Hayes v. United Fire & Casualty Company

• Decision Date: 31 August 1999
• Citation: 3 S.W.3d 853
• Court: Missouri Court of Appeals
• Parties: (Mo.App. E.D. 1999) . Wilma Earline Hayes, D. Keith Thomas and Tamara Thomas, Plaintiffs/Respondents, v. United Fire & Casualty Company, Defendant/Appellant. Case Number: 75178 Missouri Court of Appeals Eastern District Handdown Date: 0

3 S.W.3d 853 (Mo.App. E.D. 1999)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Wilma Earline Hayes, D. Keith Thomas and Tamara Thomas, Plaintiffs/Respondents, v. United Fire & Casualty Company, Defendant/Appellant.

Case Number: 75178

Missouri Court of Appeals Eastern District

Handdown Date: 08/31/99

Appeal From: Circuit Court of St. Charles County, Hon. Lucy D. Rauch

Counsel for Appellant: Thomas J. Noonan

Counsel for Respondent: Cheryl Callis and Jeffrey S. Thomsen

Opinion Summary: In an equitable garnishment action under section 379.200, accident victims sought to garnish insurance proceeds for amounts due on default judgments entered against United Fire United Fire & Casualty Company's insureds. United Fire appeals the grant of summary judgment in the accident victims' favor.

REVERSED AND REMANDED.

Division Three holds: (1) The insurer obtained a default judgment against its insured for the insureds' failure to cooperate in the defense of the accident victims' claims. The declaratory judgment determined the insurer owed no duty to defend or indemnify the insureds for the accident victims' claims against the insureds. But the declaratory judgment did not have collateral estoppel effect in the accident victims' action against the insurer because the declaratory judgment was not a judgment on the merits. (2) The accident victims failed to prove as a matter of law that the facts necessary to support the insurer's defense were absent. A trier of fact could reasonably find that the insurer was substantially prejudiced by its insureds' breach of the cooperation clause. This issue creates a genuine issue of material fact, making summary judgment improper. (3) The unambiguous language of the cooperation clause precluded coverage to all insureds if any insured was in material breach. The severability clause does not alter the unambiguous meaning of the cooperation clause.

Opinion Author: Clifford H. Ahrens, Judge

Opinion Vote: REVERSED AND REMANDED. Teitelman, P.J., and Mooney, J., concur.

Opinion:

United Fire & Casualty Company ("United Fire") appeals from the grant of summary judgment in favor of Wilma Earline Hayes, D. Keith Thomas and Tamara Thomas (collectively "plaintiffs") in an equitable garnishment action under section 379.200, RSMo 1994.¹ Plaintiffs sought to garnish insurance proceeds for amounts due on default judgments for personal injuries resulting from an automobile accident. We reverse and remand.

On August 10, 1992, Russell Dean White was involved in an automobile accident in which Wilma and Keith² suffered personal injury. Plaintiffs filed suit in the Circuit Court of the City of St. Louis in cause number 932-01346 ("underlying action") and named as defendants John White and Becky White, doing business as White's Landscaping, and Russell (collectively "the Whites"). In her petition, Wilma alleged that Russell "was acting within the course and scope of his duties for John and Becky White" and was negligent in the operation of his vehicle. The Thomases alleged counts of negligence, respondeat superior, negligent entrustment due to John's and Becky's knowledge that Russell had a physical condition which caused him to lose consciousness, and loss of consortium. United Fire represented the Whites under the commercial automobile policy issued to White's Landscaping.

Russell, the son of John and Becky, was their employee at the time of the accident. Plaintiffs took the deposition of Russell on January 19, 1994. Becky was deposed on May 24, 1994. John failed to appear for two scheduled depositions. As a result, the trial court struck John's pleadings on June 28, 1994.

Subsequent to June 8, 1994, the White's attorney, David Coffman, lost contact with his clients. Ten letters were written from that date until October 10, 1994. One of the letters, dated June 28, 1994, was sent by certified mail. None of the letters was claimed. Coffman drove to their residence twice and attempted to reach them by telephone several times. He learned that the Whites had moved and disconnected their telephone. Private investigators hired by United Fire were unable to locate the Whites.

On October 3, 1994, United Fire filed a petition for declaratory judgment in the Circuit Court of St. Charles County in cause number CV194-5790CC. In this action, United Fire alleged that, due to the failure of the Whites to cooperate, it was substantially prejudiced in its defense of the underlying action. United Fire claimed that the Whites were therefore in violation of the insurance policy. The Whites were served by publication. The trial court entered a default judgment which determined that United Fire owed no duty to defend or indemnify the Whites in the underlying action.

