Regions Bank v. Nathan I. Prager ( 2021 )

07/08/2021
IN THE SUPREME COURT OF TENNESSEE
January 6, 2021 Session1
REGIONS BANK v. NATHAN I. PRAGER
Appeal by Permission from the Court of Appeals
Circuit Court for Shelby County
No. CT-003321-17 James F. Russell, Judge
___________________________________
No. W2019-00782-SC-R11-CV
__________________________________
The issue in this appeal is whether the Plaintiff’s lawsuit is barred by the doctrine of res
judicata. The Plaintiff originally filed suit against the Defendant in the Circuit Court for
Shelby County in May 2014. Unbeknownst to the parties, the trial court sua sponte
dismissed the lawsuit for failure to prosecute. Upon learning of the dismissal over ten
months later, the Plaintiff moved to set aside the dismissal. The trial court denied the
Plaintiff’s request to set aside the dismissal but, articulating an erroneous reading of Rule
41.02(3) of the Tennessee Rules of Civil Procedure, entered an order that stated the
dismissal did not bar the Plaintiff from refiling its lawsuit. When the Plaintiff refiled its
lawsuit in August 2017, the Defendant filed a motion to dismiss based on the doctrine of
res judicata. Despite language to the contrary in its prior order, the trial court granted the
Defendant’s motion, holding that the dismissal of the original lawsuit operated as an
adjudication on the merits. A divided panel of the Court of Appeals affirmed the trial
court’s dismissal of the second lawsuit. We conclude that the doctrine of res judicata does
not bar the Plaintiff’s lawsuit. Accordingly, we reverse the decision of the Court of
Appeals, vacate the trial court’s judgment, and reinstate the Plaintiff’s lawsuit.
Tenn. R. App. P. 11 Appeal by Permission;
Judgment of the Court of Appeals Reversed;
Remanded to the Circuit Court
JEFFREY S. BIVINS, C.J., delivered the opinion of the Court, in which CORNELIA A. CLARK,
SHARON G. LEE, HOLLY KIRBY, and ROGER A. PAGE, JJ., joined.
1
We heard oral argument through videoconference under this Court’s emergency orders restricting
court proceedings because of the COVID-19 pandemic.
Christopher W. Conner, J. Matthew Williams, Tyler C. Brown, Maryville, Tennessee, for
the appellant, Regions Bank.
Joseph D. Barton, Millington, Tennessee, for the appellee, Nathan I. Prager.
OPINION
I. FACTUAL AND PROCEDURAL BACKGROUND
In May 2014, Regions Bank (“the Plaintiff”) filed a breach-of-contract lawsuit (“the
first lawsuit”) against Nathan I. Prager (“the Defendant”) based on a promissory note
executed by the parties in December 2011. On August 11, 2016, the trial court sua sponte
entered an order dismissing the first lawsuit (“the initial order of dismissal”) based on the
Plaintiff’s failure to prosecute. See Tenn. R. Civ. P. 41.02. Although the record on appeal
does not contain the initial order of dismissal, the parties agree that the order did not state
whether the dismissal was with or without prejudice. This fact is significant in that Rule
41.02(3) of the Tennessee Rules of Civil Procedure provides that, other than in the case of
certain inapplicable exceptions, “[u]nless the court in its order for dismissal otherwise
specifies, a dismissal under this subdivision and any dismissal not provided for in this Rule
41 . . . operates as an adjudication upon the merits.”
However, neither party apparently received notice that the case had been placed on
the dismissal docket, and neither party was served with the initial order of dismissal. In
fact, the parties continued to engage in discovery and settlement negotiations after entry of
the initial order of dismissal.
The Plaintiff first learned of the existence of the initial order of dismissal over ten
months later on June 29, 2017, when it attempted to file a motion in the first lawsuit.
Having learned of the order, the Plaintiff filed a motion to set aside the dismissal,
presumably pursuant to Rule 60.02 of the Tennessee Rules of Civil Procedure. Because
the motion to set aside is not in the record, it is unclear what grounds the Plaintiff relied on
in seeking relief. The parties agree that the trial court denied the motion to set aside on
July 25, 2017. However, there is no order to that effect in the record.
The Plaintiff then filed a “Motion to Reconsider” in the wake of the July 25, 2017
denial of its motion to set aside. The “Motion to Reconsider,” like the motion to set aside,
also is not in the record. What is in the record is an “Order Denying Motion to Reconsider”
and a transcript of the trial court’s related verbal ruling, which was specifically
incorporated by reference into the order. The trial court conducted a hearing on the
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“Motion to Reconsider” on July 28, 2017, three days after it had denied the motion to set
aside. The trial court’s verbal ruling, in its entirety, was as follows:
Well, let me just make a few observations for you. Number one, this
case has been on the books since May of 2014. My guess is it’s had at least
one trial date, probably more than one, and it ended up being continued.
Cases earn their way on to a dismissal docket by not showing any activity
whatsoever within at least one year prior to the date of the notice of the
dismissal docket. That would have been the case here.
Not only that, more than one year went by without anyone bothering
to check on the status of the case to even find out that it had been dismissed
for lack of prosecution.
Now, I could grant your motion and set it on another dismissal docket,
which we have active right now, and guess what, the case will be dismissed
for lack of prosecution. If I set that order aside and put it on another dismissal
docket, with notice given to you here and now verbally and in person, the
case will be dismissed for lack of prosecution.
Now with that said, a dismissal for lack of prosecution under those
circumstances is simply a dismissal pursuant to Rule 41. And unless it is
designated, quote, with prejudice, underline the word, “With” here, it is
neither with nor without prejudice and that doesn’t bar you from refiling the
suit.
We went through that when you were here over a month ago. And
that’s where we still stand. You’re welcome to refile the suit. If you had
been engaged in settlement negotiations and the rest of that sort of thing, my
common sense approach would be to sit down at a comfortable place at a
table with our clients together and come to some resolution and get it out of
the way, instead of going through all of the gymnastics, if you will, of getting
this case back into court, so to speak.
Your motion is denied.
(Emphasis added). After the July 28, 2017 hearing, the trial court entered the
corresponding “Order Denying Motion to Reconsider” on August 4, 2017. In the order,
the trial court confirmed its dismissal of the first lawsuit for failure to prosecute pursuant
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to Rule 41. The order did not specify whether the dismissal was with or without prejudice.
However, mirroring the trial court’s verbal ruling, the order expressly stated: “Unless [the
dismissal pursuant to Rule 41] is designated ‘with prejudice’, [sic] it is neither with or
without prejudice and that doesn’t bar a refiling of the suit.” Unfortunately, the trial court’s
language clearly represents an erroneous interpretation of Rule 41.02(3).
In light of the August 4, 2017 order, the Plaintiff refiled its lawsuit on August 8,
2017 (“the present lawsuit”). More than ten months later, in June 2018, the Defendant filed
a motion to dismiss in which he asserted that the matter previously had been adjudicated
on the merits pursuant to Rule 41.02(3), and thus the Plaintiff’s claim was barred under the
doctrine of res judicata. The Plaintiff filed a response to the motion to dismiss in which
the Plaintiff detailed the history of the first lawsuit. The Plaintiff argued that the most
recent order dismissing the first lawsuit—the August 4, 2017 order—governed the issue of
whether the dismissal was an adjudication on the merits. According to the Plaintiff, the
August 4, 2017 order made clear that the trial court had not intended to dismiss the first
lawsuit with prejudice, and thus the Plaintiff was free to refile its lawsuit.
The trial court granted the Defendant’s motion to dismiss the present lawsuit,
finding simply that the motion was well-taken. Thereafter, the Plaintiff filed a “Motion to
Reconsider.”2 At the hearing on this motion, the trial court commented:
Well, let me say this, I’ve read everything that you all have given me
now for this additional go around in this case. And I - - a good bit of emphasis
has been placed upon what I would characterize as a side bar comment by
the Court, you’re welcome to refile the lawsuit. And I’ve been known to
make side bar comments that were off target in other matters and I apologize
if that that [sic] misled counsel for the [P]laintiff in this particular case.
