Opinion
No. COA12–935.
2013-05-21
Laurence SASSO, as Representative and willing Administrator of the Estate of Josephine Sasso Tims (deceased), and as the representative Guardian of Cecile Sasso Lutman, Laurence Sasso and Glynn Davis, as co-administrators and representatives of the Estate of Garry Wayne Lutman (deceased), Plaintiffs, v. STATESVILLE FLYING SERVICE, Inc., a North Carolina Corporation, and the City of Statesville, North Carolina, a North Carolina Municipal Corporation, Defendants.
John J. Korzen for plaintiffs-appellants. Robert D. Potter, Jr. for defendant-appellee Statesville Flying Service, Inc.
Appeal by plaintiffs from orders entered 4 April 2012 and 7 May 2012 by the Honorable W. Erwin Spainhour in Iredell County Superior Court. Heard in the Court of Appeals 26 February 2013. John J. Korzen for plaintiffs-appellants. Robert D. Potter, Jr. for defendant-appellee Statesville Flying Service, Inc.
Dean and Gibson, PLLC, by Susan L. Hofer and Joseph L. Nelson, for defendant-appellee The City of Statesville.
HUNTER, ROBERT C., Judge.
Plaintiffs Laurence Sasso—as representative of the Estate of Josephine Sasso Tims, guardian of Cecile Sasso Lutman, and co-administrator and representative of the Estate of Garry Wayne Lutman—and Glynn Davis —as co-administrator and representative of the Estate of Garry Wayne Lutman—appeal the trial court's order filed 4 April 2012 granting summary judgment in favor of defendants Statesville Flying Service, Inc. (“SFSI”) and the City of Statesville (“the City”) (collectively “defendants”). Plaintiffs also appeal the trial court's order filed 7 May 2012 denying their Rule 59(e) motion. After careful review, we affirm the trial court's orders.
We note that, throughout the record, Mr. Davis is referred to both as “Glynn Davis” and “Glynn Davies.” For purposes of clarity in our opinion, we refer to him as “Glynn Davis.”
Background
Josephine Sasso Tims, Cecile Sasso Lutman, and Garry Wayne Lutman were the victims of an airplane crash that occurred in Statesville, North Carolina on or about 27 October 2006. The airplane was piloted by Edward Sasso, who was not injured in the crash. Josephine Tims and Garry Wayne Lutman died as a result of the crash. Cecile Lutman was severely injured and now requires around-the-clock care.
On 9 March 2007, Glenn Davis, as personal representative of the Estate of Garry Wayne Lutman, filed a lawsuit against Edward Sasso in Palm Beach County, Florida. On 28 March 2008, Laurence Sasso, as guardian of Cecil Lutman and as the personal representative of the Estate of Josephine Tims, also sued Edward Sasso in Palm Beach County, Florida. Both plaintiffs amended their complaints to include defendants.
On 10 November 2008, SFSI filed a motion to dismiss for lack of personal jurisdiction. Before the Florida court could hold a hearing on the motion, on 6 March 2009, plaintiffs filed “Notices of Dropping” their claims against defendants.
On 24 October 2008, plaintiffs filed a complaint against defendants in Iredell County Superior Court, alleging claims of negligence. Plaintiffs filed a voluntary dismissal without prejudice as to all claims on 9 June 2009. Plaintiffs refiled their complaint, asserting the same causes of action, on 24 May 2010. The City and SFSI both filed answers, on 16 August 2010 and 25 August 2010, respectively, asserting numerous affirmative defenses. However, neither defendant pled a res judicata defense.
We note that the only plaintiff listed in the caption of this complaint is Laurence Sasso, in his capacity as the administrator of the Estate of Garry Wayne Lutman and the Estate of Josephine Sasso Tims and as the guardian of Cecile Sasso Lutman. However, Glynn Davis, as an administrator of the Lutman Estate, is listed as a party to the complaint in the body. Moreover, plaintiffs state that this complaint was filed by both plaintiffs in their brief and do not contend that Glynn Davis was not a plaintiff in this original North Carolina action.
