NO. 91-396
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
SHEFFIELD INSURANCE COMPANY,
Plaintiff and Respondent,
v.
LIGHTHOUSE PROPERTIES, INC., a Montana IW/l
3 a_ '1992
corporation, GORDON R. HARDING, d/b/a
ANCIENT MARINER BAR, and TODD TIBBETTS, ,
f.2 . .
Defendants and Appellants. ci-
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Lake,
The Honorable John S. Henson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Sam E. Haddon and William L. Crowley,
Boone, Karlberg & Haddon, Missoula, Montana
For Respondent:
Steven S. Carey,Garlington, Lohn & Robinson,
Missoula, Montana
Submitted on Briefs: January 30, 1992
Decided: March 31, 1992
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
On February 17, 1989, Todd Tibbetts filed an amended complaint
against Gordon R. Harding in which he sought to hold Harding liable
for damages arising from the sale of alcohol and management of his
business premises. Sheffield Insurance Company, which insured
Harding's business, responded by filing a declaratory judgment
action in the Twentieth Judicial District in Lake County to
determine whether coverage existed for the acts or omissions
alleged in Tibbetts' complaint. The District Court granted summary
judgment for Sheffield, and held that the insurance policy did not
cover damages arising from the acts alleged in Tibbettst complaint.
The District Court also awarded attorney fees to Sheffield under
§ 37-61-421, MCA. Tibbetts appeals. We affirm in part and reverse
in part.
The issues are:
1. Did the District Court err when it held that Tibbetts'
amended complaint was barred by the doctrine of res judicata?
2. Did the District Court err when it held that the
insurance policy excluded liability for the acts alleged in
Tibbetts' amended complaint?
3. Did the District Court err when it imposed the sanction
of costs and attorney fees against Tibbetts' attorneys?
On October 5 and 6, 1985, Tibbetts and his cousin Vince Kelly
had several drinks at the Ancient Mariner Bar in Polson. Later
that night, Kelly and Tibbetts had an automobile accident while
2
Kelly was driving. Tibbetts was severely injured. Tibbetts then
sued Harding as the owner and operator of the Ancient Mariner.
~ibbetts
alleged that Harding had negligently sold alcohol to Kelly
and that Harding was, therefore, liable for the damages Tibbetts
had suffered.
On September 11, 1986, Sheffield responded by filing a
declaratory judgment action in which it sought a ruling that the
insurance policy it had issued for the Ancient Mariner did not
cover liability for damages arising from the sale of alcohol. The
District Court granted summary judgment to Sheffield, and we
affirmed. Shefield Zits. CO. v. Lighthouse Prop., Znc. ( 1988 ) , 2 34 Mont . 395,
763 P. 2d 669 (Shefield I).
On February 17, 1989, Tibbetts filed an amended complaint in
which he attempted to set forth an additional theory of liability
not based on the sale of alcohol. Specifically, Tibbetts claimed
that he was a business invitee, that Harding therefore owed him the
ordinary duty of due care, and that Harding breached that duty by
allowing Tibbetts to leave the Ancient Mariner in the company of an
obviously intoxicated person. Sheffield responded by filing this
action for declaratory judgment.
The District Court granted Sheffield's motion for summary
judgment. The court found that res judicata barred Tibbettsl amended
claim and that the insurance policy would exclude that claim even
in the absence of resjudicata. Tibbetts appeals from the judgment of
the District Court.
I
Did the District Court err when it held that Tibbetts' amended
complaint was barred by the doctrine of resjudicata?
Tibbetts contends that the District Court erred in its
application of resjudicata because his amended complaint presented a
new claim that we did not address in Shefield I . Specifically, he
contends that his original complaint alleged liability forthe sale
of alcohol based on our decision in Nehring v. LaCourzte (1986), 219
Mont. 462, 712 P.2d 1329, and that his amended complaint presented
a claim based upon premises liability.
The District Court held that res judicata barred Tibbettst
premises liability claim, based on our decision in Sheffield I. Res
judicata "bars the same parties from relitigating the same cause of
action," and furthers the public policy of finality in litigation.
Smith v. Schweigert (1990), 241 Mont. 54, 58, 785 P.2d 195, 197-98.
Generally, resjudicata bars relitigation not only of issues that have
already been decided but also issues that the parties had the
omortunitv to present for decision. First Bank Missoula v. Fourth Judicial
Dkt. Court (l987), 226 Mont. 515, 519, 737 P.2d 1132, 1134.
Tibbetts argues that in declaratory judgment actions the
application of resjudicata is more narrow and that it does not apply
to claims that were not expressly declared or decided in the
previous action. In support of his position, he brings to our
attention decisions from other jurisdictions which hold that
declaratory judgment actions are an exception to the ordinary broad
. .
scope of the res judicata doctrine. See, e.g. , Bernard v. Gulf Ins. Co. (Tex Ct
Civ. App. 1976), 542 S.W.2d 429. He asserts that we did not
address his premises liability claim in Shefjield I and that,
therefore, he is not attempting to relitigate the issues we
resolved in that decision.
Although we have not previously considered this exception to
the resjudicata doctrine, we find it unnecessary to do so in this case
because we actually addressed Tibbetts' amended claim in ShefjieldI.
In that case we said:
While Mr. Tibbetts attempts to argue that there is a
basis to consider his allegations of negligence
separately from sale or service of alcohol, our analysis
ofthe pleadings and affidavits considered in conjunction
with the granting of summary judgment leads us to
conclude that Mr. Tibbetts has failed to set forth a
theory of negligence separate and apart from the sale or
service of alcohol. As a result, we hold that coverage
is specifically excluded by the language of the policy.
Mr. Tibbetts contends that coverage should not be
excluded for negligent acts of the bar owner in failinq
to wrowerlv manaqe the bar and to properly supervise the
bar employees. We do recognize that the management and
supervision of employees could involve matters not
related to the sale or service of alcohol. However, as
we analyze the facts presented in support of Mr.
Tibbetts' position, we conclude that claims of improper
employee supervision or mismanaqement of the bar directly
relate to the sale or service of alcohol. [Emphasis
added. ]
Tibbetts asserts that his premises liability claim is separate
and distinct from his original liability theory. He asserts that
Harding, as a landowner, owed Tibbetts, as a business invitee, a
general duty to warn of known hazards existing on Harding's
property. He cites Fuhrer v. Gearhart by the Sea (Or. 1988), 760 P.2d 874,
and Restatement (Second) of Torts 5 371 (1976) in support of this
theory. Tibbetts contends that Kelly's intoxication was a known
hazard, both on and off the premises of the Ancient Mariner, and
that Harding, therefore, should have warned Tibbetts of the danger.
The problem with this theory is that Kelly's intoxication
still arises from the sale of alcohol. Other jurisdictions have
rejected similar attempts to circumvent liquor liability exclusions
in tavern and saloon insurance policies. In Marston v. Merchants Mutual
~nsuranceCompafly (Me. 1974), 319 A.2d 111, for example, the court
considered a failure to warn claim that was identical to the one
alleged in Tibbetts* amended complaint and found that it was
excluded under policy language very similar to the language we
construed in Sheffield I . In New Hampshire Insurance Company v. Hillwinds Inn, Inc.
(N.H. 1977), 373 A.2d 354, the court found that policy language
identical to the language we construed in Sheffield I excluded coverage
for,a tavern owner's failure to l'police'l
patrons as they left the
bar.
In Shefield I, we held that the insurance policy excluded
coverage for all claims arising from the sale of alcohol on the
premises. We conclude that Tibbetts' amended complaint is not
based upon an activity unrelated to the sale of alcohol and is
therefore barred by the doctrine of resjudicata.
Did the District Court err when it held that the insurance
policy excluded liability for the acts alleged in Tibbetts' amended
complaint?
The insurance policy provides as follows:
This insurance does not apply:
(h) to bodily injury or property damage for which the
indemnitee may be held liable
(1) as a person or organization engaged in the
business of manufacturing, distributing,
selling or serving alcoholic beverages, or
(2) if not so engaged, as an owner or lessor of
premises used for such purposes,
if such liability is imposed
(i) by, or because of the violation of, any
statute, ordinance or regulation
pertaining to the sale, gift, distri-
bution or use of any alcoholic beverage,
or
(ii) by reason of the selling, serving or
giving of any alcoholic beverage to a
minor or to a person under the influence
of alcohol or which causes or contributes
to the intoxication of any person;
but part (ii) of this exclusion does not apply with
respect to liability of the insured or his
indemnitee as an owner or lessor described in (2)
above.
This provision excludes coverage for liability arising from the
sale of alcohol, subject only to an exception in which it
affirmatively provides coverage to passive owners who do not
actively engage in selling alcohol on the insured premises. Thus,
this provision would extend coverage to Harding if he was not
actively engaged in the operation of the Ancient Mariner.
Tibbetts sued Harding "d/b/a Ancient Mariner Bar. In his
amended complaint, Tibbetts alleged that Harding (1) "owned and
the Ancient Mariner; (2) sold 13 to 20 drinks to Kelly on
operatedv1
October 5 and 6, 1985; (3) should have known that Kelly was too
drunk to drive; and (4) should have warned Tibbetts of the danger.
Furthermore, in response to discovery by Tibbetts, Harding admitted
that "at times he was engaged in the actual operationw of the
Ancient Mariner.
Tibbetts, however, contends that summary judgment was improper
because Harding earlier denied taking an active role in the
operation of the Ancient Mariner. However, if Tibbetts8
allegations regarding Harding's involvement are true, then Harding
is not excepted from the exclusion. If they are untrue, Tibbetts
has no basis for alleging that Harding is liable to him. Either
way, summary judgment was appropriate.
We hold that the District Court did not err when it held that
the insurance policy excluded liability for the acts alleged in
Tibbettst amended complaint.
I11
Did the District Court err when it imposed the sanction of
costs and attorney fees against Tibbetts' attorneys?
The District Court awarded attorney fees under the authority
of 5 37-61-421, MCA, which provides:
An attorney or party to any court proceeding who, in the
determination of the court, multiplies the proceedings in
any case unreasonablv and vexatiously may be required by
the court to satisfy personally the excess costs,
expenses, and attorney fees reasonably incurred because
of such conduct. [Emphasis added.]
Tibbetts argues that courts must act with circumspection in
penalizing attorneys under this statute in order to "avoid the
chilling of an attorney's legitimate ethical obligations to
represent his client zealously."
We agree. Although we have concluded that Tibbetts' amended
complaint did not present new issues or circumvent the exclusion in
the insurance policy, we do not believe it was "unreasonable and
vexatious" for his attorneys to attempt to amend the complaint in
a way that would reach Hardingts insurance coverage.
We hold that the District Court erred when it assessed costs
and attorney fees against Tibbettst attorneys.
The decision of the District Court is affirmed with respect to
its order of summary judgment, but reversed with respect to its
imposition of attorney fees.
We concur:
March 31. 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
William L. Crowley and Sam E. Haddon
BOONE, KARLBERG & HADDON
P.O. Box 9199
Missoula, MT 59807-9199
Steven S. Carey
GARLINGTON, LOHN & ROBINSON
P.O. Box 7909
Missoula, MT 59807-7909
Gordon R. Harding
4376 Mentone St.
San Diego, CA 92107
Jean Siragusa
811 W. Central
Missoula, MT 59801
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA