Hara v. Reichert

Nebraska Advance Sheets
HARA v. REICHERT 577
Cite as 287 Neb. 577

after July 1, sustained a motion to transfer him to a youth
rehabilitation and treatment center. For the same reasons set
forth in In re Interest of Marcella G., we affirm the decision
of the juvenile court.
Affirmed.

Sherry Hara, appellant, v.
Russell R eichert, appellee.
___ N.W.2d ___

Filed March 7, 2014. No. S-13-073.

 1. Judgments: Res Judicata: Collateral Estoppel: Appeal and Error. The appli-
cability of claim and issue preclusion is a question of law. On a question of law,
an appellate court reaches a conclusion independent of the court below.
 2. Judgments: Res Judicata. Claim preclusion bars the relitigation of a claim
that has been directly addressed or necessarily included in a former adjudica-
tion if (1) the former judgment was rendered by a court of competent jurisdic-
tion, (2) the former judgment was a final judgment, (3) the former judgment
was on the merits, and (4) the same parties or their privies were involved in
both actions.
 3. Res Judicata. Claim preclusion bars relitigation not only of those matters actu-
ally litigated, but also of those matters which might have been litigated in the
prior action.
  4. ____. Claim preclusion rests on the necessity to terminate litigation and on the
belief that a person should not be vexed twice for the same cause.
 5. Judgments: Collateral Estoppel. Issue preclusion bars the relitigation of a
finally determined issue that a party had a prior opportunity to fully and fairly
litigate. Issue preclusion applies where (1) an identical issue was decided in a
prior action, (2) the prior action resulted in a final judgment on the merits, (3)
the party against whom the doctrine is to be applied was a party or was in priv-
ity with a party to the prior action, and (4) there was an opportunity to fully and
fairly litigate the issue in the prior action.
 6. Collateral Estoppel. Issue preclusion applies only to issues actually litigated.
  7. ____. Issue preclusion protects litigants from relitigating an identical issue with
a party or his privy and promotes judicial economy by preventing needless
litigation.
 8. Res Judicata: Collateral Estoppel. While the doctrines of claim and issue pre-
clusion are similar and serve similar purposes, they are distinct.
 9. Small Claims Court: Judgments. A small claims court judgment is in fact
a “judgment.”
10. Small Claims Court. The purpose of small claims court is to provide a prompt
and just determination in an action involving small amounts while expending a
minimum amount of resources.
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11. Small Claims Court: Res Judicata. Claim preclusion applies to small claims
court judgments.

Appeal from the District Court for Scotts Bluff County: Leo
Dobrovolny, Judge. Affirmed.
Todd Morten, of Island & Huff, P.C., L.L.O., for appellant.
Robert M. Brenner, of Robert M. Brenner Law Office, for
appellee.
Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
Connolly, J.
Sherry Hara filed a complaint for declaratory judgment
alleging that money she had received from Russell Reichert
was a gift and not a loan. Based on a prior small claims court
judgment, the district court concluded that Hara’s action was
barred by both claim preclusion and issue preclusion and dis-
missed her complaint. Because we determine that claim preclu-
sion applies and its elements are met, we affirm.
BACKGROUND
Reichert originally sued Hara in Dundy County Small
Claims Court for $3,500. Reichert claimed that he had loaned
Hara $4,000 to help her buy a car. At the time of the transac-
tion, Reichert and Hara were dating. Hara did not deny receiv-
ing the money, but she claimed that Reichert had given her
the money as a gift. After a bench trial, the small claims court
found that the transaction was a loan and entered judgment
for Reichert.
Hara appealed the small claims court judgment to the
county court for Dundy County. While the appeal was pend-
ing, Hara filed a complaint for declaratory judgment in the
Scotts Bluff County Court, seeking a declaration that the
$4,000 was a gift rather than a loan and for the court to find
that the small claims court judgment “[had] been satisfied in
full.” Hara later dismissed her pending appeal, apparently for
financial reasons. Reichert moved to dismiss Hara’s complaint
in the Scotts Bluff County Court, which the court granted.
Hara then filed a complaint for declaratory judgment in the
 Nebraska Advance Sheets
HARA v. REICHERT 579
Cite as 287 Neb. 577

