VERELLEN, J.
¶ 1 Berschauer Phillips Construction Company (BP) appeals from the superior court order granting summary judgment dismissing its "direct action" claim against Mutual of Enumclaw Insurance Company (MOE). BP obtained a default judgment against an insured of MOE, unsuccessfully sought to recover from MOE on a "chose in action" theory in Thurston County, and also filed this direct action lawsuit against MOE in King County. BP assigns error to the superior court's determination that this direct action lawsuit was barred by the claim-splitting doctrine of res judicata. BP could have and should have raised its direct action claim against MOE in its previous lawsuit, which involved the identical subject matter and claim, included the same parties acting in the same capacities, and resulted in a final judgment in favor of MOE. Because the superior court correctly determined that res judicata barred BP's subsequent lawsuit against MOE, dismissal was proper. We affirm.
¶ 2 In 2002, BP subcontracted with Concrete Sciences Services of Seattle (CSS) to stain concrete floors at Redmond Junior High School. The concrete floor did not properly absorb the stain. At the time, CSS, a Minnesota limited liability corporation (LLC), was insured under a comprehensive general liability insurance policy issued by MOE. In 2003, following completion of the project, CSS filed articles of termination, dissolving the Minnesota LLC.
¶ 3 In 2004, BP filed a lawsuit against CSS in King County seeking to recover damages for defective workmanship. CSS did not appear, and BP obtained a $318,611.97 default judgment. BP informed MOE of the default judgment and demanded payment. MOE moved to vacate the default judgment. The superior court denied the motion as untimely. This court affirmed (Appeal 1).
¶ 4 In 2008, BP filed a lawsuit against MOE in Thurston County, alleging it had "attached all available choses in action" CSS had against MOE.
¶ 6 MOE then sought discretionary review by this court of the Thurston County court's stay order. This court granted review and determined that: CSS was the real party in interest, not BP; the trial court lacked authority to stay the case; and BP had no standing at the time it filed the action, nor at the time the stay was issued (Appeal 3).
¶ 7 After the mandate issued, BP and MOE stipulated to an order of dismissal of the Thurston County lawsuit, "with prejudice."
¶ 8 In the meantime, BP filed this new lawsuit against MOE in King County. In the complaint, BP recited that: CSS was insured by MOE; BP had a default judgment against CSS; and BP "has standing to proceed against MOE on a direct action" to collect the judgment.
¶ 9 MOE moved for summary dismissal, arguing that BP's direct action claims were barred under the doctrines of res judicata and collateral estoppel. The trial court concluded that BP's lawsuit was barred by res judicata, and granted MOE's motion for summary judgment.
¶ 10 BP appeals.
¶ 11 BP asserts that the trial court erred in dismissing its claims, arguing that res judicata does not bar its present lawsuit against MOE. We disagree.
¶ 12 Res judicata is an issue of law, subject to de novo review on appeal.
¶ 13 Where, as here, the insured has not made an assignment of its claim against its insurer to an injured third party, a third party damaged by actions of the insured has options to recover from the insurer.
¶ 14 Understanding BP's theories of liability in each relevant lawsuit is critical to the application of res judicata in this appeal. BP's Thurston County lawsuit was based on its right to execute on its default judgment against CSS by levying on the choses in action held by CSS against MOE. BP contends that its subsequent King County lawsuit was based on its "direct" right to proceed against MOE, premised on a "boilerplate" no-action provision it suspects is in the policy issued by MOE to CSS.
¶ 15 BP's efforts to distinguish between the subject matter and cause of action at issue in each of the two relevant lawsuits are not persuasive. Consideration of four factors provide an analytical tool for determining whether two causes of action are identical for purposes of res judicata: "(1) [w]hether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts."
¶ 16 BP concedes that the identical persons or parties were present in both lawsuits, but argues that it was acting in a different capacity or "quality" in the lawsuits. The quality of persons or parties is relevant in situations where the parties to two lawsuits are the same, but one or the other acts in a different capacity in the two proceedings.
¶ 17 BP's arguments that application of res judicata results in injustice are not persuasive. BP fails to adequately explain why it
¶ 18 Moreover, BP mistakenly contends that this court's determination in a previous appeal (Appeal 2) precluded BP from maintaining a garnishment action against MOE. This court concluded that BP failed to meet its burden of demonstrating that CSS actually had acquired a property interest against MOE, not that CSS's right or interest did not exist.
¶ 19 Finally, BP asserts that MOE "waived" its ability to assert the defense of res judicata in the King County proceeding because it was aware of the King County lawsuit at the time it stipulated to the dismissal with prejudice of the Thurston County lawsuit. BP relies upon but misreads Karlberg v. Otten.
¶ 20 Affirmed.
WE CONCUR: COX, and BECKER, JJ.
In most states, including Washington, a third party may proceed directly against the insurer under the state's garnishment statute on the theory that the duty to indemnify is a debt owed by the insurer to its insured. See Atlantic Casualty Ins. Co. v. Oregon Mutual Ins. Co., 137 Wn.App. 296, 304-05, 153 P.3d 211 (2007) ("An insurance company's obligation under a liability policy is subject to garnishment. The theory behind this is that as soon as the garnishing creditor established the insured's liability, the insurance company was obligated to pay and, therefore, it is an asset that can be attached in a garnishment action. In the garnishment action, the garnishee insurance company ... is entitled to raise any defense it had against its policyholder against the garnishing creditor." (citations omitted)); Trinity Universal Ins. Co. v. Willrich, 13 Wn.2d 263, 271, 124 P.2d 950 (1942) ("[I]f [the injured third parties] recover judgment against [the insured], they will have the right to compel [the insurer] to pay that judgment."); Thomas V. Harris, Washington Insurance Law, Third Edition § 10.01, at 10-1 (2010) ("A garnishment is a derivative process that allows a judgment creditor to collect the judgment by attaching the insurance `debt' owed by an insurer to its insured.").
On appeal, BP mentions a third-party beneficiary theory, but does not argue that it is a third-party beneficiary and cites no Washington cases adopting this rationale for a "direct action." Courts in other jurisdictions have applied a "third-party beneficiary" label as the basis for a direct action theory. See, e.g., Malmgren v. Sw. Auto. Ins. Co., 201 Cal. 29, 255 P. 512 (1927). Commentators, however, recognize that general and casual use of that label does not reflect a genuine third-party beneficiary contract theory. "The use of the label `third-party beneficiary' can itself cause confusion, since traditional concepts of third-party beneficiary status include certain distinct rights under the contract. In the direct action context, the label should be restricted to cases where the rights of the beneficiary are limited to the rights of the insured." 7A Russ & Segalla, supra, § 104:42, at 104-66.
