National Farmers Union Standard Ins. Co. v. Morgan, s. 91-3370

• Decision Date: 30 July 1992
• Docket Number: 91-3481,Nos. 91-3370,s. 91-3370
• Citation: 966 F.2d 1250
• Parties: NATIONAL FARMERS UNION STANDARD INSURANCE COMPANY, Appellant and Cross-Appellee, v. Walker Stanley MORGAN, Appellee, Brenda Morgan, Individually and as Parent, Next Friend, and Natural Guardian of Danny D. Stultz, Jr., a minor, Clarence Alford, Jr., Individually and as Legal Custodian of Danny D. Stultz, Jr., a minor, Appellees and Cross-Appellants, Leslie M. Greenhaw, James McCauley, as Guardian ad Litem of Billy Stultz, a minor, Linda Cummings, as Parent, Next Friend, and Natural Guardian of Sharon Bledsoe, a minor, Jimmy Ray McKee, Individually and as Parent, Next Friend, and Natural Guardian of Gina McKee, a minor, and as Administrator of the Estate of Heather McKee, deceased, Linda McKee, and Robin McKee, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1250

966 F.2d 1250

NATIONAL FARMERS UNION STANDARD INSURANCE COMPANY, Appellant and Cross-Appellee, v. Walker Stanley MORGAN, Appellee Brenda Morgan, Individually and as Parent, Next Friend, and Natural Guardian of Danny D. Stultz, Jr., a minor, Clarence Alford, Jr., Individually and as Legal Custodian of Danny D Stultz, Jr., a minor, Appellees and Cross-Appellants Leslie M. Greenhaw, James McCauley, as Guardian ad Litem of Billy Stultz, a minor, Linda Cummings, as Parent, Next Friend, and Natural Guardian of Sharon Bledsoe, a minor Jimmy Ray McKee, Individually and as Parent, Next Friend, and Natural Guardian of Gina McKee, a minor, and as Administrator of the Estate of Heather McKee, deceased, Linda McKee, and Robin McKee, Appellees.

Nos. 91-3370, 91-3481.

United States Court of Appeals, Eighth Circuit.

Submitted April 13, 1992.

Decided June 15, 1992.

Rehearing and Rehearing En Banc

Denied July 30, 1992.

Martin Wayne Bowen, West Memphis, Ark., argued, for appellant and cross-appellee.

B. Michael Easley, Forrest City, Ark., argued, for appellee Linda Cummings.

Bob R. Brooks, Jr., North Little Rock, Ark., argued, for appellees and cross-appellants Clarence Alford and Brenda Morgan.

Bob R. Brooks, Jr., North Little Rock, Ark., on brief for appellees.

Before JOHN R. GIBSON, Circuit Judge, BEAM, Circuit Judge, and HUNGATE, ^* Senior District Judge.

HUNGATE, Senior District Judge.

These cross-appeals arise from an action brought by the appellant insurer seeking a declaratory judgment that it has no duty to defend or to pay any judgment rendered in a state court action against appellees/cross-appellants Clarence Alford, Jr. ("Clarence"), Brenda Morgan ("Brenda") and Danny D. Stultz, Jr. ("Danny"). ¹ The underlying state court action arose out of a collision involving a pick-up truck owned by Clarence and driven by Danny, a teenager. Clarence lives in Forrest City, Arkansas, where the accident took place; he is Danny's grandfather and legal guardian, and Danny was staying with Clarence at the time of the accident. Brenda is Danny's mother and Clarence's daughter. Appellee Walker Stanley Morgan ("Walker") was Brenda's husband and Danny's step-father; he is the policyholder of the insurance policy in question. Brenda and Walker were separated at the time of the accident, but both were living in Mississippi. ²

The insurance coverage issue focuses on two policy provisions that define the insureds. Under the policy, Danny is covered as a "relative" of Walker's if at the time of the accident he was "a person living in [Walker's] household [and] related to [Walker] by blood, marriage or adoption, including a ward or foster child." The policy further provides, however, that "[n]o person shall be considered an insured person if that person uses a vehicle without a reasonable belief of having permission to use the vehicle." The verdict form submitted to the jury asked whether they found that, on the day of the accident, (1) Danny was living in the household of Walker and (2) Danny reasonably believed he had Clarence's permission to use the pick-up truck. The jury answered both questions in the affirmative, and the district judge initially entered judgment in favor of defendants.

