PROSPERO ASSOCIATES, a Colorado general partnership, Plaintiff-Appellant, v. BURROUGHS CORPORATION, Defendant-Appellee.
No. 81-1913.
United States Court of Appeals, Tenth Circuit.
Aug. 12, 1983.
714 F.2d 1022
Because of our holdings on the two issues discussed, we find it unnecessary to examine the other issues raised in this appeal. The judgment of the district court is AFFIRMED.
Laurence J. Kaiser, New York City (Adam Walinsky, New York City, with him on briefs), of Kronish, Lieb, Shainswit, Weiner & Hellman, New York City (Donald K. Bain and Jeffrey A. Chase of Holme Roberts & Owen, Denver, Colo., with them on briefs), for plaintiff-appellant.
Robert S. Slosky, Denver, Colo. (Ira C. Rothgerber, Denver, Colo., with him on briefs), for defendant-appellee.
Before McWILLIAMS, BARRETT and McKAY, Circuit Judges.
BARRETT, Circuit Judge.
Plaintiff-appellant Prospero Associates (Prospero) appeals from the district court‘s grant of summary judgment in favor of defendant-appellee Burroughs Corporation (Burroughs).
In 1974 Prospero contracted with the Redactron Corporation (Redactron) (predecessor in interest to Burroughs) for the sale by Redactron to Prospero of text-editing typewriter systems. At the start of the second contract year, Redactron anticipatorily breached the contract by refusing to make future sales. Pursuant to the 1974 agreement, Redactron repurchased equipment it had sold to Prospero during the first contract year. In 1978 Prospero was awarded a money judgment in Boulder County (Colorado) District Court against Redactron for breach of contract, and against Burroughs for tortious interference with a contract. Prospero thereafter filed this action (again in state court), seeking the costs it incurred relating to the repurchase of the equipment.
Burroughs removed this action to federal
I.
Prospero contends that the district court sua sponte converted Burroughs‘s motion to dismiss into one for summary judgment without formal notice to Prospero, thereby denying Prospero the right to present material pertinent to a motion for summary judgment. It is apparent from the record, and Burroughs does not contest, that the district court did not give formal notice to Prospero of the conversion. However, based on the following analysis of the facts and the law, we conclude that the trial court reasonably believed Prospero was treating the motion as one for summary judgment and waived any right to formal notice.
The general rule is that noncompliance with the time and notice provisions of
Similarly, in Dolese v. United States, 541 F.2d 853 (10th Cir.1976), we found no waiver when plaintiff‘s counsel objected strenuously upon first learning of the trial court‘s intention to grant summary judgment in favor of the government. There the government had filed a motion for summary judgment, but the trial court set a date for trial. On the day of trial the court granted summary judgment, despite the existence of a pretrial order which indicated numerous contested issues of fact. We observed that the trial court “failed to follow the mandate or spirit of
This case presents a markedly different situation. Prospero filed a complaint in the district court for breach of contract, and attached thereto a rather lengthy purchase agreement with its attendant exhibits. Thereafter Burroughs filed a motion to dismiss on grounds of, inter alia, res judicata, and incorporated by reference the findings of fact, conclusions of law and judgment of the District Court of Boulder County in a prior state action allegedly based on the same contract. Burroughs attached a copy of the findings, conclusions and judgment to the motion to dismiss. Prospero then filed a brief in opposition to Burroughs‘s motion to dismiss, in which it stated:
The motion is also procedurally defective. The affirmative defense of res judicata does not appear on the face of the Complaint [sic], as confirmed by defendant‘s incorporation of and reference to a copy of the 76-page Findings of Fact, Conclusions of Law and Judgment from the prior state court action. [Emphasis in original]. To be considered at all, the motion would have to be treated as one for summary judgment. (Citations omitted). In any event and no matter how characterized, for the reasons set forth herein, the motion should be denied in all respects.
