367 F.2d 866 (8th Cir. 1966), 18296, Universal Underwriters Ins. Co. v. Wagner

Docket Nº:18296, 18297.
Citation:367 F.2d 866
Party Name:UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a Corporation, and Masid Chevrolet-Oldsmobile & Cadillac, Inc., a Corporation, Appellants, v. Amelia G. WAGNER, Henry Gritzfeld, Jr., and Katherine G. Linder, as Executors of the Estate of Henry Gritzfeld, Deceased, and Western Mutual Insurance Company, a Corporation, Appellees. WESTERN MUTUAL INSURANCE COM
Case Date:November 07, 1966
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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367 F.2d 866 (8th Cir. 1966)

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a Corporation, and Masid Chevrolet-Oldsmobile & Cadillac, Inc., a Corporation, Appellants,


Amelia G. WAGNER, Henry Gritzfeld, Jr., and Katherine G. Linder, as Executors of the Estate of Henry Gritzfeld, Deceased, and Western Mutual Insurance Company, a Corporation, Appellees.



UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a Corporation, Masid Chevrolet-Oldsmobile & Cadillac, Inc., a Corporation, and Amelia G. Wagner, Henry Gritzfeld, Jr., and Katherine G. Linder, as Executors of the Estate of Henry Gritzfeld, Deceased, Appellees.

Nos. 18296, 18297.

United States Court of Appeals, Eighth Circuit.

November 7, 1966

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M. M. Maupin, of Maupin, Dent, Kay & Satterfield, North Platte, Neb., for Universal Underwriters Ins. Co. and others. C. J. Gatz, North Platte, Neb., was with him on the brief.

Milton C. Murphy, of Murphy, Pederson & Piccolo, North Platte, Neb., for Western Mut. Ins. Co.

Robert G. Simmons, Jr., of Wright, Simmons & Hancock, Scottsbluff, Neb., for appellees Amelia G. Wagner, Henry Gritzfeld, Jr. and Katherine G. Linder. Floyd E. Wright and James R. Hancock, Scottsbluff, Neb., were with him on the brief.

Before VOGEL, Chief Judge, and VAN OOSTERHOUT and LAY, Circuit Judges.

LAY, Circuit Judge.

This is an action brought by Western Mutual Insurance Company for a declaratory judgment under Title 28, U.S.C. § 2201. Western seeks a determination that its coverage to its assured Henry G. Gritzfeld 1 is excess coverage and not primary, as against alleged coverage issued by Universal Underwriters Insurance Company to the Masid Chevrolet-Oldsmobile & Cadillac, Inc., owner of a car loaned to Gritzfeld.

Gritzfeld filed a cross claim against Universal and Masid, as well as a counterclaim against Western seeking protection of the coverage of both companies.

The controversy arose when Gritzfeld was involved in an Oklahoma accident on April 7, 1963, driving the Masid automobile. Third parties were seriously injured. The details of the accident and the demands by the respective parties are incidental to these proceedings. 2

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Universal's coverage would give Gritzfeld the additional coverage of $300,000 for any one person and $500,000 for any one accident. This was under the Masid policy. The coverage of Western was $25,000 for any one person and $50,000 for any one accident.

Jurisdiction is alleged under 28 U.S.C. § 1332.

The trial court granted Gritzfeld a declaratory judgment against both Western and Universal. Primary coverage was afforded Gritzfeld under the Universal policy and Western's policy provided only excess coverage. The trial court found Universal must provide a defense, pay for the investigation and defense costs. Western is denied affirmative relief (in from only). Universal was ordered to pay any judgment rendered against Gritzfeld to the extent of its policy limits. The practical effect of the judgment is to allow Western to escape without any obligation whatsoever and to become completely absolved from any liability except to the extent that Universal's policy does not pay. Universal and Masid appeal from the judgment. 3 However, Western files a separate appeal from the lower court's order denying attorney fees against Universal. We affirm.

Western insured the Gritzfeld automobile, a 1962 Rambler. This was damaged in a collision in March of 1963. In April of 1963, Gritzfeld entered into an agreement with Masid to repair his car. Masid testified a Chevrolet was furnished Gritzfeld for use and operation while the Rambler was being repaired by Masid. On April 7, 1963, Gritzfeld was driving the Masid automobile (the Chevrolet) in the State of Oklahoma and was involved in a serious personal injury accident. The claims mentioned above arise out of this accident of April 7, 1963.

Gritzfeld's policy with Western contained the following proviso:

'* * * provided, however, the insurance with respect to a temporary substitute automobile or nonowned automobile shall be excess insurance over any other valid and collectible insurance.'

It is agreed that Gritzfeld did not come within any of the definitions of the word 'insured' in the Masid policy, unless the provisions of the 'customer rental coverage' would apply. The trial court did not reach such issue. 4 The policy did not

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have a general omnibus clause covering persons using the car with the permission of the assured.

