ALBANY, N.Y., October 29 – The City of New York will be able to continue its action against Welsbach Electric Corp. for contractual and common-law indemnification and contribution for negligent maintenance and breach of contract, based on a unanimous decision by the New York State Court of Appeals.

The Court of Appeals reversed the Appellate Division, First Department and upheld the decision of the Supreme Court in The City of New York v. Welsbach Electric Corp. concerning the malfunction of a traffic signal maintained by Welsbach under a contract with New York City. The contract contained an indemnification clause to hold harmless and indemnify the city from liability upon any and all claims for personal injury or property damage on account of neglect, fault or default of Welsbach.

Action was brought (in Angerone) against the city and Welsbach following an accident when the traffic signal malfunctioned by showing a green light to both drivers at the same time. Welsbach cross claimed against the city and moved for summary judgment dismissing all claims against it on the grounds that it owed no duty to the public in the performance of its contract with the city and that it had properly performed its maintenance obligations.

Supreme Court dismissed Welsbach from the case saying it does not owe a duty in tort or contract to members of the general public to perform its duties under contract withthe city. When the case went to trial, the jury found neither driver negligent because both had a green light. The jury also found that the city was negligent and 100 percent liable for the injuries.

The city later brought this action against Welsbach contending that its liability in the judgment resulted from negligent maintenance and breach of contract. Welsbach moved to dismiss arguing that the action was barred by res judicata and collateral estoppel because issues of the citys negligence and its own lack of negligence were resolved in the Angerone action.

Supreme Court denied the motion, saying (N)o cross claim existed between the city and Welsbach in the Angerone action, no transaction as between these two parties was ever raised, and the city cannot be said to be seeking a second chance to litigate against Welsbach in the present action. Welsbach raises the possibility that the equivalent of a mandatory cross claim role might apply to the present situation, requiring the city to have brought the present claims in the earlier litigation. Welsbach does not provide any precedent which would require mandatory cross claims.

Regarding collateral estoppel, the court said the 1997 summary ruling in Angerone dealt only with he issue of the duty owed to plaintiffs, and so the issue of whether Welsbachs actions contributed or caused the accident were never addressed.

The Appellate Court reversed and dismissed allegations against Welsbach saying the record shows that Welsbachs 1997 summary judgment motion specifically addressed any claims arising from the 1993 collision for which the city now seeks indemnity or contribution, that the city did not attempt to rebut any factual allegations made by Welsbach, and that the (1997 Supreme Court order) found that Welsbach had no duty to the general public and had properly performed its contractual obligations to the city.

The Appellate Court added, The city was able to litigate Welsbachs contractual compliance and duty at the time of the summary judgment motion, and must now accept the consequences of the result of the motion and failure to pursue a timely appeal at that time.

Judge Theodore T. Jones, writing the opinion for the Court of Appeals, reversed, saying that the Apellate Division fundamentally misconstrued Supreme Courts order and the citys posture vis-a-vis Welsbach.

One linchpin of res judicata is an indemnity of parties actually litigating successive actions against each other: the doctrine applies only when a claim between the parties has been previously brought to a final conclusion. Here, the city made no claim against Welsbach in the Angerone action.

For similar reasons, the citys action is not barred by collateral estoppel. This doctrine applies only if the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action and the plaintiff had a full and fair opportunity to litigate the in the earlier action.

The Appellate Divisions conclusion, and Welsbachs contention, that the Angerone court found, in its grant of summary judgment, that Welsbach properly performed its contractual obligations to the cityis unsupported by the record. Although Welsbach argued the point in its motion for summary judgment, Supreme Court did not base its grant of the motion on this ground, nor could it have because, as that court concluded, the city raised no cross claims against Welsbach and, thus, the issue was never part of the Angerone action. Because the summary judgment court granted Welsbachs motion only with respect to a duty to the general public, Welsbach did not participate in any respect in the Angerone trial, and no issue regarding Welsbachs liability was presented to the jury. Indeed, we find no record statement that could animate a contrary conclusion.

Therefore, Welsbachs claim that it fully performed its contractual obligation was not decided in, or material to, the first action, and the citys claim in this regard should proceed.

Chief Judge Judith Kaye and Judges Ciparick, Graffeo, Read, Smith and Pigott concurred.