Title: Kelley Et Ux. v. Mallory Et Ux.

State: oregon

Issuer: Oregon Supreme Court

Document:

Affirmed December 15, 1954.
*692 John F. Conway, Portland, argued the cause and filed briefs for appellants.
James P. Powers, Portland, and George G. Van Natta, St. Helens, argued the cause for respondents. With them on the briefs were Joseph & Powers and D.C. Bond, Portland.
Before LATOURETTE, Chief Justice, and WARNER, BRAND and PERRY, Justices.
AFFIRMED.
WARNER, J.
This is a suit for an accounting. From a decree dismissing the plaintiffs' complaint with prejudice, they appeal.
On April 2, 1948, the respondents as the first parties and the appellants as the second parties entered into an agreement (hereinafter referred to as "the agreement"), the pertinent parts of which read as follows:
Notwithstanding that the respective wives of the plaintiff Kelley and the defendant Mallory were parties to the agreement, they rendered no services to the Mallory Chevrolet Company which are in any way involved in this litigation, nor, so far as the record here is concerned, did they participate in any phase of the management or matters giving rise to this suit. We will, therefore, hereafter refer to Kelley and Mallory as if they were the only persons executing the contract and the only persons concerned with subsequent transactions referred to hereinafter.
There were two suits between the parties, predicated upon the above contract, wherein Kelley as plaintiff sought an accounting with Mallory as defendant. The first suit was instituted on November 6, 1950, and resulted in a decree of dismissal. Later, we will refer to the first suit more fully. The instant or second suit was filed February 5, 1952.
In the second suit Kelley argues that the agreement creates the relationship of employer and employee and that he, as an employee of Mallory, is entitled to receive wages at the rate of $400 per month, plus one half of the profits of the company during the period of his employment.
On the other hand, Mallory asserts that the agreement was terminated on February 29, 1949, by reason of Kelley's failure to pay when due the sum of $4,000 *697 on the purchase price on or before January 1, 1949; that he thereafter offered to hire Kelley at a straight salary of $400 per month; that Kelley accepted the offer and was fully paid at that rate for the entire period of his employment ensuing after February 29, 1949.
Mallory also pleads as an estoppel the decree of dismissal in the first suit as being res judicata as to all matters pleaded by the plaintiff in the second suit.
1-3. It is this defense of res judicata which first challenges our interest. When we examine the complaints in the two suits, we are immediately struck by their similarity. Both are between the same parties and both plead the entire agreement of April 2, 1948, as the basis for plaintiff's claim for relief. In both suits the relief sought is for an accounting between Kelley and Mallory predicated upon the theory that the agreement created a fiduciary relationship between them. In the first suit, however, plaintiff pleads as a conclusion of law that the agreement creates a partnership in the business known as Mallory Chevrolet Company; but a conclusion of law is not issuable, requires no denial and does not aid the pleading. Almada v. Vandecar, 94 Or 515, 519, 185 P 907. It amounts to a nullity, and a pleader's construction of the legal character of the contract is not binding on the court. Young v. Evans, 104 Or 619, 624, 208 P 741; Dickenson v. Henderson, 90 Or 408, 411, 176 P 797. When the instrument relied upon is set out in full in the pleading, as in both the Kelley suits, it prevails over the allegations as to its legal effect. Young v. Evans, supra, at page 625.
However, a close reading of the complaint in the first suit gives rise to a doubt whether the plaintiff *698 did in fact believe a "partnership" to be the true legal relationship created between the defendant and himself under the agreement of April 1948. In the complaint in that suit we find plaintiff blowing both hot and cold, therein defining the agreement first as one of partnership and later as a contract of employment. Notwithstanding that in the forepart of that complaint he refers to the agreement as a partnership, he later in paragraph VII of that pleading alludes to himself as Mallory's employee, alleging that Mallory on September 9, 1950, "did wrongfully and arbitrarily discharge plaintiff * * * Kelley from his employment" and "prevented said plaintiff from carrying on his * * * employment under said agreement * * * causing said plaintiff to be deprived of and to lose the additional sum of $6,288.00 for loss of wages due said plaintiff under said agreement and employment". (Italics ours.)
