State v. Carroll

State v. Carroll (99-472); 171 Vt. 395; 765 A.2d 500

[Filed 01-Dec-2000]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 99-472


State of Vermont	                         Supreme Court

                                                 On Appeal from
     v.	                                         Washington Superior Court


John and Adrienne Carroll	                 September Term, 2000

     v.

Mobil Oil Corp.; Mary Heaslip; Merrill 
Transport Co., d/b/a J.A. Carmen Trucking
Co., Inc.; Melru Corp.; and Vermont 
Railway, Inc.


David A. Jenkins, J.

David W. Gartenstein of Downs Rachlin & Martin PLLC, Brattleboro, for 
  Plaintiffs-Appellants.

Shannon A. Bertrand of Reiber, Kenlan, Schwiebert, Hall & Facey, P.C., Rutland,
  for Defendant-Appellee.


PRESENT:  Dooley, Morse and Skoglund, JJ., and Davenport, Supr. J., and 
          Gibson, J. (Ret.), Specially Assigned


       MORSE, J.   John and Adrienne Carroll appeal the Washington Superior
  Court's dismissal  of their third-party complaint against Melru
  Corporation.  The court determined that the Carrolls'  third-party
  complaint against Melru for contribution and indemnification pursuant to 10
  V.S.A.  § 6615(i) for clean-up costs incurred by the State related to
  hazardous materials located on the  Carrolls' property was precluded by a
  judgment in a previous action between the parties.  The 

 

  Carrolls argue that res judicata should not apply in this case to bar their
  present claim against Melru.  We agree and, therefore, reverse.

       In August 1997, the State of Vermont brought an action against the
  Carrolls under 10 V.S.A.  § 6615 for clean-up costs it had incurred in its
  ongoing efforts to remedy petroleum contamination  located on a piece of
  property owned by the Carrolls.  A fuel storage and distribution facility
  had  been operated on the property under several different owners starting
  in the early 1900s.  Having  been alerted to the petroleum contamination of
  the site, the State engaged in investigatory and  remedial activities
  starting in 1990.  As of October 1998, the State had incurred roughly
  $355,000 in  costs. 

       Under 10 V.S.A. § 6615(i), the Carrolls filed a third-party complaint
  against several  potentially responsible parties as third-party defendants,
  seeking contribution and indemnification for  their share of the clean-up
  costs.  The parties were Mobil Oil Corp., Mary Heaslip, Merrill Transport 
  Co., Vermont Railway, Inc., and Melru.  Melru thereafter brought a motion
  to dismiss the claim  against it, arguing that a judgment in its favor on a
  counterclaim brought by the Carrolls in a prior  action foreclosed the
  present claim. 

       Melru, which owned a parcel of property neighboring the Carrolls'
  property, had brought suit  against the Carrolls in 1992 seeking damages
  for petroleum contamination of its land stemming from  activity on the
  Carrolls' property.  The Carrolls filed a counterclaim for damages and
  equitable relief  based on an allegation that leakage from a 275-gallon
  fuel tank on Melru's property had caused  contamination of their property. 
  In 1995, after a bench trial, the Bennington Superior Court entered 
  judgment in favor of Melru on the Carrolls' counterclaim, determining that,
  although there  was a  contamination plume extending from Melru's property
  onto that of the Carrolls, the evidence of 

 

  causation linking the plume and the contamination on the Carrolls' property
  was "slight" and that the  Carrolls had failed to prove damages resulting
  from the contamination plume.

       After reviewing the earlier judgment and following a hearing, the
  trial court in this case  determined that the Carrolls' present claim was
  barred by res judicata.  The court dismissed the claim  against Melru,
  entering a final judgment in the case with respect to Melru only.  The
  Carrolls appeal  to this Court.

