DANIEL BURROUGHS V LAKE ARROWHEAD PROPERTY OWNERS ASSN
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STATE OF MICHIGAN
COURT OF APPEALS
DANIEL BURROUGHS,
UNPUBLISHED
March 16, 2001
Plaintiff/Counter-DefendantAppellant,
and
PATRICIA BURROUGHS and LEONARD
BODRIE,
Plaintiffs-Appellants,
v
LAKE ARROWHEAD PROPERTY OWNERS
ASSOCIATION,
No. 221511
Otsego Circuit Court
LC No. 97-007256-CH
Defendant/Counter-PlaintiffAppellee.
Before: Griffin, P.J., and Neff and White, JJ.
PER CURIAM.
Plaintiffs Daniel Burroughs, Patricia Burroughs, and Leonard Bodrie appeal as of right
from a July 28, 1999, Otsego Circuit Court judgment granting summary disposition to defendant,
Lake Arrowhead Property Owners Association (the Association) under MCR 2.116(C)(7) and
dismissing plaintiffs’ cross-motion for summary disposition under MCR 2.116(C)(10). We
reverse.
In 1995, plaintiffs, residents of Lake Arrowhead subdivision in Otsego County, brought
an action against defendant, the Association, concerning a dispute over maintenance of a
roadway in the subdivision known as Bodrie Lane. A jury trial was held in the matter and the
jury found that plaintiffs had paid dues to the Association for a number of years and the
Association was bound by contract to maintain the roadway. The jury awarded plaintiffs
damages for the Association’s breach of contract and its failure to maintain the road.
Furthermore, the jury found the Association was estopped from denying that plaintiffs were
members of the Association and the Association therefore could not deny plaintiffs the rights
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pursuant to the contract. The circuit court entered judgment for proven money damages. When
defendant continued to fail to maintain the roadway, plaintiffs brought a motion for postjudgment relief seeking further damages for the allegedly continuing breach of defendant’s
contractual duty to maintain Bodrie Lane. However, the court stated that plaintiffs were required
to bring a new action for damages.
On July 1, 1997, plaintiffs filed their second complaint and demand for jury trial, alleging
that they had paid for membership in the Association and were therefore entitled to damages for
defendant’s continuing refusal to maintain the subject road. On June 21, 1999, the circuit court
granted defendant’s motion for summary disposition pursuant to MCR 2.116(C)(7), concluding
that the jury in the previous action awarded damages to plaintiffs up to the date of the verdict.
The circuit court stated that review of the trial court’s ruling precluding future damages was
never sought by appeal or otherwise, stating:
It is quite clear that even if the decision of the initial Trial Court in the
previously filed action was in error, there has not been sought an appeal or review
of the previous Trial Court decision. Since the awarding of future damages could
have been brought in the initial proceeding by Plaintiff, the doctrine of res
judicata bars Plaintiffs from relitigating the instant action and Defendant’s motion
for summary disposition pursuant to MCR 2.116(C)(7) is granted.
The application of res judicata is a question of law that this Court reviews de novo.
Bergeron v Busch, 228 Mich App 618, 620; 579 NW2d 124 (1998). We hold that the circuit
court erred in granting summary disposition to defendant under the doctrine of res judicata. The
doctrine of res judicata is inapplicable to a subsequent action for damages arising out of a
continuing breach of a contractual duty affirmed by a verdict in the first action. To rule
otherwise would result in an inability to enforce judgments for damages incurred by a continuing
breach of contract. Thus, we reverse the circuit court’s grant of summary disposition and remand
for further proceedings.
Under the doctrine of res judicata, a subsequent action is barred between the same parties
when the facts or evidence essential to the action are identical to those essential to a prior action.
Dart v Dart, 460 Mich 573, 586; 597 NW2d 82 (1999). The elements of res judicata are: (1) a
prior action that was decided on the merits, (2) a decree in the prior action that was a final
decision, (3) a matter contested in a second case that was or could have been resolved in the first,
and (4) both actions involve the same parties or their privies. Baraga Co v State Tax Comm, 243
Mich App 452, 455; 622 NW2d 109 (2000). Furthermore, res judicata bars a subsequent action
between the same parties when the evidence or essential facts are identical. Eaton Co Bd of Rd
Comm’rs v Schultz, 205 Mich App 371, 375; 521 NW2d 847 (1994).
The circuit court presiding over the first case ruled that damages were due plaintiffs for
defendant’s failure to maintain the road from 1982 through February 1, 1997. Neither the jury
nor the judge ruled that defendant’s contractual obligation to maintain the road ceased on the date
of judgment; rather, damages were paid for past damages incurred by plaintiffs as a result of
defendant’s failure to perform. Although the jury verdict form presented the issues of
defendant’s breach in terms that were in the past tense, the jury also found that defendant was
estopped from denying plaintiffs membership in the Association – membership that included the
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right to have the subject road maintained. The circuit court refused to speculate about the
amount of future damages if defendant continued to breach the contract. Nonetheless, the court
did state that such damages could be tried in a future action; namely, a subsequent complaint
brought by plaintiffs such as the instant action.
