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September 30, 1998


The opinion of the court was delivered by: HARRIS

Before the Court are defendants' motion to dismiss and plaintiffs' opposition thereto. Upon consideration of the entire record and accepting the factual allegations in the amended complaint as true, the Court grants the motion in part, denies it in part, and defers ruling in part on defendants' motion. "Findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56." Fed. R. Civ. P. 52(a); Summers v. Department of Justice, 140 F.3d 1077, 1079-80 (D.C. Cir. 1998). Nonetheless, the Court sets forth its reasoning.


 Plaintiffs, daughters of the late Walter Ogus ("Walter") from his first marriage, seek to enforce an alleged oral contract between Walter and Valerie Ogus ("Valerie"), Walter's second wife, or, in the alternative, to enforce rights under a trust resulting from Walter's and Valerie's actions. Plaintiffs assert that Walter and Valerie had an oral agreement that when Walter died, Valeries would enjoy the benefit of his property during her lifetime, on the condition that upon her death, she would will all of Walter's remaining property, all their joint property, and any other property she had received as a result of Walter's death equally to plaintiffs and to Valerie's daughter, Judith Newhouser. Valerie also allegedly agreed orally to preserve the assets during her lifetime and to grant plaintiffs' reasonable requests for financial assistance.

 In 1992, plaintiffs filed suit against Valerie seeking declaratory relief as to the existence of an oral contract, or, in the alternative, a trust. This Court dismissed that action on the ground that plaintiffs had not presented a justifiable case or controversy under the Declaratory Judgment Act, 28 U.S.C. § 2201. See Paley v. Ogus, No. 92-2351 SSH (D.D.C. June 9, 1993) (hereinafter "Paley I "). The Court further noted that even had the case been justiciable, it would have declined to exercise its discretion to grant declaratory relief. Id. The Court of Appeals affirmed this Court's dismissal of plaintiffs' case, but principally on different grounds. See Paley v. Ogus, 1994 U.S. App. LEXIS 36461, at *1 (D.C. Cir. 1994) (unpublished per curiam memorandum opinion) (hereinafter "Paley II "). The Court of Appeals believed that the case was justiciable, but upheld the dismissal of plaintiffs' "maintenance" and "financial assistance" claims on the alternative ground relied upon by this Court (that these claims were not suitable for declaratory relief). Id. at *2-3. The Court of Appeals further concluded that plaintiffs' claims regarding their alleged entitlement to an inheritance were barred by the Statute of Frauds, and thus affirmed this Court's dismissal of those claims. *fn1" Id.

 Subsequently, Valerie died, bequeathing just $ 1,000 to each plaintiff and the remainder of her estate to her granddaughter, Nina Newhouser ("Newhouser"). Plaintiffs then filed their complaint in this case. Counts I-III and V of the amended complaint are brought against the Estate of Valerie Ogus ("Estate"), and allege again that Walter and Valerie entered into an oral contract or, in the alternative, established a trust, which Valerie breached when she bequeathed the bulk of her estate to Newhouser. *fn2" Count IV is brought against the trust established by Walter's written will, the Walter Ogus Trust ("Trust"), and requests (1) an accounting of the Trust's assets and (2) that judgment be entered in plaintiffs' favor for any sums found to be due them as a result of such an accounting.


 I. Res Judicata, Issue Preclusion, and the Statute of Frauds

 Defendants first assert that res judicata and issue preclusion bar plaintiffs' present claims stemming from any oral contract to make a will because the Court of Appeals previously concluded that essentially identical claims were barred by the Statute of Frauds. *fn3" See Paley II, 1994 U.S. App. LEXIS, at *7-11. Plaintiffs argue that these doctrines do not apply because there is no prior final judgment on the merits and the Statute of Frauds issue was not actually litigated in the prior proceedings.

 A. Res Judicata Precludes Plaintiffs' Claims of Entitlement to an Inheritance

 "Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from retaliating issues that were or could have been raised in that action." Allen v. McCurry, 449 U.S. 90, 94, 66 L. Ed. 2d 308, 101 S. Ct. 411 (1980). In order for res judicata to apply, defendants must demonstrate the existence of (1) an identity of parties in both suits; (2) a judgment rendered by a court of competent jurisdiction; (3) a final judgment on the merits; and (4) an identity of the cause of action in both suits. Brannock Assocs., Inc., v. Capitol 801 Corp., 807 F. Supp. 127, 134 (D.D.C. 1992) (citing U.S. Indus., Inc. v. Blake Constr. Co., 246 U.S. App. D.C. 326, 765 F.2d 195, 205 n.21 (D.C. Cir. 1985)); see also Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 399, 69 L. Ed. 2d 103, 101 S. Ct. 2424 (1981) (stating that "technical elements" of res judicata were satisfied when the first case "was a final judgment on the merits and involved the same claims and the same parties as" the subsequent case). Of the foregoing requirements, plaintiffs contest only the existence of a final judgment on the merits. They note (1) that this Court's dismissal of their previous case (based upon a lack of justifiability and, alternatively, a decision not to exercise discretion under the Declaratory Judgment Act) did not constitute a final judgment on the merits; and (2) that although the Court of Appeals concluded that the Statute of Frauds barred part of the action (which ordinarily would constitute a decision on the merits), its judgment simply affirms this Court's decision rather than explicitly affirming on a different ground (the analysis indicating that the affirmance was on a different ground is contained only in the memorandum accompanying the Court of Appeals' Judgment). From these observations, plaintiffs conclude that the Court of Appeals' decision cannot constitute a final judgment on the merits because it affirms this Court's dismissal of the claims on grounds which did not reach the merits of the case, rather than entering a separate judgment on the merits.

