STUART CAUFF V FIEGER FIEGER KENNEY & JOHNSON PC
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STATE OF MICHIGAN
COURT OF APPEALS
STUART CAUFF,
UNPUBLISHED
January 27, 2009
Plaintiff-Appellant,
v
FIEGER, FIEGER, KENNEY & JOHNSON, P.C.,
and GEOFFREY N. FIEGER,
No. 281442
Oakland Circuit Court
LC No. 07-081140-CK
Defendants-Appellees.
Before: Murray, P.J., and Markey and Wilder, JJ.
PER CURIAM.
Plaintiff appeals by right from the trial court order granting defendants’ motion for
summary disposition. We affirm. This appeal has been decided without oral argument pursuant
to MCR 7.214(E).
In December 2003, defendant Fieger, Fieger, Kenney & Johnson signed an agreement to
purchase a 25% interest in a 1977 Learjet. The agreement required defendants make an initial
payment of $90,000 and pay an additional $550,000 on or before February 28, 2004. Defendants
executed a promissory note pursuant to the purchase agreement, and it was attached to the
purchase agreement as exhibit A.
Defendants paid the $90,000 down payment, but were unable to secure financing for the
remaining $550,000 because the Learjet was encumbered by a large mortgage that was not
previously disclosed to defendants. Upon discovery of the mortgage, the seller in the purchase
agreement, Pacific Jet Ventures, LLC, attempted to modify the purchase agreement so that
defendants would purchase an interest in that company rather than 25% interest in the Learjet
itself. Defendants were not interested in purchasing an ownership interest in the company.
Defendants filed a lawsuit in 2005 against Pacific Jet Ventures, LLC, a related business
entity, and multiple individuals including plaintiff in the present case. Plaintiff had introduced
defendants to Pacific Jet Ventures, LLC.
The complaint in the 2005 lawsuit included, among other allegations and requests for
relief, a request for rescission of the promissory note, a declaration that the promissory note was
null and void, and that the court determine the rights and interests of the parties in the promissory
note.
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Plaintiff filed an appearance in the 2005 lawsuit on November 27, 2006, but a default had
already been entered against him on November 9, 2006. Plaintiff’s motion to set aside the
default was denied. On January 10, 2007, the promissory note for $550,000 was assigned to
plaintiff. The 2005 lawsuit ended with the clerk of the court’s entering a default judgment in the
amount of $102,373.83 on January 30, 2007. Although the actual promissory note was not
attached to it, the purchase agreement which described the substance of the promissory note, was
attached to the default judgment.
Plaintiff’s complaint against defendants in the instant lawsuit alleges breach of contract
because defendant did not pay the promissory note by February 28, 2004. The trial court granted
defendants’ motion for summary disposition, finding that a default judgment is a judgment on
the merits; consequently, the doctrine of res judicata bars the current lawsuit.
Both summary disposition decisions and applications of res judicata are reviewed de
novo as questions of law. Wayne Co v Detroit, 233 Mich App 275, 277; 590 NW2d 619 (1998).
Under the doctrine of res judicata, a final judgment rendered by a court of
competent jurisdiction on the merits is conclusive as to the rights of the parties
and their privies, and, as to them, constitutes an absolute bar to a subsequent
action involving the same claim, demand or cause of action. The doctrine
operates where the earlier and subsequent actions involve the same parties or their
privies, the matters of dispute could or should have been resolved in the earlier
adjudication, and the earlier controversy was decided on the merits. [Id. (internal
citations omitted).]
The following four factors must be met for the doctrine of res judicata to apply: “(1) the
prior action was decided on the merits, (2) the decree in the prior action was a final decision, (3)
the matter contested in the second case was or could have been resolved in the first, and (4) both
actions involved the same parties or their privies.” Peterson Novelties, Inc v City of Berkley, 259
Mich App 1, 10; 672 NW2d 351 (2003). To determine whether a matter could have been
resolved in the first case, courts ask whether the same evidence is essential to the maintenance of
both claims. Schwartz v City of Flint, 187 Mich App 191, 194; 466 NW2d 357 (1991).
Additionally, res judicata applies to default judgments. Id.
Michigan has an established principle that “a default settles the question of liability as to
well-pleaded allegations and precludes the defaulting party from litigating that issue.”
Kalamazoo Oil Co v Boerman, 242 Mich App 75, 79; 618 NW2d 66 (2000). Further, “[e]ntry of
a default is equivalent to an admission by the defaulting party as to all well-pleaded allegations.”
Id.
When applying the four elements of res judicata to the case at hand, elements one and
two are met when the prior action was decided by a final judgment, which was a default
judgment, and is considered a decision on the merits. Schwartz, supra at 191. The third element
concerns whether the subject matter in the second case could have been decided in the first case.
Peterson, supra at 10. The 2005 complaint alleged that opposing parties made material
misrepresentations in executing the promissory note and also requested a judicial determination
to ascertain the parties’ rights and obligations under the promissory note. In this case, plaintiff is
requesting a determination that defendants breached the promissory note contract.
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The subject matter of the present case—an alleged breach of the promissory note
contract—is closely related to and could readily have been decided in the 2005 lawsuit
requesting rescission and a determination of the parties’ rights and obligations under the
promissory note. Additionally, because a default is equivalent to an admission by the defaulting
party, plaintiff’s assignors admitted to making material misrepresentations in executing the
promissory note. See, Kalamazoo Oil Co, supra at 79.
The final element of res judicata addresses whether the same parties or their privies are
involved in the second lawsuit. That element is also met in this case given that plaintiff was
individually a party to the 2005 lawsuit and that plaintiff’s assignors or privies to the promissory
note, Pacific Jet Ventures, LLC and Timothy Prero, were also parties to the 2005 lawsuit.
Plaintiffs reliance on Van Pembrook v Zero Mfg Co, 146 Mich App 87; 380 NW2d 60
(1985) and Martino v Cottman Transmissions Systems Inc, 218 Mich App 54; 554 NW2d 17
(1996) is misplaced. In Van Pembrook, this Court held that the prior Missouri federal court
action and the subsequent Michigan state court action litigated distinctly different causes of
actions which required entirely different sets of proof. Van Pembrook, supra at 101. Neither the
Missouri case nor the Michigan case addressed claims to rescind or otherwise terminate the
contract that was partially in dispute in both actions. Id. Here, however, the prior state court
action included allegations and causes of action seeking to rescind not only the purchase
agreement but also the promissory note (which was incorporated into the purchase agreement),
and it is that same promissory note that is involved in the instant case. Therefore, the two cases
do not involve distinct subject matters.
Likewise, Martino is not helpful to this appeal because our Court in that case concluded
that the subject matter in the two cases was different, and therefore not barred by res judicata.
Martino, supra at 58. To the contrary, in this case the initial lawsuit sought to rescind the
promissory note, and because of the default judgment, those allegations were deemed admitted.
The continued validity of the promissory note is a vital element in this case. Thus, we are not
dealing with distinct subject matters.
Because all four elements of res judicata have been met, there can be no relitigation of
the parties’ rights and obligations under promissory note.
We affirm. Defendant may being the prevailing party, may tax costs pursuant to MCR
7.219.
/s/ Christopher M. Murray
/s/ Jane E. Markey
/s/ Kurtis T. Wilder
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