Title: Chicago Title Ins. v. American Guarantee

State: alabama

Issuer: Alabama Supreme Court

Document:

892 So. 2d 369 (2004)
CHICAGO TITLE INSURANCE COMPANY
v.
AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY.
1022001.

Supreme Court of Alabama.
April 30, 2004.
*370 L. Graves Stiff III and Brian A. Dodd of Starnes & Atchison, LLP, Birmingham, for appellant.
William S. Pritchard III of Pritchard, McCall & Jones, Birmingham; and Scott F. Bertschi of Arnall Golden Gregory, LLP, Atlanta, Georgia, for appellee.
WOODALL, Justice.
Chicago Title Insurance Company ("Chicago Title") appeals from a summary judgment for American Guarantee and Liability Insurance Company ("American Guarantee") in an action Chicago Title brought pursuant to § 27-23-2, Ala.Code 1975. We reverse and remand.
On January 18, 2001, Chicago Title sued Lamar Ham, an attorney, seeking damages allegedly resulting from Ham's failure to disburse funds properly in real estate transactions in which Chicago Title had issued financial guarantees to the lenders. Before that action against Ham was filed, American Guarantee had issued a professional liability insurance policy to Ham, providing coverage for claims arising out of Ham's "rendering or failing to render legal services for others." On May 16, 2001, a judgment was entered in favor of Chicago Title and against Ham in the amount of $856,897.04. That judgment has not been satisfied.
On January 11, 2002, Chicago Title filed this action against American Guarantee pursuant to § 27-23-2, seeking "to have the insurance proceeds provided for in Ham's insurance policy with American [Guarantee] applied to the satisfaction of [Chicago Title's] judgment against Ham." Chicago Title's complaint did not name Ham as a defendant. After American Guarantee answered the complaint and after it filed a motion for a summary judgment, Ham filed a motion to intervene, accompanied by a proposed complaint against American Guarantee. American Guarantee objected to Ham's motion to intervene, stating, in part:
The trial court denied Ham's motion to intervene.[1] Subsequently, the trial court granted American Guarantee's summary-judgment motion, and Chicago Title appealed.
Chicago Title seeks to enforce its alleged rights as a judgment creditor, under § 27-23-2, which provides:
(Emphasis added.)
"This Court, in Insurance Company of North America v. Davis, 274 Ala. 541, 150 So. 2d 192 (1962), ... determined `that the legislature [in enacting § 12, Tit. 28, Code of Ala.1940, predecessor to § 27-23-1, -2, Ala.Code 1975] intended that all such proceedings must be brought against the defendant in the action at law and the insurance company, as joint respondents.' 274 Ala. at 542, 150 So. 2d  at 194." Wiggins v. State Farm Fire & Cas. Co., 686 So. 2d 218, 219 (Ala.1996)(emphasis added). Also, in Davis, "it [was] logically deduced that the insured is a `necessary party' under the rule that all persons having a material interest in the litigation or who are legally or beneficially interested in the subject matter of the suit and whose rights or interests are sought to be concluded thereby are necessary parties." 274 Ala. at 543, 150 So. 2d  at 194 (emphasis added).
Chicago Title brought this action against only American Guarantee. American Guarantee, in its pleadings, never raised the issue of Chicago Title's failure to include Ham. Indeed, when Ham sought to intervene, American Guarantee vigorously opposed his motion, which the trial court denied. However, this Court is entitled to raise the absence of a necessary party ex mero motu.
J.C. Jacobs Banking Co. v. Campbell, 406 So. 2d 834, 850 (Ala.1981). Where, as was the case here, the judgment creditor fails to join the insured as a party to an action brought under § 27-23-2, this Court must reverse the judgment of the trial court and remand the cause for further proceedings consistent with its opinion. Alabama Farm Bureau Mut. Cas. Ins. Co. v. Crestman, 277 Ala. 410, 412, 171 So. 2d 119, 120 (1965)("For failure to join insured as a party, the decree is reversed and the cause *372 remanded."). We reverse the summary judgment for American Guarantee and remand the case.
REVERSED AND REMANDED.
HOUSTON, SEE, LYONS, BROWN, JOHNSTONE, HARWOOD, and STUART, JJ., concur.
[1]  Following the denial of his motion to intervene, Ham filed a separate action against American Guarantee. That action remains pending.