Dairyland Ins. Co. v. Makover

• Decision Date: 04 September 1981
• Docket Number: No. 80-7232,80-7232
• Citation: 654 F.2d 1120
• Parties: DAIRYLAND INSURANCE COMPANY, Plaintiff-Appellee, v. Ann R. MAKOVER, and Bernard Makover, Defendants-Appellants, v. Robert Lawrence KNAUER, et al., Defendants-Appellees. . Unit B
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1120

654 F.2d 1120

DAIRYLAND INSURANCE COMPANY, Plaintiff-Appellee, v. Ann R. MAKOVER, and Bernard Makover, Defendants-Appellants, v. Robert Lawrence KNAUER, et al., Defendants-Appellees.

No. 80-7232.

United States Court of Appeals, Fifth Circuit.

Unit B

Sept. 4, 1981.

Neely, Player, Eichelberger, Hamilton, Hines & Welch, James A. Eichelberger, Atlanta, Ga., for defendants-appellants.

Hurt, Richardson, Garner, Todd & Cadenhead, J. Robert Persons, Atlanta, Ga., for Dairyland Ins. Co.

Henning, Chambers & Mabry, W. C. Brooks, Arthur L. Myers, Jr., Atlanta, Ga., for Hartford Ins. Co.

Appeal from the United States District Court for the Northern District of Georgia.

Before MILLER, ^* Judge, and FRANK M.

JOHNSON, Jr. and THOMAS A. CLARK, Circuit Judges.

FRANK M. JOHNSON, Jr., Circuit Judge:

Ann and Bernard Makover, the appellants in this case, appeal from an adverse judgment, after trial by jury, in a declaratory judgment action brought by Dairyland Insurance Company concerning the coverage of an insurance policy.

In an automobile accident in 1977, a Ford station wagon driven by Robert Knauer collided with a car driven by Ann Makover and owned by her husband Bernard Makover. The station wagon driven by Mr. Knauer was owned by a Ms. Lundeen, who was covered by an insurance policy issued by Dairyland. Dairyland sought a declaratory judgment that Mr. Knauer was not covered by its policy issued to Ms. Lundeen. The precise issue before the district court with respect to the Dairyland policy issued to Ms. Lundeen was whether Mr. Knauer had implied permission to use Ms. Lundeen's station wagon at the time of the accident. ¹

Dairyland named as defendants in its declaratory judgment action the Makovers, Mr. Knauer, Mr. and Ms. McDowell (two other parties injured in the accident), and the Hartford Insurance Company. An amended complaint named another couple injured in the accident, Mr. and Ms. Callaway, as additional defendants. Dairyland's declaratory judgment action was filed after civil actions seeking recovery for personal injuries resulting from the accident were filed in state court against Mr. Knauer and Ms. Lundeen by the Makovers, the McDowells and the Callaways.

Mr. Knauer's wife, Charlene, worked for Arden Farms, which was co-owned by Ms. Lundeen and a Ms. von Suttka. Arden Farms purchased a pickup truck for Ms. Knauer's use for transportation to and from her employment at Arden Farms. Title to the pickup truck was originally in Ms. Knauer's name but was subsequently transferred to Arden Farms. The Hartford Insurance Company, which was named as a defendant by Dairyland and which is an appellee in this appeal, issued a policy covering the pickup truck and listed Ms. von Suttka and Arden Farms as the insureds. Hartford cross-claimed seeking a declaratory judgment that its policy covering the pickup truck did not afford coverage to Mr. Knauer. The issue before the district court with respect to the Hartford policy was whether the station wagon driven by Mr. Knauer that was involved in the accident was a temporary substitute vehicle i. e., a substitute for the pickup truck) subject to coverage under the Hartford policy. Ms. Lundeen had allowed Ms. Knauer to use her station wagon only after the pickup truck, which was insured by Hartford, had broken down.

The district court submitted four interrogatories to the jury, which found that Mr. Knauer did not have the implied permission of Ms. Lundeen, Ms. von Suttka or Ms. Knauer, and also that his use of the station wagon was not within the scope of use authorized for Ms. Knauer. ²

The Makovers appeal from the district court's denial of their post-trial motion for judgment n.o.v. or in the alternative for a new trial. They also appeal from the trial court's denial of their post-trial motion to dismiss for lack of diversity jurisdiction under 28 U.S.C.A. § 1332(c).

