Independent Order of Foresters v. Chauvin

• Citation: 175 S.W.3d 610
• Decision Date: 20 October 2005
• Docket Number: No. 2005-SC-000193-MR.,2005-SC-000193-MR.
• Parties: THE INDEPENDENT ORDER OF FORESTERS, Appellant, v. Hon. McKay CHAUVIN, Judge, Jefferson Circuit Court, Appellee. and Forest Richard Pope, Real Party in Interest.
• Court: United States State Supreme Court — District of Kentucky

Page 610

175 S.W.3d 610

THE INDEPENDENT ORDER OF FORESTERS, Appellant, v. Hon. McKay CHAUVIN, Judge, Jefferson Circuit Court, Appellee. and Forest Richard Pope, Real Party in Interest.

No. 2005-SC-000193-MR.

Supreme Court of Kentucky.

October 20, 2005.

Joseph L. Hamilton, Marjorie Farris, Allison E. Jones, Stites & Harbison, Louisville, Counsel for Appellant.

McKay Chauvin, Judge, Louisville, pro se.

Kenneth H. Baker, Louisville, Counsel for Real Party In Interest.

Opinion of the Court by Justice ROACH.

In an original action in the Court of Appeals, Appellant, the Independent Order of Foresters ("Foresters"), sought a writ of prohibition against the circuit court on the grounds that Forest Richard Pope's claims were barred by res judicata. The Court of Appeals denied the petition, finding that Foresters had failed to carry its burden of proof. On appeal, Foresters repeats its claim that Pope's cause of action is barred by res judicata. Because Foresters has failed to show that its claim is such that the extraordinary remedy of writ is even available, we affirm the Court of Appeals.

I. FACTUAL BACKGROUND

Foresters is a fraternal benefit society that sells life and health insurance to its members. In 1989, Forest Richard Pope purchased a universal life insurance policy from Foresters. The insurance policy included a child term rider that would pay the policyholder $10,000 upon the death of the covered child. Pope's daughter was the covered child under his policy. She died in 2000 at the age of 26. Pope filed a claim under the child term rider later that year, and Foresters denied it as not being in effect at the time of the daughter's death.

In 2001, Forest Richard Pope sued Foresters in the Jefferson Circuit Court over the child term rider of his insurance policy. Specifically, Pope alleged that he had purchased the child term rider and paid its annual premiums with the understanding that it would be effective until he turned 65.¹ This belief was based on the fact that the annual billing statements Pope received from Foresters listed February 2, 2009 (when Pope will be 65) as the termination date of the child term rider.

Foresters, however, claimed that coverage under the child term rider terminated at the earlier of the policyholder turning 65 or the policyholder's child turning 25. Foresters's interpretation was based on the following language in the rider: "[A] child will cease to be an Insured Child on the earlier of the child's 25th birthday or the anniversary of the date of issue of the certificate nearest the member's 65th birthday." Foresters claims that coverage lapsed when Pope's daughter turned 25 on July 3, 1998. However, Foresters continued to bill Pope and he continued to pay for the child term rider after his daughter turned 25.

Pope discovered the difference between his interpretation and Foresters's only when Foresters refused to pay the claim he filed in 2000. Foresters also refused to repay the premiums that Pope had paid after his daughter turned 25. Based on these facts, Pope alleged in his complaint that Foresters had engaged in the practice of charging premiums when it knew or should have known that no benefit would inure to policyholders because their insured children had reached the age of 25. His complaint specifically claimed breach of contract, rescission, unjust enrichment, and negligent misrepresentation. He also sought to have the case certified as a class action, claiming that thousands of other people were similarly situated.

The insurance policy on which Pope based his lawsuit had previously been the subject of a nationwide class action lawsuit. That suit, which focused on Foresters's sales practices, was settled, and the Federal District Court for the District of New Jersey entered a Final Order and Judgment. See Roy v. Independent Order of Foresters, No. 97-CV-6225 (JCL), Final Order and Judgment (D.N.J. Aug. 3, 1999) [hereinafter Final Order and Judgment].

Foresters moved the trial court to dismiss Pope's claim as barred by res judicata because issues related to the child term rider, as part of the insurance policy in Roy, had already been decided by the Roy settlement. Foresters cited specifically to language in the Final Order and Judgment that gives it preclusive, res judicata effect over future claims based on the conduct involved in the Roy lawsuit. The trial court denied Foresters's motion, refusing to give the Roy Final Judgment and Order res judicata effect on Pope's claims. Specifically, the trial court held that Pope's current claims were distinct from those covered by the Final Order and Judgment because the Roy litigation "involved a point-of-sale fraud," whereas Pope's claims were based on allegations of "fraud ... after the purchase of the policy."