But to characterize that side bar comment as a, quote, ruling, you
know, would be inappropriate, I think. And again, having reviewed the entire
2
The Motion to Reconsider substantively consisted of little more than a reiteration of the Plaintiff’s
response to the Defendant’s motion to dismiss. The Plaintiff’s motion did not identify any rule of civil
procedure as its basis. We recognize that “[n]o technical forms of pleading or motions are required,” Tenn.
R. Civ. P. 8.05, and thus courts should consider the substance of a motion rather than its title or form, Tenn.
Farmers Mut. Ins. Co. v. Farmer, 970 S.W.2d 453, 455 (Tenn. 1998). However, the imprecision of a
“Motion to Reconsider” risks confusion, and our courts have cautioned litigants against the use of a general
“Motion to Reconsider.” See, e.g., Harris v. Chern, 33 S.W.3d 741, 743 (Tenn. 2000); McCracken v.
Brentwood United Methodist Church, 958 S.W.2d 792, 794 n.3 (Tenn. Ct. App. 1997); Savage v.
Hildenbrandt, No. M1999-00630-COA-R3-CV, 2001 WL 1013056, at *8 (Tenn. Ct. App. Sept. 6, 2001).
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matter now, yet again, and the Court is of the opinion that this motion is
simply not well taken and cannot be granted and it will not be granted. I’ll
be careful about making side bar comments henceforth.
On the Plaintiff’s appeal, a divided panel of the Court of Appeals affirmed the trial
court’s judgment dismissing the present lawsuit based on the doctrine of res judicata.
Regions Bank v. Prager, No. W2019-00782-COA-R3-CV, 2020 WL 2319168 (Tenn. Ct.
App. May 11, 2020), perm. app. granted, (Tenn. Sept. 18, 2020). The majority noted that
the initial order of dismissal did not specify whether the dismissal was with or without
prejudice. Id. at *3. Looking to Rule 41.02(3), the majority recognized that “[i]n the
absence of language that indicates otherwise, this dismissal was therefore ‘on the merits.’”
Id. (citing Tenn. R. Civ. P. 41.02(3)).
The majority acknowledged that the trial court, in its August 4, 2017 order denying
the Plaintiff’s “Motion to Reconsider” in the first lawsuit, stated that unless the dismissal
of the first lawsuit was designated “with prejudice,” the dismissal was neither with nor
without prejudice and did not bar the Plaintiff from refiling its lawsuit. Id. As the majority
recognized, the trial court’s explanation of the law “is in direct conflict with the plain
language of Rule 41.02(3).” Id. The majority acknowledged that the “Plaintiff may have
relied on the trial court’s inaccurate summary of the substance of Rule 41.02.” Id. at *4
n.3. Nevertheless, the majority concluded that the “operative order” was the initial order
of dismissal. Pursuant to Rule 41.02(3), the majority held that the initial order of dismissal
operated as an adjudication on the merits, and thus, the doctrine of res judicata barred the
Plaintiff from reasserting its claim in the present lawsuit. Id. at *3.
Judge Stafford dissented. Judge Stafford was “unable to conclude that the initial
order of dismissal was the trial court’s final say on the matter.” Id. at *6 (Stafford, J.,
dissenting). Noting that the parties did not receive notice of the initial order of dismissal
and that the order was not in the record, Judge Stafford “doubt[ed] that the initial order of
dismissal constituted a final judgment under Rule 58.” Id. at *5 (Stafford, J., dissenting).
Judge Stafford also noted that the trial court’s August 4, 2017 order on the Plaintiff’s
“Motion to Reconsider” in the first lawsuit “substantively altered the order of dismissal in
the first case.” Id. at *6 (Stafford, J., dissenting). Accordingly, Judge Stafford considered
the August 4, 2017 order to be “the operative order for purposes of the res judicata
analysis.” Id. at *7 (Stafford, J., dissenting). In Judge Stafford’s view, the language of the
August 4, 2017 order—and the trial court’s verbal ruling that was incorporated into the
order—sufficiently specified per Rule 41.02(3) that the dismissal of the first lawsuit did
not operate as an adjudication on the merits. Id. (Stafford, J., dissenting). Thus, Judge
Stafford concluded that the Defendant, whose burden it was to establish the elements of
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res judicata, had not shown that the dismissal of the first lawsuit barred the Plaintiff’s claim
in the present lawsuit. Id. at *5, *9 (Stafford, J., dissenting).