We submit that under the pleading referred to, the question of whether or not plaintiff was entitled to an accounting under the agreement as a partner or an employee was before the court in the earlier suit. We stress this feature of the first complaint for the reason that plaintiff Kelley in the second suit predicates his right to an accounting solely on the theory of being an employee with a regular monthly wage, augmented periodically by a share in the profits.
The second or instant suit abandons the "partnership" theory and, while the second complaint does not attempt to define the particular legal relationship, if any, subsisting between the parties, we were told forthrightly at the time of the oral argument that Kelley now claims as an employee of Mallory under the agreement of April 1948.
*699 Because of its importance in the ultimate determination of the question of res judicata, we set out the provisions of the decree in the first case:
Defendant's plea of res judicata projects these questions: First, is the foregoing decree, predicated *700 upon the merits, final in character and prejudicial to another suit for the same cause? Second, is the cause of action in this suit the same cause of action or any part of the cause of action pleaded in the first suit?
The right to invoke res judicata in defense finds its authority in ORS 18.220 reading:
ORS 43.160 should also be considered in conjunction with ORS 18.220. It provides:
This court, speaking through Mr. Justice TOOZE, recently said in Wagner v. Savage, as Adm'r, 195 Or 128, 146-147, 244 P2d 161:
The rationale of res judicata as a bar is found in Winters v. Bisaillon, 153 Or 509, 515, 57 P2d 1095, 104 ALR 968, where it is said:
*702 4-7. To determine whether the decree in the first suit was one "without prejudice" as argued by plaintiff or "with prejudice" as contended by defendant, we must again refer to ORS 18.220. It will there be observed that that section authorizes two different kinds of decrees effecting dismissal of suits in equity. The first rests upon a motion made by either the plaintiff or the defendant, or by the court on its own motion, and when allowed results in a decree with "the effect to bar another suit for the same cause or any part thereof". Better practice dictates that when the motion is thus employed by the defendant, it should be made only after both parties have rested. Newman v. Stover, 187 Or 641, 643, 213 P2d 137. The legal effect of the defendant's motion is to submit the evidence for decision on its merits, as contemplated by ORS 18.220. Newman v. Stover, supra, at pages 644-645. Indeed, a decree dismissing a suit in equity with prejudice can only be made, as here, after a full hearing on the merits. Newman v. Stover, supra; Roles v. Roles Shingle Company, 147 Or 365, 372, 31 P2d 180. When defendant's motion for dismissal under the statute is seasonably presented and favorably acted upon, the resultant decree operates as res judicata. In re Estate of Anderson, 192 Or 441, 462, 235 P2d 869. When such a motion for dismissal is employed by a plaintiff with the intention to bar another suit, it is usually invoked, although not so limited in use, as a means of terminating the suit because of some settlement satisfactory to the plaintiff.
8. The second type of decree of dismissal authorized by ORS 18.220 is available to the plaintiff alone and then only upon plaintiff's motion "on account of a failure of proof on the part of the plaintiff". Wolke et al. v. Schmidt et al., 112 Or 99, 104, 228 P 921. *703 Such a motion when made by a plaintiff, if allowed by the court, will result in a "decree without prejudice to another suit by the plaintiff for the same cause or any part thereof." "Failure of proof", as used in ORS 18.220, does not mean a failure to convince the court by a preponderance of the evidence offered and considered but a failure to make a prima facie case. Crim v. Thompson, 112 Or 399, 412, 229 P 916; Haney v. Parkinson, 72 Or 249, 254, 143 P 926, Ann Cas 1916D 1035.
The foregoing review of ORS 18.220 is necessary to an understanding of our determination of the kind of decree entered in the first suit in response to the motion made by the defendant and thereafter to the similar motion by the plaintiff.
