Yelin v. Carvel Corp.

Citation. 893 P.2d 450 (1995)

Brief Fact Summary.

Plaintiffs sued Defendants for breach of the lease agreement. Defendants filed a third-party complaint against Third-Party Defendants for breach of the franchise agreement.

Synopsis of Rule of Law.

A third-party complaint is proper when the third party’s potential liability is derivative of or dependent upon the outcome of the original lawsuit.

Facts.

Carvel Corporation (Third-Party Defendants) leased retail space from George Doolittle and Jeanette Doolittle Ingraham (Plaintiffs) and assigned the lease to Kenneth and Jacqueline Yelin (Defendants) as part of a franchise agreement. Defendants were forced to close the business before the lease term was complete and Plaintiffs sued Defendants for breach of the lease agreement. The Defendants filed a third-party complaint against Third-Party Defendants, arguing Third-Party Defendants’ negligent misrepresentations and breach of the franchise agreement caused Defendants’ breach of the lease agreement. The Third-Party Defendants moved to dismiss the complaint.

Issue.

Is the Third-Party Defendants potential liability derivative of the potential liability in the original complaint?

Held.

No, the Third-Party Defendants potential liability is independent of the original complaint. The lower court’s decision is affirmed.

Dissent.

Justice Franchini

Justice Franchini argued that a third-party complaint need only demonstrate partial liability related to the original claim, which was established by the Third-Party Defendants’ original lease with the Plaintiffs.

Discussion.

The court found that the Defendants’ third-party complaint was not derivative of the Plaintiffs’ original claim against the Defendants. Regardless of whether the Defendants’ are found to have breached the lease agreement with Plaintiffs, the Third-Party Defendants’ can be found liable on the claims of negligent misrepresentation and breach of a separate contractual agreement.