Title: Davis Cookie Co., Inc. v. Wasley

State: pennsylvania

Issuer: Pennsylvania Supreme Court

Document:

389 Pa. Superior Ct. 112 (1989) 566 A.2d 870 DAVIS COOKIE COMPANY, INC., Appellant, v. Thomas WASLEY, Appellee. Thomas WASLEY, Appellee, v. DAVIS COOKIE COMPANY, INC., Appellant. Supreme Court of Pennsylvania. Argued April 17, 1989. Filed November 21, 1989. *114 Avrum Levicoff, Pittsburgh, for appellant. Blythe H. Evans, Jr., Wilkes-Barre, for appellee. Before CIRILLO, President Judge, and KELLY and HESTER, JJ. KELLY, Judge: In these consolidated appeals we address two significant procedural issues regarding permissive counterclaims under Pa.R.C.P. 1031. First, we are called upon to determine whether the Luzerne County trial court abused its discretion in failing to grant allowance to amend an answer with new matter to assert a permissive counterclaim under Pa.R.C.P. 1033. We quash this appeal as having been taken improvidently from an interlocutory and unappealable order. Second, we are called upon to determine whether the Clarion County trial court erred granting dismissal on the *115 basis of the pendency of a prior action in another county in which the cause of action alleged as the basis of the complaint could have been, but was not, asserted as a permissive counterclaim. We vacate the order dismissing the complaint and remand with instructions. Since the early 1950's, appellant, Davis Cookie Co. (Davis Cookie), has had a license from Archway Cookies, Inc. to bake and sell "Archway" cookies in Pennsylvania. In 1987, Davis Cookie and appellee Thomas Wasley (Wasley) negotiated a franchise agreement memorialized by a written letter of intent. Wasley made deposits toward the franchise fee agreed in the amount of $5,247.60. Later, however, he decided not to follow through with the franchise agreement. The dispute between the parties arises from Wasley's withdrawal. Wasley desires return of his deposit. Davis Cookie contends that under the terms of the agreement the deposit was not refundable, and that Wasley is also liable for liquidated damages under the terms of the agreement in the amount of an additional $5,247.60. Substantively, we are presented with a relatively straightforward and uncomplicated contract case. It was not destined to remain so. On March 7, 1988, Wasley filed an action against Davis Cookie in Luzerne County seeking return of its deposit. In its answer and new matter, pursuant to Pa.R.C.P. 1030, Davis Cookie responded to Wasley's complaint by asserting that under the clear terms of the letter of intent signed by the parties the deposit was not refundable. Davis Cookie declined to present a counterclaim under Pa.R.C.P. 1031, for liquidated damages in Wasley's Luzerne County action. On March 30, 1988, Davis Cookie filed an action against Wasley in Clarion County seeking liquidated damages for Wasley's alleged breach of the franchise agreement. Wasley *116 asserted the ancient defense of lis alibi pendens[1] by preliminary objections. The trial court sustained the objections and dismissed the suit on July 12, 1988. Davis Cookie filed timely notice of appeal. Despite its expressed preference for pursuing its breach of contract action in Clarion County, and the prospect of eventual success on appeal from the order dismissing its Clarion County action, Davis Cookie proceeded to move to amend its answer and new matter in the Luzerne County action, pursuant to Pa.R.C.P. 1033, to assert its claim for liquidated damages as a permissive counterclaim in Wasley's action for return of its deposit. Wasley opposed the motion. The trial court denied the motion, opining that Davis Cookie had created its own procedural difficulties and that the trial court was disinclined to exercise its discretion to extricate Davis Cookie from a mess of its own making. Davis Cookie again filed timely notice of appeal. Davis Cookie's separate appeals were consolidated for argument before this Court. On appeal, Davis Cookie contends that because it was privileged under Pa.R.C.P. 1031 to decline to present its permissive counterclaim for liquidated damages in Wasley's Luzerne County action, the trial court erred in dismissing its Clarion County action on the basis of Wasley's asserted lis alibi pendens defense. Davis Cookie also contends that the trial court in Luzerne County abused its discretion in denying its motion to amend *117 its answer to assert a counterclaim under Pa.R.C.P. 1033. We reverse the dismissal, and quash the appeal of the order denying allowance to amend. In Gabriel v. O'Hara, 368 Pa.Super. 