Opinion
No. 4-671 / 03-2112
Filed January 13, 2005
Appeal from the Iowa District Court for Boone County, Michael J. Moon, Judge.
The plaintiffs appeal from the district court order that granted a defendant's motion to dismiss. REVERSED AND REMANDED.
Judd Kruse of Kruse Dakin Law Office, Boone, for appellant.
John Jordan of Jordan, Mahoney, Jordan Quinn, P.C., Boone, for appellee.
Considered by Sackett, C.J., and Vogel and Zimmer, JJ.
Plaintiffs Donald and Laura Elsberry appeal from a district court order that granted the motion to dismiss made by defendant Rick A. Wailes d/b/a Wailes Carpentry and Flooring (Wailes). We reverse the district court's dismissal order, and remand this matter for further proceedings not inconsistent with this opinion.
I. Background Facts and Proceedings.
In May 2000 the Elsberrys contracted with Wailes to build an addition on the Elsberrys' home. Construction was completed in October 2000, and the Elsberrys paid Wailes $47,641.99. By February 2001, the Elsberrys had detected defects in the hardwood floors that had been installed in the addition. They filed a small claims action against Wailes, seeking damages for the floor defects. In a January 2002 small claims ruling, a district associate judge determined the Elsberrys had established a substantial defect in the flooring, and awarded them damages in the amount of $2,892.34.
In August 2003 the Elsberrys filed a petition in district court against Wailes, the City of Boone, and Larry Swank, the city inspector who approved Wailes's work on the Elsberrys' home. The first division of the petition alleged that Wailes had breached the construction contract by "failing to properly construct the addition as promised," alleged that Wailes had breached an implied warranty the addition would be "constructed in a good and workmanlike manner," and forwarded a claim for exemplary damages due to Wailes's allegedly "outrageous" conduct. The second and third divisions of the petition made claims against the City of Boone and Swank, alleging Swank had failed to adequately inspect the construction of the addition.
Wailes filed a pre-answer motion to dismiss Count I of the petition, asserting that it failed to state any claims upon which relief could be granted. Wailes contended the current action was based on the same contract, and defects in the same addition, as was the small claims action, and thus the claims in Count I were barred by the doctrine of claim preclusion. The Elsberrys resisted the motion, asserting the district court action was based on a different and unrelated defect to the addition — a faulty wall — that was unknown to them at the time of the small claims action, and thus the alleged wrong, the recovery demanded, and the evidence in support of the claim were different than those in the first proceeding.
Wailes alternatively asserted that Count I should be dismissed because the doctrine of claim preclusion deprived the district court of subject matter jurisdiction. However, subject matter jurisdiction refers, not to the court's ability or authority to hear a particular matter, but to the court's power to hear the general class of cases to which a particular matter belongs. See In re Estate of Falck, 672 N.W.2d 785, 790 (Iowa 2003). Clearly, the district court has subject matter jurisdiction over contract disputes.
The district court granted the motion and dismissed all claims against Wailes. The court concluded the doctrine of claim preclusion barred litigation of the claims in Count I, as the Elsberrys had an obligation to explore and discover all "possible causes of action" at the time of the small claims proceeding, and allege "all of their separate and distinct objections to the project" at one time. The Elsberrys appeal.
II. Scope of Review.
We review the district court's ruling on a motion to dismiss for the correction of errors at law. Henry v. Shober, 566 N.W.2d 190, 191 (Iowa 1997). We assess the petition in the light most favorable to the Elsberrys and resolve all doubts and ambiguities in their favor. Id. III. Discussion.
Before discussing the merits of the appeal, we note that the parties' arguments center on facts not contained within the pleadings. However, the thrust of a motion to dismiss is directed at the pleadings; facts outside the pleadings will not generally be considered. Troester v. Sisters of Mercy Health Corp., 328 N.W.2d 308, 310 (Iowa 1982); see also Tate v. Derifield, 510 N.W.2d 885, 887 (Iowa 1994) (providing that a motion to dismiss cannot rely on facts outside the petition, except those of which judicial notice may be taken). Accordingly, we limit our review to those facts contained within the petition, and its attachments.
