Oldham v. McRoberts
| Decision Date | 21 May 1964 |
| Citation | 249 N.Y.S.2d 780,21 A.D.2d 231 |
| Parties | Frank B. OLDHAM et al., Appellants, and Great Eastern Gas Corporation, Respondent, v. H. Theodore McROBERTS, Appellant-Respondent, and Joseph E. Phelps, Defendant. |
| Court | New York Supreme Court — Appellate Division |
Joslin & Joslin, Buffalo, for appellant-respondent; Norman E. Joslin, Buffalo, of counsel.
Gunderman, Barone, Wende & Piazza, Buffalo, for respondents-appellants; Mark N. Turner, Buffalo, Basil R. Piazza and Harry E. Lorenzo, Buffalo, of counsel.
Before WILLIAMS, P. J., and BASTOW, NOONAN and DEL VECCHIO, JJ.
On August 21, 1951 the Charleroi Mountain Club of Pennsylvania granted a prospecting option to the Phelps Prospecting Company. The option provided inter alia that Phelps Prospecting was to procure a drilling company to drill for gas on the property of the Club; that the Club was to receive a 1/8th royalty on all gas produced; that Phelps Prospecting was to receive its compensation from the drilling company; and that Phelps Prospecting could not assign the agreement without the consent of the Club.
Phelps Prospecting then procured Keta Gas and Oil Company to drill on the Club's land, and Keta entered into a drilling agreement with the Club providing for a 1/8th royalty to the Club. Keta had agreed to pay Phelps Prospecting a $3000 cash bonus and a royalty of 1/8th of Keta's 7/8th interest for Phelps Prospecting's services in arranging the lease with the Club. Thereafter, on November 14, 1951, Keta paid the $3000 cash bonus, and executed an instrument at the request of plaintiff Oldham granting the 1/8th overriding royalty, not to Phelps Prospecting, but to plaintiff Great Eastern Gas Corporation. This 1/8th overriding royalty (the Charleroi override), which has produced profits of about $480,000, is the basis of the present controversy.
In September, 1953 defendant McRoberts and a group of his associates, claiming to constitute Phelps Prospecting Company, commenced a suit in the Court of Common Pleas, Allegheny County, Pennsylvania against Great Eastern and Keta, asking that Keta's grant or assignment of the Charleroi override to Great Eastern be cancelled; that Keta be ordered to assign the override to McRoberts et al., doing business as Phelps Prospecting; and that all of the proceeds of the override be paid to plaintiffs. The Chancellor decreed that Keta's grant of the override to Great Eastern was null and void; that Keta execute a new agreement granting the override to McRoberts and associates; and that all of the proceeds of the override be paid to Phelps Prospecting. The Chancellor's findings and decision were sustained by the Court of Common Pleas in 1956 and by the Pennsylvania Supreme Court in 1958. (McRoberts v. Phelps, 391 Pa. 591, 138 A.2d 439.)
The plaintiff Great Eastern brought this action to recover damages for loss of the Charleroi overriding royalty allegedly caused by a master conspiracy of McRoberts and others, as a part of which they adduced perjured testimony and false documents at the Pennsylvania trial thus fraudulently inducing that court to enter judgment on behalf of McRoberts and against Great Eastern.
The answer denies these allegations and sets up the Pennsylvania judgment as a complete defense and bar to this action.
Trial Term held that the Pennsylvania judgment was no bar and awarded Great Eastern damages in the amount of the proceeds of the Charleroi override, upon the theory that Great Eastern, not Phelps Prospecting, was the true owner of the override and that McRoberts perpetrated a fraud upon the Pennsylvania courts in obtaining the Charleroi override from Great Eastern.
In awarding this judgment the Trial Court redetermined all the issues concerning the activities of the various parties in procuring the Charleroi royalty which Great Eastern had litigated fully and which had been resolved adversely to Great Eastern in the Pennsylvania action.
It is apparent that the judgment cannot stand; applying the doctrine of full faith and credit, plaintiff cannot recover on the third cause of action set forth in the complaint upon which judgment has been rendered.
Notwithstanding its protestations to the contrary, plaintiff by this cause of action is in effect attempting to impeach the judgment rendered in Allegheny County, State of Pennsylvania. Judgment in its favor in the present action of necessity rests upon a determination that it, not Phelps Prospecting, was the true owner of the Charleroi override and is a repudiation of the Pennsylvania judgment which embodies exactly the opposite conclusion.
However, Article IV, § 1 of the United States Constitution and U.S. Code, tit. 28, § 1738 require that the courts of this state accord full faith and credit to the judgment of the Pennsylvania courts. The extent of this obligation is stated in Parker v. Hoefer, 2 N.Y.2d 612, at page 616, 162 N.Y.S.2d 13, at page 16, 142 N.E.2d 194, at page 196:
'Because there is a full faith and credit clause, defendant may not a second time challenge the validity of plaintiff's right which has repended into a judgment (Magnolia Petroleum Co. v. Hunt, 320 U.S. 430, 64 S.Ct. 208, 88 L.Ed. 149), which is to say that a judgment of a court having jurisdiction of the parties and of the subject matter operates as res judicata in the absence of fraud or collusion * * *.'
Stated otherwise, a state court is required to recognize the judgment of a court of another state unless the court rendering the judgment was without jurisdiction or the judgment was obtained by extrinsic fraud.
In order to bring itself within the exception which permits attack on a foreign judgment on the basis of fraud or collusion, plaintiff has set forth extensive allegations of fraudulent conduct by defendants. These allegations however, and the proof offered in support thereof, relate almost entirely to conduct of defendants prior to the trial of the Pennsylvania action, the propriety of which was put in issue and completely litigated in...
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