Harrison v. Chandler-Sampson Ins., Inc.

• Decision Date: 20 January 2005
• Docket Number: No. 2003-CA-02085-SCT.,2003-CA-02085-SCT.
• Citation: 891 So.2d 224
• Parties: Neil R. HARRISON and Julia A. Harrison v. CHANDLER-SAMPSON INSURANCE, INC.
• Court: Mississippi Supreme Court

891 So.2d 224

Neil R. HARRISON and Julia A. Harrison v. CHANDLER-SAMPSON INSURANCE, INC.

No. 2003-CA-02085-SCT.

Supreme Court of Mississippi.

January 20, 2005.

James W. Nobles, Jr., Jackson, W. Brady Kellems, Brookhaven, attorneys for appellants.

Douglas Drew Malone, Richard M. Edmonson, Jackson, attorneys for appellee.

Before COBB, P.J., CARLSON and RANDOLPH, JJ.

CARLSON, Justice, for the Court.

¶ 1. Neil R. and Julia A. Harrison, husband and wife, appeal to this Court from the Madison County Circuit Court's entry of a final judgment of dismissal on res judicata grounds. Finding no reversible error, we affirm.

FACTS AND PROCEEDINGS IN THE TRIAL COURTS

¶ 2. The Harrisons (referred to individually as Neil and Julia, for the sake of clarity) owned and operated two separate, but interactive, businesses. Their flagship venture, incorporated under the name Service Air ("Service Air"), operated as a heating and air conditioning business for which the Harrisons served concurrently as directors, officers and shareholders. In addition to her interest in Service Air, Julia worked in her own capacity as a homebuilder. This separate business venture was operated as a sole proprietorship under Julia's exclusive control.¹ In building her homes, Julia employed a homesteader strategy. Typically, the Harrisons moved into the residences which Julia built, and, after a period of time, they sold them in the real estate market. The Harrisons' cooperative plan allowed their two business ventures to work in concert with each other as Service Air provided the central air components to Julia's building projects. In relation to this contractual relationship, the Harrisons regularly procured commercial general liability ("CGL") insurance coverage for Service Air.

¶ 3. In 1992 the Harrisons again implemented their cooperative business plan and, pursuant to their efforts to build their newest project, obtained an insurance policy through Chandler-Sampson Insurance, Inc. (Chandler-Sampson).² The policy was issued by Ohio Casualty Insurance Company ("Ohio Casualty") to Service Air on June 30, 1994. After two and half years of residency in Julia's newest home, the Harrisons placed the residence on the market. In October of 1994, Dr. Fred L. McMillan bought the Harrisons' house and shortly thereafter, the home began to deteriorate as problems ranging from structural defects to foundational flaws surfaced. On February 12, 1997, Dr. McMillan sued the Harrisons in the Circuit Court of Madison County for breach of contract, breach of implied warranty, negligence and fraud. A jury trial resulted in a verdict in the amount of $290,066 in favor of Dr. McMillan and against the Harrisons, and on appeal this Court affirmed the circuit court judgment. Harrison v. McMillan, 828 So.2d 756 (Miss.2002).

¶ 4. Following the McMillan judgment, the Harrisons filed two suits in the Madison County Circuit Court against their insurers. In Cause No. CI-98-0074, Chandler-Sampson, Ohio Casualty, and Great American Insurance Company³ were named as defendants and in Cause No. CI-98-0111, Chandler-Sampson, State Automobile Mutual Insurance Company, and State Auto Property and Casualty Insurance Company⁴ were named as defendants. In both complaints the Harrisons asserted similar legal theories and claimed that Chandler-Sampson was liable for the damages stemming from the McMillan judgment. Specifically, the Harrisons alleged that Chandler-Sampson incurred liability when it refused to notify the liability insurance carriers of the Harrisons' potential lawsuit and for their subsequent refusal to defend the suit. Concerning the defendant insurance carriers, the issue was whether the Harrisons' breach of their contract with Dr. McMillan fell within any of the specific areas of coverage provided by each insurer.

¶ 5. The insurance carriers removed both cases to the United States District Court for the Southern District of Mississippi on a theory of fraudulent joinder. The insurance carriers argued that the Harrisons did not have a cognizable claim against Chandler-Sampson and that Chandler-Sampson had been joined in the suit strictly for the purpose of destroying the federal court's diversity jurisdiction.

¶ 6. In both cases, the Harrisons filed a motion to remand to state court. The Harrisons asserted that Chandler-Sampson was liable under Mississippi law and, as the procurer of the policies in question, Chandler-Sampson incurred individual liability when it disclaimed its liability under all insurance policies and refused to undertake the defense of the McMillan suit. Additionally, and for the first time, the Harrisons asserted that Chandler-Sampson was jointly liable with the several insurance carriers for negligence.⁵

¶ 7. In considering the motions, the federal district court pierced the pleadings and employed a summary-judgment-like procedure in order to determine whether the Harrisons had any possibility of recovering against the non-diverse party, Chandler-Sampson. The federal district court acknowledged Chandler-Sampson's status as that of an agent for a disclosed principal and reasoned that, in order to incur independent liability, an agent must act with gross negligence, malice or recklessness. The federal district court applied this standard and determined that the Harrisons asserted no cognizable claim, and that they were thus precluded from recovering against Chandler-Sampson. Based on these findings, the federal district court dismissed Chandler-Sampson from the suit as an improper party, retained jurisdiction, and ultimately consolidated the two claims against the remaining insurance carriers. Several months later, after determining that the Harrisons' judgment debt was not covered by the companies' insurance contracts, the federal district court granted summary judgment in favor of the insurance carriers. Harrison v. Ohio Cas. Ins. Co., Inc., 199 F.Supp.2d 518 (S.D.Miss.2000). In 2002, the Fifth Circuit affirmed both the federal district court's grant of Chandler-Sampson's motion to dismiss and its grant of the insurance carriers' motions for summary judgment. Harrison v. Ohio Cas. Ins. Co., 31 Fed.Appx. 833 (5th Cir.2002) (per curiam) available at ftp://opinions. ca5.uscourts. gov/unpub/01/ 01-60386.0.wpd.pdf.

¶ 8. On April 14, 1999, the Harrisons filed suit in the Madison County Circuit Court against Chandler-Sampson. It is this suit from which the instant appeal arises. Under the auspices of a new legal theory, the Harrisons claim that Chandler-Sampson, as their insurance agent, was negligent in the writing of their insurance coverage due to Chandler-Sampson's failure to assure that the relevant policies covered the McMillan claims.

¶ 9. In response, Chandler-Sampson filed a motion for summary judgment asserting that it was previously joined as a party-defendant in two prior cases which were removed to the federal district court. Accordingly, in this motion, Chandler-Sampson raised the defense of res judicata and argued that the bar was appropriate since the Harrisons' current claim was fully adjudicated on the merits in the federal district court action.

¶ 10. The Madison County Circuit Court granted summary judgment in favor of Chandler-Sampson holding that the doctrine of res judicata barred all issues which were raised or could have been raised in the initial suit. It is from this final judgment that the Harrisons now appeal.

DISCUSSION

¶ 11. We apply a de novo standard of review of a trial court's grant or denial of a motion for summary judgment. Satchfield v. R.R. Morrison & Son, Inc., 872 So.2d 661, 663 (Miss.2004); McMillan v. Rodriguez, 823 So.2d 1173, 1176-77 (Miss.2002); Lewallen v. Slawson, 822 So.2d 236, 237-38 (Miss.2002); Jenkins v. Ohio Cas. Ins. Co., 794 So.2d 228, 232 (Miss.2001); Aetna Cas., & Sur. Co. v. Berry, 669 So.2d 56, 70 (Miss.1996). Accordingly, just like the trial court, this Court looks at all evidentiary matters in the record, including admissions in pleadings, answers to interrogatories, depositions, affidavits, etc. Id. at 70. The evidence must be viewed in the light most favorable to the party against whom the motion has been made. Id. If, in this view, the moving party is entitled to judgment as a matter of law, summary judgment should forthwith be entered in his favor. Id. When a motion for summary judgment is made and supported as provided in Miss. R. Civ. P. 56, an adverse party may not rest upon the mere allegations or denials of the pleadings, but instead the response must set forth specific facts showing that there is a genuine issue for trial. Miller v. Meeks, 762 So.2d 302, 304 (Miss.2000). If any triable issues of fact exist, the trial court's decision to grant summary judgment will be reversed. Otherwise, the decision is affirmed. Id. at 304.

I. WHETHER THE FEDERAL DISTRICT COURT'S REFUSAL TO REMAND AND SUBSEQUENT DISMISSAL OF CHANDLER-SAMPSON AS AN IMPROPERLY JOINED PARTY CONSTITUTED A FINAL ADJUDICATION ON THE MERITS?

¶ 12. The Harrisons' threshold argument is that the federal district court's denial of their motion to remand was not an adjudication on the merits. They predicate this argument on their interpretation of Fed.R.Civ.P. 41(b). The Harrisons assert that a Rule 41(b) involuntary dismissal is strictly reserved for a failure to prosecute, a failure to comply with the rules of civil procedure or a failure to comply with a court order. In applying this interpretation to the federal district court's final order finding inter alia that Chandler-Sampson was an improperly joined party to the suit and that diversity of citizenship jurisdiction was preserved in accordance with 28 U.S.C. § 1332, the Harrisons argue that the federal district court dismissal was not one envisioned by Fed.R.Civ.P. 41(b) and thus was not an adjudication on the merits. The Harrisons assert that a § 1332 diversity inquiry, for purposes of removal under 28 U.S.C. § 1441, requires only that the federal...