Petition — Harding, Dahm & Co. v. Lightsey

AK, JR., CLERK

In THE

Supreme Court of the Gnited States

Ocroser Trrm, 1980

Sieean

— —

HARDING, DAHM & COMPANY, INC.,

Petitioner,

vs.

RUDY LIGHTSEY,

Respondent.

|

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~— >

ae

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BURT, BLEE, HAWK & SUTTON

By: Thomas J. Blee

Counsel for Petitioner

Of Counsel: George Martin

13th Floor Lincoln Bank Tower

Fort Wayne, IN 46802

(219) 426-1300

Midwest Law Printing Co., Chicago 60601, Financial 6-3988

i

QUESTIONS PRESENTED FOR REVIEW

1. Does full faith and credit apply to final ad-

judications of state administrative agencies so that a

federal court cannot refuse to grant collateral estoppel

effect to a specific finding of the agency material to that

agency’s final decision on the ground that the agency did

not have jurisdiction to make the finding when the find-

ing was necessary to decide an issue a state statute re-

quired the agency to adjudicate aud when no other state

law denies that jurisdiction.

2. Do principles of federal-state comity apply to final

adjudications of state administrative agencies made pur-

suant to a requirement imposed by the state legislature

so that a federal court, sitting in a diversity’ case, cannot

refuse to grant collateral estoppel effect to a specific find-

ing of the agency material to that agency’s final deci-

sion on the ground of lack of jurisdiction unless that

court can cite law of the state clearly demonstrating

lack of jurisdiction.

4 ili

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED FOR REVIEW ................ i

TABLE OF AUTHORITIES iv

OPINIONS BELOW 1

JURISDICTION in

CONSTITUTION, STATUTES AND REGULA-

TIONS 2

STATEMENT OF THE CASE AES ie 8

REASONS FOR GRANTING THE WRIT:

A.

Full Faith And Credit Does Not Allow The

Court Of Appeals To Reverse The Trial Court

On The Ground Of Lack Of Jurisdiction ................ 11]

B.

Comity Requires Finding A Proper Assumption

Of Jurisdiction By The Real Estate Commission .. 18

cs cancecere 21

APPENDICES:

1—Opinion of the United States Court of Appeals

for the Seventh Circuit ....2...0..........csscececesescecseeseeeeeees la

2—Decision of the United States District Court for

the Northern District of Indiana, Fort Wayne

Division 7a

3—Decision of the Indiana Real Estate Commission .. 17a

1 PREVIOUS PAGE WAS BLANK i

iv

TABLE OF AUTHORITIES

Cases

Barber v. Barber, 323 U.S. 77, 89 L. Ed. 82 (1944) ........ 14

Beal v. Missouri Pacific R. iiss 85 L. Ed. 577, 312

iF 2h: Remote 20

Bowen v. United States, 570 F. 2d 1311 1 (7th Cir. 1978) .. 13

Castro v. Beecher, 459 F. 2d 725 (1st Cir. 1972) ............ 19

Davis v. Davis, 305 U.S. 32, 83 L. Ed. 26 (1938) ........ 12, 14

Erie Railroad Co. v. Tomkins, 304 U.S. 64, 82 L. Ed.

VUBB (1GBB) enncvinoncnaccsnssnssssosesconsnscanenssonssiionnminmnesesasenniesiesneeh 18

Francis v. Henderson, 425 U.S. 536, 48 L. Ed. 2d 149

CRITE ioisdssisdccssseecscanovesnsathiceadstinibosancnndpaitemsionemennan tial 19, 20

General Telephone Co. of Indiana v. Public Service

Commission, 238 Ind. 646, 154 N.E. 2d 372 (1958) ..... 15

Gleason v. Real Estate Commission, 157 Ind. vat

344, 300 N.E. 2d 116 (1973) ............... Gdiaicyullacamidsea 12

Huron Holding Corp. v. Lincoln M. Operating Co., 312

U.S. 188, GB Ls, Tie, TAO (UGG) ericeccccccsecsocccssosncorinsencesensen 12

Huffman v. Pursue, Ltd., 420 U.S. 592, 43 L. Ed. 2d

482 (1975) 19

Indiana Telephone Corp. v. Indiana Bell Telephone

Co., 358 N.E. 2d 218 (Ind. Ct. of App. 1976 ........ 12, 16, 17

Johnson County Rural Electric Membership Corpora-

tion v. Public Service Company of Indiana, Inc., 378

N.E. 2d 1 (Ind. App., 1978) 15

Magnolia Petroleum Co. v. Hunt, 320 U.S. 430, 88 L.

TE, 14D (19GB) cececinececesensecnsasensccnctepneseesnnse ae

Milliken v. Meyer, 311 U.S. 457, 85 L. Ed. 278 (1940) .. 14

Taylor v. New York City Transit Authority, 433 F. 2d

G65 (2nd Cir., 1970) .........-...c.c-crvcccecerecseseresernsscnenssessencesses 19

Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669 (1971) 19

United States Constitution

beta tike sc aoesa 8 Cae ae CITES Ha La eae 2,11

Statutes

Indiana Administrative Adjudication Act,

oles oe he ypan be Ot OTS Cee. rE 4,9

Se agg EE EL I 12

|. AREER ence ay nana aR 12

eth i ag ah ON OE ARE 5, 13

co 13, 15, 16

sskestsetonkup aah pes ee 2

sch i pind ssn ef oe 2, 11, 12

“lint a. ca yams oe ATE, 3, 12

References

1 Indiana Law Encyclopedia, Administrative Law and

ih seh Thao a Ree aT 15

32 Am.Jur. 2d, Federal Practice and Procedure, See.

Hiern PN et RCE SI IE 14

In Tue

Supreme Court of the United States

Ocroser Tzrm, 1980

HARDING, DAHM & COMPANY, INC.,

Petitioner,

vs,

RUDY LIGHTSEY,

) Respondent.

————V0O—3OIe63sea0—

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

OPINIONS BELOW

-_

The decision of the United States District Court for

the Northern District of Indiana is unpublished and

appears in the Appendix hereto. The opinion of the Un-

ited States Court of Appeals for the Seventh Circuit will

be published shortly and appears in the Appendix

hereto.

ellie

JURISDICTION

The opinion of the Court of Appeals for the Seventh

Circuit was entered on June 12, 1980. This Petition for

Certiorari was filed within ninety (90) days of that date.

This Court’s jurisdiction is invoked under 28 U.S.C.

Sec. 1254(1).

CONSTITUTION, STATUTES AND

REGULATIONS

ee

Article IV, Section 1 of the Constitution provides:

“Section 1. Full Faith and Credit shall be given

in each State to the public Acts, Records, and

judicial Proceedings of every other State. And the

Congress may by general Laws prescribe the

Manner in which such Acts, Records and

Acco aaa shall be proved, and the Effect

thereof.”

28 U.S.C. Sec. 1738 provides as follows:

“$1738. State and Territorial statutes and judicial

proceedings; full faith and credit. The Acts of the

legislature of any State, Territory, or Possession of

the United States, or copies thereof, shall be

authenticated by affixing the seal of such State,

Territory or Possession thereto.

The ivcords and judicial proceedings of any court

of any such State, Territory or Possession, or copies

thereof, shall be proved or admitted in other courts

within the United States and its Territories and

Possessions by the attestation of the clerk and seal

ein

of the court annexed, if a seal exists, together with

a certificate of a judge of the court that the said

attestation is in proper form.

