Jordache Enterprises, Inc. v. National Union Fire Insurance

(1972).14 920, 282 N.E.2d 250 Ill.App.3d injus- it would be manifest We believe prior our decisions and inconsistent with

tice Myers to his allow withdraw not Mr.

plea.15

IV.

CONCLUSION presented, Mr. view of the matters

Myers’ and sentence are reversed. conviction with instructions

This case remanded plea from the permitted to withdraw

he be plea agreement. his

Reversed and Remanded. MAYNARD, deeming himself dis-

Justice participate in the decision

qualified, did not this case. MOATS,

Judge sitting temporary as-

signment.

513 S.E.2d ENTERPRISES, INC.,

JORDACHE al., Foreign Corporation, et

Appellants, FIRE

NATIONAL UNION INSURANCE PITTSBURGH,

COMPANY OF

PA., Appellee.

No. 24672. Appeals

Supreme Court Virginia. Sept.

Submitted 1998. Nov. 1998.

Decided state, Clancy such syllabus [and] the defendant and point State 1 of ex rel. 14. Coiner, (1971), fulfilled, plea promises 154 W.Va. S.E.2d ... such were Court stated further: involuntary and void. totality apparent of cir- When it is from the entry plea by a guilty cumstances that permit Mr. decision to As a result of our by a certain belief that defendant was induced remaining plea, as- Myers to withdraw his his prosecuting promises been made had signments of are moot. error attorney, promises the benefit inure to which

467 Johnson, Esq., Charleston, David W. West Attorney Virginia, Appellants. for the Schuda, Esq., Ramey, Daniel R. Aneil G. Johnson, Charleston, Esq., Steptoe & Attorneys Virginia, Appellee. for the MAYNARD, The culminating chain of events Justice: underlying began appellants’ actions with the Enterprises, appellants, The Jordache financial involvement the Retail Nakash, Avi, Joseph Ralph and Jor- (“RAC”) Acquisition Corporation which was officers, and sole sharehold- dache’s directors incorporated purpose acquiring for the all ers, Court of appeal the denial the Circuit assets of retail divisions of several 60(b) County Kanawha of their Rule motion companies.3 appellants’ different stated summary judgment on behalf to set aside purpose their involvement RAC was Fire Insur- appellee, National Union acquisition outlets which to market Pennsylvania, Company Pittsburgh, ance The exact Jordache merchandise. nature of coverage bad faith ac- in an insurance relationship appellants between reasons, following we affirm in tion. For the disputed RAC the crux formed part part. reverse necessary repro- It is actions below.4 duce here the controverted facts because I. they pertinent are not narrow issue before us. FACTS Enterprises, appellants Jordache By April itself RAC found a debtor (“Jordache”), corporation Inc. New York Chapter under Bankruptcy Code.5 business, apparel Joseph and which is in the subsequently prepared Counsel for RAC Nakash, Nakash, offi- Ralph Avi Nakash and against complaint draft the Nakash brothers cers, directors and sole shareholders of Jor- corporations, essentially and various al- their appellants purchased The from the daehe.1 leging the brothers that Nakash exercised appellee, National Union Fire Insurance RAC to enrich the control of themselves to (“Na- Company Pittsburgh, Pennsylvania of detriment of RAC and RAC’s creditors. Union”), a officers tional directors and insur- (“D policy began company negotiations and The Nakash brothers ance reimbursement provide coverage for for of claims and policy”) & its di- settlement RAC’s demand- rectors, brothers, appellee participate ed fund the Nakash and seven offi- that the and cers, appellee the declined to do three of whom the Nakashes.2 The settlement. alleged policy so its belief that the actions D & 0 indemnifies the directors and based on any alleged suf- resulting alleged of the Nakashes and the losses officers for losses D wrongful respective capacities in their fered RAC were not covered the & act as ultimately corporation policy. The brothers directors or officers and the Nakash they it has the or reached a settlement with RAC wherein the extent indemnified directors agreed pay million arising alleged a loss from the RAC five dollars. officers for return, released from all wrongful Jordache was act. positions as RAC’s and 1. The Nakash are residents of stock and assume officers three brothers gains appellee York. states RAC’s directors. personal and were reflected on the income losses headquarters 2. National Union has its in New as tax the brothers individual returns of Nakash York. than tax returns. owners rather on Jordache’s 3. RAC laws of Delaware was formed under the 27, 1989, bankruptcy proceeding was on 5.The initiated purpose acquir- of on December ing for the 20, 1991, involuntary petition under all assets of March of the retail division Stores, Heck’s, Inc., HPI, Singleton's Bankruptcy Inc. and Code in United Chapter 7 of the the Inc. RAC under the name conducted business Bankruptcy Court for the Southern Dis- States Department Joe 9, 1991, L.A. Stores. Virginia. April RAC trict West On entry to the of an order for relief consented Court, appellants to this the state their briefs Chapter 7 of the moved for the conversion from invested sums in RAC that Jordache substantial Chapter April Bankruptcy Code to 11. On guaranteed According much RAC’sdebt. for was entered under an order relief personally appellee, to the the Nakash brothers Chapter at RAC remained in 11 and that time corpora- as an S financed the creation RAC possession and continued in busi- of its assets tion. into the debt structure of RAC were Built ness. exchange rights held the Nakash brothers to complete ownership debt for almost of RAC’s approved by stay claims. This settlement was the automatic commencement the or con- bankruptcy court. any against tinuation of bankrupt the any judgment the enforcement of against 2, 1992, May appellants On filed him. Accordingly, dispute there is no complaint against appellee in the Circuit stayed New York action was as to Jo- County they Court of Kanawha wherein seph.9 sought a D policy declaration that & 0 covers their settlement of claims and defense lengthy After a discovery and contentious Further, appellants alleged costs. period, appellants’ the trial on the claims contract; breach of a violation of the West the Circuit Court of County began Kanawha Act, specifi- Unfair Trade Practices on proceeded October 1995 and for six cally 11—4(9)(b),(c), (e), § (d), W.Va.Code 33— days parties resting on October (f)6; duty violation of the common law 1995. That day, Supreme same Court of good dealing; willful, faith fair granted New York summary judgment malicious and intentional misconduct. The appellee behalf of the in the New York ac- appellee sought dismissal of the action on the reasoned, tion. The court part: conveniens, non grounds of which was forum appellee denied. The complaint then filed a By piercing corporate veil it is clear appellants in New York in which [sic acting Nakash were ] their own appellee sought declaratory personal capacities they when committed D policy & 0 does not cover alleged Thus, wrongful acts. now it appellants.7 claims made can be determined that Nakash did not act capacities in their On October as Directors Nakash filed and Offi- voluntary petition reorganization coverage cers of Jordache.[N]o under exists Chapter general 11 of the Bankruptcy policy United States under provisions and 362(a)8, 4(k).10 (Footnote Code. Pursuant to 11 pursuant U.S.C. to Exclusion filing added). of bankruptcy petition operates a as an 33-ll-4(9)(b), (c), (d), (e), (f) § 6. W.Va.Code and operates Protection Act of stay, aas (1985) entities, state: applicable to all of— (1) continuation, the (9) commencement or in- practices. per- claim settlement Unfair —No cluding employment pro- the issuance or of perform son shall commit or quency with such fre- cess, administrative, judicial, of a or other ac- general prac- as to indicate a business proceeding against any tion or following: the debtor tice that was (b) Failing or could acknowledge reasonably to have been and act commenced before the promptly title, upon respect commencement of the case communications with under this or arising to policies; against claims under to insurance recover claim the debtor that arose (c) Failing adopt implement to and reasonable before the commencement of the case under prompt investigation standards for the of this litle[.] arising policies; claims under insurance (d) Refusing pay conducting terms, to claims By without 9. stays only § its own 11 U.S.C. investigation upon reasonable based all Therefore, avail- those actions the debtor. the information; able stay automatic Virginia did not affect the West (e) Failing deny coverage to affirm or of action. claims proof within a reasonable time after of completed; loss statements have been 4(k) policy Exclusion of & the D O 10. states: (f) attempting good Not in faith to effectuate The Insurer any shall not be liable prompt, to make equitable fair and settlements of payment any for Loss in connection liability claims with claim in which has become reason- clear; ably or claims made the Directors or Offi- cers: appellants 7. The filed an answer in New York (k) of, alleging, arising upon out based or action which raised claims of bad faith and any attributable to act or omission in their breach of contract under New York law. capacities any as directors or officers of other entity Company, other than the or reason of (1994)

