Court Opinion

ID: 3024916
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:32:38.209616+00
Date Added: 2024-06-11T18:19:39.281943
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                      ___________

                                      No. 99-2195
                                      ___________

Bankcard Systems, Inc.; Raymond C.       *
Hyatt; Myra Overright Hyatt,             *
                                         *
             Appellants,                 *
                                         *
      v.                                 * Appeal from the United States
                                         * District Court for the
Miller/Overfelt, Inc., doing business as * Western District of Missouri.
Jack Miller Jeep Eagle; Chrysler         *
Financial Corporation; Dale E. Overfelt; *
Melissa S. Overfelt; Aaron Loughlin;     *
Gary Meschon, Jr.; Richard Ogden, Jr.; *
John B. Heshion,                         *
                                         *
             Appellees.                  *
                                    ___________

                               Submitted: January 10, 2000

                                     Filed: July 19, 2000
                                      ___________

Before WOLLMAN, Chief Judge, MORRIS SHEPPARD ARNOLD, and MURPHY,
      Circuit Judges.
                             ___________

WOLLMAN, Chief Judge.

      Raymond C. Hyatt, Myra Overright Hyatt, and Bankcard Systems, Inc.
(Bankcard), brought suit in federal district court against Miller/Overfelt, Inc., d/b/a Jack
Miller Jeep Eagle (Miller Jeep), several named corporate officers and employees of
Miller/Overfelt, Inc., and Chrysler Financial Company, L.L.C. (Chrysler) (collectively,
respondents), asserting a variety of claims that developed from the attempted purchase
of a business vehicle. The district court1 dismissed the action for failure to state a
claim, holding that the claims should have been brought as compulsory counterclaims
in state court. We affirm.

                                           I.

       In February of 1998, the Hyatts, who are corporate officers of Bankcard, went
to the Miller Jeep dealership in North Kansas City, Missouri, and negotiated the
purchase of a 1998 Jeep Grand Cherokee for Bankcard’s use. The arrangement
included the dealership’s acceptance of the Hyatts’ two personal vehicles as trade-ins.
After Raymond Hyatt signed on behalf of Bankcard a retail installment contract and a
rider concerning contract assignment, Bankcard took possession of the Cherokee.
Approximately one week later, employees from Miller Jeep requested that the Hyatts
sign a new contract. Because the Hyatts believed that the new contract changed the
terms of the agreement, they, on behalf of Bankcard, refused to sign it and retained the
Cherokee. A number of discussions occurred between the representatives of Bankcard
and representatives of Miller Jeep during the following months, but the parties were
unable to resolve their disagreements. In May of 1998, Miller Jeep repossessed the
Cherokee. The Hyatts’ trade-in vehicles were repossessed from the Miller Jeep lot by
lien holders for want of payments.

      On December 9, 1998, Miller Jeep filed suit solely against Bankcard in the
Circuit Court of Clay County, Missouri, petitioning for damages for breach of contract.2

      1
      The Honorable Scott O. Wright, Senior United States District Judge for the
Western District of Missouri.
      2
      Because to our knowledge the state court action has not yet proceeded to final
judgment, the doctrines of claim preclusion and issue preclusion are inapposite. See,

                                          -2-
On December 23, 1998, the Hyatts filed suit against the respondents in the United
States District Court for the Western District of Missouri, alleging breach of contract,
fraud, intentional infliction of emotional distress, conspiracy to commit fraud, malicious
prosecution, and racketeering claims under the Racketeer Influenced and Corrupt
Organizations Act (RICO).

       The district court dismissed the claims against Miller Jeep and the individual
defendants on March 22, 1999, and against Chrysler on April 6, 1999, finding that
Missouri Supreme Court Rule 55.32(a) required the Hyatts to bring all their claims as
counterclaims in the state court action. The Hyatts appeal, contending that because the
state court action involves only the validity of the rider to the contract and because
none of their claims implicate the rider, they and Bankcard should be allowed to
proceed in federal court. They further argue that even if their contract claims are
precluded, their RICO-based claim should survive in federal court.3

                                           II.

       We review de novo the district court’s dismissal of the claims for failure to state
a cause of action. See Helvey v. City of Maplewood, 154 F.3d 841, 844 (8th Cir.
1998). “A complaint should not be so dismissed unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim that would demonstrate an
entitlement to relief.” Springdale Educ. Ass’n v. Springdale Sch. Dist., 133 F.3d 649,
651 (8th Cir. 1998). To determine whether the complaint should be dismissed because

e.g., Popp Telcom v. American Sharecom, Inc., 210 F.3d 928, 939-41 (8th Cir. 2000).
      3
       The Hyatts also argue that the state court does not have personal jurisdiction
over Myra Overright Hyatt. Because this issue was not raised before the district court,
we decline to address it. See Carlson v. Hyundai Motor Co., 164 F.3d 1160, 1163 (8th
Cir. 1999).

