S. T. Grand, Inc. v. City of New York
298 N.E.2d 105, 344 N.Y.S.2d 938, 32 N.Y.2d 300 (1973)
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Rule of Law:
A criminal conviction is conclusive proof of its underlying facts in a subsequent civil action and collaterally estops the convicted party from relitigating those facts, provided the issue is identical and there was a full and fair opportunity to contest the issue in the criminal proceeding.
Facts:
- In November 1966, S. T. Grand, Inc. entered into a contract with the City of New York to clean the Jerome Park Reservoir.
- The contract was awarded on a no-bid basis by James Marcus, the city’s Commissioner of Water Supply, Gas and Electricity, under a 'public emergency' exception.
- S. T. Grand, Inc. and its president were subsequently convicted in federal court of conspiracy to commit bribery.
- The conviction was based on evidence that S. T. Grand, Inc. had agreed to pay a 'kickback' to Marcus in exchange for being awarded the cleaning contract.
- S. T. Grand, Inc. fully performed the cleaning work as required by the contract.
- The City of New York had paid S. T. Grand, Inc. $689,500 but refused to pay the remaining balance of $148,735.
Procedural Posture:
- S. T. Grand, Inc. sued the City of New York in New York Supreme Court, Special Term (the trial court) to recover an unpaid contract balance.
- The City asserted the contract's illegality as a defense and counterclaimed to recover money already paid.
- The City moved for summary judgment on both the complaint and its counterclaim.
- The trial court denied the City's motion.
- The City of New York, as appellant, appealed to the Appellate Division of the Supreme Court (an intermediate appellate court).
- The Appellate Division modified the trial court's order and granted summary judgment in favor of the City.
- S. T. Grand, Inc., as appellant, appealed that decision to the Court of Appeals of New York (the state's highest court).
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Issue:
Is a criminal conviction for bribery conclusive proof of the contract's illegality in a subsequent civil action for payment, thereby collaterally estopping the convicted party from relitigating the issue of bribery?
Opinions:
Majority - Jasen, J.
Yes. A criminal conviction is conclusive proof of its underlying facts in a subsequent civil action. The court holds that S. T. Grand, Inc. is collaterally estopped from denying the bribery that rendered the contract illegal. The court overrules its prior precedent in Schindler v. Royal Ins. Co., which held that a criminal conviction was only prima facie evidence. The court notes that the rationale for Schindler—the requirement of mutuality of estoppel—has since been abandoned in New York law. Under the modern test for collateral estoppel, there are only two requirements: (1) an identity of issue that was necessarily decided in the prior action and is decisive in the current action, and (2) a full and fair opportunity for the party to have contested the issue in the prior proceeding. Both requirements are met here, as the bribery issue is identical, and S. T. Grand had a full and fair opportunity to defend itself in the criminal trial, which has more rigorous procedural safeguards than a civil trial. Regarding the remedy, the general rule is that a party cannot recover on an illegal municipal contract, and the municipality may recover all sums previously paid to deter corruption. The court distinguishes this case from the equitable exception in Gerzof v. Sweeney, because here the illegality (bribery) tainted the contract from its inception, and there was no legitimate bidding process to provide a baseline for calculating damages. Therefore, the harsh rule of complete forfeiture applies.
Analysis:
This decision marks a significant shift in New York's doctrine of collateral estoppel by explicitly overruling Schindler v. Royal Ins. Co. and holding that a criminal conviction is conclusive, not merely prima facie evidence, in a subsequent civil suit. By aligning the preclusive effect of criminal convictions with the modern estoppel framework that abandoned the mutuality requirement, the court promotes judicial economy and prevents inconsistent outcomes. The ruling reinforces a strong public policy against corruption in public contracting by applying a strict forfeiture rule, thereby deterring illegal conduct by ensuring that vendors who engage in bribery cannot profit from their wrongdoing or even recover their costs.
