Pharmaceia Eni Diagnostics, Inc. v. Washington Suburban Sanitary Commission

BLOOM, Judge. The ten-year-old dispute involved in this appeal has previously been before this Court, the Court of Appeals (twice), two circuit courts of this State, and one federal court. The litigation began when appellee, Washington Suburban Sanitary Commission, instituted in the Circuit Court for Montgomery County a declaratory judgment action against several property owners, including appellant, Pharmaceia ENI Diagnostics, Inc. Instead of filing a counterclaim, appellant chose to pursue separate actions against appellee, which thereafter filed a dismissal of appellant from the declaratory judgment action. Unable to obtain relief in its separate actions, appellant attempted to file a counterclaim in the declaratory judgment action.

Upon motion by appellee, the Circuit Court for Montgomery County (Weinstein, J.) struck appellant's counterclaim on the ground that appellant was no longer a party to the action. Appellant thereupon filed a motion to intervene, which was denied. It is from those rulings that this appeal was taken. Perceiving no reversible error, we shall affirm.

Facts Appellant operates a biological laboratory for the performance of medical testing and the manufacturing of medical products. The laboratory is situated on Lot No. 6 of the Montgomery Industrial Park in Montgomery County, Maryland. Lot No. 6 is adjacent to a tract of land known as “Site 2” and, along with other lots in Montgomery Industrial Park, is benefited by restrictive covenants prohibiting the accumulation of waste material or refuse on, and the emission of objectionable odors from, Site 2. In July, 1980, appellee acquired Site 2 in condemnation proceedings; in November of that year it instituted its declaratory judgment action (hereinafter referred to as the Frankel case) seeking a declaration that the covenants on Site 2 were not ⁵⁵⁹ property interests for which it had to compensate the beneficiaries of the covenants.

All of the property owners benefiting by the covenants, including appellant, were named as defendants. Most of the defendants filed counterclaims; appellant did not. In December, 1982, the Circuit Court for Montgomery County (Mitchell, J.) held that the restrictive covenants were compensable property interests. We affirmed that ruling in Washington Suburban Sanitary Commission v. Frankel, 57 Md.App. 419 , 470 A.2d 813 (1984).

One year later, however, the Court of Appeals vacated that holding for want of final judgment and remanded the case for litigation of damages and adjudication of the counterclaims. Washington Suburban Sanitary Commission v. Frankel, 302 Md. 301 , 487 A.2d 651 (1985). Appellant had filed an answer to the complaint in the Frankel case on 3 March 1981, but thereafter did not participate in that case. Instead, it filed a separate action against appellee in the United States District Court for the District of Maryland on 2 April 1986.

The District Court dismissed appellant’s complaint for failure to state a claim upon which relief could be granted. Seeking compensation for the taking of its property, but opting not to do so by filing a counterclaim in the Frankel case, appellant filed a separate “inverse condemnation” action (Electro-Nucleonics v. Washington Suburban Sanitary Commission) in March, 1986. On 27 June 1987, appellee filed an amended complaint in the Frankel case, which appellant did not answer, and in December of that year appellee filed a notice dismissing appellant from that case. Appellant did not object to the dismissal, nor did it assert any right to remain in the case.

In the Electro-Nucleonics action, the Circuit Court for Montgomery County (Cave, J.) granted summary judgment to appellee, finding that the suit was filed more than three years after appellee acquired title to Site 2 and was thus barred by limitations. That judgment was appealed, but prior to our review of the decision, the Court of Appeals ⁵⁶⁰ granted certiorari, and on 13 March 1989, it affirmed the granting of summary judgment. Electro-Nucleonics v. Washington Suburban Sanitary Commission, 315 Md. 361 , 554 A.2d 804 (1989). Of particular significance to the case sub judice, the Court of Appeals noted that, during oral argument, appellant’s counsel admitted that appellant had been dismissed, without prejudice, from the Frankel case. 315 Md. at 365 , 554 A.2d 804 .

The United States Supreme Court denied certiorari in Electro-Nucleonics on 2 October 1989. — U.S.-, 110 S.Ct. 158 , 107 L.Ed.2d 115 (1989). Having failed to obtain relief in two separate actions, appellant, on 20 September 1989, sought to reactivate its status as a party to the Frankel case by filing therein a counterclaim against appellee. The trial court granted appellee’s motion to strike the counterclaim on 7 March 1990, ruling that appellant had been dismissed from the suit and was thus barred from filing a counterclaim. Promptly thereafter, on 23 March 1990, appellant filed a motion to intervene in the declaratory judgment case.

Appellant claimed that it had a right to intervene; in the alternative, it sought permission to intervene. The circuit court, however, denied the motion, without explanation, on 19 April 1990. In this appeal, appellant contends that it was never properly dismissed from the Frankel case, notwithstanding its admission to the Court of Appeals to the contrary, because it had filed an answer to the original complaint on 3 March 1981, well in advance of the December 1987 Notice of Dismissal, and never stipulated to the dismissal. Therefore, appellant argues, it was not dismissed in accordance with Md. Rule 2-506(a).

