Wright Mach. Corp. v. Seaman-Andwall Corp., SEAMAN-ANDWALL

• Decision Date: 01 March 1974
• Docket Number: SEAMAN-ANDWALL
• Citation: 364 Mass. 683,307 N.E.2d 826
• Parties: WRIGHT MACHINE CORPORATION v.CORPORATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 826

307 N.E.2d 826

364 Mass. 683

WRIGHT MACHINE CORPORATION v. SEAMAN-ANDWALL CORPORATION.

Supreme Judicial Court of Massachusetts, Worcester.

Argued Nov. 7, 1973.

Decided March 1, 1974.

Richard A. Robinson, Worcester, for plaintiff.

William J. LeDoux, Worcester, for defendant.

Before TAURO, C.J., and REARDON, QUIRICA, KAPLAN and WILKINS, JJ.

QUIRICO, Justice.

This case is the third proceeding between Wright Machine Corporation (Wright) and Seaman-Andwall Corporation (Seaman) relating to the 1966 sale of Seaman's aluminum coating and steel siding business to Wright. The previous actions were brought in New York and Delaware and resulted in final judgments for Seaman. The question before us is whether Wright's present Massachusetts action against Seaman for breach of contract is barred by these prior proceedings under the doctrine of res judicata and the requirements of the full faith and credit clause of the United States Constitution, art. 4, § 1.

In June, 1966, Wright entered into a written agreement with Seaman for the purchase of Seaman's business assets and assumption of its business liabilities. The agreement required Wright to make certain immediate payments in cash and to execute a $250,000 mortgage note which provided for ten annual payments of principal of $25,000 and semi-annual payments of interest. The note was guaranteed by B.S.F. Company, Edward Krock and Victor Muscat.

In July, 1967, Wright brought an action in the Supreme Court of the State of New York, New York County, against Seaman and its parent corporation for fraud, breach of contract and rescission. Wright's complaint alleged that in order to induce Wright to enter into the agreement of sale, Seaman had fraudulently misrepresented the value of its inventory and accounts receivable and failed to disclose certain of its liabilities, and that it had not carried out an obligation under the contract to reimburse Wright for certain expenses.

When Wright failed to pay the first annual instalment of $25,000 which became due on the mortgage note in June, 1967, Seaman exercised its right under the note to accelerate its maturity. In September, 1967, Seaman commenced an action against Wright, the B.S.F. Company, Krock and Muscat ¹ for the full amount of the note with interest. Seaman's action was also brought in the Supreme Court of the State of New York, New York County, by a motion for summary judgment in lieu of a complaint pursuant to the New York Rules of Civil Practice, Rule 3213. ²

Wright moved to consolidate its action against Seaman for breach of contract and rescission with Seaman's action on the note. It also opposed the latter's motion for summary judgment with an affidavit of defence based almost entirely on the same allegations of misrepresentation contained in its own complaint. The New York Supreme Court denied Seaman's motion for summary judgment and granted Wright's motion to consolidate. Seaman appealed that portion of the court's order denying its own motion but did not appeal the granting of Wright's motion to consolidate.

The Appellate Division of the New York Supreme Court reversed the order of denial and granted Seaman's motion for summary judgment. ³ In its opinion the Appellate Division stated that the proof of defences raised by Wright was 'fatally deficient both as to form and substance,' and held that all Wright's allegations of fraud were 'either precluded by the terms of the contract of sale or lack any substantiation of the conclusions asserted.' Judgment was entered for Seaman on January 29, 1969, for the full amount of the note with interest. Wright appealed to the New York Court of Appeals which affirmed the Appellate Division's decision without opinion. ⁴

On February 10, 1969, Seaman commenced an action on this judgment against Wright in the Superior Court of New Castle County, Delaware. ⁵

On May 16, 1969, Wright began another action for breach of contract against Seaman in the Superior Court for the County of Worcester in Massachusetts. In its declaration it alleged that Seaman was liable for:

(a) misrepresenting the value of its inventory;

(b) misrepresenting the value of its accounts receivable;

(c) failing to disclose certain contractual liabilities;

(d) failing to disclose the existence of specific contractual obligations to the Logan-Long Company;

(e) misrepresenting and failing to disclose the amount of product liability claims pending against it; and

(f) failing to reimburse Wright under the terms of the agreement for satisfaction of customer claims. A comparison of these allegations with those raised in the New York case shows that with the exception of the Logan-Long contracts the claim in each suit was essentially the same; each arose from the 1966 sale transaction and comprised specifications of fraudulent representations allegedly made in the agreement of sale.

