Western Casualty and Surety Company v. Teel, 9488

Decision Date19 March 1968
Docket NumberNo. 9488,9489.,9488
Citation391 F.2d 764
PartiesThe WESTERN CASUALTY AND SURETY COMPANY, a foreign corporation, Appellant, v. John W. TEEL, Mabel C. Teel, George L. Lange, Eloise M. Lange, Leland M. Morton, Esther A. Morton, doing business as Teel Laundry and Dry Cleaning Company, Bonnie Gates, a Minor, and John Gates, Appellees. John GATES, Appellant, v. The WESTERN CASUALTY AND SURETY COMPANY, a foreign corporation, and John W. Teel, Mabel C. Teel, George L. Lange, Eloise M. Lange, Leland M. Morton, Esther A. Morton, doing business as Teel Laundry and Dry Cleaning Company, Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

Richard Dan Wagner, Tulsa, Okl. (Alfred B. Knight, Tulsa, Okl., on the brief), for The Western Casualty and Surety Co.

Jesse L. Leeds, Muskogee, Okl. (M. Dean Storts, Muskogee, Okl., on the brief), for Bonnie Gates, a Minor, and John Gates.

Joe H. Kennedy, Muskogee, Okl. (Joe R. Kennedy, Muskogee, Okl., on the brief), for John W. Teel, Mabel C. Teel, George L. Lange, Eloise M. Lange, Leland M. Morton and Esther A. Morton, doing business as Teel Laundry and Dry Cleaning Co.

Before MURRAH, Chief Judge, HILL, Circuit Judge, and CHRISTENSEN, District Judge.

HILL, Circuit Judge.

These appeals concern the legal duty of appellant to defend, and its liability to pay any judgment procured, in an action arising from personal injuries received by appellee Bonnie Gates upon the premises of the other appellees.

Appellees, Teels, Langes and Mortons were engaged in business as Teel Laundry and Dry Cleaning Company. Appellant, Western Casualty & Surety Company, insured Teel Laundry with a General Comprehensive Liability policy excluding coverage for bodily injury "to an employee of the insured arising out of and in the course of his employment of the insured." Bonnie Gates, a minor, was injured while operating a freight elevator within the premises of Teel Laundry on September 14, 1965. Bonnie Gates instituted an action by her father and next friend, John Gates, in the District Court of Muskogee County, Oklahoma, against the Teels, Langes and Mortons, doing business as Teel Laundry and Dry Cleaning Company and these defendants demanded that appellant assume the defense of the action and protect their interest by reason of the above mentioned policy. Appellant initiated this federal Declaratory Judgment action to have its rights as insurer determined alleging that no obligation existed as the policy excluded bodily injury to an employee of the insured arising out of and in the course of his employment by the insured and that at the time of the injury Bonnie Gates was an employee of the insured Teel Laundry. The trial court found that Bonnie Gates was not an employee and that the accident was covered by the insurance policy issued by appellant. Appellant takes issue with this determination. An appeal was also taken by appellees Bonnie Gates and John Gates who sought in a motion for new trial to have the declaratory action dismissed on the grounds that the district court should not have assumed jurisdiction because there was pending in the state court an identical suit between identical parties.

