Ocean Accident & Guar. Corp. v. Southwestern B. Tel. Co.

• Decision Date: 03 January 1939
• Docket Number: No. 11220.,11220.
• Citation: 100 F.2d 441
• Parties: OCEAN ACCIDENT & GUARANTEE CORPORATION, Limited, v. SOUTHWESTERN BELL TELEPHONE CO.
• Court: U.S. Court of Appeals — Eighth Circuit

100 F.2d 441 (1939)

OCEAN ACCIDENT & GUARANTEE CORPORATION, Limited, v. SOUTHWESTERN BELL TELEPHONE CO.^*

No. 11220.

Circuit Court of Appeals, Eighth Circuit.

January 3, 1939.

David A. Murphy, of Kansas City, Mo. (E. R. Adams, John T. Harding, R. C. Tucker, and John Murphy, all of Kansas City, Mo., on the brief), for appellant.

Walter A. Raymond, of Kansas City, Mo. (Fenton Hume, of Kansas City, Mo., on the brief), for appellee.

Before STONE, GARDNER, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

This is an appeal from a judgment entered upon the verdict of a jury in favor of appellee, plaintiff below, and against appellant, defendant below. For opinion of the trial court in ruling on motion for a new trial, see Southwestern Bell Telephone Co. v. Ocean Accident & Guarantee Corporation, Ltd., D.C., 22 F.Supp. 686.

The plaintiff predicated its cause of action upon an "Employers' Liability Policy" of insurance issued by appellant to the Kansas City Telephone Company. The policy was for a term of three years commencing November 16, 1924, and expiring November 16, 1927.

The material provisions of the policy are as follows:

"The Ocean Accident and Guarantee Corporation, Limited (Hereinafter called the Company) does hereby agree with the Assured named and described as such in the Declarations forming a part hereof, respecting accidental bodily injuries sustained by Assured's employees, including death at any time resulting therefrom, as follows:

"1. To Insure the Assured against loss by reason of the liability imposed by law upon the Assured for damages on account of such injuries, and to pay and satisfy judgments finally establishing Assured's liability in actions defended by the Company, all subject to the limits expressed in Paragraph 11 of the Declarations;

"2. To Investigate accidents involving such injuries, to negotiate all claims made as may be deemed expedient by the Company, and to defend suits for damages, even if groundless, brought on account of such injuries in the name and on behalf of the Assured, unless or until the Company shall elect to effect settlement thereof;

"3. To Pay (a) all costs taxed against the Assured in any legal proceeding defended by the Company according to the foregoing paragraph, and interest accruing up to the date of payment by the Company upon the Company's share of the judgment rendered in connection therewith, (b) all premium charges on attachment or appeal bonds required in such legal proceedings, (c) all expenses incurred by the Company for investigation, negotiation and defense; and

"4. To Reimburse the Assured for the expense incurred in providing such immediate surgical and medical relief as is imperative at the time of the accident.

* * * * * *

"The Assured shall not voluntarily assume any liability, nor incur any expense (other than for immediate surgical or medical relief), nor settle any claim, except at the Assured's own cost. The Assured shall not interfere in any negotiation for settlement, nor in any legal proceeding, but, whenever requested by the Company, and at the Company's expense, the Assured shall aid in securing information and evidence and the attendance of witnesses, and shall co-operate with the Company (except in a pecuniary way) in all matters which the Company may deem necessary in the defense of any suit or in the prosecution of any appeal."

* * * * * *

"No assignment of interest under this policy shall be binding upon the Company unless such assignment is consented to by endorsement hereto, signed by the Manager and Attorney at the City of New York, * * *."

"Declarations.

"1. Name of Assured Kansas City Telephone Company."

The plaintiff pleaded and relies upon two assignments of the policy. The first is a bill of sale dated January 22, 1927, by the terms of which the Kansas City Telephone Company sold, assigned and conveyed to the Southwestern Bell Telephone Company all of its property, including "4. All other property, rights and assets of whatsoever nature and description, real, personal or mixed, corporeal or incorporeal, legal or equitable, in possession or in expectancy, now owned by the party of the first part, whether in this conveyance specifically named or not."