Such Acts, records and judicial proceedings or

copies thereof, so authenticated, shall have the same

full faith aid credit in every court within the Un-

ited States and its Territories and Possessions as

they have by law or usage in the courts of such

State, Territory or Possession from which they are

taken.” June 25, 1948, c. 646, 62 Stat. 947,

28 U.S.C. Sec. 1739 provides as follows:

“$1739. State and Territorial nonjudicial records;

full faith and credit. All nonjudicial records or

books kept in any public office of any State,

Territory, or Possession of the United States, or

copies thereof, shall be proved or admitted in any

court or office in any other State, Territory, or

Possession by the attestation of the custodian of

such records or books, and the seal of his office

annexed, if there be a seal, together with a cer-

tificate of a judge of a court of record of the county,

parish, or district in which such office may be kept,

or of the Governor, or Secretary of state, the

chancellor or keeper of the great seal, of the State,

Territory, or Possession that the said attestation is

in due form and by the proper officers.

If the certificate is given by a judge, it shall be

further authenticated by the clerk or prothonotary

of the court, who shall certify, under his hand and

the seal of his office, that such judge is duly com-

missioned and qualified; or, if given by such Gover-

nor, secretary, chancellor, or keeper of the great

seal, it shall be under the great seal of the State,

Territory, or Possession in which it is made,

Such records or books, or copies thereof, so

authenticated, shall have the same full faith and

credit in every court and office within the United

States and its Territories and Possessions as they

have by law or usage in the courts or offices of the

State, Territory, or Possession from which they are

taken.” June 25, 1948, c. 646, 62 Stat. 947,

niet

Indiana Code 4-22-1-14 provides as follows:

“4-22-1-14 [63-3014]. Judicial Review—Courts—

Procedure. Any party or person aggrieved by any

order or determination made by any such agency

shall be entitled to a judicial review thereof in ac-

cordance with the provisions of this act [4-22-1-1—4-

22-1-30]. Such review may be had by filing with the

circuit or superior court of the county in which such

person resides, or in any county in which such order

or determination is to be carried out or enforced, a

verified petition setting out such order, decision or

determination so made by said agency, and alleging -

specifically wherein said order, decision or deter-

mination is:

(1) Arbitrary, capricious, an abuse of discre-

tion or otherwise not in accordance with

law; or

(2) Contrary to constitutional right, power,

privilege or immunity; or

(3) In excess of statutory jurisdiction, authori-

ty or limitations, or short of statutory

right; or

(4) Without observance of procedure required

by law; or

(5) Unsupported by substantial evidence.

Said petition for review shall be filed within fif-

teen (15) days after receipt of notice that such

order, decision or determination is made by any

such agency. Notice shall be given in the manner

prescribed in section 6 [4-22-1-6] of this act. Unless

a proceeding for review is commenced by so filing

of such petition within fifteen (15) days any and all

rights of judicial review and all rights of recourse

to the courts shall terminate.

Written notice of the filing of such verified peti-

tion for review and a copy of said petition shall be

personally served upon the agency and the attorney

general. Where the agency consists of more than

one member it shall be personally served upon the

secretary or chairman of such agency.

=a

Any party or person so filing such verified peti-

tion for review with such court shall within fifteen

(15) days thereafter secure from such agency a cer-

tified copy of the transcript of said proceedings

before the agency including the order or admin-

istrative adjudication sought to be reviewed and

file the same with the clerk of such court in which

such action for review is pending. An extension of

time in which to file such transcript shall be

granted by said court in which such action for

review is pending for good cause shown. Inability to

obtain such transcript within time shall be good

cause. Failure to file such transcript within said

period of fifteen (15) days, or to secure an extension

of time therefor, shall be cause for the dismissal of

such petition for review by the court or on petitior

of any party of record to the original proceeding.

When more than one person may be aggrieved by

the administrative adjudication only one (1) pro-

ceeding for review may be had and the court in

which a petition for review is first properly filed

shall have jurisdiction. All persons who were par-

ties to the hearing before the agency shall be made

parties to the petition for review and shall be

notified thereof by the person filing such petition.”

[Acts TB ch. 365, §14, p. 1451; 1957, ch. 355, §4,

p. 1033.

Indiana Code 25-34-1-16 provides as follows:

“25-34-1-16 [63-2415]. Denial, refusal to renew,

revocation, or suspension of license—F ines—

Unprofessional conduct.—The commission shall,

after approval by a majority of all of its members,

deny, refuse to renew, revoke, or suspend any

license issued under this chapter and levy fines not

to exceed five hundred dollars ($500) when the com-

mission finds, after notice and hearing, that any

licensee has violated this chapter, has violated any

of the rules and regulations promulgated by the

commission, has engaged in activity in connection

with his license which activity is found to be fraud,

mal

misrepresentation, or incompetency, or has been

guilty of unprofessional conduct, which includes the

following:

(1) Failure to account and remit any

moneys or documents coming into his posses-

sion belonging to others.

(2) Accepting, giving, or charging any un-

disclosed commission, rebate, or direct profit

on expenditures made for a principal.

(3) Acting in a dual capacity of broker and

undisclosed principal in any transaction.

(4) Guaranteeing, or permitting any person

to guarantee, future profits which may result

from the resale of real property.

(5) Offering real property for sale, ex-

change, rent, or lease without the written con-

sent of the owner or his authorized agent or on

any terms other than those authorized by the

owner or his authorized agent.

(6) Inducing any party to a contract of sale

to break such a contract for the purpose of sub-

stituting, in lieu thereof, a new contract with

another principal.

(7) Accepting employment or compensation

for appraising real property contingent upon

the reporting of a predetermined value cr issu-

ing an appraisal report on real property in

which he has an undisclosed interest, unless the

interest is disclosed in the report.

(8) Negotiating a sale, exchange or lease of

real property directly with an owner or lessor

if he knows that the owner has a written out-

standing contract, in connection with the

property, granting an exclusive agency to

another broker.

(9) Soliciting, selling or offering for sale

real property by offering “free lots” or conduct-

ing lotteries for the purpose of influencing a

purchaser or prospective purchaser of real

property.

spiel

(10) Representing or attempting to repre-

sent a real estate broker, other than the asso-

ciated broker, without the express knowl-

edge or consent of the associated broker.

(11) Paying a commission or compensation

to any person for performing the services of a

real estate broker or real estate salesman who

has not first secured his license under this

chapter.

(12) Being convicted of a crime if the con-

duct that resulted in the conviction has a direct

bearing on whether or not the person should be

entrusted to serve the public as a licensed real

estate salesman or broker.

(13) Requesting the issuance of a salesman

license for the association of the salesman with

a broker when the broker does not intend to be

associated with the salesman.

(14) Engaging in an unlawful discrim-

inatory practice under IC 22-9-1 [22-9-1-1—

22-9-1-12].” [Acts of 1949, ch. 44, §15, p. 129;

1967, ch. 356, §2, p. 1828: 1969 ch. 418, §3, p.

1789; 1977, P.L. 172, §51, p. 749; 1978, P.L. 2,

§2558, p. ..... .]

~

STATEMENT OF THE CASE

This petition is based upon the refusal of the Seventh

Circuit United States Court of Appeals to uphold the

summary judgment granted by the District Court,

Northern District of Indiana, holding that a decision of

the Indiana Real Estate Commission should be granted

collateral estoppel effect and that this foreclosed any

genuine issue of fact in this case where federal jurisdic-

tion is founded upon diversity of citizenship.

