AHS HOSPITAL CORPORATION VS. MAINARDI MANAGEMENT COMPANY, LP(L-1407-14, MORRIS COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4443-14T4

AHS HOSPITAL CORPORATION,

Plaintiff-Appellant,

v.

MAINARDI MANAGEMENT
COMPANY, LP and UNION
MEDICAL PARK, LLC,

Defendants-Respondents.

_______________________________

Argued January 24, 2017 – Decided July 14, 2017

Before Judges Espinosa and Guadagno.

On appeal from the Superior Court of New
Jersey, Law Division, Morris County, Docket
No. L-1407-14.

Katelyn E. Cutinello argued the cause for
appellant (Bubb, Grogan & Cocca, LLP,
attorneys; Ms. Cutinello, of counsel and on
the briefs).

Michael J. Palma argued the cause for
respondents (Law Offices of Viscomi & Lyons,
attorneys; Mr. Palma, on the brief).

PER CURIAM

Plaintiff AHS Hospital Corporation (AHS) appeals from the
dismissal of a complaint it filed in Morris County to seek

indemnification and defense costs incurred in an action filed,

settled and dismissed in Essex County. For the reasons that

follow, we affirm.

I.

AHS leased premises from defendant Union Medical Park, LLC

(Union) pursuant to a lease agreement in which Union agreed to

indemnify and defend AHS against personal injury claims

"occasioned wholly or in part by any act or omission of" Union or

its agents. In the underlying slip and fall lawsuit filed against

them in Essex County, Rodriguez v. Mainardi Management, Co., L.P.,

et al., No. ESX-L-3914-11,1 AHS and Union asserted cross-claims

against each other. AHS sought contribution, indemnification

generally and specifically pursuant to the lease agreement, as

well as a judgment for attorneys' fees and defense costs it would

incur in the Rodriguez lawsuit.

The Rodriguez action was submitted to non-binding arbitration

in April 2013, resulting in the following: (1) Rodriguez's damages

were assessed at $20,000, not including $6,123.44 for medical

expenses, (2) Rodriguez was found fifty percent (50%) at fault;

(3) Mainardi was found fifty percent (50%) at fault; and (4) no

1
It was alleged in the Rodriguez complaint that defendant
Mainardi Management Company is Union's management company.

2 A-4443-14T4
fault was found as to AHS and Union. AHS notified defendants of

its intent to seek indemnification pursuant to the lease in the

event the Rodriguez action proceeded to trial. The Rodriguez

action settled for $13,000, an amount paid entirely by defendants'

insurance carrier.

Within days of the settlement, the trial judge in Essex County

entered an order stating the Rodriguez action was settled. The

order is silent as to the cross-claims filed by AHS and defendants

against each other.

In October 2013, defendants moved to reinstate their cross-

claims against AHS. AHS did not file a similar motion to seek

such relief. It subsequently opposed defendants' motion and cross-

moved for attorneys' fees and costs on the basis that, under the

relevant lease provisions, defendants were responsible for the

condition which caused Rodriguez's slip-and-fall and were required

to indemnify and defend AHS in the Rodriguez action.

A voluntary stipulation of dismissal with prejudice was filed

that dismissed Rodriguez's claims but maintained defendants'

cross-claims against AHS. The stipulation, which was silent as

to AHS's claims against defendants, was executed by Rodriguez and

defendants but not by AHS.

Following oral argument on defendants' motion and AHS's

cross-motion, the Essex County trial judge denied both motions by

3 A-4443-14T4
orders dated December 6, 2013. The order on defendants' motion

denied their request to reinstate their cross-claims with

prejudice. The order denying AHS's motion for attorneys' fees and

costs did not specify that it was entered with prejudice. AHS did

not move for reconsideration or file a notice of appeal from this

order.

Approximately six months later, AHS filed the instant suit

in Morris County (the AHS suit). AHS alleged breach of contract,

contractual and common law indemnification claims, specifically

seeking reimbursement for attorneys' fees and costs incurred as a

result of the Rodriguez action. Defendants filed an answer,

denying the allegations.