On 16 and 17 February 2012, SFSI and the City, respectively, filed motions for summary judgment, arguing that plaintiffs' claims are barred by res judicata as they have already voluntarily dismissed their claims against defendants twice. The matter came on for hearing on 19 March 2012. On 4 April 2012, the trial court issued an order granting defendants' motions for summary judgment (“summary judgment order”). Specifically, the trial court concluded that since plaintiffs had already dismissed the same claims against the same defendants in Florida on 6 March 2009, the voluntary dismissal filed by plaintiffs in Iredell County Superior Court on 10 June 2009 was an adjudication upon the merits. Plaintiffs appealed the summary judgment order on 3 May 2012.
Pursuant to Rule 59(e), plaintiffs filed a Motion to Amend the trial court's judgment granting summary judgment on 12 April 2012. The matter came on for hearing on 24 April 2012. After hearing arguments, the trial court denied plaintiffs' motion on 7 May 2012. Plaintiffs appealed the Rule 59(e) order on 6 June 2012.
Arguments
Plaintiffs first argue that the trial court erred in granting summary judgment based on res judicata and the two-dismissal rule. Specifically, they contend that defendants waived a res judicata defense by failing to plead it in their answers, and this delay in raising it caused plaintiffs “financial prejudice.” Thus, plaintiffs argue that the trial court should not have allowed defendants to raise the res judicata defense for the first time at summary judgment. We disagree.
The first issue that must be determined is what this Court's standard of review is of this issue. Plaintiffs assert that this Court should review the matter de novo. However, defendants, relying on County of Rutherford ex rel. Hedrick v. Whitener, 100 N.C.App. 70, 394 S.E.2d 263 (1990), contend that our review is essentially a two-part process. First, defendants claim that the trial court must have considered their pleadings, i.e., their answers, “deemed amended” in order to include the affirmative defense of res judicata. This first determination should be reviewed under an abuse of discretion standard. Second, defendants argue that the trial court, based on that unpled affirmative defense of res judicata, concluded that summary judgment was proper, requiring a de novo standard of review on appeal.
Pursuant to Rule 8(c) of our North Carolina Rules of Civil Procedure, the affirmative defense of res judicata must be specifically pled in a party's responsive pleading. N.C. Gen.Stat. § 1A–1, Rule 8(c) (2011). However, this Court has specifically held that: “To avoid a decision based on a pleading technicality, we now hold that absent prejudice to plaintiff, an affirmative defense may be raised by a motion for summary judgment regardless of whether it was pleaded in the answer or not.” Whitener, 100 N.C.App. at 73–74, 394 S.E.2d at 265 (internal quotation marks omitted). However, the motion for summary judgment must “ordinarily refer expressly to the affirmative defense relied upon.” Id. In Barrett, Robert & Woods, Inc. v. Armi, 59 N.C.App. 134, 137–38, 296 S.E.2d 10, 13,disc. review denied, 307 N.C. 269, 299 S.E.2d 214 (1982), this Court noted that unpled defenses raised for the first time in a motion for summary judgment may be “deemed part of the pleadings.” See also Rabon v. Hopkins, 208 N.C.App. 351, 357–58, 703 S.E.2d 181, 186 (2010) (noting that “[i]n the context of summary judgment, this policy of liberality [favoring liberality in amendment of pleadings] urges the trial court to consider evidence of the unpleaded affirmative defense by either deeming the answer amended to conform to the evidence, or permitting formal amendment of the answer prior to considering the proof”). The trial court may, in turn, consider it in determining whether summary judgment is proper. Id. at 357, 703 S.E.2d at 186;see also Miller v. Talton, 112 N.C.App. 484, 487, 435 S.E.2d 793, 796–97 (1993) (holding that even affirmative defenses not pled in an answer or a motion for summary judgment may still be considered in resolving a motion for summary judgment if the issue was before the trial court).
