S. H. Nevers Corp. v. Husky Hydraulics, Inc.

• Decision Date: 30 November 1979
• Parties: 27 UCC Rep.Serv. 1271 The S. H. NEVERS CORPORATION v. HUSKY HYDRAULICS, INC.
• Court: Maine Supreme Court

Page 676

408 A.2d 676

27 UCC Rep.Serv. 1271

The S. H. NEVERS CORPORATION v. HUSKY HYDRAULICS, INC.

Supreme Judicial Court of Maine.

Nov. 30, 1979.

Bither & Goodwin by Thomas L. Goodwin (orally), Houlton, for plaintiff.

Barnes & Sylvester by Torrey A. Sylvester (orally), Houlton, for defendant.

Before McKUSICK, C. J., and POMEROY, WERNICK, ARCHIBALD, GODFREY, NICHOLS and GLASSMAN, JJ.

GLASSMAN, Justice.

Husky Hydraulics, Inc. (Husky) appeals from a judgment of the Superior Court, Aroostook County, in the amount of $17,000.00, entered following a trial in which the jury found Husky had breached an express warranty in the sale of a defective logging machine manufactured by the appellant. We affirm the judgment.

This dispute involves two separate actions arising from the sale of a heel boom crane, a machine designed to facilitate the loading of timber, which proved defective when used by the appellee, The S. H. Nevers Corporation (Nevers), in its timber harvesting business. The machine had been manufactured by the appellant Husky and sold to Nevers on July 24, 1973 by Canaan Equipment Corporation (Canaan), an authorized distributor. Because of the procedural complexity within which the issues on this appeal arise, it is necessary to review in some detail the procedural chronology of the two actions which resulted from this dispute.

On April 14, 1975, Nevers brought an action in the Superior Court, Aroostook County, bearing docket number CV-75-99, charging Canaan with misrepresentation and breach of express and implied warranties. On April 17, 1975, Canaan answered and filed a counterclaim against Nevers and a third-party complaint against Husky. The counterclaim alleged that Nevers owed Canaan $16,093.87 for materials furnished to Nevers and for labor rendered by Canaan in connection with unsuccessful attempts to repair the log loader. In its third-party complaint, Canaan asserted that Husky, as the manufacturer, was solely responsible for any damages caused by the defective unit. ¹ In addition, Canaan claimed that Husky had expressly and impliedly warranted the merchantability of the log loader and, in the event Canaan did not prevail on its counterclaim, Husky should be ordered to pay the $16,093.87 to Canaan for its expenses in attempting to repair the unit. On June 18, 1975, Husky answered the third-party complaint and filed a counterclaim against Canaan. Husky alleged that any sum due Nevers was the result of Canaan's negligent failure or intentional refusal to follow the instructions and recommendations of Husky in the maintenance, operation and repair of the log loader.

During the pendency of this action, Canaan ceased doing business as a retailer of heavy equipment and, deciding not to pursue the action further, directed its counsel to move for leave to withdraw. This motion was granted and, in an order entered on February 15, 1977, Canaan was declared in default for failing to file a pre-trial memorandum and for failing to appear at the pre-trial conference.

On May 18, 1977, Nevers filed a motion seeking appointment of a referee to assess damages and establish dismissal of the counterclaim. This motion was granted and an order appointing a referee was entered on June 20, 1977. The report of the referee was filed on August 31, 1977, finding that Canaan was indebted to Nevers in the amount of $11,500.00 plus costs. No judgment has ever been entered.

On May 19, 1977, Nevers moved to amend its complaint to join Husky as a party defendant. On June 13, 1977, prior to entry of the order appointing the referee and in apparent disregard of M.R.Civ.P. 14(a), the presiding Justice in the Superior Court denied the motion to amend "without prejudicing the right of plaintiff to institute suit against Husky Hydraulics, Inc."

On June 23, 1977, Nevers commenced a separate action in the Superior Court, Aroostook County, bearing docket number CV-77-216, against Husky, seeking damages for an alleged breach of the implied warranty of fitness. The court later permitted Nevers to amend its complaint to allege a count for breach of express warranty. In its answer, Husky asserted res judicata as a defense. Husky also filed a motion to dismiss the complaint on the ground of res judicata, which motion was denied without prejudice. In its pre-trial memorandum, Husky noted its defenses of res judicata and collateral estoppel. In a pre-trial order, the Justice of the Superior Court made the following notation: "Affirmative defenses of res judicata and collateral estoppel submitted to the court by agreement and upon request to take judicial notice of CV-75-99. Defenses overruled. Rule 12(b)(6) defenses denied." Following a jury trial, a verdict was returned for Nevers and against Husky in the amount of $17,000.00 for breach of express warranty and judgment was entered upon that verdict. It is from this judgment that Husky appeals.

