Hennepin Paper Co. v. Fort Wayne Corrugated Paper Co.

Brief Fact Summary.

In an initial action alleging breach of contract, the court refused to consider parol evidence that changed the terms of the contract. Subsequently, Hennepin Paper Co. (Plaintiff) filed a reformation action and Fort Wayne Corrugated Paper Co. (Defendant) argued that the reformation action was barred by res judicata.

Synopsis of Rule of Law.

When a contract is the basis for an earlier lawsuit, a later action for reformation of that contract is barred by res judicata when reformation could have been requested in the earlier action.

Facts.

Plaintiff sued Defendant for breach of contract, alleging that the written purchase contract had been modified by a contemporary modification to require purchase of a minimum of 600 tons and a later oral modification raising the requirement to 800 tons. Defendant successfully moved to strike the contemporary modification as parol evidence. A judgment was entered for Defendant. Plaintiff then brought an action to reform the purchase contract to the true intentions of the parties. Defendant moved for summary judgment on the basis of res judicata and the motion was granted. Plaintiff appealed, arguing that reformation was a distinct equitable action that could be separately litigated. Defendant argued that reformation could have been requested in the original action.

Issue.

When a contract forms the basis for a lawsuit that proceeds to judgment, may a party bring a later action for reformation of that same contract?

Held.

(Baltzell, J.) No. When a contract is the basis for an earlier lawsuit, a later action for reformation of that contract is barred by res judicata. Plaintiff could have requested reformation in the earlier action, and its failure to do so waives the claim. Although reformation is an equitable action, it can be brought as part of a legal action when a single court is empowered to hear matters of law and equity. The federal district court that heard the first suit had the ability to grant a request for reformation, had one been made. When a party sues over a contract and the proceedings reach judgment, he cannot bring a later action for reformation of that contract. Had the original court lacked the authority to grant the equitable remedy of reformation, the outcome would be different. Affirmed.

Discussion.

In Clarke v. Redeker, 406 F.2d 883 (8th Cir. 1969), the Eighth Circuit held that an earlier action declaring an Iowa nonresident tuition statute void barred a subsequent action for tuition already paid. The court found that the issue of damages could have been raised in the earlier case and that the issues raised in the two actions were the same.