8. 11 U.S.C. is titled “Automatic their status as a Director or Officer of such Stay” part: and states in entity; other (a) Except provided (b) as Supreme subsection of this The October 1995 order of the section, petition 301, 302, filed under section Court part: of New York also states in relevant title, application or 303 of this or an filed overwhelmingly National's evidence shows 5(a)(3) under funds, section of the Securities Investor commingled that Nakash [sic ] disre- decision, him, had a on the New York collateral effect As a result of remedy Virgi- application is an to the West County grant Court of Kanawha the Circuit nia could court. The decision of this court summary judg for appellee’s motion ed Joseph, not since action had been bind on the of ment based doctrines stayed to him. as ac estoppel and dismissed the Although the court’s order did October of prejudice.11 By order November tion Au- repeat not statement made appel denied the circuit court gust stayed the action as to order that was judgment and or amend lants’ motion alter Joseph, stay an oversight. this was stay.12 and a for a new trial motion for Any automatic. reference in the October York, Meanwhile, appel- back collectively order to the Nakash brothers reargu- a motion renewal lants filed for including Joseph as is withdrawn. By Supreme of New York. ment Court coverage un- that there declaration was no Supreme June order dated only der affected other de- policy New York refused to reconsider its Court of Jor- fendants. The determination original decision but stated: ego Ralph dache the alter of Avi and was held Virginia If the a determination Jordache is Joseph.13 binding Joseph, ego order was or alter October formalities, 59(a) (e) money corporate the West Rules of Civil garded shuttled 59(a) (1998) (amended personal (e) their and out of to suit Jordache Rule Procedure. needs, employees paid used Jordache May supp.) states: them, and, work for other entities owned (a) granted may new trial be Grounds.-—A carry generally, out used their own Jordache any parties part or all and on all personal other conclusion can business. No there has the issues in an in which plaintiff but has be reached established by jury, any for for been a trial of the reasons personally that Nakash benefitted from granted which new trials have heretofore been set forth in the draft fraudulent transactions law; action tried complaint and claim that their actions in actions at in an now any jury, for of Jordache in order were taken the benefit reasons for which without policy. granted to recover under the National has rehearings heretofore been corporate entity proven was a that Jordache’s equity. a new trial in suits in On motion for sham. may jury, without a the court action tried entered, open if one has been Specifically, the 1995 order of the October findings testimony, take additional amend part: stated circuit court find- fact of law or malte new and conclusions Court finds that the Order entered [T]his Supreme 31, conclusions, entry ings of a and direct the and York, New Part Court of the State of judgment. new given and should be full faith credit (e) judgment. alter or Motion to amend —A this the doctrines of res Courts of State and judgment shall be or amend the motion to alter any judicata estoppel and bar further collateral entry days 10 served not later than after matter, proceedings in this both this Court judgment. concerning same issues and the actions motion, averred, appellants inter finding parties, their Court that the same and this alia, Court, New decision does ruling "[t]he even that York of the New York if errone- ous, apply, purposes final for of res and collateral is and therefore estoppel application. apply, Joseph to Nakash due to do not that, We here bankruptcy!)]” note pending his 1, [ujnder IV of the Section Article Constitu- appealed court’s de- appellants The the circuit States, 5, or tion of the United February nial of this motion order a court of another state will decree of of record 1997, appellants' petition. this Court refused given in the be full faith and credit courts State, clearly by plead- unless shown it be appeal, October 13.On the New York orders of proof ing court of such state that the other 17, 26, by the 1996 were affirmed 1995 and June same, jurisdiction without to render or was Division, Court, Appellate Supreme New York procured through was fraud. that it 333, 652 Department at 235 First A.D.2d 1, Huntington Moving Syllabus v. Point Johnson (1997). Appeals of N.Y.S.2d 966 Court 796, Storage, W.Va. 239 S.E.2d 128 & (1977). 160 Joseph subsequently Na- York dismissed Also, faith and credit clause "[t]he full ground appeal kash's leave motion for estoppel.” encompasses the of collateral doctrine aggrieved. The Joseph was not 982, omitted). (footnote p. 50 C.J.S. 587 appellants appeal other motion for leave to of the 931, 664 N.Y.S.2d was See N.Y.2d appellants’ or denied. 90 12. motion alter amend 263, (1997). pursuant N.E.2d 1359 judgment and for to Rule 686 new trial was 1, 1996, July appellants On filed a showing there is a of an abuse of such motion to vacate and for other discretion. relief from the County pursuant of Kanawha Circuit Court 5, Syllabus Shelton, Point Toler v. 157 W.Va. 60(b)14 Virginia to Rule of the West Rules of (1974). 778, also, Syllabus S.E.2d See Civil Procedure. The basis of the motion 1, Davis, Hospital Point Jackson General v. was that since the New York court’s decision 74, (1995); 195 W.Va. Sylla- S.E.2d 593 26, 17, of June 1996 stated the October 1, Nancy bus Point Darlene M. v. James Lee ruling apply regard M., does not 153, (1995); 195 W.Va. 464 S.E.2d 795 Joseph expressly any Nakash and Powderidge withdrew Highland Unit Prop., Owners 692, reference to the (1996); Nakash brothers in the or- 196 W.Va. 474 S.E.2d 872 1, including Joseph, apparent Syllabus der as it Marquez, Point Hartwell v.. 433, (1997). the October 1995 order of the W.Va. 498 S.E.2d Circuit County dismissing Court of Kanawha This standard of review reflects the circuit action as it relates to was based on position court’s institutional as the forum inadvertence, alternatively mistake or or was equipped determining best appro- upon portion 60(b) based priate New York court’s use of Rule to ensure that October litigants 1995 decision which was subse- vigorously who have diligent- quently ly complied withdrawn or vacated and is thus summary judgment with the void. mandates of Rule penalized by 56 are not the action of those who choose not to com- By order of November the Circuit ply- County appel- Court of Kanawha denied the Powderidge, supra, 196 W.Va. at 60(b) lant’s appellants Rule motion. The now S.E.2d at 885. appeal the order of November 1996 to this Court. This Court has stated that circuit

courts, 60(b) considering when Rule motions 60(b) should be mindful that Rule “is to be II. liberally purpose construed for the of accom plishing justice and that it designed STANDARD OF REVIEW legal objective facilitate the desirable that, It is well-settled cases are to be Syl decided on the merits.” [a] motion to vacate a made Toler, part, labus Point supra. This is 60(b), pursuant W.Va.R.C.P., to Rule especially, exclusively, true but not addressed to the sound discretion of the judgments. context of default See Cruciotti ruling McNeel, and the court’s on such motion 183 W.Va. 396 S.E.2d 191 (1990). appeal will not be Nevertheless, disturbed on unless circuit court “[a] is not 60(b) prospective Rule of Civil Procedure application; any other rea- (1998) (amended May supp.) justifying states: operation son relief from the judgment. The motion shall be made within a (b) Mistakes; Inadvertence; Excusable Ne- time, (2), (1), (3), reasonable and for reasons Cause; glect; Newly Unavoidable Discovered (6) eight not more than months after the Evidence; Fraud, upon etc.—On motion and order, judgment, proceeding or was entered or just, may such terms as are the court relieve a (b) taken. A motion under this subdivision party legal representative or his from a final finality judgment does not affect the order, of a or judgment, proceeding or for the follow- operation. suspend its (1) Mistake, This Rule ing inadvertence, does not lim- reasons: sur- power indepen- it the of a prise, cause; court to entertain an neglect, excusable or unavoidable (2) party newly judgment, dent action to relieve a from a discovered evidence which due diligence proceeding, grant order statutory or or to could not relief have been discovered in 59(b); in the same time to move a action to a defendant not for new trial under Rule served (3) (whether action, fraud with a summons heretofore in that or to set denominated in- aside extrinsic), judgment misrepresentation, upon a trinsic or for fraud or the court. Writs of oth- nobis, vobis, (4) party; petitions er coram misconduct of an adverse coram the for rehear- void; (5) judgment ing, judgment is has been bills of review and bills in the nature of a satisfied, released, review, abolished, discharged, prior procedure or or a bill of are and the judgment upon obtaining any which is judgment it based has been for relief a from shall vacated, long- reversed or prescribed otherwise or it is no be motion as in these rules or equitable judgment er independent should have an action. 60(b) enforced, they low be grant a motion unless should not cite required to Rule ., 434, satisfy N.C. v. 173 W.Va. 317 S.E.2d moving party can one of criteria W.R.C a eases, (1984), sup- as other for Powderidge, as well under it.” enumerated W.R.C., port. Syllabus Point 3 of N.C. 474 S.E.2d at 886. atW.Va. this Court stated: purposes of the One a order to obtain relief from final 60(b) is to provide Rule of Civil Procedure judgment, proceeding through order or an instituting a for collateral mechanism action, independent independent action judgment final in a civil on a action attack (1) following must contain elements: extraordinary certain enumerated when judgment, proceeding the final order or present. are When such circumstances sought from is which relief must be one absent, extraordinary circumstances conscience, that, equity good should inappropriate attack is an (2) enforced; party seeking not be attempting to means defeat final good relief defense to the should in a action. judgment civil upon judg- cause of action which the final Oil, Syllabus v. Ashland Point Hustead (3) based; ment, proceeding or order (1996) 197 W.Va. S.E.2d fraud, there must have been accident or added). Court, This when review (emphasis prevented party seeking mistake that 60(b) ing rulings court on Rule mo circuit obtaining relief of his from benefit tions, not its is careful to substitute discre defense; there must be absence fault tion for that circuit when negligence part party or on the not its discretion. See latter has abused relief; and be seeking there must no Gibson, Realty Intercity Company v. remedy. adequate legal (1970). 369, 175 W.Va. S.E.2d independent An action obtain relief from a the law commits a determination to Where judgment final is distinct a motion for from judge and discretion is exercised a trial his 60(b). pursuant relief to Rule “In addition to balance, judicial the decision should judgment, from a final motion for relief reviewing overruled unless the not be pursuant proceeding order to the reasons actuated, by a desire reach court is 60(b)(1) through set forth W.Va.R.Civ.P. result, firm by a conviction a different but (5), provides specifically that a rule abuse of has been com- that an discretion may judgment, relief from a final or- obtain mitted. through independent proceeding der or an 377, 175 Intercity, 154 W.Va. at S.E.2d at Syllabus action.” Point N.C. v. W.R.C. omitted). (citation Also, appeal “[o]n action, independent “The of an as definition appellant the burden of this Court bears 60(b), .P. is an contemplated W.Va.R.Civ proceed showing that there error relitigate equitable does not ings resulting below judgment, pro- final order or issues of the complains, presumptions being which he all sought and ceeding which relief is proceedings favor of the correctness of special limited to circumstances.” one that is the trial and of court.” Syllabus Point Id. Coiner, Syllabus Point Perdue reasons, appellants’ For several (1973). 467, 194 S.E.2d 657 With W.Va. equity is not before this Court reliance on mind, pro we now these considerations First, valid the facts this case. under to the issues before us. ceed for other appellants’ motion vacate and inwas relief the final order below III. 60(b) not Rule motion and an nature of a DISCUSSION Further, independent an equitable action. Court, equitable independent action an appears In their brief this it element of remedy. adequate legal request of an appellants their for absence that base however, 60(b) appellants judice, equitable the case sub on both Rule relief 60(b) First, brought timely Rule motion which argue grounds. appellants remedy. adequate legal Final- judgment equity final be- constitutes demands that the 474

ly, present rare, States, this case does not un- judgment United of a court of an- exceptional usual and in circumstances which other state has the same force and effect equitable independent resort to an action is as it State has the state in which it Kane, appropriate. Wright, pronounced.” 3, See Miller & Syllabus Point Id. In Federal Practice and Procedure: Civil 2d order to judg- ensure that another state’s (1995). § Accordingly, given we will consider ment is the same force and effect it 60(b) only appellants’ state, the merits of the Rule general would have in that rule appears motion. validity to be that “[t]he and effect judgment of a by must be determined refer- 60(b) prevail motion, In order to on a Rule ence laws of the state where it was satisfy must one of the five criteria 969, § p. rendered.” 50 C.J.S. 563. This According appel- stated the rule. to the general Court utilized the rule Perkins v. lants, wrongly the circuit court believed that Hall, 707, (1941), 123 W.Va. 17 S.E.2d 17, the New York order of October determining that the force and effect of an applied Joseph judg- Nakash and based its judgment governed Ohio must be the law They ment on this incorrect belief. also of that state. Joseph contend because Nakash was specifically 17, excluded from the October It jurisdic- is also true that “the law of the judgment, judicata 1995 New York judgment tion where the may was rendered estoppel apply collateral cannot to him. judicata be determinative of the res or collat- appellants conclude that these estoppel circumstances eral judgment.” effect of a 969, constitute a mistake or Duke, § inadvertence on the p. C.J.S. Durfee part 60(b)(1). of the circuit 106, 242,11 court under (1963), Rule U.S. 84 S.Ct. L.Ed.2d 186 Further, appellants aver that the October Supreme the United States Court held that a court, upon order York New Nebraska on an quiet action to based, which the circuit court’s order was properly title was held a federal district was vacated as to preclude Nakash court to the same action in Mis- York stated, order of June thus com- souri.15 The Court prising grounds relief under Rule The constitutional command of full faith 60(b)(5). credit, implemented by Congress, as requires “judicial proceedings

