Magnet Bank v. Barnette
Annotate this CaseJanuary 1992 Term
___________
No. 20406
___________
MAGNET BANK, F.S.B.,
Plaintiff Below, Appellee
v.
WILLIAM A. BARNETTE, FRANK M. MORRISON,
AND MOUNTAIN TOP ATHLETIC CLUB, INC.,
A CORPORATION,
Defendants and Third-Party Plaintiffs Below,
Appellants
v.
ROBERT P. MARTIN,
Third-Party Defendant Below,
Appellee
_______________________________________________________
Appeal from the Circuit Court of Pocahontas County
Honorable Frank E. Jolliffe, Judge
Civil Action No. 86-C-130
Reversed
________________________________________________________
Submitted: April 29, 1992
Filed: May 29, 1992
Michael C. Allen
Charleston, West Virginia
Christopher P. Bastien
Charleston, West Virginia
Attorneys for the Appellee
Robert P. Martin
David A. Sims
Michele W. Good
Wallace, Ross & Harris
Elkins, West Virginia
Attorneys for Appellants
The Opinion of the Court was delivered PER CURIAM.
SYLLABUS BY THE COURT
1. "'The provisions for impleader under Rule 14(a),
West Virginia Rules of Civil Procedure, . . . are within the sound
discretion of the trial court and where the third party procedure
may create confusion or cause complicated litigation involving
separate and distinct issues the trial court does not abuse its
discretion in refusing to allow impleader under third party
practice.' Syl. Pt. 5, in part, Bluefield Sash & Door Co., Inc. v.
Corte Constr. Co., 158 W. Va. 802, 216 S.E.2d 216 (1975), overruled
on other grounds, Haynes v. City of Nitro, 161 W. Va. 230, 240 S.E.2d 544 (1977)." Syllabus Point 5, Shamblin v. Nationwide Mut.
Ins. Co., 183 W. Va. 585, 396 S.E.2d 766 (1990).
2, "'Impleader under Rule 14(a), West Virginia Rules of
Civil Procedure, should not be allowed if there is a possibility of
prejudice to the original plaintiff or the third party defendant.'
Syl. Pt. 3, Bluefield Sash & Door Co., Inc. v. Corte Constr. Co.,
158 W. Va. 802, 216 S.E.2d 216 (1975), overruled on other grounds,
Haynes v. City of Nitro, 161 W. Va. 230, 240 S.E.2d 544 (1977)."
Syllabus Point 6, Shamblin v. Nationwide Mut. Ins. Co., 183 W. Va.
585, 396 S.E.2d 766 (1990).
3. "The purpose of Rule 14(a), West Virginia Rules of
Civil Procedure, permitting impleader of a third party defendant by
the original defendant, is to eliminate circuity of actions when
the rights of all three parties center upon a common factual
situation." Syllabus Point 1, Bluefield Sash & Door Co., Inc. v.
Corte Constr. Co., 158 W. Va. 802, 216 S.E.2d 216 (1975), overruled
on other grounds, Haynes v. City of Nitro, 161 W. Va. 230, 240 S.E.2d 544 (1977).
Miller, Justice:
In this appeal, the defendants and third-party plaintiffs
assert that the trial court erred in dismissing their complaint.
The basis for the trial court's dismissal was that the third-party
complaint was unrelated to the matters arising out of the original
complaint. The court concluded that the third-party complaint did
not meet the criteria of Rule 14 of the West Virginia Rules of
Civil Procedure, which governs third-party actions. We disagree.
Rule 14(a) permits a defendant to bring a third-party
complaint against "a person not a party to the action who is or may
be liable to him for all or part of the plaintiff's claim against
him." Similar language is found in Rule 14 of the Federal Rules of
Civil Procedure, from which our Rule 14 was taken.
The appellee third-party defendant relies mainly on
Shamblin v. Nationwide Mutual Insurance Co., 183 W. Va. 585, 396 S.E.2d 766 (1990), where we affirmed the trial court's initial
denial of a motion to bring a third-party action.See footnote 1 In Shamblin,
the defendant attempted to file the third-party complaint more than
four years after the lawsuit was filed and two months before the
actual trial. In Syllabus Points 5 and 6 of Shamblin, we quoted
with approval Syllabus Point 3, in its entirety, and Syllabus Point
5, in part, of Bluefield Sash & Door Co., Inc. v. Corte
Construction Co., 158 W. Va. 802, 216 S.E.2d 216 (1975), overruled
on other grounds by Haynes v. City of Nitro, 161 W. Va. 230, 240 S.E.2d 544 (1977):
"5. 'The provisions for impleader
under Rule 14(a), West Virginia Rules of Civil
Procedure, . . . are within the sound
discretion of the trial court and where the
third party procedure may create confusion or
cause complicated litigation involving
separate and distinct issues the trial court
does not abuse its discretion in refusing to
allow impleader under third party
practice.'. . .
"6. 'Impleader under Rule 14(a),
West Virginia Rules of Civil Procedure, should
not be allowed if there is a possibility of
prejudice to the original plaintiff or the
third party defendant.'. . ." (Citations
omitted).