We granted the Plaintiff’s application for permission to appeal. We now have
determined that, under the circumstances of this case and consistent with Rule 41.02(3),
the involuntary dismissal of the first lawsuit did not operate as an adjudication on the
merits. Accordingly, we hold that the doctrine of res judicata does not bar the present
lawsuit.
II. ANALYSIS
We begin our analysis of whether the doctrine of res judicata bars the present lawsuit
by recognizing that “[t]he prime function and purpose of the judicial system is to settle,
determine and end differences between contending parties.” Childress v. Bennett, 816
S.W.2d 314, 316 (Tenn. 1991). The doctrine of res judicata, or claim preclusion, long has
served that purpose.3 Res judicata “bars a second suit between the same parties or their
privies on the same claim with respect to all issues which were, or could have been, litigated
in the former suit.” Elvis Presley Enters., Inc. v. City of Memphis, 620 S.W.3d 318, 323–
24 (Tenn. 2021) (quoting Jackson v. Smith, 387 S.W.3d 486, 491 (Tenn. 2012)). The
fundamental principle underlying the doctrine “is that a party who once has had a chance
to litigate a claim before an appropriate tribunal usually ought not to have another chance
to do so.” Restatement (Second) of Judgments, ch. 1, at 6 (Am. L. Inst. 1982).
“The primary purposes of the doctrine are to promote finality in litigation, prevent
inconsistent or contradictory judgments, conserve legal resources, and protect litigants
from the cost and vexation of multiple lawsuits.” Napolitano v. Bd. of Pro. Resp., 535
S.W.3d 481, 496 (Tenn. 2017) (quoting Creech v. Addington, 281 S.W.3d 363, 376 (Tenn.
2009)). In light of its purposes, res judicata has been characterized as a “rule of rest.”
Jackson, 387 S.W.3d at 491 (quoting Moulton v. Ford Motor Co., 533 S.W.2d 295, 296
(Tenn. 1976)); see also Restatement (Second) of Judgments, ch. 1, at 11 (“Finality, then,
is the service rendered by the courts through operation of the law of res judicata. . . . It
compels repose.”). Thus, application of res judicata “is not based on any presumption that
the final judgment was right or just. Rather, it is justifiable on the broad grounds of public
policy which requires an eventual end to litigation.” Moulton, 533 S.W.2d at 296; see also
Restatement (Second) of Judgments § 19 cmt. a (“The rule that a defendant’s judgment
acts as a bar to a second action on the same claim is based largely on the ground that
3
The public policy supporting res judicata “has a long history in our state, even preceding the
adoption of our 1870 Constitution.” Creech v. Addington, 281 S.W.3d 363, 376 n.15 (Tenn. 2009).
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fairness to the defendant, and sound judicial administration, require that at some point
litigation over the particular controversy come to an end.”).
A. Elements of Res Judicata and Standard of Review
The party asserting the defense of res judicata bears the burden of demonstrating:
(1) that the underlying judgment was rendered by a court of competent
jurisdiction;
(2) that the same parties or their privies were involved in both suits;
(3) that the same claim or cause of action was asserted in both suits; and
(4) that the underlying judgment was final and on the merits.
Elvis Presley Enters., 620 S.W.3d at 324 (citing Jackson, 387 S.W.3d at 491); Napolitano,
535 S.W.3d at 496. We have observed that “[a] party asserting a res judicata defense may
generally prove its defense with a copy of the judgment in the former proceeding.”
Jackson, 387 S.W.3d at 492 n.10.