Defendants moved to dismiss AHS's complaint as barred by the

December 6, 2013 order in the Rodriguez action under the entire

controversy doctrine and res judicata. In response, AHS argued

that the entire controversy doctrine did not bar its complaint

because the claims it raised in the AHS suit were not addressed

on their merits and had not accrued at the time of the Rodriguez

action. AHS also argued that res judicata did not bar its

complaint because (1) the December 6, 2013 decision in the

Rodriguez action did not address the merits of its claims and was

not made with prejudice; (2) there was no identity of issues or

cause of action between the Rodriguez action and the AHS suit; and

4 A-4443-14T4
(3) defendants were not prejudiced by the filing of the AHS suit.

Following oral argument, the trial judge in Morris County

entered an order dismissing AHS's complaint with prejudice. The

judge recognized that the December 6, 2013 decision was not made

on "a motion to reinstate [AHS's] cross claim" and the record was

sparse regarding the Essex County judge's consideration of AHS's

motion for attorney's fees. Still, he reasoned it could be

inferred that the Essex County trial judge had considered

reinstating AHS's cross-claim and therefore, the decision should

be viewed as one on the merits, warranting the application of res

judicata to bar the AHS suit in Morris County.

In its appeal, AHS argues the trial court erred in dismissing

its complaint on res judicata grounds because: the trial judge in

Essex County did not enter a final judgment on the merits of the

claims AHS presented in the instant suit; its claims against

defendant had not accrued; there was no identity of issues, claims

and causes of action in the Rodriguez action and equity requires

that its contractual and indemnity claims be heard fully and fairly

on the merits. AHS also argues its claims are not barred by the

entire controversy doctrine because there was no ruling on the

merits of its claims against defendants in the Rodriguez action.

We agree with AHS that it was error to apply the doctrine of

res judicata to dismiss the instant lawsuit. However, "appeals

5 A-4443-14T4
are taken from orders and judgments and not from opinions, oral

decisions, informal written decisions, or reasons given for the

ultimate conclusion." Do-Wop Corp. v. City of Rahway, 168 N.J.

191, 199 (2001). Our review of legal questions, such as the

application of res judicata, collateral estoppel and the entire

controversy doctrine, is de novo. Int’l Union of Operating Eng'rs

Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372, 386

(2007). Because our review of the record supports the dismissal

of AHS's complaint under both collateral estoppel and the entire

controversy doctrine, we affirm.

II.

Res judicata, or claim preclusion, embodies "the principle

that public policy and welfare require a definite end to litigation

when each of the parties has had a full, free and untrammeled

opportunity of presenting all of the facts pertinent to the

controversy." McNeil v. Legislative Apportionment Comm'n, 177

N.J. 364, 399-400 (2003) (citation omitted), cert. denied, 540

U.S. 1107, 124 S. Ct. 1068, 157 L. Ed. 2d 893 (2004). By barring

subsequent litigation, this doctrine "insulates courts from the

inefficiency of relitigating claims that have already been

resolved, thereby protecting the integrity of judgments and

preventing the harassment of parties." Bondi v. Citigroup, Inc.,

423 N.J. Super. 377, 422 (App. Div. 2011), certif. denied, 210

6 A-4443-14T4
N.J. 478 (2012).

There are three requirements that must be satisfied for res

judicata to apply:

(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.

[Ibid. (quoting Watkins v. Resorts Int'l Hotel
& Casino, 124 N.J. 398, 412 (1991)).]

The first of these criteria is not satisfied here. The

December 6, 2013 order and the reasoning proffered in the judge's

oral decision did not address the merits of AHS's cross-claims.

