Case Title: Capitol Fuels, Inc. v. Clark Equipment Co.

Citation: 342 S.E.2d 245

Docket Number: CC949

State: west-virginia

Court: West Virginia Supreme Court

Date: 1986-04-03T00:00:00Z

Document:
342 S.E.2d 245 (1986) CAPITOL FUELS, INC. v. CLARK EQUIPMENT CO. WRIGHT-THOMAS EQUIPMENT COMPANY v. GOULD, INC. No. CC949. Supreme Court of Appeals of West Virginia. April 3, 1986. Hurt & Carrico, Charles E. Hurt, Charleston, for appellant. Kay, Casto & Chaney, Jeffrey M. Wakefield, Charleston, for Clark Equipment Co. McGRAW, Justice: The Honorable A. Andrew MacQueen of the Thirteenth Judicial Circuit entered an *246 order in this action certifying the following question to this Court: After careful consideration, we respond to this certified question in the negative. The pertinent facts of this proceeding are not in dispute. Capitol Fuels, Inc., plaintiff below, purchased a tractor-shovel manufactured by Clark Equipment Co., defendant and third-party plaintiff below, from the Wright-Thomas Equipment Co., defendant and third-party plaintiff below. Several years later, the tractor-shovel was destroyed by fire determined by Federal Mine Safety and Health Administration officials to have been caused by the rupture of a high pressure hydraulic hose manufactured by Gould, Inc., third-party defendant below. Capitol Fuels had insured this machine with the Zurich Insurance Company, but contends that its value exceeded the amount of the insurance coverage. This certified question arose following submission of a motion to dismiss by Wright-Thomas asserting, inter alia, failure to name the Zurich Insurance Company as a plaintiff under the "real party in interest" provision of Rule 17(a) of the West Virginia Rules of Civil Procedure. Rule 17(a) of the West Virginia Rules of Civil Procedure provides, in relevant part, that, "Every action shall be prosecuted in the name of the real party in interest." In Syllabus Point 2 of Housing Authority v. E.T. Boggess, Architect, Inc., 160 W. Va. 303, 233 S.E.2d 740 (1977), this Court held that, "Under Rule 17, W.Va.R.C.P., it is not a plaintiff's responsibility, under pain of dismissal, to bring in every party who might have a substantive law right against the defendant. It is sufficient Rule 17 compliance if the plaintiff has a substantive right to sue." This Court noted with disapproval in Housing Authority v. E.T. Boggess, Architect, Inc., 160 W. Va. at 310, 233 S.E.2d at 744, the practice of resorting to Rule 17 to prevent the prosecution of claims: The defendants below rely heavily upon the decision of the United States Supreme Court in United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 70 S. Ct. 207, 94 L. Ed. 171 (1949). The issue presented in Aetna was, "May an insurance company bring suit in its own name against the United States upon a claim to which it has become subrogated by payment to an insured who would have been able to bring such action?" 338 U.S. at 367-68, 70 S. Ct. at 208-09, 94 L. Ed. at 178. In response to this issue, the Court observed: *247 338 U.S. at 380-81, 70 S. Ct. at 215, 94 L. Ed. at 185 (Footnote omitted). With respect to the interpretation of the Court's decision in Aetna at the federal level, it has been noted that: 44 Am.Jur.2d Insurance § 1828, at 818-19 (1982) (Footnotes omitted). The source of confusion with respect to this final issue is rooted in the following passage from the Court's opinion in Aetna, 338 U.S. at 381-82, 70 S. Ct. at 215-16, 94 L.Ed. at 185-86: See Annot., 13 A.L.R.3d 140, 156 (1967) ("[T]he conflict in principle grows out of the broad and unqualified statement in some cases that where an action against an alleged tortfeasor is instituted either by the insured in his name alone or by the insurer-partial subrogee in its name alone, upon timely motion the defendant may compel their joinder."). At the time of the Court's decision in Aetna, Rule 19 of the Federal Rules of Civil Procedure provided, in relevant part, that "persons having a joint interest shall be made parties." As the Fifth Circuit noted in Dudley v. Smith, 504 F.2d 979, 983 n. 4 (5th Cir.1974), "Before the 1966 amendments, Rule 19(a) classified parties to be joined, i.e., `persons having a joint interest,' as `necessary' or `indispensable.' The Court in Aetna placed the unjoined insureds in the `necessary party' category, and as a result, viewed their joinder as compulsory. 338 U.S. at 382, 70 S. Ct. at 216, 94 L. Ed. at 186." "The rigid classifications of former Rule 19(a)," however, noted the Fifth Circuit in Dudley v. Smith, 504 F.2d at 983 n. 5, "were abandoned in 1966 in favor of a more flexible description of parties for which joinder would be `desirable.' Rule 19, F.R.Civ.P., Advisory Comm. Note, 39 F.R.D. 89, 91. Joinder is compulsory only where the facts fit within one of the Rule 19(a) premises. Id. at 92-92." Rule 19(a) of the Federal Rules of Civil Procedure now provides, in relevant part, that: *248 In 1978, Rule 19(a) of the West Virginia Rules of Civil Procedure was amended to conform to the federal rule. Commentary accompanying the 1978 revision echoed the sentiment of the Fifth Circuit's interpretation of the federal amendment: "The amendment attempts to lay down particular guidelines for joinder of parties, and at the same time provide more flexibility in joinder by abolishing the concept of the `indispensable party.'" As one commentator has noted: D. Olson, Modern Civil Practice in West Virginia § 5.9, at 207 (1984) (Footnote omitted). Recently, in Wachter v. Dostert, 303 S.E.2d 731, 733 (W.Va.1983), this Court observed that: Previously, the hurdle to be cleared in compelling the joinder of a party under Rule 19(a) was whether the individual sought to be joined had a "joint interest" with one of the existing parties to the litigation. Having concluded that partially subrogated insurers' were real parties in interest under Rule 17(a), it naturally followed that the Court in Aetna classified them as "necessary" parties under Rule 19. Currently, a two-prong test is utilized for determining the applicability of compulsory joinder under Rule 19(a). As this Court held in the single Syllabus of Wachter v. Dostert, supra: Thus, after amendment to Rule 19(a), the three alternative threshold areas of inquiry are (1) whether complete relief to the existing parties can be granted in the absence of the individual sought to be joined; (2) whether nonjoinder will impair protection of an individual's interest in the subject litigation; or, (3) whether nonjoinder will create a substantial risk of multiple litigation. Even under the current version of Rule 19(a), compulsory joinder of insureds, as in Aetna, in actions brought by their partially subrogated insurers, would be *249 mandated. As noted by the Fifth Circuit in Dudley v. Smith, 504 F.2d at 983: "Where the suit is by the insured ... for the full amount of the loss," however, as the Fifth Circuit noted in Dudley v. Smith, 504 F.2d at 983, "the requirements of Rule 19(a)" are simply not met. In addition to the Fifth Circuit, the rule that joinder of partially subrogated insurers can be compelled under Rule 19(a) has been rejected by the Ninth Circuit in Glacier General Assurance Co. v. G. Gordon Symons Co., 631 F.2d 131, 134-35 (9th Cir.1980), which said that: Several federal district courts have also held that although a partially subrogated insurer is a real party in interest under Rule 17(a), joinder cannot be compelled under Rule 19(a). For example, in Braniff Airways, Inc. v. Falkingham, 20 F.R.D. 141, 144 (D.Minn.1957), the court distinguished Aetna as follows: See also Prudential Lines, Inc. v. General Tire International Co., 74 F.R.D. 474, 475-76 (S.D.N.Y.1977); White Hall Building Corp. v. Profexray Division of Litton Industries, Inc., 387 F. Supp. 1202, 1207 (E.D.Pa.1974) aff'd, 578 F.2d 1377 (3d Cir.1978); Wright v. Schebler Co., 37 F.R.D. 319, 321-22 (S.D. Iowa 1965). A number of state courts which have addressed the issue under "real party in interest" rules or statutes have also held that joinder of partially subrogated insurers in actions brought by insureds for the whole loss is not required. For example, in Syllabus Point 4 of Thompson v. James, 3 *250 Kan.App.2d 499, 597 P.2d 259 (1979), the court held that: Similarly, in the single Syllabus of Vantine Paint & Glass Co. v. Kudrna, 194 N.W.2d 760 (N.D.1972), the North Dakota Supreme Court held that, "Rule 17(a), North Dakota Rules of Civil Procedure, which requires that every action be prosecuted in the name of the real party in interest, is complied with where an action is brought against a tort-feasor in the name of an insured who has been paid by an insurer for only a portion of his loss." One rationale, among others, often advanced in support of this rule was expressed in Syllabus Point 5 of the opinion by the Nebraska Supreme Court in Krause v. State Farm Mutual Automobile Ins. Co., 184 Neb. 588, 169 N.W.2d 601 (1969), "If the property loss is greater than the amount of insurance paid the action should be in the name of the insured, and the insured holds as much of the judgment recovered as the money paid by the insurer amounts to, in trust for the insurer." See also Syl. pt. 1, Ellsaesser v. Mid-Continent Cas. Co., 195 Kan. 117, 403 P.2d 185 (1965); Hardware Dealers Mutual Fire Ins. Co. v. Sheek, 272 N.C. 484, 487, 158 S.E.2d 635, 637 (1968). Without question, appellate courts at both the federal and state levels have held that partially subrogated insurers as real parties in interest should be joined in actions brought by insureds for the total amount of the loss involved. See Travelers Ins. Co. v. Riggs, 671 F.2d 810, 813 (4th Cir.1982); Garcia v. Hall, 624 F.2d 150, 152 (10th Cir.1980); Wadsworth v. United Postal Service, 511 F.2d 64, 67 (7th Cir.1975); Executive Jet Aviation, Inc. v. United States, 507 F.2d 508, 513 (6th Cir.1974); National Garment Co. v. New York, Chi. & St. Louis R.R. Co., 173 F.2d 32, 34-35 (8th Cir.1949); Roberts v. Hughes, 432 So. 2d 1232, 1233 (Ala.1983); Truckweld Equipment Co. v. Swenson Trucking & Excavating, Inc., 649 P.2d 234, 238 (Alaska 1982); Louisville & N.R. Co., 269 S.W.2d 707, 710 (Ky.Ct.App.1954); Bergh v. Rogers, 167 Mont. 243, 244-45, 536 P.2d 1190, 1191-92 (1973); Security Fire & Idem. Co. v. Barnhardt, 267 N.C. 302, 304, 148 S.E.2d 117, 119 (1966); Laushway v. Slate, 238 Or. 352, 355, 395 P.2d 110, 111 (1964); Carle v. Earth Stove, Inc., 35 Wash. App. 904, 908, 670 P.2d 1086, 1089 (1983). We believe, however, in light of amendment to Rule 19(a) as previously discussed and our prior case law, a contrary result is more consistent with the true interests involved. Quite often, those courts which hold that partially subrogated insurers may be joined in actions brought by insureds for the total amount of the loss advance the rationale that such rule is necessary to prevent splitting a single cause of action into a multiplicity of suits. This Court held, however, in State Farm Mut. Auto. Ins. Co. v. DeWees, 143 W.Va. 75, 82, 101 S.E.2d 273, 277 (1957): Thus, under DeWees, splitting a cause of action between a partial subrogee insurer and a partial subrogor insured would be prohibited since the partial subrogee insurer's interest is inseparable from the partial subrogor insured's interest. Additionally, this Court can perceive no principled distinction between joinder of a *251 plaintiff's partially subrogated insurer and joinder of a defendant's partially subrogated insurer. Recently, in Syllabus Point 1 of Davis v. Robertson, 332 S.E.2d 819 (W.Va.1985), this Court held that, "An injured plaintiff may not join the defendant's insurance carrier in a suit for damages filed against the defendant arising from a motor vehicle accident, unless the insurance policy or a statute authorizes such direct action." In support of this rule, this Court observed in Davis v. Robertson, 332 S.E.2d at 823-24, that: In dissenting to a holding by the District of Columbia Circuit that when an insurer whose liability is absolute settles a claim by execution of a loan agreement, the insurer remains a real party in interest whose joinder may be compelled under Rule 17(a) of the Federal Rules of Civil Procedure, Chief Justice Warren E. Burger, then a District of Columbia Circuit Judge, perceptively observed that: City Stores Co. v. Lerner Shops of District of Columbia, Inc., 410 F.2d 1010, 1015-16 (D.C.Cir.1969) (Burger, J., dissenting). For the foregoing reasons, we hold that joinder of a partially subrogated insurer as a "real party in interest" under Rule 17(a) of the West Virginia Rules of Civil Procedure in a suit brought by an insured for the total loss may not be compelled under Rule 19(a) of the West Virginia Rules of Civil Procedure, and remand this case for disposition consistent with this opinion. Certified question answered. Case remanded for disposition.