Merriless v. Treasurer

                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 91-114

                              APRIL TERM, 1992


 David Merrilees, et al.           }          APPEALED FROM:
                                   }
                                   }
      v.                           }          Washington Superior Court
                                   }
                                   }
 Treasurer, State of Vermont,      }
 et al.                            }          DOCKET NO. S29-89WnC


              In the above entitled cause the Clerk will enter:


      At issue is whether passage of Senate Bill 39 (1985), codified at 13
 V.S.A. {{ 7281-7283, levying a $5.00 surcharge on certain penalties and
 fines paid to the State, violated the origination clause of the Vermont
 Constitution, Chapter II { 6 (revenue bills must originate in the House of
 Representatives).  The issue was raised in a class action brought by
 plaintiff Merrilees on behalf of all those against whom the surcharge had
 been levied.  The trial court found that the contested measure was not a
 revenue bill and entered summary judgment in defendant's favor.  This appeal
 followed.  We affirm.

      Following our policy of deciding cases on nonconstitutional grounds, we
 asked the parties to brief an issue which they had not raised, that is,
 whether this appeal is controlled by Chittenden Trust Co. v. MacPherson, 139
 Vt. 281, 284-85, 427 A.2d 356, 358-59 (1981) (in actions to recover monies
 required to be paid pursuant to judicial proceeding, appeal must be taken
 directly; absent fraud, res judicata bars collateral attack on issues that
 were or could have been raised in proceeding).

      In response to this request, plaintiffs challenge this Court's
 authority to raise sua sponte the issue of res judicata.  Res judicata is an
 affirmative defense that is waived if not raised by the parties.  V.R.C.P.
 8(c).  Ordinarily, if such a defense is not raised in the pleadings, it is
 not available at trial or on appeal.  Brouha v. Postman, 145 Vt. 449, 452,
 491 A.2d 1038, 1040 (1985).  The rule, however, is subject to exceptions.
 See City of Burlington v. Mountain Cable Co., 151 Vt. 161, 163, 559 A.2d 153, 154 (1989) (Court will recognize unraised affirmative defense of
 illegality "if of a serious nature").  Rule 8(c) is a notice provision,
 intended to prevent unfair surprise at trial.  But notice considerations are
 not implicated here.  No factual development is required to decide res
 judicata, and the parties have been given an opportunity to fully brief the
 issue.

      In addition, ample and persuasive precedent allows a court to raise
 res judicata on its own where the parties have failed to raise it and
         consequently waived the right to do so.  Dakota Title & Escrow Co. v.
 World-Wide Steel Systems, Inc., 238 Neb. 519, 525-26, 471 N.W.2d 430, 434-45
 (1991) (adopting the principle and citing authority).  Allowing an appellate
 court to raise res judicata is consistent with policies of avoiding
 unnecessary judicial waste, id. at 526, 471 N.W.2d  at 435, and fostering
 reliance on judicial decisions by precluding relitigation, Wilson v. United
 States, 166 F.2d 527, 529 (8th Cir. 1948).  Moreover, it is consistent with
 the rule that judgments are entitled to be affirmed if any legal ground
 exists to do so, even one not raised by the parties, Robertson v. Interstate
         Securities Co., 435 F.2d 784, 787 n.4 (8th Cir. 1971), a rule long followed
 by this Court in other contexts.  See, e.g., Richards v. Union High School
 District No. 32, 137 Vt. 132, 134, 400 A.2d 987, 989 (1979).

      Res judicata bars parties from relitigating, not only those claims and
 issues that were previously litigated, but also those that could have been
 litigated in a prior action.  Converse v. Town of Charleston, 3 Vt. L.W. 75,
 75 (March 6, 1992).  Although there is no record on this point, the parties
 do not dispute that members of the plaintiff class were subject to criminal
         or administrative proceedings in which each paid the surcharge without
 objecting on constitutional grounds.  The origination clause issue, without
 doubt, could have been raised in those proceedings.  Instead, these
 litigants were joined together in a class action, a collateral proceeding
 initiated after their own individual proceedings were completed, which is
 precisely the type of attack that MacPherson condemns.

      To the contrary, plaintiffs assert that a criminal conviction should
 not support issue preclusion in a later civil action.  Assuming this
 principle were correct, it would not apply here.  This case is res judicata
 by virtue of claim, not issue, preclusion, which bars parties from
 litigating claims or causes of action that were or should have been raised
 in previous litigation where the parties, subject matter, and causes of
 action are identical or substantially identical.  American Trucking Ass'ns
 v. Conway, 152 Vt. 363, 370, 566 A.2d 1323, 1328 (1989).  The doctrine
 specifically bars defendants from using defenses available in one action as
 the basis for a claim in a later action.  18 C. Wright, A. Miller & E.
 Cooper, Federal Practice and Procedure { 4414, at 111 (1981).

      Even though res judicata governs this case, plaintiffs nonetheless
 argue that policies favoring class actions should be recognized over those
 favoring res judicata.  As a practical matter, plaintiffs assert, no
 individual litigant would have attempted to recover a minor sum ($5.00) in
 light of the time and expense involved in litigation and appeal, and
 consequently, only a class action suit makes this litigation possible.  Res
 judicata is a "judicially created rule of law," American Trucking, 152 Vt.
 at 371, 566 A.2d  at 1328, and a very small number of cases avoid preclusion
 on broad grounds of "public interest" or "unwarranted injustice."  18
 Wright, Miller & Cooper, supra, at 131-35.  Plaintiffs ask us, in effect, to
 create such an exception and, in the process, to overrule the direct
 precedent of MacPherson.  They make no compelling argument for us to do
 either.

      MacPherson cannot be distinguished.  In that case, executors who had
 paid probate distribution fees when closing estates later sought to bring a
 class action to recover the fees on the ground they were unconstitutional
 taxes.  This attempt was barred by res judicata because each class member
 could have raised the constitutional issue in the prior probate proceeding.
 As here, the individual executors may have had little incentive to challenge
 the allegedly unconstitutional tax.  Small amounts were at issue, and the
 main focus of the proceeding was to close the estate.  Yet, we found these
 reasons insufficient to disturb the finality of prior judgments.  139 Vt. at
 285, 427 A.2d  at 359.

      Plaintiffs' argument for class status is far weaker than that in
 MacPherson.  Unlike the probate context, many of the class members subject
 to the surcharge would have been represented by public defenders; they would
 not personally be forced to bear the cost of raising the constitutional
 issue.  Moreover, many of the cases would have been contested and many would
 have been appealed.  Any one of them could have been a vehicle for receiving
 a decision from this Court.

      Here, as in MacPherson, the issue is finality, not the obvious utility
 of aggregating small claims in a class action.  By failing to raise the
 asserted illegality of the surcharge to the court assessing the charge,
 plaintiffs, by their own inaction, have created the necessity for
 aggregation.  If they prevail, the burden shifts to the state to locate and
 reimburse persons who failed to complain about the charge when it was
 directly before the court.  Under these circumstances, plaintiffs'
 aggregation argument does not outweigh the need for finality.


      Affirmed.



                                    BY THE COURT:




                                    Frederic W. Allen, Chief Justice


 [ ]  Publish                       Ernest W. Gibson III, Associate Justice

 [ ]  Do Not Publish
                                    John A. Dooley, Associate Justice


                                    James L. Morse, Associate Justice


                                    Denise R. Johnson, Associate Justice