Seigler v. American Surety Company

• Decision Date: 25 April 1957
• Docket Number: Civ. No. 7497.
• Citation: 151 F. Supp. 556
• Parties: Roberta SEIGLER et al., Plaintiffs, v. AMERICAN SURETY COMPANY OF NEW YORK, a corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of California

151 F. Supp. 556

Roberta SEIGLER et al., Plaintiffs, v. AMERICAN SURETY COMPANY OF NEW YORK, a corporation, et al., Defendants.

Civ. No. 7497.

United States District Court N. D. California, N. D.

April 25, 1957.

Burton, Lee & Hennessy, Yreka, Cal., for plaintiffs.

Ware & Kutz, Chico, Cal., and Johnson, Davies & Greve, Sacramento, Cal., for defendants.

HALBERT, District Judge.

Basing its claim on diversity of citizenship between the parties to the action, defendant American Surety Company of New York (hereinafter referred to as American Surety) has removed this action to this Court from the Superior Court of the State of California, in and for the County of Siskiyou, where it was originally instituted by the plaintiffs. The action arises out of a contract of insurance. There is no dispute about the jurisdictional amount. The issue of diversity of citizenship of the parties cannot, however, be so readily resolved. It is patent from the record that plaintiffs are citizens of California; that the defendant, American Surety, is a New York corporation; and that all other defendants are citizens of the State of California. In support of its claim that diversity of citizenship exists between the parties to this action, American Surety contends that while its co-defendants are admittedly citizens and residents of California (like plaintiffs) these co-defendants are merely nominal or informal parties, and as such, their joinder cannot defeat federal jurisdiction.

Plaintiffs have filed a timely motion to remand the action to the state court based on several grounds, one of which is that American Surety has lost its right to remove the action by failing to file its petition within the time prescribed by § 1446(b) of Title 28 U.S.C.A. The Court does not feel it necessary to reach any of the other issues raised by the parties, as it is apparent that the motion to remand must be granted on this latter ground.

It appears from the record that plaintiffs recovered in an action pending in the Superior Court of the State of California, in and for the County of Siskiyou, a judgment (by default) against defendant, Joan Scott, for damages arising out of her negligent operation of a motor vehicle on March 8, 1956. On July 2, 1956, plaintiffs filed their original complaint in this action against American Surety, and T. M. Barnum, the alleged resident agent of American Surety, seeking recovery on the judgment against Joan Scott. The single cause of action sought to be stated in this original complaint was predicated on the theory that American Surety, acting through its agent, Barnum, agreed to insure the parents of Joan Scott, namely, Harold E. and Betty Scott (all three are defendants here), for public liability arising out of the use and operation of a motor vehicle owned by said Harold E. and Betty Scott, and that the insurance contract provided coverage for liability arising out of the use and operation of the automobile by said Joan Scott, insureds' minor daughter, as well. It does not appear from the record before this Court when the Summons was served in the original action, but it was issued on July 2, 1956. It does, however, appear from the record that on August 2, 1956, plaintiffs and defendants, acting through their attorneys (the same attorneys who now appear before this Court on behalf of these same parties), entered into a stipulation vacating a judgment entered by default against Barnum on July 19, 1956. On August 7, 1956, American Surety and Barnum filed a demurrer to the original complaint alleging, inter alia, that the complaint failed to state a cause of action against the agent, Barnum. On August 10, 1956, an order was entered by the Superior Court in Siskiyou County vacating the default judgment against Barnum, pursuant to the stipulation of the parties.

The record before this Court does not disclose what occurred in the interim, but it does appear that on September 5, 1956, plaintiffs served an amended complaint on defendants (the date it was filed does not appear) alleging for the first time, in addition to the cause of action ex contractu against American Surety, which plaintiffs had previously alleged in their original complaint, two separate causes of action against Barnum, the agent of American Surety. These new causes of action were for fraud, it being claimed in each instance that Barnum was acting in excess of the authority given him by American Surety. On September 15, 1956, American Surety and Barnum served on plaintiffs their demurrer to plaintiffs' first amended complaint (again, the date it was filed does not appear) alleging once again, that the complaint failed to state a cause of action against Barnum. Defendants at this time argued affirmatively, among other things, that Barnum was joined only for the purpose of defeating American Surety's right to remove the action to the Federal Court.

On September 27, 1956, the Superior Court in Siskiyou County handed down a "Ruling on Demurrer" in which it was held that the cause of action alleged against American Surety was sufficient, but that the two causes of action for fraud against Barnum were wanting in the elements necessary to state a claim. The Court concluded that the two causes of action for fraud were improperly joined with the contract cause of action alleged against American Surety for the reasons that they were inconsistent, and were depriving American Surety of its right to remove the action to the Federal Court, and on this basis the Superior Court ordered plaintiffs to make an election between the fraud claim and the contract claim.

On January 11, 1957, plaintiffs filed their second amended complaint, where (as the result of the Superior Court's order) for the first time they elected to proceed against American Surety on the contract claim alone. Plaintiffs did, however, at this time join as co-defendants of American Surety, the defendants, Harold E. and Betty Scott. This second amended complaint was served on American Surety on January 2, 1957, and on January 22, 1957, American Surety filed its petition for removal....