Keidatz v. Albany

Brief Fact Summary.

A court dismissed Keidatz’s (Plaintiff) suit against Albany (Defendant) for rescission of a contract with a general demurrer, giving Plaintiff leave to amend the complaint. Instead, Plaintiff sued again under a different theory and Defendant argued res judicata.

Synopsis of Rule of Law.

When the general demurrer would not have been granted in the original action had this new theory been then pled, it will not bar a second action under the new theory.

Facts.

Plaintiff purchased a home from Defendant. Plaintiff discovered defects in the home and sued to rescind the contract based upon the defects and misrepresentation by Defendant. Defendant moved for a general demurrer based upon a defense of laches. The court granted the motion, dismissing the action while giving Plaintiff leave to amend his complaint. Plaintiff did not amend his original complaint, but did file a new suit alleging fraud and requesting damages. Defendant moved to dismiss this new claim based on res judicata and the trial court granted the motion. Plaintiff appealed, arguing that this second proceeding was based on a new cause of action.

Issue.

Does a dismissal under a general demurrer automatically bar a second suit filed under a different theory?

Held.

(Traynor, J.) No. When the general demurrer would not have been granted in the original action had this new theory been then pled, it will not bar a second action under the new theory. Res judicata bars actions previously litigated before the court. If the general demurrer from the  initial action would apply to the current action, it is barred even where new facts are pled. However, if the general demurrer would not have been granted on the current complaint, the current complaint is not barred. Laches was a proper defense to Plaintiff’s original suit requesting a remedy in equity of rescission. Laches is not an appropriate defense, however, when the action is one at law requesting damages. The new theory of recovery was never litigated in the previous action, so res judicata does not bar it. Had the original suit been fully litigated and reached judgment on the merits, a new action under a different theory would be barred. Here, there is not much burden to Defendant to defend the new action since the first was dismissed on a general demurer. The general demurrer does not work to bar actions in the way that a nonsuit or a full trial on the merits would. Where the defect that led to the general demurrer is cured in a subsequent action, the later action is not barred. Reversed.

Discussion.

Many courts follow this approach and find that a general demurrer granted with leave to amend does not bar a second action on a new theory even when the plaintiff never amended the original complaint. Other courts follow the approach adopted by a draft of the Restatement Second on Judgments which holds that a failure to amend the original complaint bars subsequent actions on the same cause of action.