Priest v. American Smelting & Refining Co.

• Citation: 409 F.2d 1229
• Decision Date: 20 March 1969
• Docket Number: No. 22369.,22369.
• Parties: Gerald H. PRIEST, Appellant, v. AMERICAN SMELTING & REFINING CO., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

409 F.2d 1229 (1969)

Gerald H. PRIEST, Appellant, v. AMERICAN SMELTING & REFINING CO., Appellee.

No. 22369.

United States Court of Appeals Ninth Circuit.

March 20, 1969.

Nelson Christensen (argued), of Howe, Davis, Riese & Jones, Seattle, Wash., for appellant.

David E. Wagoner (argued), of Holman, Marion, Perkins, Coie & Stone, Seattle, Wash., for appellee.

Before HAMLEY, MERRILL and HUFSTEDLER, Circuit Judges.

HAMLEY, Circuit Judge:

Gerald H. Priest brought this action against American Smelting & Refining Co., (Company) to recover damages in the amount of approximately $200,000 for the alleged conversion of seventy tons of high grade silver ore, and, in the alternative, for the alleged breach of a contract to reimburse plaintiff for that ore.¹ Priest is a Canadian citizen and the Company is a New Jersey corporation doing business in Washington. Jurisdiction of the United States District Court for the Western District of Washington, where the lawsuit was commenced, rests upon diversity of citizenship.

The parties filed cross-motions for summary judgment. The district court granted the Company's motion and entered a judgment dismissing the action. The court did so on the ground that, in a prior criminal prosecution against Priest in the territorial court of Yukon Territory, Canada, it was judicially determined that he was not the owner of the ore in question, and that he is therefore collaterally estopped to contend otherwise in this civil suit against the Company. Priest appeals.

The relevant facts are not in dispute. Priest is the owner of the Moon mining claims in the Mayo area of Yukon Territory. In June, 1963, he shipped approximately seventy tons of high grade silver ore from the Mayo area to the Company's smelter in East Helena, Montana. The ore was consigned to the Company for processing.²

Shortly after the shipment was made, three mining companies operating in Yukon Territory each claimed that the ore had been taken from its properties. One of these, United Keno Hill Mine, Ltd. (United Keno) notified the Company that it claimed title to the ore.

Late in 1963, upon the complaint of United Keno, a five-count indictment was returned against Priest in the territorial court of Yukon Territory for violations of Canadian criminal laws relating to theft and unlawful sale of precious metals. The charges pertained to Priest's acquisition of the seventy tons of ore referred to above. Priest pleaded not guilty.

While this criminal proceeding was pending, the Company smelted the seventy tons of ore in February, 1964. But instead of reimbursing Priest for the ore, the Company paid the sum of $125,322.77 to United Keno, in settlement of the amount owed for the ore.

On December 7, 1964, Priest was acquitted on the two theft charges. However, the jury was unable to reach a verdict on the three remaining charges of unlawful sale of, and conspiracy to unlawfully sell, the ore in question. He was retried on the latter charges and, on March 31, 1965, was convicted on all three. Priest was sentenced to four years imprisonment on each count, the sentences to be served concurrently. The convictions were affirmed by the Court of Appeal for Yukon Territory and Priest served the sentences until November, 1966, when he was released on parole.

Priest contends that the district court erred in holding that these Canadian criminal convictions collaterally estop him from asserting, in this civil suit arising in the State of Washington, that he was the owner of the seventy tons of silver ore.

Since federal jurisdiction in this case is based upon diversity of citizenship, the district court and this court must apply the substantive law of the forum state, the State of Washington. See 28 U.S.C. § 1652 (1964); Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188; Davis v. Aetna Life Insurance Co., 9 Cir., 279 F.2d 304, 307. The substantive law of a state includes the law pertaining to res judicata. Gramm v. Lincoln, 9 Cir., 257 F.2d 250, 255 n. 6. It must therefore, we believe, also include the law pertaining to collateral estoppel. See Centennial Insurance Company v. Miller, E.D.Cal., 264 F.Supp. 431, 433.

In attempting to apply the Washington law of collateral estoppel we are met at the outset by a conflict of laws problem. The alleged conversion of the ore occurred in Montana. Under Priest's alternative theory, the contract to reimburse him for the ore also arose in Montana, since that is where the Company received the consigned ore. Under these circumstances, would the courts of Washington apply the rules of Washington pertaining to the collateral estoppel effect to be given a foreign criminal conviction in a subsequent civil suit, or would they apply the collateral estoppel rules of Montana?³

The parties have not addressed themselves to this conflict of laws question. They simply argue, in effect, that under the law of Washington, the applicable principles of collateral estoppel support their respective positions in this action, and that the law of Montana does likewise.⁴

Our independent research has failed to disclose any Washington decisional law bearing upon this conflict of laws problem. We will therefore assume, as have the parties, that the courts of Washington would, under the circumstances of this case, apply their own rules of collateral estoppel.

In Washington, consistent with the general rule, where collateral estoppel is applicable it prevents retrial of a crucial issue or determinative fact. Bordeaux v. Ingersoll Rand Company, 71 Wash.2d 392, 429 P.2d 207, 209-210.⁵ The Company established such a similarity of issues in the case now before us. Ownership of the seventy tons of silver ore was a crucial issue in both the Canadian proceeding and in this case.

Also in keeping with the general rule, the present state of the Washington decisional law appears to be that, in civil cases, collateral estoppel may be applied only as between parties who were also parties in the prior action. The reasoning is that if the party seeking to apply collateral estoppel was not a party in the prior action, the doctrine is inapplicable because it could not have been applied against him had the decision gone the other way, and mutuality is therefore lacking. The leading case in Washington on this subject appears to be Owens v. Kuro, 56 Wash.2d 564, 354 P.2d 696, where the court said:

"A judgment is not res judicata nor is one collaterally estopped by judgment in a later case if there is no identity or privity of parties in the same antagonistic relation as in the decided action. Riblet v. Ideal Cement Co., 154 Wash. Dec. 960, 345 P.2d 173; Rufener v. Scott, 46 Wash.2d 240, 280 P.2d 253. An esoppel must be mutual and cannot apply for or against a stranger to a judgment since a stranger\'s rights cannot be determined in his absence from the controversy." (354 P.2d at 699)

There is some question whether this traditional requirement of mutuality, disparaged by some, will continue to be applied by the courts of Washington in civil cases. A rejection of the doctrine, in various degrees, has been taking place in some jurisdictions. See, for example, Teitelbaum Furs, Inc. v. Dominion Insurance Co., 58 Cal.2d 601, 25 Cal.Rptr. 559, 375 P.2d 439, 440; Bernhard v. Bank of America Nat. Trust & Savings Ass'n., 19 Cal.2d 807, 122 P.2d 892, and the cases listed in 2 Orland, Washington Practice, 2nd Ed., 1968 Supp., § 390, at 93-96. However, we have found no Washington Supreme Court case adopting this trend; indeed that court has recently quoted with approval the rule of mutuality enunciated in Owens. See Bordeaux v. Ingersoll Rand Company, 71 Wash.2d 392, 429 P.2d 207, 210.

But defendant urges that, whatever the Washington rule may be as to the requirement of mutuality in civil cases, it would be erroneous to hold that Washington requires a showing of mutuality where the judgment relied upon as working a collateral estoppel was entered in a prior criminal proceeding.

As Professor Lewis H. Orland has observed, probably a majority of the courts in the country still refuse to give res judicata (and therefore collateral estoppel) effect to a prior criminal conviction in a subsequent civil case, such refusal being due, at least in part, to traditional notions of mutuality. 2 Orland, Washington Practice, 2nd Ed., 1968 Supp., § 390, at 96. As Professor Orland further notes, however, an increasing number of courts are permitting the use of criminal judgments in subsequent civil suits, because of the different standards of proof applicable in criminal and civil cases. Professor Orland continues:

"In a criminal case, the state\'s proof of guilt must be made beyond a reasonable doubt; the plaintiff in a civil action need only prove his case by a preponderance of the evidence. Because of this difference in the burden of proof, it is reasoned that, inasmuch as a greater burden of proof has been sustained on the issue in the prior criminal trial, and the motivation to defend such cases is generally strong, the use of the criminal judgment is not unfair."

Our problem is to determine whether the courts of Washington would give collateral estoppel effect to a prior criminal judgment. Apparently no Washington court has categorically ruled upon this question. In two cases, however, the Washington Supreme Court, by way of dictum, has referred to the general rule denying collateral estoppel effect to criminal judgments in terms which seem to imply approval of that rule. See Billington v. Schaal, 42 Wash. 2d 878, 259 P.2d 634, 637; Reynolds v. Donoho, 39 Wash.2d 451, 236 P.2d 552, 555.⁶

Professor Orland also points out that it has long been a part of the professional "folklore" in Washington that a prior criminal judgment cannot even be admitted as evidence in a subsequent civil case as tending to prove the facts on which the prior judgment was based. He cites Instruction 46, King County Uniform Jury Instructions (1955) and Instruction...