What ... Law Governs shall have the full same faith and credit specific These ap contentions of the every court within the United ... States 60(b) pellants concerning Rule are summed they as usage law or in the courts up single issue of whether the circuit of such ... they State from which properly ruled that the doctrines of res taken.” Full gener- and credit thus faith judicata preclude Jo ally requires every give judg- State to to a seph continuing Nakash from his action in ment at least the res which effect the Circuit County. Court of Kanawha Be would be accorded in the being cause we are asked to determine the State which rendered it. effect of a New York order on a Virgi Durfee, 375 U.S. at 84 S.Ct. at proceeding, nia we must first decide what (footnote L.Ed.2d at 190 empha omitted and apply. begin law to prop We with the basic added). stated, sis The Court further “[i]t is IV, osition that “[u]nder Article Section questioned the Nebraska courts States, the Constitution of the United a valid give would full res effect to the judgment of a court of another state is enti judgment quieting Nebraska peti title in the tled to full faith and credit in the courts of (Footnote omitted). tioners.” Id. Syllabus this State.” Point State ex rel. Lynn 345, 163 Eddy, 152 W.Va. S.E.2d 472 recognized by This rule is also the Restate- (1968). Further, (Second) “[b]y virtue of the full faith ment of Conflict of Laws and credit clause of states, the Constitution (Supp.1988), p. which changed 15. This case arose after a river had actually state the laud at issue was located. creating dispute concerning course in which

475 to quires a valid us to look Delaware law deter are determined What issues determined, mine how that State would treat the sum subject to judgment is State mary judgment granted its court limitations, Seaman local law constitutional judicata, of the doctrine res so terms judgment was ren- where of the State may give judgment that we Delaware dered. given and effect be same force as it would Further, explains, c of 95 Comment York, there.”); Nav New Peros v. Cia De on judgment is the defendant If the Netumar, 75 349 Mar Misc.2d and if under the local law of the merits (1973) (“It 926, general 927 N.Y.S.2d is judgment was rendered State where judicata judg res a rule that the effect of judgment in of a valid and final the effect is to be determined the law of the' ment merits is to of the defendant on the favor judgment state which is rendered. claim, plaintiff may longer no bar jurisdiction” applies This also to the Federal any an action on the claim maintain (citations omitted).); Florida, Andujar v. Na State. Underwriters, Property and 659 tional Cas. approach. adopted Several states (“We 1214, agree (Fla.App.1995) 1216 So.2d 96, Hill, Delaware, Bata v. Del.Ch. See 37 that federal with defendant the extent 159, (Del.Ch.1958), 106-107, 139 A.2d 165 preclusion governs, law rather than claim Bata, grounds, v. 39 on other Bata judicata Florida’s. res is assert Whenever modified 258, (Del.Supr.1960), 163 A.2d 493 Del.Ch. ed, is the court second forum bound 964, denied, Bata, v. 81 cert. Bata 366 U.S. judgment preclu- give the same the former (“I (1961) 1926, there 6 L.Ed.2d 1255 S.Ct. rendering court would sive effect that New York fore first consider whether under principle so give general it. Indeed that is Bata, judgment York in Bata v. law the New as to no further eluci well established need above, thus a bar to Oklahoma, is res dation.”); Mut. v. Shelter Smith (“The (Okl.1994) Co., [in of this action on its merits 1260, 1265 determination P.2d Ins. 867 Delaware].”); v. Jersey, New Reliance Ins. judgment is law of the state where the local Ind., 538, 545- Armstrong N.J.Super. 259 W. decided and rendered determines the issues (foot 642, (1992), 546, judgment 614 A.2d 645-646 merits” whether a is on the modified 148, omitted).); Kansas, N.J.Super. 265 625 Bros. grounds, on Johnson other note (1993), Clemmons, Kan. grounds, Liquor 233 A.2d 601 reversed on other Co. v. Wholesale (N.J.Su denied, 365, 405, (1983), 1242 464 N.J.Super. 678 1152 661 P.2d cert. 292 A.2d 936, 345, L.Ed.2d 311 per.A.D.1996) (party sought preliminary 104 S.Ct. 78 U.S. judg (Validity finality foreign ruling respecting California decision are to be tested where the coverage policy ter ments insurance insurance rendered). also, Illinois, v. Jersey was See binding upon minology a New Bulfin Co., 785, Ill.App.3d 614 Lilly 244 Eli & Jersey stated that court. The (1993), 403, appeal 185 Ill.Dec. 269 N.E.2d Jersey recognizes collateral “New 1201, denied, 555, 190 Ill.2d N.E.2d dependent a judgment effect of (1993); v. Michigan, Jones State Ill.Dec. 884 rendering A it.... upon the law state Co., Mich.App. Auto. Ins. Farm ‘Mut. equivalent is the stipulated (1993), 393, N.W.2d 829 pur judgment after contested trial for modified Kleiman, 447 v. grounds, Patterson other estoppel.” poses judicata or of res Arizona, (1994); Mich. 526 N.W.2d 879 Minnesota, law); Citing California Ibach, 600 P.2d v. Ariz. Ibach Al-Chroma, Inc., 386 N.W.2d McBroom Carolina, (1979); Inst. North American (“This (Minn.App.1986) must Court Realty Marketing Systems, Inc. v. Willard whether apply law to determine Wisconsin 230, 176 Co., Raleigh, S.E.2d Inc. 277 N.C. actions now before this court the two (1970). effect of the Wis barred Massachusetts, however, Wright this Court has judgment.”); appears, consin It adopted Corp., expressly the rule discussed Corp. v. Seaman-Andwall Machine never Eddy, supra. Lynn ex N.E.2d 832 above. State rel. 364 Mass. (“The of other judgments re- full faith clause the Court stated that and credit finality states have the same force and effect in this no estop plaintiffs.” and would not they State as in the states in 565, which were Flanagan, 136 W.Va. at 67 S.E.2d at pronounced, proceed nevertheless the Court infra, As will be discussed the New judicata ed to determine the res effect aof York law on this issue different. Because Pennsylvania judgment using this State’s difference, compelled of this apply we are Peer, judicata. law on In Litten res deciding preclusive New York law in 791, (1973), W.Va. 197 S.E.2d on the effect, any, if of the New York order. As hand, other an filed in federal district above, noted full faith and credit clause plaintiff court was dismissed for generally requires the courts of this State to prosecution pursuant want of to Federal give judgment the New York at least the res 41(b). plaintiff Rule of Civil Procedure judicata effect which it would be accorded subsequently instituted his action in the Cir New York courts. County. appeal, cuit Court of Pendleton On

the issue before this Court whether the The New York Law Res Judicata disposition plaintiffs case in federal Estoppel Collateral judicata court was res so as to bar the Pen- County dleton action. This Court based its law, Under New York the essen analysis on the maxim that “the effect of a tial estoppel, elements or issue judgment judicata as res is ‘substantive’ and preclusion, “[f]irst, are: the identical issue jurisdictions regard other being must it as as necessarily must been in decided broad and conclusive it as would be prior action present and be decisive of the jurisdiction in which it was rendered.” Lit action, second, precluded to be ten, 796, 156 W.Va. at 197 S.E.2d at 326 relitigating from the issue must have had a (citation omitted). rule, Applying this full opportunity and fair prior contest the 41(b) language Court looked to the of Rule Cortines, determination.” Juan v.C. in determining federal case law whether 659, 667, 1061, 1065, N.Y.2d 679 N.E.2d judgment judi- the dismissal was final for res (1997) (citation 581, omitted). N.Y.S.2d purposes. cata provide guidance These cases judicata, preclusion, Res or claim on the oth currently on the issue before us. hand, question er “involves the of whether a addition, In whether New York law plaintiffs claim, present distinguished as Virginia or West law is utilized determines from previously litigated, discrete issues has the result in this case. The circuit court extinguished by adjudication been a final in a ruled County that the Kanawha action was prior proceeding parties, in which the or judicata by rendered res the October them, privity those in were the same as 1995 order of the New York court at a time presently the action before the court.” when the being October 1995 order was Kret Kret v. Brookdale Hosp. Medical appealed or the time perfect limits fixed for Center, 93 A.D.2d 462 N.Y.S.2d ing appeal expired. an had not Consequent (1983), aff'd, Kret v. Hosp. Brookdale ly, appears it that the order would not have Center, Medical 61 N.Y.2d 462 N.E.2d judicata been final for res and collateral es (1984). Concerning N.Y.S.2d 970 toppel purposes under West law. the distinction between res and col Although expressly this Court has never held estoppel, lateral it has been stated: judgment pending appeal that a final Collateral appli- is a narrower estoppel pur res and collateral poses, judicata. cation of it Where a Flanagan intimated as much in second Poole, Inc., Gregory parties, lawsuit between & the same 136 W.Va. those (1951). place, S.E.2d 865 who stand their Flanagan, a involves a differ- defendant action, ent plaintiffs estopped asserted that cause of were bringing estops relitigation first action plaintiffs only action where the those had litigated subject recovered a first action matters that which was still were and the pending on a writ of error. of a The Court noted final determination or verdict. that if pending words, the first action was on a writ other prior judg- the effect of the error, “the specific the first action has ment is limited to issues litigated regard plaintiff between a dispose of to issues and does not action

second another defendant. and entire suit. Co., Surety v. Seaboard United States Joseph undisputed It is that was (D.C.N.Y.1985). 882,

