In this gаrnishment proceeding, garnishee, Old Republic Insurance Company, appeals
An airplane chartered through the Duran-go Air Service, Inc. (DAS) crashed, killing the pilot and both passengers. Plaintiffs, the passengers’ surviving sрouses and children, brought a wrongful death action against DAS, its president and half-owner, Watkins, and the pilot’s estate.
DAS and Watkins (defendants) were insured under two policies issued by Old Republic. The aviation policy covered liability resulting from bodily injury and death from operation of an aircraft and had a coverage limit of $700,000 with a liability limit of $100,000 per passenger. Old Republic paid plaintiffs $200,000 under this policy.
However, Old Republic disputed coverage under a comprehensive general liability policy that had a policy limit of $1 million. Old Republic sought a declaratory judgment in the federal district court “that it had discharged the full extent of its obligation to indemnify the insureds.” Ultimately, the Court of Appeals for the Tenth Circuit affirmed the district court’s dеtermination that Old Republic was liable under both policies.
Old Republic Ins. Co. v. Durango Air Serv., Inc.,
During the federal court proceedings, plaintiffs and defendants entered into a settlement agreement in which (1) defendants confessed judgment of $2 million per plaintiff group plus interest; (2) Watkins agreed to sign a $50,000 promissory note tо plaintiffs, for which he would be reimbursed if plaintiffs recovered more than the amount of the consent judgment against Old Republic; (3) defendants agreed to prosecute claims against Old Republic fully; (4) defendants agreed to be represented by plaintiffs’ lawyers and waived any potential conflict of interest; (5) plaintiffs reserved the right to approve any settlеment reached with Old Republic; and (6) plaintiffs and defendants agreed to share any compensatory or punitive damages recovered beyond the amount of the consent judgment. Defendants then confessed judgment on all claims contained in the amended complaint, and the trial court entered a consent judgment of $4 million.
Almost a year after Old Reрublic paid plaintiffs under the CGL policy, plaintiffs filed writs of garnishment for over $5.7 million against Old Republic for post-judgment interest on the consent judgment under the terms of the CGL policy and costs.
I.
Old Republic first contends the trial court erred in ruling that it agreed to the consent judgment and that res judicata barred its challenge to the judgment. Conversely, plaintiffs contend that Old Republic сonsented to the judgment and that the doctrines of res judicata, equitable estoppel, and waiver bar Old Republic’s challenge to the consent judgment. We agree with Old Republic.
A.
We reject plaintiffs’ argument that Old Republic consented to the judgment in a letter written by Old Republic’s counsel to Watkins’s counsel.
Interpretation of a written document presents a question of law which we review de novo.
Bolser v. Bd. of Comm’rs,
Plaintiffs cite the following language to prove Old Republics consent:
On behalf of Old Republic, we can assure you and your clients that, if your clients wish to resolve the litigation as you have suggested, Old Republic has no objection to that and will agree to indemnify your insureds, but only to the extent of the determined insurance coverage.
However, this language immediately follows a sentence in which Old Republic distinguished a previous request to “authorize” defendants to confess judgment and stated that the current request was for an answer whether “such a confession of judgment [is] a breach of the policy, affecting your clients’ insurance coverage.” Moreover, Old Republic reiterated that it “stands by the position it
The context of the letter, therefore, shows that Old Republic agreed to pay plaintiffs under the insurance policy if the parties entered into a settlemеnt agreement. Furthermore, even if the language cited by plaintiffs could be read as consenting to the judgment, Old Republic agreed to indemnify “only to the extent of the determined insurance coverage,” not the full amount of the consent judgment.
Accordingly, Old Republic only agreed to indemnify defendants to the extent of any liability under the insurance policies.
B.
Plaintiffs аlso argue that res judicata bars Old Republic’s challenges to the consent judgment because Old Republic failed to raise those challenges in the federal court proceedings. We disagree.
The Colorado Supreme Court uses the terms “claim preclusion” and “issue preclusion,” rather than “res judicata” and “collateral estoppel,” because “res judicata” is commonly used as an overarching label for both claim and issue preclusion.
Argus Real Estate, Inc. v. E-470 Pub. Highway Auth.,
Claim preclusion prevents the relit-igation of matters that have already been decided as well as matters that could have been raised in a prior proceeding but were not. For a claim in a second judicial proceeding to be precluded by a previous judgment, there must exist (1) finality of the first judgment; (2) identity of subject matter; (3) identity of claims for relief; and (4) identity or privity between parties to the aсtions. Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., supra.
However, a declaratory judgment action is an exception to the claim preclusion doctrine.
Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., supra
(recognizing exception for declaratory judgments because they are limited proceedings in which the court determines the rights of parties based on the interpretation of a written instrument);
Atchison v. City of Englewood,
Here, in federal court Old Republic sought only a dеclaratory judgment of its liability under the insurance policies at issue. As such, the declaratory judgment was binding on the amount of coverage only. Therefore, the doctrine of claim preclusion does not bar Old Republic’s challenge to the consent judgment.
C.
Plaintiffs next assert that Old Republic’s challenge is barred by the doctrine of equitable estoppel. Wе are not persuaded.
Equitable estoppel requires that a person induce another detrimentally to change position in reasonable reliance on the person’s actions through words, conduct, or silence. The party to be estopped must intend that its representation be acted on so that the other party is justified in relying upon the represented facts.
Cont’l W. Ins. Co. v. Jim’s Hardwood Floor Co.,
Here, plaintiffs argue that they relied on the letter from Old Republic in entering into the consent judgment. However, the letter stated that settlement would not constitute a breach of the policy and clearly limited indemnity to the policy limits. Therefore, we cannot conclude that plaintiffs’ reliance on the letter was reasonablе. See Cont’l W. Ins. Co. v. Jim’s Hardwood Floor Co., supra.
Nevertheless, plaintiffs argue that Old Republic paid them in partial satisfaction of the consent judgment and therefore waived any objection to the judgment. However, Old Republic was required to pay plaintiffs under the terms of its insurance policies, as determined by the court. Plaintiffs incorrectly conflate payment under one legal obligation with acknоwledgement of another. Moreover, plaintiffs do not dispute that when Old Republic tendered payment under the gener
, Plaintiffs further argue that Old Republic represented in federal court that the judgment was properly entered as one collective judgment. However, we find nothing in the record to support plaintiffs’ claim that Old Republic conceded in the federal court proceedings that the consent judgment was valid or that it was binding on Old Republic.
See People v. Dist. Court,
Accordingly, we conclude equitable estop-pel does not bar Old Republic’s challenge to the consent judgment.
D.
Plaintiffs next argue that Old Republic waived its challenges to the consent judgment. We disagree.
Waiver is the intentional relinquishment of a known right. Waiver may be express, as when a party states its intent to abandon an existing right, or may be implied, as when a party engages in conduct that manifests its intent to relinquish the right or that is inconsistent with its assertion.
In re Marriage of Robbins,
Here, plaintiffs rely on the letter, the lack of objection in the federal court proceedings, and the payment toward satisfaction of the consent judgment in arguing that Old Republic waived its challenges. However, we reject these arguments for the reasons discussed above.
E.
Finally, plaintiffs assert that Old Republic’s arguments on appeal constitute an imprоper collateral attack on the underlying consent judgmént. Again, we disagree.
A final judgment entered with proper jurisdiction is not subject to collateral attack.
Lake Durango Water Co. v. Pub. Utils. Comm’n,
However, persons not parties to a judicial proceеding cannot be bound by the court’s action therein.
People ex rel. Inter-Church Temperance Movement v. Baker,
Here, Old Republic was not a party to the consent judgment. As discussed previously, it did not agree to be bound by the judgment, act as if it were bound by the judgment, or waive its rights to challenge the enforceability of the judgment against it. Therefore, Old Republic’s challenge to the consent judgment doеs not constitute an improper collateral attack because it is not bound by that judgment. See People ex rel. Inter-Church Temperance Movement v. Baker, supra.
Accordingly, we conclude the trial court erred in determining that Old Republic consented to the judgment and in applying the doctrine of claim preclusion to bar Old Republic’s challеnges to the writs of garnishment.
We next consider whether Old Republic is bound by the judgment notwithstanding its lack of consent. Old Republic contends it is not bound by the consent judgment because plaintiffs did not prove that the judgment was valid or reasonable. We agree.
A judgment creditor attempting to collect on a judgment debt bears the burden of proving the existence and validity of the indеbtedness of the garnishee. Accordingly, the garnishee is treated as if it had been sued directly by the judgment debtor and is entitled to deny the indebtedness, to conduct discovery, and to have a hearing at which the judgment creditor must prove the allegations by a preponderance of evidence.
Hoang v. Monterra Homes (Powderhorn) LLC,
A.
Initially, we reject plaintiffs’ argument that the settlement agreemеnt constitutes a valid Bashor agreement.
