# Petition — Harding, Dahm & Co. v. Lightsey

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1981
- **Citation:** 449 U.S. 1077

## Text

AK, JR., CLERK

In THE

Supreme Court of the Gnited States

Ocroser Trrm, 1980

Sieean
— —

HARDING, DAHM & COMPANY, INC.,

Petitioner,

vs.

RUDY LIGHTSEY,
Respondent.

|
1}
|

~— >
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0406%3A1. Public record. Not legal advice.