July 27, 2010
MERCHANTS INSURANCE GROUP, PLAINTIFF-RESPONDENT,
WILLIAM T. MILLER AND JILL MILLER, H/W, JOINTLY AND SEVERALLY; AND WILLIAM T. MILLER AND JILL MILLER, D/B/A CLEO'S FISH PALACE, INC., DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-462-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 24, 2010
Before Judges Fisher and Sapp-Peterson.
Defendants, William T. and Jill Miller (the Millers), are the former owners of property on which an underground oil tank was left and from which there apparently was leakage of pollutants not only onto their property but also onto the property of a neighbor. The current owners, to whom the Millers sold their property, were sued by their neighbor and, as a result, they commenced a third-party action against the Millers. The Millers sought coverage from their insurer, plaintiff, Merchants Insurance Group (Merchants), which was denied. They commenced an action in Superior Court, Special Civil Part, seeking "a declaratory judgment that [Merchants] [is] required to fully defend and indemnify the [Millers]" with respect to the third-party action. The relief sought included "[a]ttorneys['] fees and costs of this action pursuant to [Rule] 4:42-9[.]" Merchants filed a motion for summary judgment, arguing that the Millers were not entitled to coverage. The Millers opposed the motion and also filed a cross-motion seeking a declaration that they were entitled to coverage. In their brief, the Millers contended they "reasonably expected that the heating oil migration on the applicable and neighboring property was covered up to $10,000 as per the applicable policy of insurance." (emphasis added).
The motion judge found "that the insurance policy was not actually navigable by the insurer to the final conclusion that the pollution cleanup at issue is not covered. . . . The declarations sheet very clearly states that 'Pollutant CleanUp and Removal' are part of the 'Automatic Coverages' of the policy." The court denied Merchants' motion but granted the Millers' cross-motion.
Although the Millers' complaint sought the award of counsel fees, in their cross-motion for summary judgment, they failed to raise the issue of counsel fees. Later, however, through their attorney's apparent discussion and correspondence with Merchants' attorney, they claimed they were entitled to reimbursement for the counsel fees and costs they incurred. Merchants disagreed and filed a complaint seeking declaratory relief adjudging that its maximum exposure under the policy issued to the Millers was $10,000 and the Millers were not "entitled to a reimbursement of their legal fees and costs . . . in connection with their filing of the first declaratory judgment action" because they were "first[-]party insureds." Both parties subsequently filed summary judgment motions.
In its June 5, 2009 order, the court found that the Millers "did not seek a declaration for indemnity benefits or attorneys' fees within their [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction" and that they were "barred from asserting a claim that they should have briefed in the [o]riginal [a]ction."
The court denied their motion for summary judgment, but granted Merchants' cross-motion for summary judgment.
The Millers moved for reconsideration, which the court denied after concluding that the motion "does not present anything new to the [c]court, nor does it demonstrate how the June 5, 2009 [o]rder was based upon a 'palpably incorrect or irrational basis.'" (citation omitted).
The court, in its September 1 written opinion denying reconsideration, found:
Defendants' [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction was one that sought first[-]party direct coverage. This [c]court noted that defendants did not seek a declaration for indemnity benefits or attorneys' fees within their [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction. This [c]court finds that its [o]rder dated January 22, 2008 constituted a final determination on the merits for purposes of issue and claim preclusion.
The Millers filed the ensuing appeal. On appeal, they contend the motion judge erred in not awarding counsel fees because fees were recoverable pursuant to Rule 4:42-9(a)(6) and their claim for fees was not subject to claim preclusion. Specifically, the Millers argue: (1) that they were required to subsidize their defense on a claim covered by their insurance policy; (2) the claim for counsel fees and costs should not have been precluded because only the issue of coverage was resolved; (3) the issue of attorneys' fees and costs was not ripe for determination because counsel fees and costs were still being accrued; and (4) Merchants was aware that the Millers were still paying attorneys' fees after the court's declaratory judgment declaring that they were entitled to coverage. We reject these contentions and affirm substantially for the reasons expressed by Judge Joseph E. Kane in his written opinions of June 5, 2009 and September 1, 2009. We add the following brief comments.
"The concept that a party is required to bring all possible claims in one proceeding is embodied in the closely linked concepts of res judicata and the entire controversy doctrine." McNeil v. Legislative Apportionment Comm'n, 177 N.J. 364, 395 (2003), cert. denied, 540 U.S. 1107, 124 S.Ct. 1068, 157 L.Ed. 2d 893 (2004). Res judicata, or claim preclusion, is a long-established doctrine that not only restricts a litigant's ability to bring claims in a subsequent civil action that were actually litigated in an earlier proceeding but precludes litigation, in a subsequent proceeding, of those claims that could have been adjudicated in an earlier lawsuit involving the same parties. Lubliner v. Bd. Of Alcoholic Bev. Control, 33 N.J. 428, 435 (1960). Claim preclusion "rests upon policy considerations which seek to guard the individual against vexatious repetitious litigation and the public against the serious burdens which such litigation imposes upon the community." Ibid. For these reasons, the original judgment carries with it preclusive effects. See also Restatement (Second) of Judgments Ch. 1 Scope at 1 (1982).
