Staatsburg Water Co. v. Staatsburg Fire Dist.

• Decision Date: 07 July 1988
• Citation: 531 N.Y.S.2d 876,72 N.Y.2d 147,527 N.E.2d 754
• Parties: , 527 N.E.2d 754 STAATSBURG WATER COMPANY, Respondent, v. STAATSBURG FIRE DISTRICT, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 876

531 N.Y.S.2d 876

72 N.Y.2d 147, 527 N.E.2d 754

STAATSBURG WATER COMPANY, Respondent, v. STAATSBURG FIRE DISTRICT, Appellant.

Court of Appeals of New York.

July 7, 1988.

Valentino T. Sammarco and Bernard Kessler, Hyde Park, for appellant.

Howard J. Read and Kevin R. Brocks, Albany, for respondent.

Robert A. Simpson and Marilyn Mann Faulkner, for New York State Public Service Com'n, amicus curiae.

OPINION OF THE COURT

WACHTLER, Chief Judge.

While this action was pending in Supreme Court, the Public Service Commission (PSC) conducted a public hearing and issued a determination purporting to resolve the underlying controversy in plaintiff's favor. The primary question presented by this appeal is whether, pursuant to principles of issue preclusion, the PSC's determination is binding upon defendant in this action. We hold that under the circumstances presented here, unlike those in Allied Chem. v. Ni Mohawk Power Corp, 72 N.Y.2d 271, 532 N.Y.S.2d 230, 528 N.E.2d 153), it is not, and modify the Appellate Division order accordingly.

Plaintiff Staatsburg Water Company is a public utility corporation which supplies water to customers in parts of Dutchess County, including the Village of Staatsburg. Its activities, including the rates charged, are regulated by the Public Service Commission, which appears in this appeal as amicus curiae. Among plaintiff's customers is the defendant, Staatsburg Fire District, to whom the Water Company supplies water for public fire protection through a number of fire hydrants. Plaintiff charges for this service based on a fixed annual rate per hydrant.

Since January 1, 1982, defendant has refused to pay plaintiff for this service, complaining that the service was inadequate due to malfunctioning hydrants and insufficient water pressure. As a result, plaintiff experienced a revenue deficiency and, in November 1983, sought permission from the PSC to assess its other customers a surcharge to make up for defendant's nonpayment. In an order issued July 31, 1984, the PSC authorized a temporary increase but withheld a final determination regarding the proposed surcharge until plaintiff demonstrated that it had taken "all necessary and practicable steps, which may include the initiation of legal action, to secure payment from the Fire District."

Accordingly, plaintiff commenced this action in Supreme Court, seeking to recover the unpaid public fire protection charges. Defendant answered with allegations that the service provided by plaintiff was inadequate, and plaintiff, in turn, moved for summary judgment on the ground that the PSC's July 31 order had resolved the adequacy-of-service issue in plaintiff's favor. Supreme Court denied the motion, noting that the PSC had not determined the merits of defendant's claim.

Meanwhile, and on March 27, 1985, plaintiff again filed for approval of a surcharge to make up for the lost revenues resulting from defendant's continued nonpayment. In light of Supreme Court's decision, however, the PSC ordered that, before considering the surcharge proposal, it would initiate a formal investigation to determine whether plaintiff's fire protection service was adequate and whether defendant was justified in withholding payment. A public hearing was scheduled and all interested parties, including defendant, were invited to participate. Defendant's attorney appeared at the hearing, but protested at the outset that the PSC had no authority to rule on the dispute. Defendant contended that the appropriate forum for resolution of the issue was Supreme Court, where this action remained pending. Accordingly, defendant presented no witnesses at the hearing, although its attorney conducted cross-examination, introduced three exhibits and filed posthearing briefs.

Following the hearing, the PSC determined, in essence, that the service supplied by plaintiff was adequate and that defendant was not justified in withholding payment. The PSC again reserved decision on plaintiff's request for a surcharge until after plaintiff sought recovery from defendant through litigation, a task which, the PSC opined, should be "facilitated" by its findings. Armed with this determination, plaintiff returned to Supreme Court, moved to amend the ad damnum clause in the complaint and renewed its motion for summary judgment, contending that the PSC's finding was binding on the defendant. Supreme Court denied the motion to amend the complaint and, refusing to give collateral estoppel effect to the PSC's determinatio denied the motion for summary judgment.

