SHAFAGHI (SASAN) VS. WASHINGTON MUTUAL BANK, FA , ET AL.Annotate this Case
RENDERED: SEPTEMBER 26, 2008; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
SASAN SHAFAGHI AND
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE SHEILA R. ISAAC, JUDGE
ACTION NO. 03-CI-04779
WASHINGTON MUTUAL BANK, FA;
J.W.I., INC.; AND JEFF WOLFE
** ** ** ** **
BEFORE: COMBS, CHIEF JUDGE; DIXON AND LAMBERT, JUDGES.
DIXON, JUDGE: Sasan Shafaghi and Nurdan Shafaghi1 (“Shafaghi”) appeal from
an order of the Fayette Circuit Court granting summary judgment in favor of
Nurdan Shafaghi is the former wife of Sasan Shafaghi. Mrs. Shafaghi, a named Appellant, has
not participated in this appeal.
Washington Mutual Bank, FA (“Washington Mutual”), Jeff Wolfe and J.W.I., Inc.2
(collectively, “Wolfe”). We affirm.
Shafaghi owns a home at 324 Ashmoor Drive in Lexington,
Kentucky. The property is encumbered by a mortgage held by Washington
Mutual. On February 4, 2000, the home was severely damaged by a fire. In April
2001, Shafaghi entered into a construction contract with Wolfe for restoration of
the home. Ultimately, Shafaghi ceased making progress payments to Wolfe, and
Wolfe abandoned the restoration project in July 2001.
In February 2002, Wolfe filed suit against Shafaghi in Fayette Circuit
Court, alleging breach of the construction contract. Shafaghi filed a third-party
complaint against his homeowner’s insurance company alleging bad faith. Wolfe
subsequently moved for summary judgment, and in January 2003, the circuit court
granted Wolfe’s motion without opposition from Shafaghi. The court found that
Wolfe was owed $23,728.74 for the construction work he completed. Thereafter,
Shafaghi’s bad faith claim was heard by a jury, and Shafaghi received a judgment
of $127,500.00 plus attorney’s fees.
Following the jury trial, Shafaghi filed a motion to alter, amend or
vacate the summary judgment in favor of Wolfe. Shafaghi alleged Wolfe had not
completed the work and asked the court to compel performance. The court denied
Shafaghi’s motion, and no appeal was taken.
J.W.I., Inc. is a building restoration and construction company owned by Jeff Wolfe.
In November 2003, Washington Mutual filed a foreclosure complaint
against Shafaghi. Washington Mutual also named Wolfe as a defendant in the
action because he held a mechanic’s lien on the property. On December 19, 2003,
Shafaghi filed an answer and asserted a counterclaim against Washington Mutual.
He alleged that Washington Mutual improperly disbursed funds to Wolfe and
failed to inspect the property. Thereafter, on August 10, 2004, Shafaghi filed an
amended answer and asserted a cross claim against Wolfe. In his cross claim,
Shafaghi contended that Wolfe made fraudulent misrepresentations about the
construction project and negligently damaged the property during construction.
Following a lengthy period of discovery, Washington Mutual and
Wolfe moved for summary judgment. On January 10, 2007, the trial court granted
summary judgment against Shafaghi, and this appeal followed.
Summary judgment “should only be used ‘to terminate litigation
when, as a matter of law, it appears that it would be impossible for the respondent
to produce evidence at the trial warranting a judgment in his favor and against the
movant.’” Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 483
(Ky. 1991) (quoting Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 256 (Ky.
1985)). Accordingly, on appellate review of a summary judgment, we must
determine “whether the trial court correctly found that there were no genuine
issues as to any material fact and that the moving party was entitled to judgment as
a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citing
Kentucky Rules of Civil Procedure (CR) 56.03).
Shafaghi’s Cross Claims Against Wolfe
Shafaghi contends that genuine issues of fact exist as to whether
Wolfe made negligent or fraudulent misrepresentations about the construction of
the house and whether the construction was defective. Wolfe argues that
Shafaghi’s claims are barred by res judicata because they should have been raised
as compulsory counterclaims in the first litigation. CR 13.01.
“The rule of res judicata is an affirmative defense which operates to
bar repetitious suits involving the same cause of action.” Yeoman v.