The first issue considered is the denial of the motion for new trial on the grounds that the federal court should not have assumed jurisdiction of a matter when there was pending in the state court an action wherein the same issues would be raised. This argument is based upon the principle stated by this court in Franklin Life Insurance Co. v. Johnson, 10 Cir., 157 F.2d 653, that a federal court will generally not entertain jurisdiction in a declaratory action if the identical issues are involved in another pending proceeding.1 Appellee Gates argues that because Western Casualty is an insurer of the Teel Laundry Company, defendant in the state court action, it is an interested party in that proceeding. This court in Duggins v. Hunt, 10 Cir., 323 F.2d 746, at 748, stated, "The questions of when to exercise jurisdiction, when to hold jurisdiction in abeyance, and when to reject jurisdiction are to be determined initially by the trial court, * * * and the judgment of the trial court will be reviewed by this court only to consider whether a clear abuse of discretion appears." It was also recognized by this court in Franklin Life Insurance Co. v. Johnson, supra, that courts should not be deterred from "giving full force and effect to the purpose of the Declaratory Judgment Act." In the instant case there was clearly no abuse by the trial court in refusing to grant appellee's motion. In Maryland Casualty Company v. Consumers Finance Service, Inc., 3 Cir., 101 F.2d 514, it was held that a trial court abused its discretion in refusing to exercise its jurisdiction in a case substantially the same as the instant case. The decision was based upon well recognized law that jurisdiction may not be refused merely on the ground that another remedy is available or because of the pendency of another suit if the controversy between the parties will not necessarily be determined in that suit. Since the issues raised by the insurer would not be determined in the state court suit by the injured party it was held to be an abuse of discretion not to hear the Federal Declaratory Judgment action. The fact that such issues might later arise in a garnishment action in the state courts does not mean that the federal courts should refuse to exercise its jurisdiction under the Declaratory Judgment Act. It was additionally recognized by this court in Franklin Life Insurance Co. v. Johnson, supra, that a declaratory action by an insurer to establish nonliability under casualty insurance was one of the prime purposes of the Declaratory Judgment Act. It should be further noted this issue was first raised on motion for new trial after trial had been held and the judgment entered. By invoking the principle asserted by appellee judicial proceedings would not be conserved but actually wasted. The potential interference with state proceedings would have to be extremely great to justify reversal of the trial court's decision to accept jurisdiction when the issue was not raised until after trial was completed. Certainly the facts of this case do not present such an extreme case.

The sole argument raised by appellant Western Casualty was that the insurance exclusion clause was unambiguous as determined by this court in Tri-State Casualty Insurance Co. v. Loper, 10 Cir., 204 F.2d 557, and that therefore its terms are to be understood in their plain, ordinary and popular sense, citing Order of United Commercial Travelers of America v. Edwards, 10 Cir., 51 F.2d 187. The issue in the instant case was whether Bonnie Gates was an employee of Teel Laundry. Appellee argues that the trial court failed to determine if Bonnie Gates was an employee as that term is understood in its plain, ordinary and popular sense, but instead feels that "The joinder of the case involving workmen's compensation may have caused the Trial Court to erroneously apply in this case a legal or technical meaning to the term `employee' as used in the Oklahoma Statutes involving child labor. * * * It is apparent that the Trial Court failed to distinguish between the compensation case and the one at bar, and applied to each the same definition of the term `employee.'" This assertion is based upon a statement made by the trial court at the conclusion of the trial when upon request of counsel the court made an oral statement of its probable decision. Therein the court stated, "Now everyone seems to feel that Bonnie Gates was an employee, at least in the non-legal or popular meaning of the word. If I understand correctly, or remember correctly, she herself in the state court action has assumed that position. But, I do not consider her an employee of the company in any way. I am of the opinion she was not an employee of the Teel Laundry in any sense of the word." This statement does not in any way support the position taken by appellant. It is patently clear that the trial court did not consider Bonnie Gates to be an employee in any sense of the use of that term, either in the plain and ordinary meaning or in the legal sense.2 This is made further clear by the trial court's findings of facts, wherein the court states, "The Court finds that * * * Bonnie Gates, a minor, was not an employee of Teel Laundry and Dry Cleaning Company, either legal or illegal, and that the Court, from the evidence finds that Bonnie Gates, a minor, was not a legal or illegal or any type of employee of the defendant, Teel Laundry and Dry Cleaning Company and the owners of the said organization." Since the trial court did not find Bonnie Gates to be an employee in any sense of the word including the popular meaning of the term, the sole issue that remains is whether the evidence supports the findings of facts necessary for the court to make the conclusion that Bonnie Gates was not an employee.

The basic facts of Bonnie's relationship to Teel Laundry are not in dispute. These facts are that Bonnie's mother, Mrs. Eleanor Jane Gates, was a regular employee at Teel Laundry. During the summer preceding the accident Bonnie Gates and other children whose mothers were also employed at Teel Laundry, folded rags and towels at the Teel Laundry on a more or less irregular basis. No set hours for their folding work were made and reimbursement for this work was to the mothers on the basis of the number of towels folded by the children. The children were under no direct supervision and the folding work done by the children was also done by regular employees of the Teel Laundry. The trial court in its findings of fact No. 4 found "The court further finds that the presence of Bonnie Gates in said Teel Laundry and Dry Cleaning Company was shown by the evidence to be a practical way of maintaining employee relations with her mother the same as they did with other mothers under similar circumstances and was a method of...

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