CIVIL PROCEDURE:  Issue preclusion 
DATE RENDERED:  8/18/2006

Issue preclusion precludes buyer in default from pursuing claim against law firm after dec action determined buyer partcipated in starting fire to destroy premises.

This appeal arose from an installment purchase of real property in which the seller was the loss payee on the buyer’s policy of insurance.  The buyer defaulted on the installments and the property was destroyed by fire.  The insurer paid the seller.  Insurer then files suit in federal court to resolve by declaratory judgment action asserting among several claims that the buyer was responsible for setting fire to the property and thus not entitled to any of the proceeds, and obtained a default judgment.  Meanwhile appeals followed on the federal action, an action was filed by the buyer in state court but held in abeyance pending the appeal, and then dismissed.

The buyer then filed suit over the proceeds and seeking damages against the insurance company and its attorneys.  Trial court dismissed this claim relying upon issue preclusion.  COA agreed and affirmed.  The attorneys were not parties to the federal action but obtained the benefit of issue preclusion which is not the same as res judicata.

Clearly, the current proceeding is based on the same acts and controversies that previously were litigated. Issues  surrounding the insurance policy contract were fully adjudicated by a final judgment in the prior federal action. Issues surrounding the contract for deed were fully adjudicated by a final judgment in the prior state action. Because the suits “concern the same controversy, then the previous suit is deemed to have adjudicated every matter which was or could have been brought in support of the cause of action.”   Simply put, all of Jellinick’s claims should have been resolved in the two previous actions.

Although attorney Chastain [attorney for insurance company]was not part of the previous actions, the claim against him is barred by issue preclusion, which requires:

(1) identity of issues;
(2) a final decision or judgment on the merits;
(3) a necessary issue with the estopped party given a full and fair opportunity to litigate;
(4) a prior losing litigant.

Here, the issues raised as to Chastain are identical to those which were raised or could have been raised in previous actions concerning the same controversy. Those actions were fully litigated, and they resulted in final decisions against Jellinick. As the four requirements therefore have been satisfied, Jellinick [defaulting buyer] is barred from litigating them here. It follows that the trial court did not err by entering summary judgment for appellees.

I apologize.  This entry has been corrected from an erroneous cross-line.  oops.

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