Broz v. Winland

• Citation: 68 Ohio St.3d 521,629 N.E.2d 395
• Decision Date: 30 March 1994
• Docket Number: No. 92-2370,92-2370
• Parties: BROZ, Exr., et al., Appellants, v. WINLAND et al.; American States Insurance Company, Appellee.
• Court: United States State Supreme Court of Ohio

Page 521

68 Ohio St.3d 521

629 N.E.2d 395

BROZ, Exr., et al., Appellants, v. WINLAND et al.; American States Insurance Company, Appellee.

No. 92-2370.

Supreme Court of Ohio.

Submitted Dec. 14, 1993.

Decided March 30, 1994.

SYLLABUS BY THE COURT

A determination made in a declaratory judgment action between an insurance company and its insured does not bind persons injured by the insured's negligence who are not parties to the declaratory judgment action.

On July 16, 1989, Rosemarie Broz, her fiance Dana Dominick, and her mother Rose Marie Broz were involved in an automobile accident when their vehicle was struck by an automobile driven by Melissa Winland. Rosemarie was severely injured and her mother and fiance were killed. Rosemarie Broz and Richard E. Broz, as executor of the estate of Rose Marie Broz, appellants, brought a tort action against Melissa Winland for the resulting personal injury and wrongful death. The estate of Dana Dominick is not a party to this appeal.

At the time of the accident, Melissa's father, Harold Winland, was insured under an American States Insurance Company automobile policy. While Melissa, as a family member, was a "covered person" pursuant to the policy, the insurance contract excluded liability coverage for any person "using a vehicle without a reasonable belief that the person is entitled to do so."

While the tort action was pending, American States brought a separate declaratory judgment action against its insureds, Harold and Melissa Winland, seeking a determination that there was no coverage for Melissa because she did not have a reasonable belief that she was entitled to use the vehicle she was operating at the time of the accident. The court hearing the declaratory judgment action agreed and entered judgment for American States.

Meanwhile, the tort action against Melissa had been set for trial. Prior to trial, however, and after the declaratory judgment, Melissa confessed judgment to the Brozes in the sum of $1.2 million. After the judgment went unsatisfied for thirty days, the Brozes filed a supplemental complaint against American States pursuant to R.C. 3929.06.

American States filed a motion to dismiss and a motion for summary judgment, raising the affirmative defense of res judicata because of the determination reached in the declaratory judgment action. Both motions were denied and the case proceeded to trial.

At trial, Melissa testified concerning the events leading up to this tragedy. According to Melissa, on July 16, 1989, she accompanied her friend, Tisa Yates, and Tisa's parents to a high school graduation party. Tisa, her parents, and Melissa arrived at the party around 5:30 p.m. Tisa's brother, Daniel, also attended the party; however, he drove separately.

At approximately 8:15 p.m., Tisa's parents decided to leave the party. Mr. and Mrs. Yates informed the girls they would be back around 9:30 p.m. to take them home. After Mr. and Mrs. Yates left, the girls offered to drive another friend home. Although neither Tisa, age eighteen, nor Melissa, age seventeen, had a driver's license, Tisa's brother Daniel gave his car keys to Tisa and gave Tisa permission to drive his car. However, Daniel expressly instructed his sister not to let Melissa drive. Melissa overheard this conversation.

Once outside the house, Tisa asked Melissa to back the car out of the parking space, because she had difficulty in doing so. According to Melissa, Melissa continued driving at Tisa's request. Melissa also testified that she sought to relinquish the driving responsibilities to Tisa on two more occasions, but Tisa claimed she could not drive because she had been drinking. Although Tisa testified that Melissa had specifically requested permission to drive, she admitted she allowed Melissa to do so because she was afraid that they could be stopped by the police, and she felt the penalties would not be as harsh for a seventeen-year-old.

After driving their friend home, the girls were on their way back to the party when Melissa lost control of the vehicle, causing this tragic collision.