Husky first contends that the second action is barred by the doctrine of res judicata or collateral estoppel. Where there has been a valid final judgment in a prior action, the doctrine of res judicata bars relitigation of the same claim by the parties or their privies. The scope of this preclusion extends to all matters which were, or might have been, litigated in the prior action. Kradoska v. Kipp, Me., 397 A.2d 562, 565 (1979); Bray v. Spencer, 146 Me. 416, 418, 82 A.2d 794, 795 (1951). Serving the same interest of judicial economy, the related doctrine of collateral estoppel provides that the determination of an essential fact or issue that has been actually litigated and resolved by a valid final judgment in a prior action is conclusive on that fact or issue in subsequent litigation between the parties or their privies. Hossler v. Barry, Me., 403 A.2d 762, 767 (1979); Chandler v. Dubey, Me., 378 A.2d 1096, 1098 (1977).

The application of res judicata or collateral estoppel requires as a predicate a valid final judgment in the prior action. Hossler v. Barry, supra, 403 A.2d at 767; Kradoska v. Kipp, supra, 397 A.2d at 565. Although both parties to this appeal assert that a final judgment was entered in CV-75-99, a review of the docket in that case filed as a part of the record on this appeal reveals that they are in error. In that action a default was entered against Canaan and pursuant to an order of reference the referee assessed Nevers' damages and filed his report. No judgment was ever entered on the referee's report. For there to be a final judgment as to Nevers' claim against Canaan, a judgment must in fact be entered. Dufour v. Silsby, Me., 405 A.2d 737, 738 (1979); Adams v. Alley, Me., 308 A.2d 568, 571 (1973). Moreover, an entry of judgment on Nevers' claim alone would not be a final judgment since no judgments were ever entered on the two counterclaims and the third-party complaint. See M.R.Civ.P. 54(b).

Husky also contends that Nevers' claim against it is barred by that portion of M.R.Civ.P. 14(a) which requires a plaintiff to assert against a third-party defendant any claims arising out of the transaction or occurrence that is the subject matter of the basic action. The specific language of Rule 14(a) to which Husky refers provides:

The plaintiff may assert any claim against the third-party defendant arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff, And his failure to do so shall have the effect of the failure to state a claim in a pleading under Rule 13(a). (Emphasis added).

Husky's argument is that Nevers' failure to assert its claim against Husky in the original action barred the second action.

We have not before had occasion to construe the provision of Rule 14(a) emphasized in the preceding quotation. It is not found in the federal rule on third-party practice. See F.R.Civ.P. 14(a). According to the Reporter's Notes to our Rule 14(a), the purpose of the claim preclusion is to assure fairness to the third-party defendant by requiring "the plaintiff to clean up in a single action the entire controversy arising out of a single transaction or occurrence." To evaluate Husky's contention, we must examine the procedure by which a plaintiff may assert his claim against a third-party defendant.

It has been suggested that under the federal rule a plaintiff may assert his claim either by filing a new pleading or by amending his original complaint. See 6 C. Wright & A. Miller, Federal Practice and Procedure § 1459 (1971). We conclude that under the Maine rule a plaintiff may not assert his claim against a third-party defendant by a new and separate pleading; we reach this conclusion because Rule 7(a) enumerating the pleadings which may be filed in a civil action does not enumerate any pleading that could be used to assert the plaintiff's claim. The rule concludes with the following language: "No other pleading shall be allowed, except that the court may order a reply to an answer or a third-party answer." M.R.Civ.P. 7(a). (Emphasis added). Therefore, the plaintiff may bring his claim against the third-party defendant only by amendment to his original complaint. The method of amendment and the time within which the amendment may be made is established by Rule 15(a). ²Ordinarily the plaintiff must seek leave of court for the amendment. The court should freely grant leave to make such an amendment because a final judgment would bar the plaintiff's unasserted claim.

The application of the principles enunciated above would foreclose Nevers' independent action against Husky were it not for the peculiar circumstances of this case. It is axiomatic that the rules are to be interpreted "to secure the just, speedy and inexpensive determination of every action." M.R.Civ.P. 1. Nevers did attempt to assert its claim against Husky in the first action by moving to amend its complaint. With apparently no recognition of the existence of the bar of Rule 14(a) by either court or counsel, the court denied the ...