Xiaoyan Gu v. Da Hua Hu

• Decision Date: 29 July 2014
• Docket Number: No. ED 100001.,ED 100001.
• Citation: 447 S.W.3d 680
• Court: Missouri Court of Appeals
• Parties: XIAOYAN GU, Plaintiff/Appellant, v. DA HUA HU, and Ace Ina Insurance Company Canada, Defendants/Respondents.

447 S.W.3d 680

XIAOYAN GU, Plaintiff/Appellant

v.DA HUA HU, and Ace Ina Insurance Company Canada, Defendants/Respondents.

No. ED 100001.

Missouri Court of Appeals, Eastern District, Division Four.

July 29, 2014.

Motion for Rehearing and/or Transfer to Supreme Court Denied Sept. 2, 2014.

James P. Leonard, St. Louis, MO, for appellant.

Walter L. Floyd, Jr., Clayton, MO, Gino F. Battisti, Ryan M. Hatcher–( Co–Counsel), St. Louis, MO, Christopher A. Wadley–( Co–Counsel), Chicago, IL, for respondent.

PHILIP M. HESS, Judge.

I. Introduction

In this equitable garnishment action, Xiaoyan Gu (Plaintiff) appeals the judgment of the circuit court denying her motion for summary judgment and granting the cross-motion for summary judgment of Ace Ina Insurance Company Canada (Defendant).¹ Plaintiff claims the circuit court's judgment is erroneous because Defendant is precluded from asserting its policy exclusion defense where the issue of the insured's coverage was conclusively determined in a prior matter and Plaintiff “stands in the shoes” of the insured under § 379.200 RSMo (2000).² We reverse the judgment of the circuit court and remand for entry of judgment in Plaintiff's favor.

II. Factual Background

The events underlying Plaintiff's equitable garnishment claim occurred in 2007, when her husband, Wei Wu (Husband), suffered serious bodily injury in a tractor trailer accident. Husband and Plaintiff filed suit to recover damages for Husband's injuries and Plaintiff's loss of consortium against the involved trucking companies and Da Hua Hu, the driver of the tractor trailer in which Husband was a passenger. After a bench trial, the court entered a judgment in favor of Husband and Plaintiff, awarding Husband $13,803,203.46 and Plaintiff $1,500,000.³

A. Prior Garnishment Action

To collect on the judgment, Plaintiff and Husband jointly filed a § 379.200 equitable garnishment claim against Defendant, the insurer of the accident vehicle. Notably, Hu (Driver) had not purchased Defendant's insurance coverage. Instead, the insured under Defendant's Ontario Garage Automobile Policy (the Policy) was a Volvo dealership, Performance Equipment, from which Driver had purchased his tractor truck. Performance Equipment had rented Driver the Ryder truck involved in the accident.⁴ The Policy, however, provided coverage to additional insureds if that person operated any automobile in connection with Performance Equipment's business as a Volvo dealership.

Before the matter proceeded to a bench trial, Plaintiff voluntarily dismissed her claim without prejudice. Husband, however, proceeded with his claim on the theory that Driver was an additional insured under the Policy, meaning that Defendant would be required to indemnify Driver in the amount of Husband's tort judgment. Defendant's defense was that Driver was not entitled to coverage because at the time of the accident, he was operating the truck in furtherance of his own trucking business, not in connection with Performance Equipment's business. Indeed, it is undisputed that at the time of the accident, Driver was transporting a trailer of grapes and carrots between California and Ontario pursuant to a contract between his trucking company and a transportation broker.

On the first day of trial, Defendant raised an affirmative defense that the Policy's carriage-of-goods exclusion precluded coverage and requested leave to amend its pleadings. That exclusion provided an exception from coverage when the “automobile is being used ... for the carrying of goods or materials for compensation.” The trial court decided to “take [the matter] with trial,” but ultimately denied the motion to amend the pleadings because such an amendment would prejudice Husband.

Subsequently, the trial court entered judgment in favor of Husband, finding that Driver was entitled to coverage under the Policy because Driver was operating the tractor trailer in connection with Performance Equipment's business since Performance Equipment rented the Ryder truck for Driver. The trial court entered a judgment against Defendant in the amount of $11,345,681.38.⁵

B. Present Garnishment Action

Plaintiff then filed the instant equitable garnishment suit under § 379.200. In her petition, Plaintiff alleged that the issue of Driver's coverage under the Policy had been fully litigated in the prior garnishment action and that Defendant is collaterally estopped from re-litigating the issue of coverage for damages. Defendant denied liability, timely raising the affirmative defense that the Policy's carriage-of-goods exclusion precluded coverage.

