Travelers Indemnity Co. v. State Farm Mutual Auto. Ins. Co.

Decision Date25 March 1964
Docket NumberNo. 18566.,18566.
PartiesThe TRAVELERS INDEMNITY COMPANY, Edward J. Hart, Administrator of Estate of Isabelle Hart, deceased, Robert G. Clinnin, Guardian Ad Litem for Bruce Allen Ray, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Spray, Gould & Bowers, Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Schell & Delamer, Walter O. Schell and Richard B. Goethels, Los Angeles, Cal., for appellant Travelers Indemnity Co.

James G. Butler, Compton, Cal., and James T. Townsell, Inglewood, Cal., for appellant Hart.

Thorpe, Sullivan, Clinnin & Workman, and John G. Thorpe, John G. Thorpe, Los Angeles, Cal., for appellant Clinnin.

Belcher, Henzie & Biegenzahn, and David Bernard, Los Angeles, Cal., for appellee Spray, Gould & Bowers.

Crider, Tilson & Ruppe and Henry E. Kappler, Los Angeles, Cal., for appellee State Farm Mut. Auto Ins. Co.

Before POPE, JERTBERG and MERRILL, Circuit Judges.

POPE, Circuit Judge.

Isabelle M. Hart, originally the plaintiff in this action in the court below, had recovered in a California state court a money judgment against Bruce Allen Ray in the sum of $57,500 for damages on account of injuries received by Mrs. Hart as the result of Ray's negligent operation of a certain automobile. At the time of the injuries, Bruce Allen Ray was fifteen years of age. He was in the company of two other fifteen year old boys, one of whom, Thomas Risse, was the son of J. A. Risse, who owned the automobile that Ray was driving. Ray's father, James Ray, was the holder of an automobile liability policy issued by The Travelers Indemnity Company, which insured James Ray against liability for bodily injury or property damage arising out of the maintenance or use of a described "owned automobile" or any "non-owned automobile." The policy also provided for insurance of other persons, reciting that with respect to a non-owned automobile, a relative of James Ray should also be deemed an insured under the policy, "provided the actual use thereof is with the permission of the owner."

Asserting that Bruce Allen Ray was at the time here in question operating the Risse automobile with the permission of the owner and hence, that he was an insured under the policy referred to, Isabelle M. Hart brought this action as plaintiff against The Travelers Indemnity Company, seeking recovery of the amount of her judgment against Ray. Mrs. Hart's suit was pursuant to the provisions of California Insurance Code § 11580(b) (2).1

The action was commenced in the Superior Court for Los Angeles County. It was removed to the court below on the ground that plaintiff was a California citizen and that the defendant was incorporated in the state of Connecticut. Initially we notice one plainly erroneous finding of the court below. The first finding of fact was to the effect that The Travelers Indemnity Company "is now, and at all times herein mentioned was, a corporation duly organized and existing under and by virtue of the laws of the State of California." We disregard this plainly erroneous finding — obviously an inadvertent one. Clearly the court did not intend to find itself without jurisdiction.

Travelers filed its answer in the court below. It also filed a third party complaint against Edward J. Hart (husband of Isabelle), State Farm Mutual Automobile Insurance Company (which had issued a liability policy to J. A. Risse), Spray, Gould & Bowers (attorneys for State Farm Mutual), Bruce Allen Ray and Butler & Hegner (attorneys for the Harts). This third party complaint alleged that State Farm's policy of automobile liability insurance was primary insurance with policy limits here applicable of $25,000, and that the coverage afforded by Travelers' policy was excess insurance over and above any valid and collectible insurance on the automobile driven at the time of the accident. It further alleged the doing of certain acts by the third party defendants in connection with the original personal injury suit brought in the state court by Isabelle Hart against J. A. Risse and Bruce Allen Ray, including the making of certain stipulations on behalf of State Farm, which Travelers alleged was undertaken and attempted for the purpose of shifting responsibility for any judgment recovered against Ray from State Farm to Travelers, and that such was a fraud on Travelers. The disposition we make of this appeal renders it unnecessary to discuss here these claims of fraud.

Travelers prayed that it have judgment for any losses, costs and expenses it had suffered, and that, if there was any duty to indemnify Ray, that State Farm be held liable for the same. It also prayed that the rights, duties, and obligations of all the parties to the action be declared.

