State Farm Fire & Casualty Co. v. Fullerton ( 1997 )

REVISED
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-40078
STATE FARM FIRE AND CASUALTY COMPANY,
Plaintiff-Appellant,
versus
VIRGIL L. FULLERTON, ET AL,
Defendants,
W. BRYANT BUCKNER, Individually and as
Representative of the Estate of Karen Jones,
deceased; JACOB JOSEPH ANSLUM, Individually
and as Representative of the Estate of
Karen Jones, deceased; STEPHEN PAUL BUCKNER,
Individually and as Representative of the
Estate of Karen Jones, deceased,
Defendants-Appellees.
Appeal from the United States District Court
For the Eastern District of Texas, Beaumont
July 22, 1997
Before KING and HIGGINBOTHAM, Circuit Judges, and LAKE,* District
Judge.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This case requires us to surmise how a Texas court would rule
on a question that has received diverse answers in those states
*
District Judge of the Southern District of Texas, sitting by
designation.
that have considered it: whether an insured’s guilty plea in a
prior criminal proceeding can preclude third parties from
collecting on the insured’s policy. More specifically, we must
determine whether Texas law allows the heirs of the victims of a
shooting to argue that the shooting was unintentional in spite of
the fact that the insured pled guilty to murder.
We hold that the insured’s guilty plea satisfies the
requisites of issue preclusion. We will reverse the district
court’s declaration that the policy affords coverage and enter
judgment in favor of State Farm.
I.
On July 7, 1992, Virgil L. Fullerton killed his wife, Artie
Harris Fullerton, and his step-daughter, Karen Denby Jones, with a
shotgun at their rural residence. Fullerton’s precise motive has
never come to light, but the family had experienced considerable
domestic friction. A number of dangerous incidents convinced him
that his wife was trying to kill him. At one point, Artie
Fullerton considered filing assault charges against her husband,
and after her death her relatives asserted that Fullerton treated
her cruelly. Whatever the story behind the slayings, Fullerton did
not try to escape justice: he immediately called the sheriff’s
department and went peaceably to jail.
The state of Texas charged Fullerton with two counts of
capital murder. His attorney concluded that Fullerton had a good
chance of acquittal if he pled not guilty by reason of insanity.
But the attorney was reluctant to adopt that strategy because
Fullerton was approaching seventy years of age and was in poor
health. Unlike an order of commitment to a psychiatric hospital,
a conviction on something less than capital murder might allow
Fullerton to return home if he entered the last stages of a
terminal illness. Based on this advice, Fullerton pled guilty to
the lesser offense of simple murder. The court sentenced him to
life imprisonment. The judgment of conviction stated that
Fullerton was mentally competent, and the issue of his mental
competence to form the intent to kill never surfaced before the
court. He remains incarcerated.
The heirs of the two victims brought wrongful death actions
against Fullerton in state court. At the time of the shooting,
Virgil and Artie Fullerton held a homeowners’ insurance policy that
provided coverage for, among other things, personal liability for
bodily injuries. In general, the policy covered injuries “caused
by an occurrence” and defined an “occurrence” as “an accident,
including exposure to conditions, which results in bodily injury
. . . during the policy period.” It excluded, however, injuries
“caused intentionally by or at the direction of the insured.”
State Farm, the issuer of the policy, provided Fullerton a defense
under a reservation of rights and filed this declaratory judgment
action in federal court to establish that it has no duty to defend
or indemnify Fullerton against the wrongful death claims. Its
complaint listed Fullerton and the representatives of Karen Jones’s
estate as defendants.1 Fullerton himself did not answer the suit.
1
The executrix of Artie Fullerton’s estate, Judith A. Pace,
was also involved in the case throughout the trial. State Farm,
however, succeeded in its motion for judgment notwithstanding the
3
He stated by affidavit: “I do not believe that insurance coverage
exists for these claims because any action taken by me was
intentional and intended to cause harm to Artie Harris Fullerton
and Karen Denby Jones.” The other defendants—Stephen Paul Buckner,
Jacob Joseph Anslum, and W. Bryant Buckner (collectively “the
Buckners”)—moved for appointment of a guardian ad litem on the
grounds that Fullerton is not mentally competent. The court
granted the motion over State Farm’s objection.
State Farm moved for summary judgment on the theories that
Fullerton’s conviction collaterally estops the Buckners from
litigating Fullerton’s intent and that the evidence that Fullerton
shot his wife and Jones intentionally leaves no genuine issue of
material fact. In support, it attached transcripts and other
documents from the criminal proceedings. The court denied the
motion without explanation. It similarly denied State Farm’s
motion for judgment as a matter of law at the close of evidence.2
At trial, the Buckners presented expert opinion that Fullerton
was “severely mentally ill” at the time of the shooting because he
was suffering from a “delusional disorder” that caused him to
believe that the victims wanted to kill him. The jury credited
this testimony and found that the killings were unintentional.
State Farm appeals and asserts a number of errors, including
verdict as to Pace because of a policy exclusion for bodily
injuries sustained by insureds. Pace has not appealed that ruling.
2
State Farm also urged a judicial estoppel theory based on
Anslum’s testimony at the sentencing phase of Fullerton’s trial.
This theory is not before us on appeal.
4
evidentiary and instructional errors. Because we agree with State
Farm’s assertion that the Buckners are precluded from litigating
the issue of Fullerton’s intent, we do not reach any other issues
presented on appeal.
II.
Our inquiry into the preclusive effect of Fullerton’s guilty
plea is governed by Texas law. Angel v. Bullington, 330 U.S. 183,
191-93 (1947); In the Matter of King, 103 F.3d 17, 19 n.2 (5th Cir.