[R., Vol. I at p. 182 (emphasis supplied)]. Burroughs responded with its reply brief, to which exhibits were attached. In this
Approximately five months later, during which period Prospero never objected to Burroughs‘s characterization that Prospero had suggested converting the motion into one for summary judgment, the trial court granted summary judgment for Burroughs. The trial court found that Prospero‘s claim was barred by the principles of res judicata. Prior to this ultimate finding, the district court stated:
Because defendant‘s motion to dismiss was accompanied by the judgment in the previous case,
F.R.Civ.P. 12(b) requires me to treat the motion to dismiss as one for summary judgment. Both parties have stated in their briefs that the motion should be considered as one for summary judgment and, in accordance with this understanding, both parties have filed exhibits. The requirement of notice to treat a motion to dismiss as one for summary judgment has been met. Adams v. Campbell County School Dist., 483 F.2d 1351 (10th Cir.1973).
[R., Vol. II at p. 303]; 517 F.Supp. at p. 659 n. 2.
Prospero contends that the district court erred in stating that both parties had filed exhibits. This argument is curious because Prospero contends the only “exhibits” it filed were the two separate contracts, the Purchase Agreement and Repurchase Agreement,1 filed with the complaint. While Prospero did not file any exhibits with its brief in opposition to its motion to dismiss, it referred to the substance of the above documents in that brief and obviously intended that the court consider them in reference to the res judicata claim. Hence, this argument is specious.
The heart of the matter lies in the lack of formal notice by the court. Under the circumstances outlined above, we hold that the trial court reasonably believed Prospero was treating the motion as one for summary judgment. Prospero was the party first to mention summary judgment; Prospero had actual notice that Burroughs believed Prospero was treating the motion as one for summary judgment; Prospero had actual notice that Burroughs was treating the motion as one for summary judgment; and Prospero did not at any time lodge an objection with the trial court after it received actual notice. Prospero may not now be heard to say it was “surprised” by the trial court‘s grant of summary judgment. See Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389, 393 (6th Cir.1975) (“The ‘reasonable opportunity’ language of
II.
Prospero‘s second contention is that the district court erred in granting summary judgment for Burroughs on grounds of res judicata. Under
Collateral estoppel, or issue preclusion, is not applicable in this case. The issues relating to costs incurred as a result of the repurchase were not litigated in the state court action. The issue here regards claim preclusion. As the district court noted, “[c]laim preclusion ... prohibits a party from asserting any matter that might have been asserted in the previous cause of action, even if it was not actually asserted.” 517 F.Supp. at p. 660. The question then
In 1976, after Redactron anticipatorily breached the 1974 agreement, Prospero and Redactron arranged to have Redactron repurchase the equipment as provided by a clause in the 1974 agreement. A “Bill of Sale and Assignment of Lease” (Bill of Sale) was drawn up for this purpose. Prospero‘s argument against a res judicata bar to this action is that the 1974 agreement and the Bill of Sale are two separate contracts, or, in the alternative, that the repurchase option in the 1974 agreement is divisible from the rest of the contract. Prospero argues that the claims are distinct and that this action for costs incurred as a result of the repurchase is not precluded by the prior action for breach of the contract.
To settle this question of divisible or multiple contracts, we look to the contract law of the State of New York, the law which expressly governs the interpretation of these agreements. [R., Vol. I, pp. 71, 75, 91]. “Whether a contract is entire or severable generally is a question of intention, to be determined from the language employed by the parties, viewed in the light of the circumstances surrounding them at the time they contracted.” Christian v. Christian, 42 N.Y.2d 63, 73, 365 N.E.2d 849, 856, 396 N.Y.S.2d 817, 824 (1977) (citing 5 Williston, Contracts [3d ed.], § 767 p. 629). Accord: Matter of Estate of Wilson, 50 N.Y.2d 59, 405 N.E.2d 220, 427 N.Y.S.2d 977 (1980); American Surety Co. of New York v. Rosenthal, 133 N.Y.S.2d 870, 206 Misc. 485 (Sup.Ct.1954). The test for divisibility is basically a simple one: “Did the parties give a single assent to the whole transaction or did they assent separately to several things? 3 Williston on Contracts, supra, § 863.” American Surety v. Rosenthal, supra, 133 N.Y.S.2d at p. 874. If a contract is divisible, “there must either be successive divisions upon performance of which the other party becomes bound, or categories with such identifiable lines of demarcation that it becomes apparent the parties assented separately to several things.” First Savings & Loan Ass‘n v. American Home Assurance Co., 35 A.D.2d 344, 316 N.Y.S.2d 233, 235 (1970).