F.Supp. party a to the New York action and that not York order not final as to the New was him. Identity # 1: Claims Element of however, undisputed, that the order It is also element of res find that the first We Jordache, adjudication final to Avi was a as identity claims judicata, there of whether is law, Ralph York and Nakash. Under New action, and second is satisfied in the first or is one that dis “a ‘final’ order action, In York case. the New the instant action poses of all causes of between declaratory brought action appellee a parties proceeding in the and action or judgment, seeking a nothing judicial leaves .further “Directors and Officers Insurance that apart matters.” from mere ministerial Policy” No. 436 Company Reimbursement Crosson, 15, 10, Burke v. 85 N.Y.2d (the Policy”), “D issued & 0 29 15 739, 736, 524, 623 N.Y.S.2d N.E.2d insuring Jor- Plaintiff National Union and (citation omitted). and footnote The October Enterprises, subsidiaries dache its meets criteria that 1995 order this it officers, does not and their directors and disposed of all the of action between causes coverage respect to certain provide with Jordache, Nakash, Ralph Avi Nakash and Defendants and made claims Further, National Union. under New those claims. settlement of law, summary judgment granting of York action, Likewise, the West adjudica complaint dismissal of is alia, sought, inter appellants subject on the merits which is to res tion a officer’s a director’s and declaration judicata Murray effect. v. National Broad liability policy insurance between Co., casting 178 A.D.2d 576 N.Y.S.2d 578 and Defendant National Union Plaintiffs (1991). Finally, York, rule in New “[t]he Pittsburgh, Company of Fire Insurance jurisdictions, in other unlike that pay for obligates National Union to Pa.... prevent pendency appeal of an does not mere Plain- of the settlement claims challenged judgment as the use of Acquisition Corp... and the Retail tiffs collaterally estopping party a to' of basis costs incurred Plaintiffs. defense Matter proceeding.” in a second declaratory Co., are that these actions A.D.2d It is clear Mut. Ins. Amica (citations facts They concern the same set of omit identical. 445 N.Y.S.2d ted). in- appellants’ Therefore, arise from the we the October that both find that subsequent adjudication with settlement a on the volvement order is final Also, interpre- actions on the both turn is entitled to res RAC. merits which Finally, policy. estoppel. the same insurance tation of ac- support evidence would both the same

tions. # 3: Parties Element Same Privity Those Or In Adjudication # 2: Final

Element party a to the In First fact that was not Action not settle the issue New York action does question must answer is we The second judicata applies not preclusion because res in the adjudication there was final whether prior in which only parties proceeding to a argue appellants York action. adjudication but also a final there was Joseph Nakash point that because decide, must privity with them. We those action, there party New York not therefore, privity whether the element concerning litigation of the issues was no Appeals in this case. The Court satisfied courts, in They other him. also assert that has New York stated: situations, have held that res related litiga- general, nonparty prior “a estoppel will bind one defen- or collateral circumstances, may collaterally estopped dant, be in certain tion at least litigation by having general, determination may it privi- be said that ... relationship prior with a litiga- ty to the person involves a so in inter- identified rights tion obligations such that his own est with another represents that he subsequent proceeding legal right. condi- same on, way tioned in one or another or deriva- 663, § 47 Judgments Am.Jur.2d pp. 84-86 of, rights party tive of prior the the to the (1995) (footnotes omitted). One court has litigation.” priv- This a form constitutes of that, stated however, ity; privity “the term does not privy, in estop- [a] the context of collateral have a technical and well-defined mean- pel, by identity is one so related of interest Rather, ing.” amorphous concept it “is an to the that such .the easy application,” not of and “includes party represented legal right. same property those who are successors to a in privity Parties are interest, those who control an action al- purposes if the interests of non-party though parties it, not formal those closely are so related to the interests represented by party whose interests are a party, non-party fairly can be action, possibly coparties to the to a day considered to have had his in court. prior Importantly, action.” “all the cir- cumstances must be considered from which Products, Missouri Mexican Inc. v. Duna may one infer whether or not there was fon, 282, (cita (Mo.App.1994) 873 S.W.2d 286 participation amounting sharing to a omitted). tions litigation.” control of the specific There are governing rules when Juan, 667-68, 89 N.Y.2d at 679 N.E.2d at corporations and their officers and share- 1065, also, 657 N.Y.S.2d at 585. See Green v. privity. Generally, holders are in corpora- Industries, 244, Santa Fe 70 N.Y.2d tions and their officers and shareholders are 253, 793, 514 N.E.2d 519 N.Y.S.2d privity for res and collateral (1987) (“the 796 par- connection between the estoppel purposes. See 47 Judg- Am.Jur.2d ties must be such that the interests of the (1995); § ments 696 Dumpson, Patton v. nonparty can said to represent- be have been F.Supp. 498 (“identity 943 of in- (citation ed in the prior proceeding” omit- presumed terest is not private between cor- ted).). These characterizations are accord officers.”). porations rule, and their This with the statements of commentators on the however, privity. issue apply closely-held does not corporations generally There is no prevailing defini- shareholders, and their officers and such privity tion of automatically which can be corporation that a close generally is con- applied involving to all cases privity sidered to be in with its dominant estoppel. and collateral shareholder, officer and especially where nonparty officer and shareholder ac- tively participated in determining prior privity exists, whether corporation, generally employ

courts unless his or her analy- a functional sis, corporation interest and that of the which entails a careful are so examination nonparty different that the the circumstances of should have an the case and the opportunity rights relitigate issue. parties interests of the to be Thus, in privity. question held of who 47 Judgments § Am.Jur.2d pp. at 160- privy is a requiring factual one a case- (footnotes omitted). 161 See also 50 C.J.S. by-case examination. (1997); (Sec- § Judgment 867 Restatement ond) (1982).16 Judgments § 59 Comment Judgment 16. 50 C.J.S. pp. litigating 441-442 subsequent that claim in a ac- part: states in judgment against corporation tion. A has a Generally, corporation privity is in with its preclusive upon effect its sole owner as to estoppel pur- sole shareholder for collateral prior litigation issues decided in a where the poses. ruling controlling A per- adverse to a actively participated prior litiga- owner corporation precludes son corporation of a

479 (Second) Corp., Kerr-McGee Chemical Judgments v. the Restatement 6 of of Hartford (7th Cir.1989); why Carpet F.2d part, rendered 1252 Red explains, closely may Roberts, corporation (Fla.App. held be Corp. v. 443 So.2d 377 1983), vice versa. binding on shareholders rev. sub nom. v. Rob denied Hatcher held, erts, (Fla.1986); corporation closely Spickler v. So.2d When corporation’s Dube, however, (Me.1994); interests Missouri 644 A.2d 465 cor- management Products, Inc., supra; and stockholders Mexican Joe’s Pizza fully By generally coincide. poration Co., itself Aetna & Cas. Conn. Life definition, are few in stockholders Bilka, (1996); A.2d Grisanzio v. and either themselves constitute number Ill.App.3d N.E.2d 110 Ill.Dec. personal management or have direct (1987); Exca Hofsommer Hofsommer many respects, over it. control (N.D.1992); vating, N.W.2d 380 partner- or enterprise proprietorship is a Alloy Company, 992 Horwitz v. Automotive corporate form. the ship in If conducted (7th Cir.1993); Mid F.2d 100 Marine by ignored corpora- the corporate form is (2nd Slyman, Bank 995 F.2d 362 land v.. corporation may proprietors the be tion’s Cir.1993). ego, with treated as their alter the conse- recognized New York courts have likewise they personally are liable for quence that, circumstances, appropriate a “under corporation’s obligations. the the When major closely corpora a shareholder of held to, adequately adhered the fact form is judgment in by will a rendered tion be bound corporation closely held that interests aof litigation corporation.” against the usually proprietors are identical and its Delford Cons., A.D.2d Dept. Industries v. legal identity separate the does efface of Env. (1991) (cita 566 N.Y.S.2d purposes corporation as of the for such omitted). appropriate circum tions Such taxation, regulation, the limitation of nonparty stances found where the have been liability to their stockholders’ investment participated previous in controlled the liti corporation. purpose the of or in the For day gation corporation. in on affording opportunity for a court on of the See behalf Services, however, litigation, in Re 762 F.2d issues contested Teltronics (2d.Cir.1985) (“If stockholder, good why closely a held there is no reason a officer or corporation owners should ordi- and its be corporation of controls an action director a narily regarded legally distinct. the as On brought in his furtherance of on its behalf contrary, may presumed it be then- interests, by of he is bound the result own opportunity that one interests coincide and (citation omitted).); Eagle that action” litigate them in that concern com- issues O’Connor, Ltd., Transport Inc. sufficiently protect both. mon should (S.D.N.Y.1979)(“A F.Supp. 731, determi against corporation a will be nation made accepted princi- these courts have Several stockholder, See, binding or director Casualty on officer e.g., Surety & Co. ples. Aetna tion, corporation against action or are or unless his interests different from corporation. upon ownership those of the it is holder in conclusive of held, closely judgment corporation If a is as to determined the other of them issues in a shareholder's action is conclusive on therein as follows: relitigation corporation except when is neces- (a) an or in action protect sary of another owner or the interest corporation upon the holder is conclusive corporation. When the own- creditor actively participated in ownership he of its if closely corporation participate at ers of a held corporation, unless the action on behalf trial, may presumed that their it be interests corporation are those of the his interests and corporation’s with coincide interests opportunity to so that he should have different litigate opportunity that one interests that issue; relitigate sufficiently them should concern in common (b) judgment in an omitted). (Footnotes protect both. corporation ownership is in the holder of (Second) Judgments § Restatement corporation except upon when conclusive part: states in justified relitigation order to the issue is in held, closely corporation If the in protect owner or the interest another persons substantially a few hold one or it, corporation. ownership creditor entire in subsequent proceeding whether, if the depends individual nation under the cir- cumstances, controlled the earlier action the further- nonparty the interests of the interests.”)- ance of his own In the instant adequately were represented prior case, it is not clear record to what proceeding.... theory underlying [T]he extent, any, Joseph participated if in or con- party this determination is that “the bound trolled the York action. We cannot substance the one whose interests conclude, therefore, privi- was in prior were at litigation.” stake in the ty parties to the New York action Co., Bankers Trust 108 B.R. at 428. The upon based this factor. court found sufficient evidence of Braten’s However, New York courts have also de previous litigation control over the to bind “ privity scribed ‘mutual or as successive re prior him to judgment. Concerning Soi- lationships rights property.’ to the same fer, the court concluded: ground upon persons ‘The ... which stand only BAC, As the other shareholder of ing [privity] litigating party to the Soifer could be participat- deemed to have proceedings bound to which he was a controlling litigation ed in in the revo- they is that are identified with him ” proceeding. cation While Bankers has not Will, interest.’ In re Shea’s 309 N.Y. provided examples this Court with of Soi- (1956) (citations 132 N.E.2d “apparent day-to-day leadership fer’s role omitted). A appli ease which illustrates the prior litigation,” the Soifer was BAC’s privity cation of this definition of is Bankers only shareholder, other provided and he (S.D.N.Y. Rhoades, Trust Co. v. 108 B.R. 423 specific this Court with no 1989). evidence to BAC, corpora That case concerned highly plausible rebut the inference that he wholly tion owned two A shareholders. shared control proceedings. bankruptcy originally court confirmed BAC’s Chapter plan but revoked the confirma event, any In it is clear that and BAC ruling tion after that BAC had committed Soifer, shareholders, one principal its of bankruptcy by concealing ownership fraud its had a identity substantial interest of interest in corporation providing another and avoiding a finding bankruptcy of fraud. misleading information to its creditors and possibility Besides the losing his invest- of throughout Chapter pro ment, litigation against was future Soifer Bankers, ceedings. creditor, largest BAC’s given previous amount foreseeable of subsequently brought a RICO action litigation parties between the and their BAC, Soifer, Milton Braten and Herman who relationship. hostile Because Soifer respectively owned 55% and 45% of BAC’s BAC identity shared an interest in the of stock, Rhoades, as well as Daniel an officer proceeding, revocation is bound Soifer during of BAC and its counsel the revocation bankruptcy court’s determination of proceeding. Braten, argued Bankers that bankruptcy fraud. Soifer collaterally and Rhoades were es- Id., added) (cita- (emphasis 108 B.R. at 429 topped relitigating from the issue whether omitted). tions perpetrated bankruptcy BAC fraud. In Braten, its discussion of whether Soifer We foregoing conclude from the that and Rhoades should be bound the initial law, privity judicata under New York for res finding fraud, on the issue of the court first estoppel purposes and collateral is a broad determined that Rhoades exercised insuffi- concept requiring carefully courts to consider cient control over the first proceeding to all the given circumstances of a case order exercise collateral estoppel on that basis. to determine nonparty actively whether a The court next identity examined the in- of participated in or litiga controlled the first terests of the explained: defendants and tion or identity had such an of interest with a question party’s

