Regions Bank v. Nathan I. Prager - Dissent ( 2020 )

05/11/2020
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
February 12, 2020 Session
REGIONS BANK v. NATHAN I. PRAGER
Appeal from the Circuit Court for Shelby County
No. CT-003321-17 James F. Russell, Judge
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No. W2019-00782-COA-R3-CV
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J. Steven Stafford, dissenting.
I again find myself in disagreement from my learned colleagues as to the
application of res judicata.1 Because I cannot conclude that Defendant met its burden to
show all the elements of the defense, I respectfully dissent from the majority opinion.
As an initial matter, I begin with the standard of review applicable in this case.
Here, Defendant filed a motion to dismiss Plaintiff’s complaint on the basis of res
judicata. Defendant, of course, has the burden of proving all of the elements of this
defense. As the majority correctly notes, to meet this burden, Defendant must show
(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.
Napolitano v. Bd. of Prof’l Responsibility, 535 S.W.3d 481, 496 (Tenn. 2017) (quoting
Long v. Bd. of Prof’l Responsibility of Supreme Court, 435 S.W.3d 174, 183 (Tenn.
2014)). Likewise, the burden was on Defendant to prevail on its motion to dismiss. And
this burden is a high one: “[T]he facts pleaded and the allegations made must be viewed
in the light most favorable to the plaintiff, with every doubt resolved in his behalf.” Ladd
v. Roane Hosiery, Inc., 556 S.W.2d 758, 759 (Tenn. 1977). Consequently, we take “all
allegations of fact [in the complaint] as true[.]” Stein v. Davidson Hotel Co., 945 S.W.2d
1
I previously filed a dissent to the application of res judicata in Elvis Presley Enterprises, Inc. v. City of
Memphis, No. W2019-00299-COA-R3-CV, 2019 WL 7205894 (Tenn. Ct. App. Dec. 26, 2019). Judges
Armstrong and McGee, along with myself, made up the panel in that case as well.
714, 716 (Tenn. 1997). Only “if it ‘appears beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to relief[]’” should the claim
be dismissed. Ladd, 556 S.W.2d at 759−60 (quoting Conley v. Gibson, 355 U.S. 41, 45-
46, 78 S. Ct. 99, 1102, 2 L. Ed. 2d 80 (1957)). Thus, Defendant had the burden to show
beyond doubt that the elements of res judicata were met in this case.
Defendant’s burden therefore required that he establish a final judgment on the
merits for res judicata to apply.2 Finality includes “both substantive and technical
requirements.” Jackson v. Smith, No. W2011-00194-COA-R3-CV, 2011 WL 3963589,
at *9 (Tenn. Ct. App. Sept. 9, 2011), aff’d, 387 S.W.3d 486 (Tenn. 2012). Thus, the order
must both: (1) adjudicate the whole merits of the case leaving nothing for the court to
decide; and (2) comply with the technical requirements of Rule 58 of the Tennessee
Rules of Civil Procedure. Rule 58 requires that orders contain, inter alia, the judge’s
signature and either the signatures of counsel or a certificate of service to counsel to be
“effective.” Tenn. R. Civ. P. 58. A judgment is not final unless and until the requirements
of Rule 58 are met. See Riggs v. Wright, 510 S.W.3d 421, 425 (Tenn. Ct. App. 2016)
(noting that a Tennessee Supreme Court order determined that a notice of appeal was
timely when it was filed within thirty days of the date that Rule 58 was complied with,
although the notice of appeal was filed more than thirty days from the entry of the subject
order). The first case resulted in two separate orders that are relevant to this appeal: (1)
the initial order of dismissal (“initial order of dismissal” or “the first order”) and (2) the
order denying Plaintiff’s motion to reconsider (“order on the motion to reconsider” or
“the subsequent order”).3
Here, Defendant contends that the first order was both final and on the merits so as
to support his res judicata defense. Defendant’s effort to show that both the substantive
and technical requirements of finality are met as to the first order is, unfortunately,
lacking. Importantly, the initial order of dismissal, the very order that Defendant urges
this Court to apply preclusively, is notably absent from the record. Defendant, in filing its
motion to dismiss, failed to include this important document for our review. Still, this
absence is not fatal, so long as “the plaintiff’s own allegations in the complaint [or
response to a motion to dismiss] show that an affirmative defense exists and that this
defense legally defeats the claim for relief.” Jackson v. Smith, 387 S.W.3d 486, 492
(Tenn. 2012) (quoting Ragsdale v. Hill, 37 Tenn. App. 671, 681, 269 S.W.2d 911, 916
(Tenn. Ct. App. 1954)) (noting that while plaintiff’s complaint did not establish res
2
I agree with the majority that the other elements have been established in this case.
