Chrysler Corp. v. Lakeshore Commercial Finance Corp.

• Decision Date: 06 March 1975
• Docket Number: No. 73-C-488.,73-C-488.
• Citation: 389 F. Supp. 1216
• Parties: CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff, v. LAKESHORE COMMERCIAL FINANCE CORPORATION, a Wisconsin Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

389 F. Supp. 1216

CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff, v. LAKESHORE COMMERCIAL FINANCE CORPORATION, a Wisconsin Corporation, Defendant.

No. 73-C-488.

United States District Court, E. D. Wisconsin, Milwaukee Division.

March 6, 1975.

COPYRIGHT MATERIAL OMITTED

Victor M. Harding, Whyte, Hirschboeck, Minahan, Harding & Harland, S. C., Milwaukee, Wis., for plaintiff.

Robert K. Steuer, Lorinczi & Weiss, Milwaukee, Wis., for defendant.

DECISION AND ORDER

WARREN, District Judge.

On September 7, 1973, plaintiff Chrysler Corporation filed a complaint against defendant Lakeshore Commercial Finance Corporation in federal court charging that defendant had wrongfully induced a third corporation, Adamatic, Inc., not a party to the instant action, to breach its contract with plaintiff. Defendant responded to the complaint on September 13, 1973, by filing a motion to dismiss for failure to state a claim upon which relief could be granted pursuant to rule 12(b)(6) of the Federal Rules of Civil Procedure, premised upon the doctrine of collateral estoppel. That motion, which has been fully briefed and argued by the parties, is the subject of disposition herein. With respect to plaintiff's cause of action for wrongful inducement of a breach of contract, jurisdiction resides in this Court by virtue of the provisions of 28 U.S.C. § 1332(a)(1).¹

This case represents another phase of a continuing dispute between Chrysler Corporation and Lakeshore Commercial Finance Corporation which culminated in a replevin action commenced by Chrysler Corporation against Adamatic, Inc. in the Circuit Court of Milwaukee County. Essentially, it is the defendant's position that the doctrine of collateral estoppel effectively precludes litigation herein of plaintiff's cause of action for wrongful inducement of a breach of contract by defendant in view of the fact that the Wisconsin Supreme Court has conclusively decided that defendant was privileged to interfere in such contract. In support of its position, defendant relies on the decision of the Wisconsin Supreme Court in Chrysler Corp. v. Adamatic, Inc., 59 Wis.2d 219, 208 N.W.2d 97 (1973), a copy of which has been annexed to defendant's motion, as well as several affidavits to which copies of the circuit court pleadings and judgment have been annexed. In addition, the Court has requested submission of the briefs argued by both parties on appeal to the Wisconsin Supreme Court.

Although it is proper to raise the defenses of judicial finality either by motion to dismiss or by motion for summary judgment,² rule 12(b) of the Federal Rules of Civil Procedure provides in part as follows:

"(b) How Presented. . . . If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56 . . ."

Moreover, the decision of the Seventh Circuit Court of Appeals in Grand Opera Co. v. Twentieth Century-Fox Film Corp., 235 F.2d 303 (7th Cir., 1956) implicitly mandates that if this Court examines the affidavits and exhibits submitted by defendant in support of its motion to dismiss, it must treat such motion as one for summary judgment:

"It is elementary that the district judge, in considering the motions to dismiss the amended complaint, had no right to consider any facts except those well-pleaded in the amended complaint. He had no right to hear evidence. He had no right to take judicial notice of anything, with the possible exception of facts of common knowledge which controvert averments set up in the amended complaint. . . ." Id. at 307.

In view of the fact that resolution of the collateral estoppel issue is necessarily dependent upon this Court's ability to examine the decision of the Wisconsin Supreme Court, heretofore mentioned, as well as the affidavits of defendant's counsel and the exhibits attached thereto, this Court will treat defendant's motion as one for summary judgment in accord with rule 56 of the Federal Rules of Civil Procedure. Having so decided, it is incumbent upon the Court to examine the undisputed facts surrounding this controversy.

