Milwaukee Mechanics Ins. Co. v. Davis

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: HOLMES, BORAH and RIVES, Circuit
• Citation: Milwaukee Mechanics Ins. Co. v. Davis, 198 F.2d 441 (5th Cir. 1952)
• Decision Date: 08 August 1952
• Docket Number: No. 13849.,13849.
• Parties: MILWAUKEE MECHANICS INS. CO. et al. v. DAVIS.

198 F.2d 441 (1952)

MILWAUKEE MECHANICS INS. CO. et al. v. DAVIS.

No. 13849.

United States Court of Appeals Fifth Circuit.

August 8, 1952.

Rembert Marshall, W. Neal Baird, Atlanta, Ga., for appellants.

Herbert Johnson, Atlanta, Ga., for appellee.

Before HOLMES, BORAH and RIVES, Circuit Judges.

RIVES, Circuit Judge.

The appellee agrees that, with one omission, the appellants' statement of the case is correct. Accordingly, that concise and accurate statement (but without its record references) is here quoted:

"The Appellee (plaintiff in the Court below) brought suit against Appellants to recover expenses and attorney\'s fees claimed to have been sustained because of Appellants `failure to live up to\' a certain automobile liability insurance contract existing between the parties.

"The case was tried before the Judge without a jury principally upon an agreed stipulation of facts * * * the only oral testimony being with respect to the reasonableness of the legal expenses claimed to have been incurred.

"Judgment was rendered against Appellants for the sum of Thirty Five Hundred ($3500.00) Dollars * * * and after a motion to amend findings was overruled * * * a notice of appeal to this Court was filed * * *.

"The background of the case is as follows:

"Appellee was insured with Appellants under a certain automobile insurance policy which covered a 1941 Oldsmobile automobile and which provided for automatic insurance for newly acquired automobiles under certain provisions (copy of policy attached to transcript of record from Fulton Superior Court sent up in original form).

"On July 20, 1946 the Oldsmobile was traded in on a 1941 Cadillac and several months later, to-wit: on November 16, 1946, Appellee had an accident with said automobile, seriously injuring one Don Morton and one L. B. Hawkins, Jr. * * *.

"Early in December, 1946, suits were filed against Appellee by both injured parties claiming damages and these suits were referred to Appellants for defense * * *. On December 20, 1946 Appellee was notified that Appellants were taking the position that there was no coverage under the policy because the acquisition of the Cadillac car was never reported to Appellants with the consequence that said automobile did not come within the automatic insurance provision. The two suits were returned to Appellee on that date * * *. Appellee disputed this and contended that he had notified an agent of the companies at the time he acquired the Cadillac automobile. However, said suits were turned over to Appellee\'s attorney for further handling * * *.

"A week after the suits were returned to Appellee and before they were answered and before the time for answering had expired Appellants filed a declaratory judgment action in the State Court to have their rights under the policy declared, and obtained an order enjoining the further prosecution of the two personal injury suits, including the marking of said suits in default by the Clerk because of any failure to answer by defendants * * *.

"Thereafter Mr. Herbert Johnson, attorney for Appellee, filed answers in the two cases, each of such answers consisting of nothing more than a general denial of all paragraphs (transcript from Fulton Superior Court sent up in original form) after making some investigation * * *.

"Mr. Johnson represented Appellee in the declaratory judgment action which had a number of hearings, a trial on the merits and an appeal by the insurance companies to the State Supreme Court, with the subsequent transfer of the case to the Court of Appeals * * *.

"After a decision against the insurance companies in the trial Court and pending the appeal a joint conference was held between the attorneys for the plaintiffs in the two personal injury actions, the attorney for Appellee and the attorneys for Appellants, resulting in a settlement of such suits by the taking of consent verdicts against Appellee but with the understanding that such verdicts were to be paid off by Appellants in the event the declaratory judgment action was decided against them * * *.

"The declaratory judgment action was decided adversely to Appellants, Milwaukee Mechanics Ins. Co. v. Davis, 79 Ga.App. 70, 52 S.E.2d 643, and promptly thereafter they paid off each of the verdicts and the personal injury suits were thereby terminated * * *.

"Thereafter the instant suit was brought in the State Court and removed to the United States District Court * * * on grounds of diversity of citizenship * * *.

"A copy of the entire record in the declaratory judgment action, which record contains a copy of the record in each of the personal injury suits, was introduced in evidence as a part of the stipulation of facts * * * and has been sent up in original form * * *."

The one omission from the foregoing statement of the case noted by the appellee is "* * * that the attorneys for the plaintiffs in the actions for damages in the Fulton Superior Court filed a petition to consolidate the damage suits with the declaratory judgment action and seeking to dissolve the restraining order. Appellee's attorney argued these motions before the Fulton Superior Court."

The district court found as facts that the insured incurred liability for attorney's fees in the amount of $1,500.00 for work in preparing and defending the personal injury actions filed against the insured and that such fees were necessary and reasonable; that the insured necessarily incurred liability for reasonable attorney's fees in defending the declaratory judgment action in the sum of $2,000.00.

In its conclusions of law, the district court said in part:

"It is concluded that the liability incurred by complainant for attorney\'s fees in defending both the damage suits and the declaratory judgment action are damages flowing directly from the breach of the contract of insurance and are recoverable as such.

"That the liability for attorney\'s fees in both the damage suits and the declaratory judgment action were incurred at the `Company\'s request\' within the meaning of the terms of the contract of insurance."

The policy is to be construed in accordance with the laws of Georgia; it was written in Georgia, to be performed in that State, and is being sued on in Georgia. See John Hancock Mutual Life Ins. Co. v. Yates, 50 Ga.App. 713, 179 S.E. 239, affirmed 182 Ga. 213, 185 S.E. 268, certiorari granted 299 U.S. 525, 57 S.Ct. 20, 81 L.Ed. 386, reversed 299 U.S. 178, 57 S.Ct. 129, 81 L.Ed. 106, reversed 184 Ga. 42, 190 S. E. 560, vacated 55 Ga.App. 771, 191 S.E. 392.

Georgia has certain statutes, Sections 56-706 and 20-1404 of the Code of Georgia, providing for the recovery of attorney's fees as expenses of litigation where a defendant has acted in bad faith or has been stubbornly litigious. With commendable candor the appellee's counsel stated to the trial court, and repeats here, that the appellee did not make out a case of bad faith or stubborn litigiousness on the part of the insurance company.

It seems to us, that the Georgia Court of Appeals has conclusively answered the contention that the attorney's fees incurred by the insured in defending the declaratory judgment action are damages flowing directly from the breach of the contract of insurance and recoverable as such. In the case of Maryland Casualty Co. v. Sammons, 63 Ga.App. 323, 11 S.E. 2d 89, 91, that court speaking through Judge Felton said:

"The petition, * * *, does not set out a cause of action for expense incurred in the case in the Federal Court for the reason that it was in effect a suit against the insurance company on the policy, in which the liability of the company to Sammons on the policy was involved, and the policy does not provide for the payment of expenses or attorney\'s fees in such a case, and the petition is not predicated upon the idea that the case in the Federal Court was brought in bad faith or that the insurance company was stubbornly litigious. The situation is the same as if the petition for a declaratory judgment had not been filed. If Crandall had obtained a judgment against Sammons and the

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