Summary
In Fish v Vanderlip (218 N.Y. 29, 37), the court said: "'under the term "parties" in this connection [res judicata], the law includes all who are directly interested in the subject-matter, and had a right to make defense, or to control the proceedings, and to appeal from the judgment.
Summary of this case from Matter of Lascaris v. DownsOpinion
Argued February 23, 1916
Decided April 18, 1916
Irving G. Vann and Harry W. Hayward for appellant.
Jesse W. Tobey for respondent.
The obligation assumed by the underwriters toward the assured was a several liability. Not only was this expressly declared in the contract of insurance, but the assumption of any joint liability was distinctly negatived therein. It has been held that the insured under such a contract cannot maintain a single action against all the insurers to recover the aggregate amount of the policy. ( Straus v. Hoadley, 23 App. Div. 360.) Reference is made in the brief of the learned counsel for the appellant to the contents of the agreement between the underwriters themselves which provides that the losses are to be paid out of the premiums and in case the cash assets are insufficient to meet the obligations an advisory committee has power to levy an assessment; but we cannot take cognizance of this agreement in passing upon the defense attacked by the demurrer, as it forms no part of the record. According to that defense the plaintiff has been defeated in another action which he brought against another one of the underwriters to enforce his individual liability, and a judgment upon the merits was rendered against him after a trial of the same issues as are involved in the present suit. He is now met with the defense of res adjudicata based upon such former judgment. This defense is predicated solely upon the ground that the defendant here, together with his co-subscribers, had, with the knowledge of the plaintiff, joined in defending the former suit and contributed to the expense thereof, and that he will lose the proportionate part of such expenses contributed by him unless the former judgment is held to be an estoppel. The appellant contends that the rule of estoppel by former judgment extends not only to the parties to the former suit and their privies, but also to persons not parties of record, who to the knowledge of the opposite party participated in the defense for the protection of some interest of their own. It is conceded that no case in the New York state courts has gone as far as we are asked to go in this case, but it is insisted that there is no decision to the contrary by the New York courts and that there is ample authority to be found in Federal cases for taking this desirable step in advance.
The Federal decision which gives most support to the position of the appellant is Greenwich Ins. Co. v. Friedman Co. (142 Fed. Rep. 944), decided by the Circuit Court of Appeals for the Sixth Circuit. In that case a store belonging to the insured parties at Grand Rapids, Michigan, had been destroyed by fire and a large loss was sustained. Some thirty insurance companies had issued policies covering the property destroyed. Payment was refused by the companies upon the ground that a substantial part of the loss was occasioned by the fall of the building prior to the fire. The assured recovered judgment against two of the companies in actions where the issue thus raised was decided against the companies. These former judgments were set up by the assured as conclusive upon the liability of the Greenwich Insurance Company, and the claim thus set up was sustained. The court's decision was based upon the finding of fact that the Greenwich Insurance Company had for the protection of its own interests joined with the defendants in the other suits, and that the said joinder was open and avowed and was well known to the assured. The Circuit Court of Appeals in sustaining the decision of the lower court rested its decision upon the rule announced in previous cases to the following effect: "The doctrine is well settled that one who, for his own interest, joins in the defense of a suit to which he is not a party of record, is as much concluded by the judgment as if he had been a party thereto, provided his conduct in that respect was open and avowed or otherwise well known to the opposite party." The rule thus stated was quoted from Penfield v. Potts Co. (126 Fed. Rep. 475, 480) which was one of several patent infringement suits in which several parties who were charged as infringers of the same patent had joined together in making defense. In one of such suits the complainant was defeated and the judgment therein was held to be conclusive upon him in another suit against another alleged infringer. The court there, before stating the rule as above quoted, said (p. 479): "Thus the question in respect of the infringement of the third claim was in each of these two cases identical, and, if the appellants were privies with the Anderson Machine Company in such sense that they would have been concluded by a decree determining a question litigated upon the same evidence in each case, it must follow, from the mutuality of an estoppel, that the patentees who were plaintiffs in both cases would be also concluded, for an estoppel by judgment or decree must be mutual." The court there in effect held that the defendant there had become privy to the defendant in the former action by its conduct in joining in the defense of the former suit with the knowledge of the plaintiff. Similar decisions have been rendered in other cases in the Federal courts of which the following are examples: Theller v. Hershey (89 Fed. Rep. 576); Lane v. Welds (99 Fed. Rep. 286). There are other cases, however, decided by the Federal courts where a contrary doctrine seems to have been laid down and in which it was held that where a party to protect some interest of his own, aids and contributes to the expense of a suit, he does not thereby become bound by the judgment in a subsequent litigation where he is a party and the same issues are involved. ( Helm v. Zarecor, 213 Fed. Rep. 648, 654; Merchants Coal Co. v. Fairmont Coal Co., 160 Fed. Rep. 769, 777.) The cases holding otherwise are all patent infringement cases, except the Greenwich Insurance Company Case ( supra) which does not appear to have been since cited or followed. It is true that an application for a writ of certiorari to review the decision in that case was denied by the United States Supreme Court ( 200 U.S. 621), but we may not assume from this action of that court that it approved of the decision sought to be reviewed. The Federal Supreme Court exercises its power of granting the writ of certiorari very sparingly, and only where the case is one of gravity or general importance. ( Matter of Woods, 143 U.S. 202; Forsyth v. Hammond, 166 U.S. 506.)
