Summary
holding that denial of leave to amend based on futility is subject to claim preclusion, but implying that denial of leave to amend based on other reasons may not be subject to claim preclusion
Summary of this case from Darrow v. City of PottervilleOpinion
Docket No. 54211.
Decided March 18, 1982.
Wayne County Neighborhood Legal Services, Inc. (by Michael A. Gehrls and Mark H. Magidson), for plaintiffs.
Dykema, Gossett, Spencer, Goodnow Trigg (by Joseph F. Lucas), for Michigan Consolidated Gas Company.
Michael D. Gladstone, for The Detroit Edison Company.
Plaintiffs appeal as of right from an order of accelerated judgment in favor of defendants Michigan Consolidated Gas Company and The Detroit Edison Company, granted on the ground of res judicata.
Plaintiffs were tenants in a Detroit multi-unit apartment building owned and operated by defendant Deuchler. On February 15, 1979, Michigan Consolidated Gas and Detroit Edison, at the request of Deuchler, terminated the gas and electric services to the building. The following day, plaintiff's filed suit in Wayne County Circuit Court seeking injunctive relief and damages to remedy the alleged wrongful termination of utility services. Plaintiffs contended that Deuchler had violated MCL 600.2918; MSA 27A.2918 by in effect forceably evicting them in an unlawful manner. Plaintiffs further alleged that Michigan Consolidated Gas and Detroit Edison failed to comply with the Michigan Public Service Commission rules and violated the plaintiffs' due process rights by terminating utility services without providing plaintiffs with prior notice and a hearing.
The two utility companies filed motions for summary and/or accelerated judgment with regard to the latter claims. The motions were granted on May 4, 1979, and rehearing was denied on July 20, 1979. On July 20, plaintiffs also filed a motion to amend their complaint, seeking to add claims that the utility companies violated MCL 600.2918; MSA 27A.2918 by (1) acting as agents of Deuchler and (2) conspiring with Deuchler to shut off the gas and electricity. The trial court denied the motion to amend on the basis that the added counts did not state valid causes of action.
Although that suit is presently on appeal to this Court, plaintiffs apparently have not argued that the trial court erred in denying their motion to amend.
On February 14, 1980, plaintiffs commenced the present suit against defendants Deuchler, Michigan Consolidated Gas Company and The Detroit Edison Company. Plaintiffs' complaint reiterated those claims that they attempted unsuccessfully to add in the former case. The two utility companies filed motions for accelerated judgment, asserting that the prior disposition was res judicata. The motions were heard and granted on August 1, 1980. Plaintiffs' motion for rehearing was subsequently denied and the present appeal then filed.
The issue presented in this appeal is whether the denial of plaintiffs' motion to amend their pleadings in the first suit constituted an adjudication on the merits of those new claims which would have been contained in the amended complaint. Michigan law applies the broad rule of res judicata, barring not only claims actually litigated but also those claims arising out of the same transaction which the plaintiff could have brought, but did not. Gose v Monroe Auto Equipment Co, 409 Mich. 147, 160; 294 N.W.2d 165 (1980). However, when a particular claims was not actually litigated, the res judicata doctrine is tempered by GCR 1963, 203.1, which requires a defendant to object to the splitting of causes of action at the first proceeding. Because defendants failed to object during the first proceeding (indeed, defendants opposed the motion to amend), GCR 1963, 203.1 would appear to preclude application of the broad rule of res judicata. Rogers v Colonial Federal Savings Loan Ass'n of Grosse Pointe Woods, 405 Mich. 607; 275 N.W.2d 499 (1979). Therefore, the critical question here is whether the claims were adjudicated on the merits in the prior suit. We believe that such an adjudication did occur, and affirm.
Although the Supreme Court ultimately dismissed the Rogers appeal, 405 Mich. 607, 637, the Court apparently considered its application of GCR 1963, 201.3 to be correct. See Gose v Monroe Auto Equipment Co, 409 Mich. 147, 172, fn 4; 294 N.W.2d 165 (1980), Gose, supra, 203, fn 20 (LEVIN, J., dissenting).
In most instances, the denial of a motion to amend will not be a decision on the merits. For example, when amendment is denied because of undue delay, bad faith, dilatory motive or undue prejudice to the opposing party, Ben P Fyke Sons v Gunter Co, 390 Mich. 649, 656; 213 N.W.2d 134 (1973), the substance of the claims sought to be added will not likely have been considered. However, when, as in the present case, the denial is made on the basis of the futility of the amendment, it is in effect a determination that the added claims are substantively without merit; that is, that the claims are frivolous or legally insufficient on their face. See 6 Wright Miller, Federal Practice Procedure, § 1487, pp 432-433. Such a determination is entitled to res judicata impact.
In deciding this case, we express no opinion on the correctness of the trial court's determination in the first suit that amendment was futile. We observe that the Supreme Court has indicated that, in view of the scant record before a trial court reviewing a motion to amend, disposition on the merits should be made only when the claim is insufficient on its face. Fyke Sons, supra, 660. Nonetheless, the propriety of the trial court's actions in the first case could only be considered on direct appeal from that disposition.
Affirmed.
J.H. GILLIS, J., concurs in all but the last paragraph of the opinion.