                                           -3-
of preclusion under state counterclaim requirements, we turn to Missouri law. See
Brannan v. Eisenstein, 804 F.2d 1041, 1044 (8th Cir. 1986).

        Under Missouri Supreme Court Rule 55.32(a), a party is precluded from
asserting counterclaims that are deemed to be compulsory and thus should have been
brought in a previous action. See id. (explaining relevant Missouri law). Rule 55.32(a)
states:

      (a) Compulsory Counterclaim. A pleading shall state as a counterclaim
      any claim that at the time of serving the pleading the pleader has against
      any opposing party, if it arises out of the transaction or occurrence that is
      the subject of the opposing party’s claim and does not require for its
      adjudication the presence of third parties of whom the court cannot
      acquire jurisdiction.

        This rule is “identical to [Federal Rule of Civil Procedure] 13(a),” and it
functions “as ‘a means of bringing all logically related claims into a single litigation,
through the penalty of precluding the later assertion of omitted claims.’” State ex rel.
J.E. Dunn, Jr. & Assocs., Inc. v. Schoenlaub, 668 S.W.2d 72, 75 (Mo. 1984) (en banc)
(quoting Cantrell v. City of Caruthersville, 221 S.W.2d 471, 474 (Mo. 1949)). Under
Rule 55.32(a), the subject of an opposing party’s claim consists of the physical facts,
things real or personal, the money, lands, chattels, and the like, in relation to which the
suit is prosecuted, and the term “transaction” is to be applied in its broadest sense, to
include all facts and circumstances constituting the foundation of the claim. See Choate
v. Hicks, 983 S.W.2d 611, 614, 613 (Mo. Ct. App. 1999). When the facts which
would support a defense to the original claim would also support a counterclaim, the
two arise from the same transaction. See id. at 614.

      In sum, for a counterclaim to be compulsory under Missouri law, it must be a
claim that, at the time of serving the pleading, arises from the same transaction or

                                           -4-
occurrence as the original claim, i.e., is logically related to the claim in a broad sense;
and must be brought by one party against an opposing party, not involving any third
parties over whom the court cannot acquire jurisdiction.

       We conclude that the Hyatts’ and Bankcard’s claims are logically related to the
state court claim, because they involve the facts and circumstances of the making and
enforcing of the same contract. In state court, Miller Jeep sued Bankcard for breach
of contract, citing the February 1998 contract and the accompanying rider. The Hyatts’
claims of breach of contract, fraud, and conspiracy to commit fraud also pertain to the
February 1998 contract; they allege that it was Miller Jeep and its agents that failed to
abide by the contract and that this failure, which harmed both Bankcard and the Hyatts,
was intentional.

       The Hyatts’ RICO, malicious prosecution, and intentional infliction of emotional
distress claims have a slightly different cast, as they rely more heavily on the events
that occurred following the initial interactions. The scope of compulsory
counterclaims, however, is not limited “to only those claims which are of the same
nature or seek the same relief.” Schoenlaub, 668 S.W.2d at 75. These claims, despite
the shift in emphasis, still focus on what respondents, Bankcard, and the Hyatts did in
response to each other’s perceived failure to live up to the February 1998 contract. To
hear these claims separately would defeat the function of Rule 55.32(a) by requiring
a reexamination of the same events of the state court action in a later litigation. See
Schoenlaub, 668 S.W.2d at 75. As we stated about the claims in Tullos v. Parks, 915
F.2d 1192, 1196 (8th Cir. 1990), “[t]o put the matter simply, all the claims asserted by
both sides in this case are part of the fight between the parties.”4

      4
       Although under Missouri law a malicious prosecution claim based on a pending
action may not even constitute a claim, much less a compulsory counterclaim in that
pending action, because the Hyatts failed to raise this issue we will not address it.

                                           -5-
       This conclusion does not end our inquiry. For a counterclaim to be compulsory,
it must be asserted by a party against an “opposing party,” see Schoenlaub, 668 S.W.2d
at 76; Oates v. Safeco Ins. Co., 583 S.W.2d 713, 717 (Mo. 1979) (en banc), or
someone in privity with that party. See Schneeberger v. Hoette Concrete Const. Co.,
680 S.W.2d 301, 303 (Mo. Ct. App. 1984). The Hyatts note that the state court action
involves only Bankcard and Miller Jeep, not themselves, any of the individual
defendants, or Chrysler.

       Respondents refer to several cases for the proposition that “a compulsory
counterclaim may arise without complete mutuality and identity of parties at the time
it must be asserted,” id.; see Barclay Inv. Corp. v. Lamkin, 408 S.W.2d 168, 169-70
(Mo. Ct. App. 1966), and contend that the minor difference in parties is not
determinative because all of the individuals are corporate officers or employees of the
corporations that are already parties. They rely heavily on Schneeberger, in which the
Missouri Court of Appeals held that a homeowner was barred from bringing suit
against a subcontractor for the same damage that the homeowner had previously
claimed against the contractor. See Schneeberger, 680 S.W.2d at 303. The court there
noted that a compulsory counterclaim may arise without complete mutuality and
identity of parties and that if the defendant subcontractor “was a necessary party to the
full adjudication of the issues in the [] suit, . . . it was [claimant’s] duty to request that
defendant [] be made a party.” See id.

