle of justice, that no man ought to be bound by proceedings to which he was a stranger; but the converse of this rule is equally true, that by proceedings to which he was not a stranger, he may well be held bound. Under the term parties, in this connection, the law includes all who are directly interested in the subject matter, and had a right to make a defense, or to control the proceedings and to appeal from the judgment. This right involves also the right to adduce testimony and to cross-examine the witnesses on the other side. Persons not having these rights, are regarded as strangers to the cause.

But to give full effect to the principle by which ³⁶ parties are held bound by a judgment, all persons who are represented by the parties, and claim under them, or in privity with them, are equally concluded by the same proceedings.” The wall of mutuality never having been solid, the likely has happened and courts have gradually widened the breaches. In Curtis v. Baptist Union Ass’n, 176 Md. 430, 437 , the Court reiterated the applicability of the rule of mutuality but quoted with approval 34 C. J. Judgments § (1405) — 2 as follows: “ ‘This rule, that there must be a substantial identity of parties as well as of the subject matter, is based on the fundamental principle that no man can be deprived of his property except by due process of law, a principle which in the United States has been embodied in the federal constitution and in the constitutions of the several states. In applying the rule the courts have allowed themselves a good deal of latitude, observing the spirit of it rather than the letter, and there are some well recognized exceptions to or modifications of it.’ ” In Williams v. Messick, 177 Md. 605 , an individual defen•dant who was the majority stockholder and manager of a corporation defended a suit seeking a receiver for the corporation by asserting that the identical issues had previously been liti.gated in a suit directly against the corporation. The Court of Appeals went outside the record and, on a point not raised or •argued, assumed mutuality by assuming that the individual defendant had actually controlled the defense of the first suit because he was the majority stockholder and manager of the corporation.

In Baker v. Cooper, 166 Md. 1, 13 , Judge Parke, for the Court, held that a Maryland resident, the sole distributee of a Maryland intestate, was sufficiently represented by an ancillary administrator appointed in Delaware against whom a claimant had obtained a judgment for money due him by the intestate, to require the Delaware judgment to be given effect in Maryland against the distributee. The Court said: “So, under the term ³⁷ ‘parties/ all persons who are represented by the [actual] parties, and claim under them, or in privity with them, are equally concluded by the same proceedings.” See also Myers v. Gordon, 165 Md. 534 ; Ugast v. LaFontaine, 189 Md. 227, 232 ; Keitz v. National Paving Co., 214 Md. 479, 500-03 . Other jurisdictions recently have made further breaches in the wall of mutuality. An early and leading one was the decision in the Delaware case of Coca-Cola Co. v. Pepsi-Cola Co., 172 A. 260 (Sup.

Ct. Del. 1934). The Court there examined the rule of mutuality and the exceptions based on privity, derivative connection or liability over (see Restatement Judgments §§ 89, 95 and 96 (1942)) and concluded that the case before it— one in which the plaintiff had previously unsuccessfully litigated as complainant the identical issue on which its present suit was based and there was no relationship between the prior defendants and the present defendant — did not come within any exception theretofore recognized. The Court said (at page 263) : “The classification now considered must, however, be subdivided, for it would seem that two distinct principles are involved (a) Where the plea of res judicata is raised by a party to the prior suit against one who was not such a party; And (b) Where the plea of res judicata is raised by one not a party to the prior suit against one who was such a party. “(a) This first class of cases gives full force and scope to the historical reason of the requirement of mutuality, viz., that no person should be deprived of his property without due process of law. The person against whom the plea is made was not a party to the former proceeding and there is no liability over either way with any person that was a party to the first suit.

