Commercial Box & Lumber Co., Inc. v. Uniroyal, Inc.

• Decision Date: 07 August 1980
• Docket Number: No. 78-3282,78-3282
• Citation: 623 F.2d 371
• Parties: COMMERCIAL BOX & LUMBER COMPANY, INC., Plaintiff-Appellant, v. UNIROYAL, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 371

623 F.2d 371

COMMERCIAL BOX & LUMBER COMPANY, INC., Plaintiff-Appellant, v. UNIROYAL, INC., Defendant-Appellee.

No. 78-3282.

United States Court of Appeals Fifth Circuit.

Aug. 7, 1980.

Charles A. Potter, Texarkana, Tex., for plaintiff-appellant.

Atchley, Russell, Waldrop & Hlavinka, Norman C. Russell, Howard Waldrop, Texarkana, Tex., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Texas.

Before GOLDBERG, GARZA and REAVLEY, Circuit Judges.

GARZA, Circuit Judge:

This is a diversity action in which the Appellant Commercial Box & Lumber Company (Commercial Box) sought a monetary judgment from Uniroyal, Inc. for the latter's alleged wrongful deduction of discounts arising out of a purchase contract between the two. The district court granted summary judgment in favor of Uniroyal on the ground that the present suit is barred by res judicata. We reverse.

On November 20, 1974, Commercial Box and Uniroyal entered into Purchase Contract No. 4-90145-2JB. The contract provided for Commercial Box to supply ammunition boxes to Uniroyal at the Joliet Army Ammunition Depot in Joliet, Illinois. The ammunition boxes were to be constructed according to Defendant's specifications. On July 21, 1975, after shipments began, Uniroyal notified Commercial Box of a change in destination. Uniroyal desired a change in its destination point from Joliet to the Kansas Army Ammunition Plant in Parsons, Kansas. Due to more rigid inspection procedures at the Kansas plant, a higher number of boxes were rejected. This required their transportation to Texarkana, Texas for correction of the defects. Upon re-delivery, they were accepted at the Kansas plant.

After a breakdown in negotiations, Commercial Box filed a diversity suit in district court to recover its labor and lumber losses incurred in performing the contract arising out of the delivery and re-delivery of boxes to Kansas. A trial by jury resulted in a monetary judgment favorable to Commercial Box. The present suit arises out of the same purchase contract but involves a different issue. The terms of payment allowed Uniroyal to deduct a discount if payment was made in ten days. The ten day period did not begin to run until delivery of the ammunition boxes to the destination. ¹

In the instant suit, Commercial Box alleges a wrongful deduction of discounts from Uniroyal's payment prices for the period of November 1974 to January 1976. Commercial Box contends that Uniroyal had no right to the discounts since payments were made after the ten day period. Uniroyal filed a motion for summary judgment claiming that, in light of the allegations and decision in the first case, this case should be barred by res judicata or in the alternative under the doctrine of collateral estoppel. The district court granted Uniroyal's motion on the grounds that the action was barred by res judicata.

Although state law governs whether a state court judgment bars a subsequent federal diversity action, Cleckner v. Republic Van & Storage Co., Inc., 556 F.2d 766, 768 (5th Cir. 1977), the situation is different when the first suit was brought in federal court. When a prior action is brought in diversity in federal court, the federal law of res judicata governs in a second suit brought in diversity. Aerojet-General Corp. v. Askew, 511 F.2d 710, 715 (5th Cir. 1975), appeal dismissed, 423 U.S. 908, 96 S.Ct. 210, 46 L.Ed.2d 137 (1975). Even though the second action in Aerojet was brought under federal question as well as diversity, the above rule applies even when both the previous and subsequent actions are based solely on diversity. Id. at 718. See also Johnson v. United States, 576 F.2d 606, 610 (5th Cir. 1978); Cleckner v. Republic Van & Storage Co., Inc., 556 F.2d at 769 n.4. Thus, this court is clearly bound by the federal law of res judicata.

Under federal law, a prior suit which concluded with a final judgment on the merits rendered by a court of competent jurisdiction acts as an absolute bar to a subsequent action between the same parties based on the same action. Kilgoar v. Colbert County Board of Education, 578 F.2d 1033, 1035 (5th Cir. 1978). The federal law of res judicata also establishes that a judgment in a prior suit bars a subsequent cause of action between the same parties not only as to all matters litigated in the first suit but also as to all issues that could have been litigated regarding the same cause of action. Johnson v. United States, 576 F.2d at 611; Moch v. East Baton Rouge Parish School Board, 548 F.2d at 594, 596 (5th Cir. 1977), cert. denied, 434 U.S. 859, 98 S.Ct. 183, 54 L.Ed.2d 132 (1977).

Clearly, the prior action resulted in a final judgment rendered by a court of competent jurisdiction. Additionally, the parties in the present lawsuit are identical to those in the first. The only dispute in this case as to the existence of the elements necessary to satisfy the federal res judicata rule is whether the present suit is based upon the same cause of action as the first. In comparing causes of action, the question is whether the prior right and duty and wrong are the same in each action. Kemp v. Birmingham...