National Garment Co. v. New York, C. & St. LR Co.
| Decision Date | 05 April 1949 |
| Docket Number | No. 13713.,13713. |
| Citation | 173 F.2d 32 |
| Parties | NATIONAL GARMENT CO. v. NEW YORK, C. & ST. L. R. CO. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Melvin L. Newmark and Victor Packman, both of St. Louis, Mo., for appellant.
Vincent L. Boisaubin, of St. Louis, Mo. (Jones, Hocker, Gladney & Grand, of St. Louis, Mo., on the brief), for appellee.
Before GARDNER, Chief Judge, and WOODROUGH and RIDDICK, Circuit Judges.
The National Garment Company shipped a carload of knitting machinery from Bushwick in New York to St. Louis, Missouri. The shipment reached its destination over the lines of the appellee railroad company, the delivering carrier. It was delivered to the initial carrier in New York on May 3, 1943, and was transported under a bill of lading which contains the following qualified benefit of insurance clause (§ 2(c)): "Any carrier or party liable on account of loss or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or on account of said property, so far as this shall not avoid the policies or contracts of insurance: Provided, That the carrier reimburse the claimant for the premium paid thereon."
The bill of lading containing this insurance clause is the Uniform Bill of Lading adopted by the Interstate Commerce Commission for use in domestic transportation by all carriers subject to the Interstate Commerce Act, as amended. See In Re Bills of Lading, 52 I.C.C. 671, April 14, 1919; 64 I.C.C. 357, October 21, 1921.
On May 4, 1943, the garment company obtained an insurance policy from The Connecticut Fire Insurance Company insuring the shipment against all loss or damage during transit to the amount of $10,000. This policy contained the following provisions:
* * * * * *
"This Policy is made and accepted subject to the foregoing stipulation and conditions * * *."
While in transit the shipment was damaged. The garment company filed a claim on the policy in which it stated that the whole amount of loss and damage to the property was $4,151. The proof of loss contained the following agreements:
The insurer paid the amount claimed, taking the following receipt from the garment company:
After receiving the insurance payment of $4,140, the garment company sued the carrier to recover all damage to the shipment, alleging that the whole amount of its loss was $6,346.53. In the complaint no reference was made to the garment company's insurance transactions. The complaint merely stated a claim against the carrier for damages.
In its answer the carrier denied the charges of negligence and damage, and in paragraph VI of its answer set up the further defense that by section 2(c) of the bill of lading, the benefit of insurance clause, it was entitled to the full benefit of the insurance carried on the shipment by the garment company; and that the garment company having received from the insurer the full amount of damage claimed in the proof of loss was estopped to claim more from the carrier.
The answer showed that the carrier was in full possession of the facts concerning the garment company's insurance transactions. It raised no question of a defect of parties plaintiff, nor did it ask to have the insurer joined as a party plaintiff.
Rule 17(a) of the Rules of Civil Procedure, 28 U.S.C.A., requires that every action shall be prosecuted in the name of the real party in interest. As the case now stands, the plaintiff is alleging a loss in excess of the amount paid by the insurer. The rule is that, in the absence of timely objection on the part of the defendant, the party suffering the loss may maintain an action for the recovery of the whole loss against the party primarily liable, although the plaintiff has been indemnified for part of his loss and the indemnifier, to the extent of the payment made, has been subrogated to the plaintiff's rights against the person primarily liable. Norwich Union Fire Ins. Society v. Standard Oil Co., 8 Cir., 59 F. 984; Fairgrieve et al. v. Marine Ins. Co. of London, 8 Cir., 94 F. 686, 688; Firemen's Ins. Co. v. Bremner, 8 Cir., 25 F.2d 75, 76; Illinois Power & Light Corp. v. Hurley, 8 Cir., 49 F.2d 681, 691; Van Wie v. United States, D.C., 77 F.Supp. 22, 33; Yale Transport Corp. v. Yellow Truck and Coach Mfg. Co., D.C., 3 F.R.D. 440, 442. In this situation there are two real parties in interest — the insurer to the extent of its payment and the insured to the extent of the difference between the payment received from the insurer and the whole loss. In the absence of objection either may maintain an action against the person primarily liable, the insurer to the extent of its payment, the insured to the extent of the whole loss. The rule against splitting a cause of action is for the benefit of the defendant and may be waived. Capital Fire Ins. Co. v. Langhorne, 8 Cir., 146 F.2d 237, 243. On objection by the defendant, the absent party should be made a party plaintiff. Where the action is by the insured for the whole loss, the defendant not objecting, the recovery is impressed with a trust for the insurer to the amount to which it is entitled by subrogation. See 3 Moore's Federal Practice, 2d Ed., § 17.09, pp. 1348, 1349.
At a pretrial hearing the court ordered the issues raised by paragraph VI of the answer heard and decided prior to the trial of the other issues raised by the pleadings. This order was followed. The only evidence produced was the bill of lading, the insurance policy, proof of loss, the company's check in payment of the loss, and the subrogation receipt given by the garment company to the insurer. No evidence was heard to establish the actual damage to the shipment, whether greater or less than the sum paid by the insurer. The actual damage to the shipment was not in issue. The sole reliance of the defense was on the insurance benefit clause of the bill of lading. The contention of the carrier was that by the insurance benefit clause of the bill of lading the carrier was given the full benefit of the insurance, and that the garment company was for that reason estopped to claim damages or loss to the shipment more than the amount which it collected from the insurer.
The court concluded as matters of law:
That the bill of lading having been executed and delivered in New York was to be construed as interpreted by the courts of that State; and
That the garment company, by the benefit of insurance clause in the bill of lading, having contracted with the carrier to give it the full benefit of the insurance, the insurer took any rights it may have had against the carrier, subject to this contract between the carrier and the shipper; that the insurer having recognized the validity of the policy and having subsequently and unconditionally paid the loss in full, neither the insurer nor the shipper might contend that the policy was void or that the carrier did not have the benefit of insurance; and that there could be no recovery in the action on the theory of subrogation. That is to say, neither the shipper nor the insurer, if a party, could recover.
The court also ruled as a matter of law that the garment company owed a duty to the carrier, created by the insurance benefit clause of the bill of lading, to assert its claim against the insurer for the full amount of the loss, and was estopped to make any other or greater claim against the carrier than made against and collected from the insurer.
Based on this interpretation of the benefit clause of the bill of lading, the trial court decided the issues in favor of the carrier and, in so doing, made a finding of fact in substance that the payment by the insurer to the garment company was in full satisfaction and discharge of all claims and demands of the garment company against the carrier for all loss and damage to the property in shipment and was a voluntary and unconditional payment.
The interpretation of the bill of lading is controlled by Federal law, not by the law of the State wh...
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