S. T. Grand, Inc. v. City of New York

• Decision Date: 04 May 1973
• Citation: 344 N.Y.S.2d 938,32 N.Y.2d 300
• Parties: , 298 N.E.2d 105 S. T. GRAND, INC., Appellant, v. CITY OF NEW YORK, Respondent, and Third-Party Plaintiff, v. SHAMOON INDUSTRIES, INC., Warren Foundry and Pipe Division, Third-Party Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 938

344 N.Y.S.2d 938

32 N.Y.2d 300, 298 N.E.2d 105

S. T. GRAND, INC., Appellant, v. CITY OF NEW YORK, Respondent, and Third-Party Plaintiff, v. SHAMOON INDUSTRIES, INC., Warren Foundry and Pipe Division,

Third-Party Defendant.

Court of Appeals of New York.

May 4, 1973.

William T. Griffin, New York City, for appellant.

Norman Redlich, Corp. Counsel (Nina G. Goldstein and Stanley Buchsbaum, New York City, of counsel), for respondent.

JASEN, Judge.

The primary issue presented on this appeal is whether a criminal conviction is conclusive proof of its underlying facts in a subsequent civil action. If such a conviction is conclusive, the second issue is whether the equitable remedy which this court fashioned in Gerzof v. Sweeney (22 N.Y.2d 297, 292 N.Y.S.2d 640, 239 N.E.2d 521) is available to the appellant.

In November, 1966, plaintiff-appellant, S. T. Grand, Inc., entered into a contract with the defendant-respondent, City of New York, for the cleaning of the Jerome Park Reservoir. No bidding was required, since James Marcus, the city's Commissioner of Water Supply, Gas and Electricity, let the contract pursuant to the 'public emergency' exception to the general bidding requirements for municipal contracts. (General Municipal Law, § 103, subd. 4.) The entire cleaning has been performed.

Subsequently, the appellant and its president were convicted in Federal court of conspiracy to use interstate facilities with intent to violate the New York State bribery laws. (United States v. Corallo, 2 Cir., 413 F.2d 1306.) The conviction was based upon a series of events which culminated in an agreement by the appellant to pay a 'kickback' to Marcus, in return for Marcus' award of the cleaning contract to the appellant.

When the appellant sued the city for the unpaid balance of $148,735 due on the cleaning contract, the city claimed, as a defense, that the contract was illegal by reason of the bribery of Marcus, and asserted a counterclaim for the $689,500 which it had previously paid under the contract.

The city moved for summary judgment upon appellant's cause of action for the unpaid balance and upon the counterclaim. Special Term denied the city's motion for summary judgment, not on the ground that it found triable issues of fact, but because the court was of the opinion that the case of Gerzof v. Sweeney, 22 N.Y.2d 297, 292 N.Y.S.2d 640, 239 N.E.2d 521, Supra, 'furnishes compelling authority for holding plaintiff not completely foreclosed from recovery or retaining the amount paid by (the city).'

The Appellate Division modified and directed judgment for the city upon both its counterclaim and appellant's claim for the unpaid balance. The Appellate Division, 330 N.Y.S.2d 594, was of the opinion that there were no issues of fact here and that the unique circumstances which were present in Gerzof were not present in this case so that it would not offend the conscience to allow a complete forfeiture of money previously paid or to be paid under the illegal contract.

We turn first to the question of whether the criminal conviction of appellant for bribery conclusively establishes the illegality of the 'emergency' cleaning contract with the city.

In Schindler v. Royal Ins. Co., 258 N.Y. 310, 179 N.E. 711 (1932), we held that a criminal conviction was prima facie evidence, but not conclusive proof of its underlying facts in a subsequent civil action. In that case, the defendant insurance company interposed the defense of collateral estoppel to a suit by the plaintiff insured for recovery of losses suffered when an insured building was destroyed by fire. The defense was based upon the fact that plaintiff has been convicted of submitting false claims and proofs of loss. The defense was stricken and plaintiff was allowed to recover. We reluctantly concluded that this result was dictated by Stare decisis. In so concluding, we rejected the traditional reason of dissimilarity of object, procedure, and degree and elements of proof between criminal and civil processes, and based our decision solely upon the lack of mutuality of estoppel.

