Jordan v. Stuart Creamery, Inc.

• Decision Date: 21 September 1965
• Docket Number: No. 51727,51727
• Citation: 137 N.W.2d 259,258 Iowa 1
• Parties: Lewis H. JORDAN, Trustee of the Estate of Merle J. Jensen, Bankrupt, Appellee, v. STUART CREAMERY, INCORPORATED, Arnold Madsen, John Snowgren, Hobart E. Newton and Howard Randolph, Appellants.
• Court: Iowa Supreme Court

Page 259

137 N.W.2d 259

258 Iowa 1

Lewis H. JORDAN, Trustee of the Estate of Merle J. Jensen, Bankrupt, Appellee, v. STUART CREAMERY, INCORPORATED, Arnold Madsen, John Snowgren, Hobart E. Newton and Howard Randolph, Appellants.

No. 51727.

Supreme Court of Iowa.

Sept. 21, 1965.

Frank Thompson, of Batschelet & Thompson, Guthrie Center, and Clyde Putnam, Jr., of Putnam, Putnam & Putnam, Des Monies, for appellants.

Robert O. Frederick, of Webster, Frederick & Jordan Winterset, for appellee.

STUART, Justice.

Defendants, with our permission, have appealed from the trial court's interlocutory order refusing to dismiss plaintiff's petition on their motion for an anjudication of law points. The specific question to be decided is whether it can be determined from the pleadings that plaintiff's cause of action has been previously adjudicated and therefore barred under the doctrine of res judicata.

This action is the third in which the ownership of 89 shares of stock in Stuart Creamery, Inc. has been the primary issue. Equity No. 15701, filed March 29, 1960, was brought by plaintiff's bankrupt. It was dismissed when he failed to comply with an order of court requiring him to produce certain books and records belonging to the creamery. An identical action, Equity No. 15919, filed December 6, 1961 was dismissed on the ground there had been a prior adjudication by the dismissal of 15701. No appeals were taken and defendants' plea of res judicata is based on these dismissals.

R.C.P. 217 provides: 'All dismissals not governed by rule 215 or not for want of jurisdiction or improper venue, shall operate as adjudications on the merits unless they specify otherwise.' Therefore, these dismissals were with prejudice on the merits.

Such dismissals without an actual trial can be the basis of a plea of res judicata. Credit Industrial Corp. v. Miller, 255 Iowa 1022, 125 N.W.2d 142; Lynch v. Lynch, 250 Iowa 407, 415, 94 N.W.2d 105; J. R. Watkins Co. v. Kramer, 250 Iowa 947, 97 N.W.2d 303; Patterson v. Union Pacific Railroad, 242 Iowa 1273, 49 N.W.2d 820; Stucker v. County of Muscatine, 249 Iowa 485, 87 N.W.2d 452.

To sustain a plea of res judicata, the cases must involve '1. Same parties, or parties in privity. 2. Same cause of action. 3. Same issues.' Trustees of Green Bay Levee and Drainage District, etc. v. Alexander, 252 Iowa 801, 807, 108 N.W.2d 593, 597; In Re Estate of Richardson, 250 Iowa 275, 281, 93 N.W.2d 777, and citations.

Plaintiff claims the parties and cause of action in the instant case differ from those in the other two cases. The trial court held the issues in all three cases were substantially the same, but as the named defendants are not the same, defendants must establish privity between those named and those omitted and this cannot be established from the pleadings.

I. We will first consider whether the same cause of action is involved. Briefly stated, in the first case, Equity No. 15701, present plaintiff's bankrupt, Merle J. Jensen, alleged he was the owner of 89 shares of stock in Stuart Creamery, Inc. and that Howard Randolph and obtained possession of the certificate for this stock and claimed ownership. He alleged Randolph evicted him from the creamery office and that the present board of directors was elected or appointed by Randolph. He asked that he be adjudged the owner of said 89 shares, Randolph be ordered to deliver the certificate to him, the board of directors be removed as illegally elected, and further asked for an accounting of all creamery assets and income since his eviction as well as general equitable relief. The second case Equity 15919 was identical.

Here, plaintiff has pleaded the transaction involving the 89 shares more in detail but the basic issue is still the ownership of these 89 shares claimed by both plaintiff and Randolph. In addition, however, plaintiff in a separate count claims the ownership of one other share of stock obtained by his bankrupt on an assignment from a third party. This certificate for one share was sent to the attorney for the creamery for transfer and never returned, according to the allegations.

The trial court was of the opinion that, as an accounting of all the assets and earnings of the corporation was requested in the first two cases, they 'would have involved the one share of stock as well as all other shares of stock even though said share or shares were not specifically named in the pleadings'.