district court for Scotts Bluff County, again seeking a declara-
tion that the $4,000 was a gift rather than a loan and for the
court to find that the small claims court judgment “[had] been
satisfied in full.”
Reichert again moved to dismiss Hara’s complaint, which
the court granted. The court reasoned that both claim preclu-
sion and issue preclusion applied and barred Hara’s action.
The court recognized that Henriksen v. Gleason1 stated that,
given the procedural differences in small claims court, “it is
inappropriate to give any issue preclusive effect to any small
claims court judgment in a later proceeding brought in county
or district court.”2 But the court found Henriksen distinguish-
able because the claim here was the exact same claim and
Henriksen made that statement only as to issue preclusion, not
claim preclusion. The court also reasoned that if Henriksen
were read broadly, then “within the statute of limitations for
the particular cause of action, a successful litigant in small
claims [court] could not rely on [that court’s] judgment.” The
court dismissed Hara’s complaint, and she appealed.
ASSIGNMENT OF ERROR
Hara assigns, restated, that the district court erred in con-
cluding that her complaint was barred by both claim preclusion
and issue preclusion.
STANDARD OF REVIEW
[1] The applicability of claim and issue preclusion is a ques-
tion of law.3 On a question of law, we reach a conclusion inde-
pendent of the court below.4
ANALYSIS
Relying on Henriksen,5 Hara argues that a small claims
court judgment cannot be given any preclusive effect, under

 1
Henriksen v. Gleason, 263 Neb. 840, 643 N.W.2d 652 (2002).
 2
Id. at 845, 643 N.W.2d at 657.
 3
See Eicher v. Mid America Fin. Invest. Corp., 270 Neb. 370, 702 N.W.2d
792 (2005).
 4
See, e.g., In re Interest of S.C., 283 Neb. 294, 810 N.W.2d 699 (2012).
 5
Henriksen, supra note 1.
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580 287 NEBRASKA REPORTS

either claim preclusion or issue preclusion, because of the
procedural limitations of small claims court. We agree that
under Henriksen, issue preclusion does not apply to small
claims court judgments, and that the district court therefore
erred in concluding that issue preclusion barred Hara’s suit.
But Henriksen speaks only to issue preclusion and not claim
preclusion. Because claim preclusion applies to small claims
court judgments, and because all of its elements are met here,
we affirm the district court’s dismissal.

P rinciples of P reclusion
In the past, we have referred to claim preclusion and issue
preclusion as res judicata and collateral estoppel.6 Courts and
commentators have moved away from that terminology and
now use the terms claim preclusion and issue preclusion.7 Put
simply, they are more clear and descriptive.8
[2-4] Claim preclusion bars the relitigation of a claim that
has been directly addressed or necessarily included in a for-
mer adjudication if (1) the former judgment was rendered by
a court of competent jurisdiction, (2) the former judgment was
a final judgment, (3) the former judgment was on the merits,
and (4) the same parties or their privies were involved in both
actions.9 The doctrine bars relitigation not only of those mat-
ters actually litigated, but also of those matters which might
have been litigated in the prior action.10 The doctrine rests on

 6
See, e.g., Kiplinger v. Nebraska Dept. of Nat. Resources, 282 Neb. 237,
803 N.W.2d 28 (2011), disapproved in part on other grounds, Banks v.
Heineman, 286 Neb. 390, 837 N.W.2d 70 (2013); Eicher, supra note 3; In
re Estate of Wagner, 246 Neb. 625, 522 N.W.2d 159 (1994).
 7
See, e.g., Taylor v. Sturgell, 553 U.S. 880, 128 S. Ct. 2161, 171 L. Ed.
2d 155 (2008); Restatement (Second) of Judgments ch. 3 (1982); John P.
Lenich, Nebraska Civil Procedure § 8:3 (2008); Christopher Klein et al.,
Principles of Preclusion and Estoppel in Bankruptcy Cases, 79 Am. Bankr.
L.J. 839 (2005).
 8
See, e.g., Taylor, supra note 7; Klein et al., supra note 7.
 9
See Eicher, supra note 3.
10
See id.
 Nebraska Advance Sheets
HARA v. REICHERT 581
Cite as 287 Neb. 577