In the 40 years since we decided Schindler, we have greatly expanded the application of collateral estoppel, ¹ primarily by abolishing the prerequisite of mutuality of estoppel. (B. R. DeWitt, Inc. v. Hall, 19 N.Y.2d 141, 278 N.Y.S.2d 596, 225 N.E.2d 195; Schwartz v. Public Administrator of County of Bronx, 24 N.Y.2d 65, 298 N.Y.S.2d 955, 246 N.E.2d 725; Albero v. State of New York, 26 N.Y.2d 630, 307 N.Y.S.2d 469, 255 N.E.2d 724.) Since the Ratio decidendi of the Schindler opinion, mutuality of estoppel, has been expressly abandoned, Schindler and its progeny are no longer viable. (Cf. Vavolizza v. Krieger, 39 A.D.2d 446, 336 N.Y.S.2d 748.)

In Schwartz v. Public Administrator of County of Bronx (supra), we set forth the present state of the doctrine of collateral estoppel: 'New York Law has now reached the point where there are but two necessary requirements for the invocation of the doctrine of collateral estoppel. There must be an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling.' (at p. 71, 298 N.Y.S.2d at p. 960, 246 N.E.2d at p. 729).

In the case before us, the appellant was convicted of conspiracy to use interstate facilities with intent to violate New York State bribery laws. The facts upon which that conviction rests--the bribery of Marcus--are the identical facts asserted here to prove the illegality of the 'emergency' cleaning contract.

In addition, Appellant was afforded a full and fair opportunity to contest the bribery issue at its trial. It is well recognized that there are rigorous safeguards imposed to insure against unjust conviction in a criminal action, including the requirements of proof beyond a reasonable doubt (CPL 70.20), and of unanimous verdict (CPL 310.80; People v. Light, 285 App.Div. 496, 138 N.Y.S.2d 262); the right to counsel at any critical stage of the criminal process (e.g., Hamilton v. Alabama, 368 U.S. 52, 82 S.Ct. 157, 7 L.Ed.2d 114); the right to suppression of involuntary statements (e.g., Brown v. Mississippi, 297 U.S. 278, 56 S.Ct. 461, 80 L.Ed. 682), and of illegally seized evidence (e.g., Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081). There can be little doubt that stability of judgments and expedition of trials are served with a resulting increase in the efficiency of the judicial process in finally disposing of disputes, and no injustice is committed when criminal defendants are estopped from relitigating issues determined in conformity with these safeguards.

Thus, we hold that the criminal conviction is conclusive proof of appellant's bribery of Marcus, and that, consequently, the illegality of the 'emergency' cleaning contract is established, as a matter of law.

Turning to the question of remedy, the rule is that where work is done pursuant to an illegal municipal contract, no recovery may be had by the vendor, either on the contract or in Quantum meruit. (Gerzof v. Sweeney, 22 N.Y.2d 297, Supra, at p. 304, 292 N.Y.S.2d 640, at pp. 643--644, 239 N.E.2d 521 at p. 523; Jered Contr. Corp. v. New York City Tr. Auth., 22 N.Y.2d 187, 192, 292 N.Y.S.2d 98, 102, 239 N.E.2d 197, 200; 15 Williston, Contracts (3d ed.), § 1786A; Ann., Municipality--Quasi-Contract Liability, 33 A.L.R.3d 1164, 1172; Restatement, Contracts, § 598.) We have also declared that the municipality can recover from the vendor all amounts paid under the illegal contract. (Gerzof v. Sweeney, Supra, at p. 305, 292 N.Y.S.2d at p. 644, 239 N.E.2d at p. 523.)

The reason for this harsh rule, which works a complete forfeiture of the vendor's interest, is to deter violation of the bidding statutes. (Gerzof v. Sweeney, Supra, at p. 304, 292 N.Y.S.2d at pp. 643--644, 239 N.E.2d at p. 523; Jered Contr. Corp. v. New York City Tr. Auth., Supra, at pp....