Whitehead v. Van Leuven

• Decision Date: 01 September 1972
• Docket Number: Civ. No. 1-71-8.
• Citation: 347 F. Supp. 505
• Parties: Trevor R. WHITEHEAD, Plaintiff, v. Kathryn VAN LEUVEN, now known as Kathryn Chase, and Sharon Eileen McConnell, now known as Sharon Eileen Patterson, Defendants.
• Court: U.S. District Court — District of Idaho

347 F. Supp. 505

Trevor R. WHITEHEAD, Plaintiff, v. Kathryn VAN LEUVEN, now known as Kathryn Chase, and Sharon Eileen McConnell, now known as Sharon Eileen Patterson, Defendants.

Civ. No. 1-71-8.

United States District Court, D. Idaho.

September 1, 1972.

Hawley, Troxell, Ennis & Hawley, Boise, Idaho, for plaintiff.

Elam, Burke, Jeppesen, Evans & Boyd, Boise, Idaho, for defendants.

MEMORANDUM DECISION AND ORDER

ANDERSON, District Judge.

This personal injury case has gone to judgment after jury trial. It is now before the Court on plaintiff's proceedings supplementary to, and in aid of, satisfaction of the judgment against defendants Patterson and Van Leuven. Judgment was entered against defendants for $74,710.52. Thereafter, the liability insurance carriers for defendants paid $33,799.70 on behalf of defendants to apply in reduction of the judgment. The unsatisfied balance of the judgment is $41,716.18.

By uncontradicted affidavits it appears that defendants, young ladies of college age, have no unexempt property that can be reached by execution in satisfaction of the judgment. A showing is further made that defendants have, or may have, a claim or cause of action against their respective insurance carriers for a wrongful failure of those companies to settle within the policy limits. From all that appears of record, the insurance companies, by their attorneys, handled all aspects of this case from beginning to end and Patterson and Van Leuven did not, and do not now, have independent counsel of record. The plaintiff's affidavit asserts that demand has been made upon Patterson and Van Leuven for assignment of their alleged claims upon the giving of a covenant not to execute, that this request has been denied and that, of course, the insurance companies deny that any such claim or cause of action exists.

After oral argument and briefing, plaintiff finally rests his case on several sections of the Idaho Code under the title "Proceedings Supplementary to Execution." They are as follows:

"11-506. Application of judgment debtor's property to satisfaction of execution. — The judge or referee may order any money or property of a judgment debtor not exempt from execution, in the hands of such debtor or any other person, or due to the judgment debtor, to be applied toward the satisfaction of the judgment. C.C. P.1881, § 465; R.S., R.C., & C.L., § 4509; C.S., § 6946; I.C.A., § 8-506."

On its face this section would seem to intend to cover established property rights and liquidated claims of the judgment debtor.

"11-507. Proceedings against defendant's debtor. — If it appears that a person or corporation, alleged to have money or property of the judgment debtor, or to be indebted to him, claims an interest in the money or property adverse to him, or denies the debt, the court or judge may authorize, by an order made to that effect, the judgment creditor to institute an action against such person or corporation for the recovery of such interest or debt; and the court or judge may, by order, forbid a transfer or other disposition of such interest or debt, until an action can be commenced and prosecuted to judgment. Such order may be modified or vacated by the judge granting the same, or the court in which the action is brought, at any time, upon such terms as may be just. C.C.P.1881, § 466; R.S., R.C., & C.L., § 4510; C.S., § 6947; I.C.A., § 8-507." (Emphasis added.)

When compared to Sec. 11-506, I.C., supra, this section would seem to refer to and cover disputed and unliquidated money or property rights or claims.

From the research of counsel and the Court's own, this would appear to be a case of first impression in Idaho, thus the Court is confronted with the inspirational approach of deciding what is, or will be, the Idaho law on the issue.

Plaintiff vigorously contends that Mewes v. Jacobson, 70 Idaho 427, 220 P.2d 681 (1950) lays the matter at rest. Just as vigorously defendants assert that it does not and that it is distinguishable. The facts recited in Mewes are meager. Mewes obtained judgment against Jacobson for $7,500.00. Thereafter Mewes cited Jacobson's insurance carrier into court pursuant to Sections 11-504 and 11-505, Idaho Code, to answer interrogatories concerning any money alleged to be owing to Jacobson. The insurance carrier, through its officers and attorney, denied any liability (coverage) to Jacobson. After hearing, the trial court found liability to Jacobson from his carrier and entered a summary judgment against it for $7,500.00. On appeal the Idaho Supreme Court held that the trial court exceeded its jurisdiction under the statutes by entering judgment, but did hold that under Sec. 11-507, I.C., supra, the trial court did have the power to authorize the judgment creditor to institute a plenary action against the insurance carrier to litigate with it Jacobson's alleged claim or cause of action.

