Burtis R. HAMMONDS et ux., d/b/a the Garden Center and Flower Shop, Petitioners, v. Ed HOLMES et al., Respondents, 559 S.W.2d 345

CHADICK, Justice. The question here is the preclusive effect of a prior judgment. In the prior suit Burtis Hammonds and his wife, Norma, sued Corsicana National Bank for wrongful foreclosure of a deed of trust on their business property. That suit was resolved by a judgment of dismissal with prejudice, granted on motion of the plaintiffs Ham-monds. Four months later the present suit was filed by Mr. and Mrs. Hammonds “individually and d/b/a The Garden Center and Flower Shop” against Corsicana Bank, Ed Holmes, and Zane Stites for wrongful foreclosure of the same deed of trust on the same property. On the ground of res adjudicata the trial court granted a

summary judgment for all defendants. The Court of Civil Appeals affirmed. 543 S.W.2d 20. We affirm as to the Bank and Stites but reverse- and remand as to Holmes.

A statement of the traditional general principle of res adjudicata is as follows: [A] question of fact or of law, distinctly put in issue and directly determined by a court of competent jurisdiction as a ground of recovery or defense in a suit or action between parties sui juris, is conclusively settled by the final judgment or decree therein, so that it cannot be further litigated in a subsequent suit between the same parties or their privies, whether the second suit be for the same or a different cause of action. State of Oklahoma v. State of Texas, 256 U.S. 70, 86, 41 S.Ct. 420, 422, 65 L.Ed. 831 (1920).

Without finality of judgments, litigants might face harassment by contentious adversaries and courts might generate inconsistent dispositions of the same dispute, causing confusion and wasting judicial time. Steakley and Howell, Ruminations on Res Judicata, 28 Sw.L.J. 355 (1974). Hammonds argues that the second suit is brought in a different capacity by virtue of the claim of the partnership. The petition alleges that The Garden Center and Flower Shop is “a partnership comprised of and owned by Burtis R. Hammonds and Norma Hammonds” and “an assumed name through which Burtis R.

Hammonds and Norma Hammonds transact business.” There is no diversity in identity or interest of the party plaintiffs in the two suits. If the partnership is to be viewed as a separate entity, the individual partners sued as its representatives in the former suit. It is said that the “[i]dentity of parties is not a mere matter of form, but of substance.” Chicago, R. I. & P. R. Co. v. Schendel, 270 U.S. 611, 620, 46 S.Ct. 420, 424, 70 L.Ed. 757 (1926); National Bondholders Corp. v. Seaboard Citizens National Bank, 110 F.2d 138, 145 (4th Cir. 1940); Restatement (Second) of Judgments § 85 (Tent.Draft No. 2, 1975).

Hammonds then argues that the former judgment is no bar to the suit against Zane Stites and Ed Holmes, who were not parties in the first suit. Zane Stites is President of Corsicana National Bank, and Ed Holmes is a Vice-President. A final judgment for or against an employer may or may not bar a second suit against an employee. See Marange v. Marshall, 402 S.W.2d 236 (Tex.Civ.App.1966, writ ref d n. r. e.); Restatement (Second) of Judgments § 99 (Tent.Draft No. 3, 1976); Annot., 23 A.L.R.2d 710 (1952).

It is frequently said in cases where there is a diversity of parties that the former judgment bars a second suit against all who were in “privity” with the party in the first suit. Benson v. Wanda Petroleum Co., 468 S.W.2d 361 (Tex.1971). It is important to look to the claim that was litigated in the first suit as well as the relationship of the new defendant to the former one.

If a plaintiff suffers a take nothing judgment or dismissal with prejudice in a suit against an employer only because the harm was due to a deed of an employee done outside the scope of his employment, the judgment should not bar suit against the employee. If the first suit was against an employee, a second suit may be brought against the employer if the cause of action sets forth liability not entirely derivative of the liability pursued against the employee in the first suit. Maxey v. Citizens National Bank of Lubbock, 507 S.W.2d 722 (Tex.1974).

Plaintiffs’ pleadings in these two suits differ with respect to Stites only in that he is named as a formal party in the present suit. As President of the Bank he was the actor for the Bank. He is here alleged to have ousted plaintiffs from their property “in concert” with the Bank. There is no allegation that Stites acted in any respect except as President of the Bank; we construe the petition to say that he acted only as President of the Bank. There are therefore no issues as to Stites’ liability which plaintiffs have not previously litigated. The situation is different as to Holmes.

He was trustee in the deed of trust, and plaintiffs allege that he foreclosed without cause to do so and that he acted maliciously. It cannot be said as a matter of law that he acted in the foreclosure in the capacity of bank employee. The trustee has a separate capacity and is imposed with a particular legal responsibility. He must act with absolute impartiality and fairness to the grantor in performing the powers vested in him by the deed of trust. First Federal Savings & Loan Assoc. v. Sharp, 359 S.W.2d 902 (Tex.1962); Fuller v. O’Neal, 69 Tex. 349, 6 S.W. 181 (1887). The

summary judgment was not justified on the strength of the former judgment and the allegations of these pleadings alone. Plaintiffs’ cause of action against Ed Holmes is severed from the cause of action against Zane Stites and Corsicana National Bank. The judgments of the courts below are affirmed as to the latter cause. In the cause of action against Ed Holmes, the judgments below are reversed and the cause is remanded to the trial court. Dissenting opinion by McGEE, J.