FIREMAN'S FUND INSURANCE COMPANY v. Hanley

• Decision Date: 27 March 1956
• Docket Number: Civ. A. No. 2706.
• Citation: 140 F. Supp. 206
• Parties: FIREMAN'S FUND INSURANCE COMPANY, a California corporation, Plaintiff, v. Joseph A. HANLEY and Ruth C. Hanley, Defendants.
• Court: U.S. District Court — Western District of Michigan

140 F. Supp. 206

FIREMAN'S FUND INSURANCE COMPANY, a California corporation, Plaintiff, v. Joseph A. HANLEY and Ruth C. Hanley, Defendants.

Civ. A. No. 2706.

United States District Court W. D. Michigan, S. D.

March 27, 1956.

J. T. Hammond, Benton Harbor, Mich., Herbert R. Stoffels, Chicago, Ill., for plaintiff.

John T. Ryan, St. Joseph, Mich., Warner, Norcross & Judd, Harold S. Sawyer, Jr., Grand Rapids, Mich., for defendants.

STARR, Chief Judge.

The defendants' motion to dismiss this present action, No. 2706, must be considered in connection with a prior pending action, No. 2596, between the same parties.

On December 29, 1954, the defendants herein, Joseph A. Hanley and Ruth C. Hanley, his wife, as plaintiffs began suit in the circuit court of Berrien county, Michigan, against the Fireman's Fund Insurance Company, plaintiff in the present action. The Fireman's company as defendant removed that action, No. 2596, to this court on the basis of diversity of citizenship. In that action the Hanleys alleged that on March 13, 1954, the defendant company had issued and delivered to them a policy of fire insurance numbered 512306 in the amount of $30,000 with "special home owners comprehensive form" endorsement and other endorsements thereon, which insured them against physical loss or damage to their brick-veneer, one-family dwelling located at 20 Lake Shore drive in the city of St. Joseph, Michigan. In that action the Hanleys further alleged that on October 13, 1954, following several days of extremely heavy rainfall, a sudden landslide occurred on the premises on which their dwelling was located, resulting in the collapse and total loss of the dwelling. They alleged that their loss and damages resulting from the collapse of their dwelling were covered by the above-mentioned policy issued by the Fireman's company. They asked for judgment in the amount of $30,000 and demanded jury trial. The defendant Fireman's company filed answer denying that the damage to the Hanleys' dwelling was occasioned by a landslide, and denying all liability under their policy. As a further defense it alleged that the policy issued to the Hanleys was void from its inception because the Hanleys had knowingly, wilfully, and fraudulently concealed certain facts and conditions materially affecting its acceptance of the risk. As a further defense it also alleged that the Hanleys' premises on which their dwelling was located bordered on Lake Michigan; that said premises had gradually been eroding for several years; that the damage to their dwelling was caused by the subsiding and settling of their premises as the result of high water, waves, inundation, tide or tidal wave, surface waters, overflow of streams or bodies of water, flood or flood waters, "all whether driven by wind or not"; and that the damage to the Hanley dwelling from any of such causes was not within the risks assumed and was expressly excluded from coverage by their policy and endorsements thereon.

It is clear that the above-mentioned prior action, No. 2596, instituted by the Hanleys against the Fireman's company December 29, 1954, involved the question of the validity of the insurance policy issued to them; the question as to whether their loss and the damages to their dwelling were covered by the policy and endorsements; and also the question as to the amount of their loss and damages.

On June 14, 1955, the Fireman's company (defendant in prior action No. 2596) began the present action No. 2706 against the Hanleys for a declaratory judgment, 28 U.S.C.A. § 2201, determining that its said policy with endorsements issued to the Hanleys March 13, 1954, was void from its inception or, in the alternative, that the loss and damages sustained by the Hanleys were not within the risk assumed and coverage provided by the policy and endorsements. The Fireman's company further asks that, if its policy is not declared void and the Hanleys' loss and damages are held to be within the coverage of the policy, the court enter a declaratory judgment determining the actual loss and damages sustained by the Hanleys. It also asks that the Hanleys be enjoined from further prosecution of their prior action, No. 2596, pending hearing and determination of the issues involved in the present action, No. 2706.

On July 16, 1955, the Hanleys filed a motion to dismiss the present action on the ground that "there is presently pending before this court Civil Action No. 2596 wherein Joseph A. Hanley and Ruth C. Hanley are plaintiffs, and Fireman's Fund Insurance Company is defendant, involving the same subject matter as this action and all of the matters set forth in this action are available to the plaintiff as defendant in the said Civil Action No. 2596."

