STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. EAKINS (1997)

¶ 1. The case now before the Court comes to us by way of an appeal by the garnishee in a postjudgment garnishment action.   Bridget Eakins, Doris Winters, and Duane Quarles, the appellees before this Court, recovered a judgment against Christopher Jobe for injuries they received when the vehicle in which they were riding was struck by a vehicle driven by Jobe. The vehicle Jobe was driving was owned by Ronald Chester.   Mr. Chester had purchased a policy of automobile liability insurance from the appellant, State Farm Mutual Automobile Insurance Company (hereafter “State Farm”);  however, Jobe was not a member of Chester's household, nor was he named as an insured driver under the policy.

¶ 2. State Farm provided a defense to Jobe under a reservation of rights.   The company subsequently declined to satisfy the judgment, claiming that Jobe was not an insured under the terms of the policy.   Jobe's judgment creditors filed a post-judgment garnishment action against State Farm, alleging that State Farm was, in fact, indebted to Jobe. Although the suggestion of garnishment does not state the basis for the claim of indebtedness, all parties proceeded at the trial level on the assumption that the alleged indebtedness arose out of the policy of insurance covering the vehicle.   This Court will proceed under the same assumption.

¶ 3. The trial court ruled, in effect, that State Farm was estopped from denying coverage for reasons we will discuss in more detail later in this opinion.   The court, therefore, entered judgment against the company in the amount of the jury verdict.   State Farm has perfected this appeal from that judgment entered against it in the garnishment action.

II.

Preliminary Discussion

¶ 4. A garnishment action is an ancillary post-judgment proceeding brought against an entity other than the judgment debtor, the purpose of which is to discover and capture assets belonging to the judgment debtor that may be used to satisfy the judgment.   Mississippi statutory law governs the procedure for instituting and pursuing such actions.   It provides that, on proper suggestion, a third party may be compelled to come before the court and answer as to whether, among other things, he (a) is indebted to the judgment debtor, (b) holds assets belonging to the judgment debtor, or (c) is aware of assets of the judgment debtor in the possession of others that might be reached to satisfy the judgment.  Miss.Code Ann. § 11-35-1 (1972).

¶ 5. Mississippi law has recognized that a garnishment action is a proper proceeding to seek to force a recalcitrant liability insurer to honor the terms of its obligation to its insured.  Briggs v. Benjamin, 467 So.2d 932, 934 (Miss.1985).   Thus, we may reframe the issue before the Court to properly identify the legal question upon which the case turns.   In order for State Farm to be “indebted” to Jobe within the meaning of the garnishment laws and the Briggs case, the judgment creditors in this case must have established that Jobe was an insured driver of the vehicle within the terms of the policy of insurance.   The balance of this opinion is in pursuit of an answer to this question.

III.

The Procedure for Resolving a Contested Garnishment Action

¶ 6. Mississippi garnishment law provides that a judgment holder may institute a garnishment proceeding against a third party by formally suggesting to the court that this third party is indebted to the judgment debtor or is in possession of assets belonging to the debtor.  Miss.Code Ann. § 11-35-1 (1972).   Upon the filing of such a suggestion, the court issues a writ of garnishment to the third party (who becomes, in legal terms, the “garnishee”) commanding him to appear before the court and answer as to such matters.   Miss.Code Ann. § 11-35-25 (1972).   If the garnishing judgment creditor, or “garnishor”, is dissatisfied with any aspect of the answer, the statute permits the garnishor to file a written contest to the answer.  Miss.Code Ann. § 11-35-45 (1972).   Upon the filing of such contest, the court must proceed to try the contested issue and render an appropriate judgment.  Miss.Code Ann. § 11-35-45.

IV.

The Procedural Failing in this Case

¶ 7. State Farm filed an answer to the garnishment writ served on it and denied any indebtedness.   Besides its general denial, State Farm affirmatively pled that Jobe was not an insured driver at the time of the accident because he had stolen the vehicle and was operating it without the owner's permission.   Normally, the law provides that the answer of the garnishee is conclusive unless it is successfully contested by the garnishor.  Grenada Bank v. Seligman, 164 Miss. 168, 173, 143 So. 474, 475 (1932).   Procedurally, this would seem to require the garnishor to file a written contest to the garnishee's answer under section 11-35-45 in order to frame the issue to be tried.   The garnishors did not file such a contest in this case.

¶ 8. Nevertheless, this Court notes that the record contains a consent order, agreed to by State Farm, setting the garnishment contest down for hearing as a bench trial.   It appears from this that the parties were satisfied that the critical issue of the case-whether Jobe was a permissive user and thus an insured under the policy-was properly before the court without the necessity of a formal pleading to that effect by the garnishors.   We will, therefore, treat the case procedurally as if the garnishors had filed a formal written contest to State Farm's answer and alleged that Jobe's use of the car was permissive.

V.

The Burden of Proof

¶ 9. In a contested garnishment proceeding, the garnishor carries the burden of establishing the facts necessary to render the garnishee liable under the writ.  Grenada Bank, 143 So. at 475.   Thus, in order to affirm the trial court's judgment against State Farm, we must determine that the garnishors established by a preponderance of the evidence that Jobe was a permissive user of the vehicle at the time of the accident.

¶ 10. We observed earlier in this opinion that the trial court, in effect, held that State Farm was estopped from denying coverage.   As a result, it did not reach the merits of the contest.   We now quote the actual rationale of the trial court on the point:

Throughout the discovery [apparently referring to discovery during the case-in-chief against Jobe], there was no mention of this car ever being stolen or that there was not permission given to drive this car.   It was not until May of '95, when the State Farm responded to the Writ of Garnishment, of any mention of the driver of the car not having permission of the car.   The court finds that at this late date, it is just too late to assert non-permission.   The court finds that the non-permission is asserted at this time in an effort not to honor the Writ of Garnishment.   The court will, therefore, grant to the plaintiffs ․ a judgment against State Farm․

¶ 11. This Court concludes that the trial court erred in applying a form of estoppel against State Farm in this case.   State Farm was not a party to the case-in-chief.   That case consisted solely of a tort claim sounding in negligence against Jobe. There is no indication that Jobe's status as a permissive or non-permissive driver of the car was relevant in the tort claim action.   Whether an alleged tortfeasor, subjected to a claim for negligently causing a vehicular accident, was driving the vehicle with or without the permission of the owner would not seem particularly relevant-especially from the defendant's standpoint.   State Farm had no standing to interject this issue into the trial since it was not a party to that proceeding.   The act of providing a defense under a reservation of rights means nothing more than that the company is defraying the costs of defending the action, including the payment of defense counsel's fees.   The company providing such a defense has no right to direct defense counsel to raise issues that might benefit the company but could be prejudicial to the defendant.   Defense counsel's duty is solely to the client, notwithstanding the fact that an insurance company is paying for the defense.  Hartford Accident & Indem. Co. v. Foster, 528 So.2d 255, 268 (Miss.1988).

¶ 12. In that light, it would appear that it was undoubtedly in Jobe's best interest for the jury to be unaware of the fact that he was allegedly driving a stolen vehicle at the time of the accident.   Certainly, such information could be seen to cast Jobe in a highly unfavorable light.   Therefore, we cannot see any basis for the idea that State Farm should have, or even could have, raised the issue of Jobe's status prior to judgment on the merits of the tort claim.

¶ 13. Thus, the first opportunity State Farm had to raise the issue of permissive versus nonpermissive use was when it was subjected to the garnishment action.   The company promptly did so by alleging non-permissive use in its statutorily-required answer.

¶ 14. The trial court was manifestly in error in concluding that State Farm waived its right to contest coverage by failing to raise the issue in a proceeding to which it was not a party.   We must, therefore, proceed to determine the consequences of the error in the court's ruling.

¶ 15. Because principles of estoppel did not apply, the issue before the trial court should have properly been resolved on the facts, with each side given the opportunity to present evidence.   The brief record in this case reveals that neither side put on any testimony or documentary evidence at the hearing.   Both sides seemed content to have the case resolved on those facts which were stipulated in the pleadings.   The trial court questioned counsel for both sides regarding the existence of certain evidence, such as accident reports or law enforcement theft reports, but no such documents were introduced.   Neither side was denied the opportunity to present evidence to the court, but both chose not to do so.   We will, therefore, determine what pertinent facts can be gleaned from this sparse record, treat the matter as if it had been tried on the merits, and determine whether the garnishors were entitled to judgment on those facts.   If so, this Court can affirm the trial court's judgment on the principle that where the trial court reaches the right result, even if for the wrong reason, the case may be affirmed on appeal.   Puckett v. Stuckey, 633 So.2d 978, 980 (Miss.1993).

¶ 16. The result appears to hinge upon a proper analysis of two questions:  (a) Who had the burden of proof on the issue of Jobe's permissive use of the vehicle and (b) Is there a presumption that any use of a vehicle by a non-owner is permissive?

¶ 17. From the record in this case, we may gather only these bare-bones facts:  (a) Jobe was, at the time of the accident, driving a vehicle covered by a State Farm liability policy;  and (b) though the policy itself was not introduced, we may accept as fact, due to statutory constraints, that the policy made Jobe an insured under the policy if his use of the vehicle was permissive, since every policy issued in this state must obligate the company to “pay on behalf of the insured named therein and any other person, as insured, using any such motor vehicle ․ with the express or implied permission of such named insured, all sums which the insured shall become legally obligated to pay as damages arising out of [a covered event.]”   Miss.Code Ann. § 63-15-43(2) (1972) (emphasis supplied).   The parties have, by their own choice, left the Court with no other facts upon which to proceed.

¶ 18. We have previously observed that when State Farm answered and denied that Jobe's use of the vehicle was permissive, the burden of proof was placed on the garnishors to prove the necessary facts to establish an indebtedness, i.e., that in fact, Jobe's use was with express or implied permission.   Hunter v. Commercial Secs. Co., 237 Miss. 41, 49, 113 So.2d 127, 130 (1959).   The garnishors presented no evidence on the point.   Instead, they chose to rely, both at the trial level and on appeal, upon a presumption that the use was permissive.   According to their argument, this presumption shifted the burden of persuasion to State Farm to establish affirmatively that Jobe's use was not permissive.

¶ 19. Like the garnishors, State Farm declined to present any evidence on the character of Jobe's use.   Therefore, we seem to have reduced the case to this proposition:  If, in the absence of proof one way or the other, there is a presumption that use of a vehicle is permissive, then the garnishors ought to prevail.   If, on the other hand, no such presumption exists, the garnishors' claim may not prevail because they failed to meet their burden to affirmatively establish Jobe's status as a permissive user.

¶ 20. The garnishors cite us to no authority for the proposition that proof that a driver was behind the wheel of a vehicle, and nothing more, creates a presumption that he was there with the permission of the named insured of a policy of insurance covering the vehicle.   Our research reveals no Mississippi authority on the point.   Looking to other jurisdictions, we find a split of authority.   For example, our sister state of Louisiana holds that no such presumption exists.

A plaintiff who seeks to establish coverage under the omnibus clause of an automobile liability policy must prove that the vehicle was being used with the express or implied permission of the named insured. (citations omitted).   The fact of permission must be proved by a preponderance of the evidence without the aid of any presumptions.

Johnson v. White, 693 So.2d 1223, 1225 (La.Ct.App.1997).

¶ 21. The State of Iowa answers the question differently and holds that a presumption that the use was permissive exists, once ownership of the vehicle and existence of coverage is proven.  McKirchy v. Ness, 256 Iowa 744, 128 N.W.2d 910, 911 (1964).   The Iowa court based its decision on the proposition that it is quite easy to simply deny that the use was permissive and thereby confound a judgment creditor's collection attempts because it is often the case that little affirmative evidence of the nature of the use is available.  Id.

¶ 22. Other states, including New York and Tennessee, have adopted legislation that creates a statutory presumption that any operation of a motor vehicle is by permission.   See e.g. Tenn.Code Ann. § 55-10-311 (1993);  Fili v. Matson Motors, Inc., 183 A.D.2d 324, 590 N.Y.S.2d 961, 964 (1992).

¶ 23. This Court concludes that the better rule is that followed by Iowa and that there exists a presumption that a person driving a motor vehicle does so with the permission of the insured owner.   The presumption indulged by the Iowa court was said to be a weak one that disappears when substantial evidence on the issue is presented.   At that point, the question is converted to one of fact to be decided by the preponderance of the evidence.   Thus, as a practical matter, the presumption only has any real effect in those cases where there is little or no evidence one way or the other on the nature of the driver's use of the vehicle.   In those limited instances, and only in those instances, the presumption would be available to carry the day for the garnishor.   This Court finds this to be a reasonable procedural method for resolving a dispute of this nature.   In the absence of any proof on the nature of the driver's use as being permissive or nonpermissive, the law must assess the consequences against either (a) an injured litigant who has successfully prosecuted an action against his tortfeasor, or (b) an insured vehicle owner who is apparently unable to offer any probative evidence as to why that tortfeasor was operating the vehicle.   That the injured party would prevail does not appear to produce an inequitable result.

¶ 24. State Farm in this case elected not to present any evidence on the question of Jobe's status as a permissive driver at the time of the accident.   In the absence of any such evidence, this Court holds that the presumption that Jobe's use of the vehicle was permissive has not been overcome and that the presumption is sufficient to entitle the garnishors to judgment in this case.

¶ 25. We, therefore, determine that the trial court reached the right result in this case, even though for the wrong reason, and we affirm the judgment of the trial court.

¶ 26. THE JUDGMENT OF THE CIRCUIT COURT OF HOLMES COUNTY IS AFFIRMED.   STATUTORY PENALTIES AND INTEREST ARE AWARDED.   COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.

McMILLIN, Presiding Justice, for the Court:

BRIDGES, C.J., THOMAS, P.J., and COLEMAN, DIAZ, HERRING, HINKEBEIN, KING, PAYNE and SOUTHWICK, JJ., concur.