The general rule is that a former adjudication to be available as a plea must have been a previous determination of the same issues between the same parties or their privies. It is not always necessary, however, that the person sought to be bound should have been a party to the record in the previous suit. It is enough if he had the right to control the conduct of the litigation and appeal from the judgment. Such was the case of Castle v. Noyes ( 14 N.Y. 329, 335). There it appeared that in a former action the defendant had sued the servant of the plaintiff's testator for the recovery of property belonging to the testator. The defendant was defeated in the former action and the judgment therein was held conclusive. In that case Judge COMSTOCK said: "Upon these facts the parties are to be regarded as the same. It is by no means true that, in order to constitute an estoppel by judgment, the parties on the record must be the same. The term has a broader meaning. It includes the real and substantial parties who, although not upon the record, had a right to control the proceedings and appeal from the judgment."
Professor Greenleaf thus states the true principles upon which estoppels by judgment proceed: "The rules of law upon this subject are founded upon these evident principles or axioms that it is for the interest of the community that a limit should be prescribed to litigation, and that the same cause of action ought not to be brought twice to a final determination. Justice requires that every cause be once fairly and impartially tried; but the public tranquillity demands that, having been once so tried, all litigation of that question, and between those parties, should be closed forever. It is also a most obvious principle of justice that no man ought to be bound by proceedings to which he was a stranger; but the converse of this rule is equally true, that by proceedings to which he was not a stranger, he may well be held bound. Under the term `parties,' in this connection, the law includes all who are directly interested in the subject-matter, and had a right to make defense, or to control the proceedings, and to appeal from the judgment. This right involves also the right to adduce testimony, and to cross-examine the witnesses adduced on the other side." (Greenleaf's Evidence, §§ 522, 523. See, also, § 535.) The defendant here had no right to control the former suit, or to appeal from the judgment.
In Bigelow v. Old Dominion Copper M. . S. Co. ( 225 U.S. 111, 126) separate suits against joint promoters of a corporation to recover secret profits were instituted by the corporation. One of the defendants, Lewisohn, lived in New York, and a separate suit was instituted against him there. The New York suit was dismissed. In another suit in Massachusetts where the defendant Bigelow lived the New York judgment was pleaded by Bigelow as a bar. The Supreme Court of the United States in holding that the New York judgment was not a bar, said: "To conclude Bigelow by the New York judgment, it must appear that he was either a party or a privy. That he was not a party to the record is conceded. He had no legal right to defend or control the proceedings, nor to appeal from the decree. He was, therefore, a stranger, and was not concluded by that judgment as a party thereto. That he was indirectly interested in the result because the question there litigated was one which might affect his own liability as a judicial precedent in a subsequent suit against him upon the same cause of action is true, but the effect of a judgment against Lewisohn as a precedent is not that of res judicata, and the Massachusetts court was under no obligation to follow the decision as a mere judicial precedent. Nor would assistance in the defense of the suit, because of interest in the decision as a judicial precedent which might influence the decision in his own case, create an estoppel as to Bigelow." The court then declares again the rule that estoppels must be mutual, and in discussing this phase of the question, said: "An apparent exception to this rule of mutuality has been held to exist where the liability of the defendant is altogether dependent upon the culpability of one exonerated in a prior suit, upon the same facts, when sued by the same plaintiff. (See Portland Gold Mining Co. v. Stratton's Independence, 158 Fed. Rep. 63, where the cases are collected.) The unilateral character of the estoppel of an adjudication in such cases is justified by the injustice which would result in allowing a recovery against a defendant for conduct of another, when that other has been exonerated in a direct suit. The cases in which it has been enforced are cases where the relation between the defendants in the two suits has been that of principal and agent, master and servant, or indemnitor and indemnitee." (p. 127.) The defendant here comes neither within these classes nor within the principle upon which such parties are held bound. There are other adjudicated cases not strictly within the classes mentioned where the same principle applies.
