Enquip, Inc. v. Smith-McDonald Corp., SMITH-M

Decision Date28 July 1981
Docket NumberSMITH-M,Nos. 80-1633,80-1822,s. 80-1633
Citation655 F.2d 115
Parties9 Fed. R. Evid. Serv. 652 ENQUIP, INC. and Tank Service, Inc., Plaintiffs, v.cDONALD CORP., Defendant, Third-Party Plaintiff and Counter-Defendant-Appellee, v. GARDNER CONSTRUCTION CO., Third-Party Defendant and Third-Party Plaintiff-Appellant. ENQUIP, INC. and Tank Service, Inc., Plaintiffs-Appellees, v.cDONALD CORP., Defendant, Third-Party Plaintiff and Counter-Defendant-Appellant, v. GARDNER CONSTRUCTION CO., Third-Party Defendant and Third-Party Plaintiff-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Patrick J. Mazza, Chicago, Ill., for third party defendant-appellant.

Christopher J. McElroy, Jenner & Block, Chicago, Ill., for plaintiff-appellee.

Martha A. Mills, Chicago, Ill., for third party plaintiff-appellee.

Before FAIRCHILD, PELL and SPRECHER, Circuit Judges.

PELL, Circuit Judge.

These appeals are from a judgment in an action brought to recover the contract price for oil-water separator tanks manufactured by the plaintiff-appellee, Enquip, Inc. (Enquip), sold to its dealer, the defendant third-party plaintiff-appellee, Smith-McDonald Corp. (Smith-McDonald), and sold by Smith-McDonald in turn to the third-party defendant-appellant, Gardner Construction Co. (Gardner), a general contractor who had ordered the tanks for installation at a state tollway oasis. The major issue presented is whether the trial court erred in entering partial summary judgment against Gardner on the basis of his pleading in a related state court case. 1 The appeals are before the court following grants of partial summary judgment entered by the trial court pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

Gardner contends that the trial court erred in its ruling on the issue of liability when it considered as an admission a statement made in a verified complaint which Gardner had filed in the Illinois courts against the Illinois State Toll Highway Authority (ISTHA), the ultimate purchaser of the tanks. The defendant asserts that it was error for the district court to have relied on the state court pleading because it was an unsworn document and not within the meaning of Rule 56(e), and further that the allegations of the complaint were consistent with Gardner's alternative and hypothetical pleadings, and thus did not constitute an admission.

I.

The factual background giving rise to this dispute is well laid out in the memorandum opinion of the district court. To review briefly, the general contractor Gardner contracted with ISTHA to install oil-water separator tanks as part of the renovation of a tollway oasis. Gardner then contracted with the subcontractor Smith-McDonald for sale and delivery of eight such tanks. Smith-McDonald in turn placed an order for the tanks with Enquip, the manufacturer. ISTHA, after initially appearing to have orally approved the Enquip tanks as conforming to specifications, rejected them after they arrived at the site as nonconforming and unsatisfactory on the recommendation of the project architect-engineer.

Enquip then filed suit against Smith-McDonald for breach of contract based on failure to pay for the tanks. Smith-McDonald filed a third-party complaint against Gardner for the contract price, alleging Gardner's liability over to Enquip. Gardner counterclaimed, alleging that the tanks did not meet specifications, and also filed a third-party complaint against ISTHA for failure to accept the separators. Smith-McDonald then filed a third-party complaint against Enquip, asserting that if Smith-McDonald was held liable to Gardner on the basis of the failure of the tanks to meet specifications, Enquip would be liable over to Smith-McDonald.

Meanwhile, in the Illinois courts, Gardner filed an action against ISTHA, and Pace Associates, Inc. (Pace), the architect-engineering firm which recommended that ISTHA reject the tanks. That suit claimed that the tanks met specifications. Pace filed a verified answer denying that the tanks met the specifications.

On the basis of Gardner's pleading in the state court action, Smith-McDonald filed a motion for summary judgment in the district court as to liability against Gardner. In support of its motion, Smith-McDonald cited Gardner's pleading in the state case, which had asserted that the tanks were in conformity with the specifications. Smith-McDonald claimed that this constituted an admission on the only factual issue in dispute in the case, and that summary judgment was therefore appropriate. Gardner submitted a motion in opposition to the motion for summary judgment, in the form of a memorandum with exhibits attached. The exhibits were a portion of the Gardner-ISTHA contract establishing Pace's approval as the criterion of conformity, a letter from Pace to ISTHA rejecting the tanks, and a letter from ISTHA to Gardner rejecting the tanks.

The district court granted the motion for summary judgment, noting that, "it is clear that the question of liability is dependent on the resolution of one factual dispute: whether the eight API Oil-Water separators were in compliance with the specifications." The court went on to hold that the state court complaint was cognizable as an admission by the district court on a motion for summary judgment. The judge then turned to Gardner's objection to the motion and held that since it was neither sworn nor in affidavit form, it did not meet the requirements of Fed.R.Civ.P. 56(e), and could not be relied upon to establish the existence of an issue of material fact. He concluded: "Gardner, therefore, having failed to respond with facts supporting its opposition to the motion, summary relief is appropriate." He then ruled that this also determined that Smith-McDonald was liable over to Enquip, and granted Enquip summary judgment against Smith-McDonald.

Shortly thereafter Gardner filed a motion to reconsider. Attached to it were several exhibits: Pace's verified answer to Gardner's state court complaint, which denied that the separators met the specifications; a copy of Gardner's amended complaint which pleaded in the alternative a third-party allegation that if the tanks did not meet the specifications that Smith-McDonald was liable to Gardner for breach of contract; the Gardner-ISTHA contract and purchase order; the tank specifications; letters from Pace and ISTHA rejecting the tanks; and an affidavit of Gardner's attorney which did not purport to testify to the truth or falsity of the matters in the exhibits, but did aver that the contentions and allegations of the exhibits were those of the parties to the state case. The motion to reconsider was denied without opinion. Gardner appeals to this court from the grant of summary judgment.

II.

We must reject Gardner's contention that it was error for the district court to consider as an admission the pleading in the state court case. It is well established in this circuit and elsewhere that such matter from one proceeding is indeed admissible and cognizable as an admission in another. See, e. g., United States for and on behalf of Cannon Air Corp. v. National Homes Construction Corp., 581 F.2d 157, 163 (8th Cir. 1978); Waldron v. Hardwick, 406 F.2d 86, 90 (7th Cir. 1969); Frank R. Jellef, Inc. v. Braden, 233 F.2d 671, 675-77 (D.C.Cir.1956). Furthermore, the trial court properly ruled that while such evidence was admissible it was not a judicial admission, and thus not binding or conclusive. State Farm Mutual Automobile Insurance Co. v. Worthington, 405 F.2d...

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