Counsel for the defendants has examined the transcript on appeal in Mewes v. Jacobson, supra, and, in addition to facts set forth in the opinion in that case, now reports to this court that the insurance company's attorney conceded in open court that the judgment creditor (the injured party in a personal injury suit) could, by court order, bring an action against the insurance company to determine its liability for the loss, undoubtedly, having reference to Sec. 11-507, Idaho Code. Defendants here then conclude from this that the litigation ensued by consent and, therefore, the case cannot be regarded as precedent. With the greatest respect for counsel's reasoning, it does not appeal. It seems to be just as reasonable to conclude that the company attorney in the Mewes case conceded the plain language of Sec. 11-507, I.C., and its applicability to the predicament in which he found himself.

Additionally, defendants' counsel here advises this Court that Mewes involved the issue of public liability coverage for its alleged insured and then concludes, correctly, that the cause of action there arose out of contract and did not involve a claim of excess liability nor arise out of a claimed tort — presumably meaning fraud or bad faith in failing or refusing to settle within the policy limits. These additional reported facts in the Mewes case are, of course, accepted as being true and correct. Nevertheless, they are not in the opinion of the Court dispositive of the issue here.

While Mewes may not go precisely to the point here, it is persuasive guidance as to what the Idaho Supreme Court might do if presented with the issue, especially when read in conjunction with Ch. 5, Title 11, Idaho Code, and the plain language of Sec. 11-507, Idaho Code, and Secs. 5-302, I.C. and 55-402, I.C., infra, both of which are discussed later.

Defendants' counsel then argues the "flood gate" doctrine and gives the example that a judgment creditor of a farmer could conduct an investigation to determine whether the farmer might have been wrongfully flooded by a neighbor, and, contrary to the wishes of the farmer, appropriate the cause of action to himself to satisfy his judgment claim and that, therefore, there would be endless litigation. The "flood gate" doctrine has never been a reason for denying a legal right and remedy if, in fact, the law recognizes its existence. Defendants' argument and attempted analogy fails for another reason. Defendants themselves cite authority for the proposition that while a personal tort action may not be the subject of a creditor's suit — "it is otherwise as to a right of action for conversion of or injury to property." 21 C.J.S. Creditors' Suits § 29, p. 1071. In defendants' example of the wrongfully flooded farmer we are speaking of injury to property.

Defendants cite and rely mainly upon several cases which hold that a personal injury claim sounding in tort, not reduced to judgment, is not a debt which can be reached by garnishment. For example, Coty v. Cogswell (Mont.1935), 50 P.2d 249. This line of cases is inappropriate here. We are not dealing with the personal injury action. That has been tried and has been liquidated by the judgment. We are, as already stated, dealing with the insured's alleged cause of action after judgment for a claimed "bad faith" refusal of the insurance carrier to settle within the policy limits.

The root solution of the problem seems to lie in an analysis of the nature of the insured's claim against the insurer for a claim of excess liability above the limits of coverage afforded by the policy. If we must deal in dichotomies of whether such a claim sounds in tort or contract, the contract view seems more logical than tort. In law we can have a fraudulent as well as a negligent breach of contractual obligations. In addition to the express obligations of a public liability insurance agreement requiring assumption of investigation, defense and settlement of claims, there is an implied obligation in every contract that each of the parties will act in good faith toward the other with respect to the performance of the obligations imposed on each party by the contract. Were this not so as implied to the public liability insurance contract, the insured would be at the complete mercy of the insurer and it would operate to deprive the insured of the benefits of his contract. 11 Williston on Contr., 3rd Ed., Sec. 1295, pp. 40-42.

Therefore, any alleged breach of this implied obligation would appear to arise out of the contract and not out of any other duty or relationship that could be characterized as giving rise to tortious misconduct distinct and apart from the implied obligation. The contract creates the relationship and the duty and the conduct of the parties determines whether or not there is a breach. Simply put, absent the existence of the contractual obligations, the insured could have...