Graves v. Associated Transport, Inc., 9727.

• Decision Date: 07 April 1965
• Docket Number: No. 9727.,9727.
• Citation: 344 F.2d 894
• Parties: Walter B. GRAVES, Appellee, v. ASSOCIATED TRANSPORT, INC., Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

344 F.2d 894 (1965)

Walter B. GRAVES, Appellee, v. ASSOCIATED TRANSPORT, INC., Appellant.

No. 9727.

United States Court of Appeals Fourth Circuit.

Argued February 2, 1965.

Decided April 7, 1965.

Evans B. Jessee, Roanoke, Va. (Arthur E. Smith, Roanoke, Va., on brief), for appellant.

James M. Roe, Jr., Fincastle, Va. (Carter & Roe, and Stuart B. Carter, Fincastle, Va., on brief), for appellee.

Before HAYNSWORTH, Chief Judge, J. SPENCER BELL, Circuit Judge, and CHRISTIE, District Judge.

J. SPENCER BELL, Circuit Judge.

This action, originally filed in the Circuit Court of Botetourt County, Virginia, and removed to the District Court for the Western District of Virginia on the ground of the diversity of the citizenship of the parties, presents a single question: Did the district court err in refusing to treat as res judicata the judgment in a former action (to which only one of the parties in the instant case was a party) arising from the same highway collision?

On November 19, 1962, a collision occurred near Fincastle, Virginia, between a passenger automobile owned and operated by the plaintiff, Walter B. Graves, and a tractor-trailer transport owned by the defendant, Associated Transport, Inc. hereinafter Associated, and operated by its employee, Thomas S. Flowers. In the present action Graves seeks damages from Associated for personal injuries suffered in the collision, which he alleges was caused by negligence on the part of the defendant's driver, Flowers. On July 14, 1964, the jury returned a verdict for Graves in the amount of $4,000.00 after the district judge in several distinct rulings had refused Associated's plea of res judicata.

There can be no doubt that the defendant effectively presented its defense of res judicata to the court below and preserved that issue for the purpose of this appeal. It affirmatively pleaded the former judgment; it orally moved for summary judgment at the close of the plaintiff's evidence; it moved for summary judgment at the close of all the evidence; and it moved to set aside the verdict and for summary judgment after verdict. The plea, the motions for summary judgment, and the motion to set aside the verdict were all based upon the theory that the former judgment was conclusive of the issues in this case.

The former judgment in question was rendered by the Law and Chancery Court of the City of Roanoke, Virginia, on July 10, 1964, in an action brought by Flowers, the driver of the tractor-trailer combination owned by Associated, the present defendant, against Graves, the owner-operator of the passenger car and the plaintiff in the case at bar. Flowers alleged in the state court action that personal injuries suffered by him in the collision were the proximate result of the negligence of Graves; Graves denied any negligence and contended that the sole proximate cause of the collision was the negligence of Flowers. The issues of negligence and contributory negligence as causal factors in the collision were thus clearly joined and litigated. The jury in the case of Flowers v. Graves¹ returned a verdict in favor of Flowers, awarding him damages in the amount of $2,000.00. We must take it, then, that the jury found Graves guilty of negligence and Flowers free from contributory fault. If this were a case in which Graves were seeking to relitigate the issues decided in the state court personal injury suit against his adversary in that action, Flowers, we would hold without discussion that, the issues, the causes of action, and the parties being the same in both suits, the former judgment operated as res judicata to bar the second action. Here, however, the plea is asserted not by Flowers, Graves' adversary in the former action, but by the employer of Flowers, Associated, who was not a party to the prior action.

It is clear beyond question that we must decide this case in accordance with the substantive law of Virginia. The case is in the federal courts solely by reason of the diversity of the citizenship of the parties, and their rights and obligations are concededly governed by Virginia law. Hence the doctrine of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), applies.

The parties seem agreed that no Virginia authority squarely in point is to be found. In that situation it is our duty, as we see it, to decide the case as we believe it would be decided by the highest court of Virginia, taking into account not merely the generalizations and the dicta in cases from years past but also trends in modern legal thought which we think would be accepted by the Supreme Court of Appeals of Virginia today.