 Plaintiffs are correct in their observation that this Court's dismissal of their previous case did not constitute a judgment on the merits for the purposes of res judicata. See 18 Charles Alan Wright, et al., Federal Practice and Procedure: Jurisdiction § 4446 (1981) (indicating that the denial of declaratory relief as a matter of remedial discretion does not preclude further litigation on the same issues or claims); id. § 4435 (indicating that dismissals for lack of jurisdiction do not operate to bar a second action); see also Costello v. United States, 365 U.S. 265, 286, 5 L. Ed. 2d 551, 81 S. Ct. 534 (1961). The Court of Appeals' disposition of the case, however, clearly constitutes a final judgment on the merits on some of plaintiffs' claims. The Court of Appeals has de novo review of a district court's decision to grant a motion to dismiss. See Kowal v. MCI Communications Corp., 305 U.S. App. D.C. 60, 16 F.3d 1271, 1276 (D.C. Cir. 1994). Furthermore, an appellate court may affirm a lower court's decision on a different ground than the one relied on by the lower court. See Helvering v. Gowran, 302 U.S. 238, 245, 82 L. Ed. 224, 58 S. Ct. 154 (1937) ("In the review of judicial proceedings, the rule is settled that, if the decision below is correct, it must be affirmed, although the lower court relied upon a wrong ground or gave a wrong reason."). In light of these well-established principles, the Court rejects plaintiffs' novel and unsupported argument that an appellate court's affirmance of a lower court decision renders the ground for the affirmance given by the appellate court in an accompanying unpublished memorandum mere dicta, and concludes that the part of the Court of Appeals' decision dismissing plaintiffs' claims on Statute of Frauds grounds constituted a final judgment on the merits. Consequently, plaintiffs' claims asserting that they were entitled to inherit portion of Valerie's estate are barred by res judicata.

 B. Issue Preclusion Does Not Bar Litigation of the Statute of Frauds Question

 Defendants next contend that issue preclusion prevents the Court from revisiting the factual question, relevant to plaintiffs' "maintenance" and "financial assistance" claims, of whether the alleged oral contract involved realty (in which case it would be barred by the Statute of Frauds). Issue preclusion prevents the relitigation of an issue which has been "'actually litigated and necessarily decided by a final disposition on the merits,' in a prior litigation between the same parties" by a court of competent jurisdiction, United States v. TDC Mgmt. Corp., 306 U.S. App. D.C. 286, 24 F.3d 292, 295 (D.C. Cir. 1994) (internal citation omitted); see also Allen, 449 U.S. at 94 ("Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case."), but only if preclusion in the second case would not work a basic unfairness to the party bound by the first determination. See Blonder-Tongue Labs., Inc. v. University of Ill. Found., 402 U.S. 313, 333, 28 L. Ed. 2d 788, 91 S. Ct. 1434 (1971) (noting that fairness is a concern when there is a risk that "prior proceedings were seriously defective"); Yamaha Corp. of Amer. v. United States, 295 U.S. App. D.C. 158, 961 F.2d 245, 254 (D.C. Cir. 1992) (stating that "an example of such unfairness would be when the losing party clearly lacked any incentive to litigate the point in the first trial, but the stakes of the second trial are of a vastly greater magnitude"), cert. denied, 506 U.S. 1078, 122 L. Ed. 2d 353, 113 S. Ct. 1044 (1993); Otherson v. Department of Justice, 228 U.S. App. D.C. 481, 711 F.2d 267, 273 (D.C. Cir. 1983).

 The key issue in this case is the "actually litigated" element of issue preclusion and its application to the factual question of whether the alleged oral contract dealt with realty and the closely related legal issue of the application of the Statute of Frauds to the contract. "Actually litigated" means that the same issue was "contested by the parties and submitted for determination by the court." Otherson, 711 F.2d at 273; see also Martin v. Malhoyt, 265 U.S. App. D.C. 89, 830 F.2d 237, 264 (D.C. Cir. 1987) (indicating that issue preclusion only applies where the party against whom it is asserted had a "full and fair opportunity to litigate the issue in the first action") (internal citation omitted). Therefore, "if the court, in the former action, assumes to adjudicate an issue or question not submitted by the parties in their pleadings nor drawn into controversy by them in the course of the evidence, and bases its judgment on such adjudication, the judgment is not conclusive in a subsequent proceeding, under the doctrine of estoppel by judgment." Diplomat Elec., Inc. v. Westinghouse Elec. Supply Co., 430 F.2d 38, 45 (5th Cir. 1970).

 Plaintiffs assert that the factual issue of whether realty was involved was "not contested" by the parties in Paley II, but rather that the Court of Appeals (incorrectly) presumed that plaintiffs conceded the real property issue because they did not contest defendants' factual assertion to that effect made in their motion to dismiss. *fn4" According to plaintiffs, issue preclusion cannot apply because they were not under an obligation to contest defendants' factual assertion, and the Court of Appeals' reliance on that assertion deprived plaintiffs of a full and fair opportunity to litigate the realty issue.

 The Court agrees with plaintiffs that if they had no notice that the Court of Appeals would address the factual issue contained in defendants' motion to dismiss or that plaintiffs' failure to contest the issue would result in defendants' assertion being deemed true, the realty issue cannot be said to have been "actually litigated." *fn5" Thus, the crucial issue is whether the proceedings before the Court of Appeals should have given plaintiffs notice of an obligation to contest the factual issue. Upon careful consideration of the proceedings before the Court of Appeals in Paley II and the relevant law, the Court concludes that plaintiffs had ...

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