Case Title: Chandler v. Commercial Union Ins. Co.

Citation: 467 So. 2d 244

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1985-03-22T00:00:00Z

Document:
467 So. 2d 244 (1985)
B. Keith CHANDLER
v.
COMMERCIAL UNION INSURANCE COMPANY.
83-1104.

Supreme Court of Alabama.
March 22, 1985.
*245 David H. Meginniss of Hornsby, Blankenship, Robinson & Meginniss, Huntsville, for appellants.
Danny D. Henderson of Williams, Spurrier, Moore, Rice, Henderson & Grace, Huntsville, for appellee.
BEATTY, Justice.
Appeal from a summary judgment in favor of the defendant, Commercial Union Insurance Company, Inc. (Commercial Union), in a bad-faith-refusal-to-pay case brought by plaintiff, B. Keith Chandler d/b/a Keith Chandler Construction Company. We affirm.
The present lawsuit is an outgrowth of a prior action also brought by plaintiff in which plaintiff sought to have reformation of an insurance policy issued by this defendant in order to obtain coverage on plaintiff's truck, which had sustained fire damage.
Chandler, a construction contractor, was engaged in installing water and sewer lines and doing related work in a Madison, Alabama, subdivision. He owned three trucks; however, the truck in question was the one used on this job. This truck, a 1979 Ford LNT dump truck, was purchased for $27,334.70. Plaintiff had a heavy duty rock bed installed on it, costing $54,000.00. He also had the engine and transmission rebuilt. The truck caught fire and was severely damaged while plaintiff was operating it on the job.
Prior to the fire, the plaintiff had obtained insurance coverage on a 1978 Ford F-800 dump truck from Commercial Union. After plaintiff made a claim on his fire loss, Commercial Union denied coverage. That denial led to plaintiff's first action, in which he sought a reformation of the policy and payment under the policy. Commercial Union answered and counterclaimed in that action, asking for a judgment declaring that the destroyed vehicle was not covered under the policy or, in the alternative, asserting that the truck was destroyed intentionally by Chandler himself or at his direction. The circuit court entered a decree reforming the policy to include the burned truck, and the remaining issues were tried to a jury, which awarded Chandler $25,145.00 in damages. No appeal was taken from that judgment. The damages awarded were paid into court and in due course paid to the plaintiff.
Thereafter, plaintiff initiated this present action, alleging one count in bad faith refusal to pay a lawful claim. This complaint was later amended by adding a count in fraud. We reproduce these allegations below:
Commercial Union moved for summary judgment based upon the pleadings, decree of reformation, and jury verdict and judgment in the first action, the pleadings in this second action, and a memorandum of law. Plaintiff opposed the defendant's summary judgment motion with references to the pleadings, together with the affidavit of David H. Meginniss and the deposition of Randall C. Stafford. The trial court treated the motion as directed to Count One and, after a hearing, denied the motion. Following a pretrial conference, Commercial Union filed another motion for summary judgment, stating these grounds:
This motion was also heard, after which the trial court granted summary judgment as to both counts. Plaintiff's motion to vacate the summary judgment was denied. This appeal followed.
In granting summary judgment for the defendant, the trial court did not specify its reasons. On this appeal, the parties have presented the same issues as those presented below on the motion for summary judgment. We need not examine each of these because we find that the trial court's grant of summary judgment for the defendant was proper; the claims asserted *249 by plaintiff in the second action are barred by res judicata in that the second action involved claims which could and should have been litigated in the first action.
The record in this case discloses that during the trial of the contract action plaintiff approached the trial judge (not the judge who tried the present action) concerning the propriety of filing an amendment alleging bad faith. This is shown by the trial court's affidavit:
This Court has held that a claim for bad faith is a compulsory counterclaim where an insurance company has filed an action for declaratory judgment against an insured. Safeco Ins. Co. of America v. Sims, 435 So. 2d 1219 (Ala.1983); Federated Guaranty Life Ins. Co. v. Wilkins, 435 So. 2d 10 (Ala.1983). A consideration of Sims and Wilkins leads us to conclude that plaintiff's bad faith claim should have been asserted in his first action. Granted, it appears from the affidavit above that plaintiff attempted to amend his complaint to allege bad faith, but was thwarted in his effort by the trial judge. Clearly, this was error on the part of the trial judge. See Rule 15(b), A.R.Civ.P. ("An amendment shall not be refused under subdivision (a) and (b) of this rule solely because it adds a claim or defense, changes a claim or defense, or works a complete change in parties. The court is to be liberal in granting permission to amend when justice so requires."). Cf. Wilkins, 435 So. 2d  at 14 (noting that the trial court erred in striking a counterclaim for bad faith brought in the insurer's action for declaratory judgment).
It must be noted, however, that no proffer of or ruling on this amendment appears in those portions of the record from plaintiff's first action which have been made a part of the record on appeal in the present action. Thus, it appears that the issue concerning the denial of the amendment would not have been properly preserved for our review had plaintiff appealed in the first action. Plaintiff's proper course of action would have been to offer the amendment and obtain a ruling for the record, and subsequently appeal that ruling if adverse.
