Merchants Mutual Insurance v. Arzillo , 472 N.Y.S.2d 97 ( 1984 )

OPINION OF THE COURT

Niehoff, J.

On June 18,1978 a fire occurred at the premises of State Utilities, Inc., in Lindenhurst, New York, causing serious damage to the building and its contents. The present action is brought by the plaintiff, Merchants Mutual Insurance Company, as subrogee of State Utilities, Inc., to recover the sum of $49,222.22 which Merchants Mutual expended for coverage of the loss under a fire insurance policy on the damaged premises.

Following the fire the defendant Salvatore Arzillo was indicted for arson in the third degree, the People claiming that he had been responsible for the fire. After a number of court appearances, the defendant entered a Serrimo-type plea of guilty (.People v Serrano, 15 NY2d 304) to a reduced charge of arson in the fourth degree. In the instant action for recovery of the amount of the fire loss, Merchants Mutual alleges that “defendant recklessly and wantonly damaged said building belonging to plaintiff’s subrogor when he intentionally caused a fire to start which caused great damage”.

The issue to be resolved on this appeal is whether the defendant’s plea of guilty to arson in the fourth degree for the very same incident which is the subject of this civil lawsuit collaterally estops the defendant from litigating the question of willful responsibility for the fire or whether, by entering a Serrano plea, at which time he claimed to have been framed, and by continuing to protest his innocence thereafter when he was sentenced, defendant is entitled to a trial on the issue of his legal responsibility to pay money for damages for the fire loss.

The appeal comes to us as a consequence of Special Term’s denying Merchant Mutual’s motion for summary judgment. In denying the motion, Special Term wrote: “Defendant’s prior plea to [sic] guilty of arson in the fourth degree before Acting County Court Judge Best on January 14, 1981 in the County Court of Suffolk represents an admission and is receivable in evidence in this civil action against him (Fisch on NY Evidence [2 ed] Sec. 803; Ando v Woodberry, 8 NY 2d 165, 167). While defendant may not relitigate the issue of his guilt, he may offer proof relevant to character of crime committed (.Matter of Levy, 37 NY 2d 279) and is entitled to the opportunity to explain it (Chamberlain v Iba, 181 NY 486, 490).”

For reasons set forth below, we conclude that the doctrine of collateral estoppel applies to defendant’s Serrano plea of guilty and that the plaintiff is entitled to summary judgment on the question of defendant’s liability for civil money, damages.

The essential facts are as follows:

By Suffolk County indictment number 2587/79 the defendant, Salvatore Arzillo, was charged with violating section 150.10 of the Penal Law, arson in the third degree (a class C felony). On January 14,1981, after some 15 court appearances, the defendant withdrew his previously entered plea of not guilty to the charge of arson in the third degree and interposed a plea of guilty to arson in the fourth degree, a class E felony (Penal Law, § 150.05). Before the County Court accepted defendant’s plea of guilty to the reduced charge, the County Court conducted a detailed allocution concerning the voluntariness of the plea.

After noting the defendant’s desire to plead guilty to arson in the fourth degree, the court indicated its intention to sentence the defendant to a period of probation, inquired if any promises or threats were made to the defendant, advised the defendant of his rights, including the burden on the People to prove the case beyond a reasonable doubt, the defendant’s right to call witnesses on his own behalf and cross-examine the People’s witnesses, and defendant’s right to counsel, admonished the defendant that his guilty plea constituted a waiver of those rights, and informed defendant of various sentencing alternatives. After questioning the defendant the court found as follows:

the court: The Court finds you alert and intelligent, and you understand the nature of the charges against you, and appreciate the consequences of the guilty plea. The Court finds you understand your rights, and are willing to give them up by a plea of guilty at this time.

The Court finds you understand the facts the district attorney must prove to establish your guilt, and these facts are — knowing all this, as to the charge of Arson in the Fourth Degree, a Class E felony, how do you plead?

the defendant: Guilty.

After so finding, the court asked Salvatore Arzillo about the incident in question. In answer to the query the defendant stated that there was an ongoing feud between him and the proprietor of State Utilities, Inc., and that he had been framed. Understandably concerned by the defendant’s statements, the County Court Judge pursued this line of inquiry and painstakingly explained all of the ramifications of a guilty plea to Mr. Arzillo. During that discussion Mr. Arzillo’s attorney stated that the “purpose of this plea is in the form of the guidelines of the Seroano [sic] plea, that his Honor and the district attorney and the Court is familiar with”, after which the prosecutor outlined the People’s case for the court as follows:

I would like to outline for the Court, the proof that the People would adduce at trial, were this case to go to trial, and indicate to the Court that we would prove that a fire happened at State Utilities Corporation, on the 18th day of June, 1978, at 290 West Hoffman Avenue, Lindenhurst.