Here, although neither of defendants' answers asserted the affirmative defense of res judicata, they raised the issue in their motions for summary judgment. Therefore, barring prejudice, the trial court was authorized to deem defendants' answers amended and could consider this defense in resolving defendants' motion for summary judgment. Generally, our standard of review regarding a formal amendment of pleadings is for an abuse of discretion. Delta Envtl. Consultants of N.C., Inc. v. Wysong & Miles Co., 132 N.C.App. 160, 165, 510 S.E.2d 690, 694 (1999). However, here, there was no formal amendment made. Instead, the trial court implicitly deemed the answers amended. On review, when a pleading is “deemed amended,” this Court has not reviewed the issue using an abuse of discretion standard, see Whitener, 100 N.C.App. at 74, 394 S.E.2d at 265,Tripp v. City of Winston–Salem, 188 N.C.App. 577, 583, 655 S.E.2d 890, 894 (2008), which is used when the trial court formally amends a pleading. Therefore, we review the issue de novo. See In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 563 (2008) (“Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.”) (internal quotation marks omitted).
While, as noted above, our prior cases give trial courts the discretion to consider an affirmative defense at the summary judgment stage that was not pled in the defendant's answer, we note that the better practice is for a defendant to expressly seek leave from the trial court pursuant to Rule 15 to amend its pleading to add the affirmative defense.
We note that when this issue arises in some of the federal courts, the district court is permitted to construe the motion for summary judgment additionally as a motion to amend. See Monahan v. New York City Dep't of Corr., 214 F.3d 275, 283 (2nd Cir.2000) (holding that “[a]lthough res judicata is an affirmative defense that should be raised in the defendant's answer, the district court has the discretion to entertain the defense when it is raised in a motion for summary judgment, by construing the motion as one to amend the defendant's answer”). As argued by defendants, if the district court elects to do so, the standard of review on appeal is abuse of discretion. Id. However, as discussed, when this Court has reviewed a trial court's decision to allow an unpleaded affirmative defense to be raised at summary judgment by deeming an answer amended, we do not review for abuse of discretion, and we are bound by these decisions. In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989).
Here, plaintiffs contend that the trial court should not have deemed the defendants' answers amended, as allowed in Whitener and Barrett, because of “financial prejudice.” Specifically, plaintiffs assert that they have incurred approximately $250,000 in discovery expenses due to the delay in asserting the affirmative defense.
While this Court has indicated that financial prejudice may be a factor when determining whether a trial court properly dismissed a complaint under Rule 41(b), see Dillahunt v. First Mount Vernon Indus. Loan Ass'n, 208 N.C.App. 568, 706 S.E.2d 841 (2010) (unpublished), disc. review denied,365 N.C. 329, 717 S.E.2d 396 (2011), we have yet to address whether the accrual of litigation costs, including discovery costs, may constitute prejudice to bar a defendant from raising an affirmative defense for the first time in a summary judgment motion. However, the issue has been addressed in the federal courts in regards to formal motions to amend. In Monahan v. New York City Dep't of Corr., 214 F.3d 275, 284 (2nd Cir.2000), the Second Circuit noted that:
In determining what constitutes “prejudice,” we generally consider whether the assertion of the new claim or defense would (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction.
(Emphasis added) (internal quotation marks omitted). In rejecting the party's claim that they suffered prejudice as a result of wasting money and resources, the Monahan Court stated that:
[T] he fact that one party has spent time and money preparing for trial will usually not be deemed prejudice sufficient to warrant a deviation from the rule broadly allowing amendment to pleadings. Rather, we will be most hesitant to allow amendment where doing so unfairly surprises the non-movant and impedes the fair prosecution of the claim.
Id. at 284 (internal citations omitted).
The Tenth Circuit has adopted a similar reasoning and concluded that “the expenditure of time, money, and effort alone is not grounds for a finding of prejudice” when determining whether to allow a party to amend its answer to include an affirmative defense. Bylin v. Billings, 568 F.3d 1224, 1230 (10th Cir.2009). The Tenth Circuit also noted that “[t]ypically, courts will find prejudice only when an amendment unfairly affects non-movants in terms of preparing their response to the amendment.” Id. at 1229 (internal quotation marks omitted). Similarly, the Sixth Circuit, see Granus v. N. Am. Philips Lighting Corp., 821 F.2d 1253, 1256 (6th Cir.1987), and Ninth Circuit, see Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir.2001), have adopted similar holdings. In Owens, the Ninth Circuit noted that although the appellants claimed they suffered prejudice as a result of substantial litigation expenses:
Appellants cite no case holding that prejudice should be measured by litigation expenses incurred before a motion to amend is filed. While we agree that delaying assertion of an affirmative defense for the purpose of forcing a party to incur unnecessary expenses would demonstrate bad faith, there is no evidence that [the moving party] acted with such a purpose.