Commonwealth, 983 S.W.2d 459, 464 (Ky. 1998). Claim preclusion, a subpart of
res judicata, “bars a party from re-litigating a previously adjudicated cause of
action and entirely bars a new lawsuit on the same cause of action.” Id. at 465.
The key inquiry in deciding whether the lawsuits concern
the same controversy is whether they both arise from the
same transactional nucleus of facts. If the two 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
Id. (internal citations omitted) (emphasis added).
CR 13.01 states in relevant part:
A pleading shall state as a counterclaim any claim which
at the time of serving the pleading the pleader has against
any opposing party, if it arises out of the transaction or
occurrence that is the subject matter of the opposing
party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot
Shafaghi opines that his allegations against Wolfe were not known to
him at the time of the first litigation; thus, he contends that his claims are not
barred. We disagree.
First, Shafaghi claims Wolfe made material misstatements as to the
completion date for the project. The record reflects that Wolfe and his
construction supervisor advised Shafaghi that construction on the home would be
complete in August 2001. Shafaghi overlooks the fact the he ceased making
payments to Wolfe prior to August 2001 and that he requested significant changes
to the original work order. Nevertheless, Shafaghi was clearly aware of these
alleged misrepresentations at the time of the first litigation.
Second, Shafaghi asserts that, in the prior litigation, Wolfe
fraudulently misstated the value of his work and recovered a judgment for work
that was unfinished. The record refutes this claim.
In November 2001, Shafaghi wrote a letter to Washington Mutual
complaining that the construction was incomplete and Wolfe should not be paid.
Shafaghi wrote a second letter to Washington Mutual in December 2002, asserting
that Wolfe had not earned the money he sought to recover in the then-pending
litigation. Consequently, the initial letter reveals that Shafaghi was clearly
dissatisfied with the cost and workmanship of the project prior to the first lawsuit.
Finally, as to his claim of defective workmanship, Shafaghi opines
that he did not have the expertise to recognize faulty construction at the time of the
first lawsuit. He contends that he did not learn of the defects until a structural
engineer evaluated the property in the summer of 2003. However, contrary to
these assertions, in his deposition, Shafaghi testified that he was aware of the
defective construction “shortly after” Wolfe abandoned the project in the summer
Despite Shafaghi’s argument to the contrary, the record shows that his
claims “properly belonged to the subject of the litigation in the first action and
which in the exercise of reasonable diligence might have been brought forward at
the time.” Egbert v. Curtis, 695 S.W.2d 123, 124 (Ky. App. 1985). Consequently,
Shafaghi was required, pursuant to CR 13.01, to bring his compulsory
counterclaim against Wolfe during the breach of contract litigation. We conclude
that summary judgment was proper, as Shafaghi’s cross claim against Wolfe is
barred by res judicata.
Shafaghi’s Counterclaim Against Washington Mutual
Shafaghi contends that Washington Mutual improperly disbursed
funds to Wolfe for work that was incomplete and “breached its duty to inspect the
repairs” to the property. Washington Mutual points out that it made the April 2003
payment pursuant to the judgment entered in Fayette Circuit Court. Washington
Mutual further notes that Shafaghi endorsed the check payable to Wolfe.
Even considering the record in the light most favorable to Shafaghi,
we are not persuaded that a genuine issue of fact exists. As we have already noted,
Shafaghi was dissatisfied with Wolfe’s allegedly incomplete performance, but he
failed to bring a compulsory counterclaim against Wolfe or oppose summary
judgment. In his February 2003 motion to vacate Wolfe’s summary judgment,
Shafaghi contended that Wolfe failed to complete the work under the contract.
Yet, in this appeal, Shafaghi opines that he endorsed the April 2003 check because
he relied on Wolfe’s assertions during the breach of contract litigation that the
work was finished. Furthermore, Shafaghi cites no authority supporting his
argument that Washington Mutual owed him a duty to inspect the house prior to
disbursing funds pursuant to a valid court order. After reviewing the record, we
conclude summary judgment in favor of Washington Mutual was proper.
For the foregoing reasons, the judgment of the Fayette Circuit Court is
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Washington Mutual Bank, FA:
Stephen L. Marshall
Brian E. Chapman
No Brief for Appellant:
BRIEF FOR APPELLEES:
Jeff Wolfe and J.W.I., Inc.:
H. Caywood Prewitt, Jr.