We would also prove there was a long outstanding history of personal animosity between the owner of the property that the fire occurred on, and Mr. Arzillo. So we’d be able to establish a motive.

We would also be able to produce a witness, a Kevin O’Reilly, known to Mr. Arzillo, who would testify that Mr. Arzillo discussed with him, prior to the fire, his desire to have a fire occur at this particular location, and that Mr. O’Reilly would testify that Mr. Arzillo paid him to, in fact, see that a fire occurred at this particular location.

Mr. O’Reilly received some two hundred dollars from Mr. Arzillo over a period of some two weeks, in installments. He, in fact —■ Mr. O’Reilly had someone else start the fire which occurred on the 18th day of June, 1978, and that members of the Suffolk County Arson Squad would testify that, as a result of information they received some few days after the fire, their investigation showed that Mr. O’Reilly’s version of how, in fact, the fire was started and occurred, at the location on the 18th, was corroborating; in fact, that a certain brick was located at the property and it was thrown — it was located in the area where Mr. O’Reilly indicated a brick was thrown. Gasoline was poured through an office window, and the fire was started in that fashion.

It’s our feeling that were we pressed to try this case, we would be able to prove, beyond a reasonable doubt, that Mr. Arzillo, in fact, was the moving force and the person who caused this fire to occur.

However, as in any case, certainty is not something’s [sic] positive, so we’ve decided to offer Mr. Arzillo this plea under these particular circumstances.

After continued colloquy and a further claim by defendant that he had been framed, the following occurred:

the court: Sir, the more you tell me you were framed, the more I might be inclined not to accept your plea. Do you understand that? I don’t want to have somebody tell me they want me to accept their plea, and with the same breath, tell me they were framed.

The record is inconsistent in that regard. Do you want me to accept your plea?

the defendant: Yes.

the court: Is that your final decision, sir? I don’t want you to now say that any injustice was done to you in this Court. Do you understand that, sir?

the defendant: Yes.

the court: I don’t want you to say that somebody framed you, and you can maintain your innocence. But I don’t want you to say, in the second breath, that you were framed. Do you understand that? the defendant: Yes.

the court: Do I make my point to you, sir?

the defendant: Yes, your Honor.

the court: You’re asking me to accept this plea?

the defendant: Yes, your Honor.

the court: All right. I will accept your plea.

I will accept your plea on the basis that, if you did stand trial, you may well be found guilty of the higher charge and you may well have to face greater punishment. This is what you are escaping. Is that right?

the defendant: Yes.

Having thus satisfied itsélf as to the voluntariness of Mr. Arzillo’s plea the court directed the clerk to record the plea on the record. During that portion of the proceeding the following transpired:

the cleric: Are you pleading guilty of your own free will?

the defendant: I am.

the clerk: Do you know that your plea of guilty is an admission that you committed the crime to which you now plead guilty?

the defendant: Yes.

MR. giorgini [Defense Counsel]: The last question that was asked is yes, sir, with the stipulation that he is maintaining his innocence, and entering the Seroano [sic] plea.

the court: The record is clear as to what his position is. But he must understand that he’s pleading guilty to an Arson in the Fourth Degree.

MR. girogini [sic]: He understands that, your Honor.

the court: That means guilty. It doesn’t mean anything else.

Mr. Arzillo, you just signed this paper. It was filled out by your attorney? the defendant: Yes, your Honor.

the court: You were asked those questions and you gave those answers?

the defendant: Yes,'your Honor.

the court: Are each of them answered correctly?

the defendant: Yes, your Honor.

the court: And they are — they reflect accurately your answers to these questions?

the defendant: Yes, your Honor.

the court: Is it still your desire to make this disposition of this case?

the defendant: Yes, your Honor.

the court: Do you want to change your mind, sir?

the defendant: No, your Honor.

the court: This is what you want to do?

the defendant: Yes, your Honor.

From the foregoing it can be seen that the County Court Judge became somewhat alarmed when the defendant made the claim that he had been framed and that the Judge’s concern led him to take considerable care to explain to the defendant the ramifications of a guilty plea. The minutes of the plea disclose that when the Judge completed his colloquy with the defendant, the clerk specifically informed the defendant that his plea of guilty was an admission that he had committed the crime to which he was pleading guilty and the Judge then said “That means guilty. It doesn’t mean anything else”. Moreover, before the plea was accepted, the Assistant District Attorney outlined his case against the defendant in an effort to satisfy the court and the defendant that the case was a strong one.

