Rennie v. Freeway Transport

• Decision Date: 30 December 1982
• Citation: 294 Or. 319,656 P.2d 919
• Parties: Richard RENNIE, as administrator of the Estate of Eugene David Rennie, and in his own individual capacity, Respondent on Review, v. FREEWAY TRANSPORT, Leon Spada, Ernest Spada, and Sam Terese, Petitioners on Review. CA 19045; SC 28446. . *
• Court: Oregon Supreme Court

Page 919

656 P.2d 919

294 Or. 319

Richard RENNIE, as administrator of the Estate of Eugene David Rennie, and in his own individual capacity Respondent on Review, v. FREEWAY TRANSPORT, Leon Spada, Ernest Spada, and Sam Terese Petitioners on Review.

CA 19045; SC 28446.

Supreme Court of Oregon In banc. ^*

Argued and Submitted June 8, 1982.

Decided Dec. 30, 1982.

Marvin S. Nepom, Portland, argued the cause and filed the petition and briefs for petitioners on review.

Magar E. Magar, Portland, filed the briefs for respondent on review.

ROBERTS, Justice.

This case presents an issue identical to the one decided this day in Rennie v. Pozzi, 294 Or. 334, 656 P.2d 934 (1982). For the reasons set forth in that opinion, we also hold here that the trial court erred in granting defendants' motion for summary judgment based upon the statute of limitations. By operation of ORS 114.255, plaintiff's appointment as personal representative related back to the commencement of this action making it valid and timely.

Defendants here, however, advance a second and alternative ground for upholding the dismissal of plaintiff's action against them. They contend that it is barred due to res judicata because of a prior federal court judgment in their favor based on the same factual transaction.

The facts relevant to this contention are as follows. Immediately after being reappointed personal representative the plaintiff commenced an action in the federal district court against the same defendants named herein; the complaint alleged that they had violated federal securities laws and regulations in the course of repurchasing the Freeway Transport stock from him. ¹ Soon thereafter, plaintiff commenced this action in Multnomah County Circuit Court alleging a cause of action in common law fraud. ² Although the latter action is based on the same set of facts as the former and the named defendants in both actions are the same, plaintiff made no attempt to join the state law claim to the pending federal court action.

Defendants then filed a motion to dismiss or abate this action which stated:

"Defendants demur to plaintiff's complaint and alternatively pray that said complaint be abated on the ground and for the reason that there is another action pending between the same parties for the same cause."

See ORCP 21 A. (3). Plaintiff opposed the motion contending that, although the relevant facts were the same, the two actions were legally distinct. He further argued that he preferred the two actions to be tried separately and noted that "[i]f defendants want to take the initiative in invoking the pendent jurisdiction of the Federal Court they are, of course, free to do so." The trial court denied defendants' motion to dismiss but it did allow their plea in abatement; it thereupon ordered this action stayed pending resolution of the federal court proceedings.

Before the federal court the defendants, besides defending on the merits, argued that a "jurisdictional" prerequisite to relief under the federal laws was lacking, namely, utilization by the defendants of an instrumentality of interstate commerce. That issue was controverted at trial and ultimately was submitted to the jury, along with the substantive issues. The jury returned a general verdict for defendants; however, given the nature of the verdict it cannot be determined whether the verdict was based on the "jurisdictional" question or on the merits. Plaintiff did not appeal that decision. ³

After entry of judgment in the federal court action, defendants by answer and demurrer in this case raised the defense that the action here was barred by res judicata. In the subsequent summary judgment motion on that ground they contended that the federal court judgment was a final adjudication binding on plaintiff with regard to the stock repurchase transaction and that it consequently barred further litigation based on the transaction. The trial court denied the motion and defendants cited this ruling as error in their cross-appeal. The Court of Appeals affirmed that aspect of the case; it reasoned that since plaintiff did not have a right to have his state law claim joined in his federal court action res judicata would not result from his failure to do so. Rennie v. Freeway Transport, 55 Or.App. 1008, 1013, 640 P.2d 704 (1982).