Procedurally, AHS's cross-claims were dismissed by virtue of the

order that dismissed the Rodriguez action. AHS had not filed a

motion to reinstate its cross-claim or a motion for reconsideration

of the June 17, 2013 dismissal order pursuant to Rule 4:49-2. It

was perhaps not unreasonable for the trial judge in Morris County

to infer that the Essex County judge had considered the merits of

reinstating AHS's cross-claim when he denied the cross-motion for

attorneys' fees. However, in the absence of such a motion or any

identifiable statement in the record to support that inference,

we are constrained to conclude that the inference is based upon

speculation rather than upon a record that reveals AHS had a full

7 A-4443-14T4
and fair hearing on its cross-claims prior to the December 6, 2013

order. See also Walker v. Choudhary, 425 N.J. Super. 135, 154

(App. Div.), certif. denied, 211 N.J. 274 (2012). It was,

therefore, error to apply the doctrine of res judicata here.

III.

The corollary of res judicata – which bars the relitigation

of a claim – is collateral estoppel, which bars the relitigation

of an issue. Unlike res judicata, "issue preclusion can result

from a judgment even if that judgment was not rendered on the

merits." Watkins, supra, 124 N.J. at 422. Collateral estoppel

bars the relitigation of an issue that has been adjudicated in a

prior litigation if:

(1) the issue to be precluded is identical to
the issue decided in the prior proceeding; (2)
the issue was actually litigated in the prior
proceeding; (3) the court in the prior
proceeding issued a final judgment on the
merits; (4) the determination of the issue was
essential to the prior judgment; and (5) the
party against whom the doctrine is asserted
was a party to or in privity with a party to
the earlier proceeding.

[Bondi, supra, 423 N.J. Super. at 423 (quoting
First Union Nat'l Bank v. Penn Salem Marina,
Inc., 190 N.J. 342, 352 (2007)).]

Under the first prong, determining whether the issues are

identical requires consideration of

[1] whether there is substantial overlap of
evidence or argument in the second proceeding;

8 A-4443-14T4
 [2] whether the evidence involves application
of the same rule of law; [3] whether discovery
in the first proceeding could have encompassed
discovery in the second; and [4] whether the
claims asserted in the two actions are closely
related.

[First Union Nat'l Bank, supra, 190 N.J. at
353.]

AHS's cross-motion for attorneys' fees and costs in the

Rodriguez action raised two main arguments: (1) pursuant to section

7.01(a) of the lease,2 defendants were responsible for the

condition that led to Rodriguez's injury, and (2) pursuant to

Section 8.05(b) of the Lease,3 defendants were required to

2
Section 7.01(a) of the lease, "Responsibilities of Landlord,"
provides, in relevant part:

[Union] agrees, at no additional cost to
[plaintiff], to repair, maintain and, if
necessary, replace: (i) the Common Areas,
including, without limitation, cleaning and
sweeping the Common Areas . . . and the common
utility systems (including plumbing,
electricity and lighting) serving the Common
Areas, . . . and personnel to provide and
supervise such services, and (ii) . . . and
all operating systems serving HEALTH PARK (as
opposed to solely the Leased Premises),
including . . . plumbing . . . .
3
Section 8.05(b) of the lease, "Indemnification," provides:

[Union] shall indemnify, defend and save
[plaintiff] harmless from and against any and
all claims, actions, damages, liability and
expense in connection with . . . personal
injury . . . arising from or out of any

9 A-4443-14T4
indemnify and defend AHS in the Rodriguez action, thereby making

them liable for AHS's attorneys' fees and costs. In support, AHS

cited the deposition testimony of Rodriguez and a Mainardi

representative as well as the lease. The claims AHS alleged in

the instant suit essentially rely upon the same arguments,

evidence, and rule of law. Although the breach of contract claim

additionally requires a determination that defendants breached the

lease by causing the condition that led to Rodriguez's injury and

refusing to indemnify or defend AHS in the Rodriguez action, it

seeks the same relief pursuant to the same lease provision as

AHS's cross-motion in the Rodriguez action. Thus, the cross-

motion in the Rodriguez action and the claims in the AHS suit

implicate identical issues.

