Wolfson v. Northern States Management Co.

• Decision Date: 12 April 1946
• Docket Number: No. 34199.,34199.
• Citation: 22 N.W.2d 545,221 Minn. 474
• Parties: WOLFSON v. NORTHERN STATES MANAGEMENT CO.
• Court: Minnesota Supreme Court

22 N.W.2d 545

221 Minn. 474

WOLFSON v. NORTHERN STATES MANAGEMENT CO.

No. 34199.

Supreme Court of Minnesota.

April 12, 1946.

Appeal from District Court, Hennepin County; Paul W. Guilford, Judge.

Action by Wilfred Wolfson against Northern States Management Company to recover balance allegedly due under a contract of employment and to recover damages for breach of contract in discharging plaintiff. From a judgment for defendant, entered upon sustaining defendant's motion for judgment on the pleadings as to the second cause of action pleaded, plaintiff appeals.

Reversed.

Louis B. Schwartz, of Minneapolis, for appellant.

Louis Sachs, of Minneapolis, for respondent.

MATSON, Justice.

Appeal from judgment entered pursuant to an order granting defendant's motion for judgment in its favor on the pleadings on plaintiff's second cause of action.

In 1936, plaintiff and defendant entered into a ten-year written contract whereby plaintiff, in return for a one-third share of the net profits, agreed to devote such portion of his personal time and attention as should be reasonably necessary in and for the successful management of defendant's property known as the Carlsboro Apartments in Minneapolis. (The contract terms are more fully set forth in our opinion on the former appeal. See, Wolfson v. Northern States Management Co., 210 Minn. 504, 299 N.W. 676.) In December 1938, defendant, alleging that plaintiff had neglected his duty and failed to perform the terms of the contract, ousted plaintiff as manager. In the present action, plaintiff's complaint set forth two causes of action, the first, for the recovery of an unpaid balance of earnings alleged to have accrued prior to plaintiff's ouster, and the second, for the recovery of $10,000 as damages for breach of contract by defendant in ousting plaintiff. Defendant's answer pleaded as a first defense that plaintiff had himself neglected his duty and had wholly breached and failed to perform the terms of the contract. As a further defense, it alleged that the fact issue as to whether plaintiff had himself breached the contract had been finally adjudicated and determined in defendant's favor in a prior action, and that the judgment entered in said prior action is therefore res judicata of the same issue in the instant case. Plaintiff then moved the trial court for an order striking from defendant's answer the paragraph setting up the defense of res judicata, but the motion was denied. Defendant then moved for judgment on the pleadings, and this latter motion, though denied as to the first cause of action, was granted as to the second on the ground of res judicata. Judgment on the second cause of action was thereupon entered for defendant, and from this judgment this appeal is taken.

Unlike the present suit for breach of contract, plaintiff's former action (see, Wolfson v. Northern States Management Co., supra) sounded in tort and was brought to recover damages sustained as the result of an alleged conspiracy to oust plaintiff and deprive him of the benefits of his contract. The former action was brought against the present defendant, a corporation, and also two corporate directors individually. As a defense, the corporation alleged that plaintiff had himself breached the contract. The individual defendants interposed an answer in the form of a general denial. In instructing the jury, the trial court in the former action defined the issue as follows:

"* * * As the Court stated to you, this action is not brought for a breach of contract. If it was brought on a breach of contract, then the issue which you would determine is as to whether or not the plaintiff was performing that contract,—or performing his duties in the management of that building pursuant to that contract. But this action is brought on the theory of a tort, that the defendants conspired together to unlawfully oust the plaintiff from the management of that building. It is the claim of the plaintiff that the defendants acted maliciously, and that simply means that they acted without justification or excuse. So that is going to be one of the issues for you, members of the jury, to determine in this case,—as to whether or not the defendants acted as they did with justification or excuse.

"* * * The term, malice, as I have used it, means nothing more than the intentional doing of a wrongful act without legal justification or excuse. The standard by which to judge whether one party acted without justification or excuse, is reasonable conduct under all the circumstances of the case as you find the circumstances and facts to be.

* * * * * *

"* * * if you find and believe that the defendants in discharging the plaintiff as manager of the Carlsboro apartment hotel, acted with justification or in good faith, that is if they had reason to believe that the plaintiff was not managing said apartment in accordance with the terms of the contract, then your verdict will be for the defendants. Have I made that clear to you, ladies and gentlemen? You are to determine the question, not whether they acted rightfully or not, but whether they acted with justification whether or not they had good reason to believe that they were doing the right thing." (Italics supplied.)

The jury's verdict was for defendants, and, upon appeal, the verdict was affirmed. Wolfson v. Northern States Management Co., supra.

1. Was the issue of fact as to whether plaintiff himself had breached the contract finally adjudicated and determined in the former action so as to constitute the judgment therein a bar to the same issue raised in plaintiff's second cause of action in the instant case? In determining whether the defense of res judicata is available, it is important to distinguish between estoppel by judgment and estoppel by verdict.

"* * * `There is a wide difference between the effect of a judgment as a bar or estoppel against the prosecution of a second action upon the same claim or demand and its effect as an estoppel in another action between the same parties upon a different claim or cause of action.' In the latter case, the judgment in the first suit does operate as an estoppel, but only as to any `point or question actually litigated and determined.'" Gustafson v. Gustafson, 178 Minn. 1, 3, 226 N.W. 412, 413.

Estoppel by verdict, as distinguished from estoppel by judgment, is limited in its application to the issues of fact actually adjudicated...