1997), cert. denied, 65 U.S.L.W. 3818 (U.S. June 16, 1997);
Cleckner v. Republic Van & Storage Co., 556 F.2d 766, 768-69 (5th
Cir. 1977). “A party seeking to assert the bar of collateral
estoppel must establish that (1) the facts sought to be litigated
in the second action were fully and fairly litigated in the first
action; (2) those facts were essential to the judgment in the first
action; and (3) the parties were cast as adversaries in the first
action.” Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796,
801 (Tex. 1994). The third requirement, however, is subject to an
important qualification: “[t]o satisfy the requirements of due
process, it is only necessary that the party against whom the
doctrine is asserted was a party or in privity with a party in the
first action.” Id. at 802 (emphasis in original).
The second requirement need not detain us. Fullerton pled
guilty to a violation of Tex. Penal Code § 19.02. By entering this
plea, he admitted that he intended to kill his victims or at least
5
knew that his actions would cause their deaths.3 In other words,
his convictions were valid because he admitted that the deaths were
not accidents. The convictions are inconsistent both with the
Buckners’ suggestion that Fullerton’s delusions made the shootings
acts of self-defense and with their contention that he was legally
insane during the incident. If the criminal proceedings decided
anything, it was that the shootings were not “occurrences.” See
Dinnery v. State, 592 S.W.2d 343, 352-54 (Tex. Crim. App. 1980)
(holding that a judicial confession in a guilty plea is itself
sufficient evidence to support the crime charged).
The first and third requisites for issue preclusion require
more searching analysis. We first take up the question of whether
3
Section 19.02(b) reads:
A person commits an offense if he:
(1) intentionally or knowingly causes the death of an
individual;
(2) intends to cause serious bodily injury and commits an
act clearly dangerous to human life that causes the death
of an individual; or
(3) commits or attempts to commit a felony, other than
manslaughter, and in the course of and in furtherance of
the commission or attempt, or in immediate flight from
the commission or attempt, he commits or attempts to
commit an act clearly dangerous to human life that causes
the death of an individual.
Neither serious-bodily-injury murder nor felony murder, described
in subsections (2) and (3) of the statute respectively, was at
issue in the criminal proceedings, and the Buckners do not suggest
otherwise. According to the indictment and the complaint, which
State Farm filed as an exhibit with its motion for summary
judgment, Fullerton “knowingly and intentionally cause[d] the
death[s]” of his wife and Jones. Thus, a brief investigation of
the pleadings, see Jones v. City of Houston, 907 S.W.2d 871, 874
(Tex. App.—Houston [1st Dist.] 1995, writ denied), reveals that
either Fullerton’s intent to kill or knowledge that he was killing
were essential to his convictions.
6
a guilty plea counts as “full and fair litigation” under Texas law.
Then we ask whether the preclusive effect of Fullerton’s plea
extends to the Buckners; in the traditional language of collateral
estoppel, we must determine whether the Buckners are in privity
with Fullerton.
III.
If Fullerton had been convicted on the murder counts after a
full trial, there would be no question that the jury’s factual
finding that he killed intentionally would satisfy the full-and-
fair-litigation prong of the test for issue preclusion. Texas law
collaterally estops an insured who has suffered a conviction for
murder before a jury from arguing in a subsequent coverage dispute
that the killing was not willful. Francis v. Marshall, 841 S.W.2d
51, 54 (Tex. App.—Houston 1992, no writ) (imposing sanctions for
frivolous litigation on an insured who sought to recover benefits
after a murder conviction). See also United States v. Thomas, 709
F.2d 968, 972 (5th Cir. 1983) (“Because of the existence of a
higher standard of proof and greater procedural protection in a
criminal prosecution, a conviction is conclusive as to an issue
arising against the criminal defendant in a subsequent civil
action.”).
Unfortunately, Texas courts have not decided whether a guilty
plea produces similarly preclusive effects in subsequent coverage
litigation. We are thus in the uncomfortable position of
speculating how a Texas court might answer a close question of
first impression. We may consult a variety of sources in making an
7
Erie-guess: dicta in Texas court decisions, the general rule on the
issue, and the rules in other states that Texas might look to, as
well as treatises and law journals. Hill v. London, Stetelman, &
Kirkwood, Inc., 906 F.2d 204, 207 (5th Cir. 1990). After reviewing
case law from other jurisdictions, which is divided roughly evenly
on the question, we have concluded that Texas would most likely
follow the rule that a valid guilty plea serves as a full and fair
litigation of the facts necessary to establish the elements of the
crime and thus that a Texas court would preclude Fullerton from
contesting State Farm’s assertion that he acted intentionally.
A.
A survey of the preclusive effects of guilty pleas in other
jurisdictions gives us little guidance. Even if Texas wanted to
follow the general rule, it would be unable to identify a majority
view with any confidence.
Some courts treat a conviction pursuant to a guilty plea in
the same way they would treat a conviction imposed by a jury after
a full-blown trial. An especially thorough and well-reasoned
justification for this approach appears in Ideal Mutual Ins. Co. v.
Winker, 319 N.W.2d 289 (Iowa 1982). In Winker, an off-duty deputy
sheriff shot and killed his girlfriend and pled guilty to second-
degree murder. The administrator of the girlfriend’s estate
brought a wrongful death action against the deputy, who was insured
under a law enforcement officers’ comprehensive liability policy.
The insurer in turn brought a declaratory judgment action to
establish that it had no duty to defend the deputy because of an
8
exclusion for injuries “resulting from a criminal act.” The deputy
admitted that the plea could be used as evidence of his intent, but
he insisted that he should be allowed to present countervailing
evidence that the shooting was not criminal because it was the
result of a nervous breakdown.
Overruling a prior case, Book v. Datema, 131 N.W.2d 470(1964), the Iowa Supreme Court prohibited “relitigation concerning
an essential element of a crime when the accused has tendered a
guilty plea, which necessarily admits the elements of the crime,
and the court has ascertained that a factual basis exists for the
plea and accepts it.” Winker, 319 N.W.2d at 295. The court
considered the apparently contrary rule announced in comment b to
§ 85 of the Restatement (Second) of Judgments (1982), which
indicates that preclusion “does not apply where the criminal
judgment was based on a plea of nolo contendere or a plea of
guilty.” According to the court, this technical rule does little
work in light of the statement several lines later that
[a] defendant who pleads guilty may be held to be
estopped in subsequent civil litigation from contesting
facts representing the elements of the offense.
However, under the terms of this Restatement such an
estoppel is not a matter of issue preclusion, because
the issue has not actually been litigated, but is a
matter of the law of evidence beyond the scope of this
Restatement.
Unable to find any cases utilizing the American Law Institute’s
notion of “evidentiary estoppel,” the court “conclude[d] that the
conclusive effect given to a guilty plea . . . is founded on issue
preclusion rather than estoppel.” Winker, 319 N.W.2d at 293-94
(citing especially Prosise v. Haring, 667 F.2d 1133 (4th Cir.
9
1981), aff’d, 462 U.S. 306, 103 S. Ct. 2368, 76 L. Ed. 2d 595(1983)).
The same result obtained in State Mutual Ins. Co. v. Bragg,
589 A.2d 35 (Me. 1991), in which a man pled guilty to murdering his
wife and son and attempting to murder his daughter. When he
entered the pleas, he was the defendant in a wrongful death suit
brought by the personal representative of his deceased wife. The
court held that the guilty pleas precluded any recovery from the
man’s insurer or the personal representative because he had a “full
and fair opportunity to litigate in the prior suit.” Id. at 37(quoting Hossler v. Barry, 403 A.2d 762, 769 (Me. 1979)). It
explained that “murder and attempted murder are crimes in which the
intent to cause, or the expectation of causing injury inheres.”
Id.Similarly, in State Farm Fire & Cas. Co. v. Sallak, 914 P.2d
697 (Or. Ct. App.), rev. denied, 920 P.2d 551 (Or. 1996), the court
held that a man who pled guilty to resisting arrest and assaulting
a police officer could not argue in a declaratory judgment action
that his insurer should provide coverage because the injuries he
inflicted were not “expected or intended.” Like the Winker and
Bragg courts, the Sallak court found it especially significant that
the criminal proceedings included “a colloquy with [the judge] to
satisfy the court that the plea was voluntarily and intelligently
made.” Id. at 700. “Because the factual basis rule requires that
the trial court be convinced that the plea is founded on fact, we
conclude that acceptance of [the insured’s] plea is the equivalent
10
of a judicial determination of each of the material elements of
[his] crime and satisfies the ‘actually litigated’ requirement of
issue preclusion.” Id. See also Bower v. O’Hara, 759 F.2d 1117,
1128 (3d Cir. 1985) (Sloviter, J., dissenting) (“[T]here seems to
be almost no deviation from the general principle that when a
defendant has pled guilty in a federal criminal action the
defendant will be estopped in a subsequent civil suit by or against
the United States government or its agencies from contesting issues
encompassed by the prior guilty plea.”); United States v.
$31,697.59 Cash, 665 F.2d 903, 906 (9th Cir. 1982) (precluding a
litigant who pled guilty to a federal crime from relitigating facts
in a subsequent forfeiture hearing, in spite of any failure to
ensure that the guilty plea had a factual basis); Colorado Farm
Bureau Mut. Ins. Co. v. Snowbarger, 934 P.2d 909, 911 (Colo. Ct.
App. 1997) (applying issue preclusion to an insured who pled guilty
to sexual assault because “intent is an issue that, when finally
decided in a previous criminal prosecution, cannot be relitigated
so as to avoid the intentional acts exclusion of an insurance
policy”); State Farm Fire & Cas. Co. v. Groshek, 411 N.W.2d 480,
484 (Mich. Ct. App. 1987) (“[A]n insured’s plea of guilty to a
crime involving intentional conduct . . . dispels any triable
factual issue regarding the insured’s intention or expectation to
cause injury to the victim.”); State v. Gonzalez, 641 A.2d 1060,
1061 (N.J. Super. Ct. App. Div. 1994) (“[O]ne who has been
convicted of a crime, whether by way of trial or a plea of guilty,
should not be permitted to re-litigate, in another forum, the fact
11
of his guilt.”), aff’d, 667 A.2d 684 (N.J. 1995); Merchants Mut.
Ins. Co. v. Arzillo, 472 N.Y.S.2d 97 (N.Y. App. Div. 1984) (holding
that the recent expansion of collateral estoppel warrants applying
it even when a litigant has previously entered an Alford-type plea
and insisted at sentencing that he was framed); Commercial Union
Ins. Co. v. Mauldin, 303 S.E.2d 214, 217 (N.C. Ct. App. 1983)
(“[The insured’s] guilty plea to second degree murder was an
admission that he had the general intent to do the act, and it
excluded him from coverage under the insurance policy.”). See also
In the Matter of Nassau Ins. Co., 577 N.E.2d 1039 (N.Y. 1991)
(applying issue preclusion to third-party claimants who sought to
contest the intent of an insured who waived his right to a jury
trial on a murder charge and was convicted of manslaughter after
raising only the successful defense of extreme emotional
disturbance).
But some courts refuse to treat guilty pleas as fully
litigated matters for the purposes of collateral estoppel. The
Supreme Judicial Court of Massachusetts, for example, has
distinguished convictions that resulted from full-blown trials from
convictions that resulted from guilty pleas and has held that
collateral estoppel does not apply in the latter situation. The
court explained that allowing re-litigation of facts underlying
guilty pleas would compromise neither of the central goals of issue
preclusion: efficiency and fairness.