The case arises out of a written Agreement to

Purchase a hotel in downtown, Fort Wayne, Indiana

among one J. L. Fine and Plaintiff, Rudy Lightsey as

buyers and First Federal Savings and Loan Association

as Seller with Defendant, Harding, Dahm & Co. as

broker. Pursuant to the Agreement, Lightsey, deposited

a $20,000.00 earnest money deposit with the real estate

broker and Defendant in the District Court, Harding,

Dahm and Company (“Harding”). The Agreement in-

cluded an Addendum stating that the $20,000 earnest

money deposit would be returned if financing was not

available. Fine and Lightsey refused to consummate the

Agreement to Purchase, and Harding refused to refund

the earnest money © 2posit on the grounds that financing

had become available.

Lightsey tried to get the earnest money back by

threatening to bring and by bringing an action before

the Indiana Real Estate Commission seeking revocation

of Harding’s real estate license. Harding submitted a

formal answer denying Lightsey’s assertions. On April

26, 1978, three hearing commissioners representing the

Indiana Rea! Estate Commission held a formal hearing

scene

lasting almost one day into Lightsey’s allegations. Both

Lightsey and Harding were present and were rep-

resented by attorneys at the hearing. Based upon the

hearing and documents submitted to it, the Hearing

Committee entered a finding and recommendation to the

Hearing Commission that:

“Therefore, it is the conclusion of the Hearing

Committee that James E. Harding, and Harding,

Dahm & Company have committed no violation of

the Indiana Real Estate License Laws in the rea]

estate transaction heard in this cause,

AND that the monies transmitted in said trans-

action were disbursed by the broker, James E.

Harding, in a manner which was in accordance

with the contractual agreement between the par-

ties.” (Petitioner’s Appendix 3, pp. 17a, 18a)

This recommendation was formally adopted by the In-

diana Real Estate Commission on May 25, 1978.

(Petitioner’s Appendix 3, pp. 17a, 18a) Although he was

notified of this finding, Lightsey did not request a

rehearing or appeal this decision to the Indiana courts

as authorized by the Indiana Administrative Adjudica-

tion Act, Indiana Code 4-22-1-14 and this decision

became final under Indiana law.

Instead, on August 30, 1978, Lightsey instituted an ac-

tion in the United States District Court, Northern Dis-

trict of Indiana to recover the $20,000 earnest money.

Harding moved for a summary judgment on the

grounds that the adjudication by the Indiana Real Es-

tate Commission, including their specific finding that

the monies were disbursed by the broker in accordance

with the contractual agreement between the parties,

collaterally estopped Lightsey’s federal court action. The

District Court for the Northern District of Indiana

—10—

granted the summary judgment motion on the basis that

the Real Estate Commission had, in fact, determined the

issue before the Court—that the monies were disbursed

in accordance with the contract and that the Commis-

sion had jurisdiction to render this decision. (Petitioner’s

Appendix 2) Lightsey appealed this decision and on

June 12, 1980, the Seventh U.S. Circuit Court of

Appeals reversed Judge Eschbach. That court held that

while Indiana courts grant collateral estoppel effect to

decisions of administrative agencies, this decision could

not be granted collateral estoppel effect because the

Commission did not have jurisdiction to construe con-

tracts, to determine the validity or invalidity of con-

tracts or to determine whether all the conditions prece-

dent to the performance of the contract had been

satisfied so that its finding that the funds were disburs-

ed in accordance with the contract was not entitled to

collateral estoppel effect. (Petitioner’s Appendix 1, pp.

5a, 6a)

am, a

REASONS FOR GRANTING THE WRIT

_

This Petition should be granted because the immense

importance of state administrative agencies in today’s

society requires that the effect of their decisions be more

fully defined. Not only has the burgeoning vf state agen-

cies caused them to have a great influence on people’s

lives; this phenomenon has also had a tremendous im-

pact on federal-state relations. Federalism can no longer

be explained solely in terms of the federal courts’ and

Congress’ relationship to state courts and legislatures,

The increasing role of state agencies in this federal]

framework more than ever requires clear guidelines as

to that role. In particular, this case presents an oppor-

tunity for this Court to define the role full faith and

credit and comity should play when a federal court

reviews a state agency’s jurisdiction, a role that has not

yet been adequately defined.

A

FULL FAITH AND CREDIT DOES NOT ALLOW

THE COURT OF APPEALS TO REVERSE THE TRIAL

io ON THE GROUND OF LACK OF JURISDIC-

The United States Constitution leaves no doubt about

the effect one state court’s decisions will have in the

courts of another state. Art. IV, Sec. 1, specifies that:

“Full faith and credit shall be given in each state to

the public acts, records and judicial proceedings of

every other state.”

In 28 U.S.C. Sec. 1788, the United States Congress has

filled in +he_yaid the framers of the Constitution left in

the relationship between federal and state courts by re-

a

quiring federal courts to extend full faith and credit to

state court decisions. This statute mandates that federal

courts give such state court proceedings the same full

faith and credit as they have in the courts of the state

from which they are taken. See Huron Holding Corp. v.

Lincoln M. Operating Co., 312 U.S. 188, 85 L. Ed. 725

(1941). Davis v. Davis, 305 U.S. 32, 88 L. Ed. 26 (1988).

Congress has also extended full faith and credit to all

nonjudicial records and books kept in any state public

offices. 28 U.S.C. Sec. 1739. The decision of the Indiana

Real Estate Commission hereinafter sometimes, “the

Commission”, is entitled to full faith and credit in the

federal court under one or both of these two statutes.

Either the Commission’s decision was a judicial act! and

falls under the aegis of 28 U.S.C. Sec. 17388 or that deci-

sion wa* a nonjudicial decision, and the record of that

decision is a nonjudicial record kept in the public offices

of the Commission (See, Ind. Code 25-34-1-3) which must

receive full faith and credit treatment under 28 U.S.C.

Sec. 1739. That is precisely the basis the Supreme Court

relied upon in Magnolia Petroleum Co. v. Hunt, 320 U.S.

430, 88 _L. Ed. 149, 157-158 (1948) to grant res judicata

effect to a state agency determination. The Magnolia

case requires the federal courts in this case to grant the

Commission’s adjudication “such faith and credit”...

as it has in the State of Indiana. Jbid., p. 158. Under In-

diana law, decisions of agencies acting in a judicial

'_ The Commission is a quasi-judicial agency. It is governed

by the Indiana Administrative Adjudication Act, I.C. 4-22-1-1,

et seg.; Gleason v. Real Estate Commission, 157 Ind. App. 344,

300 N.E. 2d 116 (1973) and conducts its proceedings in accor-

dance with that act. The distinction between agency Pg

and lecislative proceedings in Indiana is set forth in Indiana

Telephone Corp. v. Indiana Bell Telephone Co., 358 N.E. 2d

218 (indians Coust of Appeals, 1976). See infra p. 17.

— |

capacity are entitled to res judicata effect. Bowen v. Un-

ited States, 570 F. 2d 1311 (7th Cir. 1978)

The Court of Appeals’ treatment of the Commission’s

decision in this case blatantly violated full faith and

credit. The Commission’s finding that the monies were

disbursed in accordance with the contract arose as

follows. The Plaintiff, Lightsey, filed a grievance with

the Commission seeking revocation of Harding’s license

on the grounds Harding had improperly refused to re-

fund Lightsey his $20,000.00 earnest money deposit. The

Real Estate Commission was then required by Indiana

statute to determine whether Harding’s license should

be revoked because it violated the standards set forth in

Indiana Code 25-34-1-16, in particular whether Harding

had:

. +. violated any of the rules and regulations

promulgated by the Commission, ha[d] engaged in

activity in connection with his license which activity

is found to be fraud, misrepresentation or in-

competency, or ha[d] been guilty of unprofessional

conduct, which includes the following:

(1) Failure to account and remit any monies

or documents coming into his possession

belonging to others.”