On April 3, 1995, Coffman filed a motion to withdraw in the underlying action. This motion recited that he had been retained by United Fire, John had not participated in required discovery and counsel had been unable to locate the Whites. The trial court granted Coffman's motion on May 18, 1995.

On May 24, 1996, the trial court entered a default judgment in favor of plaintiffs and against the Whites in the underlying action.

Thereafter, plaintiffs filed an equitable garnishment action, cause number CV196-4347CC, in the Circuit Court of St. Charles County. In this action, plaintiffs sought to have the Whites' insurance proceeds applied to the judgments granted in their favor in the underlying action. United Fire moved for summary judgment and alleged that the declaratory judgment collaterally estopped plaintiffs from contesting United Fire's duty to indemnify or defend the Whites or, in the alternative, that the Whites had materially breached their duty to cooperate under the insurance policy and plaintiffs were therefore not entitled to recover under the Whites' policy.

Plaintiffs also moved for summary judgment. In their joint memorandum of law, plaintiffs alleged that collateral estoppel did not apply in this case and that United Fire had not demonstrated substantial prejudice due to the Whites' failure to cooperate. On August 28, 1998, the trial court entered summary judgment in the equitable garnishment action in favor of plaintiffs. United Fire appeals from this judgment.

In its first point on appeal, United Fire argues that the Whites were collaterally estopped from litigating the issue of whether United Fire had the duty to indemnify or defend the Whites. United Fire points to the default declaratory judgment in which the Circuit Court of St. Charles County found that United Fire owed no such duty. It is then argued that as plaintiffs "stand in the shoes" of the Whites, plaintiffs were similarly estopped from litigating this issue. We disagree.

In reviewing whether to apply the doctrine of collateral estoppel, a court should consider: (1) whether the issue decided in the prior adjudication was identical with the issue presented in the present action; (2) whether the prior adjudication resulted in a judgment on the merits; (3) whether the party against whom collateral estoppel is asserted was a party or in privity with a party to the prior adjudication; and (4) whether the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior suit. Baldridge v. Lacks, 883 S.W.2d 947, 950 (Mo. App. 1994); Cox v. Steck, No. ED73993, 1999 WL 152457 at *2 (Mo. App. March 23, 1999).

Plaintiffs proceeded in an equitable garnishment action under section 379.200. As such, they stand in the shoes of the Whites. See Killian v. State Farm Fire & Cas. Co., 903 S.W.2d 215, 216 (Mo. App. 1995). Plaintiffs' right of recovery is no greater and no less than that of the Whites. Id. The breadth of plaintiffs' right of recovery in this case is controlled by the decision of the Western District of this court in Hangley v. American Family Mutual Ins. Co., 872 S.W.2d 544 (Mo. App. 1994). In Hangley, the plaintiffs were involved in an automobile accident with Gaetano D'Angelo. 872 S.W.2d at 545. The defendant was D'Angelo's insurer. The plaintiffs sued D'Angelo in the Circuit Court of Jackson County for injuries resulting from the accident. Id. at 546. Before that case was heard, the United States District Court for the Western District of Missouri granted the insurer default summary judgment and determined that the insurer did not owe D'Angelo a duty to indemnify in an action between the plaintiffs and D'Angelo. Id. at 547. D'Angelo and the plaintiffs settled the Jackson County suit. The plaintiffs then filed an action against the insurer under section 379.200. Id. at 546. The insurer claimed that the plaintiffs were collaterally estopped from litigating the issue of insurance coverage in light of the federal summary judgment. However, the Hangley court found that the federal judgment was not on the merits. Id. at 548. "Where there is a question of whether a previous decision went to the merits of the case, no preclusive effect is given to the earlier decision." Id.

Other decisions of this court hold that a "judgment on the merits is one rendered after argument and investigation and when it is determined which party is in the right, as distinguished from a judgment rendered upon some preliminary or technical point, or by default, and without trial." Laususe v. Normandy Osteopathic Hosp., 918 S.W.2d 953, 956 (Mo. App. 1996); see also Bi-State Dev. Agency v. Whelan Sec. Co., 679 S.W.2d 332, 336 (Mo. App. 1984). We find that Hernandez v. Westoak Realty & Investment, Inc., 771 S.W.2d 876, 884 (Mo. App. 1989), upon which United Fire relies in its brief on this issue, is inapplicable.

The judgment entered in the declaratory judgment action was not a judgment on the merits. Consequently, plaintiffs' petition for equitable garnishment was not barred by collateral estoppel. Point denied.

In its second point on appeal, United Fire argues that the trial court erred...