Rettig Enterprises, Inc. v. Koehler - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO
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Rettig Enterprises, Inc. et al., Appellees, v. Koehler et al.,
Appellants.
[Cite as Rettig Enterprises, Inc. v. Koehler (1994), Ohio
St.3d .]
Civil procedure -- Civ.R. 13 -- Counterclaim and cross-claim --
All existing claims between opposing parties that arise
out of same transaction must be litigated in a single
lawsuit -- "Logical relation" test can be used to
determine whether claims between opposing parties arise
out of the same transaction.
1. All existing claims between opposing parties that arise out
of the same transaction or occurrence must be litigated in
a single lawsuit pursuant to Civ. R 13(A), no matter which
party intitiates the action.
2. The "logical relation" test, which provides that a compulsory
counterclaim is one which is logically related to the
opposing party's claim where separate trials on each of
their respective claims would involve a substantial
duplication of effort and time by the parties and the
courts, can be used to determine whether claims between
opposing parties arise out of the same transaction or
occurrence.
(No. 92-2121 -- Submitted November 10, 1993 -- Decided
February 9, 1994.)
Appeal from the Court of Appeals for Hancock County, No.
5-91-19.
This appeal involves issues relating to three lawsuits
arising out of business disputes between the parties. The
facts will be set forth as they are relevant to each lawsuit.
"Rettig I"
On August 1, 1988, plaintiff, Rettig Enterprises, Inc.,
d.b.a. Ohio Tool & Surplus, filed a "Complaint for Rescission
and Money" in the Hancock County Court of Common Pleas against
defendants, Dennis E. Lane, James C. Koehler, Northwest Passage
Trading Co., Inc. and Northwest Ohio Tool (case No. 88-431-MJ,
later redesignated No. 88-431-OC, and hereafter referred to as
"Rettig I"). The complaint alleged that the defendants orally
agreed to purchase Ohio Tool & Surplus ("Ohio Tool"), a retail

store located at 820 North Main Street in Findlay, Ohio that
deals in the sale and trading of tools and surplus goods.
According to the complaint, the defendants took possession of
Ohio Tool's inventory on February 1, 1988 and thereafter failed
to account for such inventory as agreed. The complaint sought
a constructive trust on all inventory, rescission of the oral
agreement, return of the inventory to plaintiff, and damages in
an amount equal to the value of any inventory that "dissipated"
while in defendants' possession. The complaint also alleged a
balance due on the unpaid purchase price of Ohio Tool.
On October 17, 1988, the parties entered into an agreement
which purported to settle Rettig I and the underlying disputes
surrounding the sale of Ohio Tool. The settlement agreement
refers to the underlying business arrangement as a "lease," the
real property of which defendants "improved." The agreement
provides that defendant shall pay a specified sum of money to
the plaintiff for the estimated cost of the inventory that
defendants sold, the payment balance due and net accounts
receivable, less money already paid. The agreement further
provides, however, that the estimated cost of the inventory
that defendants sold is subject to change depending on the
results of an arranged calculation. Under this arrangement,
the defendants would remain at 820 North Main Street until
December 31, 1988, at which time they would vacate the premises
and all improvements would accrue to plaintiff's benefit.
Meanwhile, the plaintiff must remove its inventory and
defendants must give plaintiff access to all their inventory
sales slips from February 1, 1988 until the day that plaintiff
removes its inventory. At that time, Kevin Rettig on
plaintiff's behalf and Will Shinew on defendants' behalf were
to calculate the cost value of all inventory sold based on
those sales slips. The agreement also provides that Rettig I
would be dismissed with prejudice.
Rettig I was eventually dismissed on March 20, 1990,
during the pendency of "Rettig II."
"Rettig II"
On January 6, 1989, plaintiffs, Rettig Enterprises, Inc.,
Edward M. Rettig and Kevin Rettig, filed a "Complaint for Money
Only" against the same defendants named in Rettig I (case No.
89-7-MJ, redesignated 89-7-OC, and herein referred to as
"Rettig II"). The complaint alleged "that defendants have
willfully and maliciously failed to pay***the sums agreed under
the [settlement agreement]," particularly with regard to
inventory allegedly sold by defendants from February 1, 1988
through November 12, 1988.
On June 1, 1989, defendants filed a counterclaim which
alleged that plaintiffs owed defendants money for certain items
purchased while the business at 820 North Main Street was being
operated by defendants and/or in the process of being returned
to plaintiffs. The items include: (1) tools and equipment
purchased on credit between February 1, 1988 and October 25,
1988; (2) certain Curtis bolts and screws purchased on November
19, 1988; and (3) three rows of shelving purchased on November
19, 1988.
On October 10, 1989, the case proceeded to trial to the
court. Following the testimony of Kevin Rettig in plaintiffs'
case-in-chief, the trial court found that the parties had

