You may think that a favorable outcome in a case is res judicata and prevents relitigating previously litigated issues. But while this is generally true, it is not a universal truth.
The Schroeders owned two tracts of land in Allen County, one of which was landlocked. They executed a purchase agreement to Tract A with the Binzes on June 8, 2014 and disclosed that there would be an easement to the landlocked Tract B. Meanwhile, the
Schroeders entered into an easement agreement with the Brimners on July 14, 2014, which gave the Brimners access to Tract B and made the Brimners responsible for maintaining the easement. The sale for Tract A closed on August 6, and the easement signed by the Brimners and the deed for Tract A was recorded on August 8.
Over the next few years, the Brimners maintained the easement. But a dispute arose over the Brimners’ rights under the easement, which led to a lawsuit. In that suit, the Binzes argued that the Schroeders breached the purchase agreement and that the easement was unenforceable. They also sued the title companies involved in the sale of Tract A. The Brimners counterclaimed for damage to the landscaping they had installed on the easement.
In June 2019, the parties entered into a joint stipulation that dismissed the Binzes’ claims with prejudice, but did not dismiss the Brimners’ claims. The Brimners argued that the dismissal of the Binzes’ claims was res judicata as to their counterclaim, leaving only the question of damages to be resolved. The trial court disagreed, finding the easement unenforceable and granting summary judgment to the Binzes. The Brimners appealed.
On appeal, the Brimners continued to argue that the Binzes’ dismissal of their claims precluded the Binzes from disputing the enforceability of the easement. The Court disagreed.
When reaching this conclusion, the court noted that when dealing with issues of claim preclusion, you must have a final judgment on the merits—and a dismissal of only some of the claims in the lawsuit without Rule 54(B)’s “magic language” is not a final judgment.
As mentioned, while the Binzes’ amended complaint was dismissed by stipulation, the Brimners’ counterclaim was explicitly excluded from that stipulation, leaving to be resolved the claim that the Binzes had unlawfully damaged the improvements the Brimners made to the easement. Moreover, the trial court did not expressly make, in writing, an entry of judgment or determine that there was no just reason for delay. Consequently, there was no final judgment on the merits, a foundational requirement of claim preclusion.
This still left the possibility of issue preclusion, but this only applies to “matters actually litigated and decided.”
Because the Binzes’ amended complaint was dismissed by stipulation, the issue of the enforceability of the Easement Instrument was not actually litigated and decided. Consequently, issue preclusion does not apply to bar its consideration as raised in the Brimners’ counterclaim.
While the Brimners may have felt that they won when the Binzes dismissed their claims, they had not. We all should keep this in mind when trying to settle lawsuits in the future.
Lessons:
1. The dismissal of some of the claims in a lawsuit cannot preclude other claims in the lawsuit if the dismissal does not include Rule 54(B)’s magic language.
2. The voluntary dismissal of some claims in a lawsuit cannot preclude the litigation of issues in those claims because the dismissed claims were not actually litigated and decided.