Clarence, Brenda and Danny timely moved to amend the judgment to include declaratory relief in their favor, i.e., to include a declaration that National Farmers Union ("NFU") had a duty to defend and a duty to pay any judgment. NFU did not respond to the motion. The district court granted the motion and entered a "modified and substituted judgment" declaring NFU's duties with respect to the underlying state court action. The district court denied NFU's motion for judgment notwithstanding the verdict or in the alternative for new trial, as well as a motion for attorney's fees filed by Brenda, Danny and Clarence.

NFU appeals (1) the granting of the motion to amend the judgment and the entry of the modified and substituted judgment, (2) the denial of NFU's motion for summary judgment on the issue of collateral estoppel, (3) the denial of NFU's motion for judgment notwithstanding the verdict, and (4) the denial of NFU's motion for new trial. Clarence, Brenda and Danny cross-appeal, arguing that the district court erred in denying their motion for attorneys' fees. Because we find that NFU's motion for summary judgment was wrongly denied, the remaining issues on appeal are mooted.

The Court of Appeals makes a de novo review of the denial of summary judgment. See, e.g., Holloway v. Conger, 896 F.2d 1131, 1134 (8th Cir.1990). NFU moved for summary judgment on collateral estoppel grounds, asserting that in another Eastern District of Arkansas action brought by Danny and Clarence against an insurance salesman and his agency, Stultz and Alford v. Greer and Greer & White Insurance, Inc. ("Greer"), Civil No. J-C-90-131, a conclusive determination was made that Danny had no permission to operate Clarence's truck on the day of the accident.

In Greer, the written judgment of the Honorable G. Thomas Eisele, entered on the court's grant of the defendants' motions for directed verdict, contained the following language apropos of the permission issue:

Mr. Stultz testified that he did not have Mr. Alford's permission to drive the 1981 Chevrolet pickup on the day of the accident. He further testified that he knew he would not be covered by insurance if he drove the pickup truck without permission. Thus, Mr. Stultz was not relying on Mr. Greer's alleged representation that he was covered by insurance regardless of the vehicle he was driving. He knew he was driving without insurance coverage that day and he chose to do so.

. . . . .

It could be argued that Mr. Alford gave Mr. Stultz implied consent to drive the 1981 Chevrolet. He had in the past given Mr. Stultz permission to drive the pickup, but that consent was limited to situations where a licensed driver was also present in the pickup. Mr. Alford testified that he never permitted Mr. Stultz to drive the pickup alone. Therefore, even if one assumes that Mr. Stultz had implied consent or previous permission to drive the vehicle, he exceeded the scope of that permission by driving without a licensed driver in the truck. As a result, Mr. Stultz was not insured as insurance coverage is available only if one has permission of the owner.

The Greer action involved claims by Clarence and Danny that the defendant insurance agent and agency were negligent and committed fraud in connection with selling Clarence an auto policy which admittedly failed to cover Danny's accident. The above-excerpted portions of Judge Eisele's judgment are found in his discussion of Clarence and Danny's failure to establish their reliance on the allegedly fraudulent misrepresentation concerning coverage.

Although he did not articulate his opinion in those terms, it is clear from the above excerpts that Judge Eisele was making factual findings. In the first excerpted paragraph, Judge Eisele made a finding that when Danny took the truck on the day of the accident, he knew he was doing so without Clarence's permission. In the second paragraph, Judge Eisele is indirectly stating a finding that, at most, Danny had Clarence's implied conditional consent to drive the truck when he had a licensed driver with him, but that when Danny took the truck on the day of the accident that condition was not met.

Arkansas law governs the question of collateral estoppel. See Lane v. Sullivan, 900 F.2d 1247, 1250 (8th Cir.1990). As the Court noted in Lane, however, "Arkansas law ... characterize[s] the elements of collateral estoppel in familiar language." Id. Under Arkansas law, the four elements of collateral estoppel, or issue preclusion, are that:

(1) the issue is the same as that involved in a prior litigation;

(2) the issue was actually litigated;

(3) the issue was determined by a valid and final judgment; and

(4) the determination was essential to the judgment.

East Texas Motor Freight Lines v. Freeman, 289 Ark. 539, 713 S.W.2d 456, 459 (1986), cited in Lane, 900 F.2d at 1250. Arkansas appears to have followed...