In February, 1970, Wright filed an answer and a counterclaim in Seaman's Delaware action. The counterclaim was again based on the allegedly fraudulent representations made by Seaman in connection with the sale of its business and was virtually identical with the declaration in Wright's Massachusetts action. Wright also filed a motion to stay the Delaware action until after the final determination of the Massachusetts proceedings.

The Delaware Court on July 16, 1970, before the Massachusetts court had acted, rendered a decision which denied Wright's motion to stay and granted Seaman's motion for summary judgment on the New York judgment. The court stated that 'there . . . (was) no material factual dispute growing out of defendants' counterclaim which was not finally adjudicated and brought to judgment in the New York action,' that the principles of res judicata required the Delaware court to hold that further proceedings on the matters raised in the counterclaim were barred in Delaware by virtue of the New York judgment, and that such judgment was entitled to full faith and credit. It does not appear that Wright appealed this decision.

In the Massachusetts proceedings brought by Wright, Seaman filed an answer which, as later amended, set out as an affirmative defence that Wright's action was barred by the New York and Delaware judgments against it. The two parties then jointly filed a motion to have the defence of res judicata heard in advance of a trial on the merits. The parties stipulated that for the purpose of such hearing, the New York and Delaware judgments were final and that the record would consist of Wright's case on appeal to the New York Court of Appeals and the Delaware pleadings and opinion of the Delaware Superior Court. Seaman moved for judgment, claiming that the pleadings and documents introduced as part of the stipulated record showed that there was no issue of material fact. Based on these documents and the rest of the stipulated record the trial judge entered an order which upheld Seaman's defence of res judicata and ordered judgment accordingly on Seaman's motion. The case is before us on Wright's exceptions to this action.

We hold that the judge was correct. Despite the complex procedural situation presented in this case, covering, as it does, overlapping actions brought and decisions rendered in three different jurisdictions, the principles of res judicata and the requirements imposed by art. 4, § 1, of the United States Constitution clearly dictate that we give full faith and credit to the Delaware judgment. We therefore hold that Wright is barred from maintaining an action in Massachusetts on the same claim which the Delaware court held was barred by the prior New York judgment.

The doctrine of res judicata is founded on the necessity for finality in litigation. 'Public policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest; and that matters once tried shall be considered forever settled as between the parties.' Baldwin v. Iowa State Traveling Men's Assn., 283 U.S. 522, 525, 51 S.Ct. 517, 518, 75 L.Ed. 1244 (1931). Stoll v. Gottlieb, 305 U.S. 165, 172, 59 S.Ct. 134, 83 L.Ed. 104 (1938). Durfee v. Duke, 375 U.S. 106, 113--114, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963). Browne v. Moran, 300 Mass. 107, 110--111, 14 N.E.2d 119 (1938). Considerations of fairness and the requirements of efficient judicial administration dictate that an opposing party in a particular action as well as the court is entitled to be free from continuing attempts to relitigate the same claim. For this reason the principle of res judicata requires that a valid and final personal judgment rendered by a court of competent jurisdiction over the parties and the subject matter serve as a bar to any further proceedings between the same parties on the same claim. Furthermore, a party cannot avoid this rule by seeking an alternative remedy or by raising the claim from a different posture or in a different procedural form. Cromwell v. County of Sac, 94 U.S. 351, 352--353, 24 L.Ed. 195 (1876). Franklin v. North Weymouth Coop. Bank, 283 Mass. 275, 280, 186 N.E. 641 (1933). Sandler v. Silk, 292 Mass. 493, 498, 198 N.E. 749 (1935). Iowa-Wisconsin Bridge Co. v. Phoenix Fin. Corp., 41 Del. 527, 544--546, 25 A.2d 383 (1942), cert. den. sub nom. Phoenix Fin. Corp. v. Iowa-Wisconsin Bridge Co., 317 U.S. 671, 63 S.Ct. 79, 87 L.Ed. 539 (1942). See Restatement: Judgments, § 45 (1942). ⁶ The effects of the res judicata doctrine extend to judgments rendered in other States through the full faith and credit clause of the Constitution, which requires that 'the judgment of a State court which had jurisdiction of the parties and the subject-matter in suit, shall be given in the courts of every other State the same credit, validity and effect which it has in the State where it was rendered, and be equally conclusive upon the merits . . ..' Roche v. McDonald, 275 U.S. 449, 451--452, 48 S.Ct. 142, 143, 72 L.Ed. 365 (1928).

As mentioned, Wright's allegations in...