City of Elkhart v. Middleton

• Decision Date: 21 April 1976
• Docket Number: No. 3--575A90,3--575A90
• Parties: CITY OF ELKHART, Defendant-Appellant, v. Walter F. MIDDLETON, II, Administrator of the Estate of Walter F. Middleton, Appellee, Wright Construction Corporation, Appellee-Plaintiff, Dorr-Oliver, Incorporated, Appellee-Defendant, and American Casualty Company of Reading, Pennsylvania, Appellee.
• Court: Indiana Appellate Court

Page 274

346 N.E.2d 274

CITY OF ELKHART, Defendant-Appellant, v. Walter F. MIDDLETON, II, Administrator of the Estate of Walter F. Middleton, Appellee, Wright Construction Corporation, Appellee-Plaintiff, Dorr-Oliver, Incorporated Appellee-Defendant, and American Casualty Company of Reading, Pennsylvania, Appellee.

No. 3--575A90.

Court of Appeals of Indiana, Third District.

April 21, 1976.

Opinion Superseded, see 356 N.E.2d 207.

John J. Lorber, Crumpacker, May, Levy & Searer, South Bend, Edward C. Stuart, City Atty., Elkhart, for appellant.

John E. Doran, Doran, Manion, Boynton & Kamm, Alexander Lysohir, Lysohir & Singer, Donald G. Blackmond, Jones, Obenchain, Johnson, Ford, Pankow & Link, South Bend, for appellees.

GARRARD, Judge.

Upon certification by the trial court as provided by Indiana Rules of Procedure Appellate Rule 4(B)(5), the parties have perfected this interlocutory appeal to challenge a decision denying the City of Ekhart's petition to add an additional party and file a third-party complaint. ¹

The record discloses that Wright Construction Corporation commenced this action against the city and Dorr-Oliver, Incorporated. With respect to the city, Wright alleged that it had contracted to construct additions to the city's sewage treatment system, that it had performed the contract and that it had not been paid. The statement of claim, however, in anticipation of the city's response, admitted that when the system was completed it did not function properly, but asserted that this was not the fault of Wright. The claim against Dorr-Oliver alleged that equipment furnished by it for use in the project had been misrepresented. ² In due course the city filed its answer together with a counterclaim against Wright. Two days later the city sought to file a third-party complaint against the estate of Walter F. Middleton, deceased. This complaint alleged that Middleton had been the engineer on the sewage treatment project and had prepared the plans and specifications which formed the basis for the contract with Wright. It further alleged that if it were established that the defects in the system were attributable to the plans and specifications prepared by Middleton, then the city was entitled to recover its damages from the estate, including any amount it was required to pay Wright on the contract. The estate objected to being made a party and asserted that another action was already pending between it and the city in a different court wherein the estate was claiming a balance due the decedent upon the contract for engineering services for this same project. After hearing arguments, the court denied the city's requests and the appeal was perfected.

The propriety of the court's action depends upon the proper interpretation of TR 14(A). The rule provides:

'(A) When defendant may bring in third party. A defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claim against him. The third-party plaintiff must file the third-party complaint with his original answer or by leave of court thereafter with good cause shown. The person served with the summons and the third-party complaint, hereinafter called the third-party defendant, as provided in Rules 12 and 13 may make.

(1) his defenses, cross-claims and counterclaims to the third-party plaintiff's claims,

(2) his defenses, counterclaims and cross-claims against any other defendants or third-party defendants,

(3) any defenses or claims which the third-party plaintiff has to the plaintiff's claim which are available to the third-party defendant against the plaintiff, and

(4) any defenses or claims which the third-party defendant has as against the plaintiff.

The plaintiff may assert any claim against the third-party defendant who thereupon may assert his defenses, counterclaims, and cross-claims, as provided in Rules 12 and 13. A third-party defendant may proceed under this rule against any person not a party to the action who is or may be liable to him for all or part of the claim made in the action against the third-party defendant.'

