The opinion of the court was delivered by: MEANEY
This is an application for dismissal of the complaint and for summary judgment in favor of the defendant.
The complaint, seeking damages, demands judgment against the defendant in the amount of $ 910,376.77 by reason of an alleged fraud perpetrated by the defendant upon the Government of the United States.
In view of the complex factual situation involved herein, the court will undertake a review of the background of this action.
The defendant is an attorney at law, maintaining his professional office in the City of New York, and is a resident of the State of New Jersey.
In January, 1918, the Alien Property Custodian seized the property of one J. F. Hackfeld, located in the Territory of Hawaii and of a value of over $ 3,000,000, the seizure being predicated on a determination of the Alien Property Custodian that the said Hackfeld was an enemy as defined in Section 2 of the Trading with the Enemy Act, 50 U.S.C.A.Appendix, § 2.
Hackfeld was born in Germany, and in 1877 went to Hawaii. He there entered the sugar business, subsequently achieving considerable financial success.
In 1894 the Monarchy of Hawaii was overthrown. Hackfeld, having taken an active part in the overthrow of said Monarchy, was subsequently issued a certificate by the then Republic of Hawaii entitling him to all the privileges of citizenship of that Republic. In 1900, 31, Stat. 141, 48 U.S.C.A. § 491 et seq., the United States passed an Act organizing the Territory of Hawaii, which provided, inter alia, that all persons who were citizens of the Republic of Hawaii were thereafter declared to be citizens of the United States and of the Territory of Hawaii. Shortly thereafter, in 1901, Hackfeld returned to Germany for the asserted reason of his wife's ill health. From that date until 1914 Hackfeld divided his time between Germany and Hawaii. He was in Germany in 1914 and due, allegedly, to the outbreak of the war in that year, was unable to return to Hawaii or the United States. In January of 1918 the seizure of Hackfeld's holdings was made by the Alien Property Custodian.
In 1923, the said Hackfeld retained the defendant Silliman as his attorney, to represent him in proceedings before the Government departments, for the purpose of recovering from the plaintiff herein, the United States Government the property which the Custodian had seized. In October of 1923 the defendant, on behalf of Hackfeld, filed a notice of claim with the Alien Property Custodian for the return to Hackfeld, of all property held by the Custodian for the Hackfeld account. Hackfeld, thereafter, filed an application for an American passport in the American Consulate in Bremen, Germany, in which he alleged that he was a naturalized citizen and a legal resident of Honolulu, Hawaii. It appears that Hackfeld made his claim to citizenship upon the basis of the certificate issued to him by the Republic of Hawaii and the subsequent act organizing the Territory of Hawaii, whereby citizens of the Republic of Hawaii became American Citizens.
In April 1924, President Coolidge allowed Hackfeld's claim on the recommendation of the Attorney General. Pursuant to the allowance of the claim, the Alien Property Custodian returned to Hackfeld the sum of $ 3,867,229.86.
Hackfeld died in Germany in 1932 leaving a will which was probated in Germany, letters testamentary being given one, Rodiek, as ancillary executor, in the State of New York. The defendant was employed as counsel for the estate in America and given a general power of attorney by the ancillary executor.
Subsequently, a bill was introduced in the Senate of the United States, for the payment to the estate of Hackfeld of an additional claim of $ 3,000,000 which amount it was alleged was further due as a result of injuries sustained by the estate through the sale of the Hackfeld properties by the Alien Property Custodian. That bill, by resolution of the Senate, was referred to the United States Court of Claims and on July 2, 1934, the said ancillary executor, Rodiek, with the defendant Silliman acting as his attorney, filed a sworn petition in support of the claim, with the said Court of Claims. Conclusions and an opinion were filed in 1943 by the said Court denying the claim.
During the pendency of the proceeding in the Court of Claims, the plaintiff in 1936 filed a civil action in the United States District Court for the Southern District of New York against the ancillary executor for the recovery of an alleged overpayment made to decedent, Hackfeld, in the amount of $ 881,298.38, alleging that the said overpayment had been made pursuant to the Presidential order of allowance, but under the erroneous and mistaken belief that Hackfeld was an American citizen.
