Nicole R. Kesterson and Philip M. Kesterson, Appellants v. State Farm Fire & Casualty Company and State Farm Mutual Automobile Insurance Company, Respondents.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion

Case Style: Nicole R. Kesterson and Philip M. Kesterson, Appellants v. State Farm Fire & Casualty Company and State Farm Mutual Automobile Insurance Company, Respondents. Case Number: SC88648 Handdown Date: 01/15/2008 Appeal From: Circuit Court of Saline County, Hon. Dennis A. Rolf Counsel for Appellant: Matthew J. Padberg and Anna E. Spink Counsel for Respondent: J. Christopher Spangler Opinion Summary: This summary is not part of the opinion of the Court. It has been prepared by the Communications Counsel for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court and should not be quoted or cited. The opinion of the Court, which may be quoted, follows the summary. Overview: To enable the court of appeals to consider their appeal regarding two parts of their lawsuit, plaintiffs sought the trial court's approval to dismiss, for a second time, the part of their suit that still was pending before the trial court. The trial court allowed the dismissal, and after the appeal was over, they refiled the claim. The trial court granted the defendant's motion to dismiss the refiled claim. In a unanimous decision written by Judge Michael A. Wolff, the Supreme Court reverses the trial court's decision and remands (sends back) the case to the trial court. Because the trial court expressly reserved the plaintiffs' right to refile the claim when it approved their second voluntary dismissal of the claim, they are not precluded from refiling it in a second lawsuit. Facts: Department of Natural Resources employee Nicole Kesterson was injured when her supervisor, who was driving the state vehicle in which they both were riding, lost control of the vehicle and collided with an oncoming tractor-trailer. Kesterson sued her supervisor and her insurance companies, State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Company. She alleged that her supervisor was negligent and that she was entitled to recover

from her insurer's uninsured motorist coverage, either because the state vehicle was not insured and, in the alternative, because the accident was caused by the driver of an unknown or "phantom vehicle" that caused her supervisor to lose control of the state vehicle. Her husband also sued, seeking damages for loss of consortium. At one point, the Kestersons voluntarily dismissed their claims, without prejudice, and refiled them later. The trial court ultimately dismissed the Kesterson's claims against her supervisor and granted summary judgment to State Farm, finding that Kesterson's sole remedy was through workers' compensation. The court of appeals subsequently affirmed the trial court's dismissal of the claim against the supervisor and dismissed the Kestersons' appeal of the summary judgment, declining to review the summary judgment because Kesterson's claim for uninsured motorist coverage arising out of the negligence of the "phantom vehicle" still was pending in the trial court. The Kestersons then asked the trial court to dismiss their claim, without prejudice, against State Farm for the negligence of the "phantom driver." Because the Kestersons previously had dismissed the same claim, their request to dismiss it again was subject to the trial court's approval under Rule 67.02(a). Over State Farm's objection, the trial court approved the Kestersons' motion to dismiss. The Kestersons then appealed the trial court's grant of summary judgment for State Farm on the claim for uninsured motorist coverage based on the supervisor's negligence. The court of appeals affirmed. The Kestersons later filed another suit against State Farm for uninsured motorist coverage based on the negligence of the "phantom driver," and State Farm moved to dismiss. The trial court sustained the motion and dismissed the Kestersons' claim, with prejudice. They appeal. REVERSED AND REMANDED. Court en banc holds: The trial court erred in granting State Farm's motion to dismiss based on the Kestersons' splitting of their "phantom driver" claim from the rest of their lawsuit. Ordinarily, a litigant may not split claims that arise from the same act, contract or transaction but rather must bring all such claims together. This prevents multiplicity of lawsuits and appeals with respect to a single cause of action and is designed to protect defendants against the cost and vexation of fragmented litigation. Ordinarily, split claims are prohibited by the doctrine of claim preclusion, which bars a litigant from bringing, in a subsequent lawsuit, claims that should have been brought in the first suit. This doctrine stems from the common law doctrine of res judicata, a Latin phrase meaning "a thing adjudicated," which prohibits a litigant from bringing a previously litigated claim. To determine whether claims may be split, a court must look to the factual bases for the claims, not their legal theories. For a subsequent claim on the same transaction to be considered separate, there must be new ultimate facts, not just evidentiary details, that form a new claim for relief. Here, the "phantom driver" claim against

