June v. George C. Peterson Co.

• Decision Date: 12 June 1946
• Docket Number: No. 8809.,8809.
• Citation: 155 F.2d 963
• Parties: JUNE v. GEORGE C. PETERSON CO.
• Court: U.S. Court of Appeals — Seventh Circuit

155 F.2d 963 (1946)

JUNE v. GEORGE C. PETERSON CO.

No. 8809.

Circuit Court of Appeals, Seventh Circuit.

June 12, 1946.

Peter B. Nelson, Thomas Boodell, and Thomas P. Grant, all of Chicago, Ill., for appellant.

John A. Bussian, of Chicago, Ill., for appellee.

Before SPARKS and MAJOR, Circuit Judges, and BRIGGLE, District Judge.

MAJOR, Circuit Judge.

Plaintiff brought an action in the Superior Court of Cook County, Illinois, for alleged damages suffered when defendant sold stock pledged with it by plaintiff in connection with a lease agreement between the parties. Upon removal of the cause to the federal court, defendant filed its answer to the complaint and plaintiff filed a reply. After a pre-trial conference and pursuant to the court's order, plaintiff filed an amended and supplemental reply; thereupon, defendant filed a motion to strike plaintiff's amended reply and for summary judgment upon the pleadings. The lower court granted the motion for summary judgment in favor of defendant. From this judgment plaintiff has appealed.

The judgment in the lower court was predicated upon the doctrine of res judicata or estoppel by judgment. It was held that the issues presented by the pleadings had been previously determined by the Circuit Court of Will County, Illinois. Thus the main question for determination is whether the state court action is res judicata or operates as an estoppel by judgment.

The pleadings reveal the following facts. In October, 1936, plaintiff, as lessee, entered into a written lease with the Catholic Bishop of Chicago, as lessor, for premises in the city of Joliet, Illinois, for a period of fifteen years, for the purpose of operating a filling station thereon. In November, 1937, plaintiff sublet, by written sub-lease, these premises to defendant for three years for the same purpose, defendant paying $10,000 rental in advance at the time of execution of the lease. By the terms of the original lease and sub-lease, plaintiff was obligated to pay the taxes and assessments levied against the property. Six months later, plaintiff and defendant entered into a new written sub-lease. This sub-lease of May, 1938, provided for the defendant assuming the obligations of plaintiff under the original lease and superseded the prior lease of November, 1937. Defendant paid an additional $6,000 rental in advance and plaintiff warranted that defendant would have peaceful, quiet and uninterrupted possession of the premises for the time of the lease. Plaintiff gave defendant his bond for $12,000, conditioned upon defendant having such possession; at the same time plaintiff deposited with defendant 610 shares of capital stock of defendant under a collateral security agreement by which, if plaintiff defaulted under his bond, defendant was authorized to sell such stock.

It is evident that plaintiff was liable, under the leases, for the real estate taxes assessed against the property from the time of the first lease until the 15th day of May, 1938, upon which date defendant by the second sub-lease assumed such liability. Real estate taxes were levied against the property for 1937 in the sum of $760.82, and for 1938, pro-rated to May 15, in the sum of $267.86. Plaintiff, although requested by defendant, did not pay the taxes. Defendant thereupon paid the taxes and requested reimbursement of plaintiff. After plaintiff refused to reimburse defendant, it notified plaintiff that it would sell, at public auction, the stock so pledged as collateral. After such notice defendant did sell the pledged stock in May, 1941. But, prior to the sale, plaintiff had obtained a temporary injunction in the Will County Circuit Court prohibiting such sale. Upon motion of defendant and after hearing, this injunction was dissolved and plaintiff's suit dismissed. This is the state court action upon which the lower court predicated its ruling of res judicata or estoppel by judgment.

At the outset, it is perhaps well to differentiate between res judicata and estoppel by judgment. Generally, in deciding what was adjudicated by a former judgment, the decisions point out a delineation into two categories, i.e., (1) where the prior suit was upon the same cause of action as the latter, and (2) where the prior suit was upon a different cause of action but there is a common relationship as to some fact or issue. This distinction makes a vast difference in the applicable rule. "In the former case a judgment upon the merits is an absolute bar to the subsequent action. In the latter the inquiry is whether the point or question to be determined in the later action is the same as that litigated and determined in the original action." Tait v. Western Maryland R. Co., 289 U.S. 620, 623, 53 S.Ct. 706, 707, 77 L.Ed. 1405. In the first category of cases, the thing adjudicated is the cause of action itself, and when once presented to a court with jurisdiction, the parties have had their day in court and the cause of action is extinguished. In the second category of cases, it is the issue or fact common to both actions which is adjudicated and this issue or fact cannot again be litigated. The doctrine applicable to the first category is called res judicata; that applicable to the second is estoppel by judgment. See Kelliher v. Stone & Webster, 5 Cir., 75 F.2d 331, 332, 333.

In order to interpose the defense of res judicata successfully, there must be an identity of parties, subject matter and cause of action. De Met's, Inc. v. Insull, 7 Cir., 122 F.2d 755, 757; People ex rel. Gustus v. Swan, 382 Ill. 184, 46 N.E.2d 1003. The "essence of estoppel by judgment is that some like question or fact in dispute has been judicially determined by a court of competent jurisdiction between the same parties or their privies." McVeigh...