MERCHANTS INSURANCE GROUP v. WILLIAM T. MILLER

Annotate this Case

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0394-09T2

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.
______________________________________

Argued March 24, 2010 - Decided July 27, 2010

Before Judges Fisher and Sapp-Peterson.

On appeal from the Superior Court of New
Jersey, Law Division, Atlantic County,
Docket No. L-462-09.

James P. Grimley argued the cause for
appellants (Miller Gallagher & Grimley,
attorneys; Mr. Grimley, of counsel and on
the brief).

Marc R. Jones argued the cause for
respondent (Marshall, Dennehey, Warner,
Coleman & Goggin, attorneys; Mr. Jones, on
the brief).

PER CURIAM

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 clean[]up at issue is not covered. . . . The

A-0394-09T2
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declarations sheet very clearly states that 'Pollutant Clean[]Up

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."

A-0394-09T2
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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]ourt, 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]ourt 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]ourt 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;

A-0394-09T2
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(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

A-0394-09T2
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serious burdens which such litigation imposes upon the

community." Ibid. For these reasons, the original judgment

Restatement
carries with it preclusive effects. See also

(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

DiTrolio v. Antiles, 142
waste and the reduction of delay."

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.

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[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 clean[]up 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

A-0394-09T2
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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."

A-0394-09T2
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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]ourt 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

A-0394-09T2
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from seeking to resolve their entitlement to counsel fees

pursuant to Rule 4:42-9(a)(6) in the second declaratory judgment

Watkins, supra,
124 N.J. at 412.
action.

Affirmed.

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