Ford Motor Co. v. Transport Indem. Co., Civ. A. No. 80-60066
| Decision Date | 28 June 1984 |
| Docket Number | Civ. A. No. 80-60066,Adv. No. 81-1957.,Bankruptcy No. 9-04232-P |
| Citation | 41 BR 433 |
| Parties | FORD MOTOR COMPANY, Plaintiff and Counter-Defendant, v. TRANSPORT INDEMNITY COMPANY, a California corporation and the Central National Insurance Company of Omaha, Nebraska, a Nebraska corporation, Defendants and Counter-Plaintiffs, v. AUTOMOBILE TRANSPORT, INC., a Michigan corporation, and Alexander Andrews, Trustee in Bankruptcy of Automobile Transport, Inc., Additional Defendants on Counterclaim. In re AUTOMOBILE TRANSPORT, INC., Debtor. Alexander G. ANDREWS, Plaintiff-Trustee for Automobile Transport, Inc., Plaintiff and Counter-Defendant, v. FORD MOTOR COMPANY, a Michigan corporation, Defendant and Counter-Plaintiff. |
| Court | U.S. District Court — Western District of Michigan |
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George E. Ward, Kauffman, Roche & Ward, Detroit, Mich., for plaintiff and counter-defendant.
Milton Lucow, Garan, Lucow, Miller, Lehman, Seward, & Cooper, William B. Calcutt, Cross, Wrock, Miller & Vieson, Detroit, Mich., John G. Makris, Troy, Mich., for defendants and counter-plaintiffs.
This case is before the Court on defendant Transport Indemnity Company's (TICO) Motion to Dismiss, plaintiff Ford's motion to amend the complaint, and Ford's motion for summary judgment. For the reasons stated herein, TICO's motion to dismiss is denied, and Ford's motions to amend and for summary judgment are granted.
Defendant Automobile Transport, Inc. (ATI) was a commercial hauler of newly manufactured automobiles. In this capacity, it hauled cars by truck for Ford between manufacturing plants and Ford dealerships, where the cars were sold to the retail public. ATI often transported the cars through only a segment of their journey from the factory to the showroom; other portions of the carriage were undertaken by rail carriers or other motor carriers. ATI had entered into agreements with certain of these other motor carriers, which included provisions for pro rata contributions by each of the two carriers towards damage claims made by the dealers when a new car was received in less than factory-mint condition.
ATI, as a motor carrier doing business in interstate commerce, was required under the Interstate Commerce Act, to obtain insurance or other type of security to cover damage to goods that it hauled, 49 U.S.C. § 10927(a)(3).1 ATI obtained liability insurance from defendant TICO, which was effective during the periods of April 1975 to February 1979, and from September 1979 until ATI was adjudged bankrupt, in January of 1980. Defendant Central National Insurance Co. (CNI) provided the insurance coverage during the intervening period of February to September of 1979.
Pursuant to § 10927(a)(3) of the Interstate Commerce Act, the Interstate Commerce Commission (I.C.C.) issued its Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability hereinafter designated as the "I.C.C. endorsement".2 The I.C.C. endorsement constitutes a supplemental insurance agreement at law, by which the insurer is obligated to pay the shippers of goods, such as Ford, for any loss of or damage to property that results from the transportation of the shipped goods by the insured cargo carrier, up to a specified maximum amount. The I.C.C. endorsement further provides that none of the policy limitations in effect between the insurer and the carrier will affect the liability that runs from the insurer to the shippers under the terms of the endorsement.
The endorsement in effect in this case provided that the insurer would not be liable in excess of $5,000 for any loss of or damage to property carried by a single motor vehicle, nor in excess of $10,000 for any loss of or damage to property occurring at any one time or place. Ford has sought recovery against TICO for its damage claims under the I.C.C. endorsement, and not under the policy of insurance in effect between TICO and ATI, because the insurance policy carried a $25,000 deductible provision, and because the liability established by the I.C.C. endorsement runs directly from TICO to Ford.
Ford initially brought this action against TICO and CNI, but has subsequently settled its claims against CNI. TICO was granted leave to amend its answer to bring a third-party claim against ATI.