383, 534 A.2d 488 (1987) and Barr v. General Accident Group Ins., 360 Pa.Super. 334, 520 A.2d 485 (1987), this Court held that order denying complainant's allowance to amend pursuant to Pa.R.C.P. 1033 to add a new cause of action arising from the same transaction or occurrence, effectively put the complainant out of court on the claims, and were therefore final and appealable. The instant case, though also involving an appeal from an order denying allowance to amend under Pa.R.C.P. 1033, is nonetheless materially distinguishable. In Gabriel and Barr the effect of the order denying allowance to amend under Pa.R.C.P. 1033 was to preclude the complainant from complying with the compulsory joinder rule of Pa.R.C.P. 1020(d)(1 & 4) which provides that: The effect of a failure to comply with Pa.R.C.P. 1020(d)(1) is a waiver of any cause of action not so joined. Hence, the denial of a motion to amend under Pa.R.C.P. 1033 to assert a claim covered by the compulsory joinder rule has the effect of a disposition of such a claim by dismissal on the merits. In the instant case, it is the defendant who appeals from an order denying allowance to amend the answer and new matter to assert a permissive counterclaim. While the *118 denial of allowance to amend will result in a certain degree of duplication of efforts and consequent cost both to the parties and to the court system, Davis Cookie is not "out of court" on its claim. This Court recently explained in Bender's Floor Covering Co. v. Gardner, 387 Pa.Super. 531, 564 A.2d 518 (1989): 387 Pa.Superior Ct. at 535-536, 564 A.2d at 520-21. (Emphasis in original). Rule 1033 motions for leave to amend in order to present permissive counterclaims are thus materially distinguishable from Rule 1033 motions for leave to amend in order to comply with the compulsory joinder rule or the rule requiring affirmative defenses to be plead in new matter. As in Bender's Floor Covering Co. v. Gardner, supra, we are constrained to quash the appeal from the trial court's interlocutory order denying leave to amend. The Clarion County trial court found that Davis Cookie's claim for breach of contract seeking liquidated damages involved the same parties, same causes of action, same rights, and same requested relief as were involved in the prior suit pending in Luzerne County, and granted Wasley's preliminary objection seeking dismissal on lis alibi pendens grounds. On appeal, Davis Cookie contends that because counterclaims are permissive rather than compulsory, he was privileged to bring his claim for breach of contract seeking liquidated damages in a separate action in any proper forum of his choosing, and was not required to plead it as a counterclaim in Wasley's Luzerne County suit seeking return of his deposit made under the same contract. Despite the apparent waste of judicial resources and unnecessary expense to the parties, we are constrained to agree with Davis Cookie, and reverse the dismissal. A preliminary objection alleging the pendency of a prior action is a plea in abatement which derives from the ancient maxim, "nemo debet bis vexari pro una et eadem cause," (no man shall be twice vexed for the same cause of action). See generally Broom's Maxims, at 135-39 (1845). In Cleveland, Painsville, and Ashtabula R.R. Co. v. Erie, 27 Pa. 380 (1856), Justice Black explained: 27 Pa. at 382-83; see also Spier v. Locust Laundry, Inc., 56 Pa.Super. 328, 328-30 (1914).[2] The strict formality of the common law pleading system, however, rendered the plea of lis alibi pendens one of limited application. The plea was not deemed meritorious unless both suits involved the same parties (acting in the same legal capacity), the same causes of action (with due regard for the common law distinctions between contract, trespass, and equity actions), the same rights asserted, and the same relief requested. See Cunningham v. Horne, 406 Pa. 1, 176 A.2d 648 (1961); Dickerson v. Dickersons Overseas Co., 369 Pa. 244, 85 A.2d 102 (1952); Hessenbruch v. Markle, 194 Pa. 581, 45 A. 669 (1900); Norristown Automobile Co. v. Hand, 386 Pa.Super. 269, 562 A.2d 902 (1989); Virginia Mansions Condo. v. Lampl, 380 Pa.Super. 452, 552 A.2d 275 (1988); Singer v. Dong Sup Cha, 379 Pa.Super. 556, 550 A.2d 791 (1988); Penox Technologies v. Foster Medical, 376 Pa.Super. 450, 546 A.2d 114 (1988); Procacina v. Susen, 301 Pa.Super. 