| American Std., Inc. v Oakfabco, Inc. |
| 2009 NY Slip Op 00121 [58 AD3d 485] |
| January 15, 2009 |
| Appellate Division, First Department |
| American Standard, Inc.,Appellant-Respondent, v Oakfabco, Inc., Formerly Known as Kewanee Boiler Corp.,Respondent-Appellant. |
—[*1] Landman Corsi Ballaine & Ford P.C., New York (William G. Ballaine of counsel),respondent-appellant.
Order, Supreme Court, New York County (Helen E. Freedman, J.), entered February 20,2008, which, in a declaratory judgment action involving whether, by virtue of a 1970 agreementin which defendant's predecessor purchased plaintiff's Kewanee Boiler Division, defendantassumed plaintiff's obligations to persons claiming personal injury as a result of exposure toKewanee boilers manufactured before 1970, and also seeking a permanent injunction prohibitingdefendant from disclaiming such assumption of obligations "in any forum," granted plaintiff'smotion for summary judgment to the extent of declaring that "in this jurisdiction, [defendant] isliable for injuries sustained as a result of tortious conduct in connection with Kewanee boilersinstalled prior to 1970," and granted defendant's cross motion for summary judgment declaringthat, notwithstanding any assumption by defendant of the aforementioned obligations, plaintiffremained directly liable to personal injury plaintiffs for injuries caused by Kewanee boilersinstalled before 1970, unanimously modified, on the law, to add the words, "sold, leased or"immediately before the word "installed" in the declaration, to delete the phrase "in thisjurisdiction" from the declaration, to permanently enjoin defendant from relitigating itsassumption of the aforementioned obligations in any forum, and to deny defendant's crossmotion, and otherwise affirmed, with costs in favor of plaintiff.
The subject 1970 agreement, by its terms, is governed by and to be construed in accordancewith New York law, and involved the purchase of all of Kewanee's assets. With respect to theassumption of liabilities, it provides, insofar as pertinent: "Buyer does hereby assume and agreeto pay, perform and discharge, and to indemnify Seller with respect to, all obligations, liabilities,debts and commitments (fixed or contingent), connected with or attributable to Kewanee,existing and outstanding at the date hereof." We reject defendant's argument that the "existingand outstanding" language limits the assumed liabilities to tort claims that had been actuallyasserted before the date of the agreement. Given [*2]theall-encompassing scope of the asset purchase agreement and the potential for future tort claims,we find that obligations and commitments to a potential tort claimant became "existing andoutstanding" when the boiler that injured the claimant was sold or installed, not when theclaimant brought his or her claim at a later time. Nor should this interpretation of the agreementbe limited to New York. The application of res judicata is a question of law and does not rest inthe discretion of the court (see Bannon v Bannon, 270 NY 484, 490 [1936]). We notethat our interpretation is in accord with rulings in New Jersey and Minnesota in which bothplaintiff and defendant were parties. Further, in light of the long history of litigating this matterin many different states, and in order to give plaintiff complete relief, defendant is permanentlyenjoined from relitigating whether it assumed liability to tort plaintiffs injured by Kewaneeboilers sold or installed before 1970 (see CPLR 3017 [b]). Defendant's cross motionshould have been denied because defendant did not plead any counterclaims for declaratoryrelief. In any event, the cross motion does not present a justiciable controversy. The meaning ofthe 1970 agreement as it relates to tort claimants is the only issue raised in the complaint, andany ruling on that issue can have no effect on the parties' respective potential obligations tohypothetical nonparty tort claimants.
Plaintiff's potential future liability to tort claimants can only be determined case by case, onthe basis of the facts presented and the governing law, which may vary from state to state.Concur—Tom, J.P., Gonzalez, Buckley, Sweeny and Catterson, JJ.