Wade v. New York Fire Ins. Co.

• Citation: 111 F. Supp. 748
• Decision Date: 16 April 1953
• Docket Number: No. 1079.,1079.
• Parties: WADE et al. v. NEW YORK FIRE INS. CO. et al.
• Court: U.S. District Court — Eastern District of Washington

111 F. Supp. 748

WADE et al. v. NEW YORK FIRE INS. CO. et al.

No. 1079.

United States District Court E. D. Washington, N. D.

April 16, 1953.^*

Graham, Green, Howe & Dunn and Frank T. Rosenquist, Seattle, Wash., O'Connor & O'Connor, Wenatchee, Wash., for plaintiffs.

Clarke, Clarke & Albertson, Seattle, Wash., for defendants New York Fire Ins. Co., Gould & Gould, and H. O. Price.

Hughes & Jeffers, Wenatchee, Wash., for defendant R. S. Meenach.

DRIVER, District Judge.

Plaintiffs, a Washington state resident and a domestic corporation, move to remand this action to the state court from which it was removed by defendant New York Fire Insurance Company, a New York corporation. Defendant Gould & Gould is a Washington corporation, and defendants H. O. Price and R. S. Meenach are residents of the state. The petition for removal alleges that plaintiffs fraudulently joined the resident defendants, but the allegation has not been sustained. There is no contention that the issue of fraudulent joinder is now before the court. The only question presented is whether there is a separate and independent claim or cause of action against the foreign corporation defendant, such as to authorize removal to federal court under section 1441(c) of Title 28, U.S.C.A.¹

The complaint contains two separately stated causes of action. Its pertinent allegations will be summarized briefly.

First Cause of Action: Plaintiffs owned and operated a fruit warehouse and packing plant, in Wenatchee, Washington, on which they procured from defendant New York Fire Insurance Company, through its authorized agents, the resident defendants, a fire insurance policy, with a business interruption insurance endorsement attached, in the amount of $80,000. Before the expiration of the term of the policy, a fire partially destroyed plaintiffs' establishment, causing suspension of business, loss of profits, fixed charges, and expenses in a sum substantially in excess of the amount of the policy.

Second Cause of Action: A considerable portion of the loss of profits, mentioned in the first cause of action, consisted of buying and selling profits, which plaintiffs would have earned by selling fruit acquired from the owners. For many years before the insurance was procured, as defendants knew, plaintiffs had been engaged in the business of buying and selling fruit warehoused in their building. Prior to and at the time of the issuance and delivery of the policy, the resident defendants, acting within the actual and apparent scope of their authority as agents of defendant insurance company, represented to and agreed with plaintiffs that loss of buying and selling profits was within the insurance coverage. Plaintiffs knew that the individual resident defendants had been engaged in the insurance business for many years and relied upon their advice, representations, and agreements in purchasing the policy. The insurance company defendant has denied liability for loss of buying and selling profits on the ground that the insurance does not cover such loss. If the company's position is sustained, then plaintiffs have been damaged by the representations and agreements of the individual resident defendants in the amount plaintiffs would have received, if buying and selling profits had been covered by the policy.

In the prayer of the complaint, plaintiffs ask for judgment against defendant insurance company, on the first cause of action, for the full amount of the policy; and, in the alternative, in the event the judgment against that defendant does not cover buying and selling profits, they ask for judgment against the resident defendants, on the second cause of action, on account of the loss of such profits.

In the recent case of American Fire and Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 538, 95 L.Ed. 702, the Supreme Court had occasion to consider and apply the "separate and independent claim or cause of action" ground for removal of section 1441(c), 28 U.S.C.A. The court pointed out that, by the enactment of the statute, Congress intended to avoid the difficulties experienced with the old "separable controversy" test of section 71, Title 28, U.S. C.A. (1946 Ed.) and to limit removal. The court gave "cause of action" a broad meaning, consistent with the congressional intent, and expressed the conclusion "that where there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under § 1441(c)." 341 U.S. at page 14, 71 S.Ct. at page 540. There, as in the present case, a resident plaintiff was doubtful as to whether foreign insurance companies, or their resident agent, were liable for the loss by fire of her property. Her pleading alleged that the insurance companies insured her property through their agent; that the agent controlled plaintiff's insurance and agreed to keep her property insured at all times; that the companies issued the policies, but the agent retained them in his possession and refused to deliver them to her after the fire. She asked for joint and several judgment against all of the defendants. The court held that there was only a single wrong for which relief was sought, namely, the failure to pay compensation for loss on the property, and directed that the action be remanded to the state court. At the bottom of page 14 of 341 U.S., at page 540 of 71 S.Ct. of the opinion, in footnote 13, there is set out the following quotation from Moore's Commentary on the U. S. Judicial Code (pp. 251-252), which is particularly applicable to the present case because of its reference to alternative liability:

"But where the plaintiff joins two or more defendants to recover damages for one injury, and even though he charges them with joint and several liability or only several liability, or charges them with liability in the alternative, there is no joinder of separate and independent causes of action within the meaning of § 1441(c). At most a separable controversy is presented where several or alternative liability is alleged, and is no longer the basis for removal."²

The foregoing quotation is set out also in the opinion in Chason Bros. v. Insurance Co. of North America, D.C., 102 F. Supp. 803, 805. The case is, factually, quite similar to the case at bar. There, the complaint asserted that plaintiff, a domestic corporation, requested a resident defendant insurance broker to place insurance covering loss or damage to plaintiff's goods in transit to, or in possession of, a prospective purchaser; that the broker informed plaintiff such insurance coverage had been obtained from defendant foreign insurance company; that, in reliance thereon, plaintiff delivered the goods and sustained a loss; and that defendant insurance company denied liability on the ground that the loss was not covered by the...