Had this case been presented to a Virginia court a generation or more ago, we have little doubt that the plea of res judicata would have been summarily denied. At that time the ruling notion, viable despite the cogent criticism of Jeremy Bentham² and others since the early part of the nineteenth century, was that before it could be invoked, the estoppel of a judgment must be mutual, i. e., no one could plead as conclusive a judgment in a former action unless, had the judgment gone the other way, it would have been binding on him. It seems clear that had the judgment in Flowers v. Graves gone against Flowers instead of for him, elementary principles of due process would prevent its being held binding upon Associated because it was not a party to that action and had no right to control its conduct. Makariw v. Rinard, 336 F.2d 333, 336 (3 Cir. 1964); Rice v. Ringsby Truck Lines, 302 F.2d 550, 552 (7 Cir. 1962); Restatement, Judgments § 96, comment (j) (1942). The thrust of the mutuality rule was that since one not a party to the former action could not be bound by the judgment therein, it necessarily followed that neither could he take advantage of it. The Virginia courts, like many others, subscribed to this view. See, e. g., Ferebee v. Hungate, 192 Va. 32, 63 S.E.2d 761, 764 (1951); Pittston Co. v. O'Hara, 191 Va. 886, 63 S.E.2d 34, 42, appeal dismissed sub nom. Winn v. Pittston Co., 342 U.S. 803, 72 S.Ct. 38, 96 L.Ed. 608 (1951).³

The mutuality rule was probably never a solid wall; exceptions were created under the pressure of the public interest in an end to litigation. The thought was that under certain circumstances once the party against whom the former judgment was asserted had been afforded a full and fair day in court and a reasonable opportunity to be heard on all the relevant issues, even though against a different adversary, a plea of estoppel by judgment ought to be recognized.⁴ Thus where a judgment has been rendered in favor of an indemnitor, it may be pleaded against the adversary party in the former action by the indemnitee, even though the indemnitee was not a party to the prior action. Pickeral v. Federal Land Bank, 177 Va. 743, 15 S.E.2d 82 (1941); City of Richmond v. Davis, 135 Va. 319, 116 S.E. 492 (1923); Restatement, Judgments § 96 (1942). So here, Virginia might well hold that Associated would be entitled to plead the former judgment in favor of its employee because, if required to respond in damages in the present case for the fault of its employee, it would have, at least in theory, a cause of action for indemnity against the employee; and it would be anomalous if that cause of action should be allowed to prevail against an employee who had already recovered a judgment himself against the third party. In addition, an exception to the rule of mutuality has been recognized where the liability of the person invoking the former judgment is only derivative, i. e., based solely upon the fault of another who has been exonerated. Ward v. Charlton,⁵ 177 Va. 101, 12 S.E.2d 791 (1941); Restatement, Judgments § 99 (1942); cf. Kinsley v. Markovic, 333 F.2d 684 (4 Cir. 1964). Here Virginia might well allow this plea by Associated on the ground that any liability on its part must be predicated solely upon the fault of its driver, Flowers, who was exonerated of fault by the state court decision.⁶ In reaching our decision in this case, however, we do not rest upon these exceptions because there is some question as to their applicability as the strategic positions of the parties in the respective actions vary and because we believe the Virginia courts would base their allowance of the plea on a broader ground.

As one judicial writer has asserted, perhaps the "widest breach in the citadel of mutuality was rammed"⁷ by the decision of the Supreme Court of California in Bernhard v. Bank of America Nat'l Trust & Sav. Ass'n, 19 Cal.2d 807, 122 P.2d 892 (1942). In this historic decision Justice, now Chief Justice, Traynor, writing for a unanimous court, stated:

"The criteria for determining who may assert a plea of res judicata differ fundamentally from the criteria for determining against whom a plea of res judicata may be asserted. The requirements of due process of law forbid the assertion of a plea of res judicata against a party unless he was bound by the earlier litigation in which the matter was decided. * * * He is bound by that litigation only if he has been a party thereto or in privity with a party thereto. * * * There is no compelling reason, however, for requiring that the party asserting the plea of res judicata must have been a party, or in privity with a party, to the earlier litigation.

"No satisfactory rationalization has been advanced for the requirement of mutuality. Just why a party who was not bound by a previous action should be precluded from asserting it as res judicata against a party who was bound by it is difficult to comprehend. * * *

"In determining the validity of a plea of res judicata three questions are pertinent: 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? * * *

"In the present case, therefore,

...