3
According to Plaintiff, it appears that the trial court did enter one additional order denying
Plaintiff’s motion to set aside the order of dismissal in between the filing of the first order and the
subsequent order. This order is not included in the record and Defendant does not appear to rely on this
order to form its res judicata defense; indeed, Defendant’s briefs seems to suggest that only one post-
judgment motion was filed in the first suit and only one order was entered disposing of it. Nevertheless,
nothing in the record indicates that this purported order was final under Rule 58 of the Tennessee Rules of
Civil Procedure, as discussed in detail, infra. It is therefore not relevant to my analysis.
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judicata, plaintiff made concessions in her response to defendant’s motion to dismiss that
established the existence of the prior order).
As the majority correctly notes, Plaintiff admitted in its response to Defendant’s
motion to dismiss that a prior order was entered dismissing its initial suit that did not
indicate whether the order was dismissed with or without prejudice. Thus, it appears that
Plaintiff’s own allegations are sufficient to establish that the substantive component of
finality was met with regard to the initial order of dismissal. See Jackson, 2011 WL
3963589, at *9. Plaintiff’s response, however, notes that neither party was given notice of
the order or was served with a copy of it.4 Because Rule 58 specifically concerns notice
to parties of final orders, this allegation calls into question whether the technical
component of finality was met. Id. Without a copy of the order in question or some other
evidence to this effect, I have doubt that the initial order of dismissal constituted a final
judgment under Rule 58. See Ladd, 556 S.W.2d at 759 (noting that the defendant must
prove that plaintiff cannot prevail “beyond doubt” in order to obtain summary judgment).
Although the initial order of dismissal has not been shown without doubt to be
final at the time it was entered, I cannot disagree that the first case eventually became
final. Here, the record does contain a subsequent order entered in the first case—the order
on the motion to reconsider. This order confirms that the case was dismissed in toto and
contains all of the requirements to be final under Rule 58. Based on the record presented,
the initial case therefore did eventually become final upon entry of the order on the
motion to reconsider.
A single question therefore remains: was the judgment in the first case a judgment
on the merits? The majority apparently chooses to resolve this issue only by reference to
the first order of dismissal. It is not disputed that the initial order of dismissal of the first
case did not include any indication of whether the dismissal was with or without
prejudice. This order, considered alone, would therefore be considered an adjudication on
the merits barring a second suit. As Rule 41.02 of the Tennessee Rules of Civil Procedure
provides,
(1) For failure of the plaintiff to prosecute or to comply with these rules or
any order of court, a defendant may move for dismissal of an action or of
any claim against the defendant.
* * *
(3) Unless the court in its order for dismissal otherwise specifies, a
dismissal under this subdivision and any dismissal not provided for in this
Rule 41, other than a dismissal for lack of jurisdiction or for improper
venue or for lack of an indispensable party, operates as an adjudication
4
Defendant does not appear to dispute this allegation.
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upon the merits.
Tenn. R. Civ. P. 41.02.