At the close of the plaintiffs' case, the trial court granted American States' motion for a directed verdict, ruling as a matter of law that Melissa had been without a reasonable belief that she was entitled to operate Daniel Yates's vehicle. The Brozes appealed and American States cross-appealed the trial court's decision denying the motion to dismiss and motion for summary judgment based upon res judicata.

The court of appeals upheld the directed verdict and reversed the trial court's denial of American States' motion for summary judgment.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Jeffries, Kube, Forrest & Monteleone Co., L.P.A., Michael R. Kube and William J. Shramek, Cleveland, for appellants.

Cronquist, Smith, Marshall & Weaver and Stephen C. Merriman, Cleveland, for appellee.

FRANCIS E. SWEENEY, Sr., Justice.

The legal issue we are asked to decide is whether a determination made in a declaratory judgment action between an insurance company and its insureds binds persons injured by the insured's negligence who are not parties to the declaratory judgment action. For the reasons which follow, we hold that injured persons not parties to a separate declaratory judgment action are not bound by such decision, and thus are not precluded from litigating the issue of insurance coverage in an R.C. 3929.06 supplemental proceeding.

I

American States obtained a declaratory judgment against its insureds, Melissa and her father, that determined that it had no duty to indemnify Melissa under the terms of the insurance policy because Melissa had no "reasonable belief" that she was entitled to use the car. Because of this judgment, American States filed a motion for dismissal and a motion for summary judgment in the tort action, arguing that the doctrine of res judicata prevented the Brozes from trying to collect from American States. The Brozes contend, however, that res judicata does not attach, as they were never parties to the declaratory judgment proceeding.

The concepts of res judicata, more specifically the doctrine of collateral estoppel, have no application to this matter. We have long held that mutuality of parties is a requisite to collateral estoppel. Whitehead v. Gen. Tel. Co. of Ohio (1969), 20 Ohio St.2d 108, 49 O.O.2d 435, 254 N.E.2d 10; Goodson v. McDonough Power Equip., Inc. (1983), 2 Ohio St.3d 193, 2 OBR 732, 443 N.E.2d 978. In Goodson, this court stated this general rule, and noted, "[a]s a general principle, collateral estoppel operates only where all of the parties to the present proceeding were bound by the prior judgment. * * * A prior judgment estops a party, or a person in privity with him, from subsequently relitigating the identical issue raised in the prior action." Id. at paragraph one of the syllabus. The rationale for this general rule was articulated in Goodson:

"The main legal thread which runs throughout the determination of the applicability of res judicata, inclusive of the adjunct principle of collateral estoppel, is the necessity of a fair opportunity to fully litigate and to be 'heard' in the due process sense." Id. at 200-201, 2 OBR at 739, 443 N.E.2d at 985.

The application of res judicata would deny appellants the right to litigate an issue they did not litigate in the declaratory action. They were not parties to this prior action nor were they in privity with the Winlands in the action. In fact, the Winlands and the appellants were adverse parties, at least in regard to the underlying tort action. The Winlands' primary concern is to insulate themselves from liability, whereas the appellants' concern is to obtain redress for their injuries. Thus, it cannot reasonably be found that the Winlands were adequate surrogates to protect the rights of the appellants. Thus, the appellants, who were neither engaged in the litigation of the declaratory judgment action nor in privity with the Winlands, cannot be bound by the decision reached in the prior action.

In finding that appellants were barred from litigating the issue of coverage on grounds of res judicata /collateral estoppel, the court of appeals relied on the related cases of Luntz v. Stern (1939), 135 Ohio St. 225, 14 O.O. 62, 20 N.E.2d 241, and Conold v. Stern (1941), 138 Ohio St. 352, 20 O.O. 449, 35 N.E.2d 133. However, these cases are distinguishable.

Both Luntz and Conold evolved from a single auto accident where Stern was the driver of the car and Luntz and Conold were passengers. Luntz's executors and Conold brought...