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Cruickshank v. Mapfre U.S.A.

Appeals Court of Massachusetts, Suffolk

January 8, 2019

GARY W. CRUICKSHANK, trustee, [1]
v.
MAPFRE U.S.A.[2]

          Heard: November 6, 2018.

         Collateral Estoppel. Judgment, Preclusive effect. Practice, Civil, Summary judgment.

         Civil action commenced in the Superior Court Department on September 19, 2014.

         The case was heard by Heidi E. Brieger, J., on a motion for summary judgment.

          Joseph M. Burke for the plaintiff.

          Amanda J. Cox for the defendant.

          Present: Green, C.J., Meade, & Sacks, JJ.

          GREEN, C.J.

         This appeal considers the question of when the determination of a factual issue in prior litigation may have preclusive effect against a different party in subsequent litigation. Specifically, we first consider whether, under the theory of "virtual representation," the trustee for a bankrupt tortfeasor stands in privity with the victim of an automobile accident who previously pursued, and lost, a claim against the tortfeasor's insurer based on alleged unfair settlement practices. We then consider whether the relevant equities are such that the prior adjudication has preclusive effect against the trustee's claim that the same unfair settlement practices constituted a breach of the insurer's contractual obligations under its insurance policy with the tortfeasor. We conclude that the trustee is in privity with the accident victim in the circumstances of the present case, and that the balance of equities favors preclusion. We accordingly affirm the judgment of the Superior Court dismissing the trustee's claim.

         Background.

         After Valerie Troiano struck and injured Elsa Villanueva with her automobile, Villanueva brought an action against Troiano for negligence. A Superior Court jury found Troiano sixty-five per cent negligent and Villanueva thirty-five per cent negligent for the accident, and judgment entered for Villanueva in the amount of $414, 500 after the deduction of $8, 000 in personal injury protection benefits she had already received. The insurer paid the full policy limit of $100, 000, and an execution against Troiano entered, in the amount of $552, 352.37 plus costs. Villanueva thereafter brought an action against Commerce Insurance Company (Commerce), from whom Troiano held a liability insurance policy, claiming that it engaged in unfair insurance settlement practices, in violation of G. L. c. 176D, when it initially failed to offer to settle Villanueva's claim for the $100, 000 policy limit (c. 176D action).[3] After a jury-waived trial in the Superior Court, judgment entered for Commerce, rejecting Villaneuva's assertion that Commerce had engaged in unfair settlement practices by failing to conduct an adequate investigation and refusing to make a reasonable offer of settlement at a time when liability had become reasonably clear. Villanueva appealed from the judgment, and a panel of this court affirmed. See Villanueva v. Commerce Ins. Co., 89 Mass.App.Ct. 1124 (2016).[4] After entry of the Superior Court judgment in the c. 176D action, but before conclusion of Villanueva's appeal, Villanueva filed an action for supplementary process against Troiano (who by then was known as Valerie Connors). Connors in turn filed a petition for bankruptcy, and the plaintiff trustee was appointed. Thereafter, by motion dated August 4, 2014, the trustee sought permission to employ special counsel, to be compensated pursuant to a contingent fee agreement, in order to pursue the claim against Commerce. The special counsel (the same attorney who had represented Villanueva in her unsuccessful claim against Commerce) then filed the present action against Commerce, alleging breach of contract by reason of its initial failure to offer to settle Villanueva's claim for the policy limit. See note 3, supra. A judge of the Superior Court allowed the defendant's motion for summary judgment, and this appeal followed.[5]

         Discussion.

         "'Issue preclusion' . . . prevents relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies." Heacock v. Heacock, 402 Mass. 21, 23 n.2 (1988). See Restatement (Second) of Judgments § 27 (1982). In order for issue preclusion to bar relitigation of an issue determined in an earlier adjudication, "a court must determine that (1) there was a final judgment on the merits in the prior adjudication; (2) the party against whom preclusion is asserted was a party (or in privity with a party) to the prior adjudication; and (3) the issue in the prior adjudication was identical to the issue in the current adjudication." Tuper v. North Adams Ambulance Serv., Inc., 428 Mass. 132, 134 (1998). In the present case, the prior litigation between Villanueva and Commerce resulted in a final judgment, and the issue whether Commerce made a reasonable settlement offer at a time when its insured's liability had become reasonably clear was both essential to that judgment and identical to the central issue of the trustee's claim of contractual breach in the present action. See note 4, supra. The trustee nonetheless asserts that issue preclusion does not bar his claim because he was not the party against whom the question was adjudicated in the prior litigation, and does not stand in privity with Villanueva; indeed, he observes, Connors (the debtor for whose bankruptcy estate he acts as trustee) is the party against whom Villanueva had previously obtained and sought to satisfy a substantial damages judgment.

         "For preclusive effect to flow from a prior judgment, the party against whom preclusive effect is asserted must have been either a party in the prior case or in privity with a party. See Commissioner of the Dept. of Employment & Trainingv. Dugan, 428 Mass. 138, 142 (1998) (issue preclusion, where the party against whom preclusion is asserted was a party, or in privity with a party, to the prior adjudication); Gloucester Marine Rys. Corp. v.Charles Parisi, Inc., 36 Mass.App.Ct. 386, 390 (1994) (claim preclusion, in which there must be 'identity or ...


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