Schwabe v. Chantilly, Inc.
Supreme Court of Wisconsin
226 N.W.2d 452 (1975)
In a prior action, landlord Chantilly (defendant) sued its tenants, the Schwabes (plaintiffs), for nonpayment of rent; the Schwabes raised fraudulent inducement as an affirmative defense but did not counterclaim, and judgment was entered in their favor. The Schwabes then brought a new action against Chantilly for damages based on that same fraud, plus malicious prosecution; Chantilly moved to strike the fraud claims as barred by res judicata since the Schwabes could have counterclaimed on fraud in the first action but didn't. The trial court agreed and struck the fraud claims, and the Schwabes appealed.
Whether a defendant who set up an affirmative defense but did not counterclaim in a prior action, and who won judgment on that defense, is precluded from later maintaining an action that could have been a counterclaim.