failed to calculate the cost value of the inventory as required
by the terms of the October 17, 1988 settlement agreement and
that without such calculation the court could not make a
determination. The court continued the case for thirty days
and ordered Kevin Rettig and Will Shinew to complete the
calculation (which order was entered on October 31, 1989).
On October 24, 1989, the plaintiffs filed a motion to
dismiss the case pursuant to Civ. R 41(A) and, on November 30,
1989, the defendants opposed the motion to dismiss. On January
10, 1990, the trial court entered judgment dismissing the
complaint without prejudice on its own motion for failure to
comply with the October 31, 1989 judgment entry. The judgment
provided, however, "that the foregoing dismissal does not
constitute a dismissal of the defendants' counterclaims."
The counterclaims were tried to the court on February 22,
1990. On April 17, 1990, plaintiffs filed a motion to file a
supplemental complaint pursuant to Civ. R. 15(E) which sought,
in part, to add Shinew as a party defendant. On May 10, 1990,
the trial court entered judgment denying plaintiffs' motion on
the basis that since plaintiffs' claims had been dismissed,
there is "no pleading to be supplemented." The court went on
to state that "[t]his ruling in no way precludes the
plaintiffs' [sic] from instituting an appropriate action to
complete the terms of [the] settlement agreement***[or from
litigating] any other controversies between the parties." On
May 29, 1990, judgment was entered in favor of defendants on
their counterclaims.
"Rettig III"
On May 14, 1990, the plaintiffs commenced the present
action by filing another complaint against the same defendants
and also naming Shinew as a defendant (case No. 90-122-OC,
hereafter referred to as "Rettig III"). Count I of the
complaint sought an order commanding Shinew to perform the
inventory cost calculations as provided in the settlement
agreement. Count II alleged that "[f]rom 12/24/87 to 9/20/88
the Defendants incurred [in-store] open-ended account
charges." Count III alleged that "[f]rom 2/8/88 to 3/7/89 the
Defendants charged on the telephone bill of the plaintiffs."
Count IV alleged that "defendants have willfully and
maliciously failed to pay***under the [settlement agreement]."
On April 15, 1991, the trial court granted defendants'
motion for summary judgment and dismissed plaintiffs'
complaint. In so doing, the trial court found that "[t]his
instant case *** is predicated entirely on issues relating to
the original compromise agreement," and held that "[a]ll claims
and compulsory counterclaims should have been decided in the
one action on the settlement agreement [i.e., Rettig II]
otherwise they would be waived." Additionally, the trial court
also held "that the relief sought against Mr. Shinew should
properly have been demanded in [Rettig II]."
The court of appeals reversed, finding "no connection
between the counterclaims [in Rettig II] and the terms of the
settlement agreement. *** Thus, we conclude that the
counterclaims were not compulsory and that it was error on the
part of the trial court to conclude that the doctrine of res
judicata applied."
The cause is now before this court pursuant to the

allowance of a motion to certify the record.

William Scott O'Brien, for appellees.
Brimley, Kostyo & Lather and John F. Kostyo, for
appellants James C. Koehler, Dennis E. Lane, Northwest Passage
Co., Inc., and Northwest Ohio Tool.
Bernard K. Bauer Co., L.P.A., and Bernard K. Bauer, for
appellant Will Shinew.

Alice Robie Resnick, J. Although somewhat factually
complicated, this case presents a simple legal issue: Does
Civ. R. 13(A) bar the plaintiffs from bringing Rettig III? We
answer this question in the affirmative.
Civ. R 13(A) provides, in pertinent part, that:
"A pleading shall state as a counterclaim any claim which
at the time of serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or
occurrence that is the subject matter of the opposing party's
claim and does not require for its adjudication the presence of
third parties of whom the court cannot acquire jurisdiction."
In Geauga Truck & Implement Co. v. Juskiewicz (1984), 9
Ohio St. 3d 12, 14, 9 OBR 61, 63, 457 N.E. 827, 829, this court
stated that "[t]he two-pronged test for applying Civ. R. 13(A)
is: (1) does the claim exist at the time of serving the
pleading***; and (2) does the claim arise out of the
transaction or occurrence that is the subject matter of the
opposing claim." If both prongs are met, then the present
claim was a compulsory counterclaim in the earlier action and
is barred by virtue of Civ. R. 13(A). Id.
It makes no difference to the application of Civ. R. 13(A)
that the opposing claim in the earlier action was a
counterclaim rather than a complaint or that the present claim
was originally filed as a complaint in the earlier action and
dismissed without prejudice after the defendant filed its
counterclaim. See 5 Wright & Miller, Federal Practice and
Procedure (Civil 2d 1990) 28-29, Section 1188. See, also,
Lenihan v. Shumaker (May 6, 1987), Summit App. No. 12814,
unreported; Dungan v. Bryant (Mar. 2, 1983), Lorain App. No.
3393, unreported.1 Civ. R. 13(A) requires all existing claims
between opposing parties that arise out of the same tranaction
or occurrence to be litigated in a single lawsuit, regardless
of which party initiates the lawsuit.
It is undisputed that the plaintiffs' claims in Rettig III
existed at the time the relevant pleadings were served in
Rettig II. The only question that remains is whether the
plaintiffs' claims in Rettig III arise out of the transaction
or occurrence that is the subject matter of the defendants'
counterclaims in Rettig II.
In determining whether claims arise out of the same
transaction or occurrence, courts most frequently utilize the
"logical relation" test. See, generally, 6 Wright, Miller &
Kane, Federal Practice and Procedure (Civil 2d 1990) 65,
Section 1410. Under this test, "[a] compulsory counterclaim is
one which 'is logically related to the opposing party's claim
where separate trials on each of their respective claims would
involve a substantial duplication of effort and time by the
parties and the courts.'" Staff Notes (1970) to Civ. R. 13,