9. Ordinarily, the question of former adjudication is answered by a mere inspection of the decree, the presumption being that a dismissal in equity, without qualifying words, is a final decision on the merits. Swift v. McPherson, 232 US 51, 58 L ed 499, 34 SC 239. Also see Haney et al. v. Neace-Stark Co. et al., 109 Or 93, 125, 216 P 757, 219 P 190; 2 Freeman, Judgments 5th ed, 1602, § 760; 1 Van Fleet, Former Adjudication, 156, 167, §§ 37, 44.
When we inspect the decree in the first suit, we find the court indulged in a rather unusual procedure. It ruled upon both motions at the same time and with the same result, i.e., a dismissal of the suit. This could be accomplished and justified only by the fact, as recited in the decree, that both the motion of the plaintiff and the motion of the defendant were "similar". As we have before noted, under ORS 18.220 there is only one motion available to both parties which could be similar in content. That motion, if allowed, always *704 produces a decree of dismissal with prejudice. We have also noticed that neither the court nor the defendant can move for a decree dismissing a suit without prejudice. Therefore, the fact of similarity in the motions and the recitals of the decree indicating that the court had examined all the evidence necessarily warrants the conclusion that the dismissal in the first suit was with prejudice. It also evidences the court's determination "that the plaintiff is not entitled to the relief claimed or any part thereof". The relief claimed in the first suit, as in the second, was for an accounting between the parties.
10. The right, if any, to an accounting in both suits sprang from the same evidence, i.e., the agreement between the parties dated April 2, 1948. Plaintiff contends that this agreement gave rise to a fiduciary relationship warranting the interposition of equity for the purpose of an accounting. In 1 CJS 655, Accounting, § 19, we find: "Where a fiduciary or trust relationship exists between the parties * * * equity will assume jurisdiction to compel an accounting, and no partnership relation need exist. No particular words are necessary to create the relation * * *." Also see Templeton v. Hollinshead et al., 119 Or 620, 624, 250 P 747. Proof of "partnership" was, therefore, unnecessary and unimportant if the agreement appended as an exhibit gave rise, in fact, to a fiduciary relationship obligating the defendant to account to the plaintiff.
11. In response to the first question raised by defendant's plea of former adjudication, we hold that the decree in the earlier suit between the parties was a decision on the merits, final in character and a bar to another suit upon the same cause.
*705 12. The scope and inclusiveness of such a judgment rendered on the merits is stated in Crow v. Abraham, 86 Or 99, 105, 167 P 590, in these words:
This rests upon the authority of Mr. Justice Field's classic decision in Cromwell v. County of Sac, 94 US 351, 352, 24 L ed 195.
We now turn to a consideration of the second and related question projected by the plea of res judicata and examine plaintiff's complaint in the instant matter to determine if it reveals a suit for "the same cause or any part thereof."
The term "cause of action" as defined in Phillips, Code Pleading 1st ed, 27, § 30, has been approved by this court. See Hunter v. Cunning, 176 Or 250, 282, 154 P2d 562, 157 P2d 510; Elliott v. Mosgrove, 162 Or 507, 544, 91 P2d 852, 93 P2d 1070. Section 30 reads:
The "operative fact" upon which plaintiff rests his right to an accounting in both suits is the contract of April 1948. The "delict" or culpatory act arising from the "operative fact" is likewise the same in both suits, i.e., the defendant's failure to account to plaintiff for certain profits alleged to have arisen from defendant's operation of the Mallory Chevrolet Company.
Thus we find plaintiff employing the same vehicle in this suit, that is, the agreement of 1948, that he used in the first to carry him to the same destination or objective, namely, an accounting between the parties.
13. We therefore are of the opinion that the instant or second suit is for the same cause as pleaded in the first suit. Since we have concluded that the decree of dismissal in the first suit was a final judgment on the merits, it follows that it is res judicata and a bar to the cause here pleaded.
Affirmed.