On March 13,1981, subsequent to taking of the plea, the defendant appeared before the County Court for sentencing. The following transpired:

the court: All right. Mr. Arzillo, you were before the Court a month or so ago and entered a plea of guilty to the charge of Arson in the Fourth Degree. Is that right, sir?

the defendant: Right, your Honor. the court: Is that still your plea, sir? the defendant: Yes, your Honor.

the court: Do you have any idea about changing your mind at all, sir? the defendant: No, your Honor.

the court: The matter was adjourned to today’s date for sentencing. the defendant: Right, your Honor.

the court: You have a right to address the Court before sentencing, sir. Do you have anything to say to the Court at this time?

the defendant: I don’t understand that one.

the court: Do you want to say anything to the Court before I pronounce sentence?

the defendant: No, your Honor.

As noted above, the complaint in this action alleges that the defendant “recklessly and wantonly damaged said building belonging to plaintiff’s subrogor when he intentionally caused a fire to start which caused great damage”. The answer of the defendant admits his home address and denies each of the other allegations of the complaint.

In support of its motion for summary judgment, plaintiff submitted an attorney’s affirmation, as well as the minutes of the guilty plea and the minutes of the sentencing proceeding, whereby, as previously noted, the defendant pleaded guilty to the reduced charge of arson in the fourth degree and was sentenced to five years’ probation.

The defendant opposed the summary judgment motion, stating that (1) he did not set the fire to the building or conspire to have it set; (2) his plea of guilty was in the nature of a Serrano or Alford plea (People v Serrano, 15 NY2d 304, supra; North Carolina v Alford, 400 US 25), and that he never admitted committing the acts alleged in the indictment; and (3) the question of who started the fire was never litigated.

As we have already said, we conclude that summary judgment on the issue of liability should have been granted to plaintiff.

In the prior criminal proceeding Salvatore Arzillo pleaded guilty to arson in the fourth degree, a felony. Section 150.05 of the Penal Law provides that a person is guilty of fourth degree arson when he recklessly damages a building in which some other person had a possessory or proprietary interest by intentionally starting a fire or causing an explosion. The record before us proves beyond doubt that Mr. Arzillo, after consulting with and obtaining the advice of his attorney, understood both the meaning and the consequences of a criminal conviction pursuant to his plea of guilty. It was made clear to him that his guilty plea resulted in a valid, binding and final judgment of conviction in the criminal proceeding. The doctrine of issue preclusion as it has developed in this State mandates the holding that Arzillo’s guilty plea in the criminal action conclusively establishes his commission of the elements of the crime for the purposes of the instant subrogation action.

For many years the law in this State was that a conviction in a criminal case was prima facie evidence of the underlying facts, or “presumptive proof of the commission of the crime” in a subsequent civil suit, but that it was not conclusive proof of its underlying facts in such suit (see Schindler v Royal Ins. Co., 258 NY 310, 314). However, noting that “[i]n the 40 years since we decided Schindler we have greatly expanded the application of collateral estoppel”, the Court of Appeals, in the case of S. T. Grand, Inc. v City of New York (32 NY2d 300, 304-305), declared that the reasoning of Schindler (supra) and its progeny was no longer viable and held that a criminal conviction after trial is conclusive proof of its underlying facts in a subsequent civil action. Judge Jasen writing for the court said:

“There can be little doubt that stability of judgments and expedition of trials are served with a resulting increase in the efficiency of the judicial process in finally disposing of disputes, and no injustice is committed when criminal defendants are estopped from relitigating issues determined in conformity with these safeguards.

“Thus, we hold that the criminal conviction is conclusive proof of appellant’s bribery”.

The principles underlying the rule that prior determinations made in criminal cases are to be given collateral estoppel effect in subsequent civil cases were stated succinctly by Judge Meyer in his dissenting opinion in Gilberg v Barbieri (53 NY2d 285, 295): “S. T. Grand, Inc. v City of New York (32 NY2d 300) establishes that the rule of issue preclusion applies where the defendant in a prior criminal proceeding is defendant in a subsequent civil action involving the same issue and that the collateral estoppel rules enunciated in Schwartz v Public Administrator of County of Bronx (24 NY2d 65) apply as well when the prior proceeding is criminal as when it is civil. The Schwartz case makes clear that the criteria are two: ‘an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling’ (24 NY2d, at p 71). Schwartz and B. R. De Witt, Inc. v Hall (19 NY2d 141) require that the opponent of collateral estoppel bear the burden of establishing that he did not have a full and fair opportunity, but impose on the proponent the burden of showing identicality of issue and that the issue was necessarily decided.”