the necessity to terminate litigation and on the belief that a per-
son should not be vexed twice for the same cause.11
[5-7] Issue preclusion bars the relitigation of a finally deter-
mined issue that a party had a prior opportunity to fully and
fairly litigate.12 Issue preclusion applies where (1) an identical
issue was decided in a prior action, (2) the prior action resulted
in a final judgment on the merits, (3) the party against whom
the doctrine is to be applied was a party or was in privity with
a party to the prior action, and (4) there was an opportunity
to fully and fairly litigate the issue in the prior action.13 Issue
preclusion applies only to issues actually litigated.14 Issue pre-
clusion protects litigants from relitigating an identical issue
with a party or his privy and promotes judicial economy by
preventing needless litigation.15
[8] While the doctrines are similar and serve similar pur-
poses, they are distinct.16 A close examination of their ele-
ments shows this to be true. Claim preclusion looks to the
entire cause of action as opposed to a single issue. Claim pre-
clusion does not require a full and fair opportunity to litigate,
whereas issue preclusion does. Claim preclusion bars litiga-
tion of matters not actually litigated, whereas issue preclusion
applies only to issues actually litigated. Claim preclusion also
applies only between the parties (or their privies) who were

11
See id.
12
See In re Margaret Mastny Revocable Trust, 281 Neb. 188, 794 N.W.2d
700 (2011).
13
See id.
14
See, Bobby v. Bies, 556 U.S. 825, 129 S. Ct. 2145, 173 L. Ed. 2d 1173
(2009); Peterson v. The Nebraska Nat. Gas Co., 204 Neb. 136, 281
N.W.2d 525 (1979); Schneider v. Lambert, 19 Neb. App. 271, 809 N.W.2d
515 (2011); Restatement, supra note 7, § 27; Lenich, supra note 7.
15
See, e.g., Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S. Ct. 645, 58
L. Ed. 2d 552 (1979); Thomas Lakes Owners Assn. v. Riley, 9 Neb. App.
359, 612 N.W.2d 529 (2000).
16
See, e.g., Billingsley v. BFM Liquor Mgmt., 264 Neb. 56, 645 N.W.2d 791
(2002). See, also, Restatement, supra note 7, §§ 17 through 29; Lenich,
supra note 7; 50 C.J.S. Judgments § 928 (2009).
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involved in the prior action,17 while issue preclusion may
be used by a nonparty in a later action, either offensively
or defensively.18
An example of the doctrines and how they might interact in
a hypothetical situation might be helpful. Take, for example,
a car (driven by Adam), which collides with two other cars
(driven by Brody and Carl). Brody sues Adam, on a theory
of negligence, for damage to his car. Adam denies that he
was negligent. A jury finds otherwise and final judgment is
entered against Adam. Brody cannot later maintain a separate
suit, on the same facts, for additional damage to items in his
car’s trunk. Claim preclusion would bar the suit. Now Carl
sues Adam, also on a theory of negligence, for damage to his
car. Claim preclusion would not apply, because Carl was not
involved in the prior adjudication. But assuming the same
essential facts, issue preclusion would prevent Adam from
contesting his negligence; that issue was actually and finally
decided in the prior suit between Adam and Brody.
P reclusion for Small Claims
Court Judgments
Hara’s argument—that neither claim preclusion nor issue
preclusion applies to a small claims court judgment—rests
entirely on Henriksen v. Gleason.19 In that case, Jim Gleason
sued Greg Henriksen in small claims court for failing to pay
money under a contract. The small claims court entered a
default judgment for Gleason, and Henriksen later satisfied the
judgment. Henriksen then sued Gleason in county court alleg-
ing that, basically, Gleason’s performance under the contract
was deficient. Although Gleason argued that the prior judgment
had a preclusive effect, the county court disagreed and found
for Henriksen.20

