Provident Tradesmens B. & T. Co. v. Lumbermens Mut. Cas. Co.

Citation411 F.2d 88
Decision Date02 April 1969
Docket NumberNo. 14589.,14589.
PartiesPROVIDENT TRADESMENS BANK AND TRUST COMPANY, Administrator of the Estate of John R. Lynch, also known as John Roberts Lynch, Deceased (Plaintiff), and John Landis Harris and Sarah B. Smith, Administratrix of the Estate of Thomas W. Smith, Deceased (Party Plaintiffs), v. LUMBERMENS MUTUAL CASUALTY COMPANY and George M. Patterson, Administrator of the Estate of Donald Cionci, Deceased, Lumbermens Mutual Casualty Company (Defendant), Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Norman Paul Harvey, Philadelphia, Pa., for appellant.

Avram G. Adler, Freedman, Borowsky & Lorry, Philadelphia, Pa. (Abraham E. Freedman, Freedman, Landy & Lorry, J. Willison Smith, Jr., Bayard M. Graf, Philadelphia, Pa., on the brief), for appellees.

Before KALODNER, GANEY and FREEDMAN, Circuit Judges.


FREEDMAN, Circuit Judge.

This diversity action is before us now on the Supreme Court's vacation of our prior judgment and its remand for our consideration of the issues we had found it unnecessary to decide on the earlier appeal.

Edward S. Dutcher, the named insured in a policy issued by Lumbermens Mutual Casualty Company, was the owner of a passenger car which he lent to Donald Cionci. While driving the car Cionci collided with a truck driven by Thomas W. Smith, and as a result Smith, Cionci and John R. Lynch, a passenger of Cionci, were killed and John Landis Harris, another passenger of Cionci, was injured.

Lynch's estate1 obtained a default judgment of $50,000 against Cionci's estate in the United States District Court for the Eastern District of Pennsylvania2 after Lumbermens refused to defend Cionci's estate, asserting lack of coverage under the omnibus clause of its policy3 because Cionci had deviated from the use authorized by Dutcher.

Before the entry of the default judgment Lynch's estate brought this separate action for declaratory judgment under 28 U.S.C. § 2201 against Lumbermens and Cionci's estate, in which it challenged Lumbermens' denial of coverage of Cionci's estate. On Lumbermens' motion, Harris, the injured passenger of Cionci, and the estate of Smith, the driver of the truck, were joined as plaintiffs. The joinder was sought and presumably granted because Harris and Smith's estate had brought separate damage actions in the Common Pleas Court of Delaware County, Pennsylvania, in which Cionci's estate, Lynch's estate and Dutcher were defendants, and common to these claims was the question whether Lumbermens' policy covered Cionci's estate. Although the accident happened on January 17, 1958, the two state court actions remain untried.

The trial judge excluded Dutcher's testimony as against the Lynch and Smith estates regarding the terms on which he had loaned his car to Cionci, on the ground that he was incompetent under Pennsylvania's so-called Dead Man's Act. Act of May 23, 1887, P.L. 158, § 5(e), 28 Purdon's Pa.Stat.Annot. § 322.4 The trial judge, however, permitted Dutcher to testify as against Harris, who survived the accident. The factual dispute between Harris and Lumbermens on whether Cionci had deviated from the terms of Dutcher's consent to the use of the car was submitted to the jury, which found in favor of Harris. As to the Lynch and Smith estates, the trial judge granted motions for directed verdicts against Lumbermens on the ground that with Dutcher's testimony excluded there was no evidence to rebut the presumption of permission to Cionci which flowed under Pennsylvania law from the proof of Dutcher's ownership and Cionci's admitted operation of the automobile.5 Motions for new trial and for judgment n. o. v. filed by Lumbermens were denied. 218 F.Supp. 802 (E.D.Pa.1963).

Lumbermens appealed, and at the argument before a panel of this court we raised the question whether Dutcher who had not been joined was an indispensable party under Rule 19 of the Federal Rules of Civil Procedure. A majority of the panel held that Dutcher's joinder was not required, but after a rehearing before the court en banc the judgment of the district court was vacated and a remand ordered with direction to dismiss the action on the grounds that the district court could not decide the claims because Dutcher was an indispensable party and also that the district court in the exercise of its discretion should have denied declaratory judgment relief without regard to the merits because of the pendency of the state court actions in which all the parties were present. 365 F.2d 802 (3 Cir. 1966).

