Aetna Ins. Co. v. Gilchrist Bros., Inc.

• Decision Date: 07 April 1981
• Citation: 85 N.J. 550,428 A.2d 1254
• Parties: AETNA INSURANCE COMPANY, as Subrogee of Higinio Otero, Plaintiff-Appellant, v. GILCHRIST BROTHERS, INC. and Johnnie S. Bell, Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 550

85 N.J. 550

428 A.2d 1254

AETNA INSURANCE COMPANY, as Subrogee of Higinio Otero Plaintiff-Appellant, v. GILCHRIST BROTHERS, INC. and Johnnie S. Bell, Defendants-Respondents.

Supreme Court of New Jersey.

Argued Sept. 24, 1980.

Decided April 7, 1981.

Lane M. Ferdinand, Rahway, for plaintiff-appellant (Methfessel & Werbel, Rahway, attorneys).

Elliott Abrutyn, Livingston, for defendants-respondents (Morgan, Melhuish, Monaghan & Spielvogel, Livingston, attorneys).

The opinion of the Court was delivered by

SCHREIBER, J.

This automobile accident case presents issues concerning the "single controversy" doctrine and subrogation rights of a liability insurance carrier covering the automobile involved.

The facts are undisputed. On April 5, 1975 at about 6:30 p. m., Higinio Otero was in his Ford automobile which was stopped on the shoulder of the northbound lanes of the New Jersey Turnpike in Edison Township. Johnnie S. Bell drove a Mack tractor and trailer owned by Gilchrist Brothers, Inc. into the rear of the Ford so that it traveled over 110 feet before coming to rest. Otero was seriously injured. He started a suit against Bell and Gilchrist in May 1975. Before that action came to trial, Otero died. His widow, Georgina Otero, continued the litigation as administratrix and administratrix ad prosequendum, having amended the complaint to add a count for wrongful death. The suit was settled by defendants' insurer Home Indemnity Company (Home) in July 1976 for $219,000.

Higinio Otero was the named insured under an automobile liability policy issued by the Aetna Insurance Company (Aetna), covering his Ford automobile. The policy contained a New Jersey Basic Personal Injury Protection Endorsement (PIP) which required that Aetna pay Otero certain losses (medical expense, income loss, etc.) related to personal injury caused by accidents arising out of the use "of a private passenger automobile." N.J.S.A. 39:6A-4. Aetna paid Otero approximately $30,000 because of that obligation.

Aetna advised Home, the insurer of Bell and Gilchrist, of its subrogation claim in August 1975, and Home in a letter dated November 12, 1975 rejected the claim, asserting that there was no legal basis for subrogation. Home's settlement of the Otero claim occurred as noted above, in July 1976.

Aetna then instituted this suit as subrogee of Otero against Bell and Gilchrist Brothers, Inc. seeking reimbursement of the sums paid under the PIP endorsement. Defendants moved for summary judgment and Aetna moved to strike defendants' separate defenses of the general release given by Otero in the July 1976 settlement and the lack of a statutory right under N.J.S.A. 39:6A-9 to subrogation after December 31, 1974.

The trial court granted defendants' motion. Reasoning that the PIP payments were mandated by the No Fault Act, N.J.S.A. 39:6A-1 et seq., a statute enacted to provide quick and efficient reimbursement to automobile accident victims for out-of-pocket expenses, it held that Otero was barred from recovering those same expenses under N.J.S.A. 39:6A-12 (section 12). To permit recovery would be contrary to the plain meaning of that provision and N.J.S.A. 39:6A-9 (section 9) which had eliminated subrogation rights after January 1, 1975.

The Appellate Division affirmed but not on the basis of the trial court's holding regarding subrogation rights. It held that Aetna should have asserted its claim in Otero's suit against Bell and Gilchrist and that its failure to have done so violated the "single controversy" doctrine. Accordingly, Aetna's action was not barred.

We granted plaintiff's petition for certification. 82 N.J. 297, 412 A.2d 802 (1980).

I.

The Appellate Division erred when it held that the single controversy doctrine is applicable to this situation. ¹ The single or entire controversy doctrine evolved "to eliminate delay, prevent harassment of a party and unnecessary clogging of the judicial system, avoid wasting the time and effort of the parties, and promote fundamental fairness." Barres v. Holt, Rinehart and Winston, Inc., 74 N.J. 461, 465, 378 A.2d 1148 (1977) (Schreiber, J., dissenting). These goals motivated the judicial reform expressed in the Constitution of 1947. The Report of the Committee on the Judiciary in that Constitutional Convention reminds us that an outstanding defect in the then existing court structure was

the intolerable evil of jurisdictional controversies engendered by rival courts of law and equity dealing with the same subject matter. Even where the function of each tribunal is clearly understood and not in dispute, the dual court structure necessarily entails fractional and multiple litigation of the same controversy. (II State of New Jersey Constitutional Convention of 1947 at 1182)

