Brown v. Candelora

• Decision Date: 30 January 1998
• Citation: 708 A.2d 104
• Parties: Robert BROWN and Joann Brown, His Wife, Appellants, v. Pauline CANDELORA, Executrix of the Estate of Nicholas Yiambilis, a/k/a Nikolas Yiambilis, Deceased, Nationwide Insurance Company, Appellees.
• Court: Pennsylvania Superior Court

Page 104

708 A.2d 104

Robert BROWN and Joann Brown, His Wife, Appellants, v. Pauline CANDELORA, Executrix of the Estate of Nicholas

Yiambilis, a/k/a Nikolas Yiambilis, Deceased,

Nationwide Insurance Company, Appellees.

Superior Court of Pennsylvania.

Argued March 5, 1997.

Filed Jan. 30, 1998.

Lewis Kates, Philadelphia, for appellants.

Mark L. Parisi, Philadelphia, for Nationwide Ins. Co., appellee.

Before McEWEN, President Judge, and DEL SOLE and HOFFMAN, JJ.

McEWEN, President Judge:.

This Court has not previously addressed the issue presented by this appeal, specifically, whether a plaintiff who has recovered a judgment against an insured tortfeasor may, without obtaining an assignment from the insured, institute a garnishment action against the tortfeasor's insurer based on claims of bad faith and breach of contract seeking sums in excess of the coverages provided by the terms of the policy. After a careful study of the arguments presented by the parties, we affirm the order entered by the distinguished Judge Norman Ackerman which directed the Prothonotary to set aside the writ and levy of execution filed against Nationwide Insurance Company as garnishee by the appellants, Robert and Joann Brown.

Appellants, Mr. and Mrs. Brown, instituted the underlying action on January 26, 1988, after Mr. Brown sustained a compound ankle fracture in a collision between his motorcycle and a vehicle driven by Nicholas Yiambilis which had occurred on June 9, 1986. Mr. Yiambilis was insured under a policy issued by Nationwide with a bodily injury liability limit of $100,000.00. Approximately three years after suit was commenced and five years after the accident, Mr. Brown's foot became gangrenous and was amputated. Shortly thereafter, Nationwide offered its full policy limits of $100,000.00 to appellants in exchange for a signed release. Appellants rejected this offer and a subsequent offer on March 14, 1994, immediately prior to trial, of $500,000.00, and the case proceeded to trial ¹. The jury returned a verdict in favor of Robert Brown in the amount of $1,075,221.40 and in favor of Joann Brown in the amount of $75,000.00. Thereafter, judgments, which reflected both a reduction for the 15% comparative negligence of Robert Brown and also the imposition of delay damages, were subsequently entered against the estate of Mr. Yiambilis in the amount of $1,449,646.17 in favor of Mr. Brown and $65,750.00 in favor of Mrs. Brown. Following the denial of post-trial motions, an appeal was taken to this Court, which affirmed the judgments as entered. Brown v. Candelora, No. 03502 Philadelphia 1994; filed July 13, 1995 (Memorandum). Nationwide then filed a petition for allowance of appeal with the Supreme Court, which was denied.

While these appeals were pending, appellants commenced execution proceedings against Nationwide, as garnishee, alleging that Nationwide had been guilty of bad faith and had thereby become responsible for the entire amount of the judgment entered against Mr. Yiambilis' estate and was as well contractually obligated to pay any delay damages and interest in excess of its policy limits. Nationwide filed preliminary objections and a petition for partial stay or modification. The trial court granted the stay and directed, as a condition, that Nationwide pay into the court its policy limits of $100,000.00. Thereafter, appellants filed a petition seeking the posting of additional security, alleging that Nationwide was responsible for the entire amount of the judgment. The request was denied by the trial court with the court noting that Nationwide had deposited with the prothonotary the limits of its coverage under the policy. The trial court held that the terms of the policy provided for interest payments on all awards except where the policy limits had been formally offered by the insurer. The court reasoned that since such a formal offer was made by Nationwide in September of 1991, it was not obligated to pay interest or delay damages accruing after that time. The court rejected appellants' argument that, because the offer made was conditional upon the signing of a release, there was no "formal offer". The court ruled that the language of the policy did not refer to unconditional offers, only formal offers. Because such a formal offer was made by Nationwide, it found Nationwide had no obligation to pay interest and, therefore, no basis existed for the posting of additional security. Appellant appealed and this Court affirmed the trial court's decision after accepting the appeal from a collateral order. Brown v. Candelora, 453 Pa.Super. 677, 683 A.2d 307 (1996) (Memorandum).