Ford seeks recovery on its outstanding damage claims totaling $2,165,008.66. Ford also seeks a set-off of outstanding freight charges which it owes to ATI (or more appropriately, to ATI's trustee in bankruptcy). Finally, Ford seeks in its motion for summary judgment a declaration from this court of the manner in which Ford's unprocessed claims against ATI will be verified. Prior to filing its petition in bankruptcy, ATI had processed and verified over $1,725,000 in damage claims. Further, ATI had drafted checks payable to Ford for those claims, but never delivered the checks, presumably because it lacked sufficient funds. ATI has not yet processed the remaining claims, totaling more than $655,000. It is against those unprocessed claims that Ford seeks a set-off of its unpaid freight charges.
The complaint in this case was filed on October 22, 1980. Paragraph 4 stated that jurisdiction of the Court was predicated upon 28 U.S.C. § 1332 () and 49 U.S.C. § 11707, a provision of the Interstate Commerce Act. Presumably, plaintiff sought to establish general federal question jurisdiction under 28 U.S.C. § 1331.
Plaintiff reads these portions of TICO's answer to indicate that TICO has acknowledged the existence of this court's jurisdiction in this case. The two paragraphs, read side by side, are difficult to reconcile, but the court will presume that TICO denied the existence of jurisdiction in paragraph 4, but pled in the alternative that if such jurisdiction existed, that ATI was a necessary party to this action.
Ford next argues that this motion is untimely. Rule 12(b) of the Federal Rules of Civil Procedure provides that a motion making any of the defenses enumerated under that subsection, including a motion to dismiss on the grounds of lack of jurisdiction over subject matter, "shall be made before pleading if a further pleading is permitted." Although 12(b) motions must generally be made before the filing of an answer, the courts have permitted defendants to bring challenges to the court's subject matter jurisdiction following submission of the answer, see Phillipine Airlines, Inc. v. National Mediation Board, 430 F.Supp. 426, 427 at n. 1 (N.D.Cal.1977). Although this type of motion is particularly untimely, in light of the history of this case, the court concludes that it presents sufficiently important issues to require resolution on the merits. Nonetheless, denial of the motion on the grounds of untimeliness would not have been inappropriate in this case, considering the late hour at which the issues were raised.
Ford is a Delaware corporation with its principal place of business in Michigan. TICO is a California corporation with its principal place of business in that state, so diversity would ordinarily be present between these parties. TICO argues that, because this is an action brought by the beneficiary of a policy of insurance against the insurer, it is governed by 28 U.S.C. § 1332(c),3 which provides in essence that an insurer is deemed to be a resident of the same state of its insured in actions in which jurisdiction is predicated upon the diverse citizenship of the parties. ATI is a Michigan corporation, and there is no diversity of citizenship between it and Ford. If TICO is deemed to be a citizen of Michigan by operation of § 1332(c), then diversity would be absent from this case. TICO argues that this case is controlled by Ford Motor Co. v. Insurance Co. of North America, 669 F.2d 421 (6th Cir.1982), in which the Court of Appeals concluded that § 1332(c) applied to an action brought by Ford, coincidentally the plaintiff in that action, against defendant insurer, who had issued a policy of automobile insurance that was governed by Michigan's No Fault statute. TICO argues that the no fault insurance statute imposes a similar kind of contract at law upon insurers as that created by the I.C.C. endorsement, on which Ford is seeking to recover in this case.
Although TICO's position is not without merit, the Court concludes that the I.C.C. endorsement creates a surety relationship between the insurer, the shipper, and the carrier, as opposed to an indemnity relationship normally contemplated by an insurance contract, see In re Yale Express, 362 F.2d 111, 114 (2d Cir.1966) (Friendly, J.). Further, this Court agrees with the reasoning and conclusion reached in A.J. Kellos Construction Co. v. Balboa Ins. Co., 495 F.Supp. 408 (S.D.Ga.1980). That court concluded that § 1332(c) did not operate in an action brought against a surety, as opposed to an indemnitor.4 The courts in both In re Yale Express, supra, and A.J. Kellos, supra, relied upon § 82 of the Restatement of Security5 in coming to the conclusion that the relationship between the parties was appropriately characterized as one of suretyship as opposed to indemnification.
In this case, the key language of the I.C.C. endorsement provides as follows:
The insured agrees to reimburse the Company (the insurer) for any payment made by the Company on account of any loss or damage involving a breach of the terms of the policy and for any payment that the Company would not...
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