Thus, the combination of Lightsey’s complaint before the

Commission that Harding had improperly refused to

return the earnest money deposit and Indiana Code 25-

34-1-16(1) required the Commission to discover who was

entitled to the escrow deposit. Based on this Statutory re-

quirement, the Commission examined the contractual

relationship among the parties and determined that the

monies had been disbursed in accordance with the con-

tract. Their explicit finding reflected this examination.

But in finding that the Commission had no jurisdic-

tion to render this finding, because it had no jurisdic-

o —14—

tion: to construe contracts, (Petitioner’s Appendix 1, p.

6a) to determine the validity or invalidity of contracts,

(Petitioner’s Appendix 1, p. 5a), and to determine whether

all the conditions precedent to the performance of a con-

tract had been satisfied, (Petitioner’s Appendix 1, p. 5a)

the Court of Appeals chose to give no weight at all to the

Commission’s exercise of jurisdiction and stripped the

Commission of effective power to decide future cases

questioning whether monies are properly disbursed

since most such cases involving realtors will involve

deciding who has the contractual right to monies. The

Court of Appeals also chose to give no weight to the find-

ing by the District Court that the Commission did have

jurisdiction to render the finding, despite Judge Esch-

bach’s extensive knowledge of Indiana law and despite

the credence Courts of Appeals generally grant to trial

courts on doubtful questions of local law. 32 Am. Jur. 2d

Federal Practice and Procedure, Sec. 394. Furthermore,

the Court of Appeals took this extreme action even

though it should have been constrained by the principle

that full faith and credit means “not some but full credit

...” Davis v. Davis, 305 US. 32, 83 L. Ed. 26, 29 (1938)

and even more so by the full faith and credit require-

ment that jurisdiction of the initial tribunal (in this case

the Commission) must be presumed unless disproved by

extrinsic evidence or by the record itself. Milliken v.

Meyer, 311 U.S. 457, 85 L. Ed. 278, 282 (1940), Barber v.

Barber, 323 U.S. 77, 89 L. Ed. 82, 87 (1944).

The Court of Appeals did not disprove the Com-

mission’s jurisdiction to determine who had the contrac-

tual right to the money either by the record or by ex-

trinsic evidence. Instead the Court of Appeals erroneous-

ly relied upon two Indiana cases to disprove jurisdiction,

one of which explicitly grants Indiana administrative

agencies, including this Commission, the very power the

—)

Court refused to uphold—the jurisdiction to decide cer-

tain contract disputes.

The Court of Appeals cited General Telephone Co. of

Indiana v. Public Service Commission, 238 Ind. 646, 154

N.E. 2d 372 (1958) for the proposition that:

“Under Indiana law, [the Commission] possesses

only those powers expressly granted to it by

statute.” (Petitioner’s Appendix 1, p. 5a)

However, even that case, the holding of which is ex-

plicitly limited to the Indiana Public Service Commis-

sion, (and as will be demonstrated later the Public Ser-

vice Commission is a legislative-type agency, unlike the

Real Estate Commission which is a judicial-type agency)

implies that an agency’s powers are not bound to the

strict terms of a statute.

“. . . [T]he Public Service Commission ‘derives its

tie and authority solely from the statute, and un-

ess a grant of power and authority can be found in

the statute, it must be concluded that there is

none.’” Ibid., p. 373.

The language “unless a grant of power and authority

can be found in the statute” implies that administrative

bodies also can exercise powers necessarily incident to

those powers specifically granted and in fact, that is

standard, black letter Indiana law. See 1 Indiana Law

Encyclopedia, Administrative Law and Procedure, Sec.

21; Johnson County Rural Electric Membership Corpora-

tion v. Public Service Company of Indiana, Inc., 378

N.E. 2d 1 (Ind. App., 1978).

By enacting Indiana Code 25-34-1-16(1), the Indiana

legislature required the Commission to determine

whether Harding was guilty of failure to account and

remit any monies coming into his possession belonging

to Lightsey. Since Lightsey’s money had been deposited

oY or

pursuant to a contract, in order to find to whom the

money in this case belonged, the Commission had to

have the power to examine the contract and determine

who had the contractual right to the money. The power

to determine this contractual right was “necessarily inci-

dent” to the power specifically granted by Indiana Code

25-34-1-16(1).

This conclusion is confirmed, not undermined, by the

other case on which the Court of Appeals relied, Indiana

Telephone Corp. v. Indiana Bell Telephone Co., 358 N.E.

2d 218 (Ind. App., 1976). That case, which the Court of

Appeals found so important, even specifically states that

the administrative-type tribunal, the Public Service

Commission, can in proper cases assume jurisdiction of

contract disputes.

“While we hold that under the circumstances of

this case, I.C. 8-1-2-5 had no application, it is with-

in contemplation that a provision in a contract

between two utility companies could impair the

ability of one or both to serve the public to a degree

which would properly subject the matter to

jurisdiction of the Public Service Commission. For

example, in addition to those sections of the Public

Service Commission Act [I.C. 8-1-1-1, et seg. (Burns

Code Ed. 1973)] which give direct authority to con-

trol specific utility transactions, collateral matters

have often been brought before the Commission

because of their indirect effect on rate establish-

ment and therefore have been found to be within

proper consideration of the Commission.” Jbid.,

page 225. (Emphasis added)?

? The Indiana Appellate Court in Bell also implied in its foot-

note on page 224 that the Public Service Commission should

sometimes te deferred to by the courts in breach of contract

cases.

a

Much of the reasoning of the Indiana Bell case, which

rejected that defendant’s argument that the Public Ser-

vice Commission had exclusive jurisdiction over contract

disputes, rests upon the conclusion that the Public Ser-

vice Commission did not have such jurisdiction of that

particular contractual dispute because it was an

administrative-type, not a judicial-type agency. Any

order the Public Service Commission makes is: “an ad-

ministrative order not a judgment.” Jbid., p. 224. The

Service Commission orders are only “prospective in

nature, fixing compensation for the future but not for

the past.” Jbid., p. 224. The Court’s language on page

224 aptly distinguishes the Real Estate Commission

from the Publie Service Commission.

“A judicial inquiry investigates, declares and en-

forces liabilities as they stand on present or past

That is its purpose and end. Legislation, on the

other hand, looks to the future and changes existing

conditions by making a new rule, to be applied

thereafter to all or some part of those subject to its

power. The establishment of a rate is the making of

a rule for the future, and therefore is an act

legislative, not judicial, in kind.”

It is clear that the Court of Appeals did not thorough-

ly read the Indiana Bell case. Had they done so, they

would have known that under Indiana law, even the

legislative-type agency, the Public Service Commission

has, in the proper cases, jurisdiction to render decisions

on contract questions. They would further have realized

that a fortiori the judicial-type agency, the Real Estate

Commission in the proper case has jurisdiction to deter-

mine contract cases.

It is clear that by virtue of the statute requiring the

Real Estate Commission to render determinations as to

a

whom monies belong, with the necessary implicit grant

of authority to decide contract questions, and in view of

the Indiana case law giving even legislative-type agencies

jurisdiction over contract questions, that the Court of

Appeals was wrong in not finding jurisdiction. But more

important, that Court’s clearly erroneous reading of In-

diana law and its disastrous emasculation of the effec-

tiveness of the Indiana Real Estate Commission, when it

should have given credence to that Indiana body’s find-

ings, is an egregious violation of full faith and credit.

