W E ROZINAK PROPERTIES LTD V LEEMON OIL CO
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STATE OF MICHIGAN
COURT OF APPEALS
W. E. ROZINAK PROPERTIES, LTD.,
UNPUBLISHED
February 19, 2002
Plaintiff-Appellant,
v
No. 226159
Wayne Circuit Court
LC No. 99-912568-NZ
LEEMON OIL CO.,
Defendant-Appellee.
Before: Neff, P.J., and Cavanagh and Saad, JJ.
PER CURIAM.
Plaintiff appeals as of right from the trial court’s order granting defendant’s motion for
summary disposition. We affirm.
The facts and proceedings in this case are somewhat tortuous, but are carefully set out in
the well-reasoned opinion of the trial court. For our purposes, it is sufficient to say that the
underlying controversy relates to an interest in property owned by plaintiff and on which
defendant claimed rights under a mortgage. The issue of the validity of the mortgage has been
extensively contested and litigated in numerous courts, state and federal. The trial court granted
summary disposition based on res judicata and a mutual release of claims1. Our review is de
novo. Village of Dimondale v Grable, 240 Mich App 553, 563; 618 NW2d 23 (2000).
I. Res Judicata
Plaintiff argues that summary disposition was improperly granted by the lower court
under the doctrine of res judicata. Res judicata requires that (1) the first case be decided on the
merits; (2) the matter in the second case could have been or was resolved in the first case; and (3)
both actions involve the same parties or their privies2. Eaton Co Bd of Co Rd Comm’rs v
Schultz, 205 Mich App 371, 375-376; 521 NW2d 847 (1994). Res judicata bars subsequent
actions between the same parties when the evidence or the essential facts are identical. Id. at
1
The court’s opinion refers to both MCR 2.116(C)(7) and MCR 2.116(C)(10). However, only
the former applies because the basis for decision is res judicata and release.
2
There is no claim that the actions involved the same parties or their privies.
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375. Michigan courts are very broad in the application of the doctrine of res judicata. Dart v
Dart, 460 Mich 573, 586; 597 NW2d 82 (1999). Michigan courts have not only barred claims
already litigated under the doctrine of res judicata, but have also barred claims arising from the
same transaction that the parties, in the exercise of reasonable diligence, could have raised but
did not. Id. A voluntary dismissal with prejudice will serve as res judicata for all claims that
could have been raised in the first action. Limbach v Oakland Co Bd of Co Rd Comm’rs, 226
Mich App 389, 396; 573 NW2d 336 (1997). Res judicata applies regardless of whether the
subsequent action was pursued in a state or federal forum. McKane v Lansing, 244 Mich App
462, 466; 625 NW2d 796 (2001).
We find, as did the trial judge, that this case has previously been decided on the merits
and that the issues in this case were or could have been resolved in the previous litigation
between these parties. The trial court’s opinion details the litigation history of the dispute
between these parties over the property in question. Included in this history are actions filed by
plaintiff against defendant (and others) contesting the mortgage in question in federal district
court, bankruptcy court and state circuit court. During this litigation odyssey, plaintiff twice
dismissed claims based on the validity of defendant’s mortgage and the honesty of its proof of
claim in bankruptcy court. Defendant argued in the trial court and argues again here that the two
dismissals entitle it to summary disposition on res judicata grounds based on the so-called two
dismissal rule. We agree.
Under FR Civ P 41(a)(1), a plaintiff may dismiss an action without prejudice if notice of
the dismissal is filed before the defendant files an answer or responsive pleading and only if the
plaintiff has never previously dismissed an action based on or including the same claim. Cooter
& Gell v Hartmarx Corp, 496 US 384, 394; 110 S Ct 2447; 110 L Ed 2d 359 (1990). If the
plaintiff invokes FR Civ P 41(a)(1) after previously dismissing an action based on or including
the same claim in any federal or state court, the action must be dismissed with prejudice. Id.
This is known as the two-dismissal rule, which provides that a second voluntary dismissal of a
complaint operates as an adjudication on the merits, and will have a preclusive effect in
subsequent litigation. Pacheco de Perez v AT&T Co, 139 F3d 1368, 1373 (GA 11, 1998).
