Dempsey v. Cessna Aircraft Co.

WIEAND, Judge:

Chester Dempsey entered an agreement to settle a personal injury action pending against The Cessna Aircraft Company (Cessna) in Montgomery County for the sum of three hundred thousand ($300,000.00) dollars. After the settlement had been completed and the consideration paid, however, Dempsey ascertained that Cessna had failed to disclose certain- information during discovery which may have strengthened his claim. Therefore, he filed an action against Cessna in the United States District Court for the Eastern District of Pennsylvania in which he alleged, inter alia, that he had been induced to settle by fraud. The federal court dismissed the action, holding, under Pennsylvania law, that Dempsey had affirmed the contract and waived the fraud, if any, by failing to disaffirm the settlement and offering to return the consideration. This decision was affirmed by the Third Circuit Court of Appeals. See: Dempsey v. Associated Aviation Underwriters, 977 F.2d 567 (3rd Cir.1992). Thereafter, Dempsey filed in Montgomery County a petition to set aside the settlement on grounds of fraud. The Montgomery County Court, in response to preliminary objections, dismissed the petition on grounds of res judicata.¹ From this order, Dempsey filed the instant appeal. After careful review, we affirm.

Dempsey had been injured when a Cessna C-150 single engine aircraft crashed during take off. He filed an action against Cessna to recover for injuries sustained, alleging strict liability, negligence and breach of warranty.² This case was settled prior to trial for the sum of three hundred thousand ($300,000.00) dollars. Subsequently, Dempsey learned that Cessna had been aware of fuel tank problems with the aircraft and that this information had not been disclosed during discovery. Contending that he had been induced to settle by fraud, Dempsey filed the federal action and, after that action had been dismissed, the petition in Montgomery County to set aside the settlement.

In Nocito v. Lanuitti, 402 Pa. 288, 167 A.2d 262 (1961), where the plaintiff sought to recover damages for fraud which had induced him to execute a release in a trespass action, the Supreme Court affirmed a judgment in favor of the defendant. The Court said:

If the procurement of this release was by fraud, when Nocito discovered it he had his choice either to disaffirm the contract and offer to return to Lanuitti or his insurance carrier the consideration for this release or to affirm the voidable contract and waive the fraud. Nocito’s failure to tender back the consideration after he discovered the alleged fraud constituted a waiver of the fraud and an affirmance of the contract: Walker v. Harbison, 283 Pa. 111, 128 A. 732; [ (1925) ] Corporation Funding & Finance Co. v. Stoffregen, 264 Pa. 215, 107 A. 727. [ (1919) ]

Id. at 290, 167 A.2d at 263. See also: Hess v. Evans, 288 Pa.Super. 180, 182, 431 A.2d 347, 348 (1981). It was in reliance on this state of the law pertaining to the setting aside of settlements that Dempsey’s action for fraud was dismissed by the United States District Court for the Eastern District of Pennsylvania.

Was this decision res judicata in the subsequent attempt by Dempsey to move in the state court to set aside the settlement? We conclude that it was.

The doctrine of res judicata holds that “[a] final valid judgment upon the merits by a court of competent jurisdiction bars any future suit between the same parties or their privies on the same cause of action.” Mintz v. Carlton House Partners, Ltd., 407 Pa.Super. 464, 474, 595 A.2d 1240, 1245 (1991), quoting Stevenson v. Silverman, 417 Pa. 187, 190, 208 A.2d 786, 788 (1965), cert. denied, 382 U.S. 833, 86 S.Ct. 76, 15 L.Ed.2d 76 (1965). The purpose of the doctrine is “to minimize the judicial energy devoted to individual cases, establish certainty and respect for court judgments, and protect the party relying on the prior adjudication from vexatious litigation.” Mintz v. Carlton House Partners, Ltd., supra at 474, 595 A.2d at 788, quoting Lebeau v. Lebeau, 258 Pa.Super. 519, 524, 393 A.2d 480, 492 (1978).

Where parties have been afforded an opportunity to litigate a claim before a court of competent jurisdiction, and where the court has finally decided the controversy, the interests of the state and of the parties require that the validity of the claim and any issue actually litigated in the action not be litigated again.