Res judicata is an affirmative defense, see Tenn. R. Civ. P. 8.03, and as such
ordinarily must be included in the defendant’s answer, Jackson, 387 S.W.3d at 491. In
certain circumstances, however, the defense may be raised in a motion to dismiss for failure
to state a claim upon which relief can be granted pursuant to Rule 12.02(6) of the Tennessee
Rules of Civil Procedure. Id. at 491–92 (“For a Tenn. R. Civ. P. 12.02(6) motion to be
used as a vehicle to assert an affirmative defense, the applicability of the defense must
‘clearly and unequivocally appear[] on the face of the complaint.’” (alteration in original)).
In this case, the Defendant asserted res judicata through a motion to dismiss even
though the Plaintiff’s complaint in the present lawsuit said nothing of the first lawsuit.4
The Defendant did not attach the first lawsuit to his motion. Furthermore, although the
Defendant made a passing reference to “orders appended” in his motion to dismiss, the
record contains no such orders. Thus, so far as the record shows, the Defendant failed to
attach a copy of the initial order of dismissal, the very judgment which he asserted has
preclusive effect for the present lawsuit.
4
The Defendant did not identify the specific provision under which he sought to pursue the defense.
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Nevertheless, the Plaintiff has never questioned the propriety of the Defendant’s
pursuit of the defense through a motion to dismiss. In responding to the motion to dismiss
the present lawsuit, the Plaintiff attached to its filings two documents from the first lawsuit:
the August 4, 2017 order and the transcript of the trial court’s incorporated verbal ruling.
The trial court obviously considered these matters in ruling on the motion to dismiss, for
the court specifically referred to its “side bar comment” from the transcript.
Tennessee law provides—and the parties agree in this Court—that a trial court’s
decision that a claim is barred by the doctrine of res judicata involves a question of law,
which appellate courts review de novo without a presumption of correctness. Napolitano,
535 S.W.3d at 496; Jackson, 387 S.W.3d at 491. The parties have not addressed whether
the procedural history of the present lawsuit required that the Defendant’s motion to
dismiss be treated as one for summary judgment. See Tenn. R. Civ. P. 12.02 (stating that
“[i]f . . . matters outside the pleading are presented to and not excluded by the court, the
[Rule 12.02(6)] motion shall be treated as one for summary judgment”). The trial court’s
order was couched as granting the Defendant’s motion to dismiss and stated little more
than the motion was well-taken rather than the legal grounds for granting summary
judgment. See Tenn. R. Civ. P. 56.04. However, the trial court clearly considered “matters
outside the pleading” in resolving the Defendant’s motion. See Tenn. R. Civ. P. 12.02.
These circumstances illustrate how the parties’ practice in the trial court in the
present lawsuit muddled the matter there and on appeal. Regardless, appellate review of a
trial court’s summary judgment decision is de novo without a presumption of correctness,
Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015),
consistent with our cases addressing review of a trial court’s decision that a claim is barred
by res judicata. Thus, in spite of the unorthodox manner in which the issue was litigated
before the trial court, our review remains de novo without a presumption of correctness.
Napolitano, 535 S.W.3d at 496; Jackson, 387 S.W.3d at 491.
B. Application of Res Judicata to the Present Lawsuit
In this case, there is no dispute that the first three elements of the defense of res
judicata are satisfied. The controversy centers upon the fourth element, whether the
Defendant established that the trial court dismissed the first lawsuit “on the merits.” The
Defendant argues that the initial order of dismissal controls, that it was final, and that it
operated as an adjudication on the merits pursuant to Rule 41.02(3). The Plaintiff argues
that the August 4, 2017 order on its “Motion to Reconsider” controls and that it, consistent
with Rule 41.02(3), specified that the dismissal of the first lawsuit was not an adjudication
on the merits.
