Gramatan Home Investors Corp. v. Lopez

• Decision Date: 15 February 1979
• Parties: , 386 N.E.2d 1328 GRAMATAN HOME INVESTORS CORP., Successor in Interest to Gramatan Co., Ltd., Home Investors Trust, Appellant, v. Louis N. LOPEZ et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 308

414 N.Y.S.2d 308

46 N.Y.2d 481, 386 N.E.2d 1328

GRAMATAN HOME INVESTORS CORP., Successor in Interest to Gramatan Co., Ltd., Home Investors Trust, Appellant, v. Louis N. LOPEZ et al., Respondents.

Court of Appeals of New York.

Feb. 15, 1979.

Thomas A. Dussault, Albany, for appellant

Joseph E. Rosch, Ballston Spa, for respondents.

OPINION OF THE COURT

COOKE, Chief Judge.

The ultimate issue presented is whether the grant of summary judgment in favor of defendants was proper. The courts below reasoned that the judgment in a consumer fraud action prosecuted successfully by the Attorney-General against plaintiff's assignor collaterally estopped plaintiff from raising certain matters determined there in this subsequent litigation. We hold to the contrary, since the assignment to plaintiff was made prior to the initiation of the Attorney-General's suit and therefore plaintiff was not privy to that judgment and is not bound by its terms.

In August, 1974, defendants Barbara and Louis Lopez purchased vinyl siding for their home in Saratoga County from two men who claimed they were the principals of Vinyl Engineering, Inc., a concern affiliated with the B. F. Goodrich Company. To finance the purchase, defendants entered into a retail installment contract with Vinyl Engineering and gave a mortgage on their home as security for the purchase price. Vinyl Engineering then assigned the contract and mortgage to Home Investors Trust, plaintiff's predecessor in interest, in September, 1974.

Almost two years after the assignment from Vinyl Engineering to plaintiff, the Attorney-General commenced a consumer fraud action pursuant to subdivision 12 of section 63 of the Executive Law in Supreme Court, Albany County, against a number of home solicitation sales firms, including plaintiff's assignor and its principals. Neither Vinyl Engineering nor its principals appeared in that action and a judgment was subsequently entered enjoining them from soliciting or making any further sales of siding in the State. Significantly, the judgment specifically declared void a number of contracts, including the one between Vinyl Engineering and defendants (Matter of State of New York v. Taillon, Supreme Ct., Albany County, June 14, 1976, Williams, J. (No. 4837-76)).

This action by plaintiff seeking to recover moneys allegedly due on the installment sales contract was commenced during the pendency of the consumer fraud action. Defendants appeared and asserted a number of affirmative defenses, Inter alia : that Vinyl Engineering fraudulently induced them to enter into the contract and mortgage; that fraudulent representations were made as to the quality of the siding; and that the finance charges were so onerous as to render the contract unconscionable. Following entry of judgment in the consumer fraud action, defendants moved for summary judgment and dismissal of the complaint. This request for relief was grounded on the theory that the judgment in the consumer fraud action voiding the contract between defendants and Vinyl Engineering collaterally estopped plaintiff from maintaining that the contract was enforceable. Saratoga County Court granted defendants the relief requested (89 Misc.2d 285, 391 N.Y.S.2d 355) and the Appellate Division affirmed, without opinion (59 A.D.2d 1069, 399 N.Y.S.2d 554). We granted leave to appeal to consider the collateral estoppel effect of a judgment or decree as against an assignee where the rights of the assignee have vested prior to the commencement of the action against the assignor (see 43 N.Y.2d 647, 403 N.Y.S.2d 1025, 374 N.E.2d 398).

Collateral estoppel, together with its related principles, merger and bar, is but a component of the broader doctrine of Res judicata which holds that, as to the parties in a litigation and those in privity with them, a judgment on the merits by a court of competent jurisdiction is conclusive of the issues of fact and questions of law necessarily decided therein in any subsequent action (Matter of Shea, 309 N.Y. 605, 616, 132 N.E.2d 864, 868; cf. Matter of McGrath v. Gold, 36 N.Y.2d 406, 410-411, 369 N.Y.S.2d 62, 64-65, 330 N.E.2d 35, 36-37). This principle, so necessary to conserve judicial resources by discouraging redundant litigation, is grounded on the premise that once a person has been afforded a full and fair opportunity to litigate a particular issue, that person may not be permitted to do so again (B. R. DeWitt, Inc. v. Hall, 19 N.Y.2d 141, 144, 278 N.Y.S.2d 596, 598, 225 N.E.2d 195, 196; Good Health Dairy Prods. Corp. v. Emery, 275 N.Y. 14, 18, 9 N.E.2d 758, 759). Collateral estoppel is a corollary to the doctrine of Res judicata ; it permits in certain situations the determination of an issue of fact or law raised in a subsequent action by reference to a previous judgment on a different cause of action in which the same issue was necessarily raised and decided (Statter v. Statter, 2 N.Y.2d 668, 163 N.Y.S.2d 13, 143 N.E.2d 10; Siegel, New York Practice, § 464, p. 614; 9 Carmody-Wait 2d, N.Y.Prac., § 63:204, pp. 208-209; cf. Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 25 L.Ed.2d 469).

As the consequences of a determination that a party is collaterally estopped from litigating a particular issue are great, strict requirements for application of the doctrine must be satisfied to insure that a party not be precluded from obtaining at least one full hearing on his or her claim. Although the previous requirement that there be mutuality of estoppel is now a "dead letter" (see Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65, 70, 298 N.Y.S.2d 955, 958, 246 N.E.2d 725, 728), the party seeking to invoke the benefits of the principle must still prove two necessary elements. First, it must be shown that the party against whom collateral estoppel is sought to be invoked had been afforded a full and fair opportunity to contest the decision said to be dispositive of the present controversy. Additionally, there must be proof that the issue in the prior action is identical, and thus decisive, of that in issue in the current action (24 N.Y.2d, at p. 71,...