'It is a well-established rule, of almost universal application, that a judgment, if rendered by a court of competent jurisdiction, on the merits, constitutes a complete bar and estoppel to a subsequent action between the same identical parties based upon the same claim or demand or cause of action. This is not only true with reference to matters in issue, but is in true as to all matters incident to or essentially connected with the subject of the action which might have been put in issue and adjudicated. * * *

'The doctrine of res judicata is based upon the principle that a party may not split or try his cause of action in piecemeal, but must but in issue and try his entire cause of action, or put forth his entire defense in the case on trial.' Wheatley v. City of Fairfield, 221 Iowa 66, 75, 264 N.W. 906, 911; Merrifield v. Clark, 199 Iowa 171, 201 N.W. 563; In Re Estate of Remsay, 240 Iowa 50, 59, 35 N.W.2d 651; 50 C.J.S. Judgments § 648, p. 89, § 657, p. 102, § 658, p. 104, § 668, p. 114, § 716, p. 186.

However, matters 'which were not material or issuable in the first action, or were not in controversy therein, or necessary to the decision, even though adjudicated, cannot conclude them in a subsequent proceeding.' Kunkel v. Eastern Iowa L & P Co-op., 232 Iowa 649, 659, 5 N.W.2d 899, 904, and citations. Aultman v. Meyers, 239 Iowa 940, 33 N.W.2d 400.

A test for determining whether the causes of action are the same is suggested in Phoenix Finance Corp. v. Iowa-Wisconsin Bridge Co., 237 Iowa 165, 175, 20 N.W.2d 457, 461, in which we quote from 30 Am.Jur. 918, section 174 (now 30A Am.Jur. 407, section 365):

'In the application of the doctrine of res judicata, if it is doubtful whether a second action is for the same cause of action as the first, the test generally applied is to consider the identity of the facts essential to their maintenance, or whether the same evidence would sustain both. If the same facts or evidence would sustain both, the two actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action. If, however, the two actions rest upon different states of facts, or if different proofs would be required to sustain the two actions, a judgment in one is no bar to the maintenance of the other. It has been said that this method is the best and most accurate test as to whether a former judgment is a bar in subsequent proceedings between the same parties, and it has even been designated as infallible.' See Band v. Reinke, 230 Iowa 515, 519, 298 N.W. 865, 868.

It seems apparent the causes of action involving the 89 shares of stock are identical. Plaintiff does not seriously argue otherwise. He does claim there was no final adjudication of the ownership of the 89 shares of stock, in view of the way the case 15701 was disposed of. We will discuss this proposition later.

Plaintiff on cross appeal urges the cause of action for the one share of stock is separate and distinct from the cause of action for the 89 shares and he was not required to join them. We agree. The sources of plaintiff's claimed rights in the two stock certificates are entirely different. There is no similarity in the proof required to establish these two claims. Ownership of the 89 shares of stock could be established by proof that the assignment of the stock to Howard Randolph's mother was for security purposes to be reassigned to him when the obligation was paid. Ownership of the one share is based upon an assignment of the share to him by a third party, delivery of the certificate to the corporation for transfer and the failure of the corporation to return it to him.

We do not believe the prayer for an accounting of the assets and earnings of the corporation necessarily involves a determination of the ownership of stock other than the 89 shares specifically put in issue. We therefore hold actions 15701 and 15919 are the same cause of actions as count II of the instant case involving the 89 shares of stock, but that Count I involving one share of stock is a new and separate cause of action, not previously adjudicated.

II. The parties named in the third action are not nominally the same as those in the first two actions. The following differences appear: (1) The trustee of Merle J. Jensen, bankrupt, is named as plaintiff in place of Mr. Jensen. No question is raised about the privity of these two arties. (2) Five parties named as defendants in the first two actions were dropped here. (3) One party (Hobart E. Newton) was added as a new defendant. Stuart Creamery, Inc., Arnold Madsen, John Snowgren and Howard Randolph were named as defendants in all three actions.

The trial court concluded the pleadings did not show why certain defendants were dropped and another one added and did not allege privity between those named and those dropped and he was not permitted to speculate as to the relationship between these parties. The matter was left open for proof upon trial.

It is important to examine the nature of these cases, the relief sought and the role of the defendants as shown by the pleadings to determine whether there is such identity of parties to support a plea of res judicata on the pleadings.

Of the five defendants dropped from the first action, three were named as members of the board of directors of the Stuart Creamery, Inc., whom plaintiff wanted removed as having been illegally elected when Randolph voted his stock. Randolph Foods Inc. was named as a defendant because it was alleged Randolph in his...