We start with the general rule, well established in this state, that a plaintiff who has prosecuted one action against a defendant through to a final judgment binding on the parties is barred on res judicata grounds from prosecuting another action against the same defendant where the claim in the second action is one which is based on the same factual transaction that was at issue in the first, seeks a remedy additional or alternative to the one sought earlier, and is of such a nature as could have been joined in the first action. Troutman v. Erlandson, 287 Or. 187, 201-207, 598 P.2d 1211 (1979); Dean v. Exotic Veneers, Inc., 271 Or. 188, 531 P.2d 266 (1975). In Dean we held that an unsuccessful action for breach of an express contract barred on res judicata grounds a subsequent suit for quantum meruit against the same defendant based on the same transaction. In explanation of this holding we stated:

" * * * To the extent that a given state of facts is susceptible to alternative interpretation and analysis, plaintiff must seek and exhaust all alternative grounds or theories for recovery in one action.

"Plaintiff claims to have rendered only one set of services. Nothing prevented him from presenting his claim against [the defendant] on the alternative theories of express contract and quantum meruit and from having them both adjudicated at the same time. Having once litigated his claim against defendant, he should be foreclosed from further litigation on all grounds or theories of recovery which could have been litigated in the first instance. The public policy to be served by the doctrine of res judicata prevents him from having two bites at the apple." 271 Or. at 194, 531 P.2d 266.

This type of res judicata, often denominated "claim preclusion," ⁴ is broader than traditional notions of res judicata in that it bars prosecution of claims which have never in fact been litigated between the parties. The prior judgment is deemed to have effected a merger or bar of all claims against the defendant available to the plaintiff arising from the transaction that was at issue irrespective of whether plaintiff had actually asserted them in that action. See Restatement (Second) of Judgments §§ 17, 24-25 (1982). As the Restatement notes, claim preclusion is based upon, and limited by, the ability of a plaintiff under modern liberalized joinder-of-claims rules to present all of his or her claims in one proceeding:

"As the result of a single transaction or a connected series of transactions giving rise to a unitary claim, the plaintiff may be entitled to a number of alternative or cumulative remedies or forms of relief against the defendant. In a modern system of procedure it is ordinarily open to the plaintiff to pursue in one action all the possible remedies whether or not consistent, whether alternative or cumulative, and whether of the types historically called legal or equitable.

"Therefore, it is fair to hold that after judgment for or against the plaintiff, the claim is ordinarily exhausted so that the plaintiff is precluded from seeking any other remedies deriving from the same grouping of facts.

"Preclusion is narrower when a procedural system in fact does not permit the plaintiff to claim all possible remedies in one action." Id., at § 25, com. f, p. 214.

The stated general rule is clearly applicable here. The present action involves the same parties and factual transaction as the prior federal court action and seeks remedies which are additional or alternative to those that were sought there. Moreover, plaintiff might have brought his state and federal claims together, through pendent jurisdiction, in the federal district court. See Annot., 5 A.L.R.3d 1040, 1115 [§ 26] (1966). Nonetheless, plaintiff advances three separate arguments in support of his contention that this action should not be barred: (1) Since the prior action was prosecuted in federal court, he had no absolute right to have the state law claims joined there; (2) defendants had acquiesced in his decision to split and separately prosecute his state and federal claims; and (3) in any event, since the verdict in the prior federal court case could have been based on the "jurisdictional" issue, it should not be viewed as a bar here. We will discuss these arguments in turn.

1. Split jurisdiction problem. The Court of Appeals concluded that the federal court judgment was not res judicata on plaintiff's state law claim because, although that court might have exercised pendent jurisdiction over the claim, plaintiff had no absolute right to have it adjudicated there: ⁵

"It is far from clear whether the federal court would have decided the common law cause of action, because pendant jurisdiction is considered, in most cases, to be discretionary. There are cases which say that, in certain circumstances, federal courts can be guilty of an abuse of discretion in failing to determine a state issue, but there is no unanimity concerning what those circumstances are. There are numerous cases which say that pendant jurisdiction should not be applied where the federal question was decided in a summary manner. [Citations omitted.] The federal issue in this case was not disposed of in a summary manner. However, because of the lack of a uniform application of the rules of pendant jurisdiction and because the plaintiff had no right to have his state claim adjudicated in federal court, the better rule would seem to be not to apply res judicata." 55 Or.App. at 1013, 640 P.2d 704.

The declared "better rule" is, however, contrary to the weight of authority. The Restatement, for example, takes the position...