Summary
holding that default judgments are not issue-preclusive
Summary of this case from Stephan v. Rocky Mountain Chocolate FactoryOpinion
No. 91-302
Decided June 30, 1992
1. Res Judicata — Generally A final judgment by a court of competent jurisdiction is conclusive upon the parties in a subsequent litigation involving same cause of action.
2. Res Judicata — Actions Not Barred — Particular Cases Doctrine of res judicata did not preclude plaintiffs from pursuing declaratory judgment action against defendant after defendant's insured had defaulted in underlying tort action, since in tort action court determined whether a party was liable for plaintiff's injury, while in declaratory judgment action, court had to determine whether that party was covered by a third party's insurance policy, an issue completely independent of allotting liability.
3. Estoppel — Collateral Estoppel — Generally Collateral estoppel bars a party to a prior action, or a person in privity with such a party, from relitigating any issue or fact actually litigated and determined in the prior action.
4. Judgments — Default — Generally In the case of a judgment entered by default, none of the issues is actually litigated.
5. Estoppel — Collateral Estoppel — Generally Collateral estoppel doctrine did not bar insurance company from litigating issue in declaratory judgment proceeding, even though same issue was decided by default in underlying tort action, since that doctrine did not apply to issues or facts not actually litigated.
6. Appeal and Error — Discretion of Lower Court — Generally Trial court did not err by allowing one party in insurance compensation case to file an amended motion for summary judgment, since nothing in statutes or jurisprudence significantly limited court from allowing amended motions for summary judgment after original motion had been denied. RSA 491:8-a.
7. Conflict of Laws — Contracts — Insurance Contract Interpretation of insurance policy language is governed by law of state that is principle location of the insured risk.
8. Conflict of Laws — Contracts — Insurance Contract Massachusetts law governed interpretation of insurance policy, where plaintiff incurred injury at New Hampshire workplace because of faulty machine sold by Massachusetts business, Massachusetts was principal location of insured risk, insurance policy intended to insure Massachusetts business, not its customers, and one clause in policy ensured that liability would be primarily in Massachusetts.
9. Insurance — Construction of Contracts — Ambiguity Where plaintiff suffered work injury and claimed insurance policy coverage, argument was rejected that "completed operations hazards" insurance policy clause was ambiguous under Massachusetts law, since identical provision had previously been held unambiguous by Massachusetts Supreme Judicial Court.
10. Insurance — Construction of Contracts — Generally Trial court properly applied "completed operations hazards" insurance policy clause to injury compensation case in manner consistent with plain meaning of clause's language, where business selling injuring machine did not have a continuing duty to maintain machine, since "operation" as defined in policy had at time of injury been completed.
Cullity, Kelley McDowell, of Manchester (Joseph F. McDowell, III on the brief and orally), for the plaintiffs.
Devine, Millimet and Branch, P.A., of Manchester (Eileen Fox on the brief and orally), for the defendant.
The plaintiffs, Donald and Linda Marston, appeal from a Superior Court (Dalianis, J.) order granting an amended motion for summary judgment filed by the defendant, United States Fidelity and Guaranty Company (USFG), in a declaratory judgment action. On appeal, the plaintiffs argue that the superior court erred in: (1) allowing USFG to relitigate issues of fact after its insured, AE Forklift Company (AE), had defaulted in the underlying tort action; (2) allowing USFG to file an amended motion for summary judgment; and (3) finding that USFG was not obligated to insure AE under the relevant insurance policy language. We affirm.
The record establishes the following facts. Donald Marston was employed by Sandhill Warehouse Wholesale Company (Sandhill). Sandhill had purchased a forklift from AE that continually leaked hydraulic fluid onto the warehouse floor. On October 6, 1982, Marston slipped on the hydraulic fluid while working and sustained serious injuries.
AE maintained a comprehensive general liability insurance policy underwritten by USFG. The policy did not cover AE for "completed operations hazards," defined to include
"bodily injury and property damage arising out of operations . . . but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the Named Insured. `Operations' include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:
. . . .
(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.
Operations which may require further service or maintenance work, or correction, repair or replacement because of any defect or deficiency, but which are otherwise completed, shall be deemed completed."
