State Farm Fire and Cas. Co. v. Reuter

Decision Date21 May 1985
Citation299 Or. 155,700 P.2d 236
PartiesSTATE FARM FIRE AND CASUALTY COMPANY, Petitioner on Review, v. Richard Scott REUTER, Defendant, Gail Theresa Bullen, Respondent on Review. CA A22866; SC S30777. *
CourtOregon Supreme Court

Daniel M. Holland, Eugene, argued the cause for petitioner on review. With him on the petition were Jaqua, Wheatley, Gallagher & Holland, P.C., and Denise G. Fjordbeck, Eugene.

James C. Jagger, Eugene, argued the cause for respondent on review.

PETERSON, Chief Justice.

This case involves collateral estoppel. "Collateral estoppel" is a term which describes these results: When an issue of ultimate fact has been determined by a valid and final judgment, that determination also settles the same issue in another action (a) between the same parties on a different claim, and (b) against persons who are so closely identified with a party that they are said to be "in privity" with parties to the earlier civil action.

Here, the dispute involves two parties, neither of whom was a party to the earlier litigation. 1 State Farm Fire and Casualty Co. (State Farm), plaintiff herein, asserts that Gail Theresa Bullen (Bullen), the victim of a sexual assault by Richard Scott Reuter (Reuter), is collaterally estopped from claiming coverage under State Farm's liability insurance policy because of Reuter's conviction of the sexual assault in the earlier criminal action.

The facts are not in dispute. Reuter was charged by indictment as follows:

"The defendant on or about the 9th day of August, 1977, in the county aforesaid, did unlawfully and knowingly, by forcible compulsion, engage in sexual intercourse with Gail Theresa Bullen, a female; contrary to statute and against the peace and dignity of the State of Oregon."

Reuter pleaded not responsible by reason of mental disease or defect. The jury rejected the defense and found Reuter guilty of rape in the first degree.

At the time of the rape, Reuter had a policy of liability insurance with State Farm which contained this exclusion:

"This policy does not apply * * * to bodily injury or property damage which is either expected or intended from the standpoint of the insured * * *."

Bullen brought a damage action against Reuter, alleging that Reuter's conduct occurred while he was "suffering from a mental disorder which, among other things, caused [Reuter] to be unable to conform his conduct to the requirements of law." State Farm then filed this declaratory judgment action naming Reuter and Bullen as defendants, seeking a declaration of its obligations. Reuter made no appearance.

State Farm filed a motion for summary judgment, asserting:

"On or about August 9, 1977, Richard Scott Reuter raped Gail Theresa Bullen near Bailey Hill Road in Eugene, Lane County, Oregon. In April, 1978, Richard Scott Reuter was found guilty of first degree rape as a result of this incident by a jury after a full trial on all issues in Case No. 77-4882, in and for the Circuit Court of Lane County. In that claim, the defense of diminished mental capacity was actually raised and fully adjudicated by Richard Scott Reuter. The jury rejected the defense of diminished mental capacity and found Richard Scott Reuter guilty of first degree rape * * *.

"State Farm contends in this lawsuit that homeowners policy No. 37-144857 does not provide liability or any other insurance coverage for anyone as a result of the described August 9, 1977 rape incident."

The trial court granted State Farm's motion for summary judgment. Judgment was entered against Bullen and Reuter. Bullen appealed; Reuter did not. The Court of Appeals reversed. State Farm Fire & Cas. v. Reuter, 68 Or.App. 17, 680 P.2d 1000 (1984).

If a person has had a full and fair opportunity to litigate a claim to final judgment, most courts (including this one) hold that the decision on a particular issue or determinative fact is determinative in a subsequent action between the parties on the same claim (direct estoppel). See, e.g., Waxwing Cedar Products v. Koennecke, 278 Or. 603, 610, 564 P.2d 1061, 1064-65 (1977); Bahler v. Fletcher, 257 Or. 1, 4, 474 P.2d 329, 331 (1970). The judgment generally is conclusive as well in a different action between the parties as to issues actually litigated and determined in the prior action if their determination was essential to the judgment (collateral estoppel). See, e.g., Bahler v. Fletcher, supra, 257 Or. at 4, 474 P.2d at 331. Therefore, it is appropriate to determine:

1. Was the issue decided in the prior adjudication identical with the one now presented?

2. Was there a final judgment on the merits?

3. Was the party against whom collateral estoppel is sought to be applied a party or in privity with a party to the prior adjudication? 2

Here, there was a final judgment on the merits which answers the second inquiry. As to the first question--what issue was decided--the Court of Appeals held that "plaintiff failed to produce any evidence regarding Reuter's mental state * * *. Based on the evidence produced, we cannot say that plaintiff met its burden of proof." 68 Or.App. at 22 n. 2, 680 P.2d at 1002 n. 2.

