stating, “[t]he modern trend in both federal and state courts is to abandon the requirement of mutuality for collateral estoppel, subject to certain exceptions, as long as the party to be collaterally estopped had a full and fair opportunity to litigate the issue in the earlier action[,]” and holding, “we see no good reason for continuing to require mutuality of estoppel in cases like this case”
How later courts described this case
- stating, “[t]he modern trend in both federal and state courts is to abandon the requirement of mutuality for collateral estoppel, subject to certain exceptions, as long as the party to be collaterally estopped had a full and fair opportunity to litigate the issue in the earlier action[,]” and holding, “we see no good reason for continuing to require mutuality of estoppel in cases like this case”
- holding that the defendant’s failure to respond to a complaint was due to excusable neglect where she reasonably relied upon her husband’s assurances the matter had been taken care of
- stating that North Carolina courts have abandoned the tequitement of “mutuality of estoppel” for the defensive use of collateral estoppel
- construing a rule identical to Rule 60.02(1) and observing that excusable neglect must have occurred at or before entry of the judgment and must have caused it to be entered
Written by the judges who cited it.
The opinion
Chief Justice BILLINGS
concurring in result.
I am unable to join in the majority opinion because, regardless of whether the time has come to abandon mutuality in the *436 defensive use of the doctrine of collateral estoppel, an abandonment that was not requested by the defendant and a question that was briefed by neither party, the doctrine of collateral estoppel does not prevent litigation of the issue of the plaintiffs entitlement under its contract to prejudgment interest because that issue was not “determined” in the earlier action. Nevertheless, the result reached by the majority is supported by the application of another doctrine specifically applicable to joint and several obligations, such as the one involved in this litigation, and I therefore concur in the result.
In regard to their obligations to the plaintiff under the auction contract, Mr. and Mrs. Hall were jointly and severally liable. N.C.G.S. § 1-72 (1983) permits suit “against all or any number” of persons obligated on a joint contract; therefore, the plaintiff herein was not required to join Mrs. Hall in its counterclaim against Mr. Hall in the prior lawsuit. Because persons who are jointly and severally liable on a contract are not in privity, as the majority correctly concludes, the judgment against Mr. Hall did not operate as res judicata as to the plaintiffs claim against Mrs. Hall.
Res judicata and collateral estoppel are two similar doctrines with significantly different application. Res judicata is called a doctrine of “claim preclusion” because it prevents relitigation of a claim or cause of action between the same parties or those in privity with the parties. King v. Grindstaff, 284 N.C. 348 , 200 S.E. 2d 799 (1973). It precludes not only the issues actually determined but all issues which could or should have been raised in support or defense of the claim litigated. Unquestionably, res judicata would prevent the plaintiff from seeking in a second lawsuit to recover prejudgment interest from Mr. Hall.
Collateral estoppel, on the other hand, works to preclude relitigation by parties or their privies of facts or issues actually determined in a previous action based upon a different claim or cause of action. Id.
In determining whether collateral estoppel is applicable to specific issues, certain requirements must be met: (1) The issues to be concluded must be the same as those involved in the prior action; (2) in the prior action, the issues must have been raised and actually litigated; (3) the issues must have *437 been material and relevant to the disposition of the prior action; and (4) the determination made of those issues in the prior action must have been necessary and essential to the resulting judgment.
Id. at 358 , 200 S.E. 2d at 806 .
Here the claims in the two actions are different because, although they are based upon one contract, the first was a claim to establish Mr. Hall’s liability under that contract; the action sub judice is a claim to establish Mrs. Hall’s liability, which is joint and several with but independent of Mr. Hall’s liability.
Historically in North Carolina, our courts have applied the doctrine of mutuality to both res judicata and collateral estoppel. Under the doctrine of mutuality, if the prior action did not bind one of the parties to the second action because he or she had not been a party or in privity with a party to the first action, the other party also was not bound, even though he or she had been a party to the earlier action. Kayler v. Gallimore, 269 N.C. 405 , 152 S.E. 2d 518 (1967). Because Mrs. Hall was not a party to the earlier action and was not in privity with a party, she in no way was bound by any issues determined therein. If the judgment in the prior action had not been satisfied by Mr. Hall, there is no question that the plaintiff herein could have prosecuted this action against Mrs. Hall and that she was not bound by the determination in the prior action that the debt was owed or the amount of the outstanding balance due on the debt. She also would have been free to interpose any defenses or set-offs that she had to the debt, whether or not they had been raised by Mr. Hall in the counterclaim against him. Because Mrs. Hall was not precluded by any determination in the first action, application of the doctrine of mutuality would mean that the plaintiff, although a party to the first action, would not be precluded in an action against Mrs. Hall by any determination in the first action. By abandoning the doctrine of mutuality in application of the doctrine of collateral estoppel, the majority concludes that the plaintiff is precluded by the prior judgment from seeking to recover prejudgment interest in this action against Mrs. Hall.
The problem with the majority’s analysis is not with abandonment of the doctrine of mutuality but with application of collateral estoppel to the issue of the plaintiffs entitlement to *438 prejudgment interest, because the issue of the entitlement of the plaintiff to recover prejudgment interest on its contract was not actually determined on the merits in the first action.
Among the trial judge’s findings of fact, to which no exception was taken, was the following:
l.i. No issue was submitted to the jury, and nor was any such issue requested, and nor was the jury charged concerning interest on the Mclnnis and Hall contract and the Presiding Judge declined to grant interest from the day of breach of the contract as a matter of law, he expressing the opinion that the question of interest on the breach of contract was a jury question and had consequently been waived in the absence of a timely request that an issue concerning interest be submitted to the jury; Mclnnis contended that interest was payable from the day of breach as a matter of law.