Based on the record and existing case law, plaintiffs’ subsequent action seeking to
recover further damages for defendant’s alleged continuous breach of its contractual duty is not
barred by the doctrine of res judicata. First, however similar the facts concerning defendant’s
previous failures to maintain the roadway, defendant’s subsequent failure to maintain Bodrie
Lane, despite a jury verdict finding that it had a duty to maintain the road and was estopped from
denying plaintiffs’ membership, created a new set of factual circumstances. Thus, the facts were
not identical because subsequent occurrences of defendant’s conduct created new claims and a
new cause of action. Ditmore v Michalik, ___ Mich App ___; ___ NW2d ___ (Docket No.
218708, issued 2/9/01), slip op at 4.
Second, as a matter of practicality, the issue of damages for future breach of the
defendant’s duty to maintain could not have been litigated until such breach occurred.
Additionally, the circuit court’s grant of summary disposition to defendant pursuant to MCR
2.116(C)(7) precludes a determination whether there has been compliance with the jury verdict in
the first action. By virtue of the circuit court’s cursory grant of summary disposition, plaintiffs
are faced with the dilemma of asserting that there was a continuing duty to maintain, which duty
was allegedly breached, and being advised that their present claim is barred by res judicata, while
at the same time being precluded from a determination on the merits concerning this new set of
facts.
Where damages are speculative, or their incurrence contingent on the happening of a
future event, such as further breach of a continuing duty to maintain, a subsequent suit to recover
additional damages is not barred by res judicata or collateral estoppel. Said v Rouge Steel Co,
209 Mich App 150, 159-160; 530 NW2d 765 (1995); see also Plaza Investment Co v Abel, 8
Mich App 19; 153 NW2d 379 (1967). This rule is supported by an exception to the general rule
that res judicata bars a subsequent claim brought by the plaintiff on the same set of factual
circumstances when a valid and final judgment is rendered in favor of the plaintiff.
1 Restatement Judgments 2d, § 18, 151-152. Where “[t]he court in the first action has expressly
reserved the plaintiff ’s right to maintain the second action,” the plaintiff ’s claim will not be
extinguished. Id. at § 26, 233; see also Baraga, supra at 2; Askew v Ann Arbor Public Schools,
431 Mich 714, 731; 433 NW2d 800 (1988) (Boyle, J. concurring). Thus:
Where the court determines that the plaintiff cannot enforce a given claim
or part of it in that action but must enforce it, if at all, in another action, the
judgment does not preclude the plaintiff from maintaining the other action even
though it appears that the determination in the first action was erroneous. . . . It is
immaterial that no appeal was taken from the ruling of the court in the first action.
[1 Restatement Judgments 2d, § 26, comment d, 238.]
The first court’s denial of plaintiff s’ motion for post-judgment relief to claim subsequent
damages was the type of determination encompassed by the above quoted principle.
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An exception to the doctrine of res judicata is provided where “[f]or reasons of
substantive policy in a case involving a continuing or recurrent wrong, the plaintiff is given an
option to sue once for the total harm, both past and prospective, or to sue from time to time for
the damages incurred to the date of the suit, and chooses the latter course.” Id. at § 26(1)(e), 234
(emphasis added). The circuit court presiding over the first action was faced with the choice of
(1) adjudicating damages that had not yet been incurred and that, in its own words, were
speculative, or (2) leaving the issue of future breaches, if any, to the determination of a
subsequent lawsuit if the parties could not sort out their differences. However, the first circuit
court could only do the latter because it had no jurisdiction to rule on damages it deemed too
remote or speculative. Damages recoverable for breach of contract are those that arise naturally
from the breach or those that were in the contemplation of the parties at the time the contract was
made. Farm Credit Services of Michigan’s Heartland PCA v Weldon, 232 Mich App 662, 678;
591 NW2d 438 (1998). A court is not permitted to consider damages that are speculative,
remote, or contingent on a breach that has not yet occurred. Environair, Inc v Steelcase, Inc, 190
Mich App 289, 294; 475 NW2d 366 (1991).
Under the circumstances, we therefore conclude that plaintiffs’ present action seeking to
recover further damages for defendant’s alleged continuous breach of its contractual duty to
plaintiffs is not barred by the doctrine of res judicata.
Reversed and remanded for further proceedings. We do not retain jurisdiction.
/s/ Richard Allen Griffin
/s/ Janet T. Neff
/s/ Helene N. White
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