Under the circumstances involved in this case, the judgment for the plaintiff in the first trial became res judicata as to the *250 claim for bad faith refusal against Commercial Union. As this Court has not infrequently stated, the proper inquiry is whether the issue was actually litigated or whether it could have been litigated. Wheeler v. First Alabama Bank of Birmingham, 364 So. 2d 1190 (Ala.1978); McGruder v. B & L Construction Co., 331 So. 2d 257 (Ala.1976); McCormick v. McCormick, 221 Ala. 606, 130 So. 226 (1930). In this case, both the breach of contract claim, which was the subject of plaintiff's first action, and the bad faith and fraud claims, which were the subjects of this second action, all arose from a single act, the refusal to pay the proceeds of the policy. Thus, there was only one cause of action, and the first judgment became a bar to the second action. Cf. Geer Brothers, Inc. v. Crump, 349 So. 2d 577 (Ala. 1977), and Sessions v. Jack Cole Company, 276 Ala. 10, 158 So. 2d 652 (1963). The trial court could not, by agreement with counsel or otherwise, abrogate the application of this rule to this case. See, e.g., Chambers County Commissioners v. Walker, 459 So. 2d 861 (Ala.1984).
This case is readily distinguishable from Chavers v. National Security Fire & Casualty Co., 456 So. 2d 293 (Ala.1984), in which this Court held that a bad faith claim brought subsequent to the conclusion of an action on the policy was not subject to summary judgment based on res judicata, where it was not clear when the plaintiff learned of the insurance company's alleged bad faith.
Plaintiff Chandler asserts that he did not become aware that he might have a claim for bad faith refusal to pay until the defendant pleaded arson as a defense. The fraud claim asserted by plaintiff also stems from defendant's defense of arson: Plaintiff has alleged that defendant impliedly represented that plaintiff's claim was not being paid because defendant had evidence that plaintiff intentionally caused the fire, that this representation was false, that defendant made the representation knowing it was false and with the intention that plaintiff and the court rely upon it, and that the defendant fraudulently created false evidence to support the false representation. As a result, plaintiff alleges, he "was forced to rely upon the misrepresentation in that the plaintiff was unable to discover the fraudulent creation of evidence in time to aver in good faith, prior to the trial, that the defendant had no `fairly debatable question' regarding coverage of the plaintiff's fire loss by the defendant's insurance policy."
Plaintiff maintains that he did not discover the fraudulent creation of evidence until he deposed Stafford, the chemist who analyzed glass fragments taken from the truck, and, further, that he could not depose Stafford until the day of trial because the defendant had made him "unavailable." That is, although Commercial Union answered the complaint and raised the defense of arson on or about March 29, 1982, plaintiff did not depose Stafford until October 4 or 5, 1982. However, the plaintiff addressed interrogatories to the defendant and received the defendant's answers on or about May 10, 1982, some five months before trial of the first case. Those answers revealed the name and address of Stafford's company, and, in fact, mentioned Stafford's name in connection with a "gas chromatograph." Plaintiff's use of interrogatories and his taking of other depositions clearly shows that plaintiff could have obtained other information regarding Stafford and also counters any notion that defendant did not make Stafford "available" until trial ensued. Nor does the record reveal that plaintiff requested a continuance upon discovering the alleged bad faith. Hence, it cannot be concluded on the record that defendant somehow shielded a bad faith claim from the plaintiff.
To the contrary, it is clear from plaintiff's own arguments that he was aware of both his bad faith claim and his fraud claim at least by the time of trial on his contract claim. Although both claims may have matured after he filed his original complaint, the amendment provisions of Rule 15(b) and (d), A.R.Civ.P., were available to him. As we pointed out above, plaintiff did indeed attempt to amend at the time of trial, *251 but failed to properly preserve and appeal the ruling of the trial court.
This case is also distinguishable from Federated Guaranty Life Ins. Co. v. Wilkins, 435 So. 2d 10 (Ala.1983). In Wilkins, the insurer filed an action for declaratory judgment and the plaintiff counterclaimed, alleging bad faith refusal to pay. This counterclaim was struck by the trial court on the motion of the insurer. The plaintiff then filed a separate action for bad faith, upon which she prevailed. On appeal, the insurer asserted that plaintiff's counterclaim, "identical in language to the present action and dismissed by the trial court, now bars her present claim on the ground of res judicata." 435 So. 2d  at 14. Although this Court reversed the judgment against the insurer on the bad faith issue, we noted:
However, the insurer's declaratory judgment action in Wilkins was not tried to a conclusion. Where there has been no prior final judgment, the doctrine of res judicata cannot apply. See Sterling Oil of Oklahoma, Inc. v. Pack, 291 Ala. 727, 287 So. 2d 847 (1973). In the case presently before us, the plaintiff had a final judgment upon which he, had he properly preserved the issue, could have appealed the trial court's refusal to allow his amendment, regardless of the fact that the defendant objected to the amendment. This same final judgment, however, also now bars his action for bad faith and fraud.
Let the judgment be affirmed.
AFFIRMED.
TORBERT, C.J., and MADDOX and SHORES, JJ., concur.
JONES, J., concurs in the result.
JONES, Justice (concurring in the result).
I concur in the result.
I write specially to express my concern about the apparent harshness of the result of our holding in this case. The result appears harsh because counsel in fact sought to do what we now say he had a right (indeed, what he was compelled) to do. Except for the trial court's failure to recognize a bad faith claim as a compulsory counterclaim, Appellant would not now be in this predicament. Nonetheless, I agree that his remedy was by way of appellate review of properly preserved prejudicial error.