Capitol Fuels, Inc. v. Clark Equipment Co.

• Decision Date: 03 April 1986
• Docket Number: No. CC949,WRIGHT-THOMAS,CC949
• Citation: 342 S.E.2d 245,176 W.Va. 277
• Court: West Virginia Supreme Court
• Parties: CAPITOL FUELS, INC. v. CLARK EQUIPMENT CO.EQUIPMENT COMPANY v. GOULD, INC.

Page 245

342 S.E.2d 245

176 W.Va. 277

CAPITOL FUELS, INC. v. CLARK EQUIPMENT CO.

WRIGHT-THOMAS EQUIPMENT COMPANY v. GOULD, INC.

No. CC949.

Supreme Court of Appeals of

West Virginia.

April 3, 1986.

Syllabus by the Court

Joinder of a partially subrogated insurer as a "real party in interest" under Rule 17(a) of the West Virginia Rules of Civil Procedure in a suit brought by an insured for the total loss may not be compelled under Rule 19(a) of the West Virginia Rules of Civil Procedure.

Hurt & Carrico, Charles E. Hurt, Charleston, for appellant.

Kay, Casto & Chaney, Jeffrey M. Wakefield, Charleston, for Clark Equipment Co.

McGRAW, Justice:

The Honorable A. Andrew MacQueen of the Thirteenth Judicial Circuit entered an order in this action certifying the following question to this Court:

Where an insurance company under the provisions of a policy issued to its insured, compensates its insured in part for a loss and has the right under the subrogation provisions of its policy to bring an action either in its name or in the name of its insured, and the insured institutes an action in which it seeks to recover for damages allegedly caused by the defendants, the amount of the damages sought including the subrogation interests of the insured, must the insurance company be added as a party plaintiff under Rule 17(a) of the West Virginia Rules of Civil Procedure for Trial Courts of Record as "real party in interest[?]"

After careful consideration, we respond to this certified question in the negative.

The pertinent facts of this proceeding are not in dispute. Capitol Fuels, Inc., plaintiff below, purchased a tractor-shovel manufactured by Clark Equipment Co., defendant and third-party plaintiff below, from the Wright-Thomas Equipment Co., defendant and third-party plaintiff below. Several years later, the tractor-shovel was destroyed by fire determined by Federal Mine Safety and Health Administration officials to have been caused by the rupture of a high pressure hydraulic hose manufactured by Gould, Inc., third-party defendant below.

Capitol Fuels had insured this machine with the Zurich Insurance Company, but contends that its value exceeded the amount of the insurance coverage. This certified question arose following submission of a motion to dismiss by Wright-Thomas asserting, inter alia, failure to name the Zurich Insurance Company as a plaintiff under the "real party in interest" provision of Rule 17(a) of the West Virginia Rules of Civil Procedure.

Rule 17(a) of the West Virginia Rules of Civil Procedure provides, in relevant part, that, "Every action shall be prosecuted in the name of the real party in interest." In Syllabus Point 2 of Housing Authority v. E.T. Boggess, Architect, Inc., 160 W. Va. 303, 233 S.E.2d 740 (1977), this Court held that, "Under Rule 17, W.Va.R.C.P., it is not a plaintiff's responsibility, under pain of dismissal, to bring in every party who might have a substantive law right against the defendant. It is sufficient Rule 17 compliance if the plaintiff has a substantive right to sue." This Court noted with disapproval in Housing Authority v. E.T. Boggess, Architect, Inc., 160 W. Va. at 310, 233 S.E.2d at 744, the practice of resorting to Rule 17 to prevent the prosecution of claims:

We find that Rule 17 has, properly, no function of protecting defendants from claims by other real parties in interest. We think Rule 17 would be more clearly perceived if it read, "every action shall be prosecuted in the name of a real party in interest." ... Rule 17 should not be used to do Rule 19 work.

The defendants below rely heavily upon the decision of the United States Supreme Court in United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 70 S.Ct. 207, 94 L.Ed. 171 (1949). The issue presented in Aetna was, "May an insurance company bring suit in its own name against the United States upon a claim to which it has become subrogated by payment to an insured who would have been able to bring such action?" 338 U.S. at 367-68, 70 S.Ct. at 208-09, 94 L.Ed. at 178. In response to this issue, the Court observed:

Rule 17(a) of the Federal Rules of Civil Procedure ... provides that "Every action shall be prosecuted in the name of the real party in interest," and of course an insurer-subrogee, who has substantive equitable rights, qualifies as such. If the subrogee has paid an entire loss suffered by the insured, it is the only real party in interest and must sue in its own name. 3 Moore, Federal Practice 2d ed p. 1339. If it has paid only part of the loss, both the insured and insurer (and other insurers, if any, who have also paid portions of the loss) have substantive rights against the tortfeasor which qualify them as real parties in interest.

