Wilcox v. Sealey, Docket No. 70204

• Decision Date: 16 March 1984
• Docket Number: Docket No. 70204
• Parties: Angela WILCOX and Pioneer State Mutual Insurance Company, Plaintiffs-Appellants, v. Harry SEALEY and Orpha Sealey, d/b/a Foster Heating & Plumbing Supplies, Defendants-Appellees, and Auto Owners Insurance Company, Garnishee, Defendant-Appellee. 132 Mich.App. 38, 346 N.W.2d 889
• Court: Court of Appeal of Michigan — District of US

Page 889

346 N.W.2d 889

Angela WILCOX and Pioneer State Mutual Insurance Company Plaintiffs-Appellants, v. Harry SEALEY and Orpha Sealey, d/b/a Foster Heating &amp Plumbing Supplies, Defendants-Appellees and Auto Owners Insurance Company, Garnishee Defendant-Appellee.

Docket No. 70204.

132 Mich.App. 38, 346 N.W.2d 889

Court of Appeals of Michigan.

Submitted Nov. 1, 1983.

Decided Feb. 7, 1984.

Released for Publication March 16, 1984.

[132 MICHAPP 39] Morrissey, Bove & Ebbott by Richard H. Ebbott, Flint, for plaintiffs-appellants.

[132 MICHAPP 40] Smith & Brooker, P.C. by Philip P. Swann, Flint, for Auto-Owners.

Before CYNAR, P.J., and BEASLEY and GILLESPIE, ^* JJ.

BEASLEY, Judge.

Plaintiffs-Appellants, Angela Wilcox and Pioneer State Mutual Insurance Company, appeal from an order granting the motion of garnishee defendant-appellee, Auto Owners Insurance Company, to quash a writ of garnishment.

On October 31, 1977, a house trailer, owned by plaintiff Wilcox and insured by plaintiff Pioneer, caught fire and was damaged. Plaintiffs claim that the proximate cause of the fire was the negligence of defendants Harry and Orpha Sealey. When plaintiffs brought suit against the Sealeys, the latter demanded that garnishee defendant Auto Owners defend them and pay any possible judgments up to the limits of the policy, namely, $5,000. When Auto Owners refused to do so, on the ground that the coverage afforded by the policy did not extend to plaintiffs' claims, the Sealeys started an action for declaratory judgment against Auto Owners.

In a nonjury trial, a declaratory judgment was granted in favor of Auto Owners, holding that the insurance policy neither covered plaintiffs' claims nor required Auto Owners to defend. Shortly after that declaratory judgment was entered on June 25, 1982, plaintiffs Wilcox and Pioneer settled their claim against the Sealeys under an agreement in which plaintiffs, claiming they were not bound by the declaratory judgment, reserved their rights against Auto Owners under the insurance [132 MICHAPP 41] policy. A consent judgment ¹ was entered in plaintiffs' case against the Sealeys in accordance with the settlement agreement and plaintiffs then garnished Auto Owners under the insurance policy for any amount of damage exceeding amounts paid under the settlement.

In response to the garnishment, garnishee defendant, Auto Owners, filed a disclosure denying liability, claiming, among other things, that the matter was decided by the declaratory judgment previously rendered in favor of Auto Owners. The same judge heard the motion of Auto Owners to quash the garnishment as had presided over the declaratory judgment action.

Plaintiffs were not made a party to the declaratory judgment action in which the coverage issue was decided. However, during oral argument on the motion to quash the garnishment, the parties admitted that plaintiffs knew of the fact of the declaratory judgment action. As a result, the trial court found that plaintiffs knew and could have intervened in the declaratory judgment action if they had wished to do so. Based on that fact and the fact that the trial court had already heard a similar issue in the declaratory judgment action the trial court quashed the writ of garnishment.

On appeal, plaintiffs argue that they should have been joined in the declaratory judgment action under GCR 1963, 205. In fact, plaintiffs argue further that under GCR 1963, 209.1(3), they "probably could have intervened of right". Plaintiffs[132 MICHAPP 42] cite D'Agostini v. City of Roseville, ² which provides three requirements for application of GCR 1963, 209.1(3): (1) timely application, (2) representation of the applicant's interest by existing parties is or may be inadequate, and (3) applicant may be bound by a judgment in the action. The opinion in D'Agostini holds that, if all of the above are present, an applicant is qualified for intervention as of right.

