No. 83-301
IN THE SUPREME COURT OF THE STATE OF MONTANA
1983
AETNA LIFE AND CASUALTY INSURANCE
COMPANY,
Plaintiff and Appellant,
WAYNE JOHNSON, d/b/a CORAL REEF PET SHOP
and COlJlMERCIAL UNION INSURANCE COMPANIES,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Wellcome & Frost; G. Page Wellcome argued, Bozeman,
Montana
For Respondents:
Anderson, Brown, Gerbase, Cebull & Jones; James L.
Jones argued, Billings, &Iontana
Wayne Johnson, pro se, Clarkson, Washington
------
Submitted: November 1, 1983
Decided: January 5, 1984
Filed: .;g,iq - $984
Clerk
Mr. Chief Justice Frank I. Haswell delivered the Opinion of
the Court.
Aetna Life and Casualty Insurance Co. (Aetna) appeals
the summary judgment ordered by the Gallatin County District
Court in its action against Wayne Johnson, d/b/a Coral Reef
Pet Shop, and Johnson's insurer, Comrnercj.al Union Assurance
(C.U.), respondent, for losses it paid to its insured, caused
by a fire set by Johnson. We affirm.
On May 22, 1980, a fire occurred at the Coral Reef Pet
Shop in Bozeman, causing extensive damage to the pet shop and
adjacent businesses. On December 1, 1980, Wayne Johnson,
proprietor of the pet shop, was charged with criminal mis-
chief and arson. At his trial the State sought to prove that
he intentionally set the fire to defraud his insurance compa-
ny, C.U. He was convicted by a jury on April 23, 1981. This
Court affirmed that conviction on February 25, 1982. State
v. Johnson (Mont. 1982), 641 P.2d 462, 39 St.Rep. 419.
C.U. subsequently commenced an action for declaratorv
judgment against Johnson to establish that it had no obliga-
tion to pay for Johnson's losses as the fire was set inten-
tionally. Since Aetna paid for the damage to the surrounding
businesses, it sought to intervene in this action to estab-
lish that Johnson was guilty of negligence in causing the
fire. This would enable Aetna to recover the amount it paid
to other businesses under the liability portion of Johnson's
policy. Intervention was granted on April 17, 1982. Aetna
also filed a separate action against Johnson and C.U. The
two actions were consolidated.
C.U. filed a motion for summary judgment, arguing that
the na.ture of Johnson's act is res judicata in the civil
action and relitigation thereof should be barred. The
District Court granted the motion for summary judgment. The
court's supporting memorandum indicated that since the ques-
tion at bar had not been decided by this Court, it would be
more efficient to appeal the summary judgment rather than
conducting a full trial. Also, the District Court pointed
out that there is a trend that evidence of a conviction is
conclusive as to the facts previously determined in the
criminal trial. From the summary judgment, Aetna appeals and
raises one issue for our consideration:
Was the District Court correct in holding that a crimi-
nal conviction of arson is res judicata in a subsequent civil
action brought by a third party seeking to establish damages
and liability coverage?
Aetna argues that the circumstantial evidence support-
ing Johnson's conviction and the lack of a sufficient arson
investigation leave many factual questions for jury in
spite of the conviction and appeal. Thus, a civil trial on
C.U.'s liability coverage should not be precluded by res
judicata or col-lateral estoppel.
Aetna also asserts that the different nature of the
actual proceedings and the interests of the parties involved
prevent either proceeding from barring the other.
C.U. argues that concepts of res judicata and collater-
al estoppel should apply here. Essentially, the question of
liability hinges upon the nature of Johnson's acts and this
was determined at the criminal trial and revieb~ed by this
Court. The fact that Aetna was not a party in the previous
action is immaterial. As long as the party against whom the
claim is advanced remains the same from the previous action,
it is immaterial that the other parties are not precisely
identical.
While this Court has never directly addressed the
question at ba.r, other jurisdictions have done so. In Casey
v. Northwestern Security Insurance Company (1971), 260 Or.
485, 491 P.2d 208, the Oregon Supreme Court held that the
insured's conviction of assault with a dangerous weapon upon
the victim, who subsequently sued the insured for injuries
inflicted by the crime, conclusively established that the
insured acted intentionally. When the insured sought to have
his insurance company defend him in the suit, the insurer
asserted it had no duty to defend as there was no coverage
since the iniuries inflicted by the insured were intentional.
