Liken v. Shaffer

Trial on the merits on the question of res judicata in a suit wherein certain stockholders of the Shores-Mueller Company claim wrongdoing on the part of the defendants in connection with the affairs of that corporation. A great many issues were raised by the pleadings. Before proceeding with the trial of all of the issues, the court, pursuant to Rule 42(b) of the Federal Rules of Civil Procedure, 28 U.S. C.A. following Section 723c, directed that there be a trial on the merits as to the issue of res judicata, and connected with that issue, proof has been made as to: (1) The juristic status of the Shores-Mueller Company from January 1st, 1931 to the present time, and as to (2) certain other legal proceedings in the state and federal courts having to do with the affairs of that corhpany. The Shores-Mueller Company, a corporation, was organized under the laws of the State of Iowa and was engaged in the business of manufacturing pharmaceuticals and other allied products in the city of Cedar Rapids, Linn County, Iowa. In 1933, certain proceedings were had in the Superior Court of Cedar Rapids, Iowa, whereby Arthur Barlow was appointed receiver for the corporation. Its assets were sold at a receiver’s sale. The plaintiffs, who are stockholders in the Shores-Mueller Company, claim that the individual defendants were in 1933 officers and directors of the company, and some of them were also voting stock trustees of a large amount of stock in the corporation. The claim of the plaintiffs is in substance that the individual defendants despoiled the Shores-Mueller Company of its assets by means of a collusive and fraudulent receivership and receiver’s sale. It is claimed that as a part of the fraudulent scheme, the defendants caused the defendant, Shores Company, to be organized as a corporation under the laws of the State of Iowa, and that the Shores Company has the assets of which the Shores-Mueller Company was despoiled and that the Shores Company is owned and controlled by certain of the individual defendants. It appears that the receiver, Arthur Barlow, filed his final report as receiver on October 5, 1933, and the receivership has long since been terminated. It further appears that no stockholders’ or directors’ meeting has been held since 1933, and that the corporation has been in *438 active since that time. It was stipulated by the parties that: “The Shores-Mueller Company, an Iowa Corporation, was legally incorporated, organized, and existing on January 1, 1931, and at all times subsequent thereto and up to the present time.”

Because of certain phases of the question, it is necessary to consider: (1) Certain rules of law having to do with the respective and relative rights of a corporation and its stockholders where there has been wrongdoing in connection with the affairs of a corporation; and (2) Certain matters having to do with practice and procedure.

In the present case, the complaint is, in substance, that the defendants referred to wrongfully despoiled the Shores-Mueller Company of its assets. Whatever else such claimed wrong may be, it was, at the time at least, a wrong against the corporation. It is well settled that the property of a corporation is not the property of the individual stockholders. Stewart v. Pierce, 1902, 116 Iowa 733, 89 N.W. 234. On page 240 of the Northwestern citation in that case, the Iowa Supreme Court states: “The property of a corporation is also entirely distinct from the property in the shares of stock issued by it, and the stockholders are not the owners of its property as individuals.” In the case of Klein v. Board of Tax Supervisors, 1930, 282 U.S. 19, on page 24, 51 S.Ct. 15, on page 16, 75 L.Ed. 140, 73 A.L.R. 679, Justice Holmes succinctly states: “But it leads nowhere to call a corporation a fiction. If it is a fiction it is a fiction created by law with the intent that it should be acted on as if true. The corporation is a person and its ownership is a nonconductor that makes it impossible to attribute an interest in its property to its members.”