392, 447 A.2d 1023 *121 (1982); Glazer v. Cambridge Industries, 281 Pa.Super. 621, 422 A.2d 642 (1980); Donatucci v. Utterback, 264 Pa.Super. 49, 398 A.2d 1051 (1979); Raw v. Lehnert, 238 Pa.Super. 324, 357 A.2d 574 (1976); Taylor v. Humble Oil & Refining, 225 Pa.Super. 177, 311 A.2d 324 (1973); Stewart v. Turner, 67 Pa.Super. 255 (1917). Under Pennsylvania law, the merit of a plea in abatement on lis alibi pendens grounds "is purely a question of law determinable from an inspection of the pleadings." Hessenbruch v. Markle, supra, 45 A. at 671; Procacina v. Susen, supra, 447 A.2d at 1025. The test for determining the validity of a lis alibi pendens plea in Pennsylvania state courts is not the same as would apply if the second suit had been brought in federal court. Under federal law, the second court may consider comity principles, judicial economy interests, the adequacy of relief available in the alternate forum, the identity of the parties and issues, the likelihood of prompt disposition, the convenience of parties and counsel, and the potential for prejudice to either party, in deciding whether to abate a federal action based upon the pendency of a prior state action. See CBS, Inc. v. Tee Vee Records, 96 F.R.D. 163, 165-66 (S.D.N.Y. 1982); see generally Annotation, Federal Stay State Action Pending, 5 ALR FED 10, 10-146 (1970 & 1988 supp.) (especially § 3). The differences between the Pennsylvania and federal rules are significant. While federal courts are free to consider the motivations of the parties and the interests of judicial economy, Pennsylvania courts are not. In Pennsylvania, the record is reviewed to determine if the required common law unities are present. If they are present, the plea is to be sustained; if they are not, the plea may not be sustained. It is a question of law, rather than a question of the court's discretion. See Hessenbruch v. Markle, supra; Procacina v. Susen, supra. Here, the required unities are not present. While the parties are the same and the suits arise from the same contract, neither the cause of action, rights asserted, nor relief requested are the same. In Luzerne County suit, *122 Wasley seeks return of his deposit by a cause of action which essentially sounds in the nature of an equity action for recession or reformation of the contract (recission and return of consideration, or reformation by striking the clause designating the deposit as non-refundable). The Clarion County suit, on the other hand, involves a suit in contract for breach and seeks liquidated damages. It is well-settled that a lis alibi pendens plea may not be sustained in such circumstances. See Penox Technologies v. Foster Medical, supra, 546 A.2d at 115; Raw v. Lehnert, supra, 357 A.2d at 576; Stewart v. Turner, supra, 67 Pa.Super. at 260; Raessler v. Temperance Mut. Ben. Assn., 3 Pa.Co.Ct. 393, 395 (1882). Raessler, though a common pleas decision, is particularly relevant here. In Raessler, Judge Schulyer explained: 3 Pa.Co.Ct. at 95. (Emphasis added). But for the type of contract involved, Raessler is virtually indistinguishable from the instant case. In both cases the defendant in a prior action to rescind a contract elected to preserve a permissive counterclaim for breach of the same contract for a separate suit. Here, as there, the lis alibi pendens claim must fail. As Raessler aptly demonstrates, any application of the common law doctrine of lis alibi pendens to the facts of the instant case is precluded by Pa.R.C.P. 1031, which privileged *123 Davis Cookie to withhold its permissive counterclaim from the prior suit, and to pursue it by separate action in any proper forum of its choice. In this respect, the permissive counterclaim rule must prevail over the common law lis alibi pendens doctrine. Indeed, even at common law the lis alibi pendens doctrine was so restricted. In McCredy v. Fey, 7 Watts 496 (Pa. 1838) Justice Kennedy stated, "the defendant, having a demand against the plaintiff, is not compelled by the act to set if off; he may do so, or he may bring an action against the plaintiff for it, as he pleases; . . . ." 