“The party whether a inter- litigation to the first that his interests ests in a virtually representative case are adequately represented. were Applying this nonparty interest of a present facts, is one of fact rule to the set of we find that for the trial privity court.” The Joseph determi- privity Nakash was in with Jor- order for the of Ralph Nakash in the clarifies Circuit Court and Avi and dache17 Joseph in an County Joseph York action. testified Kanawha Nakash “my Virginia action affidavit West an active New York action I, closely corpora- held are brothers we continuing precluded and could not be from tions, corporations.” very close The we action on that basis. alleged have commit- Nakash brothers are addition, appellants contend that the dealings same their ted the conduct judicata operation estop- of res collateral policy of cov- RAC so that determination impermissible pel an “end- would constitute erage applies one brother of conduct of Further, stay. support, run” the automatic around there was the other brothers also. identity Joseph appellants between interest cite In re Steak Street 48th they sought house, (2nd Inc., Cir.1987), his brotheis all declara- F.2d coverage policy D 0 under the & tion denied, nom., Group, cert. sub Rockefeller proceeds. appellants benefit of its Steakhouse, Inc., Street 485 U.S. 48th directed attention to no this Court’s 1596, 99 L.Ed.2d 910 S.Ct. facts, stay, that severs save automatic (citation omitted), which ac “[i]f states that Joseph’s conduct and interests those nonbankrupt party tion taken his brothers inevitably impact would have an adverse conclude, therefore, purposes. estoppel We estate, bankruptcy property then such identity of had such an interest action should be barred the automatic and his brothers the New with Jordache stay.” citing Group re Also In Minoco adequate- action that interests were York his Cir.1986). Ltd., (9th Companies, 799 F.2d 517 ly represented. Further, appellants that courts assert contend, however, appellants that res recently pro have held that whether a civil and collateral cannot be ceeding bankruptcy proceed is related to against Joseph Nakash as asserted someone jurisdictional upon ing purposes for is based with the York privity party in a to New proceeding of whether the outcome that 26, spe- action because the June order any conceivably on the es could have effect cifically Joseph Nakash not states that is bankruptcy. in being tate Cit administered ruling bound October (4th Corp., ing In 124 F.3d 619 re Celotex implies estoppel that no collateral there is Cir.1997). Finally, appellants that aver Instead, disagree. we read the effect. We have throughout courts the United States 26,1996 merely reiterating order as June expanded stay automatic to nondebtor order, fact, Joseph in previous stated a that parties, coverage, tort or third insurance party was as a Nakash not bound litigations litigations where such could other because the auto- October 1995 order impact adverse on the potentially have an stay. matic We not believe New York do alia, Citing, In re debtor’s estate. inter making was determination to court a as (Bankr.D.Ariz. K 121 B.R. 257 Corp., Circle privity estoppel for collateral whether exists 1990). appellants conclude from The stay prevents purposes when an automatic expanded if have the automatic courts participation party previous as to a action. a co-defendants, stay prevent or to otherwise interpretation in accord This parties, neces against third when ed actions order brevity of the The mentions order. estate, sary bankrupt’s there preserve to a not its estoppel collateral but does discuss apply attempting can be to no doubt that oper- to facts nor its applicability the instant estop- judicata or principles res collateral stay place. when an is in ation automatic theory that bankrupt, a on a pel to based Instead, simply the order reiterates that Jo- priv apply persons principles these also stay so seph was under an automatic equally ity with in violation party, apply to him. 1995 order did October therefore, stay. reading, automatic more is that The sensible extent, actually party the directors or officers it indemnified 17. Jordache was nominal only alleged wrongful arising York it would be indem- acts. action in that loss from if, policy nified under D & O and to upon by appellants The cases relied was adverse to his Joseph interests did seek inapposite present to the circumstances, facts. Those relief. Under these we sim- cases refer ply compelled by to instances where trial courts are not appellants’ ar- expanded stays gument automatic to cover non- on this Accordingly, issue. we find parties necessary Joseph debtor when considered privity was in with his brothers protect party’s Terry the debtor estate. In in the New York action. Chauffeurs, Helpers, Team. & Local The Stay An Automatic On Effect Of (M.D.N.C.1987), 81 B.R. the court Operation The Res Judicata Of addressed the issue under what circum- And Estoppel Collateral stay operate stances should an automatic

put litigation pending on hold We have found thus far that explained: debtor’s judicata co-defendants. elements of both res and collateral estoppel are satisfied this case.18 case, There is litigation against the usual solvent identity claims the New York and joint may pro- co-debtors and tortfeasors actions, adju there awas final participation ceed without the of the bank- dication in the New York action as to Jor rupt applies debtor. This rule under ei- daehe, Avi, Nakash, Ralph stay provisions ther the automatic privity inwas with his brothers in Code, the New Bankruptcy 11 U.S.C. or the remains, York action. question howev discretionary power inherent of a court to er, stay what effect the automatic has on the manage its docket. operation of res estop and collateral circumstances, however, There are pel. Our research any has failed to disclose stay pending which a proceedings as to New York cases that address the issue bankrupt ap- co-defendants of debtor is whether a debtor automatically who is propriate involving .... cases [I]n defen- stayed participating from previous in a liability contingent dants whose on the which there awas final as to his liability bankruptcy, of a debtor in or in precluded by co-defendants is or involving cases a defendant indemnified relitigating the same debtor, stayed proceedings courts have subsequent claims or issues in a proceeding. nonbankrupt those defendants on Among split other courts there opinion is a grounds continuing in the absence Terry, this issue. supra, the court subject of the debtor would the defendants reasoned: potentially judgments inconsistent effectively extinguish would As for debtor’s whether McLean would be collat- (Citation obligation. indemnification erally estopped omit- litigating from later issues ted). in decided this case while the automatic stay keeps litigator, it an inactive it would The court in Terry concluded that “the policy seem the same stay behind the granting stay of a [to co-defendants] would prevents being against claims from decided circumstance, be the unusual only done after directly, debtor in bankruptcy, while balancing competing interests and after a prevent should also those claims from be- hardship ‘clear case of inequity or has been ing against decided indirectly, by it means (citation shown.’” Terry, 81 B.R. at 396 against of suit representative,” “virtual omitted). clear, therefore, It is i.e., one whose intimately interests are could have moved for the New York court to debtor’s, aligned with the and who still expand stay the automatic to the defendants adequately represent those interests. enjoin that action or to litigation. further Instead, This he joined (citations did not do. 396, he Terry, 81 B.R. at fn. 1 omit- filing ted). of a counterclaim in the New York Likewise in Replogle, In re 929 F.2d action, silent, (1st apparently 836, remained Cir.1991), wait- 1 837 fn. the issue is Only ed for the outcome. after briefly the New addressed in a footnote where the York court judgment states, issued its final which “Although Replogle party was a Although stances, our appli- discussion focuses on the we find that both doctrines have the cability judicata of res under these circum- same effect in this case.