The policy considerations underlying application of the doctrine are threefold: "(1) the need for complete and final disposition through the avoidance of piecemeal decisions; (2) fairness to parties to the action and those with a material interest in the action; and (3) efficiency and the avoidance of waste and the reduction of delay." DiTrolio v. Antiles, 142 N.J. 253, 267 (1995) (citing Cogdell v. Hosp. Ctr., 116 N.J. 7, 15 (1989)). Invoking the doctrine of claim preclusion requires that "(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one." Watkins v. Resorts Int'l Hotel & Casino, Inc., 124 N.J. 398, 412 (1991) (citations omitted). Further, [C]auses of action are deemed part of a single "claim" if they arise out of the same transaction or occurrence. If, under various theories, a litigant seeks to remedy a single wrong, then that litigant should present all theories in the first action. Otherwise, theories not raised will be precluded in a later action.
[Id. at 413 (citations omitted).]
Here, the Millers filed a declaratory judgment action in the Special Civil Part. The complaint sought a declaration of their entitlement to coverage under their insurance policy for the discharge of pollutants both on their property and neighboring property, defense and indemnification, as well as counsel fees and costs. Notwithstanding the relief sought, when the Millers filed their cross-motion for summary judgment, they did not raise the issue of their entitlement to counsel fees. Nor did they raise the issue of defense and indemnification, which claims, if successfully advanced, would have entitled the Millers to counsel fees pursuant to Rule 4:42-9(a)(6). Rather, the Millers limited their prayer for relief in the summary judgment motion to the "ent[ry] [of] an order declaring that [Merchants] provide up to $10,000 for cleanup and removal as indicated on the declarations page." The trial court agreed with the Millers' argument that based upon the language on the declaration page, they had a reasonable expectation of coverage, and granted the relief sought.
It is clear from the record that the Millers were aware of their claim for attorneys' fees and costs at the time they filed their cross-motion for summary judgment and could have moved for summary judgment on their claimed entitlement to counsel fees under the defense and indemnity provisions of Rule 4:42-9. We reject as meritless their contention that their claim for counsel fees was not ripe because they had not yet received a "No Action" letter from the Department of Environmental Protection and legal fees were still accumulating. Absent a statute, e.g. the Law Against Discrimination, N.J.S.A. 10:5-1 to -49, or the Consumer Fraud Act, N.J.S.A. 56:8-1 to -91, court rule, e.g., Rule 4:42-9(a)(6), or contractual provision, New Jersey follows the "American Rule," that each party in litigation bears responsibility for his or her counsel fees and costs. Rendine v. Pantzer, 141 N.J. 292, 322 (1995). Hence, until the threshold, substantive question of whether the Millers were entitled to counsel fees and costs based upon fee shifting is addressed, the amount of the counsel fees sought, the fact that counsel fees were still accumulating and remediation was still ongoing, are irrelevant issues. As the motion judge so accurately observed, "[the Millers'] ripeness argument is logically unsound because the issue of indemnity benefits is no more ripe now than it was during the [o]riginal [a]ction. . . . [The Millers] are in the same position now that they were in during the [o]riginal [a]ction with regard to indemnity or attorneys' fees."
Further, the trial court, in its June 5, 2009 written opinion denying counsel fees, found that the Millers' [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction was one that sought first[-]party direct coverage. Defendants did not seek a declaration for indemnity benefits or attorneys' fees within their [m]otion for [s]ummary [j]udgment in the [o]riginal [a]ction. This [c]court finds that its [o]rder dated January 22, 2008 constituted a final determination on the merits for purposes of issue and claim preclusion.
This finding is supported by the arguments advanced by the Millers in their brief submitted in opposition to Merchants' summary judgment motion and in support of their cross-motion for summary judgment in the original motions. They stated that they "reasonably expected that the heating oil migration on the applicable [that being their property] and the neighboring property was covered up to $10,000 as per the applicable policy of insurance." This is clearly an argument addressed to first-party coverage.
To summarize, the January 28, 2008 judgment was valid and final, arose out of a coverage dispute with Merchants, the identical party in the second declaratory judgment action, and the Millers' claim of entitlement to counsel fees arose out of the same coverage claim asserted in the earlier declaratory judgment action. Under these circumstances, they were precluded from seeking to resolve their entitlement to counsel fees pursuant to Rule 4:42-9(a)(6) in the second declaratory judgment action. Watkins, supra, 124 N.J. at 412.
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