Pacific Coast Casualty Co. v. General Bonding & Casualty Ins Co.

• Decision Date: 05 March 1917
• Docket Number: 2735.
• Citation: 240 F. 36
• Parties: PACIFIC COAST CASUALTY CO. v. GENERAL BONDING & CASUALTY INS. CO. [1]
• Court: U.S. Court of Appeals — Ninth Circuit

240 F. 36

PACIFIC COAST CASUALTY CO. v. GENERAL BONDING & CASUALTY INS. CO. ^[1]

No. 2735.

United States Court of Appeals, Ninth Circuit.

March 5, 1917

Myrick & Deering and James Walter Scott, all of San Francisco, Cal for plaintiff in error.

R. S Gray, of San Francisco, Cal., and Locke & Locke, of Dallas Tex., for defendant in error.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

HUNT Circuit Judge.

The General Bonding & Casualty Insurance Company, plaintiff below, here called the 'Bonding Company,' recovered judgment against the Pacific Coast Casualty Company, here called the 'Pacific Company.' The Pacific Company sued out writ of error. The case as found by the District Court is this:

The Pacific Company of California issued to Elmo Rock Company a policy of employer's liability insurance by which the Pacific Company insured the Rock Company, a Texas corporation, for the term of a year ending June 18, 1912, on account of an accident to any of its employes 'against loss and expense arising from claims upon the assured for damages on account of bodily injuries accidentally suffered or alleged to have been suffered during the period of the policy. ' Under the policy the Pacific Company agreed that, if suit should be brought against the Rock Company on account of an accident, the Pacific Company would at its own expense settle or defend the suit whether groundless or not and that the moneys expended in such defense would not be included in the limits of the liability fixed by the policy. The policy also contained this clause:

'The assured shall not assume any liability, nor interfere with any negotiation for settlement or any legal proceeding, nor incur any expense nor settle any claim except at its own cost, without the written consent of the company.'

The policy further provided that no action would lie for any loss or expense thereunder unless it was brought for loss or expense actually sustained and paid in satisfaction of a final judgment within 90 days from the date of judgment and after trial of the issue.

In 1911 when the policy was in force, one J. B. Sowders, an employe of the Rock Company, suffered personal injuries in crushing rock for the Rock Company. Sowders sued the Rock Company in the state courts of Texas. The Pacific Company defended and managed and controlled the action in accordance with the provisions of the policy, conducting the defense through John Davis, Esq., of the firm of Meador & Davis, attorneys at law of Dallas, Tex., who were generally employed by the Pacific Company in litigation in the neighborhood of Dallas. In June, 1912, Sowders recovered judgment against the Rock Company for $5,000 with interest and costs. By letter dated June 28, 1912, the Pacific Company advised Meador & Davis to proceed with an appeal in the case, the letter also saying, 'But you will understand that we do not furnish a supersedeas bond staying execution. ' Meador & Davis then requested the Rock Company to furnish a supersedeas bond, but the company refused to do so upon the ground that the Pacific Company should do this. Davis wrote again urging that the Rock Company furnish the bond. A copy of this correspondence was forwarded to the Pacific Company at San Francisco, and on July 30, 1912, it wrote to Meador & Davis, saying:

'We indorse your action taken in this matter and will ask you to proceed with the appeal, but the assured must furnish its own supersedeas bond.'

Leeds, managing partner of Miller-Stemmons Company of Galveston, agents of the Pacific Company, then urged the Bonding Company to make a supersedeas appeal bond. That company agreed to give the bond if indemnity bond were obtained from the Pacific Company, and later indemnity bond was procured through Messrs. Meador & Davis, and supersedeas bond was executed on August 6, 1912. The indemnity contract was signed, 'Pacific Coast Casualty Company, by John Davis, Its Attorney at Law and in Fact. ' The contract, after reciting the bringing of suit by Sowders against the Rock Company, the desire to appeal from the judgment, and that a supersedeas bond of $11,000 was required to perfect the appeal, and that the General Bonding Company had agreed to execute the supersedeas bond, provided that the Pacific Coast Casualty Company would indemnify the General Bonding Company against any and all loss, charges, fees, damages, and expenses which might be sustained by reason of having executed the supersedeas bond as surety. The premium for the supersedeas bond was paid to the Bonding Company by the Pacific Company through the agents of the Pacific Company in Galveston, Tex. The lower court found that Stephenson, who was president of and acted for the Bonding Company, did not know of any limitations upon the authority of Davis, but dealt with him believing that his authority was that which was 'usual in such cases and was apparently possessed' by Davis; but both Davis, attorney, and Leeds, who was the managing partner of the agents of the Pacific Company, knew of the transaction with Stephenson and of the giving of the indemnity contract already referred to. In due time the judgment in favor of Sowders against the the Rock Company was affirmed on appeal, and judgment was rendered against the Rock Company and the General Bonding Company as surety, upon which judgment execution was issued, and under it the real and personal property of the Rock Company was levied upon. Thereafter, in a judicial proceeding in the state court a receiver was appointed for the Rock Company, and the sheriff turned over the property levied upon to the receiver under orders of the state court and made a return of his execution as unsatisfied, without having sold the property. Thereupon an alias writ was issued commanding the sheriff to make the amount of the judgment and interest and costs out of the property of the Bonding Company. Thereafter in October, 1913, the Bonding Company paid to the owners of the judgment in Sowders v. Rock Company the money due on the judgment, including interest and costs, and in consideration of payment of the judgment the owners thereof assigned the judgment to the Bonding Company and the receiver of the Rock Company under order of the state court assigned to the Bonding Company the employer's liability policy issued by the Pacific Company. Afterwards the Bonding Company demanded from the Pacific Company the payment of $5,560.90 in settlement of its obligations under the policy of employer's liability insurance and the contract of indemnity. Payment was refused, and this action followed.

The District Court held that: (1) When the Pacific Company authorized Davis, its attorney, to take an appeal, it empowered him to do all that was necessary to make the appeal effective, notwithstanding the clause in the letter of the company to Davis saying that the assured must furnish the supersedeas bond; and (2) that under the evidence the Pacific...