Daily Development for Wednesday, September 14, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

VENDOR AND PURCHASER; PROCEDURE; RES JUDICATA:  .  Lease/Purchaser's claim for, inter alia, breach of land sales contract, was barred by res judicata as a compulsory counterclaim that ought to have been filed in response to vendor's earlier forcible entry and detainer action brought in capacity as landlord. 

Forney v. Climbing Higher Enterprises, 815 N.E.2d 722 (Ohio App. 2004). 

Plaintiff tenant/purchaser filed suit in November 2002 against defendants sellers for breach of contract, fraud, negligence, and violations of the Consumer Sales Practices Act.  In 1998, plaintiff had entered into a land sales contract with sellers, one of the terms of which required sellers to obtain insurance coverage on the property.  Sellers neither obtained coverage nor disclosed to plaintiff the lot's propensity to flood, and in 1999 the lot flooded, causing the alleged injury and loss to the plaintiff. 

In their answer to plaintiff's claim, defendants pleaded res judicata and collateral estoppel as an affirmative defense, and subsequently moved for summary judgment.  In 2000, defendant Climbing Higher had filed claims against plaintiff for eviction and money damages; the magistrate allowed the writ of eviction and later entered a default judgment on the claim for money damages. 

The trial court in the instant case found that plaintiff's claims here  were compulsory counterclaims that should have been filed in response to defendant Climbing Higher’s earlier cause of action.  Citing Haney v. Roberts, 720 N.E.2d 101 (1998), the appellate court observed that in an action for forcible entry and detainer, if the landlord does not join any other action, the tenant need not file counterclaims. It pointed out that a forcible entry and detainer action involves relatively informal procedure and does not involve a jury.  It would be inappropriate to compel a tenant to bring a counterclaim in such an action if it chooses not to do so.   If,  however, if the landlord does join another action with the forcible detainer and entry action, then the summary nature of the proceeding is abrogated and Civ.R. 13(A) will apply to compel counterclaims in appropriate cases. 

(The court expressly excluded from its analysis the special situation of defenses raised for breach of the implied warranty of habitability.)

Here,  because the defendant's earlier action as landlord did join a claim for money damages, Civ.R. 13(A) applies, and the court moved to a consideration of whether it the compulsory counterclaim rules ought to apply to tenant’s action.  The court  followed the two-part test set forth in Rettig Enterprises v. Koehler, 626 N.E.2d 99 (1994), which states that a party invoking a bar based upon a compulsory counterclaim must  show that (1) the claim existed at the time of the first pleading and (2) the claim arose out of the transaction that is the subject matter of the opposing claim.  The appellate court found that because the flooding occurred a year before landlord/vendor's claim was filed, all of appellant's claims existed at that time, and because the claim arose out of the land sales contract and the subject matter of that contract (the property) the basis for each cause of action was the same.

The court further concluded that, although  the forcible entry and detainer action was brought by only one of the defendants, that defendant was in privity with the other defendants in plaintiff’s instant suit, and thus all were protected by the compulsory counterclaim rule. 

Comment 1: According to UMKC’s civil procedure maven, David Achtenburg, this case is mainstream on the procedural issue.  David notes that some statutes do provide for a claim for “rent and possession,” in which a counterclaim might not be available (and thus would not preclude a subsequent claim by the tenant/defendant).  But if the counterclaim was available -- both in the sense that it existed and in the sense that it could be asserted in the landlord's proceeding -- David thinks modern courts would pretty uniformly agree with the Ohio court.

Comment 2: There’s a useful object lesson here.  Even if your tenant client is disgusted with the whole affair and is willing to depart from the premises, a summary possession action is nothing to take lightly - be sure to inquiry carefully as to other damages claims that the tenant might want to press.  It’s not uncommon for a landlord to add a claim for rent damages as well as possession, and that’s all it took in this case to trigger the compulsory counterclaim rule. 

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