Based on the record before us, however, I am unable to conclude that the initial
order of dismissal was the trial court’s final say on the matter. As noted above, Defendant
has not established that this order was final for purposes of Rule 58. And an interlocutory
order may be altered at any time by the trial court. See Wall v. Wall, No. W2010-01069-
COA-R3-CV, 2011 WL 2732269, at *22 (Tenn. Ct. App. July 14, 2011). The trial court’s
subsequent order apparently substantively altered the order of dismissal in the first case.
Rather than mere silence on this issue, the order on the motion to reconsider contains the
following language: “Unless it is designated ‘with prejudice’, it is neither with or without
prejudice and that doesn’t bar a refiling of the suit.”5 (Emphasis added). The order on
the motion for reconsideration therefore accomplished three things: (1) it confirmed and
made final under Rule 58 the order of dismissal of the first case; (2) it contained an
incorrect statement of law as to the requirements of the Tennessee Rules of Civil
Procedure; and (3) it expressly stated that the dismissal “doesn’t bar a refiling of the
suit.” Because the order on the motion to reconsider substantively altered the previous
non-final dismissal of Plaintiff’s case, it must be considered as part and parcel of the final
judgment sought to have preclusive effect in this case.6 See Dayhoff v. Cathey, No.
W2016-00377-COA-R3-JV, 2016 WL 4487813, at *3 n.1 (Tenn. Ct. App. Aug. 25,
2016) (noting that the trial court had jurisdiction to enter a modified order despite the
filing of a notice of appeal because the appealed order was not technically final under
Rule 58); Harris v. Hensley, No. M1999-00654-COA-R3-CV, 2000 WL 630924, at *2
(Tenn. Ct. App. May 17, 2000) (noting that the trial court retains jurisdiction over a case
until a Rule 58 compliant order that adjudicates all of the claims of all of the parties is
entered); cf. Ball v. McDowell, 288 S.W.3d 833, 838 (Tenn. 2009) (“We conclude that
when consecutive ‘final’ judgments are entered, a subsequent entry of judgment operates
5
Like the majority, I find no merit in the trial court’s oral ruling in the second suit that this
statement was not a part of its ruling. This language is taken directly from the trial court’s written order
on Plaintiff’s motion to reconsider in the first suit. The entire ruling is merely four sentences long; this
sentence therefore makes up 25% of the trial court’s written ruling. The parties are entitled to rely on
statements made in trial court’s orders and should not be required to parse rulings to determine which of
the statements constitute binding rulings and which cannot be relied upon. If trial courts do not intend all
oral statements to be included in later written orders, it is their responsibility to draft accurate orders or
ensure that party-prepared orders reflect the trial court’s independent judgment. See generally Smith v.
UHS of Lakeside, Inc., 439 S.W.3d 303 (Tenn. 2014).
6
Moreover, even assuming, arguendo, that the intervening order denying the motion to set aside,
discussed supra in footnote 3, was proper under Rule 58 and thereby made the first case final upon its
entry, Plaintiff’s motion to reconsider was filed within thirty days of the entry of this order, and therefore
extended the trial court’s jurisdiction to modify its decision. See Tenn. R. Civ. P. 59.04; see also Newport
Hous. Auth., Inc. v. Hartsell, 533 S.W.2d 317, 320 (Tenn. Ct. App. 1975) (holding that once a timely
Rule 59.04 motion is filed, “any order or judgment [] is subject to the control of the trial judge and may
be modified or set aside by him at any time before becoming final”). The existence of the intervening
order therefore does not alter my analysis based on the record presented.
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as the final judgment only if the subsequent judgment affects the parties’ substantive
rights or obligations settled by the first judgment.”).7
With the order on the motion to reconsider firmly in place as the operative order
for purposes of the res judicata analysis, I must conclude that Defendant has failed to
show that the final order from the initial suit was an adjudication on the merits that
precludes a second suit. As previously discussed, Rule 41.02 merely requires that the trial
court specify that the judgment is not an adjudication on the merits, i.e., that the dismissal
is without prejudice. Rule 41.02 does not include any specific “magic language” required
to accomplish this goal. But cf. Chook v. Jones, No. W2008-02276-COA-R3-CV, 2010
WL 960319, at *3 (Tenn. Ct. App. Mar. 17, 2010) (holding “to be a final and appealable
order under Rule 54.02, the order must contain Rule 54.02’s ‘magic language’”).
