Terrell v. DeConna

• Decision Date: 27 July 1989
• Docket Number: No. 88-4445,88-4445
• Citation: 877 F.2d 1267
• Parties: Myrtis Faye TERRELL, Plaintiff-Appellant, v. Raymond J. DeCONNA and DeConna Ice Cream Company, Inc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1267

877 F.2d 1267

Myrtis Faye TERRELL, Plaintiff-Appellant, v. Raymond J. DeCONNA and DeConna Ice Cream Company, Inc., et al., Defendants-Appellees.

No. 88-4445.

United States Court of Appeals Fifth Circuit.

July 27, 1989.

C.R. McRae, Margaret P. Ellis, Pascagoula, Miss., for plaintiff-appellant.

W. Lee Watt, Raymond L. Brown, U.S. Fidelity and Guar. Co., Pascagoula, Miss., Victoria Jenkins, Fred Mannino, Biloxi, Miss., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Mississippi.

Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Myrtis Faye Terrell sued Raymond DeConna and the DeConna Ice Cream Co. in an effort to recover under a Mississippi state law loss of consortium theory for injuries to her husband. She also sued United States Fidelity & Guaranty Co., seeking a declaration as to the insurance coverage applicable to DeConna and the ice cream company. The district court held that, under federal rules of issue preclusion, an earlier judgment in a suit brought by Myrtis Faye's husband, Ronald, against DeConna and the ice cream company barred Myrtis Faye from litigating the theories of liability which she had alleged against those two defendants. The earlier litigation had adjudged the DeConna Ice Cream Company not liable, while holding Raymond DeConna liable for negligence but not gross negligence.

After trial on damages only, the district court entered judgment for Myrtis Faye against Raymond DeConna for $35,000. After a separate bench trial on the insurance coverage issues, the district court found that the only policy which might have covered the judgment against Raymond had been exhausted by Ronald Terrell's earlier recovery.

Myrtis Faye now appeals from the judgment for the defendant ice cream company and the declaratory judgment regarding insurance coverage. She contends that the district court impermissibly relied upon the doctrine of issue preclusion with respect to both judgments. She also contends that the district court erred by denying her a jury trial on the insurance coverage issues, and that the court's reading of the insurance contracts was erroneous.

We find that the district court correctly applied issue preclusion to the claims against the ice cream company, and that the preclusion issues are moot with respect to the insurance coverage action because the court did not invoke issue or claim preclusion when disposing of that suit. We further find that Myrtis Faye had no right to a jury trial on her insurance coverage claims because the cause of action underlying the declaratory action was equitable. Finally, we find no error in the district court's construction of the insurance contracts. We therefore affirm the judgment of the district court.

I

Raymond DeConna was driving to college when he fell asleep at the wheel and collided with Ronald Terrell. The van which DeConna was driving at the time had apparently been used in connection with the family ice cream business--the DeConna Ice Cream Co., Inc.--and the van's ownership has been a matter of dispute. Ronald sued Raymond DeConna and the ice cream company, and the cause was heard by a federal court sitting in diversity. DeConna confessed negligence, but was absolved of gross negligence, and Ronald obtained a judgment against him in excess of $240,000. Ronald sought to recover from the DeConna Ice Cream Company under negligent entrustment and vicarious liability theories, but the defendant ice cream company obtained a judgment in its favor on those issues. Raymond's insurance coverage was apparently exhausted at $100,000.

Myrtis Faye Terrell thereafter filed this suit for loss of consortium, again naming both Raymond DeConna and DeConna Ice Cream as defendants. Myrtis Faye also named United States Fidelity & Guaranty Co. as a defendant, seeking a judicial declaration that the accident injuring her husband was covered by policies not exhausted by the prior litigation. Myrtis Faye filed her suit in Mississippi state court, but the defendants removed to federal court.

The defendants sought to bar relitigation of issues decided in the prior suit. The district court, applying federal principles of issue preclusion, precluded relitigation of DeConna's liability and the ice cream company's liability.