       Res judicata, or claim preclusion, generally bars the litigation of a
  claim if there exists an  earlier final judgment in which "the parties,
  subject matter and causes of action are identical or  substantially
  identical."  Russell v. Atkins, 165 Vt. 176, 179, 679 A.2d 333, 335 (1996)
  (internal  quotation marks and citations omitted); see also Restatement
  (Second) of Judgments § 19 (1982) ("A  valid and final personal judgment
  rendered in favor of the defendant bars another action by the  plaintiff on
  the same claim.").  In other  words, for res judicata to apply, there must
  be (1) a valid  final judgment in the prior action, (2) identity between
  the parties to the prior action and the present  action, (3) the same
  subject matter involved in both actions and (4) the same causes of action 
  involved.  Res judicata bars not only claims that were actually litigated
  in the previous action, but  those that could have and should have been
  litigated.  See Russell, 165 Vt. at 179, 679 A.2d  at 335;  18 C.A. Wright
  et al., Federal Practice and Procedure § 4406 at 45 (1981 & 2000 Supp.)
  (noting that  for purposes of res judicata, or claim preclusion, the
  process of defining a claim is "aimed at defining  the matters that both
  might and should have been advanced in the first litigation") (emphasis in 
  original).  Res judicata thereby prevents parties from engaging in the
  practice of claim-splitting.  See  Restatement (Second) of Judgments §§ 24
  & 25 (general rule against claim splitting and examples  thereof); see also
  Carmichael v. Adirondack Bottled Gas Corp. of Vermont, 161 Vt. 200, 207,
  635 A.2d 1211, 1216 (1993) (noting exception to rule against claim-splitting
  arising when the opposing  party acquiesces in the practice by failing to
  object at the trial level).

       The Restatement notes with respect to claim preclusion, however, that
  "preclusion is  narrower when a procedural system in fact does not permit
  the plaintiff to claim all possible remedies  in one action."  Restatement
  (Second) of Judgments § 25 cmt. f.  It goes on to state:

    When any of the following circumstances exists, the general rule
    [against claim  splitting] does not apply to extinguish the
    [later] claim, and part or all of the claim  subsists as a
    possible basis for a second action by the plaintiff against the
    defendants:

        . . . . 

        (c) The plaintiff was unable to rely on a certain theory of the 
        case or to seek a certain remedy or form of relief in the first 
        action because of the limitations on the subject matter 
        jurisdiction of the courts or restrictions on their authority to 
        entertain multiple theories or demands for multiple remedies 
        or forms of relief in a single action, and the plaintiff desires in 
        the second action to rely on that theory or to seek that remedy 
        or form of relief; or

        (d) The judgment in the first action was plainly inconsistent 
        with the fair and equitable implementation of a statutory or 
        constitutional scheme, or it is the sense of the scheme that the 
        plaintiff should be permitted to split his claim.

  Restatement (Second) of Judgments § 26; see also Shapiro v. Alexanderson,
  741 F. Supp. 472, 476  (S.D.N.Y. 1990) (action seeking compensation for
  clean-up costs brought pursuant to CERCLA not  barred by previous contract
  actions brought in state court because state court did not have 
  jurisdiction to hear CERCLA claim); Lanziano v. Cocoziello, 701 A.2d 754,
  758-59 (N.J. Super. Ct.  App. Div. 1997) (holding previous contract action
  against defendant's tenants for damages stemming  from contamination of
  property did not bar subsequent action against defendants for clean-up
  costs  pursuant to state Spill Compensation and Control Act because right
  of action for contribution did not  accrue until after first action was
  settled and dismissed).

 