Plaintiff moved for summary judgment, asserting that Defendant is collaterally estopped from re-litigating the issue of Driver's coverage and additionally that the doctrine of res judicata bars Defendant from raising defenses that it failed to raise in the prior litigation. Defendant countered that the preclusion doctrines are inapplicable. Defendant also filed a cross-motion for summary judgment, asserting that it is entitled to assert the Policy's carriage-of- goods exclusion and that no genuine dispute of material fact exists that the exclusion applies to exclude coverage for Plaintiff's claim.

The circuit court found that “it would be inequitable to apply collateral estoppel or res judicata” to prevent Defendant from asserting the Policy's carriage-of-goods exclusion as a defense. The circuit court explained:

During the trial of the prior garnishment action the trial court refused to allow [Defendant] to amend its pleadings to assert the affirmative defense that the carriage-of-goods exception applied to exclude [Driver's] coverage under the insurance policy. The court did this because to allow the defense for the first time at trial would have been prejudicial to [Husband] who had no opportunity to conduct discovery on the issue or otherwise prepare to meet the defense. The present circumstance differs substantially, as Plaintiff is not prejudiced by the failure of notice of the defense. Rather, any unfairness and prejudice would be to [Defendant], whose insurance policy clearly excluded coverage of the collision in question.

The Court is cognizant of the loss of consortium damages Plaintiff has sustained and continues to suffer. However, [Defendant] did not cause those damages and cannot fairly be held liable for payment of those damages under the circumstances of this case. As noted above, fairness under the particular facts of the case is the overriding concern. Here, to disallow litigation of the issue of coverage would be inequitable.

The circuit court further found that the Policy's carriage-of-goods exclusion precludes coverage. Accordingly, the circuit court denied Plaintiff's motion, granted Defendant's cross-motion, and entered summary judgment in favor of Defendant.⁶ Plaintiff appeals.

III. Standard of Review

This Court reviews de novo the circuit court's summary judgment decision. ITT Commercial Fin. Corp. v. Mid–America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment is proper if the moving party has shown, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. Affirmative Ins. Co. v. Broeker, 412 S.W.3d 314, 318 (Mo.App. E.D.2013). We must view all the submissible evidence in the light most favorable to the non-moving party. ITT Commercial Fin. Corp., 854 S.W.2d at 376. A genuine issue of material fact barring summary judgment exists if “the record contains competent materials that evidence two plausible, but contradictory, accounts of the essential facts.” Id. at 382. However, because the parties do not dispute any material facts, our review focuses on the legal question whether Defendant was entitled to judgment as a matter of law.

IV. Discussion

Plaintiff's sole point is that Defendant is precluded from asserting the Policy's carriage-of-goods exclusion as a defense because the issue of Driver's coverage was conclusively determined in the prior garnishment action and Plaintiff “stands in the shoes” of Driver under § 379.200. In the argument portion of her brief, Plaintiff explains that either collateral estoppel or res judicata preclude Defendant from asserting the Policy's carriage-of-goods exclusion in the instant garnishment suit. In essence, Plaintiff seeks to apply the preclusion doctrines offensively in order to avail herself of the trial court's prior judgment.

A. Collateral Estoppel

We first consider Plaintiff's argument that collateral estoppel bars Defendant from raising the Policy's carriage-of-goods exclusion in the present garnishment action. “The doctrine of collateral estoppel, commonly known as issue preclusion, precludes the same parties from relitigating issues previously adjudicated between the same parties or those in privity with them.” Robin Farms, Inc. v. Beeler, 991 S.W.2d 182, 185 (Mo.App. W.D.1999). Courts considering whether to apply this doctrine determine whether: (1) the issue decided in the prior adjudication was identical with the issue presented in the present action; (2) the prior adjudication resulted in a judgment on the merits; (3) the party against whom collateral estoppel is asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior suit. Finley v. St. John's Mercy Med. Ctr., 958 S.W.2d 593, 595 (Mo.App. E.D.1998). Collateral estoppel does not apply where its application would be inequitable. See James v. Paul, 49 S.W.3d 678, 683 (Mo. banc 2001) ; Oates v. Safeco Ins. Co. of America, 583 S.W.2d 713, 721 (Mo. banc 1979). The overriding consideration is fairness and the analysis must focus primarily on principles of equity derived from the facts of each particular case. James, 49 S.W.3d at 688.

Here, we need only consider the fourth element of collateral estoppel to resolve the applicability of this doctrine. Clearly, Defendant's defense was not...