State Farm Fire & Casualty Co. v. Century Home Components

HOLMAN, Justice.

Defendant appeals from judgments entered in 13 actions for damages resulting from a fire. These actions were among 48 cases consolidated for a single hearing in the court below on the issue of collateral estoppel. The ruling of the trial court that defendant was collaterally estopped from contesting liability in each of the 48 actions forms the basis for defendant's appeal.

The fire giving rise to this litigation started early one Sunday morning in the summer of 1968. Defendant constructed prefabricated housing in a large shed. Plaintiffs' property was stored in a warehouse which was located approximately 60 feet from defendant's shed and which was connected thereto by a wooden loading dock. On the side of defendant's shed was a wooden box, called a skip box, into which sawdust from a neighboring saw was customarily deposited. On the Saturday evening preceding the fire, defendant's janitor had dumped a mix of linseed oil and dry sawdust into the box. No employees were present at the time the fire started. Whatever its cause and point of origin, and these are in dispute, the fire spread via the loading dock and caused substantial damage to defendant's shed, the warehouse and its contents.

Shortly thereafter various actions, eventually totaling over 50, were filed against defendant to recover for losses from the fire. Three of these actions proceeded separately through trial to final judgment. In each case the plaintiffs alleged essentially that defendant was negligent with respect to both the start and spread of the fire. The first case to come to trial resulted in a jury verdict for defendant. On appeal this court reversed the judgment for error in failing to compel defendant to produce a statement needed by the plaintiff for purposes of impeaching a defense witness, and remanded for a new trial. . . . During the pendency of the foregoing appeal the second case was tried and produced another jury verdict for defendant. . . . No appeal was taken from that judgment and it became final. Shortly thereafter the third case was tried and a jury verdict was returned for the plaintiff. This judgment was affirmed on appeal. . . . The Pacific N. W. Bell case was subsequently retried, this time to the court sitting without a jury, and the court found for the plaintiff. We affirmed on appeal, . . .

Following entry of final judgment in both Hesse and Pacific N. W. Bell, the present plaintiffs filed amended and supplemental complaints, conforming their allegations to those in the foregoing cases, and asserted that the judgments therein should operate to preclude defendant from again litigating the question of liability. Defendant alleged in defense that it would be unfair to bar relitigation in view of the similarity of issues between those cases and Sylwester and of the existence of the jury verdict and judgment in defendant's favor in Slywester. In the consolidated hearing on the question of collateral estoppel the parties submitted the records and transcripts of all three cases. The trial court rendered its ruling in favor of plaintiffs, finding Inter alia:

". . .That the allegations of the second amended and supplemental complaint raising the issue of collateral estoppel have been established by the greater weight of the evidence, and that the affirmative allegations of the answer thereto have not been established by the evidence. . . ."

To summarize the posture of these cases, the question of defendant's negligence has been tried four times and three final judgments have been rendered. Defendant has procured one favorable judgment (and two jury verdicts) and the claimants have received two judgments. The present plaintiffs, who were not parties to any of the previous actions, seek to utilize the prior claimants' judgments to establish conclusively defendant's negligence and its responsibility for any loss caused by the fire.

Our point of departure is our decision in Bahler v. Fletcher. . . .In Bahler we discarded the requirement of mutuality as a prerequisite to collateral estoppel because ‘mutuality is not a relevant basis on which to determine the finality of litigation.’ . . . We set forth two essential conditions for the application of collateral estoppel by a non-party against one who was a party to a prior action. First, there must exist an identity of issue between the prior action and the action in which estoppel is asserted; and second, the party against whom estoppel is sought must have had a full and fair opportunity to contest the issue decided adversely to him. . . . We clearly recognized, however, that even when these two prerequisites are satisfied, ‘the unlimited use of collateral estoppel by a person who was neither a party nor in privity with a party to the original litigation may, in some instances, lead to unfair results.’ . . . We therefore counseled the courts to ‘scrutinize with care any situation where collateral estoppel is asserted by a person who was neither a party nor in privity with a party to the first case, to make certain no unfairness will result to the prior litigant if the estoppel is applied.’

[. . .]

The ‘multiple-claimant anomaly’ was first hypothesized by Brainerd Currie as one instance where, absent mutuality, the unrestrained application of collateral estoppel might produce unfair results. . . . Currie posed the situation of a train wreck resulting in 50 separate claims being filed against the railroad for negligence. If the defendant railroad won the first 25 cases and subsequently lost the 26th, Currie characterized as an ‘absurdity’ the notion that the remaining 24 claimants could ride in on the strength of the 26th plaintiff's judgment and estop the defendant on the issue of negligence. The reason was that the 26th judgment would clearly seem to be an aberration. Currie then reasoned that, if we should be unwilling to give preclusive effect to the 26th judgment, we should not afford such effect to an adverse judgment rendered in the First action brought because ‘we have no warrant for assuming that the aberrational judgment will not come as the first in the series.’ . . . Currie thus concluded that, absent mutuality, collateral estoppel should not be applied where a defendant potentially faces more than two successive actions. . . .