When a defendant pleads guilty, waiving his right to a
trial by jury, scarce judicial and prosecutorial
resources are conserved. While the judge taking the
plea must satisfy himself that there is a factual basis
12
for a charge, he need not find that the defendant
actually committed the crime to which he is pleading
guilty. Cf. North Carolina v. Alford, 400 U.S. 25, 37-
38 & n.10, 91 S. Ct. 160, 167 & n.10, 27 L. Ed. 2d 162(1970). Furthermore, because there have been no
findings, a conviction after a plea of guilty does not
present the possibility of inconsistent factual
determinations. For collateral estoppel purposes,
those factors justify treating a conviction after a
guilty plea differently from a conviction after a
trial.
Aetna Cas. & Sur. Co. v. Niziolek, 481 N.E.2d 1356, 1364 (Mass.
1985). The number of states agreeing with Massachusetts law rivals
the number that disagrees. See, e.g., Rawling v. City of New
Haven, 537 A.2d 439, 445 (Conn. 1988) (stating in dicta that “[a]s
a general rule, a criminal judgment based on a plea of nolo
contendere or a plea of guilty has no preclusive effect in a
subsequent civil action”); Continental Cas. Co. v. Maguire, 471
P.2d 636 (Colo. Ct. App. 1970) (concluding that an insured was
insane and thus acted unintentionally in spite of a prior plea of
guilty to simple assault); Teitelbaum Furs, Inc. v. Dominion Ins.
Co., 375 P.2d 439, 441 (Cal. 1962) (in bank) (“Considerations of
fairness to civil litigants and regard for the expeditious
administration of criminal justice . . . combine to prohibit the
application of collateral estoppel against a party who, having
pleaded guilty to a criminal charge, seeks for the first time to
litigate his cause in a civil action.” (dicta)), cert. denied, 372
U.S. 966, 83 S. Ct. 1091, 10 L. Ed. 2d 130 (1963); Brohawn v.
Transamerica Ins. Co., 347 A.2d 842, 848 (Md. 1975) (“A plea of
guilty to a criminal charge . . . may be rebutted or explained in
the subsequent civil case in which it is admitted.”); Glens Falls
13
Group Ins. Corp. v. Hoium, 200 N.W.2d 189, 192 (Minn. 1972)
(allowing an insured to enter evidence of his reasons for pleading
guilty to criminal assault); Prudential Property & Cas. Ins. Co. v.
Kollar, 578 A.2d 1238, 1240 (N.J. Super. Ct. App. Div. 1990) (“We
have applied collateral estoppel only where the conviction
definitively and unambiguously established the nature of the
insured’s intent and where such conviction was the result of a
trial, not a plea.”); Stidham v. Millvale Sportsmen’s Club, 618
A.2d 945, 954 (Pa. Super. Ct. 1992) (noting that because of a
unilateral plea bargain, the insured’s “intent was never fully,
fairly and definitively litigated”), appeal denied, 637 A.2d 290(Pa. 1993); Safeco Ins. Co. v. McGrath, 708 P.2d 657, 660 (Wash.
Ct. App. 1985) (refusing to apply issue preclusion because of the
“powerful, coercive forces” confronting an insured who insists that
he acted in self-defense and chose to enter an Alford-type plea to
assault charges), rev. denied, 105 Wash.2d 1004 (1986). Although
many of these opinions cite section 85 of the Restatement (Second)
of Judgments, they do not conduct the Winker court’s careful
inquiry into the Restatement’s notion of estoppel.
A Texas court could approach this body of law in a variety of
ways. The fact that the record supports Fullerton’s claim that he
had a viable insanity defense distinguishes this case from many of
the decisions applying collateral estoppel. In Winker, for
example, the court noted that the insured “[a]pparently . . .
decided that the chances of prevailing on an insanity defense were
slight given the medical experts’ opinions.” 319 N.W.2d at 297.
14
Many of these cases emphasize the statutory duty of state judges to
ensure that the plea rests on a factual basis before accepting it.
See, e.g., Bragg, 589 A.2d at 37; Sallak, 914 P.2d at 700. See
also Gonzalez, 641 A.2d at 1063 (rejecting the California and
Maryland approaches in part because those states, unlike New
Jersey, “permit a defendant to plead guilty and yet assert
innocence”). Texas statutes do not prohibit Alford-type pleas;
they require only that “[n]o plea of guilty or plea of nolo
contendere shall be accepted by the court unless it appears that
the defendant is mentally competent and the plea is free and
voluntary.” See TEX. CODE CRIM. PROC. ANN. art. 26.13(b) (West 1989);
Allen v. State, 827 S.W.2d 69, 70 (Tex. App.—Houston [1st Dist.]
1992, no writ) (explaining that a court may allow a criminal
defendant to withdraw exculpatory evidence and enter a guilty
plea). The judge who accepted Fullerton’s plea did not engage him
in a discussion of the facts of the case; the court fulfilled its
duty to confirm that Fullerton was mentally competent and that his
plea was free and voluntary, but it did not prod the possibility
that Fullerton had a viable defense. Because Fullerton’s plea did
not lead to an airing of the facts, a Texas court might conclude
that the reasoning in the second line of cases should govern and
might hold that the plea did not qualify as full and fair
litigation of Fullerton’s intent.
On the other hand, Fullerton’s affidavit acknowledging
responsibility and his decision not to respond to State Farm’s
declaratory judgment act suggest that a belief in his own innocence
15
did not color his guilty plea. If the acknowledgment of guilt was
not an Alford-type plea, a Texas court might find it highly
reliable. The uncontradicted circumstances do not suggest self-
defense, and Fullerton’s behavior immediately after the shootings
is not characteristic of someone who, “as a result of severe mental
disease or defect, did not know that his conduct was wrong.” TEX.
PENAL CODE § 8.01 (West 1994). See also Love v. State, 909 S.W.2d
930, 943 (Tex. App.—El Paso 1995, writ ref’d) (affirming a jury
finding of sanity, in spite of a history of mental illness, where
a lucid defendant shot family members without provocation).
In short, the unsettled law in other jurisdictions leaves us
unenlightened on how Texas would resolve the question of full and
fair litigation. Perhaps the more recent decisions tend to favor
treating a guilty plea as the equivalent of a conviction after a
trial. But nothing approaching a consensus has emerged.
Predicting how a Texas court might act requires us to glean what
few hints we can from the tenor of relevant Texas opinions.
B.
We ground our conclusion that Texas would regard Fullerton’s
plea as full and fair litigation on three observations. First,
Texas has not hesitated to give default civil judgments preclusive
effect, in spite of the cursory nature of the adjudication leading
to those judgments. Second, language in a 1949 Texas Supreme Court
case suggests a willingness to give guilty pleas to murder charges
heavy weight in later civil proceedings. And finally, Texas courts
have indicated that Texas issue-preclusion rules are virtually
16
identical to the issue-preclusion rules followed in federal courts,
which routinely give guilty pleas preclusive effect.
Texas courts ask not whether the issue to be precluded could
have been litigated, but whether it was actually litigated —
whether it was “adequately deliberated and firm.” Mower v. Boyer,
811 S.W.2d 560, 563 (Tex. 1991). Three factors are especially
important in analyzing the question of full and fair litigation:
“1) whether the parties were fully heard, 2) whether the court
supported its decision with a reasoned opinion, and 3) whether the
decision was subject to appeal or was in fact reviewed on appeal.”
Rexrode v. Bazar, 937 S.W.2d 614, 617 (Tex. App.—Amarillo 1997, no
writ). These factors are in keeping with the rule that a Mary
Carter agreement can cast doubt on the fairness of an earlier
judgment and can give a trial court reason to use its discretion to
re-open issues because of misgivings about the “quality or
extensiveness of the procedures” in the earlier suit. See Scurlock
Oil Co. v. Smithwick, 724 S.W.2d 1, 7 (Tex. 1986) (quoting
Restatement (Second) of Judgments § 28(3) (1982)).
These general principles do not counsel against our finding
that Fullerton’s criminal proceedings included a full and fair
airing of his intent. The judge gave Fullerton a full hearing;
indeed, he did just what Fullerton asked him to do, which was
accept his guilty plea. There was no need for a reasoned opinion.
And Fullerton had the right to appeal his conviction. Unlike the
Mary Carter agreement in Scurlock Oil, Fullerton’s plea did not
skew the proceedings against him. He cannot take advantage of
17
abstract legal statements designed to protect parties “whose
procedural predicament is not of their own making.” Trapnell, 890
S.W.2d at 805.
We are reluctant to place much weight on the fact that, for
Texas civil litigants, “[a]n agreed judgment . . . has the same
degree of finality and binding force as one rendered by a court at
the conclusion of adversary proceedings.” Forbis v. Trinity
Universal Ins. Co., 833 S.W.2d 316, 319 (Tex. App.—Fort Worth 1992,
writ dism’d) (citing Barrientes v. Harlandale Indep. School Dist.,
764 S.W.2d 28, 29 (Tex. App.—San Antonio 1989, writ denied)). The
consequences of a capital murder conviction are difficult to
compare to the consequences of losing a civil lawsuit.
Consequently, it is difficult to map the reasons for entering a
guilty plea onto the reasons for settling with an opponent in a
civil lawsuit. Unlike a civil defendant, Fullerton could not
threaten the state with a counterclaim or bring in a third-party
defendant. The differences between plea agreements and civil
settlements make us unsure whether Texas courts would give them the
same preclusive effects.
Rather than ground our Erie-guess on generalities, we turn to
two specific Texas opinions. First, the case of Mendez v. Haynes
Brinkley & Co., 705 S.W.2d 242 (Tex. App.—San Antonio 1986, writ
ref’d n.r.e.), suggests that Texas courts do not understand “full
and fair” litigation to require an active courtroom confrontation.
The owners of an apartment building paid $358 to an insurance
recording agent, who took responsibility for insuring the building
18
against fire. When the building burned down and the owners
discovered they were uninsured, they sued the recording agent and
Haynes Brinkley, the general insurance agent with whom the
recording agent was supposed to have done business. The recording
agent did not answer the suit, and the owners dismissed Haynes
Brinkley in order to obtain a final default judgment against the
recording agent. When the owners brought a second suit against
Haynes Brinkley, they were faced with the obstacle of issue
preclusion, for the default judgment stated that the recording
agent never contacted Haynes Brinkley, which meant that Haynes
Brinkley could not be liable. Although the court of appeals did
not discuss the full-and-fair-litigation requirement, it did not
hesitate to hold that the owners could not prevail because “the
judgment states unequivocally that the premises were not insured.”
Id. at 246.4
4
We do not agree with the interpretation of Mendez offered in
In re Turner, 144 B.R. 47 (E.D. Tex. Bankr. 1992). The Turner
court noted that the recording agent in Mendez gave a deposition
and thus inferred that the parties actually agreed to the first
judgment. Id. at 52. As an agreed settlement, the judgment in
Mendez would fit into the rule announced in comment e to § 27 of
the Restatement (Second) of Judgments: “In the case of a judgment
entered by confession, consent, or default, none of the issues is
actually litigated . . . [unless] the parties have entered an
agreement manifesting such an intention.” The court in Turner
followed In re Stowell, 113 B.R. 322 (W.D. Tex. Bankr. 1990), and
held that Texas courts would follow § 27 of the Restatement in
spite of Mendez.
The passing reference to the recording agent’s deposition in
Mendez does not indicate that he consented to the judgment against
him. Even if he did consent, that fact played no role in the
court’s application of issue preclusion. See also Greater Houston
Transp. Co. v. Wilson, 725 S.W.2d 427, 430 (Tex. App.—Houston [14th
Dist.] 1987, writ ref’d n.r.e.) (giving preclusive effect to a
default judgment entered as a sanction for failing to appear for
depositions).
19
Mendez involved factors not present in this case. The
building owners, in contrast to Fullerton, initiated the first suit
themselves. More importantly, they did not face the agonizing
decision of whether to preserve the possibility of winning a
subsequent suit at the cost of risking a capital murder conviction.
Nevertheless, both the default judgment in Mendez and the
conviction in this case were the results of one-sided litigation.
In both, a court entered judgments that flowed from the failure of
one side to assert any defense. This treatment of default
judgments suggests that in Texas “full and fair litigation” need
not involve contested issues. See also Rexrode, 937 S.W.2d at 617
(“For the purposes of collateral estoppel, an issue was ‘actually
litigated’ when it was properly raised, by the pleadings or
otherwise, and it was submitted for determination, and determined.”
(citing Van Dyke v. Boswell, O’Toole, Davis & Pickering, 697 S.W.2d
381, 384 (Tex. 1985))).
Although several decades old, at least one other Texas case
shows an inclination to credit the facts underlying guilty pleas.
In Greer v. Franklin Life Ins. Co., 221 S.W.2d 857 (Tex. 1949), a
woman stabbed and killed her husband and pled guilty to “murder
without malice.” Although she was a beneficiary under her
husband’s insurance policy, a Texas statute barred recovery where
a beneficiary willfully caused the insured’s death. Members of the
husband’s family brought suit against the wife and the insurer, and
the wife in turn asserted her claim to proceeds. At trial, the
20
wife admitted that the killing was not in self-defense. The Texas
Supreme Court held that she could not recover on the policy.
Whatever be the rule as to admissibility or effect in
a civil suit such as this of a criminal conviction of
the crime in issue, we think the wholly unqualified
admission of a plea of guilty with the other evidence
above mentioned and in the absence of contrary
evidence, established intent and illegality as a matter
of law.
221 S.W.2d at 860.
The Greer court’s explanation of why the wife was ineligible
for benefits contains an ambiguity. We are not certain whether the
court meant to rely on the plea as especially convincing evidence
or as a prior preclusive judgment. The references to
“admissibility” and “other evidence” suggest that the case does not
turn on issue preclusion. But the passage is consistent with the
notion that especially reliable guilty pleas automatically
establish certain facts “as a matter of law.” Even if we read
Greer’s holding in terms of preclusion, it involves defensive,
rather than offensive, issue preclusion. Nevertheless, it is a
clue that Texas law takes seriously guilty pleas to murder when
they bear on a subsequent coverage dispute.
Texas courts have indicated that there is “little difference”
between Texas and federal rules of issue preclusion. Trapnell, 890
S.W.2d at 801 n.7; Upjohn Co. v. Freeman, 906 S.W.2d 92, 101 n.7
(Tex. App.—Dallas 1995, no writ). We thus take comfort in the fact
that our case law has invoked a plea of guilty as a ground for
collateral estoppel. In Brazzell v. Adams, 493 F.2d 489 (5th Cir.
1974), a party who pled guilty to selling heroin sought damages
21
from state officials under § 1983 on an entrapment theory. We
asserted that “the general rule is that collateral estoppel applies
equally whether the prior criminal adjudication was based on a jury
verdict or a guilty plea.” Id. at 490. Other circuits agree.
See, e.g., Fontneau v. United States, 654 F.2d 8, 10 (1st Cir.
1981) (barring a party who pled guilty to federal tax evasion from
re-litigating the issue of fraud in a subsequent civil penalty
proceeding); Ivers v. United States, 581 F.2d 1362, 1367 (9th Cir.
1978) (“While a non-frivolous argument to the contrary might well
have been made to a finder of fact had Ivers chosen to proceed to
trial, we must take his plea of guilty to be an admission of each
and every essential element of the [federal] crime charged,
including the element of knowledge and willfulness.”); Nathan v.
Tenna Corp., 560 F.2d 761, 763 (7th Cir. 1977) (“Nathan is estopped
by his guilty plea to federal mail fraud charges from denying that
his participation in the commission-splitting scheme involved
illegal conduct.”).
We conclude that a Texas court would treat Fullerton’s guilty
plea as full and fair litigation of his intent to kill his wife and
step-daughter.
IV.
Fullerton is content to go without coverage. This case
requires us to determine whether his plea counts as full and fair
litigation not for him, but for the Buckners, who hope to receive
proceeds under Fullerton’s policy. Although we recognize the
dangers of formalism tied up in the word “privity,” see Wright,
22
Miller & Cooper, 18 Federal Practice & Procedure § 4448 (1981), we
follow Texas courts in continuing to use that label in our inquiry
into whether Texas law allows State Farm to extend the preclusive
effect of the murder conviction from Fullerton to the heirs of
Fullerton’s victims.
“[P]rivity is not established by the mere fact that persons
may happen to be interested in the same question or in proving the
same state of facts.” Benson v. Wanda Petroleum Co., 468 S.W.2d
361, 363 (Tex. 1971). But privity does exist if one party
“deriv[es its] claims through a party to the prior action.”
Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996); Neel
v. HECI Exploration Co., 942 S.W.2d 212, 217 n.1 (Tex. App.—Austin
1997, no writ). See also CLS Associates v. A____ B____, 762 S.W.2d
221, 224 (Tex. App.—Dallas 1988, no writ) (“It is sufficient that
the party in the second suit be a successor-in-interest to the
party in the first suit.”).5
State Farm’s assertion of privity would fail if the Buckners
could assert their rights directly against State Farm. A New York
court, for example, has refused to find privity between co-insured
spouses when one spouse has pled guilty to an intentional crime.
