Eastern Air Lines, Inc. v. Trans Caribbean Airways, Inc.

• Decision Date: 21 March 1968
• Citation: Eastern Air Lines, Inc. v. Trans Caribbean Airways, Inc., 288 N.Y.S.2d 317, 29 A.D.2d 379 (N.Y. App. Div. 1968)
• Parties: EASTERN AIR LINES, INC., Plaintiff-Respondent, v. TRANS CARIBBEAN AIRWAYS, INC., Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 317

288 N.Y.S.2d 317

29 A.D.2d 379

EASTERN AIR LINES, INC., Plaintiff-Respondent, v.TRANS CARIBBEAN AIRWAYS, INC., Defendant-Appellant.

Supreme Court, Appellate Division, First Department.

March 21, 1968.

William J. Junkerman, New York City, of counsel(Douglas B. Bowring and Carroll E. Dubuc, New York City, on the brief; Haight, Gardner, Poor & Havens, New York City, attorneys) for appellant.

James F. Coughlin, New York City, of counsel(Mendes & Mount, New York City, attorneys) for respondent.

Before STEVENS, J.P., and EAGER, STEUER, CAPOZZOLI and McNALLY, JJ.

STEVENS, Justice.

This is an appeal from an order which denied the motion of defendantTrans Caribbean Airways, Inc.(Trans Caribbean) to dismiss the complaint.

This action, in which plaintiffEastern Air Lines, Inc.(Eastern) seeks reformation of a contract, was commenced on or about July 19, 1967.The contract, termed an Aircraft Maintenance Agreement, was executed between the parties on or about October 18--20, 1965.Plaintiff claims a mutual mistake of the parties so that the agreement, as executed, does not truly reflect the intent of the parties.

Under the terms of the agreement plaintiff undertook to perform a 'block overhaul' of two DC--8F aircraft owned by the defendant.Article XI of the agreement, entitled 'Liability', read in part as follows:

'1.It is agreed that Eastern shall carry insurance against the risks of fire, windstorm and extended coverage perils providing against loss of or damage to the aircraft to be serviced hereunder while in Eastern's possession.'

Under the provisions of paragraph 2, defendant Trans Caribbean agreed to hold Eastern harmless against claims for injury or death arising out of the work.'Except for losses covered by paragraph 1 of this Article XI Trans Caribbean' agreed to 'Carry appropriate policies of public liability and property damage insurance covering the risks against which it agrees to indemnify Eastern.'Paragraph 3 of Article XI stated that Trans Caribbean would provide Eastern with certificates of insurance indicating that the indemnity and hold-harmless provisions of paragraph 2 are insured as a contractual assumption of Eastern's liability.Such insurance was to remain in force during the term of the contract.

November 25, 1965, a fire occurred which substantially damaged one of the Trans Caribbean aircraft while it was in Eastern's possession.

On or about March 31, 1966, Trans Caribbean commenced an action for damages against Eastern for loss of the aircraft.The six causes of action stated therein were based on express contract, breach of implied contract and negligence.Eastern's answer contained counterclaims and defenses to the effect that under paragraph 2 Trans Caribbean undertook to hold Eastern harmless from any loss by fire while the aircraft was in Eastern's possession.Eastern also pleaded waiver and estoppel by reason of the delivery to Eastern of the certificates of insurance with waivers of subrogation in connection with paragraphs 2 and 3 of Article XI.Eastern sought to recover for Trans Caribbean's failure to carry fire insurance and also to recover damages for legal services and disbursements.On motion of Trans Caribbean the defenses and counterclaims were stricken, Eastern's cross-motion to dismiss the complaint was denied, and the orders entered thereon were unanimously affirmed on appeal (27 A.D.2d 804, 279 N.Y.S.2d 153).Subsequently, in July 1967, Eastern commenced this action.

In its complaint Eastern alleges, in effect, that paragraph 1 of Article XI does not mean what it says because it does not say what the parties intended it to mean.Eastern asserts that it was the actual intent of the parties that Eastern should perform the work without any requirement that Eastern obtain any additional insurance policy or policies or pay any additional premiums.Eastern alleges that it only learned of this mutual mistake on November 25, 1965, presumably after the fire occurred.

Trans Caribbean moved to dismiss the complaint on the following grounds: (1) documentary evidence sufficient to defeat Eastern's claim for reformation, (2) res judicata and collateral estoppel, (3) legal insufficiency and laches and, additionally, such other and further relief as may be just and proper.In opposition to such motion Eastern, by affidavit, asserted mutual mistake in that the parties assumed Eastern's regular insurance policies covered the work to be done without any need for additional policies at a premium cost of approximately $11,000.Thus, this lack of insurance coverage would be a fact extrinsic to the agreement.

The construction of paragraph 1, Article XI, that Eastern was obliged to provide fire insurance coverage while the plane was in Eastern's possession, was made in the action for damages brought by Trans Caribbean against Eastern.We do not say that an order may never be, in effect, a decision so as to fix rights of the parties.Here, however, the determination was made upon an interlocutory motion in a separate action which action is still pending undertermined, and which did not result in any final judgment.Accordingly, the defenses of res judicata and collateral estoppel will not serve as grounds for dismissal of the complaint (Bannon v. Bannon, 270 N.Y. 484, 1 N.E.2d 975, 105 A.L.R. 1401;Perkins v. Guaranty Trust Co., 274 N.Y. 250,...