American Fidelity & Cas. Co. v. All American Bus Lines

• Decision Date: 13 July 1951
• Docket Number: No. 4204.,4204.
• Citation: 190 F.2d 234
• Parties: AMERICAN FIDELITY & CASUALTY CO. v. ALL AMERICAN BUS LINES, Inc. et al.
• Court: U.S. Court of Appeals — Tenth Circuit

190 F.2d 234 (1951)

AMERICAN FIDELITY & CASUALTY CO. v. ALL AMERICAN BUS LINES, Inc. et al.

No. 4204.

United States Court of Appeals, Tenth Circuit.

June 23, 1951.

Rehearing Denied July 13, 1951.

Welcome D. Pierson, Oklahoma City, Okl., for appellant.

Gus Rinehart, Oklahoma City, Okl. (Butler, Rinehart & Morrison, Oklahoma City, Okl., on the brief), for appellees.

Before PHILLIPS, Chief Judge, and BRATTON and MURRAH, Circuit Judges.

BRATTON, Circuit Judge.

All American Bus lines, Inc., hereinafter referred to as Bus Company, was engaged as a motor carrier in the operation of a bus line in Oklahoma. American Fidelity & Casualty Company, hereinafter referred to as American, issued to Bus Company a policy of public liability insurance with a maximum coverage of $10,000 for injury to any one person. Security Mutual Casualty Company, hereinafter referred to as Security, issued to Bus Company a policy of public liability insurance which provided coverage for any loss in excess of $10,000 but not in excess of $100,000 for injury to any one person. Each policy contained a provision requiring the insurer to defend all litigation against the insured involving matters covered by the policy; and each contained a conventional provision of subrogation. While both policies were in effect an accident occurred which involved a bus operated by Bus Company; and thereafter Lorena Lairson, a passenger on such bus, instituted in the district court of Creek County, Oklahoma, an action against Bus Company in which she sought damages in the sum of $30,500 for alleged injury sustained in the accident. Pursuant to the obligation contained in its policy, American assumed defense of the action. Shortly before the case was called for trial, plaintiff offered to settle for $5,000. At the direction of American the offer was rejected. Immediately after such rejection, the case went to trial and resulted in a verdict and judgment for plaintiff in the sum of $25,000. Apparently Security did not know of the claim or the pendency of the suit until after entry of the judgment. At least it did not take part in the defense of Bus Company. While the cause was pending on appeal, the parties compromised it for $17,500. American paid $10,000 of that amount; Bus Company paid $7,500; and Security reimbursed Bus Company for its outlay.

After settlement had been effected in the matter outlined, Security referring to the subrogation provision contained in its policy requested Bus Company to assert a claim against American for $7,500 based upon failure to exercise good faith in declining to settle the case in the state court for $5,000. Acting in response to the demand of Security, Bus Company instituted this action against American alleging bad faith in the failure to accept the offer of settlement of the suit in the state court. American answered denying bad faith. The cause was tried to the court without a jury. The court expressly found bad faith on the part of American and entered judgment against it for $7,500. On appeal, the judgment was reversed on the ground that Bus Company was not the real party in interest and that the action could not be maintained in its name; and the cause was remanded without prejudice to the right of Security, if any, to be substituted as a party plaintiff, and in the event of substitution without prejudice to any appropriate proceedings thereafter in its own name and right. American Fidelity & Casualty Co. v. All American Bus Lines, Inc., 10 Cir., 179 F.2d 7. Following the spreading of the mandate, the court entered an order substituting Security as party plaintiff and directing that all further proceedings in the cause be prosecuted in its name as substituted plaintiff. American filed an answer to the complaint as amended and supplemented by the order of substitution; and it also filed a demand for a jury trial. Security filed a motion for judgment in its favor as substituted plaintiff. Jury trial was denied; judgment was entered for Security for $7,500; and American appealed.

Error is assigned upon the action of the court in substituting Security as the party plaintiff. It is argued in support of the contention that under Rule of Civil Procedure 25, 28 U.S.C., the substitution of a party plaintiff is authorized only on death of a party, on incompetency of a party, on transfer of interest, or on separation of a public officer from his office. And it is further argued that the only procedure available to Security for the assertion of its rights, if any, was to file a new action. The primary purpose of the new rules of federal procedure was to simplify and clarify procedure and to expedite litigation. The rules indicate clearly a general policy to disregard narrow technicalities and to bring about the final determination of justiciable controversies without undue delay. And that being their purpose, they should be liberally construed. Kilbourn v. Western Surety Co., 10 Cir., 187 F.2d 567; Phillips v. Baker, 9 Cir., 121 F.2d 752, certiorari denied, 314 U.S. 688, 62 S.Ct. 301, 86 L.Ed. 551; Fakouri v. Cadais, 5 Cir., 147 F.2d 667, certiorari denied, 326 U.S. 742, 66 S.Ct. 54, 90 L.Ed. 443; Ray v. Morris, 7 Cir., 170 F.2d 498; Dworsky v. Alanjay Bias Binding Corp., 2 Cir., 182 F.2d 803. Bus Company was only a nominal plaintiff. Security was the real party in interest for whose benefit the action was brought. And the substitution did not introduce a new cause of action into the case. In the circumstances presented, it was well within the range of power of the trial court to authorize the substitution of Security as the party plaintiff. To hold otherwise would be nothing less than a narrow and ill-grounded construction of the rules of civil procedure not in harmony with their intent and purpose.

The further contention urged for reversal of the judgment is that the claim of Security pleaded in the complaint as amended and supplemented by the order of substitution of the party plaintiff was barred by the statute of limitations of Oklahoma. The argument is that the litigation involved a claim for damages for the alleged failure of American to perform its duty in good faith under the terms of its contract of insurance; that...