Ionian Shipping Company v. British Law Insurance Co.

• Decision Date: 08 May 1970
• Docket Number: Docket 34327.,No. 655,655
• Citation: 426 F.2d 186
• Parties: IONIAN SHIPPING COMPANY, Plaintiff, and Allied Chemical Corporation, Intervenor-Appellant, v. BRITISH LAW INSURANCE CO., Ltd., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

426 F.2d 186 (1970)

IONIAN SHIPPING COMPANY, Plaintiff, and Allied Chemical Corporation, Intervenor-Appellant, v. BRITISH LAW INSURANCE CO., Ltd., et al., Defendants-Appellees.

No. 655, Docket 34327.

United States Court of Appeals, Second Circuit.

Argued March 30, 1970.

Decided May 8, 1970.

John H. Cleveland, III, New York City (Tallman Bissel, John de P. Douw, Haight, Gardner, Poor & Havens, New York City, on the brief), for intervenor-appellant Allied Chemical Corp.

William G. Symmers, New York City (Richard H. Webber, Symmers, Fish & Warner, New York City, on the brief), for defendants-appellees British Law Insurance Co., Ltd., and others.

Before KAUFMAN and FEINBERG, Circuit Judges, and TIMBERS, District Judge.^*

IRVING R. KAUFMAN, Circuit Judge:

Allied Chemical Corporation sought intervention as of right under Fed.R. Civ.P. 24(a) in Ionian Shipping Company's suit against British Law Insurance Co., Ltd., insurer of its vessel Sofia M. This appeal questions both the correctness and appealability of Judge Edelstein's order denying that petition for intervention.

In April 1968 Ionian Shipping, owner of the Sofia M, gave the Chase Manhattan Bank (National Association) a First Preferred Ship Mortgage. In order to protect its interest, Chase required Ionian to obtain and keep in force marine hull insurance. In May 1968, pursuant to that requirement, Ionian obtained a $500,000 policy from the defendant insurers for one year. The policy, in pertinent part, contained a "loss payable" clause requiring distribution of payments to Chase and Ionian "as their respective interest may appear."¹ It further required the insurer to give Chase ten days "notice of cancellation" of the policy.² The policy also contained standard "New York suable" and "service of suit" clauses, permitting suit in New York, under the law applicable as if the policy were delivered in New York.³

On July 24, 1968, the Sofia M ran aground at Punta Gallinos, Columbia, and allegedly became a total loss. British Law Insurance, claiming that the grounding was intentional, refused to pay the insurance proceeds. In April 1969 Ionian sued on the insurance contract; a week later Chase assigned the mortgage to Allied (which had previously guaranteed Ionian's obligation under the mortgage). Allied now stands in Chase's place as mortgagee, and seeks to intervene of right in Ionian's suit against British Law Insurance in order to protect its rights under the insurance contract as a mortgagee.

I. Appealability

Before reaching the merits of the motion for intervention, however, we must deal with the perplexing issue of appealability. We have jurisdiction only to review "final" orders, 28 U.S.C. § 1291 (1964), except in the limited circumstances set out in 28 U.S.C. § 1292 (1964). It is settled that the grant of a motion to intervene is not appealable. Otten v. Baltimore & O. R. Co., et al., 205 F.2d 58 (2d Cir. 1953) (L. Hand, J.) ("Since the second order granting intervention is clearly unappealable we shall disregard it."). An order denying intervention, on the other hand, presents significantly more difficult problems. Supreme Court cases have established that if "appellant may intervene as of right, the order of the court denying intervention is appealable." Sam Fox Publishing Co. v. United States, 366 U. S. 683, 688, 81 S.Ct. 1309, 6 L.Ed.2d 604 (1961); Sutphen Estates, Inc. v. United States, 342 U.S. 19, 20, 72 S.Ct. 14, 96 L.Ed. 19 (1951).

Sam Fox Publishing speaks of the party "entitled" to intervene of right; it does not deal with the case where the party seeking intervention as of right, is not, in fact "entitled" to it. In Levin v. Ruby Trading Corp., 333 F.2d 592 (2d Cir. 1964), we assumed that we did not have jurisdiction to hear such an appeal and that in effect appealability turned on the merits of the claim for intervention. The distinction "is not a very effective or useful limitation of appellate jurisdiction," since its only consequence is that if the application for intervention is not found meritorious, the reviewing court must dismiss the appeal rather than affirm the judgment below. See Levin v. Ruby Trading Corp., 333 F.2d 592, 594 (2d Cir. 1964). In a later case, however, we simply "assumed" that we had jurisdiction to hear a similar appeal,⁴ and after considering the merits, affirmed a denial below of a motion for intervention as of right instead of dismissing it. Fox v. Glickman Corp., 355 F.2d 161, 163 n. 2, 165 (2d Cir. 1965), cert. denied, sub nom. Levy v. Glickman Corp., 384 U.S. 960, 86 S.Ct. 1585, 16 L.Ed.2d 672 (1966). See also Farmland Irrigation Co. v. Dopplmaier, 220 F.2d 247, 248 (9th Cir. 1955) (denial of intervention appealable where sought as of right). But see Lipsett v. United States, 359 F.2d 956 (2d Cir. 1966) (appeal from denial of permissive intervention dismissed where no abuse of discretion); Brotherhood of Railroad Trainmen v. Baltimore & Ohio R.R. Co., 331 U.S. 519, 524, 67 S.Ct. 1387, 91 L. Ed. 1646 (1947). ("Ordinarily, in the absence of an abuse of discretion, no appeal lies from an order denying leave to intervene where intervention is a permissive matter within the discretion of the court.")