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There is no doubt that the issue in this case is complicated by the history of the first
lawsuit.5 The trial court sua sponte dismissed the first lawsuit for failure to prosecute on
August 11, 2016, without any notice to the parties that the court was considering this
action.6 Because the trial court’s order did not specify otherwise, the dismissal ordinarily
would operate as an adjudication on the merits pursuant to Rule 41.02(3). See Creech, 281
S.W.3d at 378 (stating that “any dismissal of a claim other than a dismissal for lack of
jurisdiction, for lack of venue, or for lack of an indispensable party ‘operates as an
adjudication upon the merits,’ unless the trial court specifies otherwise in its order for
dismissal”). However, when the Plaintiff received notice of the dismissal and sought relief
from the initial order of dismissal, the trial court entered the August 4, 2017 order, which
confirmed dismissal of the first lawsuit but evidenced an intent that the dismissal not
constitute an adjudication on the merits. This convoluted history resulted in a disagreement
in the intermediate appellate court over which order was the “operative order” for purposes
of res judicata analysis. Compare Prager, 2020 WL 2319168, at *3, with Prager, 2020 WL
2319168, at *6–7 (Stafford, J., dissenting).
The parties agree that the initial order of dismissal did not specify whether the
dismissal of the first lawsuit was with or without prejudice, and the language of Rule
41.02(3) certainly is clear that such a dismissal operates as an adjudication on the merits.
Of course, to establish the defense of res judicata, the Defendant bears the burden of
demonstrating that the dismissal was “final and on the merits.” Elvis Presley Enters., 620
S.W.3d at 324 (quoting Jackson, 387 S.W.3d at 491); Napolitano, 535 S.W.3d at 496. In
his dissent, Judge Stafford articulated his “doubt that the initial order of dismissal
5
We reiterate that our resolution of the issue is further complicated by the haphazard manner in
which the parties addressed the matter in the trial court. The Plaintiff’s complaint in the present lawsuit
said nothing of the first lawsuit. Nevertheless, the Defendant presented his res judicata defense through a
motion to dismiss. However, the Defendant attached neither the Plaintiff’s complaint in the first lawsuit
nor the initial order of dismissal, and thus they are missing from the record. Likewise, the Plaintiff did not
include in the record either of his motions that sought relief from the initial order of dismissal, nor does the
record contain the trial court’s ruling or order on the first of those motions. We agree that this case has
been “plagued by shortcomings,” Prager, 2020 WL 2319168, at *7 (Stafford, J., dissenting), several of
which fall at the feet of the parties.
6
We take this opportunity to emphasize that, barring exceptional circumstances, a trial court should
always give proper notice to the parties that it is considering a sua sponte dismissal of a lawsuit, even for
failure to prosecute. Likewise, a trial court should always provide proper notice of the entry of such an
order in compliance with Rule 58 of the Tennessee Rules of Civil Procedure. The trial court failed to
provide either notice in this case.
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constituted a final judgment under Rule 58.” Prager, 2020 WL 2319168, at *5 (Stafford,
J., dissenting).
Rule 58 of the Tennessee Rules of Civil Procedure, in pertinent part, provides:
Entry of a judgment or an order of final disposition is effective when
a judgment containing one of the following is marked on the face by the clerk
as filed for entry:
(1) the signatures of the judge and all parties or counsel, or
(2) the signatures of the judge and one party or counsel with a
certificate of counsel that a copy of the proposed order has been
served on all other parties or counsel, or
(3) the signature of the judge and a certificate of the clerk that a
copy has been served on all other parties or counsel.
Tenn. R. Civ. P. 58. These requirements in Rule 58 are intended “to provide litigants with
timely notice of the entry of final, appealable orders in their cases.” DeLong v. Vanderbilt
Univ., 186 S.W.3d 506, 510 (Tenn. Ct. App. 2005).
Noting that the record did not contain the initial order of dismissal, Judge Stafford
stated that the fact that the parties were not served with the order “calls into question
whether the technical component of finality was met.” Prager, 2020 WL 2319168, at *5
(Stafford, J., dissenting). We share Judge Stafford’s concern about the absence from the
record of the initial order of dismissal. The absence leaves uncertainty as to whether the
order complied with Rule 58, for there is no evidence that the trial court included a
certificate of service on its sua sponte order of dismissal. See Tenn. R. Civ. P. 58(3).
However, regardless of “whether the technical component of finality was met” with respect
to the initial order of dismissal, we conclude that the subsequent history of the first lawsuit
reflects that the ultimate dismissal was not “on the merits” for purposes of res judicata.