7 Watts at 500. The following year, Justice Sergeant explained: Himes v. Barnitz, 8 Watts 39, 43 (Pa. 1839). Similarly, in 1939, an ALR commentor observed: *124 Annotation, Pendency of Suit for Cancellation, Reformation, or Recession of a Contract as Abating Subsequent Action to Enforce It or to Recover Damages for its Breach, and Vice Versa, 118 ALR 1240 (1939). (Emphasis added). Indeed, our Supreme Court has gone even further in this regard. In Pennsylvania R.R. Co. v. Davenport, 154 Pa. 111, 25 A. 890 (1893), our Supreme Court held that a direct suit could not be separately maintained on a cause of action where the plaintiff in the second suit had previously pled the same cause of action as a defendant in a prior pending proceeding between the same parties by a permissive counterclaim. Two decades later, however, in National Metal Edge Box Co. v. American Metal Edge Box, Co., 246 Pa. 78, 92 A. 42 (1914), our Supreme Court expressly disavowed the prior decision, stating: That counterclaims remain entirely permissive in Pennsylvania is quite clear. Recently, this Court explained: Bender's Floor Covering v. Gardner, supra, 387 Pa.Superior Ct. at 535-536, 564 A.2d at 520. Concededly, the permissive counterclaim rule permits, and perhaps even encourages, wasteful overlap and duplication of court proceedings. The federal courts have long since abandoned the purely permissive counterclaim rule and have adopted a mixed permissive and compulsory counterclaim rule along with discovery, transfer, and removal rules which, by all appearances, adequately protect the legitimate litigation timing and forum selection interests which our purely permissive joinder rule is intended to protect, but without the burden of the duplicious proceedings *126 which inevitably result from our permissive counterclaim rule. See generally, Freer, Avoiding Duplicate Litigation, 50 U.Pitt.L.Rev. 809, 809-51 (1989) (discussing the litigation duplication avoidance effects of the current federal rules, and proposing further measures). Nonetheless, our Supreme Court has not as yet seen fit to alter the rule of purely permissive joinder for counterclaims. Consequently, the dismissal of the Clarion County complaint on the grounds that the cause of action asserted could have been, but was not, raised as a permissive counterclaim in the prior Luzerne County suit cannot be sustained. To do so, would require us to ignore the permissive counterclaim rule we are bound to enforce. Hence, the dismissal order must be reversed.[3] Given the complicated procedural history of this case, it seems appropriate to clearly delineate the compulsive force *127 of our decision with regard to future proceedings in the trial courts. Particularly significant are the things we have not decided and the things which we do not preclude. First, nothing in this opinion should be read to preclude the Luzerne County trial court from reconsidering its interlocutory order denying Davis Cookies' allowance to amend its answer and new matter under Pa.R.C.P. 1033 to assert its permissive counterclaim. Likewise, nothing here precludes Wasley from entering filed consent to such an amendment. See Pa.R.C.P. 1033. Under Pa.R.C.P. 1033, either allowance of the court or consent filed by the opposing party is sufficient to permit such an amendment of the pleadings at any time during the pendency of the suit. Second, by reversing the order dismissing the Clarion County action brought by Davis Cookie, we do not restrict the discretion of the trial court to hold the Clarion County action in abeyance pending disposition of the Luzerne County action. See Norristown Automobile Co. v. Hand, supra; Singer v. Dong Sup Cha, supra; Ramco Corp. v. Colt Industries, 73 D & C.2d 647 (Pa.Cm.P. 1975). Likewise, if an amendment to assert the counterclaim is permitted in the Luzerne County action, and assuming arguendo that National Metal Edge Box, supra, remains good law and applies in this context, the Clarion County trial court would still have discretionary authority to hold its action in abeyance pending resolution of the Luzerne County action. Id. If neither action is held in abeyance, the first to reach final judgment may be pled in bar of the other (as may be appropriate based on the disposition), by the modern procedural successor to the common law plea of puis darrein continuance, i.e. by a motion raising additional new matter under Pa.R.C.P. 1033. The common law plea of puis darrien continuance was essentially a plea of collateral estoppel or res judicata by new matter nunc pro tunc based upon events occurring after the pleadings had closed. Woods v. White, 97 Pa. 222 (1881); Krider v. Lafferty, 1 *128 Whar 303, 312 (Pa. 1836); Garvin v. Dawson, 13 Ser. & Raw. 246 (Pa. 1825); cf. II Bouvier's Law Dictionary 2769 (Rawle's Rev. 1914). The rigors of