STATE FARM MUT. AUTO. INS. v. Allstate Ins.

• Decision Date: 23 July 2004
• Docket Number: No. S-03-443.,S-03-443.
• Citation: STATE FARM MUT. AUTO. INS. v. Allstate Ins., 684 N.W.2d 14, 268 Neb. 439 (Neb. 2004)
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, appellee and cross-appellant, and Paul Steenson, appellant, v. ALLSTATE INSURANCE COMPANY, et al., appellees and cross-appellees.
• Court: Nebraska Supreme Court

684 N.W.2d 14

268 Neb. 439

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, appellee and cross-appellant, andPaul Steenson, appellant, v.ALLSTATE INSURANCE COMPANY, et al., appellees and cross-appellees.

No. S-03-443.

Supreme Court of Nebraska.

July 23, 2004.

Michael G. Reilly, of Reilly, Petersen, Hannan & Dreismeier, P.L.C., Council Bluffs, IA, and Diana J. Vogt for appellant.

Waldine H. Olson, of Nolan, Olson, Hansen, Fieber & Lautenbaugh, L.L.P., Omaha, for appelleeAllstate Insurance Company.

Mark C. Laughlin and Timothy J. Thalken, of Fraser, Stryker, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for appelleeState Farm Mutual Automobile Insurance Company.

HENDRY, C.J., and CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

INTRODUCTION

This is an appeal from the March 19, 2003, order of the district court for Douglas County dismissing this declaratory judgment action.The action was brought by appellee and cross-appellant, State Farm Mutual Automobile Insurance Company(State Farm), against appelleesAllstate Insurance Company(Allstate), H. Michael Harvey, and Gerald Campbell and appellant, Paul Steenson.Steenson was realigned with State Farm during the trial proceedings.

In its petition for declaratory relief, filed under Neb.Rev.Stat. § 25-21,149 et seq.(Reissue 1995 &Cum.Supp.2000) on November 2, 2001, State Farm sought a declaration of the rights, duties, and obligations of the parties arising from an automobile accident which occurred on July 28, 1997, in Omaha, Nebraska.It is agreed that Campbell, driving a vehicle owned by Harvey and insured by Allstate, collided with a vehicle owned by Steenson and insured by State Farm.Campbell was uninsured.Allstate denied coverage on the basis that Campbell was driving without Harvey's permission.

In a separate personal injury action (the underlying action) filed on July 26, 2001, Steenson sought damages from Campbell or alternatively from State Farm under uninsured motorist insurance provisions.State Farm was served and appeared in the underlying action.Steenson published service on Campbell on January 16, 23, and 30, 2002.

In the instant declaratory judgment case, the district court concluded that service on Campbell had not been completed within 6 months of the filing of the petition in the underlying action, as required by Neb.Rev.Stat. § 25-217(Reissue 1995), and that the underlying action stood dismissed.The district court reasoned that because there was "no viable claim" against Campbell and because Allstate had no obligation to defend or indemnify, there was no justiciable controversy involved in the instant declaratory judgment action.Based on this reasoning, the district court dismissed this declaratory judgment action.Steenson appealed, and State Farm cross-appealed.

For the reasons outlined below, we agree with the district court's legal conclusion that because Campbell was not served within 6 months of the date the petition was filed in the underlying action, the underlying action stood dismissed as to Campbell.However, given the fact of State Farm's appearance in the underlying action, we disagree with the district court's further determination that the entire underlying action stood dismissed.We disagree with the district court's reasoning that there are no justiciable issues among the parties, which reasoning was the basis for dismissal of this declaratory judgment action.In particular, whether Campbell was driving with Harvey's permission has not been adjudicated, and resolution of this issue bears on resolution of Steenson's claim for uninsured motorist coverage from State Farm, which claim remains an actual unresolved controversy.However, because the pending underlying action between Steenson and State Farm provides an equally serviceable remedy for resolution of the remaining issues between the parties, we do not find error in the district court's dismissal of this declaratory judgment action.Thus, for reasons other than those asserted by the district court, we affirm.

BACKGROUND

On July 28, 1997, Steenson was involved in an automobile accident with Campbell.At the time of the accident, Campbell was driving a vehicle owned by Harvey.Steenson's vehicle was insured by State Farm, Harvey's vehicle was insured by Allstate, and Campbell had no automobile insurance.Steenson made a claim on Allstate for the injuries he received as a result of the accident.Allstate investigated the claim and determined that Campbell was driving Harvey's vehicle without permission.Allstate denied the claim.Steenson then made a claim against State Farm, asserting that Campbell was an uninsured motorist.