This Court should grant certiorari on this basis alone.

COMITY REQUIRES FINDING A PROPER ASSUMP-

TION OF JURISDICTION BY THE REAL ESTATE

COMMISSION.

Because the jurisdiction of the Federal District Court

of the Northern District of Indiana was based upon

diversity of citizenship, it was bound to apply Indiana

law in this case. Erie Railroad Co. v. Tompkins, 304

U.S. 64, 82 L. Ed. 1188 (1938). Certainly the Court of

Appeals gave lip service to this requirement, but what is

the standard of care such a federal court must employ

when applying state law in diversity cases? Surely a

federal court cannot merely cite several cases of the

forum state and then freely substitute its own opinion

for a fair reading of those cases as well as for other law

of the forum. It is the petitioner’s opinion that in this

kind of diversity case where a state agency rendered a

final decision pursuant to a state statute and where a

federal court’s opinion is based upon a denial of that

agency’s jurisdiction, which jurisdiction is essential to

the agency’s exercise of its powers, that comity requires

close study before the Court can deny that the agency

had jurisdiction—that a freewheeling denial of jurisdic-

tion is prohibited.

—

In recent years, there appears to be a greater and

greater tendency of federal courts to defer to decisions

of state tribunals. In accordance with this tendency, the

federal courts appear to have extended the doctrine of

comity so as to place more reliance upon the role of state

tribunals in interpreting both federal and state law, See,

for example, Younger v. Harris, 401 U.S. 37, 27 L. Ed.

2d 669 (1971); Francis v. Henderson, 425 U.S. 586, 48 L.

Ed. 2d 149 (1976); Huffman v, Pursue, Ltd., 420 U.S.

592, 43 L. Ed. 482 (1975); of. Taylor v. New York City

Transit Authority, 483 F. 2d 665 (2d Cir, 1970),

While principles of comity are often applied in cases

involving abstention, it is clear that the principle of

comity has a far broader application than that. Comity,

for instance, also applies in cases such as this where

questions of full faith and credit arise. ef. Castro v.

Beecher, 459 F. 2d 725 (1st Cir. 1972), An application of

comity in diversity cases is completely sensible. Comity

applies in abstention cases to forbid federal courts from

enjoining state civil proceedings except in extraordinary

cases. Huffman v. Pursue, Ltd., supra, While there was

no injunction against a state agency in this case, there

was a clear and unnecessary interference with the

operations of the Indiana Real Estate Commission,

Because of the Court of Appeals’ erroneous decision that

the Commission cannot even “construe” contracts

(Petitioner’s Appendix 1, p. 6a), the Commission’s future

decisions involving contracts will have dubious legal

effect. This is a serious blow to an agency which

regulates an industry in which most of the operations

are based upon contracts. Furthermore, because the

Commission was formed pursuant to an Indiana statute

and was directed by that statute to determine whether

monies were properly remitted, the Court of Appeals’

decision has also interfered with a decision of the In-

diana legislature.

=

The Court of Appeals’ decision has thus unnecessarily

interfered with important State of Indiana functions.

But comity, extended to diversity cases, requires that

federal courts endeavor to interpret and apply state laws

“... in ways that will not unduly interfere with the

legitimate activities of the States.” Francis v. Hender-

son, 425 U.S. 586, 48 L. Ed. 2d 149 (1976), Clearly, as

the discussion, supra, pp. 14-18, demonstrates, the Court

of Appeals has instead distorted Indiana law to reach a

decision that will have the maximum interference with

Indiana law.

Comity requires that courts “give scrupulous regard to

the rightful independence of state governments.” Beal v.

Missouri Pacific R. Corp., 312 U.S. 45, 85 L. Ed. 577

(1941), Can one seriously contend that the Court of

Appeals met this standard in its decision that Indiana

law does not grant the Commission jurisdiction to decide

cases involving contracts when the state legislature has

by necessary implication required the Commission to

decide such cases. Can one seriously contend that the

Court of Appeals met this standard when the only case

it relied upon expressly granted even to legislative-type

agencies the authority to review contracts?

The principle involvéd in this case is vital to our

federal system. Comity must mean that a federal court

should avoid declaring that a state agency, which has

assumed jurisdiction in a case pursuant to statutory

direction, did not have that jurisdiction, unless that lack

of jurisdiction is manifest. In the instant case, Indiana

law clearly granted the Commission jurisdiction. If com-

ity is to continue to have meaning in diversity cases, this

Honorable Court must require federal courts to grant

State agencies proper respect and deference. This case

=—

presents an opportunity for the Court to reinforce the

principles of comity. The writ of certiorari should be

granted,

CONCLUSION

—_—-—

For the reasons stated above, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

BURT, BLEB, HAWK & SUTTON

By: Goran Manrin

J. Poni Burr

12th Floor Lincoln Tower

Fort Wayne, Indiana 46802

(219) 426-1800

Counsel for Petitioner

—la—

APPENDIX 1

IN THE

UNITED STATES COURT OF APPBRALS

FOR THE SEVENTH CIRCUTT

No, 79-1024

Rupy LIGHTsEy,

Plaintiff-Appellant,

Vv.

HARDING, DAHM & COMPANY, INC.,

Defendant-A ppellee.

Appeal from the United States District Court for the

Northern District of Indiana, Fort Wayne Division.

No, F 78-C-107—Jease E. Eschbach, Judge.

ARGUED OCTOBER 26, 1979—DecIDED JUNE 12, 1980

Before SwyGErt, CUMMINGS, and BAUER, Circuit

BAUER, Circuit Judge. Plaintiff-appellant Rudy

Lightsey appeals from the district court's order Arentin

summary judgment to defendant Harding, Dahm

Company. The district court held that Lightsey’s claim

had already been determined by the Indiana Real Estate

Commission and was therefore barred from relitigation

by collateral estoppel. We reverse because the Indiana

Real Estate Commission did not have authority to deter-

mine the disputed issue.

7

—2a—

I

In 1979, one J. L. Fine agreed to purchase some real

estate in Fort Wayne, Indiana from the First Federal

Savings and Loan Association. oe Harding, Dahm

& Company acted as broker on behalf of the seller. Un-

der an arrangement not disclosed in the record before

us, plaintiff-appeliant Lightsey furnished $20,000 as

earnest money for the purchase. An addendum to the

real estate contract stated that the $20,000 was to be

deposited “with the Seller’s agent (Harding, Dahm &

Company)” and held in escrow contingent upon the

buyer’s securing of financing for the purchase within

twelve days. The addendum concluded that “it is the in-

tention of the parties that should such financing not be

available for any reason whatsoever, then those monies

shall be returned in full to Rudy Lightsey, the provider

of the monies.”

Although the purchase was never consummated, Har-

ding, Dahm kept the money, claiming that financing

been secured. After making a formal written de.

mand for the funds, Lightsey filed a grievance with the

Indiana Real Estate Commission. The Commission

adopted the findings of a hearing committee, which

were as follows:

FINDINGS OF FACT

THAT James H. Harding, of Harding, Dahm, &

Coinpany real estate preg, of Fort Wayne, In-

Ciana, acting on behalf of the First Federal Savings

and Loan Association of Fort Wayne, Indiana, seller

of the real property in said transaction, was duly

authorized to receive monies and represent the

sellers in their behalf.

