Chapter 90 Res Judicata

• Library: South Carolina Civil Procedure (SCBar) (2020 Ed.)

Chapter 90 Res Judicata

A. Introduction

Res judicata is the principle of the law that defines the effect a valid judgment may have on subsequent litigation between the same parties and their privies.¹ Res judicata ends litigation, promotes judicial economy, and avoids the harassment and burdens of relitigating the same issues.² The doctrine also prevents inconsistent verdicts.³ These policies and benefits, however, come at the expense of making a judgment final even if wrong.⁴

The cases often summarize the elements of res judicata as requiring proof that: (1) the earlier judgment was final, valid, and on the merits; (2) the parties in the subsequent action must be the same as in the earlier action; and (3) the second action must involve matters properly included in the first action.⁵ These elements are the starting point for analysis, but as developed below, res judicata comes in two forms, and the requirements for satisfying the third element, in particular, depend upon which form of res judicata is used.

The first form of res judicata is called "claim preclusion" in the modern cases. A final judgment on the merits precludes the parties from relitigating a second action on any claim that was actually litigated or could have been litigated in the prior action. The earlier cases refer to the concept as "merger" and "bar." Recovery by the plaintiff merged the claim into the judgment, and if he lost, the plaintiff is barred by the judgment from trying the case again. The defendant must also raise all relevant issues in the first action or lose them. The defendant's failure to assert an available defense to a claim bars it as a defense in future actions⁶ or as a claim for affirmative relief⁷ in an independent action. A compulsory counterclaim must be raised in the first action.⁸

The second form of res judicata is called "issue preclusion." Any issue that was litigated, determined, and necessary to the judgment in the first case between the same parties may not be relitigated in a second action involving a different claim. The concept is referred to in earlier cases as "collateral estoppel" and sometimes as "estoppel by judgment."⁹ Issue preclusion applies when there are different claims but common issues in the first and second actions.

Both forms of res judicata have substantial ramifications for future litigation between the same parties. Claim preclusion bars anything that could have been litigated in the earlier action, while issue preclusion may affect subsequent cases between the same parties when there are different claims or causes of action, but common issues in both cases that were litigated, determined, and necessary to the judgment.

Res judicata, whether claim or issue preclusion, is an affirmative defense that must be pleaded and proved by the party asserting it.¹⁰ An affirmative defense may not be raised by oral motion¹¹ but may be added by amending the answer.¹² There is no responsive pleading to an affirmative defense because it is automatically deemed denied.¹³ Rule 8 permits, but does not require, a voluntary reply. The requirement of a formal pleading may be waived if the issues were argued and decided without objection.¹⁴ Occasionally, a complaint may allege facts that show res judicata and support a motion for failure to state a claim.¹⁵ A court may raise it sua sponte if there is no objection by the parties.¹⁶

B. Valid Judgment Necessary for Claim or Issue Preclusion

Res judicata in all forms requires a valid judgment, that is, one rendered by a court with jurisdiction of the subject matter and of the parties, is final, and is on the merits. Decisions of administrative agencies also have preclusive effects in subsequent administrative proceedings¹⁷ and civil litigation.¹⁸ Res judicata also applies to arbitration awards, including claims that could have been submitted but were not.¹⁹

If a judgment has been reversed on appeal or otherwise set aside, the judgment loses any precedential effect and the parties are left as if no judgment had ever been entered.²⁰ That is, the vacated judgment is deprived of all conclusive effect, both as to res judicata and collateral estoppel.²¹

1. Subject Matter Jurisdiction

Subject matter jurisdiction is the power granted to the court by the legislature to adjudicate matters.²² All states have a court of general jurisdiction and several specialized courts in which the subject matter jurisdiction is limited to probate or family matters.²³ Without subject matter jurisdiction, a judgment is void.²⁴ Moreover, lack of subject matter jurisdiction can be raised at any time, even on appeal, and sua sponte by the court.²⁵ A judgment so easily avoided suggests that it may not have preclusive effects. South Carolina cases contain statements to that effect.²⁶