Where loss has been caused to a corporation by the wrongful acts of those managing it, the right of action belongs to the corporation. 3 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 1282, p. 773; Dillon v. Lee, 1899, 110 Iowa 156, 81 N.W. 245; First National Bank v. Fireproof S. B. Co., 1925, 199 Iowa 1285, 202 N.W. 14; Troutman v. Council Bluffs Street Fair & Carnival Co., 1909, 142 Iowa 140, 120 N.W. 730. In the case of First National Bank v. Fireproof S. B.- Co., supra, on page 18 of the Northwestern citation, the Iowa Supreme Court states: “An unlawful diversion of the funds of the corporation is an injury to the corporation. Stockholders may maintain an action therefor, if the directors on demand refuse to do sor but such suit’is for the benefit of the corporation and not in their individual right.” In the case of Troutman v. Council Bluffs Street Fair & Carnival Co., supra, on page 731 of the Northwestern citation, the Iowa Supreme Court states: “If the action of the directors in appropriating the funds of the corporation to the purchase of the Elks’ building stock was an unlawful diversion of funds, then it is for the corporation to complain; and, while stockholders may act for the corporation if- on demand the officers and board of directors refuse to take proper action in the premises, the suit thus brought by stockholders must be for the benefit of the corporation, and not in their individual right.” In the case of Graham v. Dubuque Specialty Machine Works, 1908, 138 Iowa 456, 114 N.W. 619, 15 L.R.A.,N.S., 729, the Iowa Supreme Court, in dealing with a stockholder’s derivative suit, in page 621 of the Northwestern citation, states: “The action is, to all intents and purposes, the suit of the corporation * * The same court, on the same page of that opinion, in referring to stockholders instituting a stockholder’s derivative suit states: “They _ did not bring the suit as agents of the corporation ‘but simply in order to set in motion the judicial machinery,’ * * *. The action was instituted for the benefit of the corporation, and the relief could have been granted to no other * * In the case of Dillon v. Lee, supra, the Iowa Supreme Court, on page 247 of the Northwestern citation, states: "These profits, if any there were, belonged to the corporation and not to the individual stockholders. A fraud * * * on the part of the directors or officers of a corporation, is an injury done to the corporation itself * * In 3 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 1282, commencing on page 773, the rule is stated thus: “And no individual right of action rests in a stockholder where the directors have caused loss to the corporation through their carelessness and mismanagement. An individual right of action in stockholder against officer of corporation, can arise only from some private relation, contractual or fiduciary, as distinguished from a purely corporate relation common to all of the stockholders.” The fact that a stockholder owns all or practically all or a majority of the stock in *439 a corporation does not permit him to sue as an individual for a wrong done to the corporation. 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 5910. The fact that a corporation is no longer a going concern does not deprive it of its right of action for an injury done to it by an officer and director. Dillon v. Lee, supra.

It is well settled that the appointment of a receiver does not result in the dissolution of a corporation. 19 C.J.S., Corporations, § 1493. A stockholder’s derivative suit may be brought against the directors even though the corporation is in receivership, where a demand upon the receiver to bring the suit would be useless. Reed v. Hollingsworth, 1912, 157 Iowa 94, 135 N.W. 37. See also Weigen v. Council Bluffs Insurance Co., 1898, 104 Iowa 410, 73 N.W. 862, and 1 Cyclopedia Federal Procedure, 2d Ed., Sec. 138, p. 270. Upon discharge of a receiver, the corporation becomes reinvested with the possession and management of its own affairs. Singer v. Allied Factors, Inc., 1944, 216 Minn. 443, 13 N.W.2d 378. A corporation retains its property and rights even though its officers have resigned. Muscatine Turn Verein v. Funck, 1865, 18 Iowa 469. The fact that a corporation has been inactive does not permit an individual suit by a stockholder against the directors charged with misappropriating its assets; as long as it maintains a legal existence the claim belongs to the corporation. Brock v. Poor, 1915, 216 N.Y. 387, 111 N.E. 229. The fact that the value of the shares of stock belonging to a stockholder has been depreciated because of the misappropriation of corporate assets, does not give such stockholder an individual right of action. Smith v. Bramwell, 1934, 146 Or. 611, 31 P.2d 647. In that case the plaintiff alleged that by means of a voting trust the defendants secured control of the board of directors of the American Bancorporation and then proceeded to liquidate certain of its assets; that all was done pursuant to a conspiracy on the part of the defendants to enrich themselves at the expense of the corporation. The defendants were officers of the corporation. The plaintiff was the holder of shares of stock which had been deposited in the voting trust. The plaintiff sued the defendants for depreciation in the value of his stock because of their wrongful acts. On page 648 of the Pacific citation the Oregon Supreme Court states: “The gravamen of the complaint is that the defendants, pursuant to a conspiracy, committed wrongful acts resulting in injury to the corporation. Yet the plaintiff sues, not on behalf of the corporation, but in an individual capacity. If the plaintiff’s allegations were true, undoubtedly he would sustain damage, but no more so than any other stockholder in proportion to his interest in the company. If plaintiff can maintain this action, then every other stockholder can do so. The proximate cause of plaintiff’s loss was the alleged wrongful acts of the officers of the corporation who dissipated its assets and appropriated the same to their own use and benefit. * * * It is a well-established general rule that a stockholder of a corporation has no personal right of action against directors or officers who have defrauded or mismanaged it and thus affected the value of his stock. The wrong is against the corporation and the cause of action belongs to it.”