It is not claimed that this bill of sale was submitted to, approved by, or consented to by the appellant company. The policy, however, with all other property of the insured, came into the possession of appellant; and sometime after February 7, 1927, there was attached the following duly executed assignment: "Subject to the consent of the Ocean Accident and Guarantee Corporation, Limited, the interest of the Kansas City Telephone Company in policy #EC-155240 is, for value received, hereby assigned as of January 22, 1927, to the Southwestern Bell Telephone Company, and from and after January 22, 1927, said policy shall, subject to such consent, apply only to those employees of the Southwestern Bell Telephone Company who are employed in connection with the plants and premises formerly owned by the Kansas City Telephone Company, and who shall be at the time of injury engaged principally in the business of operating, maintaining and extending the property located in the State of Missouri, acquired on said date by the Southwestern Bell Telephone Company from the Kansas City Telephone Company, including the business of furnishing local exchange telephone service by and through said property."

The appellant admits that this assignment was formally consented to by it subject to the agreements, conditions and declarations of the policy.

Three distinct causes of action are declared upon in the petition: (1) for attorney's fees and expenses incurred in successfully defending a suit brought by Joseph Schaum for personal injuries sustained by him on November 1, 1926; (2) for $500 paid in settlement of a suit against plaintiff by Cletta Morgan for a personal injury alleged to have occurred in March, 1926, and for attorney fees; and (3) for $500 paid to Nell Conroe in settlement of a suit against plaintiff for an injury sustained in September, 1926, and for attorney fees. The plaintiffs in the three cases were, at the time the injuries complained of occurred, employees of the Kansas City Telephone Company. Notice of the alleged injury to Schaum had been given to the insurance company prior to the date of the assignment; but Morgan and Conroe had not reported their alleged injuries to any of the parties before that date. When these suits, commenced two to five years after the date of the assignment, were instituted against the plaintiff, notice in conformity with the terms of the policy was given the defendant. The defendant refused to defend the suits and denied all liability on the sole ground that "our policy covers the Kansas City Telephone Company only and does not cover the Southwestern Bell Telephone Company." The cases were accordingly handled by the plaintiff's legal department, and this suit was brought to recover as damages the expenses so incurred.

Upon the trial the defendant moved for a directed verdict, which the court denied. The case was submitted to the jury and a verdict returned for $7,563.68 on the first count of the petition and $700 on each of the other two.

The grounds on which the defendant seeks reversal may be summarized as follows: (1) the motion for a directed verdict should have been sustained because there was no privity of contract between plaintiff and defendant; (2) the court erred in its rulings on the admissibility of evidence, especially on the issue of damages; and (3) the court erred in its charge to the jury particularly with reference to the value of the services of the attorneys.

The first ground for a directed verdict on the three counts or causes of action alleged in the petition was that "under the law and the evidence no privity of contract existed, or exists, between the plaintiff and defendant relative to the subject matter of said count(s) of said petition." This thought is amplified in the motion by the statement (1) that no interest in the policy was transferred to the plaintiff by the bill of sale of January 22, 1927, (2) that the assignment to plaintiff in February, 1927, and to which defendant consented, was prospective in operation and did not apply to losses occurring before January 22, 1927, and (3) that it created a new contract between plaintiff and defendant with a new subject-matter.

Privity of contract denotes mutual or successive relationship to the same right of property or subject-matter, such as "personal representatives, heirs, devisees, legatees, assignees, voluntary grantees, or judgment creditors or purchasers from them with notice of the fact." 1 Greene. Ev. § 535; Story, Eq.Jur. § 165; State v. Johnson, 123 Mo. 43, 27 S.W. 399; National Surety Corporation of New York v. Ellison, 8 Cir., 88 F.2d 399, 407; State v. City of St. Louis, 145 Mo. 551, 46 S.W. 981, 985; Peterson v. Parviainen, 174 Minn. 297, 219 N.W. 180, 183. To say in this case that privity of contract did not or does not exist between plaintiff and defendant is no more than to assert that plaintiff did not by means of either of said assignments succeed to the rights which the Kansas City Telephone Company had under the policy. It is conceded that that company had the right to protection against the liabilities for which the suit was brought and that an obligation rested upon defendant under the policy to furnish such protection.

The only question for consideration under the first contention, therefore, relates to the validity of the assignments. If either of these assignments constituted a valid conveyance of the policy and established between the grantor and grantee the true relationship of assignor and assignee, then by the same token there came into existence at the same time and by the same means the relationship of insurer and insured between plaintiff and defendant and privity of contract existed.

As to the assignment...