This policy was in effect at the time of the accident.
In July 1985, the plaintiffs sued AE to recover for Donald Marston's injuries. Several months later, USFG determined that the injury was not covered under AE's insurance policy. Accordingly, USFG informed all parties that it would not defend AE in any further proceedings. In response to USFG's refusal to defend AE, the plaintiffs initiated a declaratory judgment action against AE and USFG in January 1986 to determine whether AE was covered under the insurance policy.
USFG moved for summary judgment in the declaratory judgment action, claiming that AE's operations were "completed" under the "completed operations hazards" provision. The Superior Court (Holman, J.) denied this motion in December 1987. It was
"unable to determine whether [AE] had a continuing duty to service and maintain the forklift, such as would arise, for example, under an agreement to provide routine service on an ongoing basis, or whether [AE] merely had an obligation to provide service and maintenance sporadically . . . . If [AE] had an ongoing service contract with [Sandhill] for routine maintenance, then its operations would not have been completed within the meaning of the ["completed operations hazards" exclusion] . . . . In that situation, the insurer would have an obligation to defend [AE] in the underlying tort action. If, on the other hand, [AE] had merely agreed to repair the forklift if and when necessary, then the operation performed by it in this case would be considered as `completed' for purposes of the policy exclusion."
In October 1988, after AE had filed for bankruptcy, AE's attorney withdrew from the declaratory judgment and the tort actions. It was advised to obtain new counsel or default. AE failed to obtain new counsel. Accordingly, it defaulted in both the declaratory judgment action and the tort action.
Having obtained a default order against AE in the underlying tort action, the plaintiffs filed a motion in limine to preclude USFG from relitigating issues of fact in the ongoing declaratory judgment action. AE argued that such issues were "already decided in the underlying [tort] action." The Superior Court (Goode, J.) denied this motion.
Next, USFG filed an amended motion for summary judgment addressing the factual issue that the superior court had been unable to decide in December 1987: "whether AE had a continuing duty to service and maintain the forklift." USFG attached the affidavit of Edward G. Robinson, a former president of AE, to its amended motion. According to Mr. Robinson, "although [AE] after the sale did perform maintenance work on the subject forklift for [Sandhill], on each occasion necessary maintenance work was completed with no obligation or plans to return and perform further work." Based on this new information, the Superior Court (Dalianis, J.) granted USFG's amended motion for summary judgment. The plaintiffs appeal from this ruling.
The plaintiffs first contend that the doctrine of res judicata barred USFG from litigating in the declaratory judgment action whether AE's operations were completed. Under res judicata, "a final judgment by a court of competent jurisdiction is conclusive upon the parties in a subsequent litigation involving the same cause of action." Eastern Marine Const. Corp. v. First Southern Leasing, 129 N.H. 270, 273, 525 A.2d 709, 711-12 (1987) (citations and quotation omitted); see also Barton v. Barton, 125 N.H. 433, 435, 480 A.2d 199, 200 (1984) (res judicata applies to proceedings following default judgments). The term "cause of action" is defined as "the right to recover, regardless of the theory of recovery." Eastern Marine Const. Corp., supra at 274, 525 A.2d at 712.
We hold that the underlying tort action did not involve the same cause of action as the declaratory judgment action from which the plaintiffs now appeal. In the tort action, the court had to determine whether AE was liable to the plaintiffs for the slipping incident. In the declaratory judgment action, the court had to determine whether the insurance policy underwritten by USFG entitled AE to coverage. The declaratory judgment action did not involve AE's liability to the plaintiffs and was, therefore, completely independent of the plaintiffs' right to recover from AE for injuries incurred.
[3-5] The plaintiffs also argue that the doctrine of collateral estoppel barred USFG from litigating the completed operations issue in the declaratory judgment proceeding. We disagree. Collateral estoppel "bars a party to a prior action, or a person in privity with such a party, from relitigating any issue or fact actually litigated and determined in the prior action." Daigle v. City of Portsmouth, 129 N.H. 561, 570, 534 A.2d 689, 693 (1987) (emphasis added). "In the case of a judgment entered by . . . default, none of the issues is actually litigated." RESTATEMENT (SECOND) OF JUDGMENTS 27, comment e at 257 (1980); see also Caouette v. Town of New Ipswich, 125 N.H. 547, 557, 484 A.2d 1106, 1113 (1984).