While there are limited situations in which a party may rely on facts outside the pleadings in support of a motion to dismiss, in those cases the proper procedure is to treat the motion as one for summary judgment. See Troester, 328 N.W.2d at 311. Reviewing the file in this matter, we cannot conclude the hearing and ruling on the motion to dismiss were tantamount to a summary judgment proceeding.
Turing to the merits of appeal, the Elsberrys concede that, of the three elements of claim preclusion, the first and third are clearly present: the parties to the two actions are identical, and there was a final judgment on the merits in the first action. See Arnevik v. University of Minnesota Bd. of Regents, 642 N.W.2d 315, 319 (Iowa 2002). The dispute centers upon the second element of claim preclusion: whether the claim made in the district court action was fully and fairly litigated in the prior small claims action. See id.
The goal of claim preclusion is to avoid piecemeal litigation. Iowa Coal Min. Co. v. Monroe County, 555 N.W.2d 418, 441 (Iowa 1996). Thus, "[a] party must litigate all matters growing out of his claim at one time and not in separate actions. A party is not entitled to a second day in court simply by alleging a new ground of recovery for the same wrong." Id. (citations and internal quotation marks omitted). However, it is important to note the difference between like claims or causes of action supported by different theories of recovery, and separate but related causes of action, based on different alleged wrongs, which share some underlying facts. While the former will be barred, the latter will not. Id. at 442. In assessing whether a party is forwarding the same or a distinct cause of action, "we examine (1) the protected right, (2) the alleged wrong, and (3) the relevant evidence." Id. at 441.
Given this detailed, three-prong analysis, the nature of a dismissal for failure to state a claim becomes critical. A motion to dismiss should be sustained only if the face of the petition reveals no right of recovery under any state of facts. Leuchtenmacher v. Farm Bureau Mut. Ins. Co., 460 N.W.2d 858, 861 (Iowa 1990). Because Iowa requires only notice pleading, a petition need not recite the ultimate facts that support the plaintiffs' claims. Smith v. Smith, 513 N.W.2d 728, 730 (Iowa 1994). It need only allege enough facts as to give the defendant "fair notice" of the incident giving rise to the claim and the claim's general nature. Id. Thus, it is a rare case that will not survive a motion to dismiss for failure to state a claim upon which relief can be granted. Id.
Here, while it is entirely possible the breach alleged in the second action has or should have been fully and fairly and litigated in the first action, that conclusion is not inevitable. We cannot know, at this early stage of the proceeding, whether the recovery demanded in the two proceedings are the same, or whether the same evidence supports both actions. See Iowa Coal, 555 N.W.2d at 441. It is entirely possible that the Elsberrys could prove a state of facts to sustain this action which is different from that established in the small claims action. If they do so, then the judgment in the small claims action should not serve as a bar to the claims advanced in Count I of this proceeding. See id.
Wailes asserts it does not matter what facts might be developed in support of the claims in Count I, because they arise out of the same transaction as the cause of action in the small claims proceeding — the construction of the addition. However, determining whether the claims arise from the same transaction or common nucleus of operative facts is necessarily a fact-laden inquiry:
The expression "transaction, or series of connected transactions," is not capable of a mathematically precise definition; it invokes a pragmatic standard to be applied with attention to the facts in the cases. And underlying the standard is the need to strike a delicate balance between, on the one hand, the interests of the defendant and of the courts in bringing litigation to a close and, on the other, the interest of the plaintiff in the vindication of a just claim.
. . . .
Though no single factor is determinative, the relevance of trial convenience makes it appropriate to ask how far the witnesses or proofs in the second action would tend to overlap the witnesses or proofs relevant to the first.Leuchtenmacher, 460 N.W.2d at 860 (quoting Restatement (Second) of Judgments § 24 cmt. b., at 196 (1982)). We cannot conclude, as a matter of law, that the claims at issue here arose out of the same transaction merely because they arose under one contract. See, e.g., Iowa Coal, 555 N.W.2d at 442 (discussing cases where claim preclusion did not apply, even though claims arose under one lease, or one promissory note).
IV. Conclusion.
The district court erred in dismissing Count I of the Elsberrys' petition. Depending upon the evidence developed during the course of litigation, it is possible for the Elsberrys to prove a state of facts that establishes a cause of action separate and distinct from the one raised in their small claims action. Accordingly, the district court order is reversed. This matter is remanded for further proceedings not inconsistent with this decision.