There is no privity, if privity be given its generally accepted meaning of having ‘mutuality or successive relationship to the same right of property.’ Questions under this heading could often arise when two joint ³⁸ tort feasors are successively sued by the same plaintiff. A holding that a judgment against the first would be res judicata as to the second could be sustained on no sound principles. “(b) A very different situation arises in the case where res judicata is pleaded by one not a party to the first suit against one who was such party. This is our present case. “It is quite apparent that a direct and decisive conflict now arises between the two principles; of requirement of mutuality of estoppel on the one hand, and, on the other, the basic principle of res judicata, viz., the limitation to a party to one full and free opportunity to try the merits of his case. “The present defendant pleading res judicata was not a party to the former proceeding and the judgment in the former proceeding did not bind it so there is no mutuality. The present plaintiff, against whom the res judicata is pleaded is alleged to have been the unsuccessful plaintiff in the former proceedings where the issues were alleged to 'have been identical with those here involved.

We are not now passing upon the actual existence, as a fact, of the identity of the issues in the two proceedings, for that identity must be proven. But assuming the identity of the issues, we are of the opinion that a plaintiff who deliberately selects his forum and there unsuccessfully presents his proofs, is bound by such adverse judgment in a second suit involving all the identical issues already decided. The requirement of mutuality must yield to public policy. To hold otherwise would be to allow repeated litigation of identical questions, expressly adjudicated, and to allow a litigant having lost on a question of fact to re-open and re-try all the old issues each time he can obtain a new adversary not in privity with his former one.” See Zdanok v. Glidden Company, Durkee Famous Foods Division, 327 F. 2d 944, 954-55 (2d Cir. 1964), wherein Judge Friendly, speaking for himself, Judge Waterman and Chief ³⁹ Judge Lumbard, in applying res judicata where there was no mutuality, said: “This doctrine of the need for mutuality of estoppels, criticized by Bentham over a century ago as destitute of any semblance of reason, and as ‘a maxim which one would suppose to have found its way from the gaming-table to the bench,’ ibid. fn. 14, has been much eroded in recent years.

Perhaps the leading federal decision is Judge Hastie’s in Bruszewski v. United States, 181 F. 2d 419 (3 Cir.), cert. denied, 340 U. S. 865 , 71 S. Ct. 87 , 95 L. Ed. 632 (1950), which this court followed in Adriaanse v. United States, 184 F. 2d 968 (2 Cir. 1950), cert. denied 340 U. S. 932 , 71 S. Ct. 495 , 95 L. Ed. 673 (1951). We see no purpose in multiplying citations since it is recognized that the widest breach in the citadel of mutuality was rammed by Justice Traynor’s opinion in Bernhard v. Bank of America, 19 Cal. 2d 807, 811-813 , 122 P. 2d 892, 894-895 (Calif. 1942). Having explained why ‘The criteria for determining who may assert a plea of res judicata differ fundamentally from the criteria for determining against whom a plea of res judicata may be asserted,’ and that there is ‘no compelling reason * * * for requiring that the party asserting the plea of res judicata must have been a party, or in privity with a party, to the earlier litigation,’ he said: ‘In determining the validity of a plea of res judicata three questions are pertinent: Was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits?

Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?’ ” There is a similar holding (applying the law of Virginia as the court thought the highest Court in Virginia would declare it to be) in Graves v. Associated Transport, Inc., 344 F. 2d 894 (4th Cir. 1965), and in United States v. United Air Lines, Inc., 216 F. Supp. 709, 725-29 (D. Nev., E. D. Wash. 1962), ⁴⁰ aff’d sub nom., United Air Lines, Inc. v. Wiener, 335 F. 2d 379 (9th Cir. 1964), cert. dismissed, 379 U. S. 951 (1964). Other cases reaching the same conclusion include Gammel v. Ernst & Ernst, 72 N. W. 2d 364 (Minn. 1955); Tezak v. Cooper, 164 N. E. 2d 493 (App. Ct. Ill. 1960) ; 1 Crosland-Cullen Company v. Crosland, 105 S. E. 2d 655 (N. C. 1958); Israel v. Wood Dolson Company, 134 N. E. 2d 97 (N. Y. 1956); Desmond v. Kramer, et al., 232 A. 2d 470 (Union County Ct. N. J. 1967). See 1 Freeman, Judgments (5th Ed. 1925), §§ 428, 429, 572; Developments in the Law — Res Judicata, 65 Harv. L. Rev. 818 , 862-64 (1952); 2 Note, The Mu ⁴¹ tuality Requirement