We also reject the plaintiffs' argument that the superior court erred in allowing USFG to file an amended motion for summary judgment. Contrary to the plaintiffs' reading of New Hampshire law, nothing in the summary judgment statute, RSA 491:8-a, or this court's summary judgment jurisprudence significantly limits a trial court from allowing a party to submit an amended motion for summary judgment after the original motion has been denied.
The plaintiffs next argue that the "completed operations hazards" clause was ambiguous and did not apply to the facts of this case. As a preliminary matter, we must determine whether Massachusetts or New Hampshire law will govern our interpretation of the policy.
Our interpretation of insurance policy language is governed by the law of the state that is the "`principal location of the insured risk.'" Glowski v. Allstate Ins. Co., 134 N.H. 196, 198, 589 A.2d 593, 595 (1991) (quoting Ellis v. Royal Inc. Co., 129 N.H. 326, 331, 530 A.2d 303, 306 (1987)); see also Stevens v. Merchants Mut. Ins. Co., 135 N.H. 26, 28, 599 A.2d 490, 491 (1991). In this case, Sandhill, Marston's employer, was located in New Hampshire, and the injury therefore arose in New Hampshire. AE, however, was located in Ashby, Massachusetts.
We find that Massachusetts was the "principal location of the insured risk." The insurance policy was intended to insure AE, rather than its customers, from liability. Additionally, the "completed operations hazards" clause, which precludes coverage when "operations have been completed" and when the injury "occurs away from premises owned by or rented to [AE]," ensures that in the great majority of instances in which AE is covered, liability will have arisen in Massachusetts.
Under Massachusetts law, the superior court did not err in finding the "completed operations hazards" clause to be unambiguous. In 1976, the Supreme Judicial Court of Massachusetts held that an identical provision was not ambiguous. See Ronald Bouchard, Inc. v. Hartford Acc. Indem. Co., 369 Mass. 846, 849, 343 N.E.2d 372, 374 (1976).
Nor did the superior court err in applying the "completed operations hazards" clause to the facts in this case. The plaintiffs argue that AE's operations were not completed at the time of the injury because the forklift was defective and AE had a continuing duty to maintain the forklift. The superior court disagreed:
"Viewed in the light most favorable to Mr. Marston, the Court finds that AE Forklift did not have a continuing duty to maintain the forklift because the `operation' as defined in the policy had at the time of injury, been completed. Mr. Robinson in his affidavit states that AE Forklift did not agree to provide maintenance on an ongoing basis to Sandhill Warehouse Wholesale after it sold the forklift, that it had no maintenance contract with it, and that when it completed the necessary maintenance work it had no obligation to perform additional work. Mr. Robinson's position is supported by the definition of the term `completed operations hazard,' which provides that operations that require maintenance work because of a defect but which are otherwise completed are deemed to be completed. The operation was completed when the forklift was put into operation in its intended use, shortly after delivery to Sandhill Warehouse Wholesale and before the date of the injury.
Mr. Marston does not dispute that no maintenance contract existed; nor does he dispute that from August 1, 1982 until October 6, 1982, the date of the accident, the forklift had been put to its intended use. According to discovery documents, Mr. Marston responded to an interrogatory that he and others plugged the forklift into a charger every night so it would be charged and ready to use the next day. He stated in response to other interrogatories that the forklift was used to unload and put away stock, and that he did not claim that the forklift was inadequate for its normal purpose[s] or uses. Since the forklift had been put to its intended use before the accident occurred, the operation was completed as so defined in the insurance policy. Because completed operations hazards were expressly excluded from coverage, the Court finds that USFG does not have a duty to defend AE Forklift in the underlying action or to indemnify it for any judgment."
We agree with the superior court. Its interpretation of the "completed operations hazards" clause is consistent with the plain meaning of the provision's language.
Affirmed.
BROCK, C.J., did not sit; the others concurred.