The members of the original panel majority dissented on the ground that the jury's factual decision on Harris' claim should have been preserved because it was reached after hearing Dutcher's testimony. In their view Lumbermens was collaterally estopped by Harris' judgment from contesting the issue of deviation as to the Lynch and Smith estates, regardless whether there was any error in the exclusion of Dutcher's testimony against the two decedents. In their view it was inappropriate to cancel belatedly the declaratory judgment relief after the case had already been decided by the jury. The dissent therefore went on to consider the merits of Lumbermens' objections to the judgment, which the majority, of course, had not found it necessary to reach. 365 F.2d at 816 et seq. The Supreme Court granted certiorari (Provident Tradesmens Bank & Trust Co., Administrator v. Patterson, Administrator, 386 U.S. 940, 87 S.Ct. 972, 17 L.Ed.2d 872 (1967)) and unanimously reversed. 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968).

On remand from the Supreme Court we ordered a hearing before the panel which had originally considered the case.

1. The Dead Man's Act.

At the trial it was shown that Dutcher's policy had a fixed limit, although a pretrial ruling prevented disclosure of its amount. Dutcher was held incompetent as a witness against the Lynch and Smith estates under the Pennsylvania Dead Man's Act6 because Dutcher had an interest in maintaining the policy for himself, whereas the purpose of the Lynch and Smith estates was to subject Dutcher's policy to Cionci's liability. The trial judge reasoned that since the combined amount of the judgments which might be recovered against Cionci's estate and Dutcher respectively was as yet unknown, the claims against Cionci's estate might reduce the protection available to Dutcher under the policy and Dutcher therefore had an interest adverse to that of the Lynch and Smith estates which barred him from testifying against them.

The seemingly simple language of the Dead Man's Act has been the subject of many decisions in Pennsylvania which show how difficult at times is its application in particular circumstances. There are no Pennsylvania decisions which clearly decide whether in the present circumstances Dutcher was competent to testify against the Lynch and Smith estates, although the Act has been held inapplicable7 in an action brought under the Pennsylvania Wrongful Death Act,8 and, also inapplicable to a survival action under the Pennsylvania Fiduciaries Act of 1949,9 when it is joined with an action for wrongful death.10 It has not yet been decided, however, whether these principles would apply in a separate proceding such as this action for declaratory judgment. Nor is it possible to found a solid judgment on whether the competing claims of coverage by Cionci's estate and Dutcher are too remote to forbid the barring of Dutcher's testimony on the ground that he has an interest adverse to the decedents.

We do not believe it is necessary or even desirable for us to decide the issue of Dutcher's competency under the Dead Man's Act, for the circumstances call strongly for the estoppel of Lumbermens from raising the issue now. Lumbermens had full opportunity to present Dutcher's testimony in the Harris claim and the jury there decided against it the issue whether Cionci had gone beyond Dutcher's consent.

2. Collateral Estoppel.11

Dutcher was permitted to testify fully on behalf of Lumbermens against Harris because the Dead Man's Act was held inapplicable. The issue in Harris' claim, whether Cionci deviated from the terms of the loan, was identical with that in the claims of the Lynch and Smith estates, which were tried at the same time before the same judge and jury.

Lumbermens argues, however, that since it could not have asserted against the Lynch and Smith estates a judgment in the Harris claim if it had gone in its favor, because the estates were neither parties to Harris' claim nor in privity with him, it cannot be bound as to the estates by the judgment which it lost to Harris. In support of this position Lumbermens invokes the well-known principle of mutuality.

The principle of mutuality has yielded with time to many piecemeal exceptions and they have multiplied while the rule itself seemingly remained intact. Justice Traynor, in the pioneer case of Bernhard v. Bank of America National Trust and Savings Association, 19 Cal.2d 807, 122 P.2d 892 (1942), opened the door to a frontal reconsideration of the requirement of mutuality. In a well-known passage12 he pointed to the constitutional requirement of due process which prohibits use of the plea against a party unless he was bound by the earlier judgment as a party to it or in privity with a party.13 No such reason, however, requires that the party who relies on the prior judgment for his claim must have been a party or in privity with a party to the earlier litigation.14 Since Bernhard many cases have reconsidered the rule of mutuality with results reaching as extreme a view as that which would abolish mutuality entirely.15

We had occasion to consider the problem in Bruszewski v. United States, 181 F.2d 419 (3 Cir.), cert. denied, 340 U.S. 865, 71 S.Ct. 87, 95 L.Ed. 632 (1950), where an injured longshoreman's suit against the United States for negligence...

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