CONCLUSION

THEREFORE, it is the conclusion of the Hearing

Committee that James E. Harding, and Harding,

Dahm, & Company have committed no violation of

the Indiana Real Estate License laws in the real es-

tate transaction heard in this cause,

—3a—

AND that the monies transmitted in said transac-

tion were disburse[d] by the broker, James E. Har-

ding, in a manner which was in accordance with

the contractual agreement between the parties.

RECOMMENDATION

THEREFORE, it is the recommendation of the

Hearing Committee that James E. Harding, In-

diana real estate license No. B-08196, and Harding,

Dahm, & Company, Indiana real estate license No.

B-18794, shall continue to hold their respective

broker’s licenses with full priviledges and respon-

= yang to which the law entitles them as holders

of such.

Lightsey did not seek review of the decision in the In-

diana courts. He instead filed a complaint in federal dis-

trict court charging Harding, Dahm with breach of con-

tract.

The district court granted summary judgment for

Harding, Dahm. The court held that the Commission’s

decision resolved “precisely the same issue” presented by

Lightsey’s complaint. The court further held that the

Commission acted in a judicial capacity and had

authority to determine breach of contract issues, even

though it was not empowered to award damages. The

court ruled that the doctrine of collateral estoppel

barred Lightsey’s complaint. -

II.

Indiana courts grant collateral estoppel effect, where

appropriate, to decisions of its administrative agencies.

Bowen v. United States, 570 F.2d 1311 (7th Cir. 1978).

For collateral estoppel effect to be given to an order of

an administrative nega A the court must find that the

same disputed issues of fact were before it as are before

the court, that the agency acted in a judicial capacity,

and that the parties had an adequate opportunity to

litigate the issues before the ig United States v.

Utah Construction and Mining Co., 384 U.S. 394 ve

Where the issue in the two proceedings are different,

—da—

however, the court should not give preclusive effect to

the administrative determination. Porter & Dietsch, Inc.

v. FT.C., 605 F.2d 294, 300 (7th Cir. 1979). Prior to

making even that inquiry, we must determine whether

the issue was properly before the orgs Bowen v. Un-

ited States, 570 F.2d at 13822. We find that the Indiana

Real Estate Commission had no statutory authority to

determine the issue presented in appellant’s suit. We

therefore hold that its finding that Harding, Dahm

acted in accordance with the contract is not entitled to

preclusive effect.

A

The Indiana Real Estate Commission — the

licensing and regulation of the real estate industry in In-

diana. The Commission is composed of a large majority

of industry representatives and two citizen members.

Ind. Code § 25-34.1-2-1 (Supp. 1979).

As part of its disciplinary powers, the Commission has

the authority to “deny, refuse to renew, revoke or sus-

pend” a real estate license of a broker and to levy fines

not exceeding $500 for violations of the commission’s

rules and regulations or a series of enumerated acts.

Ind. Code § 25-34.1-2-5 eg 1979). Included as a basis

for disciplinary action is a broker's failure “to account

and remit any moneys or documents coming into his

ssession belonging to others.” Ind. Code § 25-34-1-16(1)

learvels version at § 25-34.1-6-1(d)(1) (Supp. 1979)). The

district court ruled, without citing any support, that this

authority “would seem to include [the power to decide]

breach of contract issues, especially as the matter arises

in this case.” The court also stated that “the general

grant of power to determine whether in connection with

his license the licensee engaged in fraud, misrepresenta-

tion, incompetence or unpro essional conduct [Ind. Code

§ 25-34-1-16 (current version at Ind. Code § 25-34.1-6-

1(dX18)] would surely provide the Commission with

jurisdiction to determine the contractual propriety of the

distribution of funds by the real estate broker.” The

court then concluded that the issues before it and the

Commission were the same. We disagree.

—5ja—

The Indiana Real Estate Commission has no general

authority to determine breach of contract issues. Under

Indiana law, it possesses only those powers expressly

. S

N.E.2d 372 (1958). The sections relied upon by the dis-

trict court do not empower the Commission to etermine

the validity or invalidity of a contract or to determine

whether all the conditions precedent to the performance

of the contract have been satisfied, findings necessary

here; at most they permit the Commission to find

whether a broker’s conduct meets certain standards of

professional conduct. See Indiana Real Estate Commis-

sion v. Kirkland, 256 Ind. 249, 268 N.E.2d 105 (1971).

Section 25-34-1-16(1) governs the conduct of a broker

only when acting as an agent; breach of any other in-

dependent financial arrangement cannot be a basis for

mission’s decision.* But whatever it decided, the Com-

mission could not determine the contractual rights of

Lightsey against Harding, Dahm. Those rights can only

be determined in a court of law.

In an analogous situation, the Indiana Appellate Court

held that the Indiana Public Service Commission had no

authority to rule on breach of contract issues. Indiana

Telephone Corp. v. Indiana Bell Telephone Co., 358

* We have no idea What transpired in the hearing com-

mittee. The parties did not include a transcript of the hearin

before the Commission in the record on appeal. The recor

before us is so inadequate that we would have difficulty deter-

ining whether there was even an opportunity to litigate the

issue before the Real Estate Commission. Bowen. », United

States, 570 F.2d at 1322. We need not remand, however,

ause of our conclusion that the Commission did not have

the power to decide the breach of contract issue.

—§a—

N.E.2d 218 (Ind. App. 1976). The Indiana Public Service

Commission has the power to set charges between com-

peting phone services in the absence of agreement. The

court ruled that the absence of an agreement was a

jurisdictional requirement. “Since ITC and Bell had

voluntarily entered into a written agreement,” the court

held, “the cited section is without application.” Jd. at

223. Once it was determined that the Commission had

no statutory authority over the dispute, it was ousted of

jurisdiction. The court concluded,

the question submitted to the trial court involved

the breach of a voluntary contract. The construction

and breach of such contracts are matters for

judicial determination. The Public Service Commis-

sion does not have jurisdiction of such matters. See

In re Gumm (1949), 118 Ind. ei 695, 83 N.E.2d

487, 488. It has no authority to adjudicate a breach

of contract action.

358 N.E.2d at 224.

The Indiana Real Estate Commission had no authority

to construe the contract between Lightsey and Harding,

Dahm. The finding made by the Commission that the

“funds were disburse[d] according to the contract” is

therefore not binding because it was not relevant to a

dispute over which it had jurisdiction. United States v.

Utah Construction and Mining Co., 384 U.S. at 419 n.15.

Since the Commission had no authority to decide the

issue that was before the district court, the order of the

Commission has no collateral estoppel effect. The order

of the district court granting summary judgment to

Harding, Dahm is accordingly reversed and remanded

for further proceedings.

REVERSED AND REMANDED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

—J7a—

APPENDIX 2

_

Decision of District Court

IN THE UNITED STATES DISTRICT COURT

FOR THE

NORTHERN DISTRICT OF INDIANA

FORT WAYNE DIVISION

Civil No. F 78-107

__

RUDY LIGHTSEY, Plaintiff,

vs.

HARDING, DAHM & CO., INC., Defendant,

_

MEMORANDUM OF DECISION AND ORDER

[Filed November 29, 1978]

This cause is before the court on defendant’s motion

for summary judgment filed September 20, 1978. The court

has had the benefit of oral argument on November 27, 1978,

For the reasons discussed below, defendant’s motion for

summary judgment will be granted,

This breach of contract action, before the court under

its diversity jurisdiction, arises out of an uncompleted

real estate transaction. Plaintiff, Rudy Lightsey, made an

earnest money deposit of $20,000.00 with James FE. Harding

of the real estate firm of Harding, Dahm & Co., Ine., in

connection with an agreement to purchase certain real es-

tate in Fort Wayne, Indiana. When the transaction was

not completed, Lightsey wished to recover the $20,000.00

earnest money but Harding would not return it. Lightsey

calitidin

contends that it was impossible to obtain financing for the

real estate purchase, that he was thus relieved of any ob-

ligations under the agreement to purchase the real estate

and that he was, therefore, entitled to the return of the

earnest money.