Under the second prong, an issue is "actually litigated" if

"there was a full and fair opportunity to litigate the issue" in

the prior suit. Perez v. Rent-A-Ctr., Inc., 186 N.J. 188, 199

(2006) (citation omitted), cert. denied, 549 U.S. 1115, 127 S. Ct.

occurrence in, upon or at the Property
(excluding the Leased Premises), or occasioned
wholly or in part by any act or omission of
[Union], its agents, contractors, employees,
servants, lessees or concessionaires, unless
caused by the gross negligence or willful
misconduct of [plaintiff] or its agents or
servants.

10 A-4443-14T4
984, 166 L. Ed. 2d 710 (2007). In other words, an issue that "is

properly raised, by the pleadings or otherwise, and is submitted

for determination, and is determined" is considered to be "actually

litigated." Allesandra v. Gross, 187 N.J. Super. 96, 105-06 (App.

Div. 1982) (citation omitted). By contrast, an issue was not

found to be "actually litigated" where, although it was raised,

"[n]o testimony was taken or evidence offered in the [prior]

proceeding on this issue and no decision with respect thereto was

ever rendered by the [prior] judge." Id. at 106-07.

The very cross-motion filed by AHS in the Rodriguez action

raised the issues regarding the application of the lease provisions

to the Rodriguez action, i.e., whether defendants were responsible

for Rodriguez's injury; whether defendants were required to

indemnify and defend AHS in the Rodriguez action, and whether they

were required to reimburse AHS for incurred attorneys' fees and

costs. AHS deposed Carleen Evans, Building Supervisor for Mainardi

Management Company and Union, on these issues, relied upon that

discovery and litigated these issues in a letter brief and at oral

argument. The oral decision and December 6, 2013 order constituted

determinations of the issues raised by AHS.

Under the third prong, collateral estoppel's finality

requirement "is 'less stringent' than the finality requirement for

res judicata." In re Liquidation of Integrity Ins. Co./Celotex

11 A-4443-14T4
Asbestos Tr., 214 N.J. 51, 68 (2013) (citation omitted).

"[C]ollateral estoppel applies whenever an action is 'sufficiently

firm to be accorded conclusive effect.'" Hills Dev. Co. v.

Township of Bernards, 103 N.J. 1, 59 (1986) (quoting Restatement

(Second) of Judgments § 13 (1982)). On the other hand, "preclusion

should be refused if the decision was avowedly tentative."

Restatement (Second) of Judgments § 13 comment g (1982). "[T]hat

the parties were fully heard, that the court supported its decision

with a reasoned opinion, that the decision was subject to appeal

or was in fact reviewed on appeal, are factors supporting the

conclusion that the decision is final for the purpose of

preclusion." Ibid.

The December 6, 2013 order does not suffer from ambiguity as

to whether AHS's motions were denied. It cannot be denied that

the oral decision supporting the December 6, 2013 order lacked a

clear statement of reasons as required by Rule 1:7-4. That

deficiency does not, however, preclude a finding that the finality

prong has been satisfied. AHS had the opportunity to file a motion

for clarification or reconsideration and certainly had the right

to appeal from the order, all options it elected not to pursue.

"Correcting flawed reasoning is the subject of direct appeals, and

collateral attacks which 'undercut the decisional process' are

prohibited." Velasquez v. Franz, 123 N.J. 498, 512 (1991) (quoting

12 A-4443-14T4
Restatement (Second) of Judgments § 71 comment e (1982)).

There is no real dispute that the fourth and fifth prongs are

satisfied. Clearly, the determination of whether the lease held

defendants responsible for causing Rodriguez's injury and required

defendants to indemnify and defend AHS in the Rodriguez action was

essential to AHS's cross-motion in the Rodriguez action seeking

attorneys' fees and costs pursuant to the lease. Similarly, it

is clear that AHS, the party collateral estoppel is asserted

against in the AHS Suit, was a party in the Rodriguez action.

