Morgan v. Inter-Continental Trading Corporation

• Decision Date: 03 May 1966
• Docket Number: No. 15441.,15441.
• Citation: 360 F.2d 853
• Parties: Lyman MORGAN and Robert Dalton, Co-Partners, d/b/a Rite-Type Company, Plaintiffs-Appellants, v. INTER-CONTINENTAL TRADING CORPORATION, a Foreign corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

360 F.2d 853 (1966)

Lyman MORGAN and Robert Dalton, Co-Partners, d/b/a Rite-Type Company, Plaintiffs-Appellants, v. INTER-CONTINENTAL TRADING CORPORATION, a Foreign corporation, Defendant-Appellee.

No. 15441.

United States Court of Appeals Seventh Circuit.

May 3, 1966.

Henry C. Fuller, Jr., Lichtsinn, Dede, Anderson & Ryan, Milwaukee, Wis., for appellants.

Suel O. Arnold, Milwaukee, Wis., Arnold, Murray & O'Neill, Milwaukee, Wis., of counsel, for appellee.

Before HASTINGS, Chief Judge, and KILEY and SWYGERT, Circuit Judges.

SWYGERT, Circuit Judge.

The plaintiffs appeal from an order of the district court granting the defendant's motion for summary judgment and dismissing an action for breach of contract.¹

The plaintiffs' complaint seeks damages of $100,000 for breach of a contract to grant them an exclusive dealership for the sale of Olympia typewriters in six counties in the Milwaukee area. The complaint alleges that the dealership franchise was to come into effect upon the purchase by the plaintiffs of fifty typewriters from the defendant, the renting of a store from which to sell and service Olympia typewriters, and the hiring of a serviceman to repair and service them. It alleges that the contract was to be similar to the defendant's dealership agreement with the AAA Typewriter Company of Minneapolis and was to continue until the plaintiffs committed justifiable cause for termination. The complaint further alleges compliance with the conditions placed upon the plaintiffs and the refusal by the defendant to grant the exclusive dealership.

In an earlier action between the same parties involving the same subject matter, the plaintiffs sought damages in the same amount on the ground that agents of the defendant fraudulently induced them to enter into the same contract by making the same promise with no intention of performing it. The earlier case proceeded to trial; the facts pertaining to the dispute were fully presented and determined. The court in that case, in a comprehensive opinion, held that the plaintiffs failed to prove a cause of action based upon fraud and deceit.² Morgan v. Inter-Continental Trading Corp., 232 F.Supp. 444 (E.D.Wis.1964). The plaintiffs thereafter filed the instant complaint.

The district court granted a motion by the defendant for summary judgment and dismissed the action on the ground that the doctrine of res judicata barred the second suit. The plaintiffs appealed. We agree with the district court that the plaintiffs may not prosecute the instant action, but on a different ground, namely, collateral estoppel.

The plaintiffs correctly point out that one who is fraudulently induced to enter into a contract that subsequently remains unperformed by the wrongdoer has two distinct causes of action, one in tort for fraud and another in contract for breach of the agreement. Bankers Trust Co. v. Pacific Employers Ins. Co., 282 F.2d 106, 111 (9th Cir. 1960); McKee v. Martin, 119 Vt. 177, 122 A.2d 868 (1956); Bischoff v. Hustisford State Bank, 195 Wis. 312, 320, 218 N.W. 353 (1928) (dictum). They also correctly state that a judgment in one cause of action is not res judicata as to a second cause of action, even though presenting the same parties and subject matter. Lindemann v. Rusk, 125 Wis. 210, 237, 104 N.W. 119 (1905). Therefore, strictly speaking, the doctrine of res judicata does not prevent the plaintiffs from commencing a second action for breach of contract after the unsuccessful prosecution of an action for fraudulently inducing entry into the same contract.

However, even as between distinct causes of action, a judgment in a suit brought on one cause of action operates as an estoppel in a second suit between the same parties with respect to issues actually determined in the first action, Lindemann v. Rusk, supra, if the resolution of those issues determined that case. Schofield v. Rideout, 233 Wis. 550, 555, 290 N.W. 155, 133 A.L.R. 834 (1940). The Supreme Court succinctly stated the distinction between res judicata and collateral estoppel in Lawlor v. National Screen Service Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 867, 9 L.Ed. 1122 (1955):

Under the doctrine of res judicata, a

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