After a trial of that action, the court directed a verdict in the amount of $ 1,605,057.32 on the ground that as a matter of law, Hackfeld had never been a citizen of the United States.
After judgment for the United States was entered on the directed verdict, application was made to the Surrogate's Court by the ancillary executor for leave to pay out of estate assets, fees and disbursements for attorneys. In addition, after filing his account in the Surrogate's Court, the ancillary executor made application to the court for authority to pay reasonable administration expenses. The application was granted. The defendant in this action was shown by the account to have received certain amounts from the estate as compensation for services rendered, and was listed as a creditor of the estate for additional sums as fees on account of such services.
The government, as a general creditor of the estate, filed its objections to the account, seeking a decree from the Surrogate's Court refusing the defendant herein unpaid compensation and seeking to surcharge him with the amounts of fees and disbursements theretofore received by him from the estate.
In 1942, meanwhile, the plaintiff filed its complaint in the instant proceeding charging the defendant with complicity in the filing and prosecution of the alleged false and fraudulent claim of Hackfeld. The amended complaint alleges that the defendant, knowing Hackfeld to be a German citizen and not an eligible claimant for the return of one hundred percent of his property, filed a claim representing Hackfeld to be a loyal American citizen, domiciled in Hawaii and eligible for a return of all property seized from him. Thirteen specific misrepresentations of material facts are charged. In addition, the defendant is charged with having bribed a vice-consul of the United States Bremen Consulate in order to get from him a favorable report and recommendation to the Secretary of State upon Hackfeld's claim to American citizenship.
The defendant has moved for an order dismissing the amended complaint and for the entry of a summary judgment in favor of the defendant on the pleadings and on affidavits annexed to the motion.
Defendant has asserted several grounds for his motion. The first ground urged is that there is an existing final judgment or decree in favor of the defendant and against this plaintiff entered in the Surrogate's Court of New York, In re Hackfeld's Estate, 171 Misc. 727, 13 N.Y.S.2d 685, on the same issues as are raised herein, rendered on the merits and determining the same cause of action, between the same parties, and that said judgment or decree is res adjudicata herein and determinative of the issues in this action.
A brief review of the proceedings in the Surrogate's Court will aid a determination of this asserted ground. It is evident from a review of the facts as hereinabove set forth, that the United States, as a result of the verdict of the District Court of New York, was a judgment creditor of the Hackfeld estate, entitled to payment from the assets remaining after payment of expenses and allowances. Defendant Silliman had received from the executor, prior to the filing of his final account, over $ 48,000 for fees and disbursements, a portion of which were the result of disbursements made by Silliman in the preparation and presentation of the executor's claim for $ 3,000,000 filed against the United States.
Following the filing of the executor's final account, the United States filed objections to its allowance. The objections were in part directed to all payments and disbursements (past or proposed) in furtherance of the prosecution or in connection with the proceeding in the United States Court of Claims; and generally to all disbursements and payments of fees to Reuben D. Silliman, and requested a surcharge against him of all sums theretofore received by him from the estate on the grounds that he, as an attorney for Hackfeld, personally participated in the filing of false and fraudulent claims. The allegations contained in the objections and those set forth in the amended complaint are unquestionably grounded on the same alleged facts and evidence.
Despite this, it is the opinion of this Court that the defense of res adjudicata has no application in this proceeding and must be rejected. The fraud and misrepresentations alleged to have been perpetrated against the government by Silliman in 1923 and 1924 had no relation to the administration of the estate and were not matters within the jurisdiction of the Surrogate's Court to adjudicate. The doctrine of res adjudicata is applicable only where a judgment or a decree has been rendered by a Court of competent jurisdiction. Where it appears that a court lacked jurisdiction of the particular subject matter, a decree or judgment in respect thereto is ineffective as an estoppel. Bassick Mfg. Co. v. Larkin Automotive Parts, D.C., 23 F.2d 92; In re Wickwire Spencer Steel Co., D.C., 12 F.Supp. 528.
The fact that a court has incidentally determined a matter over which it would have no jurisdiction were the action brought directly does not cure the initial ...