Sawyer v. First City Financial Corp.

In 1974, the Sawyers (plaintiffs) sold land for development to First City Financial Corporation Ltd. (First City) and its subsidiaries (defendants) for cash and a note for $670,000. First City borrowed money to develop the land from Toronto Dominion Bank (Dominion) (defendant) that was secured by a first deed of trust that subordinated the Sawyers’ deed. The Sawyers had also waived any deficiency judgment on the note and deed of trust as part of the original sale. In 1975, after payments on the note to Dominion were discontinued, Dominion foreclosed on the note and purchased the land at the foreclosure sale for $650,000. The land was then sold to Lexington Properties (Lexington), who borrowed funds to develop the land from Lomitas Properties, Inc., which was a corporation owned and controlled by First City. The practical effect of this, the Sawyers alleged, was to wipe out First City’s $650,000 obligation to them and allow First City to develop the land without paying the original $650,000 purchase price. In February of 1978, the Sawyers sued First City, Dominion, and others and alleged several causes of action based on contract. The trial court found that Sawyers’ waiver of deficiency judgment was effective and entered judgment for all defendants in March of 1978. The judgment was eventually affirmed on appeal in December of 1979. But before that, in January of 1978, the Sawyers filed a second suit against First City, Dominion, Lexington Properties, and others for conspiracy and fraud. The damages sought in the second suit were essentially the same as those sought in the first suit with the addition of a claim for punitive damages. After numerous motions and the rulings of two judges, the claims against all defendants were dismissed on res judicata grounds. The Sawyers appealed and argued that their initial contract action was a separate and distinct cause of action from their tort action and that distinct primary rights may be injured from the same transaction.