We disagree. The record supports every assertion of fact made by State Farm in its motion for summary judgment. There is no question but that the jury in the criminal case rejected Reuter's claim that he was suffering from a mental disorder that caused him to be unable to conform his behavior to the requirement of law. The jury found, beyond a reasonable doubt, that Reuter "did unlawfully and knowingly, by forcible compulsion, engage in sexual intercourse with * * * Bullen."

The question then becomes: Is an attack that was "knowingly" committed "expected or intended from the standpoint of the insured"? The Court of Appeals held that the exclusion was applicable because "[a]n attack that was 'knowingly' committed must be, under the policy 'either expected or intended from the standpoint of the insured.' " 68 Or.App. at 20, 680 P.2d at 1001-02. Bullen has not sought review of this holding. 3 Therefore, for the purposes of this appeal, we will consider a conviction of knowingly committing first degree rape necessarily to mean that the rapist either expects or intends to injure the victim. With that assumption, coverage is excluded under the instant policy. 4

That brings us to the third question: Was Bullen in privity with Reuter? 5 A person may be bound by a previous adjudication either by reason of being a party in the case, or by reason of participation which is substantially equivalent to having been a party, or from having a legal relationship that is derived from one who was a party. Gaul v. Tourtellotte, 260 Or. 14, 20, 488 P.2d 416, 420 (1971), states the rule:

" * * * [C]ollateral estoppel may be invoked only against someone who was a party, or who was in privity with a party, to the first action. * * * Individuals in privity with named parties include those who control an action though not a party to it; those whose interests are represented by a party to the action; and successors in interest to those having derivative claims." (Emphasis in original; citations omitted.)

"Privity," in a collateral estoppel context, is a chameleon-like term. The editors of the first Restatement of Judgments (1942) invoked the term to describe an idea, "the idea that as to certain matters and in certain circumstances persons who are not parties to an action but who are connected with it in their interests are affected by the judgment with reference to interests involved in the action, as if they were parties." Restatement Judgments 389, § 83, comment a (1942). 6 Wolff v. DuPuis, 233 Or. 317, 322, 378 P.2d 707, 710 (1963). Unable to define the term more clearly, the editors defined privity by what it included:

--Those "who control an action although not parties to it;"

--Those "whose interests are represented by a party to an action;"

--"Successors in interest to those having derivative claims."

Restatement Judgments 389, § 83, comment a. 7

The editors of Restatement (Second) Judgments (1982) fared little better. They have reduced but not abandoned the use of the term. In the introductory note to Chapter 4 they state:

"A person may be legally affected by a judgment, broadly speaking, by reason either of being a party or equivalent participant in the litigation, or from having a legal relationship that is derivative from one who was a party, or in being so situated that his own rights or obligations are conditioned in one way or another by a judgment involving another person. * * * " Restatement (Second) Judgments 344.

In comment a to Restatement (Second) Judgments § 75 the editors describe privity as follows:

"A person is bound by a judgment in an action to which he is not a party if he is in 'privity' with a party. The relationships denominated by the term 'privity' fall into three general categories. The first includes relationships that are explicitly representative, referred to in §§ 41 and 42. The second includes the array of substantive legal relationships referred to in §§ 45-61, in which one of those involved in the relationship is treated as having the capacity to bind the other to a judgment in an action to which the latter is not a party. The third includes successors in interest to property, referred to in §§ 43-44."

We confess the same difficulty in defining privity. It is neither rule nor doctrine; it describes a result. Even so, despite its inherent indeterminacy, we will continue to use the term to describe the effect of various relationships which bind one to a finding necessarily made in a prior case, even though the one so bound was not a party in the earlier case.

We first examine whether Reuter, the insured, is collaterally estopped by the finding in the criminal case. In Casey v. N.W. Security Ins. Co., 260 Or. 485, 491 P.2d 208 (1971), Casey was insured by Northwestern. Casey...

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