Commentators seem to agree that requiring appealability of an order to turn on the merits serves no useful purpose. They would prefer to consider all denials of intervention final orders and therefore appealable, but would reverse only when a party is entitled to intervention as of right or the trial court abused its discretion in denying permissive intervention. See Shapiro, Some Thoughts on Intervention Before Courts, Agencies, and Arbitrators, 81 Harv.L.Rev. 720, 740-51 (1968); 3B J. W. Moore, Federal Practice ¶ 24.15 at 24-565 (1969).

This pragmatic formulation, which would permit the reviewing court to dispose of the merits without indulging in a pointless discussion of appealability in each instance, meets two objections. The Supreme Court, prior to the 1966 amendments to Rule 24(a), consistently indicated that the proper course was to dismiss when the appellate court was of the view that the order denying intervention (whether mandatory or permissive) was correct. See, e.g., Brotherhood of Railroad Trainmen v. Baltimore & Ohio R.R. Co., 331 U.S. 519, 524, 67 S.Ct. 1387 (1947).

We recognize that, to follow this approach in each instance, will require the court to examine the merits of the motion for intervention before it can consider whether it has jurisdiction. See C. Wright, Handbook of the Law of Federal Courts 332 (2d ed. 1970). Given the aim of the 1966 amendments to the Federal Rules which substituted "a practical rather than a conceptual emphasis in questions of intervention," id., at 328, the proper and sensible course is to assume that an order denying intervention is final for the purposes of appeal, and to go directly to the merits. See Fox v. Glickman Corp., 355 F.2d 161, 163 n. 2, 165 (2d Cir. 1965), cert. denied, sub nom. Levy v. Glickman Corp., 384 U.S. 960, 86 S.Ct. 1585 (1966). Hence we assume that we have jurisdiction to hear Allied's appeal from the order denying its motion for intervention.

II. Intervention

Allied moved in the district court only for intervention as of right. The motion was denied without opinion. To satisfy Rule 24(a) (2), governing intervention of right, Allied must show (1) that it claims an interest in the insurance proceeds; (2) that, as a practical matter, that may be impaired by this suit; and (3) that Ionian will not provide adequate representation.

British Law Insurance, stating that Allied's rights are "derivative and depend on whether Ionian can recover," seems to concede that the first two criteria are satisfied. Both it and Allied agree that the only issue is whether Ionian will provide Allied with adequate representation in the suit for the insurance proceeds. On the merits of that question, however, they differ. The nub of Allied's claim for intervention is that it has, or may have, interests superior to those of Ionian, interests which Ionian would be utterly disinterested in protecting, or even raising.

In defending itself against Ionian's demand for the insurance proceeds, British Law Insurance Co., Ltd., raised as a defense the claim that the grounding of the Sofia M was intentional, done with the connivance of Ionian, and thus not covered by the insurance contract. See Steam Tanker Padre Island, Inc., et al. v. London Assurance, Guildhall Insurance Company, et al., Civ. No. 66-c-94 (S.D.Tex., Dec. 16, 1969). See also P. Samuel & Co., Ltd. v. Dumas, 1924 A. C. 431. Allied's response, and the basis for its motion for intervention of right, is that even should British Law Insurance prove intentional grounding, the innocent mortgagee should not be barred from recovering. It reads the "notice of cancellation" and "loss payable" clauses, see notes 1 and 2, supra, as together imposing a "standard" mortgagee clause on the insurance contract, providing in effect that the mortgagee will not be harmed by the acts or defaults of the mortgagor. See 11 G. J. Couch, Insurance §§ 42:684, 42:685 (2d ed. 1963). See also Prudential Ins. Co. v. German Mut. Fire Ins. Assn., 228 Mo.App. 139, 60 S.W.2d 1008 (Kansas City Ct. of App. 1933).

The point is hardly free from doubt. Looking to the law of New York (Ionian's principal place of business) in the absence of an applicable federal maritime rule, Wilburn Boat Co. v. Firemen's Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), we find that a mortgagee may add a written "standard" clause stating that the mortgagee's interest shall not be "invalidated" by any act or neglect of the owner. See N. Y. Insurance Law McKinney's Consol. Laws, c. 28, § 168(6) (McKinney 1966); National Factors, Inc. v. Waters, 42 Misc.2d 822, 249 N.Y.S.2d 121, 129 (1964). Absent that clause, a "loss payable" provision naming the mortgagee does not appear to create a standard clause protecting the mortgagee from the acts...