State Farm undeniably arose out of the same transaction as the previously litigated claims because all the claims originate from the same automobile accident. In dismissing the Kestersons' "phantom vehicle" claim, without prejudice, under Rule 67.02, however, the trial court expressly reserved their right to refile the "phantom vehicle" claim at a later time. As a result, the doctrine of claim preclusion does not apply, and the Kestersons may bring this "phantom driver" claim in a second suit. Citation: Opinion Author: Michael A. Wolff, Judge Opinion Vote: REVERSED AND REMANDED. Stith, C.J., Price, Teitelman, Limbaugh and Russell, JJ., and Sweeney, Sp.J., concur. Breckenridge, J., not participating. Opinion: This slip opinion is subject to modification until the Court has ruled on the parties' motions for rehearing, if any, and will become final only after the Court issues its mandate. To see when the Court issues its mandate, please check the docket entries for the case on Case.net. Question Presented The Kestersons had two theories of uninsured motorist liability against their insurer, State Farm, arising from a car accident in which Nicole Kesterson was injured. When the Kestersons voluntarily dismissed one of their two claims, in order to appeal an adverse judgment on the other claim, did they improperly split their cause of action so that the judgment on the first claim barred the second? Facts and Procedural History Nicole Kesterson was a passenger in a car driven by her supervisor, Gary Wallut, in the December 1998 accident. The Department of Natural Resources, the employer of both Wallut and Kesterson, owned the car Wallut was driving. The accident occurred when Wallut lost control of the car and collided with an oncoming tractor-trailer.

Kesterson brought a negligence claim against Wallut. She also brought a claim against her insurer, State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Company.(FN1) Kesterson says the state vehicle Wallut was driving at the time of the collision was uninsured in that it was covered by the state legal expense fund, which was not an insurance program. Kesterson argued, therefore, that she was entitled to collect damages for Wallut's negligence under her State Farm policy, which provided for uninsured motorist coverage. Kesterson also alleged, in the alternative, that she was entitled to uninsured motorist benefits because the negligent driver of a "phantom vehicle"(FN2) caused the accident by forcing Wallut to take evasive action which resulted in a collision with the tractor-trailer. Kesterson's husband, Philip Kesterson, alleged damages for loss of consortium. Prior to trial, Wallut filed a motion to dismiss on the grounds that worker's compensation was Kesterson's sole remedy. State Farm also filed a motion for summary judgment on Kesterson's claim for uninsured motorist coverage based on Wallut's negligence. The trial court granted Wallut's motion to dismiss and State Farm's motion for summary judgment based on the court's determination that workers' compensation was Kesterson's exclusive remedy for injuries resulting from Wallut's negligence. Kesterson appealed the trial court's dismissal of the negligence claim against Wallut and the grant of State Farm's summary judgment motion. The court of appeals affirmed the trial court's dismissal of the claim against Wallut, but declined to review the trial court's decision to grant summary judgment in favor of State Farm because Kesterson's claim for uninsured motorist coverage arising out of the negligence of the "phantom vehicle" was still pending in the trial court. The court of appeals thus dismissed the appeal of the uninsured motorist claim against State Farm based on Wallut's negligence for lack of appellate jurisdiction. Kesterson v. Wallut 116 S.W.3d 590, 598 (Mo. App. 2003). After the court of appeals dismissed their appeal, the Kestersons filed a motion to dismiss their claim, without prejudice, against State Farm for the negligence of the "phantom driver." Because the Kestersons' claims had once previously been voluntarily dismissed under Rule 67.02, the motion to dismiss was subject to the court's approval under Rule 67.02(a).(FN3) Over the objection of State Farm, the trial court granted the Kestersons' motion to dismiss. The Kestersons then appealed the trial court's decision to grant summary judgment for State Farm on the claim for uninsured motorist coverage based on Wallut's negligence. On appeal, the court of appeals affirmed the trial court's decision to grant summary judgment. Kesterson v. Wallut, 157 S.W.3d 675, 686 (Mo. App. 2004).

