Liberty Mut. Ins. Co. v. Vanderbush Sheet Metal Co.

Decision Date29 April 1981
Docket NumberCiv. A. No. 9-73775.
Citation512 F. Supp. 1159
PartiesLIBERTY MUTUAL INSURANCE COMPANY, a Foreign Corporation, Plaintiff, v. VANDERBUSH SHEET METAL COMPANY, a Michigan Corporation, Defendant.
CourtU.S. District Court — Western District of Michigan

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Paul Joseph Schwab, Davidson, Gotshall, Kohl, Secrest, Wardle, Lynch & Clark, Farmington Hills, Mich., for plaintiff.

David John Cooper, Daniel L. Garan, Garan, Lucow, Miller, Lehman, Seward & Cooper, Detroit, Mich., for defendant.

OPINION

FEIKENS, Chief Judge.

Defendant was a subcontractor on a construction project in Carleton, Michigan. One of defendant's employees, Robert Kertesz, was injured while working on the project. Kertesz recovered a judgment of $158,210 in a negligence action against Toledo Engineering Corporation, the prime contractor. Pursuant to an insurance policy, plaintiff satisfied the judgment entered against Toledo. In this case, plaintiff seeks indemnity under the terms of Toledo's subcontract with defendant. Both parties move for summary judgment.

I. Res Judicata

In the original action by Kertesz against Toledo, Toledo filed a third-party complaint against defendant for contractual indemnity. Defendant moved for summary judgment. Wayne County Circuit Judge Thomas Roumell granted the motion. The judgment, inscribed on a general, printed form, contained the handwritten notation that it was a "summary" judgment, "without prejudice". Neither party appealed. I find that this judgment does not bar plaintiff from bringing this claim.

Plaintiff's claim was subrogated for Toledo's upon payment of the original judgment to Kertesz. Thus, as Toledo's assignee, plaintiff is barred by the earlier judgment against Toledo on the third-party complaint exactly to the same extent as Toledo would be barred. See Knowlton v. City of Port Huron, 355 Mich. 448, 94 N.W.2d 824 (1959); Glanz & Killian Co. v. Garland Manufacturing Co., 53 Mich.App. 210, 218 N.W.2d 791 (1974); 46 Am.Jur.2d Judgments §§ 532-33, 51 (1969). On these facts, however, I conclude that Toledo would not be barred from renewing its indemnity claim.

Under Michigan law, summary judgment can be granted for a defendant only if the plaintiff has failed to "state a claim upon which relief can be granted." G.C.R. 117.2. Typically, the motion is accompanied by affidavits, and the plaintiff is given an opportunity to amend his complaint. G.C.R. 117.3. Such a judgment for the defendant bars the plaintiff from relitigating the same claim in another suit. E. g., Curry v. City of Detroit, 394 Mich. 327, 231 N.W.2d 57 (1975). Cf. G.C.R. 116.1 (grounds for accelerated judgment); G.C.R. 504.2 (grounds for dismissal). On the other hand, the phrase "without prejudice" generally denotes the absence of res judicata. E. g., Costello v. United States, 365 U.S. 265, 81 S.Ct. 534, 5 L.Ed.2d 551 (1961); LaBour v. Michigan National Bank, 335 Mich. 298, 55 N.W.2d 838 (1952); McIntyre v. McIntyre, 205 Mich. 496, 171 N.W. 393 (1919). Thus, a "summary" judgment "without prejudice" appears to be a contradiction in terms.

Neither plaintiff nor defendant has provided much assistance in the interpretation of this hybrid judgment. The briefs submitted on the motion before Judge Roumell presented arguments on the merits of the indemnity claim. Neither party has presented a transcript of the hearing. Plaintiff states that Judge Roumell intended that Toledo be free to proceed on the indemnity claim in a separate suit. Defendant has neither disputed this assertion nor offered an alternate version of what transpired at the hearing.

I see no reason why the situation would have compelled a judgment without prejudice. Defendant was not Toledo's insurer. Mich.Comp.Laws §§ 500.106, 500.3030 (Mich.Stat.Ann. §§ 24.1106, 24.13030 (Callaghan 1972)). A third-party complaint based on contractual indemnity is not precluded by the exclusivity of the Worker's Disability Compensation Act, Mich.Comp. Laws § 418.131 (Mich.Stat.Ann. § 17.237131 (Callaghan 1975)). Ready v. Clark Equipment Co., 91 Mich.App. 474, 283 N.W.2d 650 (1979) (per curiam).1 Third-party complaints are usually permitted in Michigan courts. See G.C.R. 204.1(1). Indeed, it could be argued that defendant was a necessary party. See G.C.R. 205.1. The state court's reasons for entering judgment are not clear.

