United States Fidelity & Guaranty Co. v. Koch

• Decision Date: 16 March 1939
• Docket Number: No. 6808.,6808.
• Citation: 102 F.2d 288
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. KOCH et al.
• Court: U.S. Court of Appeals — Third Circuit

102 F.2d 288 (1939)

UNITED STATES FIDELITY & GUARANTY CO. v. KOCH et al.

No. 6808.

Circuit Court of Appeals, Third Circuit.

February 16, 1939.

Rehearing Denied March 16, 1939.

Harold E. McCamey, Charles A. Woods, Jr., Hamilton A. Robinson, and Dickie, Robinson & McCamey, all of Pittsburgh, Pa., for appellant.

Leonard M. S. Morris, Louis Caplan, and Sachs & Caplan, all of Pittsburgh, Pa., for appellees.

Before MARIS and CLARK, Circuit Judges, and KALODNER, District Judge.

CLARK, Circuit Judge.

Our opinion in this case commences with an unusually detailed relation of the facts. In that recital special emphasis is directed to dates. This is done with a full realization that both the statement and decision of facts are in the normal course particularly the province of the trial court. Here, however, we think their recapitulation useful in illustration of our conclusions.

The Claims in Litigation.

On April 12, 1934, plaintiff-appellant, a casualty insurance corporation, issued a combination automobile policy to the nonresisting defendant-appellee, Seymour Ress, for his Plymouth two door sedan. He was an Associated Press reporter and lived at the Beacon Apartment-Hotel in Pittsburgh. On June 3, 1934, while driving this car, Ress was involved in an accident (presumably a collision) in which his three passengers suffered personal injuries. One of these passengers was Flora Koch, the defendant-appellee. She is attempting to sustain an order of the District Court for the Western District of Pennsylvania entered in her favor on May 18, 1938, four years after the accident.

The two other passengers (sex undisclosed) obtained settlements from the plaintiff insurance company. One settlement was entirely voluntary and the other after entry of suit against Ress and his transmittal of the suit papers to the plaintiff-appellant. A memorandum in the company's files indicated an offer of $500 on November 9, 1934 to defendant-appellee Koch's present attorney, Louis Caplan, and its rejection by him.

The Proceedings in the State Courts.

Thereafter, and on January 22, 1935, Flora Koch filed a negligence action in the usual form in the Common Pleas Court of Allegheny County. On January 29, 1935, the writ and statement of claim thereon were served on Ress by handing them to a clerk at the apartment-hotel at which he lived. This service seems to have been the ordinary substituted service (residence or place of abode) provided by statute in actions in personam where the defendant does not happen to be at home when the sheriff calls. 50 C.J. 490. Ress never appeared in this action, and on June 26, 1935, a default judgment was entered against him in favor of Flora Koch.

By November 15, 1935, Ress had received notice of the judgment of June 26th and of the empaneling of a sheriff's jury to assess damages thereon. On November 23, 1935, he advised the manager of suit preparation for the Pittsburgh District office of the appellant company of this notice. This was plaintiff-appellant's first knowledge of the Koch suit. The not unnatural reaction of plaintiff's manager was to consult counsel and the advice of a member of the firm now pressing this appeal was sought. That advice was of a Fabian character. Ress was told to employ his own counsel and make an effort to have the default judgment reopened. What reason he was expected to give for such a reopening is not revealed. As might be supposed, the statutes do not recognize caprice or indifference but require some sufficient reason for the omission to plead in due season, 34 C.J. 525. At any rate, the advice was not followed and the sheriff's jury liquidated damages in favor of Flora Koch for the sum of $3,359.75. The subsequent course of defendant-appellee's counsel leads us to believe that he now regrets the extra $360.

On a date undisclosed, except that it was at the January Term, 1936, defendant-appellee Koch issued a writ of execution (fi. fa.) upon her judgment as above and this writ was returned by the sheriff marked nulla bona. On some date again undisclosed except that it was after this return of execution and prior to March 31, 1936, Mr. Morris, another of the defendant Koch's attorneys now defending this appeal, telephoned plaintiff's preparation of suit manager already referred to and demanded payment of this unsatisfied judgment. Such payment was refused.