More recently Judge Meyer restated those principles in Capital Tel. Co. v Pattersonville Tel. Co. (56 NY2d 11, 17) as follows: “Collateral estoppel (or issue preclusion as is its more modern name, see Matter of American Ins. Co. [Mes-singer — Aetna Cas. & Sur. Co.], 43 NY2d 184, 189, n 2) applies to administrative as well as judicial proceedings (Bernstein v Birch Wathen School, 51 NY2d 932; Matter of Evans v Monaghan, 306 NY 312, 323-324; United States v Utah Constr. Co., 384 US 394, 422; Tipler v Du Pont de Nemours & Co., 443 F2d 125, 128; see Restatement, Judgments 2d [Tent Draft No. 7], § 131). Required for application of the doctrine in either type proceeding are that the issue as to which preclusion is sought be identical with the issue decided in the prior proceeding, that the issue have been necessarily decided in the prior proceeding, and that the litigant who will be held precluded in the present proceeding have had a full and fair opportunity to litigate the issue in the prior proceeding (Gilberg v Barbieri, 53 NY2d 285, 291; Schwartz v Public Administrator of County of Bronx, 24 NY2d 65, 71; see B. R. De Witt, Inc. v Hall, 19 NY2d 141). The burden of establishing the first two elements rests upon the proponent of preclusion, but as to the lack of a full and fair opportunity to contest, the burden is on the opponent (Schwartz v Public Administrator of County of Bronx, 24 NY2d 65, 73, supra; B. R. De Witt, Inc. v Hall, 19 NY2d 141, 148, supra).”

Manifestly, the issue in this civil action is identical with the issue presented in the prior criminal proceeding, namely, whether the defendant recklessly damaged the subject building by intentionally starting a fire. Thus, the first condition for the application of collateral estoppel, or issue preclusion, exists, to . wit, identity of issue. Defendant does not argue otherwise. His contention is that his “plea of guilty was in the nature of a Serrano or Alford plea whereby [he] pled guilty to minimize the risk of being found guilty after trial, but never admitting that [he] in any way, committed any of the acts alleged in connection with the fire” and that “the question of who started the fire was never litigated and no admissions were ever made with regard thereto”.

Initially we note that ample authority exists for the general proposition that a guilty plea is equivalent to a conviction after trial for issue preclusion purposes and that a guilty plea precludes relitigation in a subsequent civil action of all issues necessarily determined by the conviction (see Brennan v Mead, 81 AD2d 821, affd 54 NY2d 811; Alexander v City of Peekskill, 80 AD2d 626; Matter of Cumberland Pharmacy v Blum, 69 AD2d 903; Armchair Races v Caso, 51 AD2d 565; Prosise v Haring, 667 F2d 1133, affd sub nom. Haring v Prosise, 462 US_, 103 S Ct 2368; United States v $31,697.59 Cash, 665 F2d 903, 906; Fontneau v United States, 654 F2d 8, 10; Ivers v United States, 581 F2d 1362, 1367; Nathan v Tenna Corp., 560 F2d 761, 763-764; Brazzel v Adams, 493 F2d 489, 490; Plunkett v Commissioner of Internal Revenue, 465 F2d 299, 305; Metros v United States Dist. Ct., 441 F2d 313, 316-317; Ford v Burke, 529 F Supp 373, 379-380; Alsco-Harvard Fraud Litigation, 523 F Supp 790, 801-804; United States v Krietemeyer, 506 F Supp 289; Mayberry v Somner, 480 F Supp 833, 838; United States v Cripps, 460 F Supp 969, 975; United States v Grunstein & Sons Co., 127 F Supp 907, 911-912; Vestal, The Restatement (Second) of Judgments: A Modest Dissent, 66 Cornell L Rev 464, 478-483; Thau, Collateral Estoppel and the Reliability of Criminal Determinations: Theoretical, Practical, and Strategic Implications for Criminal and Civil Litigation, 70 Geo L J 1079, 1104-1112).

The article “Revisiting the Second Restatement of Judgments: Issue Preclusion and Related Problems” (¡66 Cornell L Rev 564, 578) sums it up: “The clearest case for such an estoppel is where a defendant pleads guilty to a substantial criminal charge and then seeks in civil litigation concern- . ing the same transaction to assert that he did not commit the criminal act.”