There are situations where a stockholder may bring a direct action in connection with corporate matters. One type of case is represented by the case of Ritchie v. McMullen, 6 Cir., 1897, 79 F. 522, certiorari denied 168 U.S. 710, 18 S. Ct. 945, 42 L.Ed. 1212. In that case the plaintiff had pledged shares of stock in certain corporations with the defendants who were officers of the corporations. The plaintiff claimed that the defendants entered into a conspiracy to so depreciate the value of his stock that they could acquire it by sale under pledge, and that he was thus deprived of it. The plaintiff sued the defendants directly for depreciation in the pledged stocks. On page 533 of the opinion in 79 F., Justice Taft states: “The learned circuit judge was of opinion * * * that the wrongs committed were injuries to the corporations only, and that Ritchie, as a stockholder, could have no redress directly against the wrongdoers, and must find a remedy, if at all, in the enhancement in value in his stock caused by a recovery of damages by the corporations. * * * It is undoubtedly true, as the circuit court held, that a stockholder, merely as such, cannot have an action in his own behalf against one who has injured the corporation, however much the wrongful acts have depreciated the value of his shares. * * * But we are of opinion that this principle has no application where the wrongful acts are not only wrongs against the corporation, but are also viola *440 tions by the wrongdoer of a duty arising from contract or otherwise, and owing directly by him to the stockholders. * * * In the case under review there was privity between Payne, Burke, and Cornell, on one hand, and Ritchie, on the other, created by the pledges of the stock. The bailee owes a direct duty to the pledgor to be reasonably careful that no harm shall come through his custody to the subject-matter of the pledge; Jones, Pledges §§ 403-405. A fortiori it is the bailor’s duty not to do any act with the intention of depreciating the value of the pledge.” In 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 5913, in connection with exception just noted, it is stated: “It is only where the injury sustained to one’s stock is peculiar to him alone, and does not fall alike upon other stockholders, that he can recover as an individual.” A stockholder, instituting a stockholder’s derivative suit, must plead and prove that request to institute action was made on the corporation and refused, or matter or matters which excused the making of the request. Reed v. Hollingsworth, 1912, 157 Iowa 94, 135 N.W. 37, 41. Similar requirement Rule 23(b), Federal Rules of Civil Procedure and Rule 44, new Iowa Rules of Civil Procedure. Where a stockholder sues in his own individual right, no demand upon the corporation itself is necessary. 13 Fletcher Cyclopedia Corporations,, Perm. Ed., Sec. 5932. Thus, demand or lack of demand on the corporation is one of the indicia as to the nature of a suit brought by a stockholder.

There is a second type of situation in which a stockholder is permitted to bring a direct action, and that is where the wrongdoing on the part of those in control of a corporation does not work an injury to the corporation but does work an injury to minority stockholders. That situation is typified by the case of Southern Pacific Co. v. Bogert, 1919, 250 U.S. 483, 39 S.Ct. 533, 63 L.Ed. 1099. Different phases of that litigation appear and reappear in the reports. In that case, the majority stockholders put through a reorganization of the < corporation in such a manner as.t°> for all practical purposes, freeze out and eliminate the minority stockholders. The reorganization was helpful to the corporation. Bogert v. Southern Pacific Co., 2 Cir., 1917, 244 F. 61, 62, 63. The United States Supreme Court in Southern Pacific Co. v. Bogert, supra, affirmed a decree in which the minority stockholders were given direct relief against the majority stockholders. That Court on page 487 of 250 U.S., on page 535 of 39 S.Ct, 63 L.Ed. 1099, states: “In considering the many objections urged against the decree, it is important to bear constantly in mind the exact nature of the equity invoked by the bill and recognized by the lower courts. The minority stockholders do not complain of a wrong done the corporation or of any wrong done by it to them. They complain of the wrong done them directly by the Southern Pacific, and by it alone.”