338 U.S. at 380-81, 70 S.Ct. at 215, 94 L.Ed. at 185 (Footnote omitted).

With respect to the interpretation of the Court's decision in Aetna at the federal level, it has been noted that:

The question in whose name an action should be prosecuted in a federal court against an alleged tortfeasor for damage or injury where the insurer has paid a part of the loss is determined under Federal Rules of Civil Procedure, Rules 17(a) and 19. It has generally been held by the federal courts that in such case both the insured and the insurer are real parties in interest, that both are "proper" and "necessary" parties but neither is an "indispensable" party, and that an action against the tortfeasor for the whole loss may be prosecuted either by the insured and his insurer jointly or by the insured alone, and that either the insured or the insurer may sue separately in his own name for his portion of the loss; but the question of whether, in an action instituted by the insured alone or by the insurer alone, the defendant can compel joinder of the other, has resulted in conflicting answers.

44 Am.Jur.2d Insurance § 1828, at 818-19 (1982) (Footnotes omitted).

The source of confusion with respect to this final issue is rooted in the following passage from the Court's opinion in Aetna, 338 U.S. at 381-82, 70 S.Ct. at 215-16, 94 L.Ed. at 185-86:

[I]n cases of partial subrogation ... both insured and insurer "own" portions of the substantive right and should appear in litigation in their own names.

Although either party may sue, the United States, upon timely motion, may compel their joinder. Delaware County v. Diebold Safe & Lock Co., 133 U.S. 473, 488, 10 S.Ct. 399, 403, 33 L.Ed. 674, 680 (1890) (applying state code under the Conformity Act). 3 Moore, Federal Practice 2d ed p 1348. Both are "necessary" parties. Rule 19(b), Federal Rules of Civil Procedure. [Footnotes omitted].

See Annot., 13 A.L.R.3d 140, 156 (1967) ("[T]he conflict in principle grows out of the broad and unqualified statement in some cases that where an action against an alleged tortfeasor is instituted either by the insured in his name alone or by the insurer-partial subrogee in its name alone, upon timely motion the defendant may compel their joinder.").

At the time of the Court's decision in Aetna, Rule 19 of the Federal Rules of Civil Procedure provided, in relevant part, that "persons having a joint interest shall be made parties." As the Fifth Circuit noted in Dudley v. Smith, 504 F.2d 979, 983 n. 4 (5th Cir.1974), "Before the 1966 amendments, Rule 19(a) classified parties to be joined, i.e., 'persons having a joint interest,' as 'necessary' or 'indispensable.' The Court in Aetna placed the unjoined insureds in the 'necessary party' category, and as a result, viewed their joinder as compulsory. 338 U.S. at 382, 70 S.Ct. at 216, 94 L.Ed. at 186." "The rigid classifications of former Rule 19(a)," however, noted the Fifth Circuit in Dudley v. Smith, 504 F.2d at 983 n. 5, "were abandoned in 1966 in favor of a more flexible description of parties for which joinder would be 'desirable.' Rule 19, F.R.Civ.P., Advisory Comm. Note, 39 F.R.D. 89, 91. Joinder is compulsory only where the facts fit within one of the Rule 19(a) premises. Id. at 92-92." Rule 19(a) of the Federal Rules of Civil Procedure now provides, in relevant part, that:

A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

In 1978, Rule 19(a) of the West Virginia Rules of Civil Procedure was amended to conform to the federal rule. Commentary accompanying the 1978 revision echoed the sentiment of the Fifth Circuit's interpretation of the federal amendment: "The amendment attempts to lay down particular guidelines for joinder of parties, and at the same time provide more flexibility in joinder by abolishing the concept of the 'indispensable party.' " As one commentator has noted:

The 1978 amendment to Rule 19 increases the flexibility of the trial court in dealing with the compulsory joinder of parties. Under this amended provision, a person who is within the jurisdiction of the trial court and is subject to service of process, is to be joined as a party in several situations. First, a person is to be joined as a party to a pending action where complete relief cannot be granted by the court in his or her absence. Second, a person is to be joined if he or she claims an interest in the subject matter of the action that will be impaired as a result of the action. Finally, an absent person is to be joined if failure to do so subjects those already parties to a risk of incurring multiple liability. These situations identify those...