Based on the foregoing principles, we hold that the repurchase option was not divisible from the balance of the 1974 agreement. The 1974 agreement is an extensive document which covers a multitude of topics;3 however, the state court‘s opinion in the prior action makes clear that the contract was negotiated as a whole package. There is nothing in the language of the agreement to indicate that it was anything but entire. Christian v. Christian, supra. Nor are there “categories with such identifiable lines of demarcation” that the only conclusion can be the parties assented to separate things. First Savings & Loan, supra, 316 N.Y.S.2d at p. 235. Rather, the compelling conclusion is that the parties gave “a single assent to the whole.” American Surety v. Rosenthal, supra, 133 N.Y.S.2d at p. 874.
The next question, then, is whether the 1974 agreement and the bill of sale are one or two contracts. Again, New York law guides our interpretation and construc
Thus, we look to the bill of sale to determine whether the plain language of the instrument indicates the intent of the parties when the instrument was drawn. The language is clear: “Prospero ..., pursuant and subject to the provisions of that certain Agreement, dated as of June 1, 1974 ... hereby bargains, sells, transfers, conveys, assigns and delivers to Redactron....” [R., Vol. I at p. 88] (emphasis supplied). Further, the bill of sale provided that the purchase price of the equipment would be determined “as provided pursuant to Section 5.4.1 of the Agreement.” Id. at p. 89. The bill of sale also provided that certain rentals would be paid “as provided for in the Agreement.” Id. at p. 90.
We thus hold that the bill of sale and the 1974 agreement are not separate contracts. The clear language of the bill of sale is that the controlling instrument is the 1974 agreement. Indeed, standing alone, the bill of sale makes no sense as a separate contract. The bill of sale merely evidences the fact that the repurchase option under the 1974 agreement had been exercised. The two instruments are so intertwined and interdependent that they are part of the same contract.
The general rule is that a judgment on the merits of a court of competent jurisdiction is an absolute bar to the prosecution of a second action on the same claim. Pomponio v. Larsen, 80 Colo. 318, 251 P. 534, 536 (1926). Such a judgment precludes a claim “not only as to issues actually resolved, but also to all matters germane to the general issue which could or might have been litigated therein.” Ballas v. Cladis, 167 Colo. 248, 447 P.2d 224, 228 (1968), cert. denied, 395 U.S. 921 (1969) (citing McDermott v. Bent County, Colorado Irrigation District, 135 Colo. 70, 308 P.2d 603 (1957) and Newby v. Bock, 120 Colo. 454, 210 P.2d 985 (1949)).
We conclude that the district court did not err in precluding Prospero‘s claim on res judicata grounds. We have previously held that there was only one contract. It is uncontroverted that the damages alleged by Prospero relating to the repurchase of the equipment by Burroughs had accrued at the time the state court action was filed. These damages were germane to the general issue of breach of contract, since these damages arose as a consequence of a breach. Furthermore, that these damages were germane to the general issue is borne out by the fact that the contract documents were admitted in evidence at the state court trial, together with relevant federal income tax returns and Redactron‘s analysis of the tax effects of the repurchase. We hold that under Colorado law Prospero‘s claim is precluded on res judicata grounds by virtue of the prior state court action.4 See Restatement of Judgments § 62 comment h (1942) (where there are two or more breaches of a single contract all breaches committed prior to the commencement of the action are treated as a single cause of action).
WE AFFIRM.
McKAY, Circuit Judge, dissenting:
When a trial court converts a
The notice of conversion of a
I would reverse and remand for failure to comply with