Cruickshank v. MAPFRE U.S.A.

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18-P-368 Appeals Court
GARY W. CRUICKSHANK, trustee,1 vs. MAPFRE U.S.A.2
No. 18-P-368.
Suffolk. November 6, 2018. - January 8, 2019.
Present: Green, C.J., Meade, & Sacks, JJ.
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.
GREEN, C.J. This appeal considers the question of when the
determination of a factual issue in prior litigation may have
1 Of the bankruptcy estate of Valerie Connors (formerly
known as Valerie Troiano).
2 Formerly known as Commerce Insurance Company.
2
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
3
$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
3 Commerce offered to settle the claim for $5,000 before
Villanueva filed her complaint against Troiano. Approximately
two years later, shortly before trial, Commerce increased its
offer to the full policy limit, but Villanueva rejected the
offer and proceeded to trial.
4 In its decision, the panel observed that Commerce
reasonably believed that Troiano would succeed in the underlying
suit because, inter alia, "[Villanueva] had entered into the
traffic lane, outside of a crosswalk, on a dark, rainy morning,
from between two parked cars wearing dark clothing";
Villanueva's eyewitness's failure to appear for scheduled
meetings and depositions left "doubt as to his appearance at
trial"; and "Troiano was not cited for any civil or criminal
motor vehicle infraction." Villanueva, supra.
4
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
5 The Superior Court judge, who previously had denied the
defendant's motion to dismiss based on issue preclusion, rested
her order allowing summary judgment on her determination that
the undisputed facts in the summary judgment record demonstrated
that Commerce did not act in bad faith when it refused to offer
Villanueva the $100,000 policy limit prior to her filing suit.
However, "[w]e may affirm the judgment on any ground apparent on
the record that supports the result reached in the trial court"
(quotation omitted). Lopes v. Commonwealth, 442 Mass. 170, 181
(2004). Our conclusion that the trustee's claim is barred by
issue preclusion obviates any need to assess whether (as the
trustee contends on appeal) the Superior Court judge improperly
entered summary judgment despite the presence of genuine
disputes of material fact.
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
6
(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 & Training v. 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 privity
of the parties to the present and prior actions')." Bourque v.
Cape Southport Assocs., LLC., 60 Mass. App. Ct. 271, 274 (2004).
"The examination essentially reduces itself to an inquiry
whether the party against whom preclusion is asserted
participated in the prior proceeding, either himself or by a
representative." Id. Whether a different party in prior
litigation may properly be viewed as the representative of the
party against whom issue preclusion is sought in a subsequent
action is not always clear cut, however. "What [the Supreme
Judicial Court] said about privity in 1909 remains true today:
'[T]here is no generally prevailing definition of privity which
can be automatically applied to all cases.'" DeGiacomo v.
7
Quincy, 476 Mass. 38, 43 (2016), quoting Old Dominion Copper
Mining & Smelting Co. v. Bigelow, 203 Mass. 159, 214 (1909),
aff'd, 225 U.S. 111 (1912). "Instead, privity is best
understood simply as a legal conclusion that follows from an
analysis of the relationship between the parties to a prior
adjudication and the party to be bound." DeGiacomo, supra.
In the circumstances of the present case, the concept of
"virtual representation" most closely describes the theory of
nonparty preclusion upon which the defendant relies. See, e.g.,
Boyd v. Jamaica Plain Coop. Bank, 7 Mass. App. Ct. 153, 158 &
n.9 (1979) (plaintiffs in second case "sufficiently identified"
with plaintiffs in first case for issue preclusion analysis,
"either because they were 'privies' with them" or "because
[they] were permitted to act as their 'virtual representatives'"
[quotations omitted]); Gonzalez v. Banco Cent. Corp., 27 F.3d
751, 760-761 (1st Cir. 1994). Under that theory, "a person may
be bound by a judgment even though not a party if one of the
parties to the suit is so closely aligned with his interests as
to be his virtual representative." Aerojet-General Corp. v.
Askew, 511 F.2d 710, 719 (5th Cir.), cert. denied sub nom.,
Metropolitan Dade County v. Aerojet-General Corp., 423 U.S. 908
(1975). Though mere alignment of interests is insufficient to
support preclusive effect against a nonparty, standing alone,
see Gonzalez, supra at 760, a sufficiently strong alignment of
8
interests may suffice in circumstances where due process
concerns are not implicated and "the balance of the relevant
equities tips in favor of preclusion." Id. at 761.
In the present case, we are persuaded that issue preclusion
is appropriate to bar the trustee from relitigating the same
factual questions determined in Villanueva's prior action
against Commerce. As a threshold matter, we observe that in
general, "[a] trustee in bankruptcy is a fiduciary representing
the estate and creditors" (emphasis supplied). In re Medomak
Canning, 922 F.2d 895, 901 (1st Cir. 1990). Accordingly, though
the trustee nominally represents the estate of the debtor (the
tortfeasor Connors, in this case), he stands in that
representative capacity for the benefit of the creditors of the
bankrupt debtor's estate, of whom Villanueva is the most
prominent.6 Moreover, insofar as the trustee's claim for breach
of contract seeks recovery of amounts in excess of the policy
limit, based on a claim of consequential damages caused by the
failure to settle the claim on terms more favorable than the
judgment that subsequently entered, the benefit of any recovery
would flow as a practical matter to Villanueva rather than to
6 On the present record, no others appear. We express no
view on whether issue preclusion would bar the trustee's claim
if other creditors of Connors would be deprived of a potential
recovery.
9
Connors.7 That Villanueva is the real party in interest in the
present litigation is at least consistent with, if not
established by, the fact that her counsel in the prior
litigation entered an appearance, under a contingent fee
arrangement, as counsel for the trustee in the present action.
Accordingly, then, though the trustee nominally represents
Connors as bankrupt debtor, he does so in the present action for
the sole benefit of Villanueva, and neither Connors nor any
other party has any separate or independent interest in the
action. Finally, we note that Connors was not merely aware of
the prior litigation, but testified in it.8 In consideration of
7 In denying the defendant's motion to dismiss the trustee's
claim on the basis of issue preclusion, the Superior Court judge
observed that, though the trustee's interests were aligned with
those of Villanueva in the prior c. 176D action, the trustee's
claims on Connors's behalf in the present action are for a
greater amount. While that is true, we note that Villanueva's
c. 176D claim would have entitled her to multiple damages and
attorney's fees, bringing the total value of her claim in that
action very close to any claim for consequential damages in
excess of the policy limits in the trustee's present claim. We
discern no material difference in the motivation or incentive to
prosecute the claim vigorously as between Villanueva in the
prior c. 176D action and the trustee in the present one. In any
event, we also note that any and all proceeds of any successful
prosecution of the trustee's claim in the present case would
inure entirely to Villanueva, in satisfaction of her judgment in
the underlying personal injury action.
8 In her deposition testimony, in fact, Connors denied that
she was at fault in the accident that caused Villanueva's
injuries, contending that Villanueva was principally at fault
for walking suddenly and without warning into the path of
Connors's moving automobile. Connors also testified that she
never asked Commerce to settle the suit. That testimony is at
10
all the circumstances, we conclude that the trustee is in
privity with Villanueva, under the theory of virtual
representation, and the equities are such that he is barred by
issue preclusion from litigating the same factual questions
finally adjudicated adversely to Villanueva in her prior c. 176D
action against Commerce.9 The judgment of dismissal is
accordingly affirmed.
So ordered.
odds with the trustee's position in the present case that her
liability was clear at the time Commerce initially refused to
settle Villanueva's claim for the full policy limit, and that
Commerce breached its contractual obligations to her by refusing
to settle for the policy limit at that time. We need not
consider the defendant's alternative claim that the trustee is
barred, on principles of judicial estoppel, from maintaining a
claim based on a contention in the present case that is contrary
to the position Connors asserted in the prior action.
9 We note that our conclusion is consistent with that of the
bankruptcy judge in a Pennsylvania bankruptcy case involving
quite similar circumstances. See In re Kridlow, 233 B.R. 334,
343 (Bankr. E.D. Pa. 1999).