After the court of appeals affirmed the summary judgment in favor of State Farm, the Kestersons filed another suit in April 2005 against State Farm for uninsured motorist coverage based on the negligence of the "phantom driver." State Farm filed a motion to dismiss, arguing that the doctrine of res judicata, also known as claim preclusion, barred the Kestersons' suit. The trial court sustained State Farm's motion and dismissed the Kestersons' claim with prejudice. After opinion in the court of appeals, this Court granted transfer. This Court has jurisdiction. Mo. Const. art. V, section 10. Claim Preclusion Res judicata, a Latin phrase meaning "a thing adjudicated", prohibits a party from bringing a previously litigated claim. Chesterfield Village, Inc. v. City of Chesterfield, 64 S.W.3d 315, 318 (Mo. banc 2002). The modern term is "claim preclusion." Id. Claim preclusion also precludes a litigant from bringing, in a subsequent lawsuit, claims that should have been brought in the first suit.(FN4) Id. As such, the doctrine applies to "every point properly belonging to the subject matter of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time." King General Contractors, Inc., 821 S.W.2d 495, 501 (Mo. banc 1991). Improper splitting of claims occurs when a party sues on a claim which arises out of the same "act, contract or transaction" as the previously litigated claims. Id. A court should also consider "whether the parties, subject matter and evidence necessary to sustain the claim are the same in both actions." Grue v. Hensley, 210 S.W.2d 7, 10 (Mo. 1948). If the claim does arise out of the same "act, contract or transaction", the claim is barred by the original judgment under the doctrine of claim preclusion. Chesterfield Village, Inc. at 501. The rule against splitting a claim for relief serves to "prevent a multiplicity of suits and appeals with respect to a single cause of action, and is designed to protect defendants against fragmented litigation, which is vexatious and costly." Bagsby v. Gehres, 138 S.W.3d 611, 615 (Mo. App. 2004). Same Transaction? The Kestersons' argue that their "phantom vehicle" claim against State Farm is a separate claim under the doctrine of claim preclusion because there are two separate sets of operative facts that form the basis for recovery of uninsured motorist benefits under the State Farm policy with respect to the accident of December 30, 1998: (1) the

underlying negligence of Wallut as the driver of his employer's vehicle; and (2) the underlying negligence of the phantom driver of the hit-and-run vehicle. Because of their differing subject matter, the evidence necessary to prove each claim is distinct. Since the "evidence necessary to sustain the claim[s]" is different in both cases, the Kestersons argue, their voluntary dismissal and refiling of the "phantom vehicle" claim did not violate the rule against improper claim splitting. The Kestersons are correct in their assertion that a court must look to the factual bases for the claims, not the legal theories, when determining whether claims may be split. Chesterfield Village, Inc. at 319. In order for a subsequent claim on the same transaction to be considered separate, however, there must be new ultimate facts, as opposed to evidentiary details, that form a new claim for relief. Id. at 320. The evidentiary details necessary to prevail on the "phantom vehicle" claim are indeed different than those necessary to prevail on the Kestersons' uninsured motorist claim against State Farm based on Wallut's negligence. The crux of the inquiry, however, is the same. Both claims require evidence regarding the circumstances surrounding the car accident. Evidence of the road conditions on the day of the accident, Wallut's negligent driving, the relative positions of the cars and the tractor-trailer at the time of the accident and the fault of the driver of the "phantom vehicle" are integral to both claims. In other words, the ultimate facts in both claims are the same. That the "phantom vehicle" claim would require a greater focus on the negligence of the "phantom" driver does not create a separate claim for the purposes of claim preclusion. The "phantom driver" claim against State Farm undeniably arose out of the same transaction as the previously litigated claims because all of the claims originate from the same car accident. The Order and Judgment of the Trial Court Rule 67.01 provides that a dismissal "without prejudice" – the order granted by the trial court when the Kestermans moved for voluntarily dismissal of the portion of their action based on the "phantom driver" – allows the dismissing party "to bring another civil action for the same cause, unless the civil action is otherwise barred." Notwithstanding a dismissal "without prejudice," the common law doctrine of claim preclusion may present an instance where the civil action is "otherwise barred." The question in this case is whether the common law doctrine of claim preclusion admits an exception that preserves the Kestermans' "phantom driver" theory. While the doctrine of claim preclusion generally prohibits splitting of a single claim, there are limited situations where this general rule does not apply. One such exception exists when the court in the first action has expressly