In Old Dominion Copper M. S. Co. v. Bigelow ( 203 Mass. 159, 216), being the same case that was before the United States Supreme Court ( supra), in discussing the question whether the defendant Bigelow could avail himself of the judgment in favor of Lewisohn who had a common interest with him, it is said: "The evidence shows that he (Bigelow) knew of the suit, and through his counsel gave such assistance in the preparation of the briefs for the arguments of that suit as might have been expected. But, as he was not a party, this fact is not of much importance. It is treated by most of the expert witnesses called by the defendant as to the New York law as of no consequence. Privity depends upon the relation of the parties to the subject-matter, rather than their activity in a suit relating to it after the event. Participation in the defense because of general or personal interest in the result of the litigation does not make one privy to the judgment. * * * Bigelow could not have appeared as of right and made a defense in that suit. No judgment can be regarded as res judicata as to any matter where the rights in the subject-matter arise out of mutuality, and not by succession, unless the party could, as matter of right, appear and defend, even though he may have had knowledge of the suit. Otherwise, he might be bound by a judgment as to which he had never had the opportunity to be heard, which is opposed to the first principles of justice." (pp. 216, 217.) It will be seen that when this case reached the United States Supreme Court, that court took the same view in regard to the effect of the action of a defendant in aiding in the defense of another suit to which he was not a party, but in which he was simply interested.
In the case at bar, notwithstanding all the matters set up in the fifth separate defense showing a unity of interest between the underwriters as among themselves, one fact stands out with marked prominence and emphasis. The contract of insurance is so drawn as wholly to separate the rights and obligations of each insurer from the rights and obligations of every one of his associates. This must have been done with a purpose. In determining the status of the plaintiff and defendant, the policy is to be construed as if they alone were parties thereto. Otherwise no effect would be given to the declaration therein contained that the assurers bind themselves "severally and not jointly, nor any one for the other * * * each one for his own part of the whole amount herein insured only." The several character of the contract being so explicit, we cannot change it into a joint undertaking on the part of the insurers; and we would virtually do this if we held that the judgment in the Municipal Court suit constituted an estoppel. In the brief for the appellant we are told in italics: "It would be abhorrent and a reproach to the law that upon the same written instrument and under the same state of facts one of the parties to a contract should be held liable and another, in the same right, held not liable." This possibility, however, if it exists, would seem to be entirely due to the appellant and his associates who drew their policy in such a form as to compel the assured to bring a hundred different suits to recover the insurance upon his yacht, if they saw fit for any reason to refuse payment.
We conclude that the matters pleaded in the fifth separate defense in the amended answer do not suffice to make the judgment in the Municipal Court suit available to the appellant by way of estoppel. It is easy to conceive of a case where it would operate most harshly to hold a person bound by a former judgment adverse to his interest, merely because he had aided in combatting it but without any legal right to control the course of the litigation, or to appeal from the adverse judgment although it was palpably erroneous.
The order appealed from should be affirmed, with costs, and the question certified answered in the negative.
CUDDEBACK, CARDOZO and SEABURY, JJ., concur; CHASE, COLLIN and POUND, JJ., dissent on dissenting opinion of LAUGHLIN, J., below.
Order affirmed.