Lumbermens Mut. Casualty Co. v. CY Thomason Co.

• Decision Date: 12 January 1950
• Docket Number: Civ. No. 978.
• Citation: 87 F. Supp. 889
• Court: U.S. District Court — District of South Carolina
• Parties: LUMBERMENS MUT. CASUALTY CO. v. C. Y. THOMASON CO. et al.

87 F. Supp. 889

LUMBERMENS MUT. CASUALTY CO. v. C. Y. THOMASON CO. et al.

Civ. No. 978.

United States District Court W. D. South Carolina, Greenwood Division.

January 12, 1950.

Nelson, Mullins & Grier, Columbia, S. C., for plaintiff.

Mays, Featherstone & Bradford, Greenwood, S. C., for defendants, C. Y. Thomason Co. and United States Guarantee Co. of New York.

McEachin & Townsend, Florence, S. C., for defendant Reuben E. Turner.

J. D. Gilland and Royall & Wright, Florence, S.C., for defendant City of Florence.

John M. Daniel, Atty. Gen., T. C. Callison, Asst. Atty. Gen., R. Hoke Robinson, Asst. Atty. Gen., Willcox, Hardee, Houck & Palmer, Florence, S. C., for State Highway Department.

WYCHE, Chief Judge.

This is an action by Lumbermens Mutual Casualty Company, seeking a declaratory decree under 28 U.S.C.A. § 2201, adjudicating that a certain policy issued by it to C. Y. Thomason Company, a contractor of Greenwood, South Carolina, does not cover a suit brought by one Rueben E. Turner in the Court of Common Pleas for Florence County against City of Florence, State Highway Department, C. Y. Thomason Company and United States Guarantee Company, and that, consequently, the company is under no obligation to defend and indemnify the assured against any loss arising out of the action brought in the State Court. All parties to the suit in the State Court were joined as defendants in the Federal Court, but all, except C. Y. Thomason Company and United States Guarantee Company, either defaulted or filed answer indicating that they were not interested in this particular phase of the litigation. Thus, the controversy here is between the plaintiff Lumbermens Mutual Casualty Company and C. Y. Thomason Company and United States Guarantee Company, and the sole question to be decided is whether or not the plaintiff is obligated under its policy to defend this action brought in the State Court, and whether it would be liable to pay any judgment recovered therein.

The facts out of which this litigation arises are, substantially, as follows: In November, 1945, the City of Florence and State Highway Department began excavation work on Palmetto and Church Streets in the City of Florence for the construction of an underpass on State Highway No. 301 on Palmetto Street under the tracks of the Atlantic Coast Line Railway Company, and the State Highway Department awarded the contract for the construction of this underpass to C. Y. Thomason Company, and the United States Guarantee Company became guarantor or surety on C. Y. Thomason Company's contractor's bond.

In August, 1947, Reuben E. Turner, a garage owner in the City of Florence, brought suit against the City of Florence and the State Highway Department for damages which he alleges resulted from the construction of the underpass and the grading of the streets in front of, and in close proximity to, his garage. This action brought by Turner is based on the taking of plaintiff's private property for public use without just compensation, in violation of the Constitution of the State of South Carolina, and damages are alleged in the sum of $10,000. To this action the City of Florence and the State Highway Department answered, alleging among other things, that the defendant C. Y. Thomason Company executed a contract and bond to the State Highway Department with the United States Guarantee Company as surety, and agreed under this contract and bond to pay all claims for damages arising out of the construction of this project, and further agreed to indemnify and save harmless the City of Florence and the State Highway Department from any liability in connection with said project and asked that C. Y. Thomason Company and its surety, United States Guarantee Company, be made parties to this action. On motion of the City of Florence and the State Highway Department, the State Court issued an order directing that C. Y. Thomason Company and its surety be made parties to the action and providing that they be required to defend specifically the allegations set forth in the answers of the City of Florence and the State Highway Department. In conformity with this order, Rueben E. Turner amended his complaint making Thomason and the surety parties to his action. The basis of plaintiff Turner's cause of action, as set forth in the amended complaint, is summarized in paragraph 3 thereof, and is as follows: "3. That the action of the Defendants City of Florence and State Highway Department through their agents, servants, and employes in closing off Plaintiff's place of business at the beginning of their underpass project and keeping it closed off for about a year; in preventing ingress and egress to and from his garage; in causing his customers difficulty and danger in getting into and out of his garage, in throwing large quantities of earth and water into the Plaintiff's garage; in ruining equipment and supplies by throwing earth and water into his garage; in replacing the sidewalk in such manner as to make it three inches higher than the Plaintiff's garage; in causing the business to shut down on account of water and mud in his garage, constitute a taking of Plaintiffs' private property for public use without just compensation, in violation of the constitution of the State of South Carolina to Plaintiff's damage in the sum of Ten Thousand ($10,000.00) Dollars."

C. Y. Thomason Company and the Surety Company, however, contend that this paragraph should be read in connection with paragraph 4 of the amended complaint, which is as follows: "4. That the Defendant C. Y. Thomason Company was the contractor doing the construction work outlined above for the Defendant State Highway Department of South Carolina, and the Defendant United States Guarantee Company of New York is the guarantor on C. Y. Thomason Company's contractor bond, and by the terms of the said contract of construction and the contractor bond, both the Defendant C. Y. Thomason Company and the United States Guarantee Company of New York became responsible to pay any damages caused by the construction of the said underpass and approaches on Palmetto and Church Streets, and that on March 18, 1949 Hon. G. Duncan Bellinger, Presiding Judge of the Court of Common Pleas of Florence County, issued his order, a copy of which is hereto attached and made a part of this complaint, directing that the Defendant C. Y. Thomason Company and United States Guarantee Company of New York be made parties defendant to the within action and that they `be required to defend specifically the allegations set forth in the answers of the Defendants City of Florence and State Highway Department', and that for the reasons herein stated, C. Y. Thomason Company and United States Guarantee Company of New York are made parties to this action."

Upon being served with the amended complaint, Thomason and the surety called upon the plaintiff herein to assume responsibility under its policy for the defense of this suit and to pay any judgment which might be recovered. The limit of coverage afforded under the policy for property damage caused by accident is the sum of $30,000.

Plaintiff refused to take over the defense, contending that it was not liable under its policy to defend an action for the taking of private property for public use under the State Constitution, because its liability was limited and restricted to claims for damage caused solely by accident. After the plaintiff refused to take over the defense of the action on behalf of Thomason and the surety, they retained counsel and filed a demurrer to the amended complaint in the State Court, and served notice on the plaintiff that they were taking over the defense but would expect the plaintiff to pay all expenses, as well as pay any judgment that might be...