Plaintiffs conclude their argument by asserting that the better rule, as between requiring the parties to join Wilcox in their declaratory judgment action and requiring Wilcox to attempt to intervene, would be to require the joinder of plaintiffs in the declaratory judgment action by the parties to that suit. Largely, we disagree with plaintiffs' analysis and, particularly, with their conclusions.

GCR 1963, 205.1 defines necessary joinder as requiring persons having such interests in the subject matter and action that their presence in the action is essential to permit the court to render complete relief to be joined.

In the Sealeys' declaratory judgment action against Auto Owners, Wilcox was not such a party whose presence was essential to permit the court to render complete relief. All that Sealey sought in that declaratory judgment action was an interpretation and definition of the meaning of the insurance policy, with particular reference to whether or not Wilcox's claims against the Sealeys were within the coverage and whether or not Auto Owners was required to undertake the defense of the Sealeys against Wilcox's claims.

In suing their own insurance company (Auto Owners), the Sealeys could litigate and obtain the [132 MICHAPP 43] relief sought without joining Wilcox. Thus, we would not believe that for purposes of application of the rules on joinder, Wilcox was a necessary, essential party to the Sealeys' declaratory judgment action. On the other hand, we are inclined to believe that if Wilcox had made timely application to intervene in the Sealeys' declaratory judgment action against Auto Owners, Wilcox should have been permitted to intervene under GCR 1963, 209.1(3). However, although admitting to knowledge of the fact of the declaratory judgment action, Wilcox did not attempt to intervene.

In Cloud v. Vance, ³ plaintiff sued defendant for damages arising out of an automobile collision. An attorney retained by Vance's insurance company filed an appearance for him, but then was permitted to withdraw on the basis that Vance did not cooperate with him regarding discovery. Then, the insurance company sued Vance, its insured, and obtained a declaratory judgment holding that it had no obligation under the insurance policy. Cloud was not a party to the declaratory judgment action and claimed that he did not have any notice of that proceeding. Cloud then obtained a default judgment against Vance, which he sought to collect in a writ of garnishment against the insurance company.

In reversing the trial court, we held that Cloud was not precluded from a hearing on the merits regarding any obligations owed by the garnishee defendant insurance company to Cloud under the insurance policy. We held that where a plaintiff has a substantial interest in the proceeds of an insurance policy and where the insurance company has knowledge of the existence of plaintiff's [132 MICHAPP 44] claim, then plaintiff was entitled to notice from the insurance company of the declaratory judgment action that was brought and an opportunity to intervene.

We also held that res judicata did not apply because the action was not between the same parties. We also said that while we doubted that a default judgment on the coverage issue could really be described as a decision on the merits, we were not required to decide that issue because res judicata did not apply where the parties were not the same. Consequently, in Cloud, we sent the case back for a hearing to determine whether or not there was coverage.

In Ward v. Detroit Automobile Inter-Ins. Exchange, ⁴ we reversed an award of accelerated judgment in favor of an insurance company. In 1974, Ward had obtained a default judgment against Gollnick arising out of a 1973 automobile collision. After the judgment was entered, Ward garnisheed the insurance company, and the insurance company filed a disclosure denying liability to Ward. Ward did not raise the statutory issue to litigate the denial of liability. Eventually, Ward obtained an assignment from Gollnick of his cause of action against the insurance company and then filed suit against the insurance company, claiming the latter did not undertake Gollnick's defense even though it knew of the automobile accident and of Ward's claim. The insurance company claimed that its disclosure denying liability to Gollnick, given in response to Ward's garnishment, was res judicata of Ward's subsequent suit against the insurance company. The trial court agreed and granted accelerated judgment.

In reversing, we held that res judicata did not [132 MICHAPP 45] apply because Gollnick was not a party to the garnishment by Ward and disclosure by the insurance company and because the suit brought by Ward as Gollnick's assignee was not the same matter as contesting the garnishment disclosure denying liability.

Neither Cloud v. Vance, supra, nor Ward v. DAIIE, supra, control the result here because of differences in their respective facts.

First, in this case, it is admitted that plaintiffs had knowledge of the bringing of the declaratory judgment action. There is nothing in this record to indicate that there was any reason preventing plaintiffs from having intervened, and become parties in the declaratory judgment action.

In addition, the basis for the claim of no coverage is quite different here, where the claim is that the terms of the policy did not extend to the coverage sought. On the other hand, in Cloud, supra, the declaratory judgment action was based upon a lack of cooperation by the defendant with the attorney retained by the insurance company. In Ward, supra, the...