Id.
We find the reasoning of the Second, Sixth, Ninth, and Tenth Circuits persuasive and conclude that incurred litigation costs would not constitute grounds to prohibit the trial court from allowing defendants to raise the res judicata affirmative defense for the first time in their motions for summary judgment for three primary reasons. First, there was no evidence that plaintiffs would be required to spend additional resources to defend the res judicata defense. Second, plaintiffs would not have been unfairly surprised by the defense because defendants raised it in their motion for summary judgment a month before the hearing. Finally, there is no indication in the record that defendants acted with bad faith. Therefore, plaintiffs have failed to establish sufficient prejudice to prevent the trial court from deeming their answers amended and considering the affirmative defense of res judicata in granting the motion for summary judgment.
Next, plaintiffs assert that the two-dismissal rule does not apply because there has only been one dismissal of an “action.” Therefore, the trial court erred in granting summary judgment in favor of defendants. We disagree.
Plaintiffs do not argue on appeal that “dropping” a case in Florida is different than “dismissing” it. In fact, they conceded at oral argument that it is essentially the same.
The two-dismissal rule, embodied in Rule 41(a)(1) of the North Carolina Rules of Civil Procedure, states that “a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of this or any other state or of the United States, an action based on or including the same claim.” “In enacting the two dismissal provision of Rule 41(a)(1), the legislature intended that a second dismissal of an action asserting claims based upon the same transaction or occurrence as a previously dismissed action would operate as an adjudication on the merits and bar a third action based upon the same set of facts.” Dunton v. Ayscue, 203 N.C.App. 356, 358, 690 S.E.2d 752, 753 (2010).
Plaintiffs' argument hinges on the definition of “action.” The term “action,” according to plaintiffs, encompasses the entire judicial proceeding against all the defendants. Thus, since plaintiffs did not dismiss the entire Florida action, only two defendants, SFSI and the City, the rule does not apply. However, plaintiffs' strict interpretation of the term “action” has no support in our Courts. In Graham v. Hardee's Food Sys., Inc., 121 N.C.App. 383, 384, 465 S.E.2d 558, 559 (1996), the plaintiff sued two defendants, Rogers and Hardee's. She voluntarily dismissed both defendants. Id. After refiling, she voluntarily dismissed the defendant Rogers a second time but continued her action against the second defendant, Hardee's. Id. With regard to the defendant who had been voluntarily dismissed twice, this Court held that “[s]ince plaintiff twice dismissed her claims against Rogers, this served as an adjudication in his favor upon the merits.” Id. at 384, 465 S.E.2d at 560. Thus, the fact that not all the defendants were dismissed a second time did not bar application of the two-dismissal rule. The Court also applied the two-dismissal rule under similar circumstances with multiple defendants in Wrenn v. Maria Parham Hosp., Inc., 135 N.C.App. 672, 680, 522 S.E.2d 789, 794 (1999). Therefore, plaintiffs' interpretation of the two-dismissal rule, whereby the Florida dismissal would not constitute a dismissal of the “action” because plaintiffs did not dismiss all defendants, is without merit.
Moreover, plaintiffs' reliance on Hopkins v. Ciba–Geigy Corp., 111 N.C.App. 179, 432 S.E.2d 142 (1993), is misplaced. In Hopkins, the plaintiff filed its initial action against two separate defendants. Id. at 182, 432 S.E.2d at 144. The plaintiff then filed two separate notices of dismissal, one for each defendant. Id. Although the defendants tried to argue that the two-dismissal rule would apply, this Court disagreed, noting that when the plaintiff filed the two voluntary dismissals:
[P]laintiffs had dismissed their entire first action. The two-dismissal rule, however, applies only when the plaintiff has twice dismissed an action based on or including the same claim. Here, plaintiffs dismissed their first action only once. Accordingly, the two-dismissal rule does not apply in this case.
Id. (internal citations omitted and emphasis in original). In other words, when the plaintiff dismissed each defendant, the dismissal against one defendant could not be used by the other defendant in order to apply the two-dismissal rule. In contrast, in the present case, each defendant had been specifically dismissed twice. Therefore, Hopkins is distinguishable.
