Case Name: JARVIS et ux v. INDEMNITY INSURANCE COMPANY
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1961-07-12
Citations: 227 Or. 508
Docket Number: 
Parties: JARVIS et ux v. INDEMNITY INSURANCE COMPANY
Judges: Before McAllister, Chief Justice, and Rossman, Warner, Perry, Sloan, O’Connell and Goodwin, Justices.
Reporter: Oregon Reports
Volume: 227
Pages: 508–555

Head Matter:
Argued December 1, 1960,
reargued April 14,
reversed July 12, 1961
JARVIS et ux v. INDEMNITY INSURANCE COMPANY
363 P. 2d 740
John W. Whitty, Coos Bay, argued the cause for appellant. With, him on the brief were McKeown, New-house & Johansen, Coos Bay.
Lynne W. McNutt, Coos Bay, argued the cause for respondents. On the brief were McNutt and Gant, Coos Bay.
Before McAllister, Chief Justice, and Rossman, Warner, Perry, Sloan, O’Connell and Goodwin, Justices.

Opinion:
GOODWIN, J.
The defendant insurance company appeals from a judgment in favor of the plaintiffs.
The plaintiffs became judgment creditors of Robert and Elsie Bunyea in an action in Deschutes County for property damage arising out of the movement of the plaintiffs' house trailer from Winchester Bay to Madras, Oregon. The trailer was damaged in an amount found by the Deschutes County jury to be $5,800. The present defendant denied coverage, and this action was brought in Coos County to enforce the contract of insurance.
The policy excludes liability for loss incurred while carrying property for a charge. The exclusion is contained in a clause which defines the hazards insured under a garage-comprehensive endorsement. There is no substantial conflict on this point.
In the Deschutes County action, the plaintiffs alleged that the transportation was hired for valuable consideration. This allegation was denied by the Bunyeas, who alleged that the transportation was part of a joint enterprise. Trial was had, and a general verdict was returned for the plaintiffs.
The plaintiffs in the ease at bar pleaded their Deschutes County judgment and 'alleged that it was covered under their concept of the legal effect of the policy. The defendant, in an amended answer, denied coverage and alleged facts which amount to a plea of res judicata. The issue in Coos County was whether the plaintiffs' judgment against the Bunyeas was rendered upon facts which were within the terms of the defendant's insurance policy.
The trial court, sitting without a jury, found as a matter of fact that the Bunyeas were not carrying property for a charge, but that the agreement between the plaintiffs and the Bunyeas was for a mutually advantageous trip. The court found that contributions of cash (by the plaintiffs), equipment (by the Bun-yeas), and personal assistance (by both) were made so that the plaintiffs would have their trailer moved and the Bunyeas would be accommodated in the hunting of deer when the season opened the day following the accident. The court concluded that the loss which lay behind the judgment was covered by the Bunyeas' policy and entered judgment accordingly.
If there were merely a conflict in the evidence with reference to the relationship between the plaintiffs and the Bunyeas, the findings of fact by the trial court would be invulnerable upon appeal and we would need proceed no further. Miller Const. Co. v. D. M. Drake Co., 221 Or 249, 268, 351 P2d 41; Oxley et al v. Linnton Plywood Ass'n, 205 Or 78, 99, 284 P2d 766. However, the defendant contends that the plaintiffs are barred in this action as a matter of law, because the judgment in Deschutes County is res judicata with reference to the terms of the transportation agreement.
As a general proposition, a judgment in an action against an insured may be invoked as conclusive in its favor by the insurer in a subsequent action against it, if the issue decided in the prior action was material to the judgment and is identical with the issue claimed in the later action to be res judicata, even though the insurer was not a party to the first action. An notation, 123 ALE 708, 709, and oases collected therein. On privity in such eases, see Eestatement (1942 ed), Judgments 390, § 84, and Annotations, 69 ALE2d 858, 139 ALE 9, 54.
The plaintiffs, having the burden of proving that the judgment which they had previously recovered is one falling within the engagements of the insurer to pay, must prove that the loss established in the first case was an insured loss, and not merely a loss for which the Bunyeas themselves might have been liable.
Where the insured brings the action over against his insurer, it is held that he must rely upon the judgment against himself as the basis of his action against the insurer, and with the judgment he must take for better or for worse the adjudicated facts upon which it rests. Otherwise, he has no way of showing that the alleged loss is one covered by the insurer's engagement to pay. American Surety Co. v. Singer Sewing Mach. Co., 18 F Supp 750 (DC NY 1937). The burden is on the insured to demonstrate that the former judgment was based upon evidence which identified it as one within the coverage of the insurer's obligation. General Cas. Co. of Wisconsin v. Larson, 196 F2d 170, 173 (8th Cir 1952).
