Public Service Co. of Colorado v. Osmose Wood Preserving, Inc., 89CA0939

• Decision Date: 17 January 1991
• Docket Number: No. 89CA0939,89CA0939
• Citation: 813 P.2d 785
• Parties: PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation, Plaintiff-Appellant, v. OSMOSE WOOD PRESERVING, INC., a New York corporation, Defendant-Appellee. . II
• Court: Colorado Court of Appeals

Page 785

813 P.2d 785

PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation Plaintiff-Appellant, v. OSMOSE WOOD PRESERVING, INC., a New York corporation Defendant-Appellee.

No. 89CA0939.

Colorado Court of Appeals Div. II.

Jan. 17, 1991.

Rehearing Denied Feb. 14, 1991.

Certiorari Denied July 29, 1991.

Kelly, Stansfield & O'Donnell, Timothy J. Flanagan and Brent L. Backes (James R. McCotter, Sr. Vice-President and Gen. Counsel), Denver, for plaintiff-appellant.

Hall & Evans, Alan Epstein, Chris A. Mattison and Linda D. Zinser, Denver, for defendant-appellee.

Opinion by Judge DUBOFSKY.

In this action for indemnification, plaintiff, Public Service Company (PSC), appeals the judgment of the trial court in favor of Osmose Wood Preserving, Inc. (Osmose). We remand with directions.

PSC and Osmose entered into a contract whereby Osmose would inspect, maintain, and treat all of PSC's utility poles. The indemnity provision of the contract stated:

"To save and hold harmless the Company [PSC] against all liability from damage to property or injury or death of any person or persons arising out of, in any way connected with, or resulting from the work to be performed hereunder, including but not limited to, liability arising out of, or in any way connected with, or resulting from the acts, negligence or alleged negligence of the Company [PSC], its agents or employees in connection with the work to be performed hereunder; provided, however, that liability arising out of the sole and exclusive acts or negligence of the Company [PSC], its agents or employees shall be the responsibility of the Company [PSC]." (emphasis added)

Lawrence Rose, an employee of Montgomery Line Construction Company, was injured when the utility pole on which he was standing broke as he was removing television cable lines from it. The pole had been inspected and treated for decay the previous year by Osmose. Rose filed suit against PSC for negligence (Rose litigation). The jury awarded Rose damages for his personal injuries resulting from this accident after determining that PSC was 85 percent negligent and Rose was 15 percent negligent.

PSC notified Osmose 18 months prior to trial of its intent to be indemnified under the contract and two days after trial made a written demand for indemnity in the amount of the judgment. PSC did not at any time attempt to implead Osmose in the Rose litigation nor did Osmose seek to intervene. Osmose did, however, assist PSC in defending the Rose litigation. After the jury verdict, PSC settled with Rose.

PSC brought an indemnity action to recover settlement costs, defense costs, and interest from the Rose litigation. As a basis for that indemnification, PSC alleges that its liability "arose out of, in connection with, and as a result of" Osmose's inspection and maintenance of its utility poles. PSC also alleges it was not solely negligent in causing Rose's injuries.

Without reviewing the record and transcript of the Rose litigation, the trial court determined that the absence of a special verdict form reflecting the basis of the jury's decision in that action precluded it from applying collateral estoppel in this indemnity action. Therefore, it concluded that a new trial was required to determine the fault of the parties. The trial court, in the indemnity action, concluded that the judgment in the Rose jury trial did not preclude it from determining in a new trial the comparative negligence of PSC, Rose, and Osmose. Accordingly, it conducted a trial and determined that Rose was the only negligent party in causing his injuries. That finding had the effect of barring PSC from obtaining indemnity from Osmose.

Relying primarily on the doctrine of collateral estoppel, PSC challenges the conclusion and procedure followed by the trial court. In support of the trial court, Osmose argues that collateral estoppel is inapplicable here and urges that Restatement (Second) of Judgments § 57 (1982) (Restatement § 57) provides the proper criteria to evaluate the effect of the Rose litigation on Osmose's claimed right to relitigate the fault of the parties in the indemnity lawsuit. In our view, the trial court erred in its narrow application of both the collateral estoppel doctrine and Restatement § 57.

I.

A.

The doctrine of collateral estoppel bars relitigation of an issue determined in a prior proceeding if: (1) the issue on which preclusion is asserted is identical to an issue actually litigated and necessarily adjudicated in the prior proceeding; (2) the party against whom preclusion is sought was a party to, or was in privity with, a party to the prior proceeding; (3) there was a final judgment on the merits in the prior proceeding; and (4) the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding. United States v. Jesse, 744 P.2d 491 (Colo.1987).

PSC argues that review of the record and transcript as well as other relevant evidence demonstrates that the basis for the jury's decision in the Rose litigation is identical to the issue asserted in the indemnity case. PSC further argues Osmose's responsibility for the broken pole was actually litigated vis-a-vis PSC, and was necessarily adjudicated in the prior proceeding. We agree with PSC that, before determining whether to hold a separate trial on the negligence of the parties, the trial court should first review the record and transcript of the Rose litigation in order to determine the most likely basis of the prior verdict.

If the trial court finds that Osmose's negligence was litigated and determined in the Rose case, it must then determine whether Osmose was "in privity" with PSC during the Rose litigation. Privity exists when there is a substantial identity of interests between a party and a non-party such that the non-party is "virtually represented" in litigation. Aerojet-General Corp. v. Askew, 511 F.2d 710 (5th Cir.), cert. denied, 423 U.S. 908, 96 S.Ct. 210, 46 L.Ed.2d 137 (1975); United States v. ITT Rayonier, Inc., 627 F.2d 996 (9th Cir.1980).

An indemnity agreement does not necessarily create privity. A working or functional relationship must exist in which the interests of the non-party are presented and protected by the party in the litigation. Daigle v. Portsmouth, 129 N.H. 561, 534 A.2d 689 (1987).

A functional relationship may be found if a non-party substantially participates in controlling the presentation of issues as if it were a party. See Restatement § 57. As stated in Daigle v. Portsmouth, supra:

"[A] finding of privity is simply a conclusion that something in the relationship of party and non-party justifies holding the latter to the result reached in litigation in which only the former is named."

Here, there is evidence that Osmose actively participated in PSC's defense of the Rose litigation. Thus, the court on remand should determine if privity existed between PSC and Osmose. If the issue of Osmose's negligence was litigated in the Rose case and if privity did exist between PSC and Osmose, then the court should next determine if Osmose was sufficiently involved in the Rose litigation so that it had a full and fair opportunity to litigate its negligence. If it finds this latter condition to exist, then collateral estoppel is applicable and judgment should be entered in PSC's favor.

B.

If, however, the trial court on remand finds Osmose is not bound by the doctrine of collateral estoppel, then Restatement § 57 becomes pertinent.

Restatement § 57 provides:

"(1) Except as stated in Subsection (2),...