In this case, plaintiff has brought suit at least three times prior to the filing of this case,
and has consistently disputed the validity of an assignment of a mortgage on certain property to
defendant, as well as the existence of any debt under the mortgage. Plaintiff brought suit in the
United States District Court for the Eastern District of Michigan, and alleged that defendant
fraudulently sought to link a debt from one mortgage to another mortgage. Plaintiff alleged that
defendant made misrepresentations in order to prevent plaintiff from selling the property so
defendant could recoup lost funds. This case was dismissed without prejudice by stipulation of
the parties. Plaintiff then brought an adversary case in bankruptcy court against defendant
alleging that no debt was owed, and the assignment of the mortgage was invalid because it failed
to recite any material consideration. Plaintiff voluntarily dismissed this case under FR Civ P
41(a)(1). Plaintiff brought suit against defendant in the Wayne Circuit Court to quiet title, which
was subsequently removed to the bankruptcy court and became a second adversary proceeding.
Plaintiff alleged that the mortgage was assigned to defendant without consideration or a
mortgage note. Plaintiff again voluntarily dismissed under FR Civ P 41(a)(1).
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Plaintiff has consistently contested the validity of the assignment and has previously
sought to quiet title on the property, yet each time the cases were dismissed either by stipulation
or by voluntary dismissal by plaintiff. Further, in all of the above-mentioned cases, the same
nucleus of facts are involved. As pointed out in the trial court’s opinion, these cases arose out of
the same transaction and the relief sought depended on resolution of the same factual and legal
issues, the validity of the mortgage and assignment. Given the broad application of the res
judicata doctrine, we find that plaintiff’s case was properly barred because it was decided on the
merits pursuant to the two-dismissal rule under FR Civ P 41(a)(1), the issues were or could have
been decided in the previous litigations and the actions involved the same parties or their privies.
Plaintiff contends that this case provides a new cause of action because defendant filed an
allegedly false proof of claim in the bankruptcy court. However, the fact that defendant filed a
proof of claim after plaintiff filed for bankruptcy has no bearing on the fact that plaintiff brought
proceedings in three other cases regarding defendant’s allegedly fraudulent assignment held on
the property in question. Thus, the matters raised in this case could have been resolved in the
prior cases. Finally, it is undisputed that the parties involved in this action were either the same
parties or their privies involved in the prior actions. Plaintiff’s claims were barred by res
judicata and summary disposition was properly granted under MCR 2.116(C)(7) prior to the
close of discovery.
II. Release
Plaintiff’s claims were also barred because a stipulated order and mutual release of
claims were entered. The stipulated order resolved plaintiff’s bankruptcy proceedings in relation
to the property in dispute and incorporated the mutual release of claims.
Summary disposition is proper under MCR 2.116(C)(7) if there exists a valid release of
liability between the parties. Adell v Sommers, Schwartz, Silver & Schwartz, PC, 170 Mich App
196, 201; 428 NW2d 26 (1988). In order for a release to be valid, it must be fairly and
knowingly made. Id. Representatives for both plaintiff and defendant signed the mutual release
of claims. According to the terms of the stipulated order, it is apparent that all claims brought by
plaintiff or defendant in relation to the property in question would be barred under the mutual
release.
Plaintiff argues that its claims are not barred because it signed the mutual release as a
result of economic duress. In order to succeed on a claim of economic duress, plaintiff must
establish that it was illegally compelled or coerced to act by fear of serious injury to its
reputation or fortunes. Farm Credit Services v Weldon, 232 Mich App 662, 681-682; 591 NW2d
438 (1998). However, fear of financial ruin alone is insufficient to establish economic duress;
the plaintiff must also establish that the person or entity applying the coercion acted unlawfully.
Id. at 681-682.
In this case, plaintiff argues that defendant’s filing of a proof of claim in bankruptcy court
was criminal and that plaintiff entered into the stipulated order and mutual release out of fear of
losing a prospective buyer for the property in question. Plaintiff further contends that its cause
of action could not be properly raised until the proof of claim was filed. However, plaintiff does
not explain how the filing of the proof of claim is different from defendant’s filing of a lis
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pendens on the same property, which would seemingly have the same effect as the proof of claim
had on the sale of the property. Thus, this argument does not defeat the effect of the release.
Affirmed.
/s/ Janet T. Neff
/s/ Mark J. Cavanagh
/s/ Henry William Saad
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