Lodging an appeal, despite a favorable judgement?

1.      INTRODUCTION

Some parts of our civil procedural law are more difficult to comprehend. This is especially true for appellate procedural law, which is more technical in nature than the procedural law applicable at first instance. Various judgments have shown that mistakes are made quite often. In the present proceedings, the appeal to the Dutch Court of Appeal of the city of 's-Hertogenbosch was dismissed because the appellant mistakenly thought it had an interest in its appeal. The appellant then unsuccessfully appealed in cassation against amongst others this judgment to the Dutch Supreme Court. What happened exactly?

2.      DUTCH PROCEDURAL LAW

A project developer (referred to in the judgment as [plaintiff] B.V.) had purchased a parcel of land to build an apartment complex on it. On the first floor it would create a retail space. The purchase price of the parcel was provisionally set by the parties at €50,000. The project developer would pay the purchase price by delivering the retail space with the accompanying apartment right to the sellers. The purchase price only applied if a number of assumptions would stand. If not, the difference would be shared between the developer and the sellers. When the apartment complex and retail space were completed, the developer took the position that various items had turned out less favorable than budgeted. As a result, the developer believed it had a claim against the sellers that was due and suspended its obligation to deliver. Meanwhile, the retail space was leased and the sellers and the project developer agreed that they would also share the rental income between them. The sellers took the position that they were the very ones who had a claim against the developer and went to court. In short, they sought an order to deliver the apartment right and payment. In its legal consideration, the District Court arrives at a concrete calculation of the developer's claim and the conclusion that it does indeed have a claim against the sellers on balance. Its right of suspension is granted and the sellers' claims are dismissed on that ground. The project developer could not agree with the District Court's calculation. According to it, it had more to claim from sellers on balance. The project developer appealed and claimed, among other things, that the sellers' claims should again be dismissed with improvement of the grounds. The Court of Appeal rejects the appeal due to insufficient interest. Indeed, the Court of Appeal ruled that it had not been disputed that the dictum would remain unchanged even if the complaints against the legal consideration containing the calculation were to succeed. Among other things, the project developer appealed this judgment in cassation with the Dutch Court of Appeal. 

Without a sufficient interest, no one is entitled to a legal claim,' reads Article 3:303 of the Dutch Civil Code. Sufficient interest must also be present on appeal. Sufficient interest is, in principle, present when an appellant challenges a dictum of a judicial decision that is unfavorable to him. In the absence of a (timely) appeal, the judgement becomes final and the points of decision between the same parties pursuant to Article 236(1) of the Dutch Code of Civil Procedure are, in principle, binding. 

According to the project developer, it did have a sufficient interest in improving the grounds. The District Court's (too low) calculation would, in its view, be binding between the parties. The project developer also believed it had a sufficient interest in improving the grounds because, depending on that calculation, it could longer invoke its right of suspension. Over time, the sellers' claim regarding the sharing of rental income would exceed the project developer's counterclaim. From then on, the project developer would no longer have a right of suspension and would therefore have to deliver. The legal question before the Supreme Court to be decided upon was whether the project developer indeed had a sufficient interest in this appeal.  

The Supreme Court answers this question using the doctrine of res judicata. By virtue of res judicata, points of dispute in proceedings between the same parties are in principle definitively settled. The scope of res judicata is limited to '(...) the elements of the judgment that have the binding force referred to in Article 236(1) of the Dutch Code of Civil Procedure in other proceedings'. According to Article 236(1) of the Dutch Code of Civil Procedure, these are: 'Decisions which concern the legal relationship in dispute and are contained in a final judgment (...)'. The 'legal relationship in dispute' refers to the legal relationship raised by the litigants in the procedural debate. Res judicata is thus, in principle, limited by the scope of the legal dispute determined by the parties.   

The foregoing means that res judicata is not limited to the dictum, but also extends to decisions in the judgment that bear on the dictum. Non-bearing, excessively given decisions (so-called obiter dictum decisions) do not have res judicata. Moreover, res judicata does not accrue to pure factual decisions and pure decisions on objective law. This has long been established case law.

Since res judicata is not limited to the dictum, the relevant question in the dispute between the project developer and the sellers is whether the District Court's calculation includes a decision that is bearing on the dictum. After all, if a litigant cannot agree with a legal consideration that bears on the dictum, then that litigant's sufficient interest on appeal is in principle present. The fact that the dictum is already in its favor does not alter this.

A decision bearing on the dictum involves a decision that must be made before the final claim can be decided. An example in this context is provided by the Dutch Supreme Court's Terra Nova/Shinn Fu ruling. Terra Nova sought a declaratory judgment in the Sub-district Court that a new fixed-term lease had been agreed between the parties for a term of five years primarily and three years in the alternative. In a judgment dated March 7, 2007, the Sub-district Court rejected the claim. The Sub-district Court indicated in a legal consideration that the lease was for an indefinite period of time. The judgment became final. Terra Nova then initiated new proceedings in which it claimed overdue rent. This claim was also dismissed. This time, the Sub-district Court ruled that although the legal consideration in the earlier judgment that the lease was for an indefinite period of time was res judicata, the lease had since been terminated by notice. Terra Nova appealed and again invoked the relevant legal consideration from the March 7, 2007 judgment. However, the Court of Appeal ruled that this legal consideration did not bear on the dictum from the March 7, 2007 judgment. According to the Court of Appeal, the question of whether there was an indefinite contract was still open. The Supreme Court subsequently held that this apparent judgment of the Court of Appeal was not incomprehensible.

Back to the project developer and the sellers. There the legal dispute was limited to the answer to the question whether (i) the project developer had to deliver the apartment right and pay a sum of money to the sellers, or (ii) the project developer had a counterclaim on balance and was (thus) entitled to suspend the delivery of the apartment right. The amount of the project developer's claim against the sellers was not part of the legal dispute between the parties. After all, the project developer had not filed a counterclaim in that regard. Nevertheless, the court did include a concrete calculation of the amount of the claim in a legal consideration of its judgment. Based on its calculation, the District Court came to the conclusion that the project developer was the one who - on balance - had a claim against the sellers, and on that basis it rejected the sellers' claims. The District Court's concrete calculation was not a supporting decision for this rejection. But the conclusion that the project developer had a claim on balance against the sellers was.

The Court of Appeal therefore concludes that the project developer has no interest in appealing the District Court's concrete calculation. Indeed, granting the relevant complaints against the judgement cannot change the dictum. The Supreme Court sanctions this judgment. According to the Supreme Court, ‘The rejection of the claims of [the sellers] (...) does not rest in part on the District Court's rejection of contentions by [the project developer] (...) to the effect that [its] (...) claim against [the sellers] (...) is greater than the District Court assumed’. This means, according to the Supreme Court, that the District Court's decisions on the amount of the claim, to the extent that it was decided to the detriment of the project developer, 'have no binding force in another lawsuit between the same parties (Article 236(1) of the Dutch Code of Civil Procedure)’. For that matter, in our opinion, this also applies to favorable decisions.

Overall, an important lesson for the proper application of appellate procedural law. By the way, the incidental cassation appeal of the sellers did succeed (the Dutch Supreme Court went the other way around). After cassation and referral, it must again be assessed whether the project developer, to justify the continuance of its suspension, still has a claim on balance against sellers. It must of course be taken into account that the sellers' claim against the project developer with respect to half of the rental payments will have continued to accrue. Via the so-called devolutive effect of the appeal, the project developer's contentions regarding its counterclaim will also have to be reassessed. In this way, the project developer will obtain the reassessment it wants via the sellers' appeal. However, its complaints against the judgement will not be able to be included in this reassessment.

3. LEGAL ASSISTANCE IN APPEAL PROCEEDINGS

It is of the utmost importance that appeal proceedings are properly conducted. This also applies to proceedings in the first instance. Not only can this prevent errors (and therefore unnecessary legal costs), in-depth knowledge of procedural law can also create opportunities.

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[1] Zie bijv. HR 25 januari 2019, ECLI:NL:HR:2019:96, ter zake van de ‘één-keer-schieten-regel’ en HR 17 januari 2020, ECLI:NL:HR:2020:61 (Dingemans q.q. c.s./Banning c.s.), inzake de risico’s als besloten wordt niet incidenteel tegen tussenvonnissen te appelleren.

[2] Hof ’s-Hertogenbosch 7 mei 2019, ECLI:NL:GHSHE:2019:1687.

[3] V.C.A. Lindijer, De goede procesorde. Een onderzoek naar de betekenis van de goede procesorde als normatief begrip in het burgerlijk procesrecht (Burgerlijk Proces & Praktijk nr. IV) (diss. Groningen), Deventer: Kluwer 2006/9.5.3.2.

[4] P. de Bruin, Groene Serie Burgerlijke Rechtsvordering, art. 236 Rv, aant. 5, in: P. Vlas & T.F.E. Tjong Tjin Tai (red.), Groene Serie Burgerlijke Rechtsvordering, Deventer: Wolters Kluwer.

[5] P. de Bruin, Groene Serie Burgerlijke Rechtsvordering, art. 236 Rv, aant. 5.2, in: P. Vlas & T.F.E. Tjong Tjin Tai (red.), Groene Serie Burgerlijke Rechtsvordering, Deventer: Wolters Kluwer.

[6] Zie HR 18 december 2020, ECLI:NL:HR:2020:2099 (IV-Groep/Zwitserleven) en A.I.M. van Mierlo & J.H. van Dam-Lely, Procederen bij dagvaarding in eerste aanleg (Burgerlijk Proces & Praktijk nr. 1), Deventer: Kluwer 2011/11.4.1.

[7] Vgl. HR 20 januari 1984, ECLI:NL:HR:1984:AG4740, NJ 1987/295.

[8] N.E. Groeneveld-Tijssens, De verklaring voor recht (diss. Tilburg University), Deventer: Wolters Kluwer 2015, p. 69.

[9] Zie bijvoorbeeld HR 15 mei 1987, ECLI:NL:HR:1987:AC4156, NJ 1988/164, m.nt. W.H. Heemskerk (Van Huffel/Van den Hoek) en HR 27 mei 2013, ECLI:NL:HR:2013:CA0356, NJB 2013/1395.

[10] R.L. Bakels, ‘Gezag van gewijsde van het vonnis’, in: A.W. Jongbloed & A.L.H. Ernes, Burgerlijk procesrecht praktisch belicht, Deventer: Kluwer 2014/11.14.

[11] N.E. Groeneveld-Tijssens, De verklaring voor recht (diss. Tilburg University), Deventer: Wolters Kluwer 2015, p. 69.

[12] HR 12 oktober 2012, ECLI:NL:HR:2012:BW9869, NJ 2012/588 (Terra Nova/Shinn Fu).

[13] HR 12 oktober 2012, ECLI:NL:HR:2012:BW9869, r.o. 3.5, NJ 2012/588 (Terra Nova/Shinn Fu).

[14] Zie hof ’s-Hertogenbosch 7 mei 2019, ECLI:NL:GHSHE:2019:1687, r.o. 3.6.

[15] HR 26 november 2021, ECLI:NL:HR:2021:1779, r.o. 3.1.3., NJB 2021/3179.