the common law puis darrien continuance plea have been ameliorated by its successor, Pa.R.C.P. 1033. Under the common law, interjection of a puis darrien continuance plea involved an all-or-nothing gamble, as it was a substitute plea which withdrew all other defenses and confessed liability to the full amount demanded by the opposing party's pleadings if the bar was found to be improper or ineffectual. See Woods v. White, supra. Under Pa.R.C.P. 1033, an amendment to assert a collateral estoppel or res judicata claim in new matter based on events occurring after the pleadings are joined does not require a waiver of other claims; rather, it requires merely leave of court, or consent of the opposing party. See Pa.R.C.P. 1033. The appeal from the Luzerne County trial court order denying leave to amend is Quashed. The order of the Clarion County trial court granting preliminary objections and dismissing the complaint is Reversed, the complaint is Reinstated, and the case is Remanded for further proceedings consistent with this Opinion. Jurisdiction is Relinquished. [1] Although the plea in abatement alleging pendency of a prior action as a bar to suit is often referred to as simply lis pendens (a pending suit), the phrases lis alibi pendens (a suit pending elsewhere) and auter action pendant (another action pending) are more historically appropriate. Lis pendens in ancient usage referred specifically to the power which a court had over property in dispute during the pendency of a suit and the inability of parties to affect title to such property during the pendency of an action. See Dorsch v. Jenkins, 243 Pa.Super. 300, 365 A.2d 861 (1976). Lis alibi pendens and auter action pendant, on the other hand, referred specifically to the plea in abatement based upon the pendency of a prior action in another forum. See Black's Law Dictionary, at 840 (5th Ed. 1979); 1 Bouvier's Law Dictionary, at 291-92 (Rawle rev. 1914) (expanded definition with case citations for auter action pendant); 2 Bouvier's Law Dictionary, at 2032-34 (Rawle rev. 1914) (same, for lis pendens and lis alibi pendens). We shall refer to the plea as one of lis alibi pendens throughout, in accordance with the historical distinction noted. [2] It should be noted, however, that these cases address only the situation where a party initiates the separate suits as plaintiff in both identical cases, and not a situation like that here, where the defendant in the first suit is the plaintiff in the second. As it will be seen, infra, this difference is material. [3] Arguably, analysis of the "same cause of action" unity is complicated by Pa.R.C.P. 1001. In 1983, our Supreme Court promulgated the current version of Rule 1001 and thereby abolished the procedural distinctions between assumpsit and tresspass (and to a lesser extent other types of actions) which existed under the highly technical common law pleading system. The new rule provided that any action formerly denominated as an assumpsit or trespass action should be denominated simply as a "civil action," and that all other forms of action should be denominated as "civil action [type of action]." While these changes harmonized procedures and further blurred and eroded the intricate and arcane distinctions of the common law, it is clear that the rule in no way altered the substantive differences or individuality of separate causes of action arising in what was formerly known as assumpsit, trespass, and equity. While separate causes of action for breach of contract and physical assault both now may be denominated as "civil actions," may be plead together in one complaint, and may be subject to the same procedural rules, the separate causes of action have not thereby become one cause of action. The substantive rules of contract and tort were not merged by the promulgation of Pa.R.C.P. 1001. If one were fired improperly and assaulted by one's employer at the same time, two separate civil actions, with separate rights asserted and separate relief requested would nevertheless exist and not one hybrid civil action. Hence, the mere fact that different causes of action would be designated by the same term (i.e. civil action), would have to be brought in a single suit (Pa.R.C.P. 1020(d)(1 & 4) and would be regulated by the same procedures does not in any way effect the continued validity of common law distinctions between types of "causes of action" in determining a plea in abatement on lis alibi pendens grounds.