quoting Great Lakes Rubber Corp. v. Herbert Cooper Co. (C.A. 3,
1961), 286 F. 2d 631, 634.
The logical relation test comports with the object and
purpose of Civ. R. 13(A), viz., to avoid a multiplicity of
actions and to achieve a just resolution by requiring in one
lawsuit the litigation of all claims arising from common
matters. See Staff Notes, supra; Cyclops Corp. v. Fischbach &
Moore, Inc. (D.C. Pa. 1976), 71 F.R.D. 616, 619; 6 Wright,
Miller & Kane, Federal Practice and Procedure, supra, at 46,
Section 1409. This test is also useful in the flexibility it
affords:
"'Transaction' is a word of flexible meaning. It may
comprehend a series of many occurrences, depending not so much
upon the immediateness of their connection as upon their
logical relationship. *** That they are not precisely
identical, or that the counterclaim embraces additional
allegations *** does not matter. To hold otherwise would be to
rob this branch of the rule of all serviceable meaning, since
the facts relied upon by the plaintiff rarely, if ever, are, in
all particulars, the same as those constituting the defendant's
counterclaim." Moore v. New York Cotton Exchange (1926), 270
U.S. 593, 610, 46 S.Ct. 367, 371, 70 L.Ed. 750, 757.
Thus, multiple claims are compulsory counterclaims where
they "involve many of the same factual issues, or the same
factual and legal issues, or where they are offshoots of the
same basic controversy between the parties." Great Lakes
Rubber Corp., supra, at 634.
A review of the record in this case reveals that the
claims asserted by plaintiffs in Rettig III are logically
related to and arose out of the same transactions as the
counterclaims litigated in Rettig II. They are offshoots of
the same basic controversy between the parties over an
accounting of the various rights, obligations and liabilities
springing from the business arrangement involving Ohio Tool at
820 North Main Street, and include many of the same factual and
legal issues. In fact, the claims asserted by plaintiffs in
Rettig III are either very similar to or restate those that
were asserted by plaintiffs and dismissed in Rettig II.
Plaintiffs themselves recognized, in arguing their motion to
supplement their complaint in Rettig II, that "[t]he
transactions involved in the complaint, the counterclaims, and
the supplemental complaint all arise out of the same occurrence
and transaction." We agree.
Plaintiffs argue that even though Shinew did not sign the
October 17, 1988 settlement agreement, an independent action
can be brought against him for the sole purpose of forcing
Shinew to perform the inventory cost calculations required by
that agreement. The cases relied upon by plaintiffs, however,
do not support such a theory. Shinew's employer, Northwest
Ohio Tool, and not Shinew, is the real party in interest.
For the foregoing reasons, the judgment of the court of
appeals is reversed, and the summary judgment entered by the
trial court in favor of defendants is reinstated.
Judgment reversed.
Moyer, C.J., A.W. Sweeney, Douglas, Wright, F.E. Sweeney
and Pfeifer, JJ., concur.

Footnote:
1 This case does not present the issue as to whether a
defendant is estopped from asserting Civ. R. 13(A) as a bar to
plaintiff's claim where, in the earlier action, the defendant
had consented to a dismissal without prejudice and the refiling
of the claim; and a determination of such issue should not be
implied from this opinion. See, e.g., Beta II, Inc. v. Fed.
Ins. Co. (Aug. 15, 1984), Hamilton App. No. C-830779,
unreported. Nor does this case involve the situation where the
complaint in the earlier action was dismissed prior to the
filing of a counterclaim, or where a counterclaim was filed as
a complaint in another action and the two actions were
consolidated. See, e.g., Jackson v. Simmons (Mar. 4, 1993),
Cuyahoga App. No. 61906, unreported. It should be noted
further that the trial court in this case did not order
separate trials pursuant to Civ. R. 13 (I).