State Farm Mut. Automobile Ins. Co. v. Hugee

• Decision Date: 12 November 1940
• Docket Number: No. 4673.,4673.
• Citation: 132 ALR 188,115 F.2d 298
• Parties: STATE FARM MUT. AUTOMOBILE INS. CO. v. HUGEE et al.
• Court: U.S. Court of Appeals — Fourth Circuit

132 ALR 188, 115 F.2d 298 (1940)

STATE FARM MUT. AUTOMOBILE INS. CO. v. HUGEE et al.

No. 4673.

Circuit Court of Appeals, Fourth Circuit.

November 12, 1940.

Samuel Want, of Darlington, S.C., and Jack Wright, of Florence, S. C. (Royall & Wright, of Florence, S. C., on the brief), for appellant.

W. Marshall Bridges, William H. Smith, and P. H. McEachin, all of Florence, S. C. (McEachin & Townsend and W. Stokes Houck, all of Florence, S. C., and John D. Nock, of Cheraw, S. C., on the brief), for appellees.

Before PARKER, SOPER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal from an order dismissing a complaint in an action instituted to obtain a declaratory judgment under 28 U.S.C.A. § 400. Plaintiff is an insurance company of the State of Illinois. It had issued a policy of automobile liability insurance to Patton's, Inc., one of the defendants, a South Carolina corporation, operating a laundry in that state. The policy covered a laundry truck of Patton's while being operated for commercial purposes, and one of its clauses provided that plaintiff would defend any suit for damages against Patton's arising out of the operation of the truck, even though such suit should be "groundless, false or fraudulent". Other defendants are citizens of South Carolina who were injured in a collision between the truck and a bus, the driver of the bus, the bus companies which owned and operated the bus, and the administrator of the truck driver, who was killed in the collision.

The complaint as amended alleged that the truck was not being operated for commercial purposes at the time of the collision but was being operated by the driver, one McRae, "for purposes purely personal to himself"; that claims for damages arising out of the collision were not within the coverage of the policy for that reason; that Patton's had demanded that plaintiff defend any claims made against it in connection with the collision; that claims had been filed against Patton's by persons injured; that suits were about to be brought on the claims against Patton's; and that in the event of recovery in these suits claims would be made against plaintiff under the policy. It is alleged also that plaintiff would be required to employ counsel to defend the suits against Patton's and averred that the court was empowered under the Declaratory Judgment Act "to determine herein, for the benefit of all parties plaintiff and defendant, whether in fact and in law, at the time of the aforementioned incident (accident), the defendant, Patton's, Inc., is liable to the other defendants herein or any of them, and accordingly whether, under the same facts and circumstances, any liability attaches under the terms of plaintiff's policy to the defendant, Patton's Inc., and to the other defendants and in that regard the plaintiff alleges that under a proper construction of the terms of its aforesaid policy, under the facts above set forth, no liability under said policy exists, and that this plaintiff should not be put to the expense of litigating said question in the numerous individual suits that will be brought against Patton's, Inc., and against the representatives of the McRae estate involving that identical issue, but that said issue should be adjudicated herein and the question of the plaintiff's liability under the terms of its aforesaid policy should be declared in this cause."

The prayer for relief was as follows:

"(1) That none of the defendants is entitled to recover from the plaintiff the amount of said policy or any part thereof.

"(2) That each of the defendants be restrained from instituting any action against the plaintiff for the recovery of the amount of said policy or any part thereof.

"(3) That if the Court shall determine that any of the defendants are entitled to a recovery against Patton's, Inc., in such manner or under such circumstances as to involve liability on the part of the plaintiff under the terms of its aforementioned policy, then in such event the defendants be required to interplead among themselves in this Court in the present cause for the purpose of determining the respective rights and liabilities of the parties to this cause.

"(4) That the plaintiff recover its costs, and for such other and further relief as may be requisite and proper in the premises."

The defendants other than Patton's filed answers vigorously contesting the allegations of the complaint and denying the jurisdiction of the court to grant the relief prayed. Patton's filed no answer, but appeared by the same attorneys who represent plaintiff. At the hearing before the judge below they abandoned the prayer that defendants be restrained from instituting any action for recovery under the policy, but insisted on their right to a declaratory judgment. The judge dismissed the complaint on the ground that there was no actual controversy between plaintiff and Patton's, and plaintiff has appealed. In this court it has abandoned its prayer that defendants be required to interplead among themselves.

It is perfectly clear from the face of the complaint that there is no controversy between plaintiff and Patton's, either as to plaintiff's liability for the claims or as to its duty to defend suits for their enforcement. On the contrary, plaintiff alleges that it is liable to the extent of its policy for any judgment which may be obtained on such claims and that it must defend any suit thereon "even if such suit is groundless, false or fraudulent." A declaratory judgment, therefore, could not relieve plaintiff of the duty of defending suits against Patton's, except as a result of adjudicating the claims which are being asserted against Patton's, and, as we have seen, there is no controversy as to these between plaintiff and Patton's. The only controversy of either, therefore, is the controversy which they have with the claimants as to the liability of Patton's; and both deny liability for the same reason, i. e., that the driver of the truck was not operating same for a commercial purpose but for purposes purely personal to himself. The position of plaintiff then comes to this: that because the operator of a motor vehicle is insured by an out of state insurance company that agrees under its policy to defend suits against the insured, claims against the insured may be dragged into the federal courts for litigation, notwithstanding that the insured and claimant are citizens of the same...