The insurer in the case at bar contends that the relationship between the plaintiffs and the insured, whatever it might have been in fact, was decided in the prior action to be a transportation for hire, and that all parties are now bound by that decision. The plea of res judicata or collateral estoppel places the burden of proof of that issue upon .the estoppel asserter. Davis v. Schumacher, 226 Wis 76, 275 NW 902; Restatement (1942 ed), Judgments 306, §68, Comment h.
The plaintiffs must prove a prima facie case before we come to the defendant's, burden of going forward with evidence to prove a collateral estoppel. The plaintiffs offered in evidence all the pleadings used in the former action. The Deschutes County-pleadings are the only evidence in the record of the Coos County case to show what questions were resolved by the plaintiffs' judgment. The complaint in the action in Deschutes County contained the following allegation:
"That on or about the 28th day of September, 1956, the plaintiffs, for a valuable consideration, hired the defendants as a commercial carrier to tow the said trailer, containing the aforesaid furniture, furnishings and personal effects, from Winchester Bay, Oregon, to Madras, Oregon. That on said date, the said defendants, for valuable consideration paid to them by the plaintiffs, undertook to tow said trailer behind the defendants' 1950 Ford one-half ton pickup. That as a part of the consideration for said hiring, defendants employed plaintiff, Edward Jarvis, to assist defendant, Robert Bunyea, in driving the towing vehicle. That during the trip herein mentioned the said towing vehicle and trailer were under the exclusive control and direction of the defendants."
The Bunyeas, as noted earlier, had denied the quoted paragraph of the plaintiffs' complaint and alleged that the agreement was for a joint enterprise. The Bunyeas further alleged that the accident was caused by the negligence of the plaintiff Jarvis, who was driving the towing vehicle. The allegations of joint enterprise as, well as those of negligence on the part of the plaintiff Jarvis were denied, however, by the plaintiffs in their reply and can not now aid or supply allegations omitted from their complaint. Donaghy v. O.-W.R. & Nav. Co., 133 Or 663, 672, 288 P 1003, 291 P 1017.
No transcript of the Deschutes County trial has been produced, so we have no extrinsic evidence that any -issues other than those made up by the pleadings were -submitted to the Deschutes County jury. Cf. Restatement (1942 ed), Judgments 305, 306, §68, Comments h, l, and m, on treatment of extrinsic evidence to prove what is res judicata.
We will assume, without deciding, that the Deschutes County jury might have been permitted by the trial court to give judgment for the plaintiffs without believing the above-quoted allegations if some other theory had been submitted to the jury. However, the question is not whether the jury might have found for the plaintiffs on some other theory, but whether the plaintiffs' evidence in the present case permits us to indulge in such speculation. There is no relevant evidence to supplement the pleadings which accompany the judgment. These pleadings reveal the issues actually passed upon. Restatement (1942 ed), Judgments 305, § 68, Comment /«. Since the plaintiffs had to tender some issue concerning duty on the part of the Bunyeas in order to recover their first judgment, it follows that the only such issue passed upon must have been actually and necessarily included within the matters adjudicated within the meaning of ORS 43.160:
" What determined by former judgment. That only is determined by a former judgment, decree or order which appears upon its face to have been so determined or which was actually and necessarily included therein or necessary thereto."
The statutory rule is essentially the common-law role. State of Oregon v. Dewey, 206 Or 496, 504, 505, 292 P2d 799; Restatement (1942 ed), Judgments 293, § 68.
The judgment against the Bunyeas, standing alone, proves nothing against any insurer. The judgment, without some evidence of facts behind it, equally could be for a debt owed upon a note, or for a liability some other insurer has agreed to cover. The only way the plaintiffs could show what the judgment was for was to put on evidence. General Cas. Co. of Wis., supra, 196 F2d at 173. This they proceeded to do by offering in evidence the «pleadings upon which they prevailed in the former case.
The only inference permissible from the fragmentary Deschutes County record is that the plaintiffs successfully maintained before the jury in Deschutes County that the transportation of the trailer was hired for a valuable consideration and was not part of a common undertaking. Such a state of affairs was not within the hazards the present defendant insured against.
It is well settled that the pleadings may be introduced to show what was adjudicated, and in the absence of conflicting evidence they are, of course, conclusive. It is elementary law that the relief granted must necessarily be responsive to and in conformity with the pleadings and proof. Bingham et ux. v. Weber and Linn et ux., 197 Or 501, 511, 254 P2d 219; State ex rel. Dean v. Dean, 136 Or 694, 697-698, 300 P 1027, 86 ALR 79; Hine v. Board of Com'rs of McClain County, 188 Okla 260, 108 P2d 112; Angola State Bank v. State ex rel. Sanders, 222 Ind 244, 52 NE2d 620; Messier v. Ledoux, 86 NH 115, 164 A 217.