I agree that the order on the motion to reconsider is not a model of clarity and
contains an incorrect statement of law. I must conclude, however, that the clear intent of
the language used in the order is to allow a second suit in this case. This Court interprets
court orders like any other written instrument using the familiar rules of contract
construction. State v. Phillips, 138 S.W.3d 224, 229 (Tenn. Ct. App. 2003). Thus, the
primary goal is “[a]scertaining the trial court’s intention[.]” Id. “[T]his intention should
be gathered from all parts of the judgment.” Id. (citing Livingston v. Livingston, 58
Tenn. App. 271, 281, 429 S.W.2d 452, 456 (Tenn. Ct. App. 1967)). The “judgment should
be construed . . . in such a way that ‘will give force and effect to every word of it, if
possible, and make its several parts consistent, effective and reasonable.’” Id. (quoting
Branch v. Branch, 35 Tenn. App. 552, 556, 249 S.W.2d 581, 583 (Tenn. Ct. App. 1952)).
When a document is unambiguous, “subjective intent [] is not relevant.” In re Estate of
Diviney, No. M2017-00739-COA-R3-CV, 2017 WL 5712904, at *5 (Tenn. Ct. App.
Nov. 28, 2017) (citing Malone & Hyde Food Servs. v. Parson, 642 S.W.2d 157, 159
(Tenn. Ct. App. 1982)).
Here, the plain language of the trial court’s order on the motion for reconsideration
evinces an intent that the dismissal “doesn’t bar a refiling of the suit[.]” Although the trial
court’s statement of law as to how to accomplish this goal is incorrect, there is simply no
reasonable interpretation of the trial court’s order other than indicating an intent that a
second suit be allowed. In other words, of the three things accomplished by the order on
the motion to reconsider detailed supra, omitting the trial court’s incorrect statement of
law does not alter the trial court’s express direction that the case could be “refiled.”
Because Rule 41.02 requires nothing more than that the trial court specify its intent that
an order of dismissal not operate as an adjudication on the merits, I conclude that the trial
court’s order on the motion for reconsideration, which is a necessary part of the final
order of dismissal in the first case, meets both the letter and the spirit of Rule 41.02(3)’s
7
Ball is not entirely on point, as it involved two consecutively entered orders that met both the
substantive and technical requirements for finality. Ball, 288 S.W.3d at 835 (noting that both the first and
second judgments complied with Rule 58).
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requirements. See Tenn. R. Civ. P. 41.02(3).
This case has, simply put, been plagued by shortcomings. Plaintiff failed to
promptly prosecute its case, resulting in dismissal. The order of dismissal, however, was
apparently not served on any of the parties. When Plaintiff returned to the trial court
seeking relief, the trial court stated that the case could be refiled but relied on a clearly
erroneous interpretation of the Tennessee Rules of Civil Procedure. Plaintiff failed to do
its own research to reveal the trial court’s mistake or to appeal the incorrect reasoning
employed by the trial court. But neither did Defendant attempt to correct the trial court’s
mistake in any way, perhaps choosing instead to lie in wait for the opportunity to assert
that the initial suit precluded a second suit, contrary to the subsequent order’s plain
language.
Taking the trial court’s written order at face value, Plaintiff refiled its case, only to
be thwarted by a motion to dismiss on res judicata grounds. Defendant, however, failed to
support his motion with a single document, including the very order that it argued
precluded a second suit. And the trial court granted the motion to dismiss, eventually
ruling that its written ruling that the case could be refiled should not have been relied
upon by Plaintiff. Thus, the issues in this case are not the result of the failing of a single
party, but result from multiple failings by all involved.