Following the conclusion of the appeals at No. 02207 Philadelphia 1995 and No. 03502 Philadelphia 1994, Nationwide petitioned the trial court to set aside the garnishment proceedings instituted by appellants. The court granted the petition and ordered the prothonotary to mark the writ and levy of execution against Nationwide set aside. The trial court concluded that, based upon the Pennsylvania Supreme Court's decision in Johnson v. Beane, 541 Pa. 449, 664 A.2d 96 (1995), appellants had no standing to prosecute a bad faith garnishment action against Nationwide absent an actual assignment of the chose in action from the insured to appellants. Reasoning that no such assignment existed in this case, the court granted the petition. It further found that the matters of delay damages and interest which had previously been discussed and ruled on by the trial court, and affirmed by the Superior Court on appeal, could not be relitigated in the trial court. This appeal was taken from the order which set aside the writ and levy of execution.

Appellants contend that the trial court erred when it granted the motion of Nationwide to set aside this garnishment action instituted by appellants against Nationwide, based upon the argument that their "post judgment attachment execution acts as an equitable assignment to them, as judgment creditors, of [the insured, Nicholas Yiambilis'] claims against Nationwide both in contract and for its bad faith breach of contract", citing Bianco v. Concepts "100", Inc., 291 Pa.Super. 458, 463-467, 436 A.2d 206, 209-210 (1981). While it cannot be disputed that under Pennsylvania law "garnishment is a well-settled, viable remedy available to a judgment creditor to collect on a judgment from the judgment debtor's insurer," Butterfield v. Giuntoli, 448 Pa.Super. 1, 12, 670 A.2d 646, 651 (1995), allo. denied, 546 Pa. 635, 683 A.2d 875 (1996), those cases are inapplicable to the instant proceeding where the limits of the $100,000 coverage under the policy issued by Nationwide to Nicholas Yiambilis have already been paid to appellants. ²

Garnishment is a remedy created to enable a judgment creditor to reach assets of his debtor held by a stranger and is the means by " 'which a creditor collects his debt out of property of the debtor in the hands of a third party.' " Garden State Standardbred Sales Co., Inc. v. Seese, 417 Pa.Super. 15, 18, 611 A.2d 1239, 1241 (1992), quoting Triffin v. Interstate Printing Co., Inc., 357 Pa.Super. 240, 244 n. 4, 515 A.2d 956, 958 n. 4 (1986).

Rule 3101(b) of the Rules of Civil Procedure provides, inter alia, that:

" Any person may be a garnishee and shall be deemed to have possession of property of the defendant if he

(1) owes a debt to the defendant;

(2) has property of the defendant in his custody, possession or control...."

Pa.R.Civ.P. 3101(b). Where a defendant, insured under a policy of liability insurance, has been found liable to a plaintiff for damages arising from a covered loss, the contract of insurance operates to create a debt in the amount of the judgment, owed by the insurer to the insured. Thus, the insurer both owes a debt to the defendant and has property of the defendant in his possession which is subject to attachment/garnishment by the plaintiff. See, e.g., Adamski v. Miller, 545 Pa. 316, 681 A.2d 171 (1996); Dubrey v. Izaguirre, 454 Pa.Super. 504, 685 A.2d 1391 (1996); Strickler v. Huffine, 421 Pa.Super. 463, 618 A.2d 430 (1992).

Where the insured has not assigned any of his rights against his insurer to the judgment creditor, the judgment creditor may reach, via garnishment proceedings, only that "property" in the possession of the garnishee which belongs to the tortfeasor. In those instances where the garnishee is the insurer of the tortfeasor, the property subject to attachment is the applicable limits of the coverages provided by the policy insuring against the loss. See: Adamski v. Miller, supra; Strickler v. Huffine, supra; Tominello v. Janeway, 392 Pa.Super. 404, 410, 573 A.2d 218, 221 (1990).

The insured's claims against his or her insurer, however, constitute unliquidated claims, choses in action, not subject to garnishment. ³ Only such debts as are not dependent upon a contingency but are certain and payable are properly attachable in garnishment proceedings. An unliquidated claim for breach of contract is not "a debt owed" or "property" and "such a claim may not be attached as if it were the debtor's property in the garnishee's hands." In Re J. Robert Pierson, Inc., 44 B.R. 556, 559 (E.D.Pa.1984).

Where the insurer is not in possession of property of its insured, as in the instant case where the policy limits have been paid to appellants, garnishment is not an alternative means of prosecuting a claim where a direct action by the appellants against the insurer would be prohibited.

Under settled Pennsylvania law, appellants cannot maintain a direct action against Nationwide since:

(a) Appellants are strangers to the contract of insurance. See: Commonwealth, Department of General Services v. Celli-Flynn, 115 Pa.Cmwlth. 494, 498, 540 A.2d 1365, 1368 (1988); Aetna Insurance Co. v. Pennsylvania Manufacturers Association Insurance Co., 456 F.Supp. 627, 634 (E.D.Pa.1978). See also: General Accident Insurance Co. v. Federal Kemper Insurance Co., 452...