Initially, appellee Dairyland contends that the appellants Makovers lack standing to appeal because they were merely nominal defendants in this declaratory judgment action. Dairyland emphasizes that its action concerned only the issue of the coverage of two insurance policies, issued by Dairyland and Hartford, to which the Makovers were not parties. Although Dairyland claims on appeal that the Makovers' interest in the declaratory judgment action is not sufficient to grant them standing to appeal, it apparently thought that the Makovers' interest was sufficiently affected to name them as defendants. ³ Dairyland contends that the Makovers are merely potential or contingent judgment creditors of Mr. Knauer and that their interest is insufficient to confer upon them standing to appeal. It argues that the availability of insurance proceeds to satisfy a potential judgment is only a remote and secondary consequence of this litigation. Dairyland cites Libby, McNeill, & Libby v. City National Bank, 592 F.2d 504, 511 (9th Cir. 1978), which held that a party may appeal only to protect its own interests and not those of a co-party and that the appellant's interest must be immediate and pecuniary and not a remote consequence of the judgment. It also relies upon the rule that ordinarily only a litigant who was a party below and who is aggrieved by the judgment or order may appeal. See Goldstein v. Andresen & Co., 465 F.2d 972, 973 n.1 (5th Cir. 1972).

We hold that the appellants, as potential judgment creditors claiming liability in a state court tort suit against the putative insured, have standing to appeal the judicial declaration that the policy of insurance issued by Dairyland does not cover the putative insured.

It is decisive to our holding that Dairyland named the appellants as defendants in its declaratory judgment action. In a declaratory judgment action brought by an insurer to determine coverage under a liability policy issued to the insured, third parties claiming liability in state tort suits against the insured have been held to be proper parties to the declaratory suit, even though their claims against the insurer was contingent upon recovery of a judgment against the insured. Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826 (1941); Standard Accident Ins. Co. v. Meadows, 125 F.2d 422, 423 (5th Cir. 1942); Automobile Underwriters Corp. v. Graves, 489 F.2d 625, 627-28 (8th Cir. 1973); Hawkeye-Security Ins. Co. v. Schulte, 302 F.2d 174 (7th Cir. 1962). In Hawkeye-Security Ins. Co., supra, the court held that an injured third-party, who had filed a state court tort action against the insured, was improperly dismissed from a declaratory judgment action brought by the insurer to determine whether its policy covered the insured. The injured party was named by the insurer as a party defendant in the declaratory action. Significantly, only the injured party appealed from the declaratory judgment; the insured defaulted. Rejecting the insurer's contention that the injured party was properly dismissed, after the insured defaulted, because he was merely a nominal party, the court reasoned that "it would be anomalous to hold here that an actual controversy exists between appellant (the injured party) and appellee (the insurer) and yet deny appellant the right to participate in the controversy." 302 F.2d at 177. The court emphasized that the insurer voluntarily brought the appellant into the declaratory judgment action as a party defendant. Id.

Appellants Makovers' first contention is that this action should be dismissed for lack of diversity jurisdiction under 28 U.S.C.A. § 1332(c), which provides:

(c) For the purposes of this section and section 1441 of this title, a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business: Provided further, That in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.

The defendants Makovers, Callaways, McDowells, and Mr. Knauer, as well as the insureds Ms. Lundeen and Ms. von Suttka, are citizens of Georgia. Dairyland is a citizen of Wisconsin while Hartford is a Connecticut citizen. The Makovers argue that Hartford and Dairyland are deemed to be citizens of the state of which their insureds are citizens, i. e., Georgia, and therefore diversity jurisdiction is lacking. Appellants rely upon Campbell v. Insurance Co. of North America, 552 F.2d 604 (5th Cir. 1977) (per curiam); the appellees distinguish Campbell and rely upon Aetna Cas. & Sur. Co. v. Greene, 606 F.2d 123 (6th Cir. 1979).

In Campbell this Court considered an attempted appeal via trial de novo from an award of workmen's compensation by the Texas Industrial Accident Board. The district court dismissed the insurer's suit for lack of diversity jurisdiction on the authority of Hernandez v. Travelers Ins. Co., 489 F.2d 721 (5th Cir.), cert. denied, 419 U.S. 844, 95 S.Ct. 78, 42 L.Ed.2d 73 (1974), which held that in a direct action by an employee against his employer's workmen's compensation insurer, that insurer shall be deemed a citizen of the state of which the insured, i. e., the employer, is a citizen. The Court in Campbell stated that the sole distinction between the case before it and the situation in Hernandez i. e., that in Campbell it was the insurer that was appealing, whereas in Hernandez the injured workman was appealing was a distinction without a difference. The Campbell Court rejected the insurer's contention that the case was not a direct action within the meaning of Section 1332(c) and stated that the directness of the case was as immediate between the injured claimant and the insurer as in Hernandez. However,...