Carter v. Virginia Sur. Co.

• Decision Date: 11 December 1948
• Citation: Carter v. Virginia Sur. Co., 187 Tenn 595, 216 SW2d 324 (Tenn. 1948)
• Parties: CARTER v. VIRGINIA SURETY CO.
• Court: Tennessee Supreme Court

216 S.W.2d 324

187 Tenn. 595

CARTER v. VIRGINIA SURETY CO.

Supreme Court of Tennessee.

December 11, 1948

Appeal from Chancery Court, Washington County (Johnson City); Joe. W. Worley, Chancellor.

Suit by Wade H. Carter against Virginia Surety Company, for damages for an alleged violation of the fiduciary relationship between the parties as insured and insurer, respectively under an indemnity policy covering ownership, maintenance and use of a tractor with trailer.

From a decree sustaining defendant's demurrer, complainant appeals.

Affirmed.

W. J. Carter and Geo. N. Barnes, both of Johnson City, for appellant.

Kilgo & Armstrong, of Greeneville, for appellee.

BURNETT Justice.

The Virginia Surety Company demurred to a bill filed against it by Carter in the Chancery Court at Johnson City, Tennessee. The Chancellor sustained this demurrer. Carter has duly perfected his appeal to this Court.

We find in the record as excellent memorandum opinion of the cause by the learned Chancellor, Joe W. Worley. We adopt both the reasoning and conclusion therein set forth. His opinion reads as follows:

'Complainant and defendant are insured and insurer under a contract of indemnity insurance issued August 1, 1946, to be effective for one year, covering the insured's liability for personal injury and property damage arising out of the 'ownership maintenance and use' of a 1946 Studebaker tractor, with trailer, and subject to conditions and provisions therein set out.

'This suit has been brought for $1500 damages occasioned the complainant by reason of facts said to constitute a 'violation of the fiduciary relationship' arising between the parties to this insurance contract. The defendant has demurred, in that the bill shows no basis for liability assertible in this Court. The cause was taken under advisement after able argument and brief, and appears to be one of first instance in this state.

'After alleging the execution of the insurance contract the bill proceeds to show that on October 12, 1946 the vehicle described, 'while said policy was in full force and effect,' was involved in a collision near Greeneville, Teenessee, wherein four persons in the automobile struck were seriously injured, the automobile practically destroyed. There resulted, on March 10, 1947, four actions for damage by these persons in the Law Court at Johnson City, their claims aggregating $100,000. It seems that complainant's vehicle was then being operated under an agreement with E. T. & W. N. C. Transportation Co., the effect of which has previously been in dispute, and the Transportation Company was joined with our complainant as codefendant in the Law Court actions.

'After investigating the collision, and making preparations to defend the Law Court actions, the defendant Virginia Surety Company on March 20, 1947 filed suit in the Federal Court at Greeneville, denying liability under its policy, and asserting violations of certain policy provisions, and exclusions, as grounds for relief. Joined as defendants in the Federal proceeding were complainant here, the Transportation Company and its insurer, the drivers involved, and the four Law Court plaintiffs. A Declaratory Judgment was sought, exonerating the Surety Company from liability, and declaring it free from the duty of defending the actions in the State Court. After what is here stated to have been vigorously contested and expensive litigation the District Court declined to exercise its to some extent discretionary jurisdiction in declaratory judgment suits and dismissed the proceeding without prejudice. From the District Court opinion filed as an Exhibit to the bill it is apparent that our complainant had there moved for summary judgment against his insurer, and others of the Federal Court defendants had asked affirmative relief, but none was granted.

'When the State Court actions came on to be tried they were settled by compromise for $17,000, the Transportation Company and its insurer making the settlement.

'Of complainants' claim for damage $1000 is for his attorney's fees in the Federal proceeding, $500 for other expense and loss of time in that connection. It is alleged that this declaratory suit by the defendant was 'premature, vexatious, and useless' and as stated, a violation of 'fiduciary relationship.' It is not alleged that the defendant failed to defend the State Court proceedings as by provision of its policy required, or that damage resulted purely from delay in defense. The District Court opinion recites:

"The Surety Company, reserving its disclaimer of liability, has declared its intention nevertheless to defend the insured and the driver, pending the outcome of its suit for declaratory judgment.'

'Nor is it shown to have been determined whether the insurance policy 'covered' the collision that occurred, hence whether any fiduciary relationship then or thereafter existed by reason of the relationship of insurer and insured. Apparently complainant would have this suit make such determination as basic to the relief prayed for alleged violation of such relationship. The District Court did not intimate that the insurer's defense was frivolous, or that the Federal Court was not a proper tribunal to determine disputed coverage by declaratory judgment. On the contrary, both its opinion and a number of cases cited in Title 28 U.S.C.A. § 400 [now §§ 2201, 2202] indicate that the Federal Courts, jurisdictional requirements present, have often decided the question of coverage between insurer and insured in declaratory judgment proceedings, before the tort liability of the insured has been fixed by judgment. The stated reason for refusing to exercise jurisdiction was that such exercise probably involved a construction of a declaration as to the agreement between Wade H. Carter and the Transportation Company under which the vehicle was being operated, which declaration might confuse or radically affect the rights of the state court plaintiffs, thus permitting the declaratory judgment proceeding to become, 'a device for a piece meal removal of non-removable causes.' This opinion is a part of the bill and complainant presumably bound by its findings, but assuming that the federal suit was frivolous, even malicious, the remedy would sound in personal tort, which this Court has no jurisdiction to redress.

'The suit which occasioned complainant's damage was the defendant's effort to obtain a declaration that, on the facts, it owed him no duty. To hold that such a suit may not be brought without liability for damage in event of failure to prevail, even though in good faith, would go far, and place a penalty on the insurer's access to adjudication of rights not common to other contracting parties or to litigants generally. No case has been cited in support of the proposition. Public policy might lead the legislature to place this extra duty on an insurer, assuming its power present, but a Court must find sound legal principle, or at least precedent, and neither is here shown or has been discovered.

'One Federal District Court decision cited by complainant ( State Farm Mutual Automobile Insurance Co. v. Brooks, D.C., 43 F.Supp. 870) tends to show that the attorneys' fees incurred by an insured in successfully resisting his insurer's suit for declaratory judgment might be allowed as costs in the Federal Court, though does

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