However, "because it is an equitable doctrine, even if all

five elements coalesce, it 'will not be applied when it is unfair

to do so.'" Allen v. V & A Bros., Inc., 208 N.J. 114, 138 (2011)

(quoting Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521-22

(2006)). Courts consider the following factors in making a

fairness determination:

The factors favoring issue preclusion include:
conservation of judicial resources; avoidance
of repetitious litigation; and prevention of
waste, harassment, uncertainty and
inconsistency. Those factors disfavoring
preclusion include: the party against whom
preclusion is sought could not have obtained
review of the prior judgment; the quality or
extent of the procedures in the two actions
is different; it was not foreseeable at the
time of the prior action that the issue would
arise in subsequent litigation; and the
precluded party did not have an adequate
opportunity to obtain a full and fair
adjudication in the prior action.

13 A-4443-14T4
 [Olivieri, supra, 186 N.J. at 523 (citation
omitted).]

There are no factors that militate against the application

of collateral estoppel here. There was no obstacle to a review

of the December 6, 2013 decision, either by a motion for

reconsideration or direct appeal. It was not merely foreseeable

but apparent by the assertion of the cross-claims in the Rodriguez

action that AHS was aware of the issues raised by the lease

provisions. Because both suits were brought in Superior Court,

there was no difference in procedures that precluded AHS from

obtaining full relief in the Rodriguez action. In short, there

was nothing in the procedures that denied AHS a full and fair

adjudication of its claims in the Rodriguez action.

The factors favoring the application of collateral estoppel

are prevalent. Because the issues implicated in both suits are

identical, allowing the AHS suit to proceed would mean that the

same witnesses will be deposed and the same documents will be

requested in discovery, causing repetitious litigation, judicial

waste, and a severe imposition on the doctrine's intended benefits

of "avoidance of duplication" and "reduction of unnecessary

burdens of time and expenses." N.J. Div. of Youth & Family Servs.

v. R.D., 207 N.J. 88, 115 (2011) (quoting Olivieri, supra, 186

N.J. at 522).

14 A-4443-14T4
 Therefore, the legal requirements for the application of

collateral estoppel have been met and the equities weigh in favor

of its application.

IV.

The purpose of the entire controversy doctrine is 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."

Wadeer v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 605 (2015) (quoting

DiTrolio v. Antiles, 142 N.J. 253, 267 (1995)).

Codifying the entire controversy doctrine, Rule 4:30A states,

"Non-joinder of claims required to be joined by the entire

controversy doctrine shall result in the preclusion of the omitted

claims to the extent required by the entire controversy

doctrine. . . ." It is "a remedy of last resort." Hobart Bros.

Co. v. Nat’l Union Fire Ins. Co., 354 N.J. Super. 229, 244 (App.

Div.) (quoting Vision Mortg. Corp. v. Chiapperini, 156 N.J. 580,

584 (1999)), certif. denied, 175 N.J. 170 (2002). A subsequent

claim will be barred by the entire controversy doctrine "only when

a prior action based on the same transactional facts has been

tried to judgment or settled," Allstate N.J. Ins. Co. v. Cherry

Hill Pain & Rehab. Inst., 389 N.J. Super. 130, 140 (App. Div.

15 A-4443-14T4
2006) (citation omitted), certif. denied, 190 N.J. 254 (2007),

unless the claim was "either unknown, unarisen or unaccrued at the

time of the original action," K-Land Corp. No. 28 v. Landis

Sewerage Auth., 173 N.J. 59, 72 (2002) (citation omitted).

It is undisputed that the claims in the AHS suit involve the

same transactional facts as in the Rodriguez action. AHS argues,

however, that the entire controversy doctrine does not apply

because its claims did not accrue until the Rodriguez court held

defendants liable for Ms. Rodriguez's damages under the lease.

This argument lacks merit. Although varying slightly in nature,

the claims asserted in the instant suit seek indemnification and

reimbursement of attorneys' fees and costs.