17
See, Eicher, supra note 3; 47 Am. Jur. 2d Judgments § 577 (2006); 50
C.J.S., supra note 16.
18
See, JED Constr. Co., Inc. v. Lilly, 208 Neb. 607, 305 N.W.2d 1 (1981);
Peterson, supra note 14; Thomas Lakes Owners Assn., supra note 15. See,
also, 50 C.J.S., supra note 16, § 1098.
19
Henriksen, supra note 1.
20
See id.
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HARA v. REICHERT 583
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On appeal, we noted that issue preclusion “should not apply
when a new determination of the issue is warranted by differ-
ences in the quality or extensiveness of the procedures fol-
lowed in the two courts or by factors relating to the allocation
of jurisdiction between them.”21 We then explained:
Proceedings in small claims courts are conducted on
a very informal basis, with a minimum of procedural
requirements. . . . For example, the jurisdiction of small
claims court is currently limited to those cases where the
amount in controversy does not exceed $2,400, . . . par-
ties are not represented by counsel, . . . matters are tried
without a jury, . . . few formal pleadings are required, . . .
and the formal rules of evidence do not apply. . . . The
setting in small claims court affords parties the oppor-
tunity to obtain a prompt and just determination in an
action involving small amounts while expending a mini-
mum amount of resources. This setting is vastly different
from the relatively more complex and time-consuming
litigation that occurs in county or district courts. Given
these procedural differences, we believe it is inappropri-
ate to give any issue preclusive effect to any small claims
court judgment in a later proceeding brought in county or
district court. For that reason, the county court was not
barred from litigating the issue of Gleason’s performance
under the contract.22
Based on Henriksen, Hara argues that the prior small claims
court judgment cannot be given any preclusive effect, under
either claim preclusion or issue preclusion.
But Henriksen held only that issue preclusion did not apply
to small claims court judgments. This is apparent from its
language and reasoning. For example, Henriksen repeatedly
stated that it was inappropriate to give a small claims court
judgment any “issue preclusive effect,”23 and after emphasiz-
ing the procedural limitations of small claims court, Henriksen

21
Id. at 844-45, 643 N.W.2d at 656.
22
Id. at 845, 643 N.W.2d at 656-57 (citations omitted).
23
Id. at 845, 643 N.W.2d at 657-58.
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explained that “[f]or that reason, the county court was not
barred from litigating the issue of Gleason’s performance under
the contract.”24 Henriksen also relied heavily on § 28(3) of the
Restatement (Second) of Judgments and its accompanying
comment d., which pertained exclusively to issue preclusion.25
And the only case we cited in our analysis, Flobert Industries
v. Stuhr,26 also involved only issue preclusion.
Henriksen did not hold that claim preclusion was inap-
plicable to small claims court judgments. Such a holding
would have been inconsistent with our prior case law.27 Indeed,
Henriksen did not address claim preclusion at all, for what-
ever reason, even though it was squarely presented by the fact
pattern before us. Had we addressed it, we likely would have
found that claim preclusion barred the suit.28
[9,10] As impliedly noted, we have previously applied
claim preclusion to a small claims court judgment.29 And, for
several reasons, we continue to believe that claim preclusion
is applicable to small claims court judgments. First, a small
claims court judgment is in fact a “judgment,”30 and claim
preclusion, a fundamental principle of the law of judgments,31
should apply absent some persuasive reason (or reasons)
otherwise. Second, were we not to apply claim preclusion to
small claims court judgments, the small claims court would
be rendered meaningless, its judgments effectively neutered,
because any dissatisfied party could simply file a new action
on the same claim in county or district court. This would