Defendant, Harding, contends that Lightsey did secure

financing but that the transaction was not closed on the

agreed upon date, July 1, 1977, causing Lightsey to for-

feit the earnest money. He thus did not return the earnest

money to Lightsey.

Lightsey contacted the Indiana Real Estate Commission

regarding the earnest money. He was advised to make a

formal demand upon Harding for the return of the money

and if not then satisfied, to file a complaint with the

Commission. When Lightsey’s demand did not result in

the return of the earnest money, he filed a complaint with

the Commission on December 13, 1977, charging that

Harding wrongfully refused to refund the $20,000.00 ear-

nest money.

A hearing was held on April 26, 1978 before a three-

member Hearing Committee of the Indiana Real Estate

Commission, at which both parties were represented by

attorneys. Though informed that he could be represented

by private counsel at the hearing, Lightsey chose to have

his case presented by a staff attorney from the Indiana

Attorney General’s office. The case was presented for near-

ly a day.

The three-member Hearing Committee found that James

E. Harding and Harding, Dahm & Co., Inc., ‘“have commit-

ted no violation of the Indiana Real Estate License Laws

in the real estate transaction heard in this cause: and

‘*that the monies transmitted in said transaction were dis-

—9IJa—

bursed by the broker, James E. Harding, in a manner which

was in accordance with the contractural (sic) agreement

between the parties.’’ The decision of the Hearing Com-

mittee was accepted by the Indiana Real Estate Commis-

sion on May 25, 1978.

Under Ind. Code §4-22-1-14* Lightsey could have ap-

pealed the decision of the Real Estate Commission to the

circuit or superior court of Allen County within 15 days

of notice of the Commission’s final decision. This he did

not do. Instead on August 30, 1978, Lightsey filed this suit

in federal court, notwithstanding Ind. Code §4-22-1-14 which

provides that unless a proceeding for review is commenced

within 15 days of notice of the Commission’s final decision,

any and all rights of judicial review and all rights of

recourse to the courts shall terminate.

In order to succeed in this action, the plaintiff must

establish that the defendant wrongfully failed to return

the $20,000.00 earnest money in contravention of agree-

ments among the parties to the real estate transaction.

This, however, is precisely the same issue that was heard

and decided by the Indiana Real Estate Commission. As

set out above, the Commission concluded that the monies

transmitted in such transaction were disbursed by the

broker, James FE. Harding, in a manner which was in ac-

cordance with the contractual agreement among the parties. Fe

‘When an administrative agency is acting in a judicial

capacity and resolves disputed issues of fact properly

before it which the parties have had an adequate oppor-

* The Indiana Administrative Adjudication Act, Ind. Code

§§4-22-1-1 through 4-22-1-30, applies to the Indiana Real Estate

Commission. Gleason v. Real Estate Commission, 300 N.E. 2d 116

(Ind. Ct. App. 1973).

—10a—

tunity to litigate, the courts have not hesitated to apply

res judicata to enforce repose.’’ United States v. Utah

Construction & Mining Co., 384 U.S. 394, 421-22, 86 S.Ct.

1545, 1559-60 (1966). See also Hickel v. Oil Shale Corp.,

400 U.S. 48, 91 S.Ct. 196 (1970); Fruehauf Corp. v. Re-

view Board of the Indiana Employment Security Division,

269 N.E.2d 184 (Ind. Ct. App. 1971).

Further, collateral estoppel principles are applicable to

administrative findings. Under the modern view, the find-

ings of independent administrative agencies, at least when

acting in an adjudicatory capacity, are considered final,

even in a suit not directly related to the administrative

proceeding, unless there is some good reason for a new

judicial inquiry into the same facts. United States v. Utah

Construction & Mining Co., supra; Fruehauf, supra. The

rule which forbids reopening a matter once judicially de-

termined by a competent authority applies to judicial and

quasi judicial acts of public officers and boards. Landreth

v. Wabash Railroad Co., 153 F.2d 98 (7th Cir. 1946).

The Landreth case involved an award of the Illinois

Industrial Commission which had ripened into an enforce-

able award under the Illinois Workmen’s Compensation

Act. Plaintiff appealed the decision but did not exhaust

all appeals available under the provisions of the Illinois

Workmen’s Compensation Act. Instead, plaintiff filed suit

in the federal district court under the Federal Employers’

Liability Act on the basis of the same accident which was

the subject of his Illinois Workmen’s Compensation claim.

The U.S. Court of Appeals for the Seventh Circuit found

that where the parties and issues are identical, where

testimony was heard and evidence introduced before the

administrative agency and where the decision of the agen-

—lla—

cy was final, the matter should not be reopened in federal

court. Any error in the administrative proceedings should

have been appealed in the manner prescribed by the IIli-

nois Workmen’s Compensation statute. The court added,

“‘This remedy plaintiff did not choose to pursue and it is

too late to raise it here.”’ 153 F.2q at 100. See also United

States v. Willard Tablet Co., 141 F.2d 141 (7th Cir. 1944),

The essence of collateral estoppel is that some question

or fact in dispute has been judicially or finally determined

by a court of competent jurisdiction between the same par-

ties or their privies. Where there is a second action be-

tween the parties, or their privies, who are bound by a

judgment rendered in a prior suit, but the second action

involves a different claim, cause or demand, the judgment

in the first suit operates as a collateral estoppel as to those

matters or points which were in issue or controverted and

upon the determination of which the initial judgment neees-

sarily depended. 1B Moore’s Federal Practice 10.441 [2]

at 3777.

Where some faet or question has been determined and

adjudicated in a former suit, and the same fact or ques-

tion is again put in issue in a subsequent suit between the

same parties, the former adjudication of the fact or ques-

tion will be conclusive on the parties in the latter suit,

regardless of the identity of the causes of action, or lack

of it, in the two suits. Fruehau , Supra; Town of Flora vy.

Indiana Service Corp., 53 N.E.2d 161 (Ind. 1944); see also

Middlekamp v. Hamewich, 364 N.E.2d 1024 (Ind. Ct. App.

1977).

There are four conditions which must be fulfilled for

collateral estoppel to apply to bar later litigation :

—12a—

(1) The former determination must have been rendered

by a tribunal of competent jurisdiction,

(2) The matter now in issue must have been determined

in the former suit.

(3) The controversy adjudicated in the former action

must have been between the parties to the present suit.

(4) Judgment in the former suit must have been ren-

dered on the merits.

Middlekamp, supra; Fruehauf, supra.

In addition, when dealing with a determination by an

administrative tribunal, the determination must have been

made when the tribunal was acting in a judicial capacity

rather than in a rule making capacity. Davis, Administra-

tive Law of the Seventies, Chapter 18, §18.02, p, 427 (1976).

(1) The Indiana Real Estate Commission was a tri-

bunal of competent jurisdiction to determine whether

Harding transmitted monies in a manner which was in

accordance with the contractual agreement between the

parties.