There is a third type of situation-where stockholders have been permitted to recover directly, and that is where those despoiling a corporation have as a part of the wrongdoing destroyed the corporate entity of the wronged corporation. That situation is typified by Jones v. Missouri-Edison Electric Co., 8 Cir., 1906, 144 F. 765 (first appeal), certiorari denied 229 U.S. 615, 33 S.Ct. 774, 57 L.Ed. 1352, opinion in District Court, 135 F. 153; Id. (second appeal), 8 Cir., 199 F. 64, opinion on rehearing second appeal 203 F. 945; Id. (third appeal), 8 Cir., 233 F. 49; Thompson v. Bomar (last appeal), 8 Cir., 258 F. 339. That well known litigation started in 1903 and was completed in 1919. In that litigation, the plaintiff was the owner of preferred stock in the Missouri-Edison Electric Company. He charged that the majority stockholders and the directors of that company were instrumental in having that company consolidated with a corporation known as the Union Company to form a corporation known as the Consolidated Company and in having the assets of the Edison Company transferred to the Consolidated Corporation at much less than their real value, and that the defendants were the owners of all the stock in the consolidated corporation,, and that the transaction constituted a. fraud on the plaintiff and other minority stockholders. It appeared that in the consolidation, the corporate entity of the Edison Company had been destroyed. The-plaintiff brought the suit in behalf of himself and all other stockholders similarly situated and for “the use and benefit of said. Edison Company.” 144 F. 765, 777. The plaintiff asked for the rehabilitation of the Edison Company or, in the alternative, for a direct lien in his individual favor upon the property of the consolidated Company *441 for the value of his stock. 144 F. 765, 777. The Eighth Circuit Court of Appeals held it was proper and permissible for a plaintiff stockholder in one bill in equity to ask for relief in behalf of the corporation, and in the alternative for individual and direct relief. 144 F. 765, 777. The final outcome of the litigation was that the court gave the plaintiff individually a direct lien upon the property of the Consolidated Corporation for the value of his stock. The situation in the Missouri-Edison Electric Company case differs from the situation in the case of Southern Pacific Co. v. Bogert, supra, in that in the Bogert case no injury was done to the corporation, while in the Missouri-Edison case there was an injury to the corporation.

In a stockholder’s derivative suit where recovery is allowed, the judgment is entered in favor of the corporation. Smith v. Bramwell, supra; Hayden v. Perfection Water Cooler Co., 1917, 227 Mass. 589, 116 N.E. 871. The general rule is that no proportionate judgment can be allowed a stockholder in a derivative stockholder’s suit. 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 6028; Chicago Macaroni Mfg. Co. v. Boggiano, 1903, 202 Ill. 312, 67 N.E. 17. One of the reasons why courts of equity have not allowed direct proportionate recoveries in stockholder’s derivative suits, has been that the recovery is an asset of the corporation, and its creditors have first claim upon it; and that to award such recovery direct to the stockholders leaving any creditors unpaid, would be fraudulent as to them. Smith v. Bramwell, supra; Hoyt v. Hampe, 1927, 206 Iowa 206, 214 N.W. 718, 719, 220 N.W. 45. Another matter of increasing importance in recent years is the matter of state and federal taxes. Apart from the question of the recovery being needed to pay the unpaid claims of the state and federal government, is the fact that in a good many cases a substantial recovery by the corporation will require changes in tax reports previously made and result in additional tax liability.

While for certain purposes, as for instance, federal court jurisdiction, the stockholders instituting a stockholder’s suit are technically regarded as parties (13 Cyclopedia Federal Procedure, Sec. 6892), yet so far as a court of equity is concerned, their status is that of those who set the judicial machinery in motion in behalf of the corporation. Overfield v. Pennroad Cor-poration, 3 Cir., 1944, 146 F.2d 889, 894; Graham v. Dubuque Specialty Machine Works, 1908, 138 Iowa 456, 114 N.W. 619, 15 L.R.A.,N.S., 729. In the case of Potter v. Walker, 1937, 252 App.Div. 244, 293 N.Y.S. 161, 163, it is stated: “It has been well stated that in a representative derivative action a stockholder who brings the same is not the real plaintiff, but merely the ‘instigator’ of the action.”