On another undisclosed date, but prior to November 5, 1936, defendant-appellee filed another negligence action in the Superior Court of New Haven County, Connecticut, based on the same accident in reparation of which judgment had been secured in the Common Pleas Court of Allegheny County. The papers in this suit were delivered to the plaintiff-appellant by persons unknown. On November 5, 1936, plaintiff-appellant through its attorneys filed an answer to this suit pleading specially the Pennsylvania judgment. On November 5, 1937, defendant-appellee issued a writ of execution attachment against the plaintiff-appellant alleging the unsatisfied judgment against Ress and the possession by it of certain monies, etc., of Ress. On November 12, 1937, defendant-appellee sued the plaintiff-appellant in the Common Pleas Court of Allegheny County in an action in assumpsit on the unsatisfied Pennsylvania judgment, the service being on the Insurance Commissioner.

The Proceedings in the United States Courts.

On March 31, 1936, the plaintiff-appellant filed a petition for declaratory judgment under the Act of Congress permitting such a procedure, U.S.C.A., Title 28, section 400. This petition is in the usual form and claims an "actual controversy" between the parties. On April 27, 1937, defendant-appellee requested dismissal of the petition on the grounds inter alia that there was no "actual controversy", that the action was prematurely brought, and that her constitutional right to a trial by jury was in jeopardy. No factual reason for the alleged untimeliness was given and there was no showing that plaintiff-appellant even wished to dispense with a jury. Defendant-appellee asked in the alternative for a declaration that the defendant Ress had complied with the terms of the policy and that she was entitled to collect her Allegheny County judgment.

On October 21, 1936, the learned Judge in the court below heard witnesses who testified to the facts then in existence substantially as set forth under the headings in this opinion. There has been some disagreement as to the nature of declaratory judgment proceedings, 16 American Jurisprudence, Sec. 15, p. 289, some courts emphasizing their equitable character, Town of Manchester v. Town of Townshend, 109 Vt. 65, 192 A. 22, 110 A.L.R. 811. Professor Borchard, the "father" of the declaratory judgment in the United States, correctly, as we think, maintains: "Declaratory relief is neither legal nor equitable, but sui generis. It has the advantage of escaping the technicalities associated with equitable and extraordinary remedies, thus enabling the substantive goal to be reached in the speediest and most inexpensive form". Borchard, The Federal Declaratory Judgments Act, 21 Virginia Law Review, 35, 38. And see also the report of the Senate Committee, Cong.Rec. (Feb. 1, 1930), 3009-3011.

At any rate, the Federal Declaratory Judgment Act in section 3 expressly provides for submission to a jury. Both Professor Borchard and Judge Parker of the Fourth Circuit, in commenting on this particular section, as applied to a situation exactly analogous to the one at bar, say:

"Naturally the company should not by a declaratory action, often inaccurately called an action in equity, be allowed to deprive the defendants of a jury trial. All the issues of fact, practically always present in these cases, can be tried by a jury; the Federal Declaratory Judgments Act and the rules or practice in the states provide for the submission of such issues to a special jury. And even though a jury in equity may be deemed `advisory' only, this is not the case with a jury in the declaratory action". Borchard, Declaratory Judgments and Insurance Litigation (Address, before The Section of Insurance Law American Bar Association, Cleveland, Ohio, July 26, 1938) 15.

"The company seems to think that by asking a declaratory judgment it became entitled to a trial in equity without a jury and that this is a sufficient reason for granting declaratory relief notwithstanding the institution of the action on the policy; but this is clearly not the case as the defense to determine which the declaratory judgment was sought was legal and not equitable in character. Where the issues raised in a proceeding for a declaratory judgment are of this nature, they must be tried at law if either party insists upon it, for the statute so provides. 28 U.S.C.A. § 400 (3). And, irrespective of this provision of the statute, it is clear that the right of jury trial in what is essentially an action at law may not be denied a litigant merely because his adversary has asked that the controversy be determined under the declaratory procedure". Aetna Casualty & Surety Co. v. Quarles, 4 Cir., 92 F.2d 321, 325.

The learned District Judge intimated that he held the same views, saying:

"It is suggested, without deciding, that on the question of notice, if at issue, defendant is entitled to a trial by jury". Opinion filed October 29, 1937, Record, 71, 72.

On November 2, 1936, the last brief of counsel was due. On November 18th, a petition for leave to amend the answer to include the facts of the New Haven County suit was filed and amendment allowed the same day. Ten days later petitioner-appellant replied to this amendment explaining that defendant Ress "was probably entitled to a defense".

On December 11, 1936, the learned trial judge entered a decree pro confesso (note the equitable form) against the non-resisting defendant-appellee Ress. This decree specifically adjudicated the merits of the notice question against him. If it were important to our...