Aetna Life and Cas. Ins. Co. v. Johnson

• Decision Date: 05 January 1984
• Docket Number: No. 83-301,83-301
• Citation: 673 P.2d 1277,41 St.Rep. 40,207 Mont. 409
• Parties: AETNA LIFE AND CASUALTY INSURANCE COMPANY, Plaintiff and Appellant, v. Wayne JOHNSON, d/b/a Coral Reef Pet Shop and Commercial Union Insurance Companies, Defendants and Respondents.
• Court: Montana Supreme Court

Page 1277

673 P.2d 1277

207 Mont. 409

AETNA LIFE AND CASUALTY INSURANCE COMPANY, Plaintiff and Appellant, v. Wayne JOHNSON, d/b/a Coral Reef Pet Shop and Commercial

Union Insurance Companies, Defendants and

Respondents.

No. 83-301.

Supreme Court of Montana.

Submitted Nov. 1, 1983.

Decided Jan. 5, 1984.

Wellcome & Frost, G. Page Wellcome argued, Bozeman, for plaintiff and appellant.

Anderson, Brown, Gerbase, Cebull & Jones, James L. Jones argued, Billings, Wayne Johnson, pro se, for defendants and respondents.

HASWELL, Chief Justice.

Aetna Life and Casualty Insurance Co. (Aetna) appeals the summary judgment ordered by the Gallatin County District Court in its action against Wayne Johnson, d/b/a Coral Reef Pet Shop, and Johnson's insurer, Commercial Union Assurance (C.U.), respondent, for losses it paid to its insured caused by a fire set by Johnson. We affirm.

On May 22, 1980, a fire occurred at the Coral Reef Pet Shop in Bozeman, causing extensive damage to the pet shop and adjacent businesses. On December 1, 1980, Wayne Johnson, proprietor of the pet shop, was charged with criminal mischief and arson. At his trial the State sought to prove that he intentionally set the fire to defraud his insurance company, C.U. He was convicted by a jury on April 23, 1981. This Court affirmed that conviction on February 25, 1982. State v. Johnson (Mont.1982), 641 P.2d 462, 39 St.Rep. 419.

C.U. subsequently commenced an action for declaratory judgment against Johnson to establish that it had no obligation to pay for Johnson's losses as the fire was set intentionally. Since Aetna paid for the damage to the surrounding businesses, it sought to intervene in this action to establish that Johnson was guilty of negligence in causing the fire. This would enable Aetna to recover the amount it paid to other businesses under the liability portion of Johnson's policy. Intervention was granted on April 17, 1982. Aetna also filed a separate action against Johnson and C.U. The two actions were consolidated.

C.U. filed a motion for summary judgment, arguing that the nature of Johnson's act is res judicata in the civil action and relitigation thereof should be barred. The District Court granted the motion for summary judgment. The court's supporting memorandum indicated that since the question at bar had not been decided by this Court, it would be more efficient to appeal the summary judgment rather than conducting a full trial. Also, the District Court pointed out that there is a trend that evidence of a conviction is conclusive as to the facts previously determined in the criminal trial. From the summary judgment, Aetna appeals and raises one issue for our consideration:

Was the District Court correct in holding that a criminal conviction of arson is res judicata in a subsequent civil action brought by a third party seeking to establish damages and liability coverage?

Aetna argues that the circumstantial evidence supporting Johnson's conviction and the lack of a sufficient arson investigation leave many factual questions for a jury in spite of the conviction and appeal. Thus, a civil trial on C.U.'s liability coverage should not be precluded by res judicata or collateral estoppel.

Aetna also asserts that the different nature of the actual proceedings and the interests of the parties involved prevent either proceeding from barring the other.

C.U. argues that concepts of res judicata and collateral estoppel should apply here. Essentially, the question of liability hinges upon the nature of Johnson's acts and this was determined at the criminal trial and reviewed by this Court. The fact that Aetna was not a party in the previous action is immaterial. As long as the party against whom the claim is advanced remains the same from the previous action, it is immaterial that the other parties are not precisely identical.

While this Court has never directly addressed the question at bar, other jurisdictions have done so. In Casey v. Northwestern Security Insurance Company (1971), 260 Or. 485, 491 P.2d 208, the Oregon Supreme Court held that the insured's conviction of assault with a dangerous weapon upon the victim, who subsequently sued the insured for injuries inflicted by the crime, conclusively established that the insured acted intentionally. When the insured sought to have his insurance company defend him in the suit, the insurer asserted it had no duty to defend as there was no coverage since the injuries inflicted by the insured were intentional. The Court held that the insured was collaterally estopped from relitigating the issue of whether his acts were intentional in his action against his insurance company for attorney fees. The Oregon Court relied on California and Pennsylvania cases to support its holding.

In Teitelbaum Furs, Inc. v. Dominion Insurance Company (1962), 58 Cal.2d 601, 25 Cal.Rptr. 559, 375 P.2d 439, the California Supreme Court found that "... any issue necessarily decided in a prior criminal proceeding is conclusively determined as to the parties if it is involved in a subsequent civil action." 25 Cal.Rptr. at 562, 375 P.2d at 442. Justice Traynor's comments explain the basis for this rule:

" '... To preclude a civil litigant from relitigating an issue previously found against him in a criminal prosecution is less severe than to preclude him from relitigating such an issue in successive civil trials, for there are rigorous safeguards against unjust conviction, including the requirements of proof beyond a reasonable doubt (Code Civ.Proc. Sec. 2061) and of a unanimous verdict (Pen.Code, Sec. 1164), the right to counsel (In re James, 38 Cal.2d 302, 240 P.2d 596), and a record paid for by the state on appeal (Cal.Rules of Court, rule 33). Stability of judgments and expeditious trials are served and no injustice done, when criminal defendants are estopped from relitigating issues determined in conformity with these safeguards.' " 25 Cal.Rptr. at 561, 375 P.2d at 441.

The California Court held that three questions were pertinent to determine the applicability of collateral estoppel. They are:

"... Was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits? Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? ..." 25 Cal.Rptr. at 560, 375 P.2d at 440.

See, Bernhard v. Bank of America (1942), 19 Cal.2d 807, 810, 122 P.2d 892, 894. An affirmative answer to each query would establish a basis for collateral estoppel.

In Mineo v. Eureka Security Fire & Marine Insurance Company (1956), 182 Pa.Super. 75, 125 A.2d 612, the Superior Court of Pennsylvania held that an insured's conviction for setting a fire, which caused damages for which recovery was sought, was a bar to the insured's assignee's recovery on the fire policy. In essence, the key issue in the civil trial brought by the assignee was whether the insured intentionally set the fire. If so, the policy would not cover the damage pursuant to the provisions of the policy. The court found that this issue was previously determined in the criminal trial and reviewed on appeal. Thus, such determination is conclusive in the subsequent civil trial and the assignee was estopped from relitigating the question. The Pennsylvania Court set forth sound policy for this rule:

"Whether the insureds set the fire or not is a question of fact which has been established beyond a reasonable doubt in a court proceedings. Once this fact has been established, and the Commonwealth, in whose hands rests the maintenance of public policy, has...