Ham v. Sulek, 422 Pa.Super. 615, 621-622, 620 A.2d 5, 8 (1993). Regardless of whether the plaintiff effects a recovery in the first action, he may not relitigate an action which has once been adjudicated. 46 Am.Jur.2d, Judgments § 404.

Application of the doctrine of res judicata requires that the two actions possess the following common elements: (1) identity of the thing sued upon; (2) identity of the cause of action; (3) identity of the parties; (4) identity of the capacity of the parties. Matternas v. Stehman, 434 Pa.Super. 255, 261-63, 642 A.2d 1120, 1123 (1994); McArdle v. Tronetti 426 Pa.Super. 607, 612, 627 A.2d 1219, 1222 (1993), allocatur denied, 537 Pa. 622, 641 A.2d 587 (1984); Banker v. Valley Forge Ins. Co., 401 Pa.Super. 367, 373-374, 585 A.2d 504, 508 (1991), allocatur denied, 529 Pa. 615, 600 A.2d 532 (1991). Here, it is clear that the first, third and fourth elements are present, and we need focus only on the second element.

“The term ‘cause of action’ is not easily defined, and the authorities have laid down no thoroughly satisfactory and all-embracing definition____” 46 Am.Jur.2d, Judgments § 406.

A fundamental test applied for comparing causes of action, for the purpose of applying principles of res judicata, is whether the primary right and duty, and delict or wrong, are the same in each action. Under this test, there is but one cause of action where there is but one right in the plaintiff and one wrong on the part of the defendant involving that right.

46 Am.Jur.2d, Judgments § 406 (footnotes omitted). Thus, it has been said that the primary focus should be whether the ultimate and controlling issues have been decided. Hammel v. Hammel, 431 Pa.Super. 230, 238, 636 A.2d 214, 218 (1994). See also: Hopewell Estates, Inc. v. Kent, 435 Pa.Super. 471, 477, 646 A.2d 1192, 1195 (1994); Mintz v. Carlton House Partners, Ltd., supra at 475, 595 A.2d at 1247; In Re Jones & Laughlin Steel Corp., 328 Pa.Super. 442, 450, 477 A.2d 527, 531 (1984); Magee v. Grange Nat. Bank of Wyoming County, 149 Pa.Super. 477, 480, 27 A.2d 488, 489 (1942).

Identity of two causes of action may be determined by considering the similarity in the acts complained of and the demand for recovery as well as the identity of the witnesses, documents and facts alleged. McArdle v. Tronetti, supra at 612, 627 A.2d at 1222; In Re Jones & Laughlin Steel Corp., supra at 450-451, 477 A.2d at 531. “In determining whether res judicata should apply, a court may consider whether the factual allegations of both actions are the same, whether the same evidence is necessary to prove each action and whether both actions seek compensation for the same damages.” Hopewell Estates, Inc. v. Kent, supra at 476-77, 646 A.2d at 1194-1195. See also: Mintz v. Carlton House Partners, Ltd., supra at 475, 595 A.2d at 1246; Magee v. Nat. Bank of Wyoming County, supra at 480, 27 A.2d at 489. “If the acts or transactions giving rise to causes of action are identical, there may be sufficient identity between two actions for the summary judgment in the first action to be res judicata in the second.” 10 Standard Pa.Practice 2d, Judgments § 65:50 (footnote omitted).

In the federal action, the issues were whether Cessna had withheld information which Dempsey had sought to discover and had thereby induced the appellant by fraud to settle his claim. In Dempsey’s state court petition he raised the same issues. Thus, the complaint in the federal action and the petition in the state action both relied upon and asserted the same conduct and transaction. Both actions also alleged the same injury, i.e., appellant’s acceptance of an unfavorable settlement. Finally, both actions relied upon the same evidence — the discovery information which was allegedly withheld. In order to prevail in both actions it was necessary to prove fraud. In both actions, moreover, the cause of action would be defeated by an affirmance of the settlement after the facts had become known.