Despite the multitude of failings in this case, only Plaintiff suffers any harm. The
trial court is excused from its clearly erroneous interpretation of the law by reinterpreting
the statement as merely “a side bar comment” rather than an integral part of its written
ruling, as well as by the majority’s decision to focus nearly exclusively on the initial
order of dismissal. Defendant is excused from both his own failures and from defending
against the merits of Plaintiff’s action by asserting that the trial court’s order on the
motion to reconsider in the initial suit is either irrelevant or does not mean what it says.
Plaintiff, however, suffers significant harm, as it was deprived of having its case decided
on the merits even after taking the action that was expressly directed by the trial court’s
final order in the first action. And the majority, in its restricted and, in my view,
erroneous, interpretation of the initial proceedings, fails to correct this error.
Two important policies are implicated in this case. First, Tennessee law generally
does not support elevating form over substance. See e.g., Morgan Keegan & Co. v.
Smythe, 401 S.W.3d 595, 607 (Tenn. 2013) (declining to “elevate form over substance”
when it deprives a party of appellate review); Boelter v. Reagan, No. M2010-01354-
COA-R3-CV, 2011 WL 1886573, at *3 (Tenn. Ct. App. May 18, 2011) (reviewing the
essence of the trial court’s order because “we refuse to elevate form over substance”); cf.
Estate of Doyle v. Hunt, 60 S.W.3d 838, 842 (Tenn. Ct. App. 2001) (“A [] court is not
bound by the title of a pleading, but rather the court is to give effect to the pleading’s
substance and treat it according to the relief sought therein.”). This means that we will
consider the essence of a pleading or order even when the language used is imprecise.
While the trial court may not have used our preferred language to indicate that its
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dismissal was without prejudice or did not constitute an adjudication on the merits, the
substance of the trial court’s order is not in doubt: the language of the order clearly states
that Plaintiff may refile its suit.
Moreover, although the caption of the subsequent order states that the trial court
was denying Plaintiff’s motion to reconsider, the contents of the order indicate that the
trial court actually substantively altered its initial order of dismissal. Where previously
the trial court was silent as to refiling, the order on the motion to reconsider expressly
stated that refiling was permitted. We must give effect to the entirety of the trial court’s
order, rather than relying only on its caption. Cf. Adkins v. Bluegrass Estates, Inc., 360
S.W.3d 404, 411 (Tenn. Ct. App. 2011) (quoting Shuttleworth, Williams, Harper,
Waring & Derrick, PLLC v. Smith, No. W2007-02295-COA-R3-CV, 2010 WL 744375,
at *2–3 (Tenn. Ct. App. March 5, 2010) (“The interpretation of an agreement is not
dependent on any single provision, but upon the entire body of the contract and the legal
effect of it as a whole.”)); see also Phillips, 138 S.W.3d at 229 (holding that we interpret
court orders in the same manner as contracts). To hold otherwise is certainly to elevate
form over substance.
Second, it is the policy of the courts of this State to favor adjudication on the
merits. Norton v. Everhart, 895 S.W.2d 317, 322 (Tenn. 1995) (noting “the clear policy
of this state favoring the adjudication of disputes on their merits”). To achieve this goal,
we do not dismiss cases at the motion to dismiss stage unless the defendant’s entitlement
to dismiss is “beyond doubt[.]” Ladd, 556 S.W.2d at 759. Given this preference for
deciding cases on the merits, I must conclude that Defendant has not established his
entitlement to dismissal at this early stage of proceedings. Viewing the pleadings in the
light most favorable to Plaintiff, Defendant has not met his burden to show that the final
judgment in the initial suit was an adjudication on the merits under Rule 41.02(3). I
therefore must once again respectfully dissent from this panel’s application of res judicata
to dismiss an action rather than allow it to finally proceed to adjudication on the merits.
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J. STEVEN STAFFORD, JUDGE
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