Sullivan v. American Cas. Co. of Reading, Pa.

• Decision Date: 22 December 1992
• Docket Number: No. 30S04-9212-CV-1022,30S04-9212-CV-1022
• Citation: 605 N.E.2d 134
• Parties: Thomas J. SULLIVAN, Appellant, (Plaintiff below) v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, and State Farm Mutual Insurance Company, Appellees. (Defendants below)
• Court: Indiana Supreme Court

Page 134

605 N.E.2d 134

Thomas J. SULLIVAN, Appellant, (Plaintiff below) v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, and State Farm Mutual Insurance Company, Appellees (Defendants below)

No. 30S04-9212-CV-1022.

Supreme Court of Indiana.

Dec. 22, 1992.

Charles T. Jennings, Jennings & Maas, Carmel, for appellant Thomas J. Sullivan.

Richard S. Ewing, William N. Ivers, Stewart & Irwin, Indianapolis, for appellee American Cas. Ins. Co. of Reading, Pa.

John D. Cochran, Jr., Young, Cochran & Reese, Indianapolis, for appellee State Farm Mut. Ins. Co.

ON PETITIONS TO TRANSFER

KRAHULIK, Justice.

This case concerns the defensive use of collateral estoppel in uninsured motorist litigation. ¹ Thomas J. Sullivan (Appellant-Plaintiff below) and American Casualty Company of Reading, Pennsylvania, ("American Casualty") (Appellee-Defendant below) seek transfer after the Court of Appeals affirmed the entry of summary judgment in favor of State Farm Mutual Insurance Company ("State Farm") (Appellee-Defendant below) on all of Sullivan's claims, and in favor of American Casualty on one of Sullivan's claims. Sullivan v. American Casualty Co. (1991), Ind.App., 582 N.E.2d 890. In affirming the trial court's entry of summary judgment in favor of State Farm and American Casualty on all claims, we address the following issues:

(1) Whether Sullivan is collaterally estopped from relitigating the issue of the negligence of Vehicle No. 1;

(2) Whether American Casualty is entitled to summary judgment on Sullivan's claim involving Vehicle No. 2; and

(3) Whether American Casualty is entitled to summary judgment on Sullivan's claim for punitive damages.

Facts

On January 12, 1984, Sullivan suffered personal injuries in a traffic accident. The accident occurred when a semi-tractor truck driven by Lynn Walker ("Vehicle No. 1") struck the rear of an automobile operated by Jon Edwards ("Vehicle No. 2") which was stopped for a red light behind the automobile in which Sullivan was a passenger. The force of the collision caused Vehicle No. 2 to strike the rear of Sullivan's automobile. At the time, Sullivan was on business for his employer.

Vehicle No. 1 had liability insurance in the amount of $500,000 per occurrence, but the carrier was declared insolvent in 1985. Vehicle No. 2 had liability insurance in the amount of $25,000 per person and $50,000 per occurrence, but the alleged value of Sullivan's injuries exceeded these limits. Sullivan had uninsured motorist coverage as part of a personal policy issued by State Farm in the amount of $15,000 per person and $30,000 per occurrence. Sullivan's employer had uninsured motorist coverage issued by American Casualty in the amount of $500,000 per occurrence.

Sullivan sued Vehicle No. 1 and Vehicle No. 2 for negligence (the "negligence action"). Shortly before trial commenced in the negligence action, Vehicle No. 1 offered Sullivan $450,000 to settle the claim. That offer was rejected. Ultimately, the jury returned a verdict in favor of Vehicle No. 1. That judgment was affirmed in Sullivan v. Fairmont Homes, Inc. (1989), Ind.App., 543 N.E.2d 1130. In addition, during the trial, Sullivan entered into an agreed judgment with Vehicle No. 2 for $1,600,000. This judgment was subject to a loan receipt agreement pursuant to which Vehicle No. 2 advanced Sullivan $12,500 and Sullivan agreed to show a satisfaction of the agreed judgment. The judgment docket reflects that a satisfaction of the agreed judgment was filed on May 18, 1989.

While the negligence action was pending, Sullivan notified State Farm and American Casualty of his intent to assert uninsured motorist claims. The failure to have those claims resolved led to Sullivan filing this lawsuit in 1988. ² Both American Casualty and State Farm moved for summary judgment. With respect to Vehicle No. 1, American Casualty and State Farm argued that Sullivan was collaterally estopped by the judgment in the negligence action from relitigating the issue of Vehicle No. 1's fault. With respect to Vehicle No. 2, the insurance companies argued that Sullivan was estopped by the satisfaction of the agreed judgment from litigating the issue of the fault of Vehicle No. 2. Therefore, because Sullivan was not legally entitled to recover damages from the uninsured motorists, neither State Farm nor American Casualty were obligated to pay uninsured motorist benefits. The trial court granted both motions.

