New York Casualty Co. v. Sinclair Refining Co.

• Decision Date: 11 December 1939
• Docket Number: No. 1874.,1874.
• Citation: 108 F.2d 65
• Parties: NEW YORK CASUALTY CO. v. SINCLAIR REFINING CO.
• Court: U.S. Court of Appeals — Tenth Circuit

108 F.2d 65 (1939)

NEW YORK CASUALTY CO. v. SINCLAIR REFINING CO.

No. 1874.

Circuit Court of Appeals, Tenth Circuit.

November 6, 1939.

Rehearing Denied December 11, 1939.

Stephen Chandler and Richard W. Fowler, both of Oklahoma City, Okl. (Troy Shelton, John W. Swinford, and Edgar S. Vaught, Jr., all of Oklahoma City, Okl., on the brief), for appellant.

Summers Hardy, of Tulsa, Okl., and John H. Miley, of Oklahoma City, Okl. (Miley, Hoffman, Williams, France & Johnson, of Oklahoma City, Okl., on the brief), for appellee.

Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.

PHILLIPS, Circuit Judge.

On September 20, 1930, Meador & Whitaker, a copartnership, entered into a construction contract with Sinclair Texas Pipe Line Company¹ to construct a section of pipe line for Sinclair in Oklahoma. It provided that in performing the contract Meador & Whitaker should be an independent contractor; that Sinclair should have neither direction nor control of the work or of the employees of Meador & Whitaker, except with respect to the results obtained; that the work should be done in a manner finally acceptable to Sinclair; that Meador & Whitaker should be liable for any injuries to third persons caused by any act or omission of it, or its agents, servants, or employees, and should indemnify and hold Sinclair harmless from any and all losses, claims, damages, and causes of action of every nature or character which might arise or be claimed to have arisen by any act or omission of Meador & Whitaker, or its agents, servants, or employees; and that Meador & Whitaker should "protect all trenches and ditches at all times by barricades and lanterns" and all things required by an ordinarily prudent person to protect third persons from injury.

In August, 1930, the New York Casualty Company² issued a liability policy to Meador & Whitaker, insuring it from August 22, 1930 to August 22, 1931, against loss from liability imposed by law for damages on account of bodily injuries accidentally suffered or alleged to have been suffered by any person or persons not employed by Meador & Whitaker. By the terms of the policy the Casualty Company's liability for loss on account of one person so injured was limited to $10,000, and subject to the same limit for each person, its total liability on account of any one accident resulting in injury to more than one person, was limited to $20,000. The policy expressly provided that the Casualty Company should defend, in the name and on behalf of Meador & Whitaker, any suits or other proceedings which might be instituted against the latter on account of such injuries, and should pay all costs assessed against Meador & Whitaker in any legal proceeding defended by the Casualty Company, all premiums on appeal bonds required in any such proceeding, and all interest accruing after entry of judgment to the date of payment by the Casualty Company of its share of such judgment. The policy further provided that prepayment of any judgment that might be recovered against Meador & Whitaker upon any claim covered by the policy should not be a condition precedent to any right of action against the Casualty Company on the policy, and that the Casualty Company was bound to the extent of its liability under the policy to pay and satisfy any such judgment, and that an action might be maintained upon any such judgment by the injured person to enforce the liability of the Casualty Company under the policy.

In September, 1930, Sinclair obtained from Grace and Sam Patterson a grant of a right of way across their land for the pipe line. Meador & Whitaker, during the course of the construction work under the contract, left an open ditch and bell hole on the Patterson premises. On May 21, 1931, H. E. Ross and Elmer Patterson commenced actions in the district court of Payne County, Oklahoma, against Sinclair and Meador & Whitaker to recover damages for personal injuries sustained by reason of falling into the open ditch and bell hole. At the request of Meador & Whitaker, the Casualty Company, pursuant to the provisions of its policy, assumed the defense of the actions, under an agreement that the Casualty Company did not thereby acknowledge liability nor waive its right thereafter to contest liability on the ground that it had not been notified by Meador & Whitaker of the accidents in accordance with the provisions of the policy. The Casualty Company retained James S. Ross to defend the actions. At the trial of the actions, H. E. Ross recovered a judgment for $25,000 and Patterson a judgment for $10,000 against Meador & Whitaker and Sinclair.