       Because of the unique statutory right at issue in this case and the
  procedural posture in which  it arises, the Carrolls could not have been
  expected to bring their third-party claim for contribution  and
  indemnification as a compulsory counterclaim in the previous action and
  therefore should not be  barred from bringing it now.  Cf. Wursthaus, Inc.
  v. Cerreta, 149 Vt. 54, 56, 539 A.2d 534, 536  (1987) ("A failure to plead
  a compulsory counterclaim will result in the barring of litigation of the 
  claim in a subsequent proceeding.").  The Carrolls' ability to seek
  contribution and indemnification  from Melru for remediation costs incurred
  by the State was dependent on the State first bringing a  claim against
  them for the clean-up costs.  See 10 V.S.A. § 6615(c) & (i).  Prior to that
  happening,  however, Melru brought an action against the Carrolls, forcing
  the Carrolls to bring any claims they  had against Melru regarding the
  contamination of their property at that time.  See V.R.C.P. 13(a) ("A 
  pleading shall state as a counterclaim any claim which at the time of
  serving the pleading the pleader  has against any opposing party, if it
  arises out the transaction or occurrence that is the subject matter  of the
  opposing party's claim . . . .").  Because the State had not initiated any
  action against the  Carrolls when Melru brought its claim against them, the
  court in the previous action between the  parties could not have
  entertained the Carrolls' third-party, derivative claim under § 6615.  Cf.
  Riblet  Tramway Co. v. Marathon Electronics-Avtek Drive Div., 159 Vt. 503,
  506, 621 A.2d 1274, 1275  (1993) (noting that an independent action seeking
  indemnity or contribution would be premature  when liability has not yet
  been determined, and holding that "the third-party plaintiff's claim
  against  the third-party defendant arises or accrues when the plaintiff
  files the complaint" in the underlying  action).

       Furthermore, the prior decision in Melru's favor on the Carrolls'
  compulsory counterclaim  was based on a determination that the Carrolls had
  provided insufficient proof of damages.  It is 

 

  inconsistent with the statutory scheme governing waste management to
  preclude the Carrolls from  now bringing a third-party claim for
  contribution and indemnification under the statute for costs  incurred by
  the State.  See 10 V.S.A. § 6601(c) (declaration of policy and purpose
  stating, "[t]he  generators of waste should pay disposal costs that reflect
  the real costs to society of waste  management and disposal").  The
  statutory scheme is intended to hold all parties responsible for  hazardous
  materials contamination accountable for the costs associated with its
  proper clean-up and  disposal.  Therefore, the Carrolls should not be
  precluded under the doctrine of res judicata, by the  Bennington Superior
  Court's earlier judgment stemming from its findings on damages, from
  pursuing  a potential third-party claim for contribution and
  indemnification against Melru in the underlying  action brought against
  them by the State for costs that the State incurred.

       We note that Melru does not argue that the present third-party claim
  should be dismissed  based on the related doctrine of collateral estoppel. 
  See Bull v. Pinkham Eng'g Assocs., 11 Vt. L.W.  126, 129 (2000)
  ("Collateral estoppel, or issue preclusion, bars the subsequent
  relitigation of an issue  that was actually litigated and decided in a
  prior case between the parties, so long as there was a final  judgment on
  the merits and the issue was necessary to the resolution of the action."). 
  A party may be  held responsible for remediation costs associated with
  hazardous materials if the State is able to  demonstrate that a release of
  hazardous materials occurred and "the release . . . occurred at or 
  involved any real property, structure, equipment or conveyance under the
  control of that person."  10  V.S.A. § 6615(c).  Arguably, a party could be
  precluded from relitigating the issue of involvement in  the release of
  hazardous materials for purposes of liability under § 6615 by the
  resolution of this  question in an earlier suit.

       In this case, however, the trial court's findings in the earlier suit
  on the causal relationship 

 

  between the contamination plume originating on Melru's property and the
  hazardous materials  located on that of the Carrolls are ambiguous at best. 
  The court determined that the plume extended  onto the Carrolls' property,
  but then concluded that evidence of causation regarding contamination of 
  their property was "slight."  Furthermore, the trial court also found that
  the Carrolls had failed to  prove damages resulting from the contamination
  plume when finding in favor of Melru on the  Carrolls' counterclaim;
  therefore, it is not clear that its findings regarding the link between the
  plume  and the general contamination on the Carrolls' property was
  necessary to the resolution of their claim  in Melru's favor.  Presumably,
  that is why Melru has not argued that dismissal of the present claim is 
  required by the doctrine of collateral estoppel and rightly so, as the
  ambiguous findings on the issue  of causation should not prevent the
  Carrolls from pursuing the present claim against Melru for clean-up costs
  for which it may be potentially responsible.

       Reversed and remanded.



                                       FOR THE COURT:


                                       _______________________________
                                       Associate Justice