24
Id. at 845, 643 N.W.2d at 657 (emphasis supplied).
25
See, Henriksen, supra note 1; Restatement, supra note 7, § 28(3) and
comment d.
26
Flobert Industries v. Stuhr, 216 Neb. 389, 343 N.W.2d 917 (1984).
27
See DeCosta Sporting Goods, Inc. v. Kirkland, 210 Neb. 815, 316 N.W.2d
772 (1982).
28
See, id.; Pipe & Piling Supplies v. Betterman & Katelman, 8 Neb. App.
475, 596 N.W.2d 24 (1999); Lenich, supra note 7, § 8:13.
29
See DeCosta Sporting Goods, Inc., supra note 27.
30
See Nebraska Dept. of Health & Human Servs. v. Weekley, 274 Neb. 516,
741 N.W.2d 658 (2007).
31
See, generally, Restatement, supra note 7.
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be antithetical to the small claims court’s purpose, which
is to provide “a prompt and just determination in an action
involving small amounts while expending a minimum amount
of resources.”32
Third, our statutes provide a dissatisfied party with the
opportunity to appeal from a small claims court judgment.33
Those statutes would also be rendered meaningless if claim
preclusion did not apply to small claims court judgments,
because a party would never appeal; on appeal, the reviewing
court looks only for “error appearing on the record,”34 whereas
in a new action, the dissatisfied party would start from scratch.
Fourth, it is fair for the parties to be bound by the judgment of
the small claims court when they choose to proceed there. The
plaintiff chooses where to file his action and, if unhappy with
the small claims court’s procedural limitations, can choose to
file it in a court of general jurisdiction. And the defendant, if
he does not want to proceed in small claims court, can transfer
the case to county court.35
[11] Other courts have similarly concluded that claim pre-
clusion applies to small claims court judgments.36 Moreover,
our research reveals several jurisdictions that apply claim pre-
clusion to small claims court judgments while limiting or not
applying issue preclusion.37 Although Hara argues otherwise,
we see no problem with treating the doctrines differently; they

32
Henriksen, supra note 1, 263 Neb. at 845, 643 N.W.2d at 657. See, also,
Neb. Rev. Stat. § 25-2806 (Reissue 2008).
33
See Neb. Rev. Stat. §§ 25-2728 through 25-2738 (Reissue 2008 & Cum.
Supp. 2012) and 25-2807 (Reissue 2008).
34
See §§ 25-2733 and 25-2807.
35
See Neb. Rev. Stat. § 25-2805 (Cum. Supp. 2012).
36
See, e.g., Allen v. Moyer, 259 P.3d 1049 (Utah 2011); Hindmarsh v. Mock,
138 Idaho 92, 57 P.3d 803 (2002); Peterson v. Newton, 232 Ariz. 593, 307
P.3d 1020 (Ariz. App. 2013); Bailey v. Brewer, 197 Cal. App. 4th 781,
128 Cal. Rptr. 3d 380 (2011); Doherty v. McMillen, 805 S.W.2d 361 (Mo.
App. 1991); Bagley v. Hughes, 465 N.W.2d 551 (Iowa App. 1990). But see
Isaac v. Truck Service, Inc., 253 Conn. 416, 752 A.2d 509 (2000).
37
See, In re Ault, 728 N.E.2d 869 (Ind. 2000); Newton, supra note 36;
Bailey, supra note 36; Clusiau v. Clusiau Enterprises, Inc., 225 Ariz. 247,
236 P.3d 1194 (Ariz. App. 2010); Bagley, supra note 36.
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are separate doctrines with distinct elements.38 If it were not
clear before, we hold that claim preclusion applies to small
claims court judgments.
The only remaining question is whether the elements of
claim preclusion are met here. They are. Reichert originally
sued Hara in small claims court over the same $4,000 and
the dispute centered on whether it was a gift or a loan; Hara
argued, in her defense, that it was a gift. But after a trial, the
small claims court entered judgment for Reichert, finding that
it was a loan. Hara did not appeal from that judgment and now
seeks to reassert that defense—that the money was a gift and
not a loan—in a new action. This she cannot do.39 Here, we
have a former judgment, entered by a court of competent juris-
diction, which was final and on the merits, between the same
parties and involving the same claim. Claim preclusion bars
Hara’s action.

CONCLUSION
We conclude that claim preclusion, but not issue preclusion,
applies to small claims court judgments. Because the elements
of claim preclusion are satisfied here, the district court cor-
rectly dismissed Hara’s action.
Affirmed.

38
See, e.g., Billingsley, supra note 16; Restatement, supra note 7, §§ 17
through 29; Lenich, supra note 7; 50 C.J.S., supra note 16. See, also,
Newton, supra note 36; Doherty, supra note 36; Bagley, supra note 36.
39
See 50 C.J.S., supra note 16, § 1018. Cf., Dakota Title v. World-Wide Steel
Sys., 238 Neb. 519, 471 N.W.2d 430 (1991); DeCosta Sporting Goods,
Inc., supra note 27.