A
Bashor
agreement is a settlement reached between opposing parties after a judgment has been obtained against the defendant. The plaintiff agrees not to execute on the judgment in exchange for the defendant’s agreement not to appeal the judgment or pursue claims against third parties (and share any recovеry with the original plaintiff).
Stone v. Satriana,
Here, plaintiffs and defendants entered into a settlement agreement whereby defendants agreed to confess judgment, which was then entered by the trial court. The agreement, therefore, was not reached after plaintiffs obtained a judgment against defendants.
See Stone v. Satriana, supra.
Moreover, an enforceable judgment against defendants never existed apart from the confessed judgment, to which they stipulated.
See Serna v. Kingston Enters., supra; Marsh v. Warren,
Furthermore, we find the settlement agreement at issue here to be akin to the profit-sharing agreement in Serna v. Kingston Enterprises, supra. Under the agreement here, plaintiffs and defendants agreеd to share all punitive damages equally, defendants would receive any additional compensatory damages received beyond the full judgment, and Watkins would be reimbursed for the amount paid under the promissory note. Therefore, if successful against Old Republic, defendants not only would never pay the judgment against them, but also would make a profit from the prоceedings. See Serna v. Kingston Enters., supra.
Finally, Bashor agreements in Colorado are only used in bad faith insurance litigation involving allegations of breach of duty to indemnify. See Serna v. Kingston Enters., supra. Here, we note that the parties initiated a garnishment proceeding in which they allege that Old Republic consented to the full judgment, rather than litigation in which they allege Old Republic acted in bad faith in refusing to indemnify defendants.
Accordingly, we conclude that the settlement agreement does not constitute a valid Bashor agreement.
B.
A consent judgment is distinguishable in some respects from a judgment resulting from contested litigation carried to conclusion by judicial determination. A consent judgment is not a judicial determination of any litigated right, and it is not the judgment of the court, except in the sense that the court allows it to go upon the record and have the force and effect of a judgment. Such a judgment is merely the act of the parties consented to by the court. Marsh v. Warren, supra.
When dealing with consent judgments, courts must ensure that circumstantial guarantees of trustworthiness exist concerning the genuineness of the underlying judgment. The real concern is that the settlement may not actually represent an arm’s length determination of the worth of the
Here, the consent judgment was entered without a hearing, and no evidence was adduced before the court that entered the stipulated judgment. See Miller v. Byrne, supra. Rather, the parties, none of whom had an incentive to represent or protect Old Republic’s interests, determined the amount of the judgment to be collected against Old Republic. Unlike a judgment entered by a neutral fact finder, the consent judgment here was entered by parties whose incentive was to pursue an action against Old Republic, which was not a party to the judgment. See Miller v. Byrne, supra.
Moreover, “[l]egal maneuvering, under which the stipulation becomes a judgment, should not permit the accomplishment by indirection of that which could not be done directly.”
Marsh v. Warren, supra,
Accordingly, we conclude the consent judgment is not binding on Old Republic.
III.
Old Republic next contends it does not owe post-judgment interest because it is not bound by the consent judgment. Although we agree with Old Republic that it сannot be liable for interest on a judgment that is not binding on it, we conclude Old Republic is liable for interest for a different reason. Therefore, we remand for determination of the amount of interest due.
When money has been wrongfully withheld, interest shall be an amount that fully recognizes the gain or benefit realized by the person withholding such money from the date of wrongful withholding to the date of payment. Section 5-12-102, C.R.S.2005. Under this statute, wrongful withholding only requires failure to pay or deliver money when obligated to do so.
Peterman v. State Farm Mut. Auto. Ins. Co.,
The purpose of this provision is to discourage рersons responsible for the settlement of claims from stalling or delaying payment until final settlement or judgment. Therefore, prejudgment interest is available from the time a claim accrues.
Bowen v. Farmers Ins. Exch.,
Here, Old Republic agreed to indemnify defendants to the extent of the determined coverage. The federal court then determined Old Republic’s liability was $1.7 million under the insurance policies, rather than the $200,000 initially paid by Old Republic. Although Old Republic has since paid the remaining $1.5 million due under the insurance policies, it has not paid interest on it, as required by § 5-12-102.
While we recognize that an insurance company may file a declaratory judgment action to determine the extent of its potential liability,
Midwest Mut. Ins. Co. v. Murry,
Accordingly, we conclude Old Republic owes interest for wrongfully withholding the policy coverage, and we remand to the trial court for determination of the amount due.
Because we conclude Old Republic is not bound by the consent judgment, we need not consider Old Republic’s remaining arguments, and the fee award is vacated.
See Nichols v. Burlington N. & Santa Fe Ry.,
The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.