Opinion ID: 2087860
Heading Depth: 1
Heading Rank: 2

Heading: Dismissal of Cazzani's Counterclaim

Text: First, Cazzani alleged that the trial justice erred in permitting Pilot's Point to amend its response to the counterclaim to plead as an affirmative defense Cazzani's lack of corporate capacity to bring suit. Cazzani argued that such a ruling was contrary to our holding in World-Wide Computer Resources, Inc. v. Arthur Kaufman Sales Co., 615 A.2d 122 (R.I.1992) (World-Wide Computer). In that case, we held that the trial justice erred in permitting  four years after commencement of the action  a defendant to amend an answer in order to plead the plaintiff's lack of corporate capacity as a defense. Id. at 124-25. We explained that the defendant could have discovered the plaintiff's lack of capacity at the time the suit was filed. Id. at 125. Cazzani made this argument to the trial justice, who determined that the holding in World-Wide Computer was inapplicable to this case. Specifically, the trial justice found that Pilot's Point could not have raised Cazzani's lack of corporate status at the inception of the action because at that time Cazzani was a valid corporation, whereas the defendant in World-Wide Computer could easily have discovered the plaintiff corporation's lack of capacity to maintain suit in Rhode Island courts. Id. at 125. Further, the trial justice determined that there was no inequity in permitting the issue to be raised during the trial because Cazzani's trial counsel was also counsel for2/17/00 service of process, had received notice of the revocation, and had taken no steps to have the corporate charter reinstated during the preceding two years. Second, Cazzani asserted that the trial justice committed further error by denying Cazzani's motion for a continuance during which it could reinstate its corporate charter. Cazzani's certificate of incorporation was administratively revoked by the Secretary of State pursuant to G.L. 1956 § 7-1.1-87. Under § 7-1.1-88.1, a revoked certificate of incorporation may be reinstated retroactively under certain conditions. Cazzani argued before the trial justice that a one-month continuance would suffice to reinstate its certificate of incorporation, and it asserted to this Court that had the continuance been granted, its counterclaim would not have been dismissed. Thus, Cazzani claimed, the trial justice erred by not granting the continuance. Cazzani, however, has failed to point out how its rights were in any way prejudiced by the trial justice's grant of Pilot's Point's motion to amend the response and his denial of Cazzani's motion for a continuance. Walmac Co. v. Zurich Insurance Co., 114 R.I. 410, 415, 333 A.2d 686, 689 (1975). The trial justice here dismissed Cazzani's counterclaim because Cazzani lacked the capacity to sue. This dismissal did not constitute a final judgment on the merits, however, and does not preclude Cazzani from proceeding on its claim in a separate action after taking the necessary steps to regain its corporate capacity. Lombardi v. Sciacca, 707 A.2d 698, 700 n.1 (R.I.1998). Under the provisions of G.L. 1956 § 9-1-22, when an action is terminated without prejudice, as it was in this case, a party may commence a new action within one year of the termination. We have previously held that a dismissal without prejudice is a final judgment that may be appealed to this Court, Jackson v. Medical Coaches, 734 A.2d 502, 504 (R.I.1999), and when such an appeal is taken, the action is not finally terminated until this Court renders a decision on the appeal. Thus, there remains one year from the date of this2/17/00 opinion during which Cazzani may initiate an action against Pilot's Point. Cazzani alleged at trial that it would be able to have its revocation withdrawn in one month. Therefore it has suffered no harm from the dismissal given its estimate of the time it would need to activate the corporation. The lack of prejudice to Cazzani in the instant case may be contrasted with the result of the trial justice's decision to permit amendment of the response in World-Wide Computer. In that case, we noted that had lack of corporate capacity been raised at the commencement of the action, the plaintiff corporation could have obtained a certificate of authority to operate in Rhode Island well before trial. World-Wide Computer, 615 A.2d at 125. By the time the issue was actually raised, however, the corporation was no longer a validly existing corporation in Massachusetts and therefore could not readily obtain a certificate of authority in Rhode Island, without reestablishing its existence in Massachusetts. Id. Although the Court in World-Wide Computer did not explore the specific procedure the corporation would need to undertake to reestablish its existence in Massachusetts, it assumed that [t]he efforts to revitalize the corporation and obtain a certificate of authority could not reasonably be accomplished within the time remaining for the trial of the case. Id. Thus, even though the dismissal of the complaint in World-Wide Computer was also not a decision on the merits, the party whose claim was dismissed was still prejudiced by the dismissal. As we have discussed, Cazzani's interests were not harmed in the same way by the trial justice's dismissal of its counterclaim in the case at bar. It is true, however, that if Cazzani chooses to pursue its claim in a separate action, the doctrine of collateral estoppel may preclude its challenge to certain facts. This doctrine directs that an issue of ultimate fact that has been actually litigated and determined cannot be re-litigated between the same parties   . Commercial Union Insurance Co. v. Pelchat, 727 A.2d 676, 680 (R.I.1999). Thus, if the same issues recur in a later action against Pilot's Point, Cazzani will be bound by the findings of fact made by the trial justice in his decision on the claims of Pilot's Point. Depending on the exact nature of Cazzani's later claim, these findings of fact may be dispositive of any later action it may bring. Even so, Cazzani has not been prejudiced. In the case at bar, the dismissal of Cazzani's counterclaim came after it had rested its case. Cazzani was neither prevented nor discouraged from presenting all evidence necessary to prove its counterclaim or to defeat the claims of Pilot's Point. Cazzani was afforded a full and fair opportunity to litigate every fact ultimately decided by the trial justice on the claims of Pilot's Point, and it is not prejudicial if those findings of fact prove detrimental to a separate action on Cazzani's claim against Pilot's Point.