During the pendency of the suit below, Isabelle Hart died, and Edward J. Hart was appointed administrator of her estate. The court ordered him substituted for Isabelle Hart. Judgment was entered against Travelers for Hart in the amount of $37,239.58 (calculated in a manner hereafter explained) and in favor of the third party defendants other than Bruce Allen Ray.

The principal issue, other than the so-called "fraud" issue raised by the third party complaint, was whether the Travelers policy covered Bruce Allen Ray as an insured at the time of the accident. It was Travelers' position that Bruce Allen Ray was then driving the Risse automobile without the permission of the owner. The trial court held against Travelers on this issue, and that ruling resulted in the judgment against it. Because of the complexity of the case and the somewhat involved questions raised on this appeal, we shall proceed to outline the events which ultimately led to the institution of this suit.

On May 11, 1959, J. A. Risse owned a 1958 Oldsmobile and another automobile, both insured against public liability by State Farm in the sum of $25,000 in the event of injury to one person. The policy insured Risse and anyone driving with his permission. On the evening of that day, Risse and his wife left home in one of the automobiles for the purpose of visiting Risse's brother at a sanitarium. The Oldsmobile was left in the family garage and the door to the garage was closed. Risse asked his son Thomas about going along and the boy replied that he had homework to do and he had to stay home. Previously the father had warned him that he was not to drive either of the automobiles — "I told him that he couldn't drive, and I was severe with him, I told him if he was caught driving again, he wouldn't drive until he was eighteen, would not get his driver's license." At that time the father suspected that the son had driven a car other than the Oldsmobile. The son surreptitiously had a key made to fit that other car, and he had driven it without his parents' permission or knowledge. In order to conceal his driving he had disconnected the speedometer cable. After driving it on one occasion he had not properly reconnected the cable so that his father could hear a clicking sound. This led to the father suspecting that the son had taken that car. On one earlier occasion, the son without his parents' permission or knowledge took the Oldsmobile out and drove it. He had driven about four times previous to the accident without permission or knowledge of his parents.

After Risse and his wife had left for the sanitarium and shortly after nightfall, Thomas got into the Oldsmobile in which the key had been left by his mother. He backed it out into the street, closed the garage door, and drove the car around the corner so as to conceal the fact that he had the car from the neighbors. This was because he knew he was not supposed to have the car.2

After Thomas had parked the car around the corner he picked up another fifteen year old boy who lived across the street from him and the two of them drove to the home of Bruce Allen Ray. They parked the car down the street some distance from Ray's house so the latter's parents would not see the car. Ray got in the car and the three boys drove off. None of the boys had a driver's license or a learner's permit. Each drove the car in turn and finally, just before the accident, Ray was driving. He drove at a speed of eighty miles per hour — this on a one way street near the end of which was the Hart apartment. He was unable to negotiate a right turn as he came to the end of the street and the car was driven over the curb and into the apartment house where Mrs. Hart lived, in consequence of which she received serious personal injuries.

Isabelle Hart and her husband, as plaintiffs, then filed suit in the Superior Court for Los Angeles County against Bruce Allen Ray, J. A. Risse (named as "Joe Risse"), and four John Does, alleging that on May 11, 1959, Risse owned the Oldsmobile automobile; that on information and belief Bruce Allen Ray and two of the John Does were driving the motor vehicle with the consent and permission and knowledge of the defendant Joe Risse. The complaint also alleged that the defendants so negligently entrusted, managed, maintained, drove and operated the motor vehicle that it caused personal injury to Isabelle Hart to her damage in the sum of $30,000 and caused damage to plaintiff's furnishings in the sum of $1500.

Under the State Farm policy previously mentioned, J. A. Risse was the named insured. He was covered for bodily injury and property damage liability. Also designated as insured were Risse's relatives and "any other person while using the automobile, provided the actual use of the automobile is with the permission of the named insured. * * *" Risse promptly reported the accident to State Farm, which company proceeded to investigate, taking statements from the Risses and the two boys who were in the car at the time of the accident. State Farm concluded that Ray did not have permission from J. A. Risse and decided that it would not defend Ray, but would defend J. A. Risse only. It does not appear from the record that actual notice...

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