It is of no consequence that the federal action was commenced by complaint and the state action was commenced by petition to set aside a settlement agreement. The form in which two actions are commenced does not determine whether the causes of action are identical. 10 Standard Pa.Practice 2d, Judgments § 65:49.

The application of the doctrine of res judicata to identical causes of action does not depend upon the identity or differences in the forms of the two actions. A judgment upon the merits bars a subsequent suit upon the same cause, though brought in a different form of action, and a party therefore cannot, by varying the form of action or adopting a different method of presenting his case, escape the operation of the principle that one and the same cause of action shall not be twice litigated.

46 Am.Jur.2d, Judgments § 411 (footnotes omitted).

Appellant also cannot avoid the consequences of a prior judicial determination merely by altering the character of the relief sought. See: Stevenson v. Silverman, supra at 192, 208 A.2d at 788. Where the damages suffered are a consequence of the same actions alleged in an earlier suit, a new cause of action is not present merely because the relief sought has changed. Sustrik v. Jones & Laughlin Steel Corp., 413 Pa. 324, 327, 197 A.2d 44, 46 (1964). Res judicata may bar a second action based upon the same transaction even if additional grounds for relief are presented. Larsen v. Larsen, 392 Pa. 609, 611, 141 A.2d 353, 354 (1958). “[T]he fact that a different form or measure of relief is asked does not preclude the application of the judgment to estop the maintenance of the second action; for application of the doctrine, it is not necessary that the two actions be identical with respect to the relief sought.” 46 Am.Jur.2d, Judgments § 412 (footnotes omitted). See also: 46 Am.Jur.2d, Judgments § 411 (Where there has been a judgment on the merits, plaintiff may not maintain a second action to enforce another remedy.) That appellant sought monetary damages in the federal court but requested equitable relief in the nature of rescission in the state court does not change the fact that he had a single cause of action.

The decision in Briggs v. Erie Ins. Group, 406 Pa.Super. 560, 594 A.2d 761 (1991), does not command a different result. There the two actions involved different parties, and the decision of the majority considered only the defense of collateral estoppel. It remained for the author of the concurring opinion to observe that res judicata could have no application because the parties were not the same. Nevertheless, to the extent that Briggs can be interpreted as holding that an action to rescind a release for fraud and an action to recover damages for fraud are not the same cause of action for purposes of res judicata, Briggs is disapproved.³ See: Nocito v. Lanuitti supra. See also: Wedgewood Diner v. Good, 368 Pa.Super. 480, 534 A.2d 537 (1987).

Appellant, when he discovered information which had not been supplied during discovery, asserted that he had been induced to settle his claim by fraud. He could then either have disaffirmed the settlement and offered to return the amount which he had been paid or he could have affirmed the settlement and waived the fraud. In a federal action to recover additional damages the court held that he had affirmed the settlement and waived the fraud. That decision is now res judicata and bars the present, subsequent action to rescind the settlement and set it aside.⁴

Affirmed.

McEWEN, J., files a concurríng opinion. CIRILLO, J., files a dissenting opinion in which KELLY, J., joins.

1 . As a general rule, res judicata is an affirmative defense and should be pleaded as new matter in an answer. See: Pa.R.C.P. 1030. In the instant case, however, the facts are not in dispute, and neither party has objected to the procedure followed in the trial court.

2 . Cessna subsequently joined as additional defendants various parties who had been charged with maintenance of the aircraft.

3 . Appellant implies that the decision of the federal court in the action to recover damages for fraud was incorrect because it was at variance with the decision in Briggs. However, the Briggs court did not consider the decision of the Supreme Court in Nocito v. Lanuitti, supra, upon which the federal court relied. Moreover, and in any event, even if it could be said that the decision by the federal court was subject to question, it would not prevent the application of res judicata to a subsequent assertion of the same cause of action in another court.

4 . Because we hold that appellant's petition to rescind his settlement is barred by principles of res judicata, i.e., claim preclusion, we do not consider appellee’s additional arguments that the petition is also barred by principles of collateral estoppel, i.e., issue preclusion, and the doctrine of election of remedies.