       The same year that Schneeberger was decided, the Missouri Supreme Court
reiterated that for it to be a compulsory counterclaim under Rule 55.32(a), the party’s
claim must involve an “opposing party.” See Schoenlaub, 668 S.W.2d at 74. In
Schoenlaub, a contractor had brought suit against a hospital and several other parties,
but the hospital had already filed suit against the contractor. See id. The court found
that the contractor’s claims against the hospital were compulsory counterclaims under
Rule 55.32(a) because they arose from the same transaction or occurrence and involved

                                             -6-
the same parties, thus the contractor’s separate suit was barred. See id. at 74-76. The
court expressly held that the contractor’s claims against an architect and a construction
manager were not barred because they were not opposing parties in the first suit. See
id. at 76. Schneeberger itself distinguished previous compulsory counterclaim cases
by noting that those cases did not involve a party or someone in privity with a party.

        We must determine, then, whether the claims brought by Bankcard and the
Hyatts in federal court are claims by a party to the original action against an opposing
party or someone in close privity to those parties. The breach of contract claims in
both courts, by definition, are premised on the contract and rider between Miller Jeep
and Bankcard. The Hyatts individually are not parties to the contract, and Miller Jeep
does not argue that they are. Had the Hyatts acted solely as agents of Bankcard, it is
possible that they would not have been required to bring all of their personal claims as
counterclaims against Miller Jeep and others in the state court action. Compare
Prentzler v. Schneider, 411 S.W.2d 135, 139, 137 (Mo. 1966) (en banc) (wrongful
death claims between two widows about auto accident not compulsory in each other’s
suits; widows and administrators are not in privity and widow was “not a party
defendant”), with Barclay Inv. Corp., 408 S.W.2d at 170 (landlord could not bring
separate suit on lease against tenant and wife when tenant had already sued on lease;
claim was compulsory and adding wife as party necessary).

      Because the Hyatts’ personal vehicles are a part of the contract between
Bankcard and Miller Jeep, however, and because the Hyatts allege personal damages
based on the failure of Miller Jeep to perform the February 1998 contract with
Bankcard, we conclude that under Missouri law the Hyatts are necessary parties to the
state court breach of contract action. Missouri Supreme Court Rule 52.04 is the
appropriate rule regarding necessary parties, see Fruin-Colnon Corp. v. Missouri Hwy.
& Transp. Comm’n, 736 S.W.2d 41, 43 (Mo. 1987) (en banc), and requires that a
“person shall be joined in the action if . . . (2) he claims an interest relating to the

                                          -7-
subject of the action” and is so situated that the disposition of the action may impede
or impair his ability to protect that interest or leave a party subject to a substantial risk
of inconsistent obligations.

        In a breach of contract action, “the only parties defendant who may be necessary
are the other parties to the contract sued on, and those who have an interest in the
dispute which will be affected by the action.” Bunting v. McDonnell Aircraft Corp.,
522 S.W.2d 161, 169 (Mo. 1975) (en banc) (quoting Ray v. Wooster, 270 S.W.2d 743,
753 (Mo. 1954)). Because the Hyatts did not sign the February 1998 contract in their
personal capacity, we turn to the second part of the test, which is whether they have an
appropriate interest in the dispute. Such an interest “must be such a direct claim upon
the subject matter of the action that the [nonparty] will either gain or lose by direct
operation of the judgment to be rendered.” See id. (quoting State ex rel. State Farm
Mut. Auto. Ins. Co. v. Craig, 364 S.W.2d 343, 346 (Mo. Ct. App. 1963)). We
conclude that the Hyatts have such an interest; indeed, the Hyatts would have no claim
at all were they not involved with the contract.

       The Hyatts have a direct interest in the contract. Their personal vehicles were
part of the contract, and their damage claims are based largely on the failure of Miller
Jeep to retire the debt on these vehicles pursuant to the contract. Whether Bankcard
wins or loses its breach of contract claim in state court will directly affect the Hyatts’
interest, and should we permit the Hyatts to proceed separately, Miller Jeep would
potentially be subject to inconsistent outcomes and obligations on the contract. Thus,
we conclude that the Hyatts are necessary parties to the state court action. See id. at
379 (“If the court determines that a party is necessary, then the court shall order that
he be made a party.”). Once the Hyatts have been made parties in the state court
action, as they must be, they are subject to Rule 55.32(a) just as is Bankcard, and they
must bring their claims in that action.

                                            -8-
We affirm the dismissal of all claims.

A true copy.

      Attest:

         CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                   -9-