Sullivan appealed. The Court of Appeals affirmed the entry of summary judgment in favor of State Farm and American Casualty with respect to Sullivan's claims involving Vehicle No. 1. 582 N.E.2d at 898. Sullivan seeks transfer from this holding. The Court of Appeals reversed summary judgment in favor of American Casualty with respect to Sullivan's claim involving Vehicle No. 2 because the court concluded that American Casualty had waived its right to claim that Sullivan was not legally entitled to recover. Id. at 896. ³ Finally, the Court determined that there were material issues of fact precluding summary judgment on Sullivan's claim against American Casualty for punitive damages. Id. at 898. American Casualty seeks transfer from these holdings.

Collateral Estoppel

Sullivan argues that Indiana precedent requires both privity and mutuality before collateral estoppel applies, and encourages us to retain those requirements. Although it is true that historically Indiana has required identity of parties and mutuality of estoppel as prerequisites to the operation of collateral estoppel, the modern view recognized by the majority of states has eliminated these requirements. Today, we join that majority.

Sullivan's argument requires us, as a similar claim did Judge Buchanan, to visit "the miasmic land of res judicata where historic marsh vapors obscure concepts and semantic footing is slippery." State v. Speidel (1979), 181 Ind.App. 448, 451, 392 N.E.2d 1172, 1174. Sullivan first argues that the judgment in the negligence action was not res judicata as to the claims in this action. Sullivan is correct. The term res judicata is the term describing the situation where a judgment rendered on the merits is an absolute bar to a subsequent action between the same parties or those in privity with them on the same claim or demand. Town of Flora v. Indiana Service Corp. (1944), 222 Ind. 253, 256, 53 N.E.2d 161, 163. This rule is still recognized in Indiana, Chemco Transport, Inc. v. Conn (1988), Ind., 527 N.E.2d 179, and across the country. See generally Jeremy C. Moore et al., 1B Moore's Federal Practice p 0.405 (2d ed.1992) (hereinafter Moore's). Res judicata does not apply here because this subsequent action is not between the same parties on the same claim.

Collateral estoppel is a concept related to res judicata. ⁴ Generally, collateral estoppel operates to bar a subsequent relitigation of the same fact or issue where that fact or issue was necessarily adjudicated in a former suit and the same fact or issue is presented in the subsequent lawsuit. In that situation, the first adjudication will be held conclusive even if the second action is on a different claim. Moore's at p 0.441; Town of Flora, 222 Ind. at 257, 53 N.E.2d at 163. Traditionally, Indiana has required identity of parties and mutuality of estoppel before collateral estoppel may be invoked. Tobin v. McClellan (1947), 225 Ind. 335, 344, 73 N.E.2d 679, 683; Town of Flora, 222 Ind. at 257, 53 N.E.2d at 163; Dayton v. Fisher (1870), 34 Ind. 356, 358. The rule of mutuality refers to the requirement that "one taking advantage of the prior adjudication would have been bound had the prior judgment gone the other way." State v. Speidel, 181 Ind.App. at 456, 392 N.E.2d at 1177. "Identity of parties" has generally meant that the party to be bound by a prior adjudication must be the same as or in privity with the party in the prior action. Id., 181 Ind.App. at 454, 392 N.E.2d at 1176. Thus, in Indiana, a stranger to the judgment, one who is neither a party nor in privity with a party to the prior judgment, has not been permitted to take advantage of collateral estoppel in a subsequent action. Id. The requirements of mutuality and identity of parties have been questioned in recent years by Indiana appellate courts. See, e.g., Hockett v. Breunig (1988), Ind.App., 526 N.E.2d 995, 1000 (concurring opinion of Judge Shields); Board of Com'rs. of Benton Co. v. Whistler (1983), Ind.App., 455 N.E.2d 1149, 1156; Glass v. Continental Assurance Co. (1981), Ind.App., 415 N.E.2d 126, 128; State v. Speidel, 181 Ind.App. at 454, 392 N.E.2d at 1179.

The modern rule has dispensed with the rigid requirements of mutuality and identity of parties. Instead, the prime consideration is whether the party against whom the prior judgment is pled had a full and fair opportunity to litigate the issue and whether it would be otherwise unfair under the circumstances to permit the use of collateral estoppel. See Moore's at p 0.441. See also cases collected in E.H. Schopler, Annotation, Mutuality of Estoppel as Prerequisite of Availability of Doctrine of Collateral Estoppel to a Stranger to the Judgment, 31 A.L.R.3d 1044 (1970 & Supp.1992). For example, in Blonder-Tongue Labs, Inc. v. Univ. of Ill. Foundation (1971), 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788, defendants to a patent infringement suit argued that plaintiffs should be collaterally estopped from prosecuting the present action where the patent had already been found invalid in a previous infringement case. The United States Supreme Court approved abandonment of the mutuality requirement for defensive use of collateral estoppel. The Court noted that because the plaintiff had had a full and fair opportunity to litigate the issue in the first lawsuit, it would not be unfair to limit the relitigation of the same issues in the second lawsuit. The Restatement (Second) of Judgments Secs. 28 & 29 (1982) also has recognized that mutuality and identity of parties is no longer...