Fernandez v. Cigna Property & Cas. Ins. Co., 590 N.Y.S.2d 925 (App.
5
We do not discern any difference in Texas courts’
understanding of privity in the contexts of claim preclusion and
issue preclusion. Neel, for example, concerned issue preclusion
and applied privity rules delineated in Amstadt without remarking
that that case concerned claim preclusion. Similarly, CLS
Associates cited Benson to support its privity analysis in spite of
the fact that claim preclusion was at stake in CLS Associates and
issue preclusion was at stake in Benson.
23
Div. 1992). The court distinguished the rights of insured parties
from the rights of uninsured victims such as the Buckners, who
under New York statute derive their right to sue the insurer from
the rights of the insured. See D’Arata v. New York Central Mut.
Fire Ins. Co., 564 N.E.2d 634, 637 (N.Y. 1990) (“Plaintiff, by
proceeding directly against [the insurer], does so as subrogee of
the insured’s rights and is subject to whatever rules of estoppel
would apply to the insured.”).
The Iowa Supreme Court has held that a direct action statute
defeats privity between an insured who pleads guilty to a criminal
offense and the victim of the crime. In AID Ins. Co. v. Chrest,
336 N.W.2d 437 (Iowa 1983), an insurer argued that a police officer
who was shot by its insured could not bring suit after the insured
pled guilty to assault with intent to kill. But Iowa’s direct
action statute “gives the insured person an interest in the
liability insurance policy adverse to both the insurer and insured
at the time of the injury.” Id. at 440 (quoting Farm & City Ins.
Co. v. Coover, 225 N.W.2d 335, 337 (Iowa 1975)). The purpose of
the direct action statute, according to the court, is to prevent
agreements between the insurer and the insured from compromising a
victim’s ability to force the insurer to pay for the harm caused by
the insured. By making a victim’s rights against an insurer direct
rather than derivative, Iowa law prevents the insurer from using
the insured’s admission as a defense.
Because the Buckners are not themselves insureds, and because
Texas has not enacted a “direct action statute,” see Jilani v.
24
Jilani, 767 S.W.2d 671, 675-76 (Tex. 1988) (Mauzy, J., concurring),
the Buckners must win a judgment against Fullerton before claiming
entitlement to insurance proceeds. Fullerton’s policy states
explicitly that “no action with respect to [personal liability] can
be brought against [State Farm] until the obligation of the insured
has been determined by a final judgment or agreement.” When an
insurance contract contains a no-action clause, “a third party’s
right of action against the insurer does not arise until he has
secured such an agreement or a judgment against the insured.”
Great American Ins. Co. v. Murray, 437 S.W.2d 264, 265 (Tex. 1969).
See also Angus Chemical Co. v. IMC Fertilizer, Inc., 939 S.W.2d 138(Tex. 1997) (per curiam). In other words, State Farm’s duty is to
pay its insured; third parties can recover proceeds under the
policy only insofar as their rights derive from Fullerton’s right
to recover proceeds.
Thus, although Texas courts have not yet decided specifically
whether tort plaintiffs who seek insurance funds are in privity
with an insured who pleads guilty to murder, we hold that under
Texas law the Buckners are in privity with Fullerton because of the
derivative nature of their recovery under the policy.6
6
We do not understand Dairyland County Mut. Ins. Co. v.
Childress, 650 S.W.2d 770, 773-74 (Tex. 1983), as following a
contrary rule. In Childress, the insurer obtained a declaratory
judgment that its policy did not cover the insured. When the
insurer sought to use this judgment to preclude a suit by third
parties claiming under the policy, the Texas Supreme Court held
that the third parties were not in privity with the insured and
thus that issue preclusion did not apply. The basis for the
holding, however was that the insurer failed to join the third
parties as required by the Uniform Declaratory Judgment Act, which
states that “no declaration shall prejudice the rights of persons
25
This result places Texas among the bulk of other jurisdictions
that have considered the question. See, e.g., Aetna Cas. & Sur.
Co. v. Jones, 596 A.2d 414, 421, 425 (Conn. 1991) (holding that
“[w]hen the victim of an insured defendant derives her rights to
collect insurance proceeds directly from the rights of the insured
defendant,” they are in privity by virtue of “shar[ing] a legal
interest”); Tradewind Ins. Co. v. Stout, ___ P.2d ___, ___, 1997 WL
222335, at *9 (Haw. Ct. App.) (giving a criminal conviction
preclusive effect against the insured’s victim because “any ‘right’
which [the victim] has to the proceeds of the insurance policy
derive[s] solely from [the insured’s] right to coverage under the
policy”), cert. denied, 937 P.2d 922 (Haw. 1997); Safeco Ins. Co.
of America v. Yon, 796 P.2d 1040, 1044 (Idaho Ct. App. 1990)
(“[T]he wrongful-death claimants’ rights are only as good as the
rights that [the convicted insured] can assert against Safeco under
the insurance contract.”); State Mut. Ins. Co. v. Bragg, 589 A.2d
35 (Me. 1991) (affirming a declaratory judgment that an insured had
no duty to defend where its insured murdered family members and was
sued by the victims’ personal representative); Aetna Life & Cas.
Ins. Co. v. Johnson, 673 P.2d 1277, 1280-81 (Mont. 1984) (giving a
criminal conviction preclusive effect against a third party because
not parties to the proceeding.” Id. at 774; Tex. Rev. Civ. Stat.
Ann. art. 2524-1 § 11 (Vernon 1965) (current version codified at
Tex. Civ. Prac. & Rem. Code § 37.006(a) (West 1997)). Unlike
Childress, Fullerton’s case does not present an insurer that failed
to obtain declaratory relief against all interested parties. Cf.
Opheim v. Interamerican Ins. Exchange, 430 N.W.2d 118, 121 (Iowa
1988) (distinguishing Childress based on Iowa’s declaratory
judgment act, which does not require joinder of all interested
parties).