Creation of a Superior Court, with original general jurisdiction throughout the State in all causes, Art. VI, § 3, par. 2, which is required to grant legal and equitable relief "so that all matters in controversy between the parties may be completely determined," Art. VI, § 3, par. 4, was a significant step in the advancement of the entire controversy doctrine. Justice Burling observed in Massari v. Einsiedler, 6 N.J. 303, 313, 78 A.2d 572 (1951):

It is the cornerstone of our present court structure that all matters, whether legal or equitable, in a controversy be disposed of in one suit in one court to the end that a multiplicity of suits may be obviated.

This policy requires that a party include in the action all related claims against an adversary and its failure to do so precludes the maintenance of a second action. ² Several decisions of this Court have advocated that proposition. The leading opinion is that of Justice Brennan in Ajamian v. Schlanger, 14 N.J. 483, 103 A.2d 9 (1954), cert. den. 348 U.S. 835, 75 S.Ct. 58, 99 L.Ed. 659 (1954). The plaintiff's assignor had unsuccessfully sought rescission of a contract, the court holding that ratification barred recovery. Thereafter, the plaintiff sued for damages based on the deceit which had induced him to enter into the agreement. Justice Brennan, after calling attention to a "fundamental objective" of the constitutional reform "to avoid the delays and wasteful expense of the multiplicity of litigation which results from the splitting of a controversy" and the "simple and flexible procedural framework designed and proposed for the just and expeditious determination in a single action of the ultimate merits of an entire controversy between litigants," id. at 485, 103 A.2d 9, held that, since both remedies rescission and damages could have been maintained in the first action, preclusion of the action for damages "must follow if the policy to avoid undue litigation is not to be emptied of substance," id. at 488, 103 A.2d 9.

The effect of Ajamian was to require a party to join all its claims against its adversary when those claims were related to and part of the same controversy. Tevis v. Tevis, 79 N.J. 422, 434, 400 A.2d 1189 (1979); Applestein v. United Board & Carton Corp., 35 N.J. 343, 356, 173 A.2d 225 (1961); Silverstein v. Abco Vending Service, 37 N.J.Super. 439, 449, 117 A.2d 527 (App.Div.1955).

In Falcone v. Middlesex County Med. Soc., 47 N.J. 92, 219 A.2d 505 (1966), upon dismissing a second suit between the same parties for damages, the prior action having been for a judgment compelling plaintiff's admission into the defendant medical society, this Court reiterated the rule:

In any event, elemental considerations of fairness to the other party and the urgent need for eliminating the delay and wastage incident to the fragmentation of litigation dictated that all of the aspects of the plaintiff's controversy with the defendant be included within his legal proceeding. See 2 Schnitzer and Wildstein, New Jersey Rules Service A-IV-933 et seq. (1957). (Id. at 94, 219 A.2d 505.)

Though the preclusionary result of nonjoinder of claims existed in the case law, the Rules at that time provided only for permissive joinder of claims. R. 4:27-1(a), and its predecessors, R.R. 4:31-1 and R. 3:18-1 (Fed.R.Civ.P. 18(a)). The Rules were not updated to reflect the single controversy principle until 1979 when R. 4:27-1(b) was adopted stating:

(e)ach party to an action shall assert therein all claims which he may have against any other party thereto insofar as may be required by application of the entire controversy doctrine.

In the instant case preclusion would have to be predicated on the failure to have joined Aetna as a party to the Otero litigation. However, the preclusive effect of nonjoinder of claims arising out of a single dispute or wrong between the parties may not automatically be applied to a failure to join a person as a party to the action. That is a different pattern, involving different considerations. The most significant distinguishing feature is that application of the principle would prevent a non-party from prosecuting its claim or presenting its defense.

In McFadden v. Turner, 159 N.J.Super. 360, 388 A.2d 244 (App.Div.1978), Judge Pressler commented on this distinction. In that case an injured plaintiff, who had recovered against an employer via vicarious liability, was permitted to maintain a second action against the employee when the plaintiff could not recover all her damages from the employer. Judge Pressler wrote:

Although we are convinced that it is far preferable for the co-obligors to be joined in a single action and while the temptation to require that to be done by an application of the entire controversy doctrine is formidable, we nevertheless adhere to our former determination that in those circumstances the joinder rule is permissive and not mandatory. We reach that conclusion because of our continued perception of the entire controversy doctrine as a rule of mandatory joinder of claims, not of parties. As we understand the doctrine, its essential purpose is to assure a party to litigation that that litigation will be conclusive as...