Despite these pronouncements, a void judgment may survive challenge and retain its res judicata effect depending on how the issue is raised. Judgments may be challenged two ways. A direct attack on a judgment for lack of subject matter jurisdiction is made by a motion in the case itself or an action attacking that judgment.²⁷ The general statements about the ineffectiveness of judgments rendered by courts without subject matter jurisdiction are in cases of direct attacks on the judgments. Even in a direct attack, however, the court will often demand strong proof before reviewing the judgment.²⁸

Res judicata also is raised in a subsequent proceeding as a defense. Claiming that the first court lacked subject matter jurisdiction is a collateral attack. Courts are reluctant to permit collateral attacks on judgments.²⁹ For example, a court will refuse to reexamine jurisdiction if it has been previously determined.³⁰ Judgments are given a presumption of regularity, and a jurisdictional defect cannot be raised collaterally unless it appears on the face of the judgment.³¹ Although South Carolina cases do not formally hold that void judgments have res judicata effects, these rules may leave a judgment intact that would otherwise be invalid.³²

Authority exists for the view that some judgments by courts lacking subject matter jurisdiction should be binding. Federal law accords binding effect to federal court judgments even though there is no subject matter jurisdiction.³³ Likewise, the Restatement (Second) of Judgments maintains that a lack of subject matter jurisdiction should not void every judgment.³⁴ The interest of finality outweighs the interest of protecting subject matter jurisdiction, particularly when the jurisdictional issue was litigated in the first case and the challenge is raised in a collateral proceeding. Once the parties have submitted the issue to the court, they should be bound by the judgment on all questions including questions of jurisdiction. Similar sentiments can be found in our case law.³⁵

2. Jurisdiction over the Person or Property

A court with subject matter jurisdiction must also have personal jurisdiction over the parties or in rem jurisdiction over the property to have a valid judgment.³⁶ Jurisdiction over the parties is acquired through service of process on each defendant and over the property, by attachment. Jurisdiction over the person or property involves two issues: (1) whether jurisdiction was acquired properly under the relevant statutes, and (2) whether the assertion of jurisdiction under these facts is constitutional.

An objection to jurisdiction over the person or property, unlike one to subject matter jurisdiction, must be timely asserted or the defense is waived.³⁷ A proper objection to personal jurisdiction preserves the issue for review on appeal.³⁸ As with subject matter jurisdiction, the courts are reluctant to permit collateral attacks based on lack of personal jurisdiction when there was adequate opportunity to litigate the issue in the original case.³⁹ A collateral attack is possible if the defendant did not appear,⁴⁰ but is limited to constitutional issues surrounding the assertion of jurisdiction. If jurisdiction is upheld, any ruling on the merits remains effective unless relief from the judgment is obtained under Rule 60 or in an independent action.

3. Final Judgment

Only a final judgment has preclusive effects. A final judgment is one that terminates the litigation.⁴¹ An interlocutory order that does not end the case cannot have preclusive effects⁴² in subsequent litigation, although the doctrine of law of the case may determine the issue for the instant case. Once a dispositive ruling has been made, it must be entered by the clerk to be final.⁴³ The court may change its mind any time before entry of the judgment.⁴⁴

A judgment on appeal may be the basis of preclusion; however, relying on such a judgment may not be prudent because reversal of the first judgment necessarily affects the second.⁴⁵ An appellate decision that ends the case is also a final judgment. Thus, when the appellate court ruled that a defendant's motion for a directed verdict should have been granted, the case was terminated and a final judgment was entered.⁴⁶ That the judgment is wrong does not prevent its preclusive effect. Nor can the finality be destroyed by recasting the transaction on which the first judgment was based.⁴⁷

4. Judgment on the Merits

The scope of preclusion is largely determined by whether a judgment was "on the merits." A judgment "on the merits" or a dismissal "with prejudice"⁴⁸ has the greatest effect because it precludes the parties from relitigating any matter that could have been raised in the dismissed case.

The classic example of a judgment on the merits is one entered after a trial. There are some judgments dismissing a case that do not prevent relitigation of the claim, however, they may preclude retrying the issue that led to the dismissal. For example, a dismissal for lack of capacity to sue and improper joinder does not bar a subsequent action on the same claims because the first case only determined the capacity and joinder issues.⁴⁹ Rule 41 defines when dismissals are on...