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CHASE MANHATTAN BANK, N.A. v. CELOTEX CORP.

September 13, 1993

THE CHASE MANHATTAN BANK, N.A., Plaintiff,
v.
THE CELOTEX CORPORATION, DANA CORPORATION and UNITED STATES MINERAL PRODUCTS COMPANY, Defendants.


BRODERICK


The opinion of the court was delivered by: VINCENT L. BRODERICK

VINCENT L. BRODERICK, U.S.D.J.

 I

 In 1987, the New York Plaza Building Company (the "Building Company") and plaintiff Chase Manhattan Bank (the "Bank") brought separate suits based on asbestos material affecting the value of One New York Plaza (the "property"), in which Dana Corporation ("Dana") was a defendant. At the time these suits were filed, the Building Company owned the property and the Bank held an option to buy it. In October 1989 the Bank exercised its option and bought the property; the Bank obtained no restriction on the Building Company's rights with respect to the Building Company's pending litigation against Dana.

 On May 19, 1992 I dismissed on consent the Building Company's suit against Dana on the merits (87 Civ. 5513). The claims in that suit are based on the same events as those underlying the Bank's suit; the sole material difference is the status of the plaintiffs in the two actions. The Bank does not deny awareness of the Building Company's action in dismissing its case.

 On March 19, 1993 Dana moved for summary judgment dismissing the Bank's complaint. It based its motion upon the res judicata effect of the 1992 dismissal of the Building Company's suit against Dana involving the same property (now owned by the Bank).

 I grant Dana's motion and dismiss the complaint; the Clerk is directed to close this case. *fn1"

 II

 Overlapping litigation by multiple (or successive) owners is one of the scourges of the legal system. It prevents effective negotiation of settlements because a party contemplating settlement must be concerned about lawsuits by others of the multiple owners based on the same alleged injury. Were a party causing damage to property to be subject to separate suits by every owner of a partial interest in it, almost any recalcitrant plaintiff, by holding out, would be in a position to block complete resolution of the matter. Such a "whipsaw" effect would injure all parties to the process. *fn2"

 The development of different kinds and degrees of ownership in tangible and intangible property creates numerous situations in which a technically subordinate lessee, optionee, remainder owner or similar interest holder may have an economic interest greater than that of the fee owner. A proper approach where multiple claimants are involved is for such claimants to intervene in the facially senior action (e.g., the fee owner's action), or in any earlier-filed suit, to insure receipt of their applicable share of any settlement or recovery. See Fed.R.Civ.P. 24. Knowing bypass of the opportunity to intervene may be treated as a waiver of rights to participate in any settlement or other resolution. *fn3"

 Here the Bank bypassed the Building Company's suit as a vehicle for resolution of all asbestos-related claims against Dana related to the property, and then bought the property without taking any steps to obtain an assignment of the Building Company's then-pending claims against Dana. The Bank, as a sophisticated institutional party, cannot be deemed to have been misled by actions taken by the Building Company. *fn4" Nor does the Bank assert ignorance of events in the Building Company's litigation against Dana.

 In buying the property based on negotiations it has not disclosed, the Bank had full opportunity to determine whether or not to exercise its option based on knowledge of the status of the relevant lawsuits, the intentions of the Building Company or its refusal to divulge them, the difficulties caused by presence of asbestos, and on other relevant facts it knew or could have learned. The Bank knew of, but did not openly participate in, the settlement of the suit between the Building Company and Dana. It waived any objection to the settlement and the dismissal of that suit, on whatever terms were involved, by failing to object to the dismissal. *fn5"

 The Bank was in privity with the Building Company during the option period; the Bank cannot permit the Building Company to lose litigation relating to the property while taking no action to avoid this result, and then relitigate the issues. When a privy loses a litigation on the merits, the issues involved have been definitively determined. See Amalgamated Sugar Co. v. NL Industries, Inc., 825 F.2d 634, 640 (2d Cir.), cert. denied 484 U.S. 992 (1987). A ...


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