Monat v. State Farm Ins. Co.

Citation469 Mich. 679,677 N.W.2d 843
Decision Date22 April 2004
Docket NumberDocket No. 121122, Calendar No. 1.
PartiesFrank MONAT, Plaintiff-Appellee, v. STATE FARM INSURANCE COMPANY, Defendant-Appellant.
CourtSupreme Court of Michigan

Moblo & Fleming, P.C. (Richard E. Moblo and Cheryl L. Ronk), Novi, MI, for the defendant.

MARKMAN, J.

We granted leave to appeal in this case to examine the mutuality requirement of the doctrine of collateral estoppel. In this first-party, no-fault action, defendant seeks to invoke collateral estoppel to preclude plaintiff from relitigating an issue already decided in plaintiff's third-party negligence action. Due only to a lack of mutuality, the Court of Appeals, in a split decision, affirmed the trial court's denial of defendant's motion for summary disposition. We hold that, where collateral estoppel is being asserted defensively against a party who has already had a full and fair opportunity to litigate the issue, mutuality is not required. Further, because we believe that this test has been satisfied, we reverse the decision of the Court of Appeals, remand this case to the trial court, and order that court to grant defendant's motion for summary disposition.

I. BACKGROUND

While stopped at a traffic light, plaintiff's vehicle was rear-ended by another vehicle. Plaintiff claims to have suffered serious injuries as a result of this accident. Defendant, plaintiff's no-fault insurer, paid personal injury protection (PIP) benefits, but stopped paying such benefits shortly after plaintiff filed a third-party negligence action against the driver of the other vehicle. Plaintiff then filed this first-party action against defendant for PIP benefits.

The third-party action proceeded to trial, where, prior to trial, both parties entered into an agreement to forgo their opportunity to appeal in lieu of plaintiff agreeing to place a cap on damages and defendant agreeing to pay plaintiff an undisclosed sum of damages regardless of the jury's verdict. That trial ended with a "no cause of action" verdict after the jury specifically found plaintiff not to have been injured. Following this verdict, defendant moved for summary disposition in the first-party action. Defendant asserted that the doctrine of collateral estoppel precluded plaintiff's first-party claim because plaintiff litigated and lost the issue of injury in the third-party action. The trial court denied defendant's motion.

The Court of Appeals, in a split opinion, affirmed the trial court's decision.1 The majority concluded that the doctrine of collateral estoppel could not apply because mutuality of estoppel was absent. The dissenting judge, however, opined that the mutuality requirement should be relaxed in cases such as this and, thus, would have applied the doctrine of collateral estoppel.

II. STANDARD OF REVIEW

A trial court's decision to grant or deny a motion for summary disposition is reviewed de novo. Stanton v. Battle Creek, 466 Mich. 611, 614, 647 N.W.2d 508 (2002).

III. ANALYSIS

Under the no-fault act, defendant is obligated to pay plaintiff benefits for "bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle...." M.C.L. § 500.3105(1). Defendant asserts that the doctrine of collateral estoppel applies, and thus it is not liable to pay plaintiff PIP benefits because plaintiff was found not to have been injured in the third-party action.

Generally, for collateral estoppel to apply three elements must be satisfied: (1) "a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment"; (2) "the same parties must have had a full [and fair] opportunity to litigate the issue";2 and (3) "there must be mutuality of estoppel." Storey v. Meijer, Inc., 431 Mich. 368, 373 n. 3, 429 N.W.2d 169 (1988). "[M]utuality of estoppel requires that in order for a party to estop an adversary from relitigating an issue that party must have been a party, or in privy to a party, in the previous action. In other words, `[t]he estoppel is mutual if the one taking advantage of the earlier adjudication would have been bound by it, had it gone against him.'" Lichon v. American Universal Ins. Co., 435 Mich. 408, 427, 459 N.W.2d 288 (1990), quoting Howell v. Vito's Trucking & Excavating Co., 386 Mich. 37, 43, 191 N.W.2d 313 (1971).