Indeed, our dissenting colleague acknowledges that our Court of Appeals “has apparently also held that the doctrine of collateral estoppel might be applicable in such a context [i.e., where there was a prior plea of guilty] (Brennan v Mead, 54 NY2d 811, supra.)”

Does the entry, then, of a Serrano or Alford guilty plea call for a different result and somehow make the criminal conviction based on such a plea immune from the doctrine of issue preclusion? Our answer is “no”.

In Matter of Cumberland Pharmacy v Blum, (69 AD2d 903, supra) we said that “nothing in People v Serrano (15 NY 2d 304) or in North Carolina v Alford (400 US 25) suggests that if a guilty plea is accepted from a defendant who does not expressly admit to the underlying facts, the defendant is relieved of the civil consequences that flow from his plea.” We held in that case that the defendant’s “guilty plea binds [him] as strongly as any admission of the facts constituting the crime charged”.

In United States v $31,697.59 Cash (supra, p 906), the United States Court of Appeals for the Ninth Circuit held that collateral estoppel effect was to be given to the claimant’s guilty plea regardless of the fact that the record revealed no factual basis for the plea. In so concluding, that court emphasized the underlying policy of providing, for the sake of the parties and the judicial system, finality of judgments and an end to interminable litigation. The court quoted the following language from Justice Stevens’ opinion in United States v Timmreck (441 US 780, 784): “[T]he concern with finality served by the limitation on collateral attack has special force with respect to convictions based on guilty pleas. ‘Every inroad on the concept of finality undermines confidence in the integrity of our procedures; and, by increasing the volume of judicial work, inevitably delays and impairs the orderly administration of justice.’ ”

Certainly, it cannot be said that there has been an actual litigation of those issues representing the essential elements of the crime in those situations where a defendant enters a plea of guilty. However, although not actually litigated as such, the issues have necessarily been judicially determined by the plea, so that the criminal defendant is estopped to contest them in subsequent civil litigation. This must be said to be true even in those instances where a Serrano guilty plea is entered. The criminal defendant who enters such a plea is no less guilty than one who is convicted of the same charge by a jury or by a conventional guilty plea, and is subject to no less punishment. All that the Serrano-Alford line of cases require is that “before accepting a plea of guilt where the defendant’s story does not square with the crime to which he is pleading, the court should take all precautions to assure that the defendant is aware of what he is doing.” (People v Serrano, 15 NY2d 304, 310, supra.) In a word, a Serrano guilty plea is no less efficacious than a conviction after trial or an ordinary guilty plea and we perceive no sound reason for holding that the civil consequences flowing therefrom should be any less binding.

While it is true that in a Serrano-type guilty plea there is no admission, as such, of the facts justifying the conviction, it is manifest that a defendant entering such a guilty plea, like any defendant entering a conventional guilty plea, chooses, for reasons which he deems good and sufficient, not to avail himself of the opportunity to contest the facts underlying the charge against him. That of course is his prerogative. However, he must accept the consequences of his action. The fundamental principle underlying the concept of issue preclusion is that, in the public interest, a party shall not be heard a second time on issues previously determined and issues which, although not expressly litigated and determined, are included, comprehended and involved in the matter expressly litigated and determined. Hence, those who knowingly and voluntarily plead guilty to substantial criminal charges (the charge here is a felony) should not expect the courts to look behind convictions based on such pleas in order to relieve them from adverse civil consequences which may follow. As long as the guilty plea stands, the defendant is guilty and cannot be heard to say otherwise.

We note that our learned dissenting colleague places great reliance upon the County Court’s statement to the effect that just who started the fire was never litigated in court. While it is true that such a statement appears in the record, it must be pointed out that such statement was made during the course of discussion concerning the conditions of Mr. Arzillo’s probation, some two months after the defendant had originally pleaded guilty to fourth degree arson and after Mr. Arzillo had reaffirmed his desire to plead guilty. In any event, that statement cannot be said to alter the fact that defendant stands convicted upon his own plea of guilty to arson in the fourth degree. The record of the criminal proceeding shows clearly that the defendant was aware of what he was doing when he knowingly and voluntarily entered such plea and he must be held bound both criminally and civilly by his plea.

Consequently, we hold that the defendant Salvatore Arzillo’s plea of guilty to arson in connection with the fire which occurred on June 18,1978 in the State Utilities, Inc., building is sufficient to estop the defendant from contesting the operative facts of the crime in this action. As a result, the plaintiff should have been granted summary judgment on the issue of liability. Accordingly, the order appealed from is reversed, with costs, the plaintiff is granted summary judgment on the issue of liability, and the matter is remitted to the Supreme Court, Nassau County, for an assessment of damages.