Bluefield Sash & Door involved a certified question
relating to a Rule 14(a) third-party action. We concluded that the
trial court had not abused its discretion by dismissing the third-party action, because the issues in the third-party suit were
unrelated to those in the main action. We spoke in Syllabus Point
1 of Bluefield Sash & Door as to the rationale behind Rule 14:
"The purpose of Rule 14(a), West
Virginia Rules of Civil Procedure, permitting
impleader of a third party defendant by the
original defendant, is to eliminate circuity
of actions when the rights of all three
parties center upon a common factual
situation."
We have not had occasion to discuss in any detail the
type of claim which the defendant must assert to meet the
requirement of Rule 14(a) that the third-party defendant "is or may
be liable to him for all or part of the plaintiff's claim[.]" The
federal courts have considered this question and in 3 James Wm.
Moore, et al., Moore's Federal Practice ¶ 14.07(1) at 14-45-46
(1991), this summary is given:
"Thus, 'claim' is defined
transactionally, and has nothing to do with
the legal theory upon which a party relies.
The fact that the third-party complaint may be
based upon a different legal theory from the
underlying case is irrelevant; the question is
whether the assertion of liability against the
third-party defendant is derivative of the
same transaction, occurrence or nucleus of
operative fact as the underlying claim by the
plaintiff. If the transactional relatedness
is present, impleader is proper even if the
third-party complaint will be tried to the
court while the underlying action will be
tried to a jury. In sum, it is clear that the
remedial purpose of Rule 14 requires that it
be interpreted liberally to promote its
underlying purposes." (Footnotes omitted).
In this case, the defendants had borrowed $35,000 from
Magnet Bank in April of 1984 and, as security for the loan, pledged
their leasehold estate, including a building and the fixtures,
equipment, and inventory located therein. The lessor of the
property filed for bankruptcy in 1985. After the bankruptcy
filing, the defendants discovered that the lease had not been
recorded. As a result, the bankruptcy court declared the lease
void in November 1987 and caused the loss of the security to the
Bank. (The Bank had sued the appellants in November 1986 for the
amount due on the loan.)
In June of 1989, the appellants filed a motion to serve
a third-party complaint on the defendant-appellee, which the trial
court granted. Thereafter, in December of 1989, the appellants
settled with the Bank and, in July of 1990, the appellee filed his
motion to dismiss the third-party complaint. The circuit judge, in
granting the motion, referred to the Shamblin case and concluded
that there was a lack of common issues. He reasoned that the
original claim by the Bank was to collect on a debt, while the
third-party claim centered on a theory of attorney malpractice in
failing to record the lease.
From a purely factual analysis, it appears that the
third-party claim is derived from the original loan to the Bank.
Certainly, the solvency of the security constituted a substantial
interest to the Bank, but was of equal importance to the individual
guarantors of the loan. These individuals, who were named
defendants in the Bank's suit, had a right to claim that if the
security agreement had been validated by a timely recording of the
lease, their personal liability would have been at least
diminished, if not offset, by the security.
These facts are analogous to those in May's Family
Centers, Inc. v. Goodman's, Inc., 104 F.R.D. 112 (N.D. Ill. 1985),
where May's sued Goodman's because of its refusal to consent to an
assignment of May's lease. Goodman's, in turn, filed a third-party
complaint against its law firm based on the claim that if there was
any legal impropriety in the failure to consent to the assignment,
it was due to the negligence of the law firm. The court, in
upholding the third-party complaint, stated:
"[T]here is considerable overlap between the
facts necessary to establish May's breach of
contract claim and those underlying Goodman's
malpractice claim. . . . To require Goodman's
to duplicate those proofs in a separate action
would not only waste resources (including
judicial resources)--it would also create an
unfair risk of inconsistent determinations
from the same facts in the two actions." 104 F.R.D. at 116.
In Taylor v. G I Export Corp., 78 F.R.D. 494 (E.D.N.Y.
1978), the plaintiff sued for breach of contract. The defendant
had agreed to purchase the plaintiff's two corporations. The
defendant filed a third-party complaint alleging that the
negligence of Arthur Andersen & Company, an accounting firm, in
preparing financial statements had caused the contract not to be
performed. The court rejected the motion to dismiss the third-party claim because the underlying action proceeded on a breach of
contract theory, while the third-party claim was based on
negligence of the accounting firm:
"The law requires no such unjust result.
There can be no doubt that if Arthur Andersen
was negligent and that negligence proximately
caused damages to G I Export, it could recover
in a separate action. . . . To say that such
a claim for damages by G I Export cannot be
litigated in the very proceeding which will
determine whether there was damage is to make
litigation a game." 78 F.R.D. 495-96.
See also Monarch Life Ins. Co. v. Donohue, 702 F. Supp. 1195 (E.D.
Pa. 1989); O'Mara Enterprises, Inc. v. Mellon Bank, N.A., 101 F.R.D. 668 (W.D. Pa. 1983).
As earlier stated, we find that there was a sufficient
factual nexus to warrant a Rule 14(a) procedure. We, therefore,
conclude that the trial court erred in dismissing the third-party
action, and its judgment is, therefore, reversed.
Reversed.
Footnote: 1Rule 14(a) requires a defendant to seek leave of court to file a third-party action unless it is served "not later than 10 days after he serves his original answer."
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