reserved the plaintiff's right to maintain the second action. Restatement 2d of Judgments sec. 26(1)(b) (2007). In this situation, "a determination by the court that its judgment is "without prejudice" to a second action on the omitted part of the claim, expressed in the judgment itself...should ordinarily be given effect in the second action." Id. at Comment (b). Missouri cases discussing claim preclusion generally follow the Restatement of Judgments. Chesterfield Village, Inc. at 318. In its judgment and order dismissing the Kestersons' "phantom vehicle" claim without prejudice, the trial court stated, "[t]he Court finds, pursuant to the motion filed by Plaintiffs and by oral argument that the dismissal of this cause of action without prejudice would lead to judicial economy by avoiding at least one trial and potentially avoiding two trials." While it is difficult to understand, from the perspective of an appellate court, why the dismissal without prejudice would further judicial economy, the correctness of the trial court's prediction about judicial economy is not the issue. To decide the applicability of claim preclusion, the issue is whether the trial court expressly reserved the Kestersons' right to file the "phantom vehicle" claim at a later time, and it is unmistakably clear that the court did so.(FN5) The doctrine of claim preclusion, therefore, would not apply, though the doctrine would normally bar the Kestersons from bringing the "phantom vehicle" claim in a subsequent suit. Because the trial court expressly authorized the splitting of the "phantom vehicle" theory from the theory of negligence against Wallut the driver in its dismissal without prejudice, the Kestersons may bring this "phantom driver" claim in a second suit. Conclusion The trial court erred in granting State Farm's motion to dismiss. The judgment of the circuit court is reversed, and the case is remanded. Footnotes: FN1.There are two "State Farm" entities referred to in this litigation. The parties treat them as the same insurer. ltrpar FN2.Kesterson's uninsured motorist policy included coverage for accidents negligently caused by unknown or "phantom vehicles."

FN3.The Kestersons filed a motion to dismiss the "phantom vehicle" claim without prejudice in the trial court because they had had previously filed a notice of dismissal on the same claim. Rule 67.02 provides that a "party who once so dismisses a civil action and thereafter files another civil action upon the same claim shall be allowed to dismiss the same without prejudice only: Upon filing a stipulation to that effect signed by the opposing party, or On order of the court made on motion in which the ground for dismissal shall be set forth." FN4.The Restatement sets forth the common law doctrine of res judicata: "(1) When a valid and final judgment rendered in an action extinguishes the plaintiff's claim pursuant to the rules of merger or bar, the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. (2) What factual grouping constitutes a "transaction", and what groupings constitute a "series", are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage." Restatement 2d of Judgments sec. 24 (2007). FN5.What makes this case unusual is that, because of a prior dismissal without prejudice, Rule 67 requires the judge's order approving the dismissal without prejudice. In other, more common circumstances in which there has not been a prior dismissal, the plaintiff may dismiss a claim without prejudice without judicial involvement. If a party moving for a dismissal without prejudice for the first time seeks an order of court approval, the court should not be involved and no order should be entered. Any language authorizing the splitting of a claim would be mere surplusage where no judicial approval is required by Rule 67. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.