Those courts which have discarded the rule of mutuality and permit the offensive assertion of collateral estoppel have generally rejected Currie's solution to the multiple-claimant anomaly in situations where the First judgment is adverse to the defendant, and have precluded a defendant from relitigating multiple claims where it has been concluded that the defendant had in actuality the incentive and complete opportunity to contest the issue fully in the first action. Currie's reservations were based on the apprehension that the first judgment might well be an aberration, but this view failed to recognize that the very notion of collateral estoppel demands and assumes a certain confidence in the integrity of the end result of our adjudicative process. There is no foundation in either experience or policy for accepting the suggestion that a decision rendered after a full and fair presentation of the evidence and issues should be considered either substantially suspect or infected with variables indicating the question might be decided differently in another go-around. . . .

[. . .]

As the foregoing discussion would indicate, however, we are not free to disregard incongruous results when they are looking us in the eye. If the circumstances are such that our confidence in the integrity of the determination is severely undermined, or that the result would likely be different in a second trial, it would work an injustice to deny the litigant another chance. Thus, where it is apparent that the verdict was the result of a jury compromise, the losing party should not be precluded by the judgment. . . . In Berner the additional circumstance that the award of damages of $35,000 was so small in comparison to the $500,000 prayer of the complaint might well have caused the airlines to consider the judgment an actual ‘victory’ and to accept that determination rather than incur the additional expense of appealing for a new trial to rectify whatever errors may have been committed during the course of the trial. It has also been held that if the prior determination was manifestly erroneous the judgment should not be given preclusive effect. . . . And the existence of newly discovered or crucial evidence that was not available to the litigant at the first trial would provide a basis for denying preclusion where it appears the evidence would have a significant effect on the outcome. . . .

Those courts and commentators which have considered the question are in virtually unanimous agreement that where outstanding determinations are actually inconsistent on the matter sought to be precluded, it would be patently unfair to estop a party by the judgment in lost. Although Currie's initial perceptions provoked much discussion, the problem has remained largely academic because inconsistent verdicts are rarely encountered. Our research has disclosed only one case where inconsistent determinations by separate trial courts were asserted as a reason for denying collateral estoppel. . . .

We agree with the commentators to the extent at least that, where there are extant determinations that are inconsistent on the matter in issue, it is a strong indication that the application of collateral estoppel would work an injustice. There seems to be something fundamentally offensive about depriving a party of the opportunity to litigate the issue again when he has shown beyond a doubt that on another day he prevailed. . . .

Plaintiffs in the present case contend that the determinations are not ‘inconsistent’ because the issues in Hesse and Pacific N. W. Bell were not identical with the issues in Sylwester. It is true, as plaintiffs point out, that the phrasing of the allegations of negligence differed and that certain specifications of negligence were not submitted to the jury in Slywester. We do not give much weight to variations in the wording of the pleadings, however, where essentially the same acts and omissions are alleged. To concentrate on slight discrepancies in the allegations of negligence would put defendant at a distinct disadvantage, for claimants could modify the wording after each judgment for defendant until one claimant prevailed, after which all remaining claimants could conform their complaints to that of the prevailing claimant and could then successfully claim that the prior judgments for defendant were based upon different issues.

The thrust of plaintiffs' argument must be that the jury in Hesse and the court in Pacific N. W. Bell adjudicated defendant negligent in respects which were not considered by the jury in Sylwester. The records of the cases, however, do not permit such a conclusion. Since the jury in Hesse returned a general verdict, we do not know in which respects it found defendant negligent and, given the substantial similarity of some of the allegations and the basic thrust of the negligence alleged, we are unable to conclude that it found defendant negligent on the basis of conduct not submitted to the jury in Sylwester. In Pacific N. W. Bell the court specifically found that the fire started in defendant's skip box; and that defendant was negligent in failing at the close of the preceding work day to remove combustible materials from its plant, in storing them in a box which was not a suitable receptacle or bin, in placing inflammable wastes in such a manner that defendant knew or should have known that any fire in the skip box was likely to spread to adjacent structures, and in failing to empty the trash box before leaving the premises unattended for the night. Allegations of essentially the same conduct were submitted to the jury in Sylwester under proper instructions by the court, and the jury obviously found that defendant was not negligent in the respects specified by the court in Pacific N. W. Bell.

[. . .]

We conclude that the prior determinations are basically inconsistent and that the circumstances are such that it would be unfair to preclude defendants from relitigating the issue of liability.

Reversed and remanded.