It should be noted that in its present declaratory-judgment action the Fireman's company alleges substantially the same grounds for cancellation of the insurance policy in question that it alleged as a defense in the Hanleys' prior action to recover on the policy. Therefore, the question presented by the Hanleys' motion to dismiss is whether further prosecution of prior action No. 2596 should be enjoined pending trial and determination of present action No. 2706, or whether the present action should be dismissed without prejudice to the right of the Fireman's company to assert its defense of invalidity of policy and other defenses in the Hanleys' prior action on the policy.

It is clear that all contentions of fact and law which the Fireman's company asserts in its present declaratory-judgment action as a basis for determining the insurance policy to be void, have been or may be asserted by it as defenses in the Hanleys' prior action on the policy. Therefore, the Fireman's company has an adequate and complete remedy in the Hanleys' prior action, and, having such a remedy, there is no sound basis for its present action to cancel the policy.

The Hanleys' action to recover on the policy was begun in December, 1954, and the present action by the Fireman's company to cancel the policy was begun in June, 1955. The same parties are involved in both actions and both are now pending in this court. The same questions of fact and law are involved in both actions. The insurance policy involved in both actions will never become incontestable, and there are no other special or unusual circumstances which would require or entitle the Fireman's company to maintain its present action to cancel the policy in advance of a jury trial and determination of all rights and liabilities of the parties in the prior action. Whether the Fireman's company should be permitted to maintain the present action in which it asserts the alleged fraud by the Hanleys in the procurement of the policy as a basis for its cancellation, or whether it should assert the alleged fraud as a defense in the prior action by the Hanleys, is purely a procedural question and relates only to the method and means to be used in determining the rights and liabilities of the parties and the ultimate result or outcome of the litigation. In 15 Cyclopedia of Federal Procedure, 3d Ed., §§ 90.27 and 90.29, pp. 830-832, it is stated:

"§ 90.27. * * * Considerations that have weight as to whether a declaratory judgment action should be dismissed or stayed because of another action or proceeding pending include these: whether the controversy involved in the declaratory judgment action will necessarily be determined in the other suit or proceeding; whether the court in the other proceeding could handle the same matter more expeditiously and appropriately; whether there is an identity of parties in the proceedings; and whether all questions in issue will be determined in the other suit or proceeding."

"§ 90.29. * * * On the other hand, the declaratory judgment action may or should be dismissed or suspended because of another suit or proceeding which will afford the same relief sought, will determine material issues, or will settle additional issues between the parties as well as those that can be settled in the declaratory judgment action. The declaratory judgment action should not be entertained merely for the purpose of determining issues in a case already pending wherein the issues can be determined with equal facility."

In Ettelson v. Metropolitan Life Ins. Co., 3 Cir., 137 F.2d 62, 65, the court said:

"The general rule pronounced by the Supreme Court is that in insurance cases, in the absence of special circumstances, which are not present here, `fraud in the procurement of insurance is provable as a defense in an action at law upon the policy, resort to equity being unnecessary to render that defense available.' American Life Ins. Co. v. Stewart, 1937, 300 U.S. 203, 212, 57 S.Ct. 377, 379, 81 L.Ed. 605, 111 A.L.R. 1268, citing Enelow v. New York Life Ins. Co., 1935, 293 U.S. 379, 385, 55 S.Ct. 310, 79 L.Ed. 440; Adamos v. New York Life Ins. Co., 1935, 293 U.S. 386, 55 S.Ct. 315, 79 L.Ed. 444; Insurance Co. v. Bailey, 1872, 13 Wall. 616, 20 L.Ed. 501; Cable v. United States Life Ins. Co., 1903, 191 U.S. 288, 306, 24 S.Ct. 74, 48 L.Ed. 188."

In the case of Piedmont Fire Ins. Co. v. Aaron, 4 Cir., 138 F.2d 732, plaintiff Aaron began an action in the circuit court of Virginia to recover on a contract of insurance evidenced by a binder issued by the Piedmont Fire Insurance Company. The company removed the action to the United States district court and later began an action in the same district court for a declaratory judgment determining the contract and binder to be null and void on the ground of fraud and misrepresentation in its procurement. In affirming an order dismissing the insurance company's suit for a declaratory judgment, the appellate court said at page 734:

"It is clear, we think, that the order appealed from should be affirmed. The question as to whether the insurance company was liable on the binder was one for trial by jury whether arising in the action on the binder or in the suit for

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