Since July, 1967, defendant Lakeshore Commercial Finance Corporation (hereinafter "Lakeshore") had financed the operations of Adamatic, Inc. (hereinafter "Adamatic"), in return for which it obtained a security interest in Adamatic's inventory and receivables by means of various perfected security agreements. Plaintiff Chrysler Corporation (hereinafter "Chrysler") during that time conducted two transactions with Adamatic, only the second of which is relevant to this lawsuit and will be recounted herein. In April, 1970, Chrysler contracted with Adamatic for the production of three twelve-coil stator winders at a purchase price of $83,646.43 per machine. Adamatic, as seller, agreed to deliver the first such machine by September 7, 1970, the second by October 7, 1970, and the third by November 6, 1970. Furthermore, the parties had agreed that Chrysler, as buyer, would make advance payments on the purchase price to Adamatic after the work on the machines was 25 percent complete. The advance payments were not to exceed 80 percent of the value of the labor and materials which, to that point, had been used in the construction of the machines, and in September, 1970, Chrysler made such payment in the amount of $105,761.55.

On September 15, 1970, Lakeshore and Adamatic personnel met to discuss Adamatic's progress on the Chrysler contract as well as Adamatic's general financing prospects. At that time, Lakeshore advised Adamatic that it was in default and that unless it found some alternative source of financing, Lakeshore would be forced to liquidate its loan. Nevertheless, Lakeshore advanced an additional $30,000 to $50,000 to Adamatic, and by October 15, 1970, Adamatic's debt to Lakeshore was approximately $340,000.

Meanwhile, Adamatic had fallen behind in its delivery schedule with respect to the three twelve-coil stator winders, and on October 12, 1970, Chrysler sent one of its representatives to the Adamatic plant in Milwaukee to expedite delivery. After additional work was performed on the machine, the Chrysler representative advised that the first of the three twelve-coil stator winders was in an acceptable condition and arranged to have the machine prepared for shipment. Pursuant to Chrysler's directive, the machine was skidded to the Adamatic loading dock on Monday, October 19, 1970, preparatory to being loaded on a common carrier truck supplied by Chrysler for shipment of the machine to the Chrysler plant in Indianapolis.

At this point, Lakeshore became cognizant of Chrysler's attempt to take delivery of the first twelve-coil stator winder and, by telephone, directed Adamatic not to ship the machine. Accordingly, Adamatic personnel removed the machine from the truck and returned it to the plant. The following day, attorneys and representatives of Chrysler met with the attorneys and representatives of Lakeshore. Chrysler claims that at such meeting Lakeshore demanded that Chrysler renegotiate the purchase price of the three twelve-coil stator winders in excess of the contract price if it wanted delivery of the machines. Chrysler would not agree and instead commenced a replevin action against Adamatic in the Milwaukee County Circuit Court on October 21, 1970. That same day the sheriff of Milwaukee County seized the three twelve-coil stator winders, which were substantially completed, half-finished, and little more than a frame, respectively. Lakeshore petitioned the Court to intervene and was permitted to do so. It failed, however, to file a sufficient redelivery bond, and the goods were turned over to Chrysler and removed to Indianapolis on or about October 27, 1970.

Although Chrysler attempted, after Lakeshore's intervention, to amend its pleadings to assert a claim for damages against Lakeshore for inducing Adamatic to breach its contract with Chrysler, the circuit court denied Chrysler permission to amend and entered an order on June 28, 1971, reserving to Chrysler the right to prosecute any additional causes of action against either Adamatic or Lakeshore. Nevertheless, Chrysler was permitted to amend its reply to the counterclaim of Lakeshore to include the affirmative defense of wrongful inducement of a breach of contract by Lakeshore. Moreover, in the trial of this action to the jury in circuit court, the jury specifically found that Lakeshore had wrongfully caused Adamatic to detain the property involved in both the transaction at issue and the first transaction, for which it awarded Chrysler damages in the amount of $40,000. The trial judge thereafter entered judgment denying damages on the basis that Chrysler had failed to prove any special damages by virtue of Lakeshore's wrongful detention of the machines. On appeal, the Wisconsin Supreme Court affirmed the trial court judgment in this respect but concluded that the three twelve-coil stator winders had not been unlawfully detained.

As heretofore noted, jurisdiction over plaintiff's cause of action for unlawful inducement of a breach of contract is grounded upon diversity of citizenship. When acting by virtue of such jurisdiction, it is well recognized that a federal district court is simply another court of the forum state, for which reason it applies state law and policy. Angel v. Bullington, 330 U.S. 183, 191-192, 67 S.Ct. 657, 91 L.Ed. 832 (1947). This principle has been extended by the federal courts in this circuit to application of all the doctrines of judicial finality,³ including specifically the doctrine of collateral estoppel. See, e. g., Morgan v. Inter-Continental Trading Corp., 360 F.2d 853 (7th Cir., 1966). Under Wisconsin law, even as between distinct causes of action involving the same parties and the same...