Continental Cas. Co. v. Canadian Universal Ins. Co.

• Decision Date: 05 November 1979
• Docket Number: No. 77-2374,77-2374
• Citation: 605 F.2d 1340
• Parties: CONTINENTAL CASUALTY COMPANY and Employers Surplus Lines Insurance Company, Plaintiffs-Appellees, v. CANADIAN UNIVERSAL INSURANCE CO., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1340

605 F.2d 1340

CONTINENTAL CASUALTY COMPANY and Employers Surplus Lines Insurance Company, Plaintiffs-Appellees, v. CANADIAN UNIVERSAL INSURANCE CO., Defendant-Appellant.

No. 77-2374.

United States Court of Appeals Fifth Circuit.

Nov. 5, 1979.

Craig R. Nelson, New Orleans, La., for defendant-appellant.

Christopher Tompkins, A. Wendel Stout, III, New Orleans, La., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GODBOLD, GEE and RUBIN, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

Stipulations are executed in the hope of minimizing litigation. They frequently achieve that end. Occasionally, however, they result merely in the escalation of hostilities, and serve as the basis for new disputes about the meaning of the agreement. In this appeal we consider just such consequences of a 1974 stipulation executed to end a 1971 personal injury suit. To bring that suit to a partial conclusion, an insurer of one of the principal defendants, pursuant to a stipulation with the other defendants, paid a substantial amount to the injured party in settlement of his claim. This final round is fought in its effort to obtain reimbursement of one-half the payment from another insurer. We conclude that the party who paid the compromise is entitled to recoup a share of what it has paid, and thus, we hope, end the eight year battle.

I.

These facts were established by a stipulation in the prior suit brought by Mrs. Doris Fenner on behalf of her minor son, Jack, against Continental Diving Service and Aquatic Contractors.

Jack Fenner was employed by Continental Diving as a diver's tender. Aquatic engaged Continental Diving to perform diving services that were necessary to enable Aquatic to complete its contract with Chevron Oil Company. In order to perform these services, Continental Diving's crew, including Fenner, went aboard an Aquatic barge, V-102, with their diving equipment. This equipment included a helium volume tank.

The volume tank was defective and it exploded, injuring Fenner. Aquatic was not negligent in any way. The claim against Aquatic was based on the unseaworthiness of its vessel, barge V-107, and Fenner's status as a member of its crew even though he was employed by Continental Diving. The presence of the defective volume tank on the vessel made it unseaworthy. Therefore, Continental Diving paid $160,000 to Fenner in compromise of his suit.

Continental Diving had asserted claims for indemnity and contribution against Aquatic. In a formal stipulation, the parties agreed that Continental Diving would bear one-half of the sum paid, because of the claims of negligence made against it by Fenner; that the other one-half was attributable to the unseaworthiness of Aquatic's barge; and that they "reserve for trial and decision on this Stipulation and Memoranda (sic) by the court how" the second one-half "should be borne as between themselves as a matter of law."

This in effect was a stipulation that the contractor, Continental Diving, whose actions were agreed to have made unseaworthy a vessel owned by the firm with which it had a contract, Aquatic, might recoup what it had paid a person injured as a result of unseaworthiness of the vessel. It was patently unusual. The rationale for it was disclosed by facts in the record of the first case but not in the stipulation.

In its original contract with Aquatic, Continental Diving had agreed to hold Aquatic harmless against all claims arising out of the unseaworthiness of any vessel engaged in performance of the contract. Because of its obligations under this contractual indemnity clause, Continental Diving had obtained insurance from the Canadian Universal Insurance Company against contractual liability including any warranty that Continental Diving's work be performed in a workmanlike manner. Continental also had obtained insurance against legal liability, including claims arising against it delictually from three levels of insurers, referred to here only as Continental Casualty. ¹ By various pleadings, all of the insurers were joined in the Fenner suit.

Canadian had assumed defense of the claim against Aquatic in Fenner's suit. In the stipulation Canadian was dismissed from that suit, but counsel retained by it executed the stipulation nominally on behalf of Aquatic.

Continental Casualty paid the full amount of the settlement with Fenner, then sought to recoup one-half from Canadian on the basis that the liability for the "unseaworthiness half" of the judgment resulted from Continental Diving's contractual indemnity of Aquatic and was, therefore, covered by Canadian's policy, rather than from the legal liability, maritime negligence, and Jones Act claims, covered by Continental Casualty's insurance. Canadian agrees that Continental Diving owed the payment to Aquatic but contends that the obligation was delictual, arising out of the principles of comparative negligence and breach of the implied warranty of workmanlike performance due by Continental Diving to Aquatic, as distinguished from the express contractual indemnity, hence that ultimate liability should be borne solely by Continental Casualty.

The insurers first attempted to resolve this question by further proceedings in the Fenner suit. The trial court decided in favor of Continental Casualty. Canadian, in the name of Aquatic, having itself been dismissed from the case, appealed to us. In Fenner v. Continental Diving Service, Inc., 5 Cir., 1976, 543 F.2d 1113, we characterized the suit then before us as a "contrived controversy in which the wolf in sheep's clothing turns out to be the sheep," and dismissed the suit "for want of a judicial controversy between live litigants." 543 F.2d at 1114. As we there said, it was "a fight among insurance companies who have attempted to construct a controversy in the name of others." Id.

We noted, too, that Canadian could not be subrogated to the rights of Aquatic because it was not Aquatic's insurer. "Canadian's subrogation rights were to those of its assured (Continental (Diving)) and there is nothing in the policy which gave Canadian subrogation rights against its own assured or, through it, to the other insurers. There being no relationship between it and the other insurers, it cannot latch onto liabilities which the others may owe to the assured (or third parties)." 543 F.2d at 1116-17. Accordingly, we dismissed that suit.

Continental Casualty then instituted this suit in an effort to recover from Canadian, and we now have the true parties in interest before the court. The complaint does not, as the rules require, contain "a short and plain statement of the grounds upon which the court's jurisdiction depends," Fed.R.Civ.P. 8, but it does allege the citizenship of the parties and, therefore, diversity jurisdiction is evident from the face of the complaint. ² There is also jurisdiction in admiralty, 28 U.S.C. § 1333, because the suit is based on three maritime contracts, the Aquatic-Continental Diving contract and the two insurance policies.

Canadian asserted by motion to dismiss that Continental Casualty "could not become subrogated to any rights their assured . . . had Against Aquatic" (emphasis supplied), and that its dismissal from the prior suit was with prejudice and res judicata. Continental Casualty in turn countered with a motion for summary judgment based on the stipulation in the prior suit; it also produced a letter between counsel evidencing an understanding that the prior dismissal was without prejudice, and that defense is now apparently abandoned by Canadian for it was not asserted before us.

II.

It is evident from our prior opinion that it determined nothing, for we said, "(W)e intimate no views on the underlying merits." Fenner v. Continental Diving Service, Inc., 5 Cir. 1976, 543 F.2d 1113, 1117, n. 13. There is no basis for res judicata unless something is adjudged. It matters not if the thing demanded be the same or the cause of action and the parties be identical. Cf. La.Civ.Code Ann., art. 2286 (West 1952). Without a judgment on the merits nothing is adjudicated. The judgment in this case was vacated for want of jurisdiction. It is frivolous to contend that such a determination would support a plea of res judicata, for only a final judgment suffices to do so. Fed.R.Civ.P. 41(b); United States v. Lucchese, 1961, 365 U.S. 290, 81 S.Ct. 565, 5 L.Ed. 568; Costello v. United States, 1961, 365 U.S. 265, 81 S.Ct. 534, 5 L.Ed. 551; Watson v. Stynchcombe, 5 Cir. 1974, 504 F.2d 393; Oppenheim v. Sterling, 10 Cir. 1966, 368 F.2d 516, 520. See also Muchard v. Berenson, 5 Cir. 1962, 307 F.2d 368, Cert. denied, 1963, 371 U.S. 962, 83 S.Ct. 541, 9 L.Ed.2d 509.

III.

Continental Casualty in effect asserts that it is subrogated to the contractual claim of Continental Diving against Canadian (not Aquatic) arising out of Continental Diving's insurance contract with Canadian.

The first question, the answer to which is by no means clear, is whether we look to the law of Louisiana or to federal law to determine whether Continental Casualty is entitled to be subrogated to those claims. The mere fact that one basis of our jurisdiction is diversity does not answer the question. A maritime issue may be raised in a diversity suit; this is one significance of the savings-to-suitors clause, 28 U.S.C. § 1333, which permits a litigant to obtain federal jurisdiction over, and jury resolution of, an admiralty question by invoking federal jurisdiction on an independent basis. Romero v. International Terminal Operating Co., 1959, 358 U.S. 354, 79 S.Ct. 468, 3 L.Ed.2d 368; Fitzgerald v. United States Lines Co., 1963, 374 U.S. 16, 83 S.Ct. 1646, 10 L.Ed.2d 770. A maritime claim may also be brought in state court. Garrett v. Moore-McCormack Co., 1942, 317 U.S. 239, 63 S.Ct. 246, 87 L.Ed. 239. However, while jurisdiction to decide the litigation may be concurrent with state courts or invoked in...