Although a defendant's indemnification claim "begins to

accrue when the plaintiff recovers a judgment against it[,] [u]nder

the entire controversy doctrine, if those claims are known, they

should be asserted in the original action." Mettinger v. Globe

Slicing Mach. Co., 153 N.J. 371, 387 (1998), (citation omitted).

In fact, Rule 4:7-5, which governs cross-claims, was specifically

amended in 1979 "to require defendants to assert any cross-claims

for . . . indemnity which they may have against any other party

in the action itself despite the fact that the cause of action

for . . . indemnity does not technically accrue until payment of

the judgment by that defendant." Buck v. MacDonald, 300 N.J.

16 A-4443-14T4
Super. 158, 161 (App. Div. 1997) (quoting Pressler, Current N.J.

Court Rules, comment 2 on R. 4:7-5 (1997)). The fact that AHS

pled its cross-claims for indemnification in the Rodriguez action

firmly establishes its knowledge of the factual and legal basis

for these claims during that litigation, rendering them subject

to the entire controversy doctrine.

We acknowledge that a plaintiff whose claim is barred "must

have had a fair and reasonable opportunity to have fully litigated

her claim in the prior action." Oliver v. Ambrose, 152 N.J. 383,

396 (1998). However, the dismissal of an action without prejudice

does not preclude the application of the doctrine. Mystic Isle

Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 333 (1995). "In

certain circumstances, . . . the principles underlying the entire

controversy doctrine may mandate that a suit be barred even though

it stems from the dismissal of a prior action without prejudice."

Ibid. The subsequent action may be barred where a plaintiff (1)

"manipulates the judicial system in order to fragment litigation";

(2) "has failed to avail himself of opportunities to pursue his

remedies in the first proceeding"; and (3) "has deliberately

flouted orders of the court." Ibid. (quoting Restatement (Second)

of Judgments § 19 comment a (1982)).

As we have noted, AHS failed to avail itself of opportunities

to pursue its remedies in the Rodriguez action by failing to file

17 A-4443-14T4
motions for clarification or reconsideration and by failing to

seek a direct appeal. Filing a new suit rather than pursuing

those remedies runs counter to the general rule that

"requires . . . errors underlying a judgment be corrected on

appeal or other available proceedings to modify the judgment or

to set it aside, and not made the basis for a second action on the

same claim." Restatement (Second) of Judgments § 19 comment a

(1982).

Because the entire controversy doctrine is equitable in

nature, we must consider whether its application "would be unfair

in the totality of the circumstances and would not promote any of

its objectives, namely, the promotion of conclusive

determinations, party fairness, and judicial economy and

efficiency." K-Land Corp., supra, 173 N.J. at 70 (quoting

Pressler, Current N.J. Court Rules, comments 1 & 2 on R. 4:30A

(2002)).

Barring any subsequent suit forecloses the adjudication of a

claim asserted by a party. In considering party fairness, we do

not merely consider the merits of AHS's claims; we must consider

the fairness to all parties within the circumstances of the case.

Nothing in the record suggests that defendants engaged in any

strategy designed to deprive AHS of a full and fair adjudication

of its indemnification claims. AHS had only to file a motion that

18 A-4443-14T4
mirrored the ones filed by defendants in the Rodriguez action to

preserve their claims. It elected not to do so or to appeal but,

rather, to pursue those claims in a separate action in a separate

county, a choice not inconsistent with forum shopping. To permit

AHS to pursue its claims in a separate action filed well after the

time for appeal had expired would seriously undermine the

doctrine's objectives of promoting conclusive determinations,

judicial economy and efficiency, especially in light of the fact

that it took over two years to resolve the Rodriguez action.

Our consideration of the facts and equitable factors leads

us to the conclusion that the entire controversy doctrine would

properly apply here, supporting the dismissal of AHS's complaint

with prejudice. Thus, the dismissal of AHS's complaint was

warranted under either the application of collateral estoppel or

the entire controversy doctrine.

Affirmed.

19 A-4443-14T4