The initial order of dismissal was entered on August 11, 2016. After learning of the
existence of the order on June 29, 2017, the Plaintiff promptly sought to set aside the order.7
7
The record does not reveal exactly when the Plaintiff sought relief, for it does not contain either
of the Plaintiff’s motions. However, the record does demonstrate that the Plaintiff’s request for relief
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Because the record does not contain the Plaintiff’s motions in this regard, the precise
grounds are unknown. However, the known circumstances point to excusable neglect
under Rule 60.02 of the Tennessee Rules of Civil Procedure as the avenue for relief. See
Henry v. Goins, 104 S.W.3d 475, 480–81 (Tenn. 2003) (finding the entry of an involuntary
dismissal to be a “critical step” in a lawsuit and stating “[w]hen a party has no notice of a
critical step in a court proceeding, the circumstances may make out a case of excusable
neglect”); Chambers v. Dillow, 713 S.W.2d 896, 898 (Tenn. 1986) (finding that in spite of
the absence of the relevant motion from the record, a dismissal for failure to prosecute
points to excusable neglect under Rule 60.02 as the ground for relief from the judgment).
In identifying various grounds for relief from “a final judgment, order or proceeding,” Rule
60.02 “acts as an escape valve from possible inequity that might otherwise arise from the
unrelenting imposition of the principle of finality imbedded in our procedure rules.”
Rogers v. Estate of Russell, 50 S.W.3d 441, 444–45 (Tenn. Ct. App. 2001) (quoting Banks
v. Dement Constr. Co., 817 S.W.2d 16, 18 (Tenn. 1991)). However, certain grounds for
relief—including mistake, inadvertence, surprise or excusable neglect—must be sought
“not more than one year after the judgment, order or proceeding was entered or taken.”
Tenn. R. Civ. P. 60.02. The circumstances of this case reflect that the Plaintiff sought relief
from the initial order of dismissal within a year. Thus, after learning of the existence of
the initial order of dismissal, the Plaintiff both promptly and timely sought relief from the
order.8
The record contains the August 4, 2017 order in which the trial court addressed the
Plaintiff’s request for relief. In that order, the trial court confirmed its dismissal of the first
lawsuit under Rule 41 for failure to prosecute. However, the order expressly stated,
“Unless it is designated ‘with prejudice’, [sic] it is neither with or without prejudice and
that doesn’t bar a refiling of the suit.” The order also expressly incorporated the transcript
of the trial court’s verbal ruling, which is almost verbatim the language used in the written
order.
ultimately was disposed of on August 4, 2017, little more than a month after the Plaintiff learned of the
existence of the initial order of dismissal.
8
Although we have discussed the Plaintiff’s Rule 60.02 efforts with respect to the first lawsuit in
some detail, whether the trial court correctly declined to set aside the dismissal and allow for the resumption
of the first lawsuit is not the question before us. The question we face involves the present lawsuit and
whether it is barred by res judicata. Thus, the salient point from our discussion of the Plaintiff’s Rule 60.02
efforts is that the Plaintiff timely sought an available avenue of relief from the initial order of dismissal,
which resulted in the trial court’s entry of the August 4, 2017 order.
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Rule 41.02(3) provides that, other than in certain identified circumstances, an
involuntary dismissal operates as an adjudication on the merits “[u]nless the court in its
order for dismissal otherwise specifies.” Obviously, the trial court’s verbal ruling and the
corresponding language of the August 4, 2017 order exhibit an incorrect reading of Rule
41.02(3). However, Rule 41.02(3) does not require that the trial court use special language.
Rather, Rule 41.02(3) simply requires that the trial court “manifest an intention on the
record that the judgment shall not bar another action on the same claim.” Restatement
(Second) of Judgments § 20 cmt. i. The trial court’s August 4, 2017 order did just that in
spite of its incorrect statement of the law.9
In finding that res judicata barred the present lawsuit, the trial court characterized
its verbal ruling that the Plaintiff was free to refile its lawsuit as a “side bar comment.”
Like the Court of Appeals—both the majority and the dissent—we cannot agree with any
suggestion that the language lacked significance. The August 4, 2017 order clearly states
that the dismissal of the first lawsuit “doesn’t bar a refiling of the suit.” Furthermore, the
language goes to the very heart of Rule 41.02(3) in that it manifests an intention that the
involuntary dismissal of the first lawsuit not operate as an adjudication on the merits. These
circumstances demonstrate that our courts must take care to articulate the governing law
accurately.10
Having determined that the August 4, 2017 order reflects that the dismissal of the
first lawsuit did not operate as an adjudication on the merits, we further conclude that the
August 4, 2017 order is the “operative order” for purposes of our res judicata analysis, even
considering the initial order of dismissal as a final judgment. We previously have held that
“when consecutive ‘final’ judgments are entered, a subsequent entry of judgment operates
as the final judgment only if the subsequent judgment affects the parties’ substantive rights
or obligations settled by the first judgment.” Ball v. McDowell, 288 S.W.3d 833, 838
(Tenn. 2009). In this case, the August 4, 2017 order affected the parties’ substantive rights
9
The transcript of the trial court’s verbal ruling, incorporated into the August 4, 2017 order,
suggests that the same could be said of the trial court’s earlier ruling on the Plaintiff’s motion to set aside
the initial order of dismissal. The record does not contain that order, and the parties have indicated simply
that the trial court denied the Plaintiff’s motion. However, the transcript reflects that after the operative
language that also appeared in the August 4, 2017 order, the trial court stated: “We went through that when
you were here over a month ago. And that’s where we still stand. You’re welcome to refile the suit.” Thus,
it appears from the record that the trial court’s rulings with respect to the Plaintiff’s attempts to obtain relief
from the initial order of dismissal were consistent.
10
Indeed, the record indicates that had the trial court ruled that the dismissal of the first lawsuit was
with prejudice, the Plaintiff in all probability would have appealed rather than refiled its lawsuit.
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or obligations in that it provided that the dismissal did not operate as an adjudication on
the merits. As such, the Plaintiff’s substantive rights in light of the August 4, 2017 order
included the ability to refile its lawsuit rather than appeal the dismissal.
Notwithstanding the established principles supporting the doctrine of res judicata,
Tennessee law favors the adjudication of disputes on their merits. See Norton v. Everhart,
895 S.W.2d 317, 322 (Tenn. 1995); Keck v. Nationwide Sys., Inc., 499 S.W.2d 266, 267
(Tenn. Ct. App. 1973). Indeed, the Tennessee Rules of Civil Procedure seek “to [e]nsure
that cases and controversies be determined upon their merits and not upon legal
technicalities or procedural niceties.” Doyle v. Frost, 49 S.W.3d 853, 856 (Tenn. 2001)
(quoting Karash v. Pigott, 530 S.W.2d 775, 777 (Tenn. 1975)). Given the preference for
the resolution of disputes on their merits, “[i]n defining the scope of res judicata, this Court
has long been careful to balance the doctrine’s benefits of efficient proceedings and finality
and consistency of judgments with the dangers of unduly limiting the rights of litigants to
have all of their claims heard on the merits.” Creech, 281 S.W.3d at 381. In this case, the
Defendant failed to establish that the dismissal of the first lawsuit for failure to prosecute
was “on the merits.” Therefore, we conclude that the doctrine of res judicata does not bar
the Plaintiff’s present lawsuit.
III. CONCLUSION
For the foregoing reasons, we reverse the decision of the Court of Appeals and
vacate the judgment dismissing the present lawsuit. We conclude that the involuntary
dismissal of the first lawsuit for failure to prosecute did not operate as an adjudication on
the merits because the record reflects that the trial court, in its August 4, 2017 order,
specified that it did not. Accordingly, we hold that the present lawsuit is not barred by the
doctrine of res judicata. We reinstate the present lawsuit and remand the case to the trial
court for further proceedings.
The costs of this appeal are taxed to the Defendant, for which execution may issue
if necessary.
_________________________________
JEFFREY S. BIVINS, CHIEF JUSTICE
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