Merritt-Chapman & Scott Corp. v. Elgin Coal, Inc., Civ. A. No. 6339.

• Decision Date: 23 August 1972
• Docket Number: Civ. A. No. 6339.
• Citation: 358 F. Supp. 17
• Court: U.S. District Court — Eastern District of Tennessee
• Parties: MERRITT-CHAPMAN & SCOTT CORPORATION v. ELGIN COAL, INC., et al.

358 F. Supp. 17

MERRITT-CHAPMAN & SCOTT CORPORATION v. ELGIN COAL, INC., et al.

Civ. A. No. 6339.

United States District Court, E. D. Tennessee, S. D.

August 23, 1972.

COPYRIGHT MATERIAL OMITTED

Martin S. Stolzoff, Beverly Hills, Cal., Kenneth D. Higgins, Athens, Tenn., Vivienne W. Nearing, Stroock, Stroock & Lavan, New York City, for plaintiff.

Jerome C. Ables, William M. Ables, Jr., South Pittsburg, Tenn., Sizer Chambliss, Chattanooga, Tenn., for defendants.

MEMORANDUM

FRANK W. WILSON, District Judge.

This is an action based upon the following legal theories: (1) malicious prosecution, (2) abuse of civil process, (3) conspiracy to commit fraud and abuse legal process, and (4) violation of an attorney's oath and public duty. The case is presently before the Court upon the motion of defendant for summary judgment. As regards that motion, the following matters appear undisputed in the record. There is presently pending in the Chancery Court of Marion County, Tennessee the case of Merritt-Chapman & Scott Corporation v. Elgin Coal, Inc., No. 3047. In the course of that litigation a cross claim was filed by the defendant, Elgin Coal, Inc., seeking both compensatory and exemplary damages in excess of $4,000,000. The cross claim alleged that a certain contract and agreement of sublease failed to reflect certain key portions of the actual agreement between the parties and further alleged that defendant had been induced to sign the sublease on the representation that the omitted material would be incorporated into the sublease. Further, it was alleged that there was a meeting between the parties for the purpose of preparing a memorandum of the changes but that these changes were never given effect due to the wrongful conduct of plaintiff. Certain exhibits were attached to the cross claim, which exhibits were alleged to have been drawn up by the plaintiff and agreed upon by the parties to be incorporated into the sublease.

This cross claim was subsequently settled by an agreement on or about April 12, 1971, and an order dismissing the cross claim with prejudice was entered on that date. A copy of the settlement agreement is attached to the affidavit of W. M. Ables, Jr. (See Affidavit in Support of Motion to Dismiss) and a copy of the order of dismissal is made an exhibit to a former motion to dismiss. Following dismissal of the state court cross claim on April 12, 1971, suit was instituted in this court upon September 7, 1971, at a time when the original action in the state court remained pending and undisposed of.

The defendants Varnell and Ramsey are officers, directors and stockholders of defendant Elgin Coal, Inc. Defendant Ables is an officer of Elgin Coal and the attorney of record in the chancery suit. Defendant Graham is the executrix of her husband's estate, who was the president, a stockholder and a director in Elgin Coal.

The defendants' motion for summary judgment is based upon the single ground "that the suit upon which this case is based was settled." Although defendants contend that this motion relates to the entire complaint, the Court is of the opinion the motion relates only to the malicious prosecution allegations of the complaint as principally set forth in the first count of the complaint.

In an action for damages based upon a malicious prosecution the complaint must allege facts which show the institution of a prior action by the defendant with malice and without probable cause. Further it must be alleged that the prior action was terminated favorably to the plaintiff. The defendants contend that this prior action was not terminated in plaintiff's favor because a settlement agreement was entered into between the parties.

Although not raised by the defendants, the question of whether an action for malicious prosecution may be based upon the filing of a cross claim must first be resolved. There is a lack of controlling authority upon this issue. See Slee v. Simpson, 91 Colo. 461, 15 P.2d 1084, 85 A.L.R. 412 (1932); Annotation, 85 A.L.R. 415 (1933).

The Court is of the opinion that where a defendant maliciously and without probable cause files or causes to be filed a cross claim or other related action, an action for malicious prosecution may be founded upon that claim. Slee v. Simpson, supra.

As regards the defendants' contention that no malicious prosecution action will lie in light of the disposition of the state court cross claim by settlement, it is often stated as a general rule that "... a termination of the suit by way of compromise and settlement is not sufficient to support the cause of action." Prosser, Torts, 4th Ed. at 854 (1971). See also Baird v. Aluminum Seal Company, 250 F.2d 595, 601-602 (3rd Cir. 1957); 52 Am.Jur.2d, "Malicious Prosecution," §§ 43, 211-212. However, the plaintiff contends that the settlement agreement entered into between the parties was so "one-sided" as to be ineffective to invoke the general rule. The plaintiff interprets the settlement agreement as dismissing defendants' $4,000,000 cross claim upon payment by the plaintiff of $24.75 court costs. With regard to other provisions in the settlement agreement, the plaintiff contends that these are totally unrelated to the dismissal of the cross claim and in effect constituted a separate understanding between the parties.

In interpreting the settlement agreement, as with any other written contract, a question of law is presented to the Court.

The agreement here in question provided for the dismissal of the cross claim, for the cancellation of certain subleases, for the payment of certain funds, for the closing of certain mines and for the vacating by the defendant of the leasehold within 30 days. Further, the plaintiff was to pay the court costs involved in the cross claim. These are all matters which the parties considered to their mutual advantage, as evidenced by their respective execution of the settlement agreement. Accordingly, it appears unto the Court that the agreement entered between the parties is a single agreement and was based upon adequate consideration. It further appears that it would operate to bar plaintiff's claim for malicious prosecution under Tennessee law.

Although, as interpreted by the Court, the defendants' motion for summary judgment is directed only to the malicious prosecution allegations in the complaint, a motion to dismiss for failure to allege a cause of action was previously before the Court. At the time that motion was before the Court, all argument upon the motion was directed to the malicious prosecution allegations in the complaint. The Court, finding an action for malicious prosecution to have been alleged, denied the motion to dismiss. In the light of the present motion for summary judgment, and upon further consideration of the motion to dismiss as it pertains to the remaining counts of the complaint, the Court is of the opinion that insofar as the second count purports to allege a cause of action for malicious prosecution, the defendants' motion for summary judgment should be sustained as to that count, also, for the reasons heretofore stated. Insofar as the second count purports to allege a cause of action for abuse of process, it fails to state facts sufficient to state a cause of action. The second count merely reasserts the plaintiff's malicious prosecution theory and adds thereto that the defendants "set...