Plaintiffs also contend that application of the two-dismissal rule would not serve the purpose of the rule “to protect civil defendants from the harassment of repetitive lawsuits.”
The purpose of the rule, “to prevent abuse and harassment by plaintiff securing numerous dismissals without prejudice,” City of Raleigh v. Coll. Campus Apartments, Inc., 94 N.C.App. 280, 284, 380 S.E.2d 163, 166 (1989), aff'd,326 N.C. 360, 388 S.E.2d 768 (1990), is accomplished by application of the rule here. Plaintiffs had already dismissed their identical claims against defendants in Florida. They then refiled their claims in North Carolina, the appropriate jurisdiction, and then dismissed them a second time before refiling in 24 May 2010. Moreover, plaintiffs allege that because there is no evidence of “abuse or harassment,” the trial court should not have applied the rule. However, there is nothing in our caselaw suggesting that evidence of abuse or harassment is required for application of the rule.
Plaintiffs also contend that application of the rule would not “serve the interests of fairness and justice.” Specifically, plaintiffs allege that the defense of res judicata should only be applied in particular situations where its application would not “work an injustice.”
While our Courts have concluded that “the doctrine [of res judicata] must be applied as justice and fairness require,” NW Fin. Group, Inc. v. County of Gaston, 110 N.C.App. 531, 538, 430 S.E.2d 689, 694 (1993), we believe that there is nothing inherently unfair or unjust in applying the two-dismissal rule in the present case. In contrast, we conclude that the notion of fairness is satisfied by not allowing plaintiffs to bring the same claims against defendants a third time. Therefore, plaintiffs' argument is without merit.
Next, plaintiffs argue that the trial court erred in denying plaintiffs' Rule 59 Motion. Specifically, plaintiffs contend that they raised new information at the hearing. We disagree.
Our standard of review for Rule 59(e) motions is abuse of discretion. Young v. Lica, 156 N.C.App. 301, 304, 576 S.E.2d 421, 423 (2003). “ [A]n appellate court should not disturb a discretionary Rule 59 order unless it is reasonably convinced by the cold record that the trial judge's ruling probably amounted to a substantial miscarriage of justice.” Worthington v. Bynum, 305 N.C. 478, 487, 290 S.E.2d 599, 605 (1982). Pursuant to Rule 59(e), a party may make a motion to alter or amend a judgment based on any grounds listed in Rule 59(a).
Here, plaintiffs did not specifically reference any of the grounds listed in Rule 59(a) as the basis for their motion. However, they claimed that their motion was based on “undue prejudice.” Plaintiffs raised the issue of “financial prejudice” at the summary judgment hearing, and the trial court rejected those arguments. “[A] Rule 59 motion cannot be used as a means to reargue matters already argued or to put forth arguments which were not made but could have been made at the trial court level.” Sellers v. Ochs, 180 N.C.App. 332, 335, 638 S.E.2d 1, 3 (2006) (internal quotation marks omitted). Thus, “financial prejudice” and undue prejudice may not be a basis for their Rule 59(e) motion.
Finally, with regard to the argument that the discovery obtained in North Carolina could hurt plaintiffs' recovery in Florida, we do not believe that the trial court abused its discretion by not allowing plaintiffs' Rule 59 motion on this basis. Plaintiffs claimed that a Florida jury would be allowed to allocate fault against nonparties, specifically defendants, pursuant to the Florida case of Fabre v. Martin, 623 So.2d 1182 (Fla.1993), receded from in part by Wells v. Tallahassee Mem'l Reg'l Med. Ctr., Inc., 659 So.2d 249 (Fla.1995). Accordingly, plaintiffs contend that any evidence obtained in the North Carolina litigation may diminish plaintiffs' recovery in Florida. However, we do not find that the possibility of a diminished verdict in Florida is sufficient enough for us to conclude that the trial court's denial of their Rule 59(e) motion constituted a miscarriage of justice. Thus, the trial court properly acted within its discretion and denied the Rule 59(e) motion.
Conclusion
Based on the foregoing reasons, we affirm the trial court's orders.
AFFIRMED. Judges McCULLOUGH and DAVIS concur.
Report per Rule 30(e).