The finding contained in paragraph l.i. establishes that the trial judge determined that entitlement to prejudgment interest was a jury question, not a question of law. Neither he nor the jury determined that Mclnnis was not entitled under its contract to prejudgment interest; the judge determined that as against Mr. Hall in the action Mclnnis had waived its right to recover the interest by not requesting that an issue regarding prejudgment interest be submitted to the jury. Waiver is conduct by which a party relinquishes a right, Black’s Law Dictionary 1417 (5th Ed. 1979), giving up in the action the right to rely upon the claim or defense which he otherwise could rely upon. Because the waiver applied only to the conduct of the action against Mr. Hall, it was not a determination that Mclnnis could not recover the interest against other obligors on the contract. The right of Mclnnis to recover prejudgment interest under the contract was not “actually litigated and determined in the original action” although it “might have been thus litigated and determined,” Cromwell v. County of Sac, 94 U.S. 351, 353 , 24 L.Ed. 195, 198 (1877) (majority opinion, 318 N.C. 421 , 427-28, 349 S.E. 2d 552, 556 ), had Mclnnis not, under the trial judge’s view of the law, waived his right to *439 have it determined. 1 As stated in Restatement (Second) of Judgments § 27 comment e (1982):
A judgment is not conclusive in a subsequent action as to issues which might have been but were not litigated and determined in the prior action. There are many reasons why a party may choose not to raise an issue, or to contest an assertion, in a particular action. The action may involve so small an amount that litigation of the issue may cost more than the value of the lawsuit. Or the forum may be an inconvenient one in which to produce the necessary evidence or in which to litigate at all. The interests of conserving judicial resources, of maintaining consistency, and of avoiding oppression or harassment of the adverse party are less compelling when the issue on which preclusion is sought has not actually been litigated before. And if preclusive effect were given to issues not litigated, the result might serve to discourage compromise, to decrease the likelihood that the issues in an action would be narrowed by stipulation, and thus to intensify litigation.
Whether an issue raised in the pleading was actually litigated and determined must be determined by a review of the entire record, Reid v. Holden, 242 N.C. 408 , 88 S.E. 2d 125 (1955). In this case the trial judge expressly held that the issue of prejudgment interest was waived and therefore not determined. See Solarana v. Industrial Electronics, Inc., 50 Haw. 22, 28 , 428 P. 2d 411, 416 (1967) (“ ‘A judgment is not res judicata as to issues raised in a previous case which were . . . matters which a court expressly refused to determine.’ ”); Harvey v. Getchell, 190 Or. 205 , 225 P. 2d 391 (1950). Careful attention to the question of whether the issue raised in the second action was determined in the first action becomes especially necessary when we abandon the doctrine of mutuality in the defensive use of collateral estoppel.
Therefore, because the issue was not actually litigated and determined, collateral estoppel does not bar litigation of Mclnnis’ entitlement to prejudgment interest even if the doctrine of mutuality is abandoned in the circumstances presented here.
*440 The trial judge found as fact no. 7 that “[t]he only alleged meritorious defense raised by the defendant in her affidavits or in argument of counsel is that of collateral estoppel.” No exception was taken to finding of fact no. 7, nor was any question raised in either the Court of Appeals or in this Court about the possible existence of another meritorious defense.
However, the motion of the defendant to set aside the judgment, the affidavits of Mr. and Mrs. Hall, the findings of the trial judge and the statement of facts in the Court of Appeals’ opinion and in this Court’s majority opinion all state that prior to entry of the default judgment against Mrs. Hall in the case sub judice, Mclnnis had obtained a judgment against Mr. Hall for breach of the contract which also was the basis for the action against Mrs. Hall and that the judgment had been satisfied.
As this Court noted in Sherwood v. Collier, 14 N.C. 380, 381 (1832) 2 :
A payment by any one of two or more, jointly, or jointly and severally bound for the same debt, is payment by all, and any of the parties may take advantage of it and plead it to an action brought by a satisfied creditor, or in his name by the sureties.
The general rule in this country is that, although res judicata does not prevent the prosecution of separate actions and the obtaining of separate judgments against persons jointly and severally liable on the same obligation, the satisfaction of a judgment against one such obligor satisfies all debts or judgments based upon the joint and several obligation, even if the judgments are for different amounts. 47 Am. Jur. 2d, Judgments § 993 (1969), Restatement (Second) of Judgments § 50; Leo Jay Rosen Associates, Inc. v. Schultz, 148 So. 2d 293 (Fla. Dist. Ct. App.) (1963). Therefore, the satisfaction by Mr. Hall of the judgment which Mclnnis had obtained against him for the joint and several contractual obligation would constitute a defense to an action against Mrs. Hall upon the same obligation.
*441 If we are going to reach out and decide this case on the basis of legal principles not raised or briefed by the parties, I would prefer to decide it on the basis of the theory which is tailor-made for the situation present and which calls for the application of a long-accepted rule of law rather than to use this case as a vehicle to change the law of mutuality in collateral estoppel without the benefit of briefs or arguments.
Justice MEYER joins in this concurring opinion.
. It might be that if Mrs. Hall is entitled to rely on collateral estoppel in the action sub judice, Mclnnis is bound by the trial judge’s “determination” that the question of prejudgment interest is a factual, rather than a legal, question.
. The rule of the Sherwood case was not changed by the subsequent enactment of N.C.G.S. § 1-72 which permits action against “all or any number of the persons making [joint contracts].”