A stockholder’s derivative suit is an invention of the courts of equity and is recognizable only in equity and cannot be maintained at law. Felsenheld v. Bloch Bros. Tobacco Co., 1937, 119 W.Va. 167, 192 S.E. 545, 123 A.L.R. 334, 339; Callanan v. Powers, 1910, 199 N.Y. 268, 92 N.E. 747; Roberts v. Kennedy, 1922, 13 Del. Ch. 133, 116 A. 253; Harris v. Pearsall, 1921, 116 Misc. 366, 190 N.Y.S. 61; Jacobs v. First National Bank, D.C.La. 1929, 35 F.2d 227, 231; Pomeroy, Equity Jurisprudence, 3d Ed., Sec. 1985. Even if the claim, if sued directly by the corporation, would be an action at law, yet, if enforced by means of a stockholder’s derivative suit, it is prosecuted by an action in equity. Rettinger v. Pierpont, Neb.1944, 15 N.W.2d 393, 397. When a stockholder institutes a derivative suit, it is the same in legal effect as if the corporation itself had sued. Dewing v. Perdicaries, 1877, 96 U.S. 193, 198, 24 L.Ed. 654. Rule stated similarly in 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 6027, p. 427. If the corporation does not have a cause of action, then there can be no recovery in a stockholder’s derivative suit. Outing v. Plum, 1931, 212 Iowa 1169, 1172, 235 N.W. 559. The corporation’s rights in connection with a claim asserted in its behalf in a stockholder’s derivative suit arc the same as if the corporation sued direct. Arn v. Operators Royalty & Producing Co., D.C.Okl. 1936, 13 F.Supp. 769, 772. Any defense that would be good against the corporation if it sued, is good against a claim asserted in its behalf in a stockholder’s derivative suit. Kessler v. Ensley Land Co., 5 Cir., 1906, 148 F. 1019, certiorari denied 205 U.S. 541, 27 S.Ct. 788, 51 L.Ed. 921; DiTomasso v. Loverro, 1937, 250 App.Div. 206, 293 N.Y.S. 912. In equity cases where jurisdiction is based upon diversity of citizenship, the state statutes of limitations are applicable. Guaranty Trust Co. v. York, 1945, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed.-. In Iowa, statutes of limitations are applicable to both equit *442 able and law actions. Anderson v. Anderson, 1944, 234 Iowa 277, 12 N.W.2d 571, 574. Where a claim belonging to a corporation would be barred if sued upon directly by the corporation, it is also barred when asserted in its behalf in a stockholder’s derivative suit. 13 Fletcher Cyclopedia Corporations, Perm-EcL, Sec. 5886, p. 242.

In an ordinary a&tion by a corporation on a claim, the conduct of a particular stockholder is not material. Stockholders have no power to act for or bind a corporation except at a corporate meeting. 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 5730. Courts of equity, in ordinary cases, will refuse relief to those suitors who do not come into equity with clean hands, or who have ratified or acquiesced in the wrong complained of. Both of these rules of law are applicable to stockholder’s derivative suits. Where a claim is asserted in behalf of a corporation in a stockholder’s derivative action in order for matters to be a bar to the claim, they must be such matters as relate to the corporation itself, and the conduct of a particular stockholder is not material. However, the conduct of a particular stockholder who seeks to maintain a stockholder’s derivative suit might be so at variance with equitable principles, that a court of equity would abate the action. Thus, a particular stockholder who institutes a stockholder’s derivative suit, may have participated in the wrong complained of (see Conners v. Conners Bros. Co., 1913, 110 Me. 428, 86 A. 843, 846), or may have ratified the wrong complained of or acquiesced in it, or have had knowledge of the wrong complained of under circumstances which would make him guilty of laches. In such cases, a court of equity will not recognize him as a proper suitor-in a court of equity and will abate the action without reference to the merits of the claim sought to be asserted in behalf of the corporation. The fact that one stockholder has discovered fraud and is guilty of laches does not prevent another stockholder who is not guilty of laches from instituting a stockholder’s derivative suit. 13 Fletcher Cyclopedia Corporations, Perm. Ed., Sec. 5886, p. 243, also Sec. 5874. Laches to be a matter of bar must be the laches of the corporation itself. Daniels v. Briggs, 1932, 279 Mass. 87, 180 N.E. 717; 13 Fletcher Cyclopedia Corporations, Perm.Ed., Sec. 5874, p. 226. Acquiescence of a stockholder in the wrong complained of, which prevents him from maintaining a. stockholder’s derivative suit, is distinct from the acquiescence on the part of a corporation which is a bar to the claim. 1 Morawetz Private Corporations, 2d Ed., Sec. 239, p. 255, and Sec. 262. In stockholder’s derivative suits, matters in bar relate only to the claim of the corporation itself. Matters in abatement can relate to both the claim of the corporation and the particular stockholder instituting the action. A stockholder’s derivative suit may be abated so far as the corporation itself is concerned because of lack of jurisdiction or because the claim was not due. A stockholder’s derivative suit may also be abated because of the conduct or situation of the particular stockholder or stockholders instituting the action. However, the claim of the corporation cannot be barred by the conduct or situation of the particular stockholder or stockholders instituting the proceedings. If, however, a particular stockholder is suing in his own individual behalf for wrongs done in connection with corporate affairs, then his own conduct and situation could be a bar to his claim. The statute of limitations is a matter of positive bar. 37 C.J.. p. 698. The knowledge or lack of knowledge of an individual stockholder not connected with a corporation other than as a stockholder is not material in considering the statute of limitations as a bar to the claim of the corporation itself. In such a situation it is the knowledge or lack of knowledge of those connected with the corporation whose knowledge is by law imputed to the corporation. Where those whose knowledge is ordinarily imputed to a corporation are the wrongdoers and they are in control of the corporation, the statute of limitations may be suspended until that situation is changed but that is not a matter having to do with the knowledge or lack of knowledge of a particular stockholder. The knowledge or lack of knowledge of an individual stockholder is material on the question of the statute of limitations as a matter of bar where such stockholder is asserting an individual right. The knowledge or lack of knowledge of an individual stockholder who institutes a stockholder’s derivative suit is material on the matter of abatement of such a suit, because of the rule that equity will not grant relief at the behest of suitors whose conduct has offended equitable principles, but *443 that is a matter of abatement and not bar. of