483 action, bankruptcy stay nor did it to have the and the terclaim seek to the foreclosure notice, stay judge pro- the automatic issued Meade’s The case had lifted as to claim. 362, § proceedings, 11 Chapter solely upon complaint 13 U.S.C. trial ceeded to York was not surety the New decision Regal’s meant that in a against judg- and resulted judicata Replogle.” Hallisey as to damages the full ment for amount of claimed 443, 343, A.2d Corp., Deca 140 N.H. 667 Subsequently, Regal Meade. instituted (1995), court stated: 344 against money proceeding Meade to recover suggests the defendant damages alleged

The record from Meade for an breach against remained a the action a contract. The counterclaim abandoned proceed with The court did not DeCarolis. complaint proceeding Regal’s in the first against corpora the claim the defendant proceeding in the second substan- presented bankruptcy pro tion it had once initiated questions tially the same issues. One of the however, ceedings, the automat because of presented bankruptcy to the court was stay bankruptcy filing provides. ic See application judicata whether the of res 362(a)(1) (1994); Replo 11 In re U.S.C. estoppel to the second action Cir.1991) (1st gle, 1 929 F.2d n. policies underlying contrary to the the auto- (automatic stay meant de that foreclosure stay. matic bankrupt cision was not res as to bankruptcy ques- court answered this party). Consequently, no who remained a negative explained tion corporation judgment final issue, upon been which res could have entered grounded. could be Germain light Cf. of the must be examined facts Germain, N.H. A.2d independent case and as an of this (where entered filing proposition of law. After the appeal respect parties, but not to some all petition Chapter prior to the trial of generally interlocutory); Peti of order is action between the District Columbia Group Donovan tion Donovan d/b/a Meade, surety Regal Regal’s filed this Home, N.H. A.2d short, proceeding. Regal availed itself (res judicata improper where stay and then filed its pending). appeal no final because employees participated Meade. Its courts, however, surety reached the Had its Other District of Columbia trial. successful, opposite Regal go In In Re no further. result. K.G.L. Contract been need (Bankr. Services, lost, ing surety “it Regal B.R. 235 claimed was itsWhen S.D.Fla.1985), bankruptcy opportunity court for a full deprived of and fair held, any District of Florida without Southern on in the District of be heard issues comment, bankruptcy that a debtor in who suit.” Columbia’s litigant pro previous was in a a nonactive injury Regal any from re- If sustained stay privy ceeding to an automatic due maining in the District of sidelines with its co-defendants and therefore bound instead, filing this Columbia judicata. of res The case of principle injury The state- was self-inflicted. In Co. 28 B.R. 413 Regal Re Const. fundamental fairness ments of absence of (Bankr.D.Md.1983) of is instructive because in countervailing policy are hollow the similarity case. of its facts to the instant Regal. litigated of It could have all mouth Pipe In Co. filed Regal, Meade Concrete it in one of forums. When issues two Compa against Regal civil suit Construction the result obtained measure withdrew Fidelity ny, (“Regal”) surety, and its Inc. surety own action and refile its its mo Deposit Company payment recover court, protection it of this cloaked Regal subsequently filed nies to Meade. due precisely place took in what ran the risk there Soon counterclaim Meade. matter. this after, voluntary petition under Regal filed a Co., Inc., B.R. at Regal In Re Const. Chapter Bankruptcy Accord 11 of the Code. “Regal’s concluded that interests ingly, against Regal was The court Meade’s claim closely aligned those its stayed. proceed coun- so Regal did not with its were surety fairly represented. it was finding It on privity, the issue of whether the Id., judgment.” should be bound 28 October 1995 New York order was vacat (citation omitted). B.R. at 417 Joseph ed as to consequence. is not of finding circuit court’s rationale for that Jo consideration, adopt After careful we seph precluded continuing from with the Co., Regal rule of the court in In Re Const. Virginia litigation judicata West due to res Inc. because we find it well-reasoned. We and collateral estoppel is not clear from its flexible, case-by-case ap- also believe that its However, order. may, ap “[t]his Court proach promotes in fairness. This is con- peal, judgment affirm the of the lower court rigidity trast to the narrowness and appears when it Also, judgment that such is cor contrary in rule. two of the three any legal ground rect on cases, above, disclosed contrary cited which the rule record, regardless utilized, ground, applied reason explanation. it is without theory case, assigned by the lower the third the stated reasons court as the for the judgment.” Syllabus basis for its nonfinality rule Point were of the order due to olk, party’s stay one Barnett v.. pending automatic and a W.Va. Wolf (1965). appeal. explained S.E.2d 466 previously, Consequently, As this ratio- we find applicable appellants’ judice. nale is not to the case sub regarding contentions the cir 60(b) Accordingly, cuit we hold that a debtor bank- court’s denial of the Rule motion to ruptcy who is a to an Accordingly, action but whose be without merit. we affirm the participation automatically in the action is circuit appellants’ court’s denial of the Rule stayed by 60(b) provisions of 11 U.S.C. motion as it appellants’ relates to the may precluded by principles declaratory be Virgi action in West estoppel and collateral from relit- nia. igating the same claims or issues of which adjudication

there was a final as to his co- Additional Causes Action In Of defendants, subsequent in a action. Virginia West Action summarize, To we find that under New declaratory judg addition to the York law the elements of both res action, however, ment appellants brought and collateral are satisfied several other Virginia claims their West claims, identity case. There are a final complaint. They allege also breach of con adjudication merits, privity on the be- tract, statutory bad faith or unfair trade Joseph tween Nakash and his co-defendants practices, faith, common law bad and an in in the New York action so that he had a full claims, tentional tort claim. These additional opportunity and fair prior to contest the de- exception with the of the breach of contract Moreover, termination. we find that the au- claim, arise from law and could stay Joseph tomatic prevent as to does not brought have been in New York. Obvi him being precluded from relitigating ously, adjudication declaratory as to the adjudicated the claims or issues in the New judgment action in New York also extin conclude, therefore, York action. We that the guishes the breach of contract claim because ruling circuit court did not err underlying there is no duty now contractual cannot litigating continue declaratory on which find, to base such a claim. We Virginia. action West further, that the determination that there is

Accordingly, we find that the circuit coverage no policy under the D & O extin court did not denying guishes abuse its discretion in the common law bad faith and inten 60(b) appellants’ Rule motion. This tional tort claims as well. Our case law is presumes Court the correctness of the circuit clear that in policyholder order for a bring to judgment, court’s appellants and the a common law bad faith claim his failed presumption. insurer, to rebut that Specifical according Hayseeds, to Inc. v. State Farm, ly, showing there is no Cas., that the circuit 323, Fire & 177 W.Va. 352 S.E.2d 30,1995 (1986) based its October order on a progeny, mistak and policyholder its en Joseph belief as to Nakash’s status in substantially prevail the must first against his Also, proceeding. York in view of our underlying insurer on the contract action. Jordache, in ruling Mut. Ins. court did not err that Avi Nationwide See also Shamblin (1990) Nakash, Ralph Co., Nakash Nakash and W.Va. 396 S.E.2d judica- precluded by the principles are of res duty good faith (concerning the insurer’s litigating and collateral ta from dealing an a tort- insured who is and fair contract, Saseen, breach of law bad faith and common feasor); 192 W.Va. and Marshall v. Virginia. intentional tort claims Ac- (concerning unin- 450 S.E.2d cordingly, we affirm the circuit court’s denial coverage). and underinsured motorist sured 60(b) appellants’ Rule motion concern- was premise underlying Hayseeds contract, ing their breach of common law bad contractually prom- the insurer had that faith, and intentional tort claims. coverage. the insured such Conse- ised duty quently, the insurer had a to settle note, however, appel We on a with its insured claim for which brought also lants claim for the violation of legally If insured was entitled to recover. Virginia the West Unfair Trade Practices settle, the in- the insurer declined to Act, 33-ll-4(9)(b), (c), (d), (e), § W.Va.Code required and then sub- sured was to sue (f). This is not claim that could have stantially prevailed, liable the insurer was brought in the It been New York action. just the attor- for not verdict but also for substantially a claim that also not rests on ney damages. and incidental fees prevailing underlying on the action. contract Marshall, 192 W.Va. at 450 S.E.2d at bring- and predicate The conditions for Because of the court’s deter- 797. New York Penney ing a case under Jenkins v. J.C. appellee mination that the owes no contractu- Casualty Insurance Company, 167 W.Va. appellants obligation to the under the D & al (1981), wholly 280 S.E.2d 252 are dif- substantially policy, appellants O cannot necessary bringing ferent from those prevail underlying an on contract underlying bring- an contract action or for Therefore, appellee. appellee ing under Hayseeds, an action Inc. State the appellants cannot be liable to for attor- Casualty, Farm Fire & 177 W.Va. ney damages fees and incidental a common (1986). Hay- S.E.2d 73 Whereas under law bad faith claim. necessary policyholder seeds it is underlying substantially prevail on con- appellants’ tort intentional may tract action before recover en- he A clear claim must fail for same reason. damages, hanced there is under Jenkins recovering damages in a predicate punitive substantially pre- requirement no that one faith common law bad action wherein vail; required liability it is and dam- alleges knew policyholder the insurer ages previously in the course be settled policyholder’s proper, claim will but litigation. instead of the Jenkins Jenkins maliciously fully, intentionally denied the solely upon predicates entitlement to relief claim, substantially policyholder is that of the West Unfair Trade violation underlying prevail on the contract claim.19 33-11-4(9), Act, § Practices W.Va.Code Co., McCormick v. Allstate Ins. See “general where such violation arises from (“a 475 S.E.2d W.Va. practice” part on the of the insur- business predicate recovering punitive dam clear er. Hayseeds plaintiff claim ages is that the 9, McCormick, ‘substantially prevail’ underlying Syllabus supra. Be- on his Point daim”). statutoiy faith set- Again, appellants appellants’ are now un cause the bad disposed in the New prevail underlying on contract tlement claim was not able to Therefore, adjudication, we the circuit we find that the circuit York find that action. willfully, maliciously appellants preclud- acted We note that while the but nevertheless moving intentionally by failing acknowledge pay forward intentional tort ed from claim, on their recovering they precluded above, are not claim is claim." As noted Plaintiffs’ damages statutory punitive bad faith However, their extinguished. has stated this Court com- settlement claim. Count Five of their circumstances, that, plain- appropriate under the plaint of Kanawha filed the Circuit Court punitive damages for violations tiffs can recover appellants County, allege "[d]efen- that the 33-11-4(9). under W.Va.Code proper, that the was dant knew Plaintiffs' claim ruling appellants subsequently granted summary judg- in that the are court court erred bringing precluded such an action majority opinion from ment to National. The held res and collateral principles the previous ruling by that because of a a New estoppel. Accordingly, we reverse the circuit York trial court on the issue of indemnifica- 60(b) appellants’ court’s denial of the Rule tion, correctly circuit granted sum- single statutory motion bad faith as to Nakashes, mary against all the claim. settlement except respect statutory with to their bad majority faith claim. I opin- concur with the