Even if entry of the judgment "without prejudice" was a simple mistake, the Michigan Supreme Court would not apply the doctrine of res judicata. The effect to be given a mislabeled judgment depends upon the circumstances involved. When a party has appealed an order of dismissal, accelerated judgment or summary judgment, and it is clear from the record that a different type of order was appropriate, the Michigan Court of Appeals has generally treated the order as having been of the type which should have been entered. E. g., Baker v. City of Detroit, 73 Mich.App. 67, 250 N.W.2d 543 (1976); Dean v. Department of Natural Resources, 61 Mich.App. 669, 233 N.W.2d 135 (1975), rev'd on other grounds, 399 Mich. 84, 247 N.W.2d 876 (1976); Jamens v. Shelby Township, 41 Mich.App. 461, 200 N.W.2d 479 (1972). This is logical. The errors involved in these cases did not produce differences in res judicata. When both parties are present, and a case is otherwise ripe for appellate decision, no goal would be served by remanding it for a change in the caption on the order, followed by a second appeal.

If an order is erroneously entered "with" or "without" prejudice, the problem is more difficult. Each party has both a basis for reliance, and a reason for suspicion. When a circuit court erroneously dismissed a complaint "with prejudice" for lack of subject matter jurisdiction, the Michigan Supreme Court held that the plaintiff was not precluded from bringing a new action, even though he failed to appeal the first dismissal. Otherwise, he would have been precluded from litigating his claim in the appropriate forum, because he did not appeal a defective order directing him to do so. Laude v. Cossins, 334 Mich. 622, 55 N.W.2d 123 (1952).

I have found only one instance in which a party tried to attack a judgment entered "without prejudice" collaterally. The State Court of Appeals refused to permit it to do so, but did not explain its decision. Stewart v. Michigan Bell Telephone Co., 39 Mich.App. 360, 197 N.W.2d 465 (1972). Certainly, the reasons for permitting collateral attack are less compelling when the judgment was entered "without prejudice" than when it was entered "with prejudice". The latter phrase may be confusing when it is used in certain contexts, such as a dismissal for lack of subject matter jurisdiction or for failure to exhaust administrative remedies. The former phrase is less ambiguous. Thus, the failure to appeal may be more easily understood in the latter situation. Also, the consequences of prohibiting collateral attack are different. If a judgment "with prejudice" is not subject to collateral challenge, a party may lose his claim entirely because he did not appeal. If the judgment was "without prejudice", the only risk is that the same claim may be relitigated. Thus, I conclude that collateral attack of a judgment "without prejudice" should not be permitted, even if the defendant claims that the judgment was a mistake. See generally Johnson v. Haley, 357 Mich. 411, 98 N.W.2d 555 (1959); Meyering v. Russell, 85 Mich.App. 547, 272 N.W.2d 131 (1978).

This conclusion is supported by several cases in which the defendant appealed a judgment "without prejudice". There is some doubt whether such a judgment can be attacked even on appeal. Compare McDaniel v. Jackson, 78 Mich.App. 218, 259 N.W.2d 563 (1977) and Irwin v. Via, 2 Mich. App. 375, 139 N.W.2d 893 (1966) with Bettendorf v. F. W. Woolworth Co., 329 Mich. 409, 45 N.W.2d 343 (1951). But cf. Roberson v. Thomas, 13 Mich.App. 384, 164 N.W.2d 544 (1968) (suggesting that Bettendorf is consistent with Irwin). If it cannot be appealed, it certainly cannot be attacked collaterally. Furthermore, the reasons for applying res judicata are not compelling here. If the entry of judgment "without prejudice" was wrong, defendant has failed to look after his own interest in being protected from multiple suits by neglecting to appeal. See Rose v. Rose, 10 Mich.App. 233, 157 N.W.2d 16 (1968). The public interest in the conservation of judicial resources has already been undermined by the need to analyze procedural errors which should never have arisen. See Gose v. Monroe Auto Equipment Co., 409 Mich. 147, 294 N.W.2d 165 (1980).

II. Collateral Estoppel

Defendant next contends that ninety per cent of Kertesz's damages were found in the previous litigation to be attributable to Toledo. Defendant argues that plaintiff should be precluded by collateral estoppel from relitigating this fact. It points to two special questions which were answered by the jury in the earlier case:

If you find that the defendant, Toledo Engineering Company was negligent and that its negligence was a proximate cause of injury or damage to the plaintiff, what is the total amount of plaintiff's damages?
Answer of jury — $150,000.
If you find that plaintiff was also negligent and that his negligence was a proximate cause of his injury or damages, what percentage of the total combined negligence of the plaintiff and defendant, Toledo Engineering Company, is attributable to the defendant, Toledo Engineering Company?
Answer of jury — 90%.

Parties are precluded by collateral estoppel from contesting factual issues previously litigated and determined by a prior judgment. Howell v. Vito's Trucking and Excavating Co., 386 Mich. 37, 191 N.W.2d 313 (1971). I find that the issue of defendant's negligence was never presented to the jury. The verdict only determined that Toledo was negligent, and that its negligence was a proximate cause of Kertesz's injury. For the reasons outlined in Section VII, infr...

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