The plaintiffs' complaint in the prior action alleged that defendants negligently violated their duty as a carrier for hire. Carriage for hire was "essential" to the first judgment, not because legal liability could not have been imposed without it, but because that was the only issue relevant to legal duty offered to the Deschutes County jury.
When it is seen that the plaintiffs' case in chief not only failed to prove a judgment resting upon an insured state of facts, but went further and proved that their judgment rested upon an uninsured state of facts, the plaintiffs relieved the defendant of the burden of proving collateral estoppel., This court has recently held in an action by the insured against his indemnitor that if the earlier action rested upon a fact fatal to recovery in the action over against the indemnitor, the latter action could not be successfully maintained. Macdonald v. United Pacific Ins. Co., 210 Or 395, 311 P2d 425. There the insured settled with a claimant prior to judgment in an action against himself for assault and battery. His insurance excluded coverage for willful assaults. We held there was neither a duty to defend the action nor a duty to pay if a judgment had been recovered, when it appeared on the face of the pleadings in the first action that the grounds upon which the injured party sought damages were excluded from the contract of insurance.
Statutes like OPS 736.320 which permit third-party-beneficiary actions by judgment creditors of insured tort-feasors are held to give the injured plaintiff the same, but not necessarily greater, rights than the insured had under his contract. Allegretto v. Or. Auto Ins. Co., 140 Or 538, 13 P2d 647; New Jersey Fidelity & Plate Glass Ins. Co. v. Clark, 33 F2d 235 (9th Cir 1929).
It is immaterial in this case whether the insurer actually managed the defense in the Deschutes County action or took part therein. It is conceded that the insurer had notice of the action and the opportunity to defend. From a reading of the complaint in the Deschutes Counity action, it is apparent that this insurer would have 'been justified in beliving that the plaintiffs were bringing an action against the insured upon a state of facts not covered by its policy. Under such circumstances, the insured would not be bound to defend. MacDonald v. United Pacific Insurance Co., 210 Or 395, supra. In the MacDonald case we quoted the following:
" 'It appears to be well settled that, generally speaking, the obligation of a 'liability insurance company under a policy provision requiring it to defend -an action brought against the insured by a third party is to be determined by the allegations of the complaint in such action. The following cases support this rule.' 50 ALB2d 465, § 4." 210 Or at 400.
In the same case this court observed that cases might arise in which there was no duty to defend but in Which the ultimate proof might show a duty to pay. This is not such a case. The proof in the Deschutes ¡County case must be presumed, in the absence of evidence to the contrary, to have conformed to the pleadings. The pleadings clearly took the case out of the coverage of the defendant's insurance policy.
The evidence in the ease at bar proved that the judgment sued upon was founded on ¡an incident expressly excluded from the coverage of the insurer's contract with the judgment debtor. There was no conflict in the evidence on this point. The evidence was that of the plaintiffs. The plaintiffs later called Mrs. Bunyea to testify that the plaintiffs' story in Deschutes County was not true. But this testimony, interesting though it may be, does not overcome the presumption that the Deschutes County judgment rests upon the Deschutes- County pleadings. If -the judgment in Deschutes County had determined the circumstances to be as the plaintiffs now allege (and as the Bunyeas have consistently maintained), such determination would have been binding upon the insurer in this case. East v. Fields, 42 Wash2d 924, 259 P2d 639. Numerous cases in support of this general rule are collected and commented upon in the Annotation, 24 ALR2d 329. It seems equally clear that the determination in Deschutes County that the accident did not occur under the circumstances now claimed to have been in existence is equally binding upon the indemnitor and the judgment creditor. Builders Supply Co. v. McCabe, 366 Pa 322, 77 A2d 368, 24 ALR2d 319. The estoppel of the judgment is mutual. American Candy Co. v. Aetna L. Ins. Co., 164 Wis 266, 159 NW 917.
Collateral estoppel was proved in the case at bar, but by the plaintiffs themselves. Their uncontradicted evidence, in the form of the Deschutes County pleadings, proved that their judgment was founded upon a factual situation which was not within the hazards insured against by this particular defendant. Accordingly, the trial court was not at liberty to disregard the uncontradicted proof of facts subjacent to the judgment and substitute new facts, possibly more closely resembling the true ones, in order to bring the plaintiffs' judgment under the terms of the defendant's engagements to pay.
Reversed.