The comments of the Civil Code Study Commission indicate that the purpose of the rule is to substantially follow FRCP 14 and to broaden the permissible area of third-party practice beyond our early cases which limited it to parties who were 'necessary' in a very narrow sense. (For a statement of the old rule, see, e.g., Hunter v. First Nat'l. Bank (1909), 172 Ind. 62, 87 N.E. 734.)

No Indiana decisions have yet construed our rule. While it is not identical to the federal rule, it is so similar in its essential elements that we may look to the federal cases to aid our construction. ³

We first note that to be eligible for third-party treatment, the third-party plaintiff is restricted to claims asserting a third-party defendant is liable to the third-party plaintiff for all or part of the plaintiff's claim against him.

Here the claim of the city is that if it is liable to Wright on its construction contract, then the estate of the engineer is liable in tort for deficient plans and specifications. In such an action, payments the city was required to make to Wright on the construction contract would be proper elements of its damage. Federal decisions have accepted such a relationship as sufficient to satisfy the requirements of the rule, and we agree that this is its proper interpretation. See, Jones v. Waterman S.S. Corp. (C.A.3, 1946), 155 F.2d 992; Aetna Cas. & Sur. Co. v. Kochenour (D.C.Pa., 1968), 45 F.R.D. 248; Broden v. Bowles (D.C.D.C., 1964), 35 F.R.D. 13.

As the court stated in Jones, quoting with approval from Moore's Federal Practice:

"The general purpose of Rule 14 is to avoid two actions which should be tried together to save the time and cost of a reduplication of evidence, to obtain consistent results from identical or similar evidence, and to do away with the serious handicap to a defendant of a time difference between a judgment against him, and a judgment in his favor against the third-party defendant.' If Waterman will have a claim which it can assert against Reading because compelled to pay Jones money which, absent Reading's negligent in relation to Jones, it would not have to pay, Waterman may assert that claim in the suit at bar by way of its third-party complaint.' 155 F.2d 992, 997.

The city acknowledges that it failed to file its third-party complaint with its answer and was therefore required to obtain leave of court. However, it points out that the third-party complaint was filed only two days later and before any discovery had been undertaken. It urges that therefore no one was prejudiced by the delay, and it was error to deny leave.

While we agree that the city established good cause for the court to consider permitting the claim to be filed, we are forced to conclude that the city has fatally erred in concluding that the court was therefore required to permit the claim.

The entire history of the federal rule makes it clear that although it is determined that a proposed third-party claim is a proper subject for a third-party action, it remains within the sound discretion of the trial court to permit or deny maintenance of the claim as a third-party claim in the principal action. This is true whether or not the third-party complaint is filed at a time when leave of court is not required for its mere filing. ⁴ See, 6 Wright and Miller, Federal Practice and Procedure, § 1443, and numerous cases cited therein. Our Civil Code Study Commission Comments reflect the same interpretation:

'Consequently, allowance or disallowance of impleader remains largely a matter of sound judicial discretion, so that serious abuse must be made to appear from the record below.' 2 Harvey, Indiana Practice, p. 81.

Furthermore, although impleader was rarely available under our prior law, the few cases permitting it seem to recognize its discretionary character. See, Stewart v. Ludwick (1867), 29 Ind. 230.

Accordingly, we hold that the trial court is invested with sound judicial discretion in permitting litigation of a claim as a third-party complaint, and our review is limited to ascertaining whether a clear abuse of that discretion has been demonstrated. ⁵ Somportex Ltd. v. Philadelphia Chewing Gum Corp. (C.A.3, 1971), 453 F.2d 435, cert. den. 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479; Wetherbee v. Elgin J. & E. Ry. Co. (C.A.7, 1951), 191 F.2d 302, cert. den. 346 U.S. 867, 74 S.Ct. 104, 98 L.Ed. 378.

We cannot say that such an abuse appears in this case. Although litigation of the city's claim against the...