On July 26, 2001, Steenson filed the underlying action against Campbell in the district court for Douglas County, seeking damages for the personal injuries he received in the July 28, 1997, automobile accident.This lawsuit is governed by a 4-year statute of limitations.SeeNeb.Rev.Stat. § 25-207(Reissue 1995).The parties agree that the underlying action was later amended to include Steenson's claim against State Farm for uninsured motorist coverage, and State Farm appeared in the action.

On November 2, 2001, State Farm filed the instant declaratory judgment action against Allstate, Harvey, Campbell, and Steenson, seeking judgment in its favor declaring the following:

1.That no State Farm automobile insurance coverage exists under the uninsurance provision of the State Farm Policy for Defendant Steenson in any way relating to or arising out of the collision;

2.That State Farm is under no duty to either defend or pay any judgment in regard to the [underlying action]; and

3.That the terms of the Allstate policy obligate Allstate to indemnify and defend Campbell;

4.That Allstate wrongfully denied liability under the terms of its policy with Harvey;

5.Any other further just and equitable relief which this Court deems necessary.

During the trial court proceedings, Steenson became realigned with State Farm.

On November 14, 2001, in the underlying action, Steenson filed a motion for order for substitute and constructive service of process upon Campbell, whom the parties could not locate.SeeNeb.Rev.Stat. § 25-519(Cum.Supp.2000).On November 16, the district court granted the motion and authorized service on Campbell by publication.Publication occurred on January 16, 23, and 30, 2002.

The declaratory judgment action was scheduled for trial on February 10, 2003.On February 8, Allstate filed a motion seeking dismissal of the declaratory judgment action.Allstate claimed that Steenson had not obtained service of process upon Campbell within 6 months of the filing of the underlying action and that by operation of law under § 25-217, the underlying action stood dismissed.Allstate claimed that the declaratory judgment action had become nonjusticiable as a result of the dismissal of the underlying action.In sum, Allstate asserted that as a result of the dismissal of the underlying action, the issues in the declaratory judgment action had been rendered moot and required dismissal.

The parties waived their right to a jury trial, and two evidentiary hearings were conducted.At the first hearing, certain documentary exhibits, including the insurance policies, were received into evidence.One exhibit shows that Harvey had become an incapacitated person and that letters of guardianship had been issued.No live testimony was offered.The deposition of Campbell was received in lieu of live testimony.The substance of his testimony was that Harvey had given Campbell permission to drive Harvey's vehicle on July 28, 1997.At the second hearing, Allstate offered and the court received into evidence several pleadings and other documents relating to service of process in the underlying action.Included in these exhibits were the petition filed in the underlying action, the motion for constructive service, the order on constructive service, and the affidavit of proof of service.

At the conclusion of the second hearing, the district court stated that Campbell had not been served within 6 months of the filing of the petition in the underlying action and that as a result, the underlying action "was automatically dismissed pursuant to Neb.Rev.Stat. 25-217."In its written order, the district court stated that the court in the underlying action "lost jurisdiction to make any further orders, except those orders necessary to formalize the dismissal of the action."The district court also observed that the statute of limitations on the potential action by Steenson against Campbell had run on July 28, 2001, 2 days after the petition in the underlying action was filed.The district court reasoned that because there was no longer any claim against Campbell in the underlying action for which Allstate could be obligated to defend or indemnify, the declaratory judgment action which, in part, sought a declaration of rights concerning Campbell and Allstate should be dismissed.The district court dismissed the declaratory judgment action.

Steenson appealed, and State Farm cross-appealed.

ASSIGNMENTS OF ERROR

Steenson assigns nine errors.We find no merit to any of the errors assigned.Our discussion below is limited to Steenson's claim, restated, that the district court erred when it concluded that when only two of the three publications required under § 25-519 had occurred within the 6 months' timeframe provided in § 25-217, Campbell had not been served.State Farm, as appellee and cross-appellant, assigns four errors, all essentially claiming that the district court erred in dismissing the declaratory judgment action.

STANDARDS OF REVIEW

An action for declaratory judgment is sui generis; whether such action is to be treated as one at law or one in equity is to be determined by the nature of the dispute.Gast v. Peters,267 Neb. 18, 671 N.W.2d 758(2003).

In an appeal from a declaratory judgment, an appellate...