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Rutherford v. Kessel

March 30, 2009

JULIE RUTHERFORD, APPELLANT,
v.
DEAN KESSEL, APPELLEE,
ROBERT RUTHERFORD; ELIZABETH MCGREGOR, DEFENDANTS.



Appeal from the United States District Court for the District of North Dakota.

The opinion of the court was delivered by: Bye, Circuit Judge.

Submitted: December 12, 2008

Before WOLLMAN, BYE, and RILEY, Circuit Judges.

Julie Rutherford brought this action to quiet title in three condominium properties she claims to own. These properties were the subject of a North Dakota state trial court order entered against Rutherford's brother, Robert Rutherford. Such order held the transfers of ownership between the brother and sister were fraudulent and therefore null and void. Rutherford appeals the district court's*fn1 determination that her quiet title action is barred by the doctrine of res judicata. We affirm.

I.

On May 27, 2004, Robert Rutherford assaulted Dean Kessel in the latter's home in Bismarck, North Dakota. Robert was charged with burglary and assault, convicted, and sentenced to serve four years. Kessel brought a civil action in state court against Robert for the injuries suffered in the assault. At the outset of the civil action, the state trial court entered an order enjoining Robert from disposing of his assets. Near the same time, Kessel discovered three condominiums recorded as being owned by Robert. On September 21, 2004, Kessel filed and recorded a lis pendens against the properties, giving notice that a personal injury action had been filed against Robert and that title to the properties could be affected by a judgment in such action.

In August 2005, Robert informed his sister, Julie, of the civil action brought against him by Kessel. On October 15, 2005, while Robert was incarcerated, he appointed Julie his attorney-in-fact. In December 2005, acting pursuant to her appointment, Julie executed warranty deeds transferring the three condominium properties to herself. The deeds recorded by Julie show her both as grantor (via her power of attorney) and as grantee. Julie contends, however, her actual ownership of two of the properties dates back to February 2000 and February 2001. At those times, two deeds were recorded showing Robert as the legal title holder, but Julie contends she was the actual owner. She claims Robert did not provide any consideration for the deeds and only held legal title in trust for her benefit. With respect to the third property, Julie contends Robert granted her a security interest in the property in February 2000 to secure obligations owed to her by him. She contends the December 2005 transfers pursuant to her power of attorney were to fulfill expressed or implied agreements between herself and her brother regarding her actual ownership of the properties.

The personal injury action proceeded to trial in April 2006. During the course of the trial, Julie sat at defense counsel's table as her brother's representative; he was still incarcerated. Acting pursuant to her power of attorney, she also controlled certain aspects of the litigation, such as paying attorney fees. When documentation was introduced showing Robert owned the three condominium properties, Julie said nothing about her alleged ownership. The jury found in favor of Kessel and awarded damages. On April 27, 2006, the state trial court entered a judgment in Kessel's favor in the amount of $240,415.47, plus interest.

Following the trial, both Kessel and the Rutherfords brought post-judgment motions. Of particular note, on September 28, 2006, Kessel brought an ex parte motion to set aside the December 2005 transfers of the three condominium properties, alleging the transfers were fraudulent. The state trial court granted the motion, holding that the transfers were null and void and title to the properties remained with Robert. On October 2, 2006, Kessel provided Robert with notice of the order. Robert, in turn, forwarded the notice to his sister's attorneys, who received it on October 6, 2006. On that same day, Robert appealed the judgment entered against him in state trial court to the North Dakota Supreme Court, and Julie filed her quiet title action in federal district court. The North Dakota Supreme Court subsequently affirmed the judgment of the state trial court. Kessel v. Rutherford, 734 N.W.2d 342 (N.D. 2007) (unpublished table disposition).

In the quiet title action, Kessel brought a motion for summary judgment. Kessel contended, in part, Julie was improperly attempting to seek relief from the ex parte order of the state trial court and should be barred from doing so because she was in privity with her brother as a result of the power of attorney to act on his behalf. The district court initially denied Kessel's motion, concluding Julie's claims of a property interest in the three condominium properties was not identical to the issues decided in the state trial court's ex parte order. In addition, the district court found Julie was not in privity with her brother, but acknowledged it was a "close question."

After conducting discovery, which included taking Julie's deposition during which she admitted sitting silently in court when the issue of Robert's ownership of the three condominiums was discussed, Kessel filed a second motion for summary judgment. He renewed his argument that Julie should be precluded from challenging the state trial court's order voiding the transfers of the properties as fraudulent. The district court revisited Kessel's preclusion arguments, this time finding Julie was in privity with her brother and concluding the quiet title action was barred by the doctrine of res judicata. Rutherford v. Rutherford, 552 F. Supp. 2d 980, 989-90 (D. N.D. 2008). Julie filed a timely appeal to this court.

II.

The district court's grant of summary judgment on the issue of res judicata is reviewed de novo. Morse v. Comm'r, 419 F.3d 829, 833 (8th Cir. 2005). For a claim to be precluded under the doctrine of res judicata due to a determination reached in a prior lawsuit, five elements must be satisfied. Those elements are:

(1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) both suits involve the same parties (or those in privity with them); and (4) both suits are based upon the same claims or causes of action. Furthermore, the party against whom res judicata is asserted must [(5)] have had a full and fair ...


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