Jennings v. United States

• Citation: 374 F.2d 983
• Decision Date: 02 March 1967
• Docket Number: No. 10635.,10635.
• Parties: Anna JENNINGS, Administratrix of the Estate of Stewart Earl Jennings, deceased, to her own use and to the use of Government Employees Insurance Company, Subrogee, and Government Employees Insurance Company, a body corporate, Appellants, v. UNITED STATES of America, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

374 F.2d 983 (1967)

Anna JENNINGS, Administratrix of the Estate of Stewart Earl Jennings, deceased, to her own use and to the use of Government Employees Insurance Company, Subrogee, and Government Employees Insurance Company, a body corporate, Appellants, v. UNITED STATES of America, Appellee.

No. 10635.

United States Court of Appeals Fourth Circuit.

Argued December 6, 1966.

Decided March 2, 1967.

Frederick J. Green, Jr., Baltimore, Md. (Edward C. Bell, Hyattsville, Md., and Lord, Whip, Coughlan & Green, Baltimore, Md., on brief), for appellants.

John W. Bassett, Atty., Dept. of Justice (John W. Douglas, Asst. Atty. Gen., David L. Rose and Edward Berlin, Attys., Dept. of Justice, and Thomas J. Kenney, U. S. Atty., on brief), for appellee.

Before SOBELOFF, BOREMAN and J. SPENCER BELL, Circuit Judges.

SOBELOFF, Circuit Judge:

For the third time we have occasion to consider legal questions arising out of a collision between automobiles in Prince George's County, Maryland, on the Suitland Parkway, a highway maintained by the United States. The earlier appeals concerned the issue of negligence, while the present appeal poses the purely legal question of the obligation of the United States as indemnitor to reimburse an insurer for monies paid in settlement of personal injury actions generated by the accident. The District Court held in favor of the United States, finding no duty of indemnification.¹ We affirm.

On the morning of January 23, 1956, as Stewart E. Jennings, a civilian employee of the United States government, was driving along the Parkway with his brother, his vehicle skidded on a patch of ice, went out of control and collided with an automobile approaching in the opposite lane. Jennings was killed and his brother and the three occupants of the other car were injured. Suits were brought in the Maryland state courts against Jennings' widow, as administratrix, to recover damages for personal injuries sustained by the occupants of the second automobile. Defense of these actions was assumed by Jennings' insurance carrier, "Government Employees Insurance Company" (GEICO). Shortly before the trials, the plaintiffs offered to settle their claims for an amount within Jennings' policy limits. The offer was not acted on immediately but, in the course of the trial, GEICO became convinced that Jennings would be found liable if the case reached the jury, and it therefore accepted the offer. The United States was not notified of the pendency of these actions, the settlement offer, or the settlement itself, although the release executed by the plaintiffs designated the United States as one of the parties released from liability.

While this litigation was running its course, Mrs. Jennings filed an action in the United States District Court for the District of Maryland under the provisions of the Federal Tort Claims Act to recover damages from the United States for the death of her husband. That case was tried before Judge Watkins, who returned a verdict for Mrs. Jennings. After the two appeals to this court, the judgment was affirmed on the ground that the United States had negligently constructed and maintained the Parkway so as to permit water to accumulate and freeze.² An essential element of this judgment was the exoneration of Jennings from any contributory negligence.³

The present action, in which GEICO seeks, as subrogee, indemnification from the United States for the sum GEICO paid in settlement of the suits against Jennings' estate, was tried before Judge Northrop. GEICO stipulated to the binding effect of Judge Watkins' finding that Jennings was free from contributory negligence, while the United States conceded its own negligence, as found by Judge Watkins, and that the amount of the settlement was reasonable. Judge Northrop held that a settling indemnitee who fails to notify the indemnitor of the pendency of the litigation and of the settlement negotiations may recover only upon a showing that he was actually liable to the person with whom he settled. Giving effect to GEICO's stipulation, the Judge held that Jennings was not legally responsible for the accident and accordingly entered judgment for the United States.

The narrow issue which the parties have deliberately framed on this appeal is the effect of GEICO's failure to apprise the United States of the pendency of the actions against Jennings' estate. The parties agree that this is not an absolute bar to GEICO's right to indemnity. The government insists, however, that failure to give notice imposes on the indemnitee the additional burden of proving that there was actual liability to the person with whom settlement was made. It reasons that since the right of indemnity stems from an underlying liability of the indemnitee to a third party, the indemnitor should at some point have the opportunity to negative that liability. Since it was not notified of the earlier actions, and could not therefore participate in those proceedings, the government contends that it should be afforded this opportunity in the present action. While the United States does not dispute that a knowing failure to participate in the initial suits would have bound it to a reasonable settlement, it argues that lack of notice puts the indemnitee to his proof of actual liability in the present action.

GEICO's position is that the only effect of its failure to give notice is to afford the United States the opportunity in the present indemnity suit to contest the reasonableness of the settlement. If the insurance company's action in settling and the amount of the settlement were reasonable, the United States, GEICO contends, has suffered no prejudice. Since the United States has conceded that the settlement was reasonable, GEICO would have us reverse the District Court on its showing that there was a strong probability that Jennings would have been held liable by the jury.

The concept that notice plus an opportunity to defend render binding on an indemnitor the judgment in a case in which he did not participate springs from notions of res judicata. The reasoning is that where an indemnitor is notified and can take part in — indeed may control — the litigation, he is precluded from contesting the indemnitee's liability in the subsequent indemnity action. The indemnitor's knowing failure to participate is deemed a consent to representation by the indemnitee, thus forming the predicate for application of the rule that a litigant is entitled only once to his day in court. Lack of notice, however, destroys the consensual element, vitiates the binding effect of the judgment, and entitles the indemnitor to be heard on the issue of the indemnitee's liability. The indemnitee's unilateral acts, albeit reasonable and undertaken in good faith, cannot bind the indemnitor; notice and an opportunity to defend are the indispensable due process satisfying elements.

There is no more reason to dispense with the requirement of notice to the indemnitor where the suit against the indemnitee is terminated by settlement than where it is allowed to go to judgment. On the score of notice, the two cases stand alike. Indeed, if the reasonableness of the indemnitee's conduct be the touchstone, it should govern all indemnity actions, if the original suit went to judgment no less than if it was settled. Yet it would be repugnant to the sense of justice if an indemnitor could be bound by a judgment after trial in a proceeding to which he was not a party and of which he had no notice. There is no authority for binding him in such circumstances and GEICO does not contend that if the case against Jennings had resulted in a judgment against him, it would be entitled to indemnity on the ground that it acted in good faith. GEICO's argument is grounded on the proposition that there was a strong probability that the jury would have found Jennings liable. Yet it is common knowledge that juries often return unanticipated verdicts which are nevertheless not subject to vacation by the trial court or the appellate court. Despite...