Buck v. Mueller

• Decision Date: 13 April 1960
• Citation: 351 P.2d 61,221 Or. 271
• Parties: Milton LeRoy BUCK, Appellant, v. Dora McLeod MUELLER, Respondent.
• Court: Oregon Supreme Court

Page 61

351 P.2d 61

221 Or. 271

Milton LeRoy BUCK, Appellant, v. Dora McLeod MUELLER, Respondent.

Supreme Court of Oregon, Department 1.

Argued and Submitted Feb. 3, 1960.

Decided April 13, 1960.

E.R. Robnett, Portland, argued the cause for appellant. With him on the brief were Seitz, Easley & Whipple, Portland.

George P. Winslow and George P. Winslow, Jr., Tillamook, argued the cause and filed a brief for respondent.

Before McALLISTER, C. J., and PERRY, O'CONNELL and HARRIS, JJ.

O'CONNELL, Justice.

The plaintiff brings this action against the defendant lessor to recover damages for an alleged breach of a covenant in a written lease. Plaintiff is the assignee of the lessee.

The parties are before us for the second time. The first appeal, also brought by the present plaintiff-appellant, was made from an order sustaining defendant's demurrer to plaintiff's complaint. We held that the trial court erred and we remanded the cause directing the court to overrule the demurrer. Buck v. Mueller, 1956, 207 Or. 169, 293 P.2d 736.

The cause was then tried to a jury which resulted in a verdict for the plaintiff. Defendant then moved for a new trial which the lower court granted on the ground that error was committed in failing properly to instruct the jury on the measure of damages for the alleged breach of the lease. The plaintiff appealed from the order granting a new trial.

The complaint is set out in Buck v. Mueller, supra. It alleges the execution of the lease, the assignment to the plaintiff, the terms of the lease and the breach of the covenant to renew the lease.

It is alleged that the plaintiff made repeated offers to renegotiate the rental for the renewal period, including the offer to submit the determination of the rental to arbitration as provided for in the lease, but that defendant refused to accept these offers. It is then alleged that on or about April 10, 1953, defendant brought suit in the circuit court for the county of Tillamook, to recover possession of the premises in question and to recover damages from the plaintiff for his alleged wrongful possession after the expiration of the initial term of the lease, and that as a result of such suit plaintiff was forced to surrender possession to the defendant on or about April 20, 1953.

Damages in the present action are claimed in the amount of $3,500 for loss of good will of plaintiff's restaurant and tavern business which he had operated on the leasehold premises, and in the further amount of $12,000 for loss of profits.

In the action brought by the present defendant on April 10, 1953, to recover possession of the premises and damages for wrongfully withholding them, the plaintiff failed to make an appearance and a default judgment was entered for the present defendant on May 12, 1953 awarding her possession and the sum of $175 per month for the use of the leasehold by plaintiff during the period he held over.

The defendant in the case at bar first contends that the plaintiff is barred by the judgment entered in the ejectment action. It is argued that the issue in that action was the parties' right to possession and since the plaintiff's right to recover on the covenant to renew must rest upon a determination of his right to possession, the fundamental issue has already been adjudicated and constitutes a bar under the doctrine of res judicata, or more accurately, the doctrine of estoppel by judgment. That doctrine, in its applicability to a plaintiff who was a defendant in a former action, makes the judgment in that action conclusive as to all matters which he interposed or could have interposed as a defense. Strickland v. Calancorporation, Ltd., 1957, 156 Cal.App.2d 488, 319 P.2d 737; Hentig v. Redden, 1891, 46 Kan. 231, 26 P. 701; Pankonin v. Gorder, 1914, 97 Neb. 337, 149 N.W. 811; Reich v. Cochran, 1896, 151 N.Y. 122, 45 N.E. 367, 37 L.R.A. 805; 151 N.Y. 669, 46 N.E. 1151; Hill v. Cooper, 1880, 8 Or. 254; Restatement, Judgments, § 41 et seq.; Developments in the Law--Res Judicata, 65 Harv.L.Rev. 818 (1952). The doctrine applies to judgments by default. Taylor v. Sledge, 1903, 110 Tenn. 263, 75 S.W. 1074; Annotation: Doctrine of Res Judicata as Applied to Judgments by Default, 128 A.L.R. 472 (1940). But in the absence of a compulsory counterclaim statute, the defendant in the former action need not set up a counterclaim and his failure to do so does not preclude him from bringing a separate action against the plaintiff on the separate cause of action which was available to him as a counterclaim. Restatement, Judgments, § 58; Wright, Estoppel by Rule--The Compulsory Counterclaim Under Modern Pleading, 39 Iowa L.Rev. 255 (1953); Annotation: Prior Action in Which Claim Might Have Been Asserted by Counterclaim, Set Off, or Cross Petition, as Barring or Abating Subsequent Independent Action Thereon, 8 A.L.R. 694 (1920). This is clearly explained in Stillwell v. Hill, 1918, 87 Or. 112, at pages 117, 118, 169 P. 1174, at page 1176, where the court said:

'In the former action the defendants Stillwell & Proffitt, could have set up their counterclaim for damages and had the same adjudicated therein, but they did not do so. They were not compelled to take such course or be precluded from bringing an independent action for the same. They had an election to use such cross-demand as a defense by way of recoupment or to bring a separate action upon it. The omission to take advantage of matter of counterclaim as a defense is no bar to a cross or separate action upon it, so that though the cross-claim be admissible by way of defense the defendant has an option to avail himself of it in that form or to sue upon it in another action.'

The same facts may constitute both a ground for a defense and a ground for a counterclaim. The failure to assert such facts, either as a defense or as a counterclaim, does not preclude defendant from thereafter bringing a separate action based upon those facts. Leslie v. Brown Brothers Incorporation, 1929, 208 Cal. 606, 283 P. 936; Reichert v. McCool, 1929, 92 Ind.App. 406, 169 N.E. 86, 170 N.E. 84; Restatement, Judgments, § 58 comment b; Annotation: Judgment in Action in Which Matter was Asserted as a Defense Without Seeking Affirmative Relief as Precluding use of Such Matter as Basis of an Independent Action, Offset or Counterclaim, 83 A.L.R. 642 (1933).

In the ejectment action brought against Buck he could have set up as a defense his right to possession based upon the covenant to renew. He also could have counterclaimed for damages resulting from the breach of the covenant. He elected to do neither. The failure to assert his affirmative claim in the former action does not, however, preclude him from asserting it in the present action. Stillwell v. Hill, supra; cf. Jacobs v. Jacobs, 1919, 92 Or. 255, 180 P. 515. Contra: Sobey v. Beiler, 1869, 28 Iowa 323; But cf., Denton v. Young, 1922, 154 Ark. 538, 242 S.W. 801.

We reluctantly reach the conclusion that plaintiff is not estopped by the previous judgment. We do so reluctantly because the claim now presented by plaintiff, although pleaded in terms of a breach of covenant, is essentially an assertion of a right resting upon a deprivation of possession, and that asserted right could readily have been raised by plaintiff and disposed of in the previous action. It was just such situations as this which prompted the adoption of compulsory counterclaim statutes in some states. See Wright, op. cit. supra. But we do not have such legislation and until we do the rule we have announced must be applied.

We turn to a consideration of plaintiff's only assignment of error, which asserts that the trial court erred in granting a new trial. The grounds for the order granting a new trial were that the court erred in giving some of plaintiff's requested instructions as to the measure of damages and in failing to give defendant's requested instructions on that subject.

The pertinent part of defendant's requested instructions as to general damages was as follows:

'Plaintiff, by his complaint asks $2500.00 as general damages. I now instruct you that under the pleadings and evidence of this case, even though you find that plaintiff is entitled to recover, plaintiff is not entitled to recover, as general damages, more than nominal damages. * * *'

The instructions given were as follows:

'If you find that the plaintiff is entitled to a verdict at your hands, then it will be your duty to assess plaintiff's damages. In awarding damages for breach of a lease agreement, the aim and purpose of the law is to put the injured party in as good a position as he would have been in had the contract been performed. The injured party is allowed to recover those damages which are the direct natural and proximate result of the act of the defendant in wrongfully breaching the lease agreement. This includes all damages which flow from the breach in the natural course of events, or which may reasonably be presumed to have been within the contemplation of the parties at the time the contract was entered into.

'Plaintiff claims general damages, in the amount of $2,500, based upon defendant's refusal to submit the renegotiation of the rental to arbitration and ousting plaintiff from possession of said premises.

'You are instructed that general damages are implied in law and need not be specially pleaded or proved, although, if none are proved, only nominal damages can be awarded.

'Nominal damages means damage in name only, some small or trivial sum such as one dollar for the violation of some legal right without substantial injury.'

These latter instructions on general damages were regarded by the trial judge as inaccurate for the reason that they offered no specific measure or yardstick by which the jury could arrive at the damages suffered by the plaintiff and that, therefore, the jury was allowed to reach its verdict by speculation and conjecture.

We agree with the trial judge that the instructions...