The Court held that the insured was collaterally estopped
from relitigating the issue of whether his acts were inten-
tional in his action against his insura.nce company for attor-
ney fees. The Oregon Court relied on California and
Pennsylvania cases to support its holding.
In Teitelbaum Furs, Inc. v. Dominion Insurance Company
(1962), 25 Cal.Rptr. 559, 375 P.2d 439, the California Su-
preme Court found that '.
I .. any issue necessa.rily decided
in a prior criminal proceeding is conclusively determined as
to the parties if it is involved in a subsequent civil ac-
tion." 375 P.2d at 442. Justice Traynor's comments explain
the basis for this rule:
11 I . . . To preclude a
civil litigant from
re1itigatin.q an issue previously found
against him in a criminal prosecution is
less severe than to preclude him from
relitigating such an issue in successive
civil trials, for there are rigorous
safeguards against unjust conviction,
including the requirements of proof
beyond a reasonable doubt (Code Civ.Proc.
S 2061) and of a unanimous verdict (Pen.
Code, S 1164), the right to counsel (In
re James, 38 Cal.2d 302, 240 P.2d 596),
and a record paid for by the state on
a.ppea1 (Cal. Rules of Court, rule 33).
Stability of judgments and expeditious
trials are served and no injustice done,
when criminal defendants are estopped
from relitigating issues determined in
conformity with these safeguards.' 375
P.2d at 441."
The California Court held that three questions were
pertinent to determine the applicability of collateral estop-
pel. They are:
". . .
[l] Was the issue decided in the
prior adjudication identical with the one
presented in the action in question? [2]
Was there a final judgment on the merits?
[31 Was the party against whom the plea
is asserted a party or in privity with a
party to the prior adjudication? . . ."
375 P.2d at 440.
See, Bernhard v. Bank of America (1942), 19 Cal.2d 807, 810,
122 P.2d 892, 894. An affirmative answer to each query would
establish a basis for collateral estoppel.
In Mineo v. Eureka Security Fire & Marine Insurance
Company (1956), 182 Pa.Super. 75, 125 A.2d 612, the Superior
Court of Pennsylvania held that an insured's conviction for
setting a fire, which caused damages for which recovery was
sought, was a bar to the insured's assignee's recovery on the
fire policy. In essence, the key issue in the civil trial
brought by the assignee was whether the insured intentionally
set the fire. If so, the policy would not cover the damage
pursuant to the provisions of the policy. The court found
that this issue was previously determined in the criminal
trial and reviewed on appeal. Thus, such determination is
conclusive in the subsequent civil trial and the assignee was
estopped from relitigating the question. The Pennsylvania
Court set forth sound policy for this rule:
"Whether the insureds set the fire or not
is a question of fact which has been
established beyond a reasonable doubt in
a court proceedings. Once this fact has
been established, ar.d the Commonwealth,
i n whose hands rests the maintenance of
.
public pol.icy, has satisifed itself of
the fact, why then should it permit its
courts to be used by the insured in an
effort to obtain reward for the crime
which the Commonwealth has already con-
cluded he has committed?" 125 A.2d at
617.
Another case i.s particularly on point. The appellate
division of the New Jersey Superior Court held that the
doctrine of collateral estoppel barred an injured party from
relitigating with an insurer the question of whether his
injuries had been intentionally caused by the insured and
within the policy exclusion for bodily injury caused "inten-
tionally" by the insured. New Jersey Manufacturers Insurance
Company v. Rrower (1978), 161 N.J.Super. 293, 391 ~ . 2 d923.
We hold that collateral estoppel will bar litigation
an issue in a civil trial that has previously been litigated
in a criminal trial when the requirements of Teitelbaum
- -. , have been met.
Furs, Inc The authority discussed above is
persuasive and represents a growing trend indicative of our
holding.
As discussed in Teitelbaum Furs, Inc., supra, the
rigorous safeguards against an unjust criminal conviction,
especially the requirement of proof beyond a reasonable doubt
as opposed to the preponderance of the evidence, make collat-
eral estoppel between criminal and civil trials less severe
than between successive civil trials. Furthermore, applica-
tion of collateral estoppel promotes expeditious trials and
stability of judgments. We will not show such lack of faith
in the criminal jud.icia1 system to allow an issue fully and
fairly litigated in a criminal trial to be completely
relitigated in a subsequent civil trial.