The primary issue concerns the coverage afforded to Gritzfeld, if any, under the Universal policy. Universal denies any coverage.


First, appellant seeks to destroy jurisdiction by an attempt to realign the parties. It is alleged, Western, the complainant in this action, is a citizen of Iowa. Defendant Universal is a citizen of Missouri, and defendant Masid and Gritzfeld are citizens of Nebraska. Jurisdiction, being dependent in part upon diversity of citizenship between parties plaintiff and defendant, is therefore proper on its face. (28 U.S.C. § 1332) However, Universal asks that Gritzfeld be realigned as a party plaintiff. If this is accomplished, Gritzfeld and Masid both being citizens of Nebraska, diversity jurisdiction would be defeated. Such diversity must exist between all plaintiffs on one hand and all defendants on the other.

Universal claims Western and Gritzfeld are not really adverse parties and do not have any controversy between them; they both seek to assert the primary obligation of Universal to Gritzfeld since Universal's policy provides the greater coverage and benefit to Gritzfeld.

It is the duty of the federal courts to look beyond the pleading and to arrange the parties according to their sides in the dispute. The court must inquire into 'the principal purpose of the suit' and the 'primary and controlling matter in dispute.' The controversy must be 'actual' and 'substantial'. Dryden v. Dryden, 8 Cir., 265 F.2d 870; Rock Island Millwork Co. v. Hedges-Gough Lumber Co., 8 Cir., 337 F.2d 24; Thomson v. Butler, 8 Cir., 136 F.2d 644, cert. denied, 320 U.S. 761, 64 S.Ct. 69, 88 L.Ed. 454, reh den 320 U.S. 813, 64 S.Ct. 156, 88 L.Ed. 491; City of Indianapolis v. Chase National Bank, 314 U.S. 63, 62 S.Ct. 15, 86 L.Ed. 47. 5

Western and Gritzfeld both contend that there existed a controversy between them at the time of the filing of the complaint. The motion to realign the parties was filed on March 17, 1964, but was not decided until June 25, 1964. On the 18th of June, 1964, Gritzfeld and Western stipulated coverage was afforded to Gritzfeld under the Western policy but Western contended it was only excess coverage because of Universal's policy. It is argued this stipulation withdraws Western's claim that it did not afford any coverage to Gritzfeld in the particular action.

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Universal argues, in effect, that the stipulation demonstrates the entire claim of Western against Gritzfeld to be legally baseless. Without alleging 28 U.S.C. § 1359, pertaining to collusive joinder, Universal lays bare the inference by saying, 'that the position of Western was identical with the legal position of Gritzfeld, and they worked together on this litigation.'

The question of realignment, involving jurisdiction, must be tested at the time of filing of the complaint. Texas Pac.Coal & Oil Co. v. Mayfield, 5 Cir., 152 F.2d 956; B. J. Van Ingen & Co., Inc. v. Burlington County Bridge Comm., D.C. N.J.1949, 83 F.Supp. 778. See also, First Trust & Savings Bank v. Iowa-Wisconsin Bridge Co., 8 Cir., 98 F.2d 416.

The Supreme Court in testing realignment has said:

'* * * the proper course is not to try out the issues presented by the charges * * * but to determine the issue of antagonism on the face of the pleadings and by the nature of the controversy.' Smith v. Sperling, 354 U.S. 91 at 96, 77 S.Ct. 1112, 1115, 1 L.Ed.2d 1205.

However, even with the consideration of the stipulation a controversy is stated.

Gritzfeld was placed by his insurer, Western, in an undesirable position. On the one hand, Western said, 'We do not provide anything but excess coverage since Universal has the primary coverage.' Universal replied, 'You are a stranger to us; we are not going to provide you any protection.' Gritzfeld, in effect, was denied any insurance protection at all. According to Western's complaint and Universal's answer, theoretically, at this point, no one was even defending him.

If Gritzfeld had agreed with Western that there was only excess coverage provided, and sought only to assert primary coverage against Universal, then clearly we would have to agree that no controversy existed. However, Gritzfeld in his answer and counterclaim seeks basic protection from Western. 6 It is true that he seeks primary coverage from Universal, but such is an alternative theory. Although Universal's coverage was more beneficial to Gritzfeld, this fact does not weaken his claim that Western owes him more then just excess coverage. He asks Western to come to his defense and protect him unconditionally on basic limits. Therefore, we find that there was an actual and substantial controversy between Western and Gritzfeld. Gritzfeld should not be realigned with Western.


Secondly, Universal argues this court should dismiss the appeal since this case does not come within the purview of the Declaratory Judgment Act. The Declaratory Judgment Act is not a command to the district court to take jurisdiction, and the exercise of jurisdiction under the Act lies within judicial discretion. Title 28 U.S.C. § 2201; Rule 57,...

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