Sellers v. Nationwide Mutual Fire Insurance Co.

          MEMORANDUM OPINION

          KARON OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE

         “[A]ll men make mistakes, [b]ut a good man yields when he knows his course is wrong, [a]nd repairs the evil. The only crime is pride.” The Antigone of Sophocles 70 (Dudley Fitts & Robert Fitzgerald trans., Harcourt Brace Publisher, 1946). While the court previously denied Defendant Nationwide's motion in limine, the court is not too proud to reconsider its ruling.

         This matter comes before the court on “Nationwide's Motion to Reconsider.” (Doc. 77). Nationwide challenges the court's denial without prejudice of its motion it limine. (Doc. 70). Nationwide filed a motion in limine to preclude Mr. Sellers, his counsel, and his witnesses from presenting evidence regarding an issue previously litigated in a declaratory judgment action. (Doc. 63). A jury trial was held on September 10 and 11, 2018. The jury returned a verdict in favor of Plaintiff Ronald Sellers as assignee of Gary Gardner and Gary Gardner Builders, Inc. On September 19, Nationwide submitted this motion to reconsider. (Doc. 77). On September 24, Mr. Sellers responded in opposition to the motion. (Doc. 78). The motion is now ripe for review. For the reasons discussed below, the court will GRANT Defendant Nationwide's motion to reconsider, but will DENY Defendant Nationwide's motion in limine.

         I. Background

         Mr. Sellers entered into a contract with Gary Gardner and Gary Gardner Builders, Inc., for the construction of a home on August 17, 2004. (Doc. 1-1 at 5). Mr. Gardner hired Steve Durham, d/b/a Durham Contracting, as a subcontractor to provide foundation work for the home. After Mr. Sellers moved into the home, he discovered construction defects, some of which involved work on the foundation.

         Nationwide insured Mr. Durham's subcontracting work. The insurance policy provided coverage for damages to other property resulting from Mr. Durham's faulty workmanship that first manifested during the policy period, which ran from December 20, 2006 through December 20, 2007. (Doc. 60 at 3).

         Mr. Sellers sued Mr. Gardner and Mr. Durham over the construction defects on June 24, 2008 in the Circuit Court of Jefferson County, Alabama. (Doc 1-1 at 5). Mr. Gardner filed crossclaims against Mr. Durham in that action.

         While that case was pending, Mr. Durham filed for bankruptcy in the U.S. Bankruptcy Court for the Northern District of Alabama in July 2010. (Doc. 1-1 at 6). The bankruptcy court allowed Mr. Sellers to pursue his claims against Mr. Durham, but limited Mr. Sellers's recovery to Mr. Durham's available insurance benefits. Mr. Gardner filed a motion in bankruptcy court to pursue his claims against Mr. Durham by lifting the bankruptcy stay, but the bankruptcy court never ruled on that motion. The bankruptcy court discharged Mr. Durham from bankruptcy on October 8, 2010.

         In the pending state court action, Mr. Sellers and Mr. Gardner entered into a settlement agreement on October 19, 2011. Mr. Sellers released all claims against Mr. Gardner in exchange for $100, 000 and the assignment of Mr. Gardner's crossclaims against Mr. Durham. (Docs. 13-18, 13-19).

         On July 15, 2011, Nationwide filed for declaratory judgment in the U.S. District Court for the Northern District of Alabama, seeking a determination of its obligations to defend and indemnify Mr. Durham regarding Mr. Seller's claims in the pending state court action. (Doc. 63-1 at 3). Nationwide only named Mr. Durham and Mr. Sellers as defendants in the declaratory judgment action, not Mr. Gardner, who at that time still had a crossclaim pending against Mr. Durham.

         On November 17, 2011, Mr. Sellers, as the assignee of Mr. Gardner's claims, amended Mr. Gardner's earlier crossclaims against Mr. Durham in the pending state court action. (Doc. 77 at 21-29).

         On August 6, 2012, Magistrate Judge Greene entered his Report & Recommendation in the declaratory judgment action. (Doc. 63-1). Judge Greene recommended that the court grant Nationwide's motion for a default judgment against Mr. Durham and that the court grant Nationwide's motion for summary judgment against Mr. Sellers. In granting the motion for summary judgment against Mr. Sellers, Judge Greene found that the workmanship damage first manifested before the insurance policy period began. Judge Probst adopted Judge Greene's Report & Recommendation. (Doc. 13-12).

         Mr. Sellers and Mr. Durham entered into a consent judgment on October 11, 2013. (Doc. 1-1 at 7). The consent judgment entered into by Mr. Sellers and Mr. Durham provided for a judgment of $250, 000 against Mr. Durham “for the claims asserted by Ronald Sellers, individually and assignee of Gary Gardner / Gardner Builders.” (Doc. 13-16 at 4). The consent judgment limited recovery by Mr. Sellers, individually and as Mr. Gardner's assignee, to any insurance policy covering Mr. Durham, excluding recovery from Mr. Durham personally.

         On October 3, 2013, Mr. Sellers, individually and as assignee of Mr. Gardner, and Mr. Durham filed a joint motion for entry of a consent judgment in the state court action. (Doc. 13-16). On May 12, 2015, Mr. Sellers, solely as assignee of Mr. Gardner, sued Nationwide in the Circuit Court of Jefferson County, Alabama to collect the $250, 000 judgment entered against Mr. Durham. (Doc. 1-1). Nationwide timely removed the case to this court on June 8, 2015. (Doc. 1).

         II. ...