The Appellate Division reversed and granted both the motion to amend the ad damnum clause and the motion for summary judgment. Relying primarily on Ryan v. New York Tel. Co., 62 N.Y.2d 494, 478 N.Y.S.2d 823, 467 N.E.2d 487, the court ruled that the PSC's determination was entitled to preclusive effect because the PSC was an appropriate body to determine the adequacy of plaintiff's service, the hearing procedures were substantially similar to those utilized in a court of law, and the defendant was given an opportunity to present and cross-examine witnesses, present exhibits and submit briefs (131 A.D.2d 832, 517 N.Y.S.2d 192).

This convoluted procedural background gives rise to a straightforward question: Should the PSC's determination that plaintiff's service to defendant was adequate be binding on defendant in this litigation? Plaintiff's primary contention is that the doctrine of collateral estoppel precludes relitigation of the issue.

The relevant principles may be quickly restated. Collateral estoppel, or issue preclusion, may be invoked in a subsequent action or proceeding to prevent a party from relitigating an issue decided against that party in a prior adjudication ( Ryan v. New York Tel. Co., supra, at 500, 478 N.Y.S.2d 823, 467 N.E.2d 487; Schwartz v. Public Adm'r, 24 N.Y.2d 65, 70, 298 N.Y.S.2d 955, 246 N.E.2d 725). It is now familiar law that "the doctrines o ires judicata and collateral estoppel are applicable to give conclusive effect to the quasi-judicial determinations of administrative agencies * * * when rendered pursuant to the adjudicatory authority of an agency to decide cases brought before its tribunal employing procedures substantially similar to those used in a court of law" (Ryan v. New York Tel. Co., supra, at 499, 478 N.Y.S.2d 823, 467 N.E.2d 487 [citations omitted] ). Whether the prior adjudication occurred in the context of an administrative determination, an arbitration or a full-fledged judicial proceeding, issue preclusion is applicable only if there is "an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and [there was] a full and fair opportunity to contest the decision now said to be controlling" (Schwartz v. Public Adm'r, supra, at 71, 298 N.Y.S.2d 955, 246 N.E.2d 725).

In addition, we have consistently emphasized that these principles are not to be mechanically applied as a mere checklist. Collateral estoppel is an elastic doctrine and the enumeration of these elements is intended as a framework, rather than a substitute, for analysis. For example, the question whether a party had a full and fair opportunity to contest the prior decision is not answered simply by reference to the procedural benefits available in the first forum or by a conclusion that the requirements of due process were satisfied (see, Gilberg v. Barbieri, 52 N.Y.2d 285, 292, 441 N.Y.S.2d 49, 423 N.E.2d 807). Instead, the analysis requires consideration of "the realities of litigation", such as recognition that if the first proceeding involved trivial stakes, it may not have been litigated vigorously (see, id., at 292-293, 441 N.Y.S.2d 49, 423 N.E.2d 807; Schwartz v. Public Adm'r, supra, at 72, 298 N.Y.S.2d 955, 246 N.E.2d 725).

In the end, the fundamental inquiry is whether relitigation should be permitted in a particular case in light of what are often competing policy considerations, including fairness to the parties, conservation of the resources of the court and the litigants, and the societal interests in consistent and accurate results. No rigid rules are possible, because even these factors may vary in relative importance depending on the nature of the proceedings (see, Gilberg v. Barbieri, supra, at 291-292, 441 N.Y.S.2d 49, 423 N.E.2d 807). People v. Berkowitz, 50 N.Y.2d 333, 344, 428 N.Y.S.2d 927, 406 N.E.2d 783; Matter of Venes v. Community School Bd., 43 N.Y.2d 520, 524, 402 N.Y.S.2d 807, 373 N.E.2d 987.

With these principles in mind, we conclude that the proceeding which led to the PSC's determination suffers from a number of defects which, in combination, deprive it of preclusive effect. These defec all spring from the fact that the PSC's finding was, in essence, an unsolicited advisory opinion made outside the context of any complaint pending before the agency and without any direct consequences for defendant.

As a result, defendant was not, in the true sense of the word, a party to the PSC proceeding--a basic prerequisite for application of the doctrine ( see, Liss v. Trans Auto Sys., 68 N.Y.2d 15, 505 N.Y.S.2d 831, 496 N.E.2d 851; Gilberg v. Barbieri, supra, 53 N.Y.2d...