The plea of res judicata is an affirmative defense. Rule 8(c), Federal Rules of Civil Procedure. As heretofore noted, jurisdiction in the present case is based upon diversity of citizenship and is governed by Erie Railroad Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. In diversity cases, the federal courts follow the state law as to burden of proof. Cities Service Oil Co. v. Dunlap, 1939, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196; National Lead Co. v. Nulsen, 8 Cir., 1942, 131 F.2d 51, 56, certiorari denied 318 U.S. 758, 63 S.Ct. 533, 87 L.Ed. 1131. Under the Iowa law, the tmrden of proof of res judicata is upon the party asserting it. Lambert v. Rice, 1909, 143 Iowa 70, 120 N.W. 96; Williams-Perry v. Reeder, Iowa 1945, 17 N.W.2d 98. Federal courts will accord the judgment of a state court the same effect as it is given in the courts of the state of its rendition. National Lead Co. v. Nulsen, supra; 3 Cyclopedia Federal Procedure, 2d Ed., Sec. 625. Accord Brictson Mfg. Co. v. Close, 8 Cir., 1928, 25 F.2d 794. The law relating to the doctrine of res judicata is substantive and not procedural. 8 Cyclopedia Federal Procedure, 2 Ed., Sec. 3522. The doctrine of res judicata is a branch of the law of estoppel. Cook v. Hardin County Bank, 1945, 76 Ohio App. 203, 63 N.E.2d 686, 689. The doctrine of res judicata is one of general application and there is nothing peculiar to it in federal courts. 1 Cyclopedia Federal Procedure Sec. 117, p. 264. The Iowa Supreme Court had in several recent decisions stated the effect and scope of the Iowa rule as to res judicata. In the case of Phoenix Finance Corporation v. Iowa Wisconsin Bridge Co., Iowa 1945, 20 N.W.2d 457, 461, the Iowa Supreme Court states: “We must start with the proposition that ‘an adjudication by a competent tribunal is conclusive, not only in the proceeding in which it is announced, but in every other where the right or title is the same, although the cause of action may be different.’ Goodenow v. Litchfield, 59 Iowa 226, 233, 9 N.W. 107, 110, 13 N.W. 86. This proposition is reaffirmed and applied in Watson v. Richardson, 110 Iowa 698, 80 N.W. 416, 80 Am.St. Rep. 331.” In case of In re Christensen’s Estate, 1940, 227 Iowa 1028, 290 N.W. 34, on page 38 of the Northwestern citation, the Iowa Supreme Court states that it recog