Ind. Code §25-34-1-16 specifically grants the Real Estate

Commission the power to determine whether the real es-

tate licensee has engaged in activity in connection with his

license which activity is found to be fraud, misrepresenta-

tion, incompetence, or unprofessional conduct, including

failure to remit any monies or documents coming into

his possession belonging to others.

Plaintiff contends that the Commission does not have

the jurisdiction to determine issues of breach of contract

or to award money damages, Plaintiff is correct in his

contention that the Commission does not have jurisdiction

a

to award damages, but the Commission does indeed have

jurisdiction to determine breach of contract issues. The

specific grant of authority to determine whether the li-

censee failed to remit any monies coming into his pos-

session belonging to others would seem to include breach

of contract issues, especially as the matter arises in this

case, But even if it does not, the general grant of power

to determine whether in connection with his license the

licensee engaged in fraud, misrepresentation, incompetence

or unprofessional conduct would surely provide the Com-

mission with jurisdiction to determine the contractual pro-

priety of the distribution of funds by the real estate broker,

(2) The precise issue plaintiff raises before this court,

whether Harding wrongfully refused to return plaintiff's

earnest money, was previously decided by the Indiana Real

Estate Commission. There could hardly be a clearer indi-

cation of this than the text of the Commission’s findings ;

FINDINGS OF FACT

THAT James BP, Harding, of Harding, Dahm, &

Company, real estate company of Fort Wayne, Indi-

ana, acting on behalf of the First Federal Savings and

Loan Association of Fort Wayne, Indiana, seller of

the real property in said transaction, was duly au-

thorized to receive monies and represent the sellers

in their behalf.

CONCLUSION

THEREFORE, it is the conclusion of the Hearing

Committee that James B. Harding, and Harding,

Dahm, & Company have committed no violation of

the Indiana Real Hstate License Laws in the real es-

tate transaction heard in this cause,

—l4a—

AND that the n.vnies transmitted in said transac-

tion were disbursed by the broker, James E. Harding,

in a manner which was in accordance with the con-

tractual agreement between the parties.

The fact that the demand in the prior action was that

Harding's real estate license be suspended or revoked while

the present demand is for the return of the earnest money

is of no consequence, See Groom v, Kawasaki Motors Corp.,

U.S.A,, 344 F.Supp. 1000 (W.D. Okla. 1972). Even if the

second suit involves a different claim, cause, or demand,

the judgment in the former suit operates as a collateral

estoppel as to those matters or points which were in issue

or controverted and upon the determination of which the

initial judgment necessarily depended, 1B Moore’s Fed-

eral Practice {10.441[2) at 3777; Town of Flora, supra, It

is further clear that the initial judgment necessarily de-

pended on a determination that Harding did not wrong-

fully refuse to refund the earnest money; the Commission

found that he disbursed the monies in a manner which was

in accordance with the contractual agreement between the

parties,

(3) The controversy adjudicated in the former action

was between the parties to the present suit. The complaint

before the Indiana Real Estate Commission was filed by

Rudy Lightsey on December 18, 1977 charging that James

K. Harding and Harding, Dahm & Co., Inc., wrongfully

refused to return a $20,000.00 earnest money deposit to

Lightsey, Rudy Lightsey is again the plaintiff and Harding,

Dahm & Co,, Ine., the defendant in cause number F' 78-107

filed August 30, 1978 in this court.

(4) The judgment in the previous suit was rendered

on the merits,

—

Finally, in making its determination, the Indiana Real

Estate Commission was acting in a judicial capacity, not

in a rule making capacity. The distinction is set out in

Indiana Telephone Corp. v. Indiana Bell Telephone Co.,

358 N.E.2d 610 (Ind. Ct. App. 1976), modified on other

grounds, 360 N.E.2d 610 (Ind. Ct. App. 1977).

A judicial inquiry investigates, declares, and enforces

liabilities as they stand on present or past facts and

under laws supposed already to exist, That is its pur-

pose and end. Legislation, on the other hand, looks

to the future and changes existing conditions by mak-

ing a new rule, to be applied thereafter to all or some

part of those subject to its power.

In the hearing before the Indiana Real Estate Com.

mission, Lightsey filed a formal written complaint ; Harding

filed an answer to the complaint with numerous exhibits

attached. Other exhibits were introduced as evidence in

the hearing. The parties were given prior notice of the

setting of a hearing. On April 26, 1978, a hearing was

held before three Hearing Commissioners of the Indiana

Real Estate Commission. At the hearing, both parties were

represented by attorneys; the case was presented for near-

ly a day. On May 3, 1978, the three Hearing Commissioners

entered Findings of Fact, Conclusions, and Recommenda-

tions. The parties were furnished copies of the decision

of the Real Estate Commission as provided in Indiana

Administrative Adjudication Act.

The factual issue of whether Harding wrongfully refused

to return the earnest money to Lightsey having been de-

cided by the previous adjudication, there remains no genu-

ine issue as to any material fact. Summary judgment on

the basis of collateral estoppel is therefore appropriate and

defendant's motion for summary judgment filed September

-_

20, 1978 will be granted. McCracklin v. Fowler, 285 F.Supp.

41 (E.D. Wis. 1968), aff’d, 411 F.2d 580 (7th Cir. 1969) ;

Case ¢ Co., Inc. v. Board of Trade of City of Chicago, 523

F.2d 355 (7th Cir. 1975).

ORDER

Accordingly, defendant’s motion for summary judgment

filed September 20, 1978 is hereby granted and the clerk

of this court is directed to enter judgment against the

plaintiff and in favor of the defendant.

Entered this 29th day of November, 1978.

—17a—

APPENDIX 3

-=

Decision of Indiana Real Estate Commission

STATE OF INDIANA

COUNTY OF MARION—SS:

—_——_ =

Rudy Lightsey, Plaintiff,

vs.

Harding, Dahm, & Co. and James E. Harding, Defendants.

You are hereby advised that the decision of the Hearing

Committee of the Indiana Real Estate Commission in the

above cited cause is as follows:

FINDINGS OF FACT

THAT James E. Harding, of Harding, Dahm, & Com-

pany real estate company of Fort Wayne, Indiana, acting

on behalf of the First Federal Savings and Loan Associa-

tion of Fort Wayne, Indiana, seller of the real property

in said transaction, was duly authorized to receive monies

and represent the sellers in their behalf.

CONCLUSION

THEREFORE, it is the conclusion of the Hearing Com-

mittee that James E. Harding, and Harding, Dahm, &

Company have committed no violation of the Indiana Real

Estate License Laws in the real estate transaction heard

in this cause,

AND that the monies transmitted in said transaction

were disbursed by the broker, James EF. Harding, in a

=

manner which was in accordance with the contractual

agreement between the parties.

RECOMMENDATION

THEREFORE, it is the recommendation of the Hearing

Committee that James E. Harding, Indiana real estate

license No. B-08196, and Harding, Dalim, & Company, In-

diana real estate license No. B-18794 shall continue to

hold their respective broker’s licenses with full privileges

and responsibilities to which the law entitles them as hold-

ers of such.

nes Terry. wodbtel

vi . air, Commissioner

ana L. Jones, tive Secretary

Subscribed and sworn to before me, a Notar Public in the County of

kc » on this. 3,-( day of » a » 1978,

My a sion Expires: NOTARY PUBLIC: . |

a ” CAWc or “ym eet ew

pis: ™~,

/

‘

Accepted by the Indiana Real Estate Commission this as day

of p om » 1978.

Vv

Tr

4 ‘ ‘ ) ak,

mm be -——-— - c M1 _—_—

Diana L> Jones, Dies Secretary

Indiana Real Estate Commission