26
the third party’s rights derived from the convicted insured’s
insurance and because of an identity of interest at the time of the
criminal trial); New Jersey Manufacturers Ins. Co. v. Brower, 391
A.2d 923, 926 (N.J. Super. Ct. App. Div. 1978) (finding privity in
part because the victim “stood in the shoes” of the insured for the
purposes of recovering proceeds); In the Matter of Nassau Ins. Co.,
577 N.E.2d 1039, 1040 (N.Y. 1991) (following D’Arata’s holding that
criminal convictions bar third parties from claiming insurance
proceeds); State Farm Fire & Cas. Co. v. Reuter, 700 P.2d 236, 241
(Or. 1985) (holding that the victim of a sexual assault was in
privity with her assailant because of “her status as a claimant and
potential judgment creditor” of the convicted insured).
Decisions to the contrary are both less numerous and less
recent. See Clemmer v. Hartford Ins. Co., 587 P.2d 1098, 1103
(Cal. 1978) (refusing to apply issue preclusion to the holders of
a wrongful death judgment where the convicted insured may have
withdrawn a plea of insanity for strategic reasons); Massachusetts
Property Ins. Underwriting Assoc. v. Norrington, 481 N.E.2d 1364,
1367-68 (Mass. 1985) (“Allowing the application of issue preclusion
against the insured, but not against the injured person, does no
violence to the substantive principle that an injured party
succeeds only to the insured’s rights against the insurer.”). See
also Prudential Property & Cas. Ins. Co. v. Kollar, 578 A.2d 1238,
1241 (N.J. Super. Ct. App. Div. 1990) (“[A]n innocent third-party
victim . . . should not be estopped from effectively recovering
27
against a defendant and his insurer when the defendant, for
whatever reason, elects to enter a plea of guilty.” (dicta)).
V.
Texas courts have also recognized that at bottom issue
preclusion is driven by equitable principles. Therefore, they
reserve the discretion to decline to apply it when the results
would be unfair. Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1, 7
(Tex. 1986). The relevant fairness factors derive from Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 330-31 (1979):
1. Whether the use of collateral estoppel will reward
a plaintiff who could have been joined in the earlier
suit but chose to “wait and see.” . . .
2. Whether the defendant in the first suit had the
incentive to litigate that suit fully and vigorously.
. . .
3. Whether the second suit will afford the defendant
procedural opportunities available in the first suit
that could cause a different result. . . .
4. Whether the judgment in the first suit is
inconsistent with any other earlier decision. . . .
Finger v. Southern Refrig. Serv., 881 S.W. 2d 890, 896 (Tex. App. -
Houston [1st Dist.] 1994, writ denied). Of these, only the second
suggests that preclusion might be unfair. We have already decided
that the first proceeding included a full and fair litigation of
Fullerton’s intent. The state’s agreement to forego the death
penalty gave Fullerton less incentive to litigate vigorously. But
he still had a strong incentive to defend himself insofar as the
facts permitted. The second of these four factors may not be as
decisive as it could be, but we do not think that would convince a
28
Texas court to exercise its discretion to refuse to apply issue
preclusion.
The Texas Supreme Court has isolated three goals of issue
preclusion: the conservation of judicial resources, the protection
of defendants from repetitive lawsuits, and the prevention of
inconsistent judgments. Sysco Food Services, Inc. v. Trapnell, 890
S.W.2d 796, 803-04 (Tex. 1994). See also Finger, 881 S.W.2d at
894-95 (citing Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363
(Tex. 1971)). Although the second of these is not relevant, the
first and third counsel in favor of giving Fullerton’s plea
preclusive effect. Treating the question of intent as resolved
will not only cut short declaratory judgment suits such as this
one; it will also expedite the adjudication of victims’ suits
against an insured who has admitted his responsibility for a
criminal act. As the results in the trial court here demonstrate,
the danger of inconsistent judgments looms large. We recognize
that criminal defendants sometimes enter guilty pleas for reasons
other than the truth of the charges against them. But it is
disquieting when a judicial system tolerates the continued
incarceration of those defendants and at the same time awards civil
damages based on findings that those defendants did not commit all
the elements of the crimes for which they are being punished.
Texas issue-preclusion policies indicate that we should avoid that
result if possible.
Although the Buckners do not raise the issue, we recognize
that the Due Process Clause places limits on the use of offensive,
29
non-mutual issue preclusion. “It is a violation of due process for
a judgment to be binding on a litigant who was not a party or a
privy and therefore has never had an opportunity to be heard.”
Parklane Hosiery, 439 U.S. at 327 n.7 (citing Blonder-Tongue
Laboratories, Inc. v. University of Ill. Found., 402 U.S. 313, 329
(1971)). We cannot say, however, that the operation of Texas law
in this case intrudes on the Buckners’ due process rights. Perhaps
there could be circumstances in which state law definitions of
“full and fair opportunity to litigate” and “privity,” see Hardy v.
Johns-Manville Sales Corp., 681 F.2d 334, 338 (5th Cir. 1982), lead
to results that are constitutionally intolerable. But this is not
such a case. The Buckners’ inability to recover insurance proceeds
does not deprive them of a legal remedy. They can still win
damages from Fullerton, although Fullerton may not be able to
satisfy the judgment fully. Within the structure of Texas
insurance law, Fullerton’s plea did not deprive the Buckners of
their day in court, for they never had a legal right to assert
against State Farm. Finding a violation of due process here would
mean requiring Texas to alter an insurance-entitlement system that
has been in place for decades in many states. We are not prepared
to say that Texas’s efforts to protect insurance companies from
suits by third parties interferes with third parties’ rights to
assert claims to proceeds.
The judgment in favor of the Buckners is REVERSED, and
judgment is RENDERED in favor of State Farm.
30