The court severed the insurance coverage claims pursuant to F.R.Civ.P. 42(b), and set them for separate trial. The court denied Myrtis Terrell's request for a jury trial on the claims against the insurance company. After a bench trial, the court decided that the only insurance policy which might have applied to Myrtis Faye's recovery from Raymond was the individual policy of Vincent DeConna, Raymond's brother, but that the coverage limits of Vincent's policy had already been exhausted. The insurance coverage dispute turned in substantial part upon the ownership of the van driven by DeConna. The court heard evidence about the van's ownership, and eventually resolved the issue in accord with the findings made in the prior litigation. The parties dispute whether the court did, or could, rely on issue preclusion grounds for its resolution of the ownership question.

After trial on the damages issue only, judgment for $35,000 in damages was entered against Raymond DeConna. Judgment was entered in favor of the ice cream company.

To summarize, the procedural history of Myrtis Faye's suit in the district court was as follows. The district court first found the DeConna Ice Cream Co. not liable, and Raymond DeConna liable for negligence but not gross negligence, on grounds of issue preclusion and without holding any trial. The district court then severed the insurance coverage and damages suits. The insurance coverage suit was tried to the bench, despite Myrtis Faye's jury demand. The damages issue was tried separately. Because of the district court's findings with respect to issue preclusion, there was never any trial in Myrtis Faye's suit on the issues dispositive of her allegations of liability against the ice cream company.

On appeal, Myrtis contends that the requisite mutuality of parties is lacking, and so issue preclusion does not apply; that the ownership of the van was not fully litigated in the prior suit, and so should have been fully litigated in the second suit; that her demand for a jury trial on the claims for declaratory relief was improperly denied; and that the district court erred in its construction of the insurance contracts.

II

At oral argument it developed that there was some ambiguity about what issues had actually been raised on appeal. We therefore begin by clarifying that matter. Myrtis Faye's notice of appeal sought review only of the insurance coverage judgment and the judgment for DeConna Ice Cream. No appeal was taken from the judgment against Raymond DeConna, and Raymond DeConna is therefore not a party to this appeal. Although Myrtis Faye's brief is devoted almost exclusively to analysis relevant only to the insurance coverage dispute, and although Myrtis Faye's repeated request--for relief included in both her summary of argument and her conclusion, as well as in the text of her brief--asks only that this court remand the insurance coverage issues for a jury trial, some of her arguments about issue preclusion could be applied to the district court's judgment in favor of the ice cream company. We therefore address the merits of Myrtis Faye's arguments as applied to the ice cream company, as well as in their application to the insurance company.

III

We begin with the appeal from the district court's order barring relitigation of the issues relevant to the ice cream company's liability. Two of Myrtis Faye's arguments appear applicable to that order. First, Myrtis Faye contends that the company waived the preclusion defense by failing to plead it. Second, she contends that there is insufficient mutuality of parties to justify the defensive use of issue preclusion by a non-party.

The waiver argument is without merit. The defendants specifically raised the defense of issue preclusion by a motion to dismiss. That motion was sufficient to raise the defense, and there was therefore no waiver. See, e.g., American Furniture Co., Inc. v. International Accommodations Supply, 721 F.2d 478, 482 (5th Cir.1981); Jones v. Miles, 656 F.2d 103, 107-08 (5th Cir.1981).

With respect to the mutuality issue, Myrtis Faye contends that under Mississippi law "the issues in a loss of consortium case were to be determined wholly independent of any adjudication in the suit brought by the injured spouse, even to the extent that a loss of consortium action may be brought whether or not the injured spouse sues." The Fifth Circuit, however, has, however, made clear that when a federal court renders a decision in a diversity case, the decision's preclusive effect is measured by federal principles of preclusion. Aerojet-General Corp. v. Askew, 511 F.2d 710, 716 (5th Cir.1975).

Under the federal rules of issue preclusion, a party is prevented from relitigating issues provided:

(1) that the issue at stake be identical to the one involved in the prior litigation;

(2) that the issue has been actually litigated in the prior litigation; and

(3) that the determination of the issue in the prior litigation has been a critical and necessary part of the judgment in that earlier action.

Wehling v. Columbia Broadcasting System, 721 F.2d 506, 508 (5th Cir.1983).

Complete identity of parties in the two suits is not required. A preclusion defense, subject to certain conditions, may be invoked by a non-party against a party to the prior suit, and, in limited instances, against a non-party by a party to the prior suit. See, e.g., Parklane Hosiery v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). Here, a party to the first suit attempts to use issue preclusion defensively against a plaintiff who was not a party to the first suit. The...