IV. ion insofar as it finds the New York decision barred the claims of Jordache En- CONCLUSION Inc., terprises, Ralph Nakash and Avi Na- conclusion, we find that the elements However, respect kash. I dissent and collateral are satis- holdings majority opinion. two made Joseph fied in so as to bar this case Nakash First, majority opinion incorrectly found appellants continuing and the other precluded that the New York decision all declaratory in with their action the Circuit Joseph against Nakash’s claims National oth- County. Court of Kanawha Because of the statutory er than his bad faith claim. I declaratory on York ac- pre- believe the New York decision did not appellee duty tion that the has no under the any Joseph clude Nakash’s claims due to policy indemnify D appellants, & operation bankruptcy automatic they prevail on a unable contract Second, stay. I majority’s dissent from the Therefore, appellee. action finding summary judgment decision was appellants’ common law bad faith inten- improper statutory on the bad faith claim of extinguished. tional tort claims are Accord- Enterprises, Ralph Jordache Nakash ingly, we that the circuit court find did not and Avi Nakash as the bad faith claims as- denying appel- abuse its discretion plaintiffs require serted these the exis- 60(b) claims, lants’ Rule motion as to these However, coverage. tence of insurance and we affirm the order circuit court majority determined there no such cov- However, appellants’ as to these claims. erage. claim, statutory bad faith which does not depend prevailing underlying on the action, breach of contract remains viable. A. find, therefore,

We the circuit court Joseph Nakash’s Claims denying abused appel- its discretion 60(b) claim, lants’ Rule motion as to this During litigation, Joseph the New York we reverse the order of the circuit court on Chapter Nakash filed bankruptcy. for single Accordingly, claim. the order of Consequently, bankruptcy stay an automatic the circuit part court is affirmed in and re- prevented obtaining National from an ad- part. versed in him, ruling against effectively preclud- verse in part part. Affirmed and reversed in ing mounting him from a defense in that majority opinion case. The states that the DAVIS, Justice, concurring part, Chief New York trial specifi- court issued an order dissenting part: cally stating that its decision “could not bind appealed by [Nakash], This case was Joseph Jordache En- since the action had been owners, terprises, Joseph stayed Inc. and its spite evidence, Na- as to him.” In of this kash, (herein- Ralph majority opinion Nakash and Avi Nakash Joseph held that Na- “Jordache”). after referred to as Jordache kash bound the New York decision. filed an appellee, majority opinion justifies National The its innocuous (hereinafter Union Fire Company ruling by finding Insurance “that could have “National”), referred to as as a result of expand moved for the New York court to provide coverage National’s refusal stay automatic to the defendants that ac- litigation. enjoin Jordache in other litigation.” The action in- tion or to further This cluded a claim for reasoning illogical bad faith. The circuit direct violation of