James S. Ross, counsel for the Casualty Company and attorney of record for Meador & Whitaker in the personal injury actions, and John Kilgore, counsel for Meador & Whitaker, were desirous of prosecuting appeals from such judgments and of furnishing bonds to supersede them pending appeal. They experienced difficulty in securing supersedeas bonds and at a conference with Edward H. Chandler, general counsel for Sinclair, on January 9, 1932, requested Chandler to have Sinclair provide the supersedeas bonds. Chandler stated that Sinclair was indemnified against liability under its contract with Meador & Whitaker and at first refused to provide the bonds. Kilgore expressed doubt that Meador & Whitaker could provide the bonds. Finally, Chandler stated that if Meador & Whitaker would provide indemnity to Sinclair in the amount of $20,000, and James S. Ross would get the Casualty Company to withdraw its reservation of liability and assure him, if the cases were affirmed by the Supreme Court, that the Casualty Company would pay its liability under the policy, Sinclair would arrange for the supersedeas bonds.

On January 12, 1932, James S. Ross, as attorney for the Casualty Company, wrote a letter to Chandler, the material portions of which read as follows:

"Yesterday I sent the New York Casualty Company a day letter informing it in a general way of our conference and the result of it and requesting that I be permitted to notify you, as attorney for the Sinclair Texas Pipe Line Company, and Meador and Whitaker that it withdrew its reservations of right to disclaim liability to Meador and Whitaker under the policy covering the accident out of which the two above entitled cases grew and received an answer to the effect that I might withdraw the reservations. This I am now doing.

"So, as the cases stand, the liability insurance policy carried by Meador and Whitaker with the New York Casualty Company at the time of the alleged accidents to Ross and Patterson occurred was in force and that as the insured therein, they are fully protected by and entitled to all of the benefits of the conditions of this policy.

"I presume that the above statement from me, as attorney for the New York Casualty Company, fully meets the requirements which you, as attorney for the Sinclair Texas Pipe Line Company, made as a condition to your client signing the supersedeas bonds in these actions. I am sending an extra carbon copy of this letter which you may transmit or deliver to Meador and Whitaker."

Chandler advised James S. Ross that he did not question his authority, but that he would not provide the supersedeas bonds unless he had a telegram from the Casualty Company to the effect that if the cases were affirmed the Casualty Company would pay the amount of its liability under the policy. On January 15, 1932, the Casualty Company wired Chandler as follows:

"Referring Cases Ross and Patterson Versus Sinclair Texas Pipe Line Co and Meador Whitaker District Court Payne County Oklahoma at the Time Accident Out of Which These Lawsuits Grew Meador and Whitaker Had Liability Policy With New York Casualty Company Indemnifying Them in Both Cases not Exceeding Twenty Thousand Dollars Therefore If These Judgments Be Affirmed by Supreme Court Oklahoma the Company Will Recognize Its Liability as Insurance Carrier for Meador and Whitaker to Plaintiffs in Those Cases Not Exceeding Twenty Thousand Dollars in Both Cases in Addition to Costs and Interest the Exact Amount of Our Liability Being Left Open Future Determination Bases on Policy Referred to."

Thereupon, Sinclair caused supersedeas bonds to be executed by itself and Meador & Whitaker, as principals, and the United States Fidelity & Guaranty Company, as surety, and to be filed and approved in the district court of Payne County, Oklahoma, superseding the H. E. Ross and Patterson judgments.

The H. E. Ross and Patterson judgments were affirmed by the Supreme Court of Oklahoma.³ Sinclair made demand upon the Casualty Company to pay its share of the judgments, including interest and costs. The Casualty Company failed and refused to make such payment. On February 20, 1936, Sinclair, to avoid execution, paid the judgments in full. The amounts paid on the H. E. Ross judgment were $25,000 principal, $6,329.17 interest, and $187.75 costs. The amounts paid on the Patterson judgment were $10,000 principal, $2,528.33 interest, and $134.15 costs.

Sinclair brought this suit against the Casualty Company. In its petition Sinclair set up four causes of action. The first cause of action was predicated upon the telegram of January 15, 1932, from the Casualty Company to Chandler. The second cause of action sought recovery on the theory that Sinclair was subrogated to the rights of Meador & Whitaker under the policy. The third cause of action was predicated upon an alleged promise of the Casualty Company, in the event the H. E. Ross and Patterson judgments should be affirmed, to recognize its liability as insurance carrier for Meador & Whitaker in the sum of $20,000, and interest and costs, and to pay the amount thereof on the judgments.

On the first, second, and third causes of action Sinclair sought recovery of $20,000, together with interest and costs amounting to $9,179.40, an aggregate of $29,179.40, together with interest at six per cent per annum from February 20, 1936.

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