The District Court found that the conviction of Johnson
is res judicata in a subsequent civil case. However, res
judicata is d-ifferent from collateral estoppel. Collateral
estoppel involves preclusion of issues previously litigated
and res judicata is preclusion of claims that have been
litigated. Larry C. Iverson, Inc. v. Bouma (Mont- 1981) I 639
P.2d 47, 38 St.Rep. 1911. Our holding embraces only collat-
eral estoppel and, thus, is specifically limited to issue
preclusion.
Aetna contends that Wilson v. Gehring (19681, 152 Mont.
221, 448 P.2d 678, is in direct conflict with this ruling.
It quotes the following language from the case to support
this contention:
"Defendant's first argument is an effort
to convince this Court that a judgment in
a criminal action should be a bar to this
civil proceeding for damages. Such is
not the law of Montana and no purpose
would be served by an extended discus-
sion. Suffice it to say that the crimi-
nal proceeding is one prosecuted by the
state for an offense aga.inst one of its
residents; the civil proceeding is one
brought by an injured person to recover
from the wrongdoer damages for the inju-
ries caused. The injured person has no
individ.ua1 legal interest in the criminal
proceeding; the state has no direct lega,
interest in the civil proceeding. Nei-
ther proceeding is a bar to the other.
... I1
152 Mont. at 227-228, 448 P.2d
at 692.
While this language arguably supports the view that a
judgment in a criminal action would not bar a subsequent
civil proceeding for damages, it exceeds the scope of the
issues appealed and is therefore dicta. The Wilson holding
is correct because an acquittal was involved. A subsequent
civil action could produce a different result since a lesser
burden of proof is applied. Thus, an acquittal should not
bar a subsequent civil action. However, any language in
Wilson giving this specific rule a broader meaning is dicta.
In the present case we find that collateral estoppel
bars relitigation of the issue of whether Johnson intention-
ally set the fire on his business premises. Applying the
factors enumerated in Teitelbaum - -
Furs, Inc., we fin.d first
that the issue decided in the criminal trial is identical to
the key issue in the civil trial: whether Johnson set the
fire intentionally. Second, there was a final judgment on
the merits: Johnson was convicted. Third, the party against
whom the plea i.s asserted is Aetna and it is in privity with
Johnson. The fact that the parties in the civil action are
not the same as those in the criminal action does not render
the doctrine inapplicable. Many courts that have addressed
this issue have rejected what it called mutuality of parties
or mutality of estoppel (i.e. that the parties rema.in the
same in each action). Casey, supra; Teitelbaum,Furs, Inc.,
supra; and Brower, supra. However, the party against whom
the claim - advanced m.ust remain the same or be a privy of
is
the earlier party. Seattle First Natl. Bank v. Cannon
(1980), 26 Wash.App.2d 922, 61.5 P.2d 1316; New Jersey Manu-
facturers Insurance Company v. Brower, supra. While Aetna
was not involved in the original action, it was in privity
with Johnson and, therefore, barred from relitigating any
issue decided against Johnson. First, Aetna ' s recovery
hinges upon the nature of Johnson's acts. If he acted inten-
tionally, he is excluded from coverage and Aetna could not
recover for losses it paid. Thus, Aetna's rights under
Johnson's insurance policy are derivative of those of John-
son. In effect, Aetna stands in the shoes of Johnson with
respect to the liability policy involved. New Jersey Manu-
facturers Insurance Company, supra; Burd v. Sussex Mut. Ins.
Co. (1970), 56 N.J. 383, 397, 267 A.2d 7. Second, an
identity of interest existed between Aetna and Johnson at the
time of the criminal proceeding. Johnson had a great person-
al interest in establishing that he did not set the fire
because he would have avoided criminal responsibility for
arson and retained the property damage coverage on his insur-
ance policy. Aetna had a similar interest in Johnson not
being found guilty of intentionally setting the fire as it
would have recovered for losses under the liability portion
of his insurance policy.
Affirmed.
aaapcy,~
Chief Justice
We concur: