NOT TO BE PUBLISHED

OPINION

VANMETER, Judge.

Athena K. Masuda-Bond, Richard J. Bond and The Bond Family Trust (collectively referred to herein as "the Bonds") appeal from the Boone Circuit Court's order granting summary judgment in favor of Plantation Pointe Master Association, Inc. For the following reasons, we affirm.

In 2002, Athena Masuda-Bond purchased a home in the Magnolia Trace Development in Florence, Kentucky. The property was part of the Plantation Pointe Master Association, Inc. Homeowner's Association ("Association"), to which the Bonds were obligated to pay dues in exchange for maintenance services. In 2006, the Bonds became concerned about the Association's maintenance standards and withheld Association fees. As a result, in 2007 the Association filed a foreclosure action against the Bonds in order to collect the unpaid Association fees and attorney's fees. The Bonds subsequently filed an answer and cross-claims against the Association, seeking damages based on theories of Civil RICO and theft by deception and asking the court to find the Association's claims null and void.

In 2009, the trial court ruled that the Association was entitled to exercise a contractual lien on the Bonds' property for unpaid fees, but because no provision for attorney's fees was included in the Bonds' chain of title, the Association was not entitled to attorney's fees. All other allegations in the case were severed and set for trial. In lieu of a trial, the parties executed a settlement agreement on March 10, 2010 ("settlement agreement"). In exchange for the Bonds paying $1300, the parties agreed to release the claims, using the following language:

(Emphasis added). The trial court entered an agreed order on March 25, 2010, dismissing the matter with prejudice, stating in relevant part:

(Emphasis added).

In the instant case, Suntrust Mortgage, Inc. ("Suntrust"), which held the first mortgage on the Bonds' property, filed a foreclosure action on November 23, 2009, and served the Association as a co-defendant. In response, the Bonds filed counterclaims against the Association identical to those filed in the prior action. In November 2010, a default judgment was entered against the Association, which failed to respond. The Association was ultimately granted leave to respond and the default judgment was vacated. While the Association did not affirmatively plead the defense of res judicata in its initial answer, the Association subsequently filed a motion for summary judgment on the Bonds' claims in which it raised the defense of res judicata. The trial court granted the Association's motion for summary judgment, finding no issue of material fact. The Bonds filed a motion to vacate and reconsider. The trial court then entered an amended judgment, granting the Association summary judgment based on res judicata. From that judgment, the Bonds now appeal.

The Bonds first argue that the Association did not affirmatively plead res judicata in its initial answer and cross-complaint, and therefore, the Association has waived the defense pursuant to CR1 8.03. Second, the Bonds claim that the trial court erroneously granted the Association summary judgment on the ground of res judicata because the prior action and settlement agreement between the Bonds and the Association did not dispose of the Bonds' counter-claims, and thus, those claims were not resolved on the merits.

CR 56.03 provides that summary judgment is appropriate when no genuine issue of material fact exists and the moving party is therefore entitled to judgment as a matter of law. Summary judgment may be granted when "as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor and against the movant." Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 483 (Ky. 1991) (internal quotations omitted). Whether summary judgment is appropriate is a legal question involving no factual findings, so a trial court's grant of summary judgment is reviewed de novo. Coomer v. CSX Transp., Inc., 319 S.W.3d 366, 370-71 (Ky. 2010).

First, the Bonds argue that because the Association failed to plead the affirmative defense of res judicata in its initial answer, the defense has been waived. In response, the Association notes that the Bonds did not raise this argument before the trial court, but rather raised it for the first time on appeal. An issue not presented to the trial court cannot be raised on appeal for the first time, and may only be reviewed for palpable error, which requires a finding of manifest injustice to prevail. Fischer v. Fischer, 348 S.W.3d 582, 589 (Ky. 2011) (citing CR 61.02).

CR 61.02 states:

In other words, palpable error relief is not available unless three conditions are present. The error must have (1) been clear or plain under existing law, (2) been more likely than ordinary error to have affected the judgment, and (3) so seriously affected the fairness, integrity or public reputation of the proceeding to have been jurisdictionally intolerable.2

We do not believe the trial court committed palpable error because any alleged error was not clear or plain under existing law. The Bonds cite Watts ex rel., Watts v. K, S & H, 957 S.W.2d 233 (Ky. 1997), for the proposition that when res judicata is not specifically pled, but rather raised in a motion for summary judgment, the defense has been waived. While CR 8.03 does require the defense of res judicata to be affirmatively pled, and a pleading rather than a motion is usually the appropriate vehicle for pleading such affirmative defenses, we do not believe the defense is definitively waived if first raised in a motion for summary judgment. Such a failure is not inherently fatal if the opposing party is given adequate notice and suffers no prejudice. See Smith v. Sushka, 117 F.3d 965, 969 (6th Cir. 1997). Here, the Bonds were given ample time to respond to the motion for summary judgment, over 60 days, and they have not directed this court to any evidence clearly demonstrating prejudice suffered as a result of the defense being raised in a motion rather than a pleading. Thus, we decline to reverse on this ground.

Next, the Bonds argue that res judicata does not bar their claims because their claims were not resolved on the merits in the prior litigation. Res judicata "operates to bar repetitious suits involving the same cause of action[,]" and involves "two subparts: 1) claim preclusion and 2) issue preclusion." Yeoman v. Commonwealth, Health Policy Board, 983 S.W.2d 459, 464-65 (Ky. 1998). "Claim preclusion bars a party from re[]litigating a previously adjudicated cause of action[,]" and "[i]ssue preclusion bars the parties from relitigating any issue actually litigated and finally decided in an earlier action." Id. at 465. "If the two suits concern the same controversy, then the previous suit is deemed to have adjudicated every matter which was or could have been brought in support of the cause of action." Id. Two lawsuits concern the same controversy when they both arise from the same "transactional nucleus of facts." Id.

Claim preclusion applies when three elements are present: identity of the parties, identity of the causes of action, and the action must have been resolved on the merits. Id. Issue preclusion applies when: 1) the issue in the second case is the same as the issue in the first case; 2) the issue was actually litigated in the prior action; 3) the issue was actually decided; and 4) the decision on the issue in the prior action was necessary to the court's judgment. Id. The rule of res judicata is "necessary to the speedy and efficient administration of justice." Id.

In the present case, we have identical parties and identical causes of action. The Bonds assert that claim preclusion does not apply because their claims in the prior action were not addressed by the settlement agreement, and therefore were not resolved on the merits. We disagree. The language of the settlement agreement appears to settle all of the plaintiff's claims, as well as all claims related to the plaintiff's claims in the prior action. A case resolved by settlement agreement rather than tried does not preclude res judicata as long as the action is dismissed with prejudice. See 3D Enter. Contracting Corp. v. Louisville & Jefferson Cnty. Metro. Sewer Dist., 174 S.W.3d 440 (Ky. 2005). The prior action between the Bonds and the Association was dismissed with prejudice in its entirety. The agreed order clearly dismisses the entire action, which would include both the Association's claims and the Bonds' counterclaims.

For the above reasons, the Boone Circuit Court's order granting summary judgment in favor of Plantation Pointe Master Association, Inc. is affirmed.

DIXON, JUDGE, CONCURS.

JONES, JUDGE, CONCURS IN RESULT ONLY.