Further, appellant contends that since appellee failed to file a motion for voluntary dismissal before appellant’s counterclaim was filed, there was no dismissal in accordance with Md. Rule 2-506(b). Alternatively, appellant argues that even if it had been properly dismissed, the trial court erred in denying its motion to intervene. ⁵⁶¹ I Md. Rule 2-331(a) provides, in pertinent part, that “[a] party may assert as a counterclaim any claim that party has against any opposing party, whether or not arising out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” An obvious predicate to the proper filing of a counterclaim, therefore, is that the counterclaimant be a party to the action. The trial court based its decision to strike appellant’s counterclaim on its determination that appellant had consented to appellee’s Notice of Dismissal and was, consequently, no longer a party to the declaratory judgment case. From the Order and Opinion of 7 March 1990, it is apparent that the trial court inferred appellant’s consent to the dismissal from its decision to commence a separate suit against appellee, its failure to object to the notice of dismissal, its lack of participation in the Frankel case after receiving the notice, and its admission to the Court of Appeals in Electro-Nucleonics that it had been dismissed from the Frankel case.

The trial court further considered the prejudice to appellee of requiring it to relitigate the issues presented in the counterclaim after having defended itself in two prior cases instituted by appellant and involving the same issues. Md. Rule 2-331(d) provides: If a party files a counterclaim or cross-claim more than 30 days after the time for filing that party’s answer, any other party may object to the late filing by a motion to strike filed within 15 days of service of the counterclaim or cross-claim____ The court shall grant the motion to strike unless there is a showing that the delay does not prejudice other parties to the action. (Emphasis added.) Appellant failed to file a counterclaim for more than eight years after the filing of its answer. Consequently, even if appellant were still a party to the Frankel case when it filed the counterclaim, the court would have been entirely justified in striking out the counterclaim in the absence of any showing that allowing the pleading would not prejudice ⁵⁶² other parties.

Appellant clearly failed to make such a showing, and the trial court noted in its opinion and order striking the counterclaim that, “[a]fter putting [appellee] to the time and expense of defending itself in those [prior] suits, it would be unfair to permit [appellant] to relitigate the issues in the form of this counterclaim.” If the allowance of the counterclaim were a matter of discretion (i.e., if appellant were still a party), the scope of our review of the decision to grant or deny a counterclaim would be limited to determining whether the court abused its discretion. Faulkner v. Town of Chestertown, 290 Md. 214, 220 , 428 A.2d 879 (1981); Kramer v. Emche, 64 Md.App. 27, 43 , 494 A.2d 225 , cert. denied, 304 Md. 297 , 498 A.2d 1184 (1985). In view of appellant’s acquiescence to the Notice of Dismissal, as well as the other evidence before the trial court, the prejudice to appellee arising out of the late filing of the counterclaim would justify the striking of appellant’s counterclaim. The primary basis for the court’s ruling, however, was its determination that appellant had been dismissed from the case.

Appellant argues that the Notice of Dismissal was ineffective because it had filed its answer to the complaint many years before the Notice was filed. Md. Rule 2-506 provides: (a) Except as otherwise provided in these rules or by statute, a plaintiff may dismiss an action without leave of court (1) by filing a notice of dismissal at any time before the adverse party files an answer or a motion for summary judgment or (2) by filing a stipulation of dismissal signed by all parties who have appeared in the action. (b) Except as provided in section (a) of this Rule, a plaintiff may dismiss an action only by order of court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded prior to the filing of plaintiff’s motion for voluntary dismissal, the action shall not be dismissed over the objection of the party who pleaded the counterclaim unless the counterclaim can remain pending for independent adjudication by the court. ⁵⁶³ Although no stipulation or order of dismissal was filed, appellant’s conduct subsequent to receiving the Notice of Dismissal justifies the trial court’s inference of consent.

Appellee is clearly wrong in arguing that since the Notice of Dismissal was filed after its amended complaint was filed and before any parties responded to the amended complaint, the notice effected a voluntary dismissal in accordance with Rule 2-506(a). Appellee relies on Keesling v. State, 295 Md. 722, 727-28 , 458 A.2d 435 (1983); Conklin v. Schillinger, 255 Md. 50 , 257 A.2d 187 (1969); and Shapiro v. Sherwood, 254 Md. 235, 238-39 , 254 A.2d 357 (1969), in arguing that once an amended complaint is accepted by the trial court it supersedes the original complaint and becomes the operative pleading in the case as to all defendants. Although this is a correct statement of law, appellee misapplies this rule in contending that an amended complaint can resurrect a plaintiff’s right unilaterally to dismiss an action until the defendant responds to the amended complaint. This would defeat the purpose of the limitation on unilateral dismissals in Rule 2-506(a) in that any time a plaintiff wanted to dismiss an action after the defendant had filed an answer he could simply file an amended complaint and a Notice of Dismissal.

Moreover, appellee’s argument fails to address Md. Rule 2-341(a), which provides that “if no new or additional answer [to the amended complaint] is filed within the time allowed, the answer previously filed shall be treated as the answer to the amendment.” Accordingly, we reject appellee’s assertion that the Notice of Dismissal was sufficient, by itself, to dismiss appellant from the Frankel case. Nevertheless, appellant failed to object to the Notice of Dismissal or assert its right to remain in the Frankel case. Indeed, appellant did not participate in Frankel in any capacity after receiving the Notice but chose to pursue its own action against appellee, in which it admitted to the Court of Appeals that it had been dismissed from Frankel. Appellant effectively admitted its error in not objecting to the Notice of