Rather than proceeding with discovery regarding Pope's claims, Foresters initiated an original action in the Court of Appeals by filing a petition for a writ of prohibition against the trial court on the alternative grounds that the circuit court was proceeding without jurisdiction or that Foresters would suffer great injustice and irreparable injury. Both grounds were based on Foresters's assertion that Pope's underlying cause of action was barred by res judicata. The Court of Appeals denied the petition, noting simply the following:

The argument that Foresters makes in this original action fails to satisfy this Court that the respondent trial court is proceeding without jurisdiction. Further, in order to show entitlement to a review of the merits of its alternate argument, Foresters was required to demonstrate the ... prerequisites of lack of an adequate remedy by appeal or otherwise and great injustice and irreparable injury. It is clear to the Court that Foresters did not carry that burden.

Foresters now appeals to this Court as a matter of right. See Ky. Const. § 115 ("In all cases, civil and criminal, there shall be allowed as a matter of right at least one appeal to another court."); CR 76.36(7)(a) ("An appeal may be taken to the Supreme Court as a matter of right from a judgment or final order in any proceeding originating in the Court of Appeals.").

II. ANALYSIS

The writ of prohibition is such an "extraordinary remedy" that Kentucky courts "have always been cautious and conservative both in entertaining petitions for and in granting such relief." Bender v. Eaton, 343 S.W.2d 799, 800 (Ky.1961). We have divided writ cases into "two classes," which are distinguished by "whether the inferior court allegedly is (1) acting without jurisdiction (which includes `beyond its jurisdiction'), or (2) acting erroneously within its jurisdiction." We have also delineated a third "class" of writ cases (in essence, a subclass of the "acting erroneously" class): the so-called "certain special cases." Id. at 801. Foresters claims it is entitled to a writ of prohibition under all three of the writ categories we have identified. Because the requirements for a writ under each class are different, we discuss Foresters's claim under each separately.

A. Acting Without Jurisdiction

We recently announced the following standard as to the granting of writs when the lower court is allegedly acting without jurisdiction: "A writ of prohibition may be granted upon a showing that ... the lower court is proceeding or is about to proceed outside of its jurisdiction and there is no remedy through an application to an intermediate court...." Hoskins v. Maricle, 150 S.W.3d 1, 10 (Ky.2004). Foresters claims that the trial court is proceeding outside its jurisdiction because Pope's action is barred by res judicata. Foresters cites three cases — Slone v. R & S Mining, Inc., 74 S.W.3d 259 (Ky.2002); Potter v. Eli Lilly and Co., 926 S.W.2d 449 (Ky.1996); and Stephens v. Goodenough, 560 S.W.2d 556 (Ky.1977) — in support of its contention.

Foresters has mischaracterized these cases. In Slone, we held that a dismissed workers' compensation claim cannot be reopened based solely on "evidence of a change of medical condition." 74 S.W.3d at 262. While Slone was based in part on res judicata, it does not stand for the blanket proposition that res judicata removes jurisdiction over a later, other claim. Even assuming that Slone is applicable outside the limited context of the workers' compensation statutory scheme, it only prohibits the reopening of the specific denial of an award.

Foresters's citation to Potter and Stephens is even less compelling. While Foresters correctly notes that Potter involved the appeal of a writ issued because the Court of Appeals felt that the circuit court had "lost jurisdiction to reopen the judgment," 926 S.W.2d at 452, it fails to note that we reversed the Court of Appeals and dissolved the writ in that case. But even if the Court of Appeals had been correct, its writ was premised on the claim that the circuit court had lost jurisdiction because the judgment had become final, not because of the res judicata effect of the judgment. More importantly, Potter contains no discussion of res judicata. Stephens stands merely for the proposition that a ruling on a petition for a writ of prohibition can have res judicata effect on a subsequent petition, not that it strips the court of jurisdiction to consider the subsequent petition.

As we have repeatedly recognized, "the rule of res judicata is an affirmative defense...." Yeoman v. Commonwealth, Health Policy Bd., 983 S.W.2d 459 (Ky.1998); see also CR 8.03 ("In pleading to a preceding pleading, a party shall set forth affirmatively ... res judicata ... and any other matter constituting an avoidance or affirmative defense."). And as an affirmative defense, res judicata can be waived. See, e.g., Old Line Life Ins. Co. of America v. Garcia, 418 F.3d 546, 550 (6th Cir.2005) ("As a general rule, failure to plead an affirmative defense results in a waiver of that defense."). This alone indicates that res judicata has no jurisdictional dimension.

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