487 ¶ 362.04, Bankruptcy at 362-34 stay. There Collier on automatic of the purpose the ed.1996). (15th rule bankruptcy general, law nor acts taken federal exists no “expand” an auto- stay a to requires debtor automatic are void and which violation of the guaranteed Feuerstein, the benefits stay matic to obtain legal effect. Kalb v. 308 without Thus, majority stay. bankruptcy the (1940).2 the 60 84 L.Ed. 370 U.S. S.Ct. bankruptcy automatic nullifies the decision 362(d), Moreover, express 11 under U.S.C. stay. authority given party request to a to the is lack of majority opinion’s of the view stay. bankruptcy to lift the automatic court law, I be understanding bankruptcy must of (3d Wilson, Cir.1997); 116 F.3d 87 In re See general matter “a As a gin with the basics. Manor, Inc., Countryside 188 B.R. 489 In re stays ‘any act filing automatically bankruptcy (1995). held that when a Courts have estate property of of the possession to obtain sought such relief from bank who has exercise from the estate or to property or of or ruptcy stay attempts to commence contin estate,’ ‘any the property of control over debtor, against a action taken is ue a lawsuit collect, assess, or recover a claim act to (Tex. Sealy, 956 S.W.2d 803 void. Paine v. the com that arose before against the debtor 11 Additionally, pursuant App.1997). ” Bank case[.]’ the Citizens mencement of of 362(d), authority given express § U.S.C. 116 Maryland Strumpf 516 U.S. bankruptcy to annul the automatic the (1995).1 L.Ed.2d 258 The 133 S.Ct. retroactively ac stay thereby validate stay triggered the act of automatic otherwise be void. tions taken that would entry bankruptcy petition, not filing a (1st Cir.1997); Soares, In re 107 F.3d 969 See by the court. Matter of an order for relief of Michigan Corp., 990 Easley v. Pettibone P.C., B.R. 294 Eugene Pieper, L. (6th Cir.1993); Albany In re Part F.2d 905 stay is effective (Bkrtcy.D.Neb.1996). (11th Cir.1984). ners, Absent 749 F.2d 670 petition though filing of the even upon the court, bankruptcy such an annulment no notice of its existence. parties have however, stay mere termination of Scott, (Bkrtcy.M.D.Ala. 24 B.R. 738 In re of actions taken violation does not validate 1982). stay scope automatic is broad Associates, 13 B.R. 578 In re Eden it. every formal and infor applies to almost terminat (Bkrtcy.S.D.N.Y.1981). An order against property debtor or of mal action party to stay permits a re- ing the automatic debtor, as set forth under except one, lawsuit, after 362(b). al., start another King, initiate its or § P. et Lawrence U.S.C. create, (5) any perfect, or enforce act to stay provision U.S.C. of 11 1. The automatic 362(a) any lien to the provides: against properly debtor (b) that arose (a) secures a claim extent that such lien Except provided in subsection as section, petition section of the case under filed under commencement this before the title, application title; filed this or an or 303 of this 5(a)(3) collect, assess, of the Securities Investor under section (6) any recover a act to or (15 78eee(a)(3)), U.S.C. Protection Act of 1970 against debtor that arose before claim entities, stay, applicable all operates as title; case under this of the commencement continuation, (1) in- or the commencement (7) any owing the debtor debt the setoff of pro- employment of cluding cess, issuance or the commencement that arose before administrative, judicial, other ac- or any against title claim case under this proceeding against debtor that was or tion debtor; and commenced before or could have been or continuation of the commencement title, or of the case under this commencement Court proceeding United States Tax before the against the debtor that arose a claim to recover concerning debtor. case under commencement of the before the title; Krystal GMC re Cadillac Oldsmobile 2. See also In enforcement, against the debtor or Cir.1998); Truck, Inc., (3d In re F.3d 631 estate, property of a 1998); Farms, (Bkrtcy.D.Idaho 226 B.R. TNT of the case the commencement obtained before Fitch, (Bkrtcy.S.D.Cal.1998); 217 B.R. 286 In re title; under this Smith, (Bkrtcy.E.D.Mich.1998); In re B.R. (3) any possession property obtain act to (Bkrtcy. Samaniego, 224 B.R. In re property from the estate of the estate or of Scott, 1998); 24 B.R. 738 In re estate; E.D.Wash. property of the control over to exercise Beltio, Ltd., 963 (Bkrtcy.M.D.Ala.1982); create, any Lorenz (4) any perfect, or enforce act to (Nev.1998). estate; P.2d 488 against property of the lien entered, obligates stay the termination order is but does a debtor to seek a not affect the status of actions taken between proceeding involving third-parties. The rea- bankruptcy petition filing of and the no simple. son such law exists is The auto- order; entry of the termination such actions stay, majority matic opinion which the has initio. Eastern are void ab Co. repealed, protects the debtor from extrane- Refractories Inc., Forty Eight Inc. v. Insulations litigation. ous (2d Cir.1998). F.3d 169 The law is clear that Additionally, majority opinion selec only bankruptcy jurisdiction court has to tively legal right omits discussion of the exempt determine whether a matter is to be obligation of National to have motioned stay order, ed from the a state court does not bankruptcy stay. court to lift the automatic jurisdiction have to make such a determina problem. Herein lies the real Had National Brewster, (La. Hester tion. 705 So.2d 793 through wanted to bind Nakash Cir.1997). Ct.App. 5 proceeding, bankruptcy pro state court law principles bankruptcy The “basic” law vehicle, express an vided under 11 U.S.C. majority reviewed above illustrate that 362(d), request bankruptcy to court to opinion Congressional violates the intent and stay. Tubbs, lift the See Constitution Bank v. judicial prior interpretation bankruptcy (3d Cir.1995); 68 F.3d 685 Matter M4 bankruptcy designed law. The law is to Inc., Enterprises, (Bkrtcy. 183 B.R. 981 give debtors “fresh” start. It is not de N.D.Ga.1995); Molitor, In re 183 B.R. 547 signed trap However, to be a for a debtor. (Bkrtcy.E.D.Ark.1995). majority Under the trap exactly by is what was created opinion, the burden now shifts to debtors to majority’s majority decision. The decision plead bankruptcy enjoin courts to extra all holding defies tenets of fairness “that follow, litigation. neous For the reasons that Joseph could have moved for the New York I requirement believe such a illegal under expand stay court to the automatic to all the present bankruptcy federal law. enjoin defendants in that action or to further Application Stay of the Automatic litigation.” majority opinion erroneously Third-Party Litigants to bankruptcy assumes the court would auto bankruptcy stay The automatic does not matically enjoin the New York pro court separate legal extend to entities such as cor ceeding against Joseph Nakash’s brothers. porate’affiliates, partners partner in debtor Barney’s See In re 200 B.R. 527 ships, pending litiga or to codefendants (Bkrtcy.S.D.N.Y.1996) (declining equi to use ah, tion. King, Lawrence P. et Collier on enjoin powers table proceeding to state court ¶ (15th Bankruptcy 362.04, at 362-34 & n. lb against Chapter 11 prin debtors’ nondebtor ed.1996). leading case cited cipals principals’ guarantees to enforce where treatise in extending favor of not the auto adjudication of proceeding the state would stay matic Wedgeworth co-defendants is impose hardships financial on estates or (5th Corp., Fibreboard 706 F.2d 541 Cir. principals duties); divert from their In re 1983). Wedgeworth The court in articulated Spiers Spiers, (Bkrtcy. 190 B.R. 1001 Graff purpose that the N.D.Ill.1996) stay of the automatic is to (concluding that Chapter 11 protect correctly the debtor. It was rea debtor-partnership did not establish entitle soned Wedgeworth the court in injunction ment that the preventing creditor from Congressional purpose proceeding behind the in state automatic impose court action to stay personal by application is not liability against “advanced general debtor’s stay Id., partners); Co., rule to In re REPH codefendants.” 706 F.2d at Acquisition (N.D.Tex.1991) principle, B.R. 545. This that a (recognizing codefendant is not bankruptcy properly protection court entitled to the could not of the automatic use its equitable stay authority after another permanently enjoin petition defendant files a pursuing lessor from bankruptcy, state court eviction ac also followed co-lessee). tion Eighth nondebtor Assuming, Croyden Circuit. See Associates v. Alleco, Inc., (8th argument, for the sake of bankrupt Cir.1992), that the 969 F.2d 675 cert. cy stay denied, court would the state proceed 507 U.S. S.Ct. ing, (1993). I bankruptcy found no law which L.Ed.2d example, Croy- For “privy” plaintiff of a codefendants were not to his auto- alleged member class den lawsuit, stay. public matic sued deben a class action over ture and its successor interest issuer Estoppel 2. Res and Collateral liability stemming from a default on the de Cannot be Used to Circumvent proposed fairness of a set bentures and the Stay Automatic tlement, agreed after the defendants my dispute I now come to the essence of a committee of other mem settlement with majority the majority opinion. opin with The During appeal class. plaintiff bers of the upon erroneously ion relied the doctrines of Circuit, Eighth one of before the the defen judicata estoppel and collateral to retro in petition bankruptcy. dants The filed actively stay, thereby lift the automatic Eighth stay held that automatic Circuit Joseph bind Nakash to the New York court against applied only the claims to the debtor judicata estop- decision. Res and collateral stay non- and “that the available to pel in pertaining are not novel issues matters codefendants, they ‘even if in a bankrupt bankruptcy proceedings. to Unlike ma with legal similar or factual nexus the debt- however, jority opinion, other courts have Id., (quoting or.’” 969 F.2d at Mari cases, recognized, in that res similar Bank, Jersey 959 time Elec. Co. v. United application estoppel and collateral have no to (3d Cir.1991), 1194, 1205 citing F.2d For bankruptcy debtor. the case In re Partners, tier v. Anna Plaza 747 F.2d Dona (1st Cir.1991), Replogle, 929 F.2d 836 Cir.1984)). 1324, 1330(10th bankruptcy filed in debtor Massachusetts in Thereafter, September March of by Wedgeworth position The taken 1988, property November of of the' debtor Croyden, protected are not that codefendants upon in New York. The was foreclosed First by stay, supported is also automatic dispensing had Circuit little trouble 12 analogy Chapters and 13 the Bank- to by concluding “[ajlthough the matter Code, ruptcy general provides which that a foreclosure, Replogle party was to the may not take action codebtors notice, bankruptcy judge had the auto filing 11 bankruptcy. of a debtor See stay Chapter proceed matic 13 issued §§ U.S.C. 1201 & 1301. Since codefendants ings, § 11 U.S.C. meant that filing bankruptcy Chapters aof debtor under judicata as York decision not res to was subject 12 to the and 13 are also automatic Id., Replogle.” n. 1. 929 F.2d at 837 See also stay 362(a), logi- imposed U.S.C. IX, Community Ltd. v. Phillips Investors 362(a) cal conclusion is that Section does not Co., Plastering (Tex.Civ.App. 593 S.W.2d 418 362(a) stay. If include a codefendant Section 1980) (finding court judgment of state fore codebtors, impliedly protected the inclusion closing during pendency lien of automatic stay of a at Sections 1201 and 1301 codebtor void). stay was Wade, superfluous. would See Rake v. be Haines, 464, 471-73, Similarly, in In re 113 S.Ct. the case of U.S. (1993) (“We (S.D.Cal.1997), generally stay B.R. the automatic L.Ed.2d 424 avoid litigated specific lifted for matters to be construing provision a statute so as to was one spouse in a suspend provision”). another and his di- supersede between debtor hand, proceeding. vorce issue that domes- In the ease at Nakash’s code- One litigate “privy” to the court was to were not automatic tic not authorized fendants stay. pro- ability pay the debtor’s the amount deter- Had the codefendants wanted the they spouse that court. stay, tection had to motion the mined be owed to his of the Sec., During proceeding, the Stephen bankruptcy debt- bankruptcy court. See Inv. Com’n, spouse or’s the debtor was Inc. v. & Exch. 27 F.3d contended Securities (8th Cir.1994); collaterally contesting estopped In re his abil- 342 n. 5 North Star pay because the ity B.R. divorce related debt Contracting Corp., 125 370-71 (S.D.N.Y.1991). However, cryptic under the domestic court had determined issue. rejected bankruptcy the collateral logic majority opinion, Joseph Nakash The argument “[t]he and held de- “privy” has made to the state court been when, law, family [the court of debt- proceeding bankruptcy under termination B. ability pay the amounts it or’s] awarded spouse] scope was not within the limited [the Statutory Bad Faith Claim Of Jordache stay .... relief Actions taken viola- Inc., Enterprises, Ralph Nakash Id., stay tion of the automatic are void.” And Avi Nakash Schwartz, In re (citing B.R. at 591 F.2d majority (9th Cir.1992)). opinion erroneously remands statutory bad faith claim of Jordache Replogle and Haines sup decisions Enterprises, Ralph Nakash and Avi Na- my port position that neither res nor kash, ruling statutory bad faith estoppel may be invoked justiciable claim is alive and because it is debtor, bankruptcy stay unless the automatic substantially “not a claim that pre- rests on specifically has been lifted to allow extrane vailing underlying on the contract action.” litigation against spe ous the debtor for the majority carefully spe- Had the reviewed the regard judica- cific matters with to which res provisions cific upon of West law ta or In raised.3 this plaintiffs rely which asserting these their case, showing no evidence was adduced that claim, majority bad faith I believe the would bankruptcy lifted the automatic summary affirmed on that stay litigate against so that National could claim. majority opinion, Nakash. how According majority, to the En- Jordache ever, stay has ruled that the did not have to terprises, Ralph Nakash and Avi Na- argue “privi be lifted because National could kash claim that National committed bad faith ty” among simply codefendants. This is pursuant 11—4(9)(b),(c), §§ to W.Va.Code 33— Replogle wrong according and Haines. to (e) (d), (f), which read: Where debtor is sole defendant in an (b) Failing acknowledge to and act rea- action, stay extraneous automatic cannot sonably promptly upon communications judi- be circumvented the doctrines of res respect arising with to claims under insur- estoppel. cata and collateral It stands to policies; ance reason, then, where that codebtors are code- (c) Failing adopt implement to rea- against whom an judg fendants extraneous prompt sonable standards for the investi- rendered, stay ment has been the automatic gation arising of claims under insurance similarly prevail preclusive must over the policies; estop- doctrines of res and collateral (d) Refusing pay to claims without con- pel regard to a codebtor who has filed ducting a investigation reasonable based bankruptcy. privity There can be no in a information; upon all available that is void a debtor. To (e) Failing deny coverage to affirm or hold otherwise renders the automatic bank claims within a proof reasonable time after ruptcy stay meaningless in all matters involv of loss completed; statements have been ing essence, majority codefendants. (f) attempting in good Not faith to decision effec- bankruptcy modified has law and prompt, equitable tuate fair and settle- stay rendered meaningless. the automatic liability ments of claims in which has be- However, modifying bankruptcy requires law reasonably come clear. Congressional action, not usurpa state court power. permit tion of To state courts to do (f) (b), (d) reading (c), A fair requires majority opinion what the has done “serious any person reasonable to conclude that “cov- ly orderly process undercuts] erage” must exist for them to be viable. Edwards, 514 Corporation Celotex law.” However, majority opinion determined 300, 313, U.S. 115 S.Ct. coverage Therefore, pro- did not exist. (1995). (d) (b), (c), (f) L.Ed.2d 403 justiciable. visions are not text, (1st Cir.1997); 3. As I Easley discussed under 11 U.S.C. F.3d 969 v. Pettibone 362(d) authority given bankruptcy to the (6th Cir.1993); Michigan Corp., 990 F.2d 905 terminate, annul, modify court to Partners, or condition (11th Cir.1984). Albany re F.2d See, Soares, stay. e.g., the automatic In re appropriate as Summary judgment was provisions.

those (e), claims types of two provision

toAs timely coverage failing to affirm

exist: timely. coverage failing deny majority opinion, nor the

Nothing dispute

record, as a material issue reveal coverage deny National failed to whether It is clear from a reasonable time.

within opinion majority and the

the record Inc., Ralph Enterprises, Nakash

Jordache asserting part were

and Avi Nakash (e) failing “af- which addresses

provision coverage a reasonable time. On

firm” within issue, majority opinion concluded Thus, summary coverage did not exist. have been affirmed.

judgment should S.E.2d 718 Appellee, Virginia,

STATE of West CARTER, Appellant. Eugene

Robert 25186.

No. Appeals of

Supreme Court of Virginia. Nov. 1998.

Submitted

Decided Dec. Prosecuting Games-Neely, Esq.,

Pamela Esq., Quasebarth, Attorney, Christopher C. Attorney, Prosecuting Martins- Assistant Attorneys Ap- Virginia, burg, West pellee. Sayre, Esq., Law Offices H.

Thomas Royal, Virginia, At- Sayre, H. Front Thomas torney Appellant. for the MAYNARD, Justice: Carter, ap- Eugene appellant, Robert 1997 final order September peals the

Case Details

Case Name: Jordache Enterprises, Inc. v. National Union Fire Insurance

Court Name: West Virginia Supreme Court

Date Published: Nov 24, 1998

Citation: 513 S.E.2d 692

Docket Number: 24672

Court Abbreviation: W. Va.