Plaintiff has had a full and fair opportunity to litigate the issue concerning his alleged injury. The general rule permits relitigation when "[t]he party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action...." Restatement § 28(1)(emphasis added). Here, however, plaintiff voluntarily surrendered his opportunity for appellate review, to which he had been entitled as a matter of law. See, e.g., Greenleaf v. Garlock, Inc., 174 F.3d 352, 359 (C.A.3, 1999). Plaintiff, who has been represented by counsel throughout the entire litigation process, agreed prior to trial of the third-party action to forgo his opportunity for appeal the jury's verdict in lieu of the third-party defendant agreeing to pay plaintiff an undisclosed sum of damages regardless of such verdict. This is, we believe, properly understood as a waiver of any appeal. While the "full and fair opportunity to litigate" normally encompasses the opportunity to both litigate and appeal, plaintiff here voluntarily relinquished the opportunity to pursue an appeal in return for consideration-the guaranteed receipt of a minimal sum of damages regardless of the jury's verdict. Further, plaintiff's decision to forgo any appeal was a wise tactical decision because, as a result of this agreement, plaintiff received an undisclosed sum of damages even though the jury concluded that he had suffered no injury.3 While this agreement guaranteed that plaintiff would receive such damages regardless of the jury's verdict, there remained nonetheless the possibility that the jury might have awarded a greater award. This possibility afforded sufficient incentive for plaintiff's vigorous advocacy regarding the injury question in the initial litigation. Moreover, to describe this type of agreement as anything other than "full and fair" would be to encourage a plaintiff to negotiate away appeals with one defendant while keeping in suspense other lawsuits in the event that the plaintiff's first lawsuit proves unsuccessful.

Overlooking, however, the fact that plaintiff has had a full and fair opportunity to litigate the injury issue in this case,4 the dissent accepts plaintiff's argument that he is now entitled to another full and fair opportunity to litigate exactly the same issue only because mutuality of estoppel does not exist. As asserted by the dissent, the general rule supports such an argument—collateral estoppel precludes relitigation and imposes "`a state of finality to litigation where the same parties have previously had a full and fair opportunity to adjudicate their claims.' "Post at 853, quoting Nummer v. Dep't of Treasury, 448 Mich. 534, 541, 533 N.W.2d 250 (1995).

However, as the dissent acknowledges, there is a modern trend among the states to recognize exceptions to the mutuality requirement. Moreover, contrary to the dissent, this Court has not "consistently and explicitly declined the invitation to follow the modern trend" of abandoning, in part, the mutuality requirement. Post at 854.5 Rather, we have expressly recognized that "lack of mutuality does not always preclude the application of collateral estoppel. There are several well-established exceptions to the mutuality requirement, such as when an indemnitor seeks to assert in its defense a judgment in favor of its indemnitee, or where a master defends by asserting a judgment for a servant." Lichon, supra at 428 n. 16, 459 N.W.2d 288.6

Although the circumstances of the instant case are distinct from those addressed in Lichon, we now expand the exceptions to the requirement of mutuality of estoppel to encompass these circumstances. In our judgment, allowing the defensive use of collateral estoppel in these circumstances would enhance the efficient administration of justice and ensure more consistent judicial decisions.

As early as 1942, the California Supreme Court abandoned mutuality of estoppel altogether on the ground that "it would be unjust to permit one who has had his day in court to reopen identical issues...." Bernhard v. Bank of America Nat'l Trust & Savings Ass'n, 19 Cal.2d 807, 813, 122 P.2d 892 (1942).7 In Bernhard, the 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. [Id. at 811-812, 122 P.2d 892 (citations omitted).]

The United States Supreme Court in Blonder-Tongue Labs, Inc. v. Univ. of Illinois Foundation, 402 U.S. 313, 323-324, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), relied extensively on the Bernhard reasoning in holding that mutuality is not required where collateral estoppel is asserted defensively and where the plaintiff has already had a full and fair opportunity to litigate the issue. The Court stated:

The courts have often discarded the rule while commenting on crowded dockets and long delays preceding trial. Authorities differ on whether the public interest in efficient judicial administration is a sufficient ground in and of itself for abandoning mutuality, but it is clear that more than crowded dockets is involved.
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