Source: https://law.justia.com/cases/federal/appellate-courts/F2/421/937/49923/
Timestamp: 2019-09-21 13:37:55
Document Index: 674039263

Matched Legal Cases: ['§ 55', '§ 38', '§ 55', '§ 38', '§ 55', '§ 38', '§ 55', '§ 55', '§ 38', '§ 38', '§ 64']

John H. Rowe, Jr., Administrator of the Estate of Larry Mitchell Rowe, Deceased, John H. Rowe, Jr., Jerry Rowe, Under 21 Years Through His Father and Next Friend, John H. Rowe, Jr., and Lloyd G. Rowe, Appellants, v. United States Fidelity and Guaranty Company, Appellee, 421 F.2d 937 (4th Cir. 1970) :: Justia
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John H. Rowe, Jr., Administrator of the Estate of Larry Mitchell Rowe, Deceased, John H. Rowe, Jr., Jerry Rowe, Under 21 Years Through His Father and Next Friend, John H. Rowe, Jr., and Lloyd G. Rowe, Appellants, v. United States Fidelity and Guaranty Company, Appellee, 421 F.2d 937 (4th Cir. 1970)
U.S. Court of Appeals for the Fourth Circuit - 421 F.2d 937 (4th Cir. 1970) Argued December 4, 1968Decided January 26, 1970
Plaintiffs alleged that they sue USF&G as judgment creditors of the insureds and as third-party beneficiaries under the policy, claiming benefits and rights flowing to them by virtue of § 55-22, Va.Code 1950, as amended;1 also, that they have the right to proceed as judgment creditors, directly against the insurance carrier, pursuant to § 38.1-380, Va.Code 1950, as amended.2
A pretrial conference was held on August 11, 1967, at which the district court ordered a final pretrial conference on November 27, 1967, and set the case for trial on December 7, 1967. On August 23, 1967, USF&G filed a motion to dismiss on the ground that the complaint failed to state a claim upon which relief could be granted, and more particularly for reasons as follows: that these plaintiffs cannot maintain this action directly against the insurer under § 55-22 or § 38.1-380, Va.Code 1950, as amended; that the cause of action sounds in tort and is not an action based upon an instrument; that the plaintiffs, as judgment creditors of an insured, are limited in their recovery to the terms of the policy and the limit of coverage of $50,000 which had already been paid by USF&G.
In disposing of the defendant's motion to dismiss the original complaint the district court held that the action "as brought by the plaintiffs on July 22, 1964, directly against the insurance company cannot be maintained in their status as judgment creditors or third-party beneficiaries under the provisions of either § 55-22 or § 38.1-380 of Va. Code 1950, as amended, and is an action reserved only to the insured."4 For the reasons stated by the district court, we agree with this holding.
However, we would supplement the lower court's opinion by offering the following comment. The language of § 55-22, Va.Code 1950, as amended, as we construe it, makes it clear that a judgment creditor of an insured may bring an action under the statute only for the breach of covenant or promise which was made for his benefit in whole or in part. The promise of USF&G in the instant case, from which arose the duty which was allegedly breached, was made for the benefit of the insureds and not for the benefit of the plaintiffs since, in reality, it offered no benefits to plaintiffs except through its breach.5 The cases cited by the plaintiffs in support of their contention to the contrary are inapposite and unpersuasive.6
In the recent case of Davis v. National Grange Ins. Co., 281 F. Supp. 998 (E.D. Va. 1968), where the facts were somewhat similar to those in the instant case (except that there the insured and the parties injured by insured's negligence joined as plaintiffs against insurance company) the district court held that a judgment creditor of the insured could maintain this type of action against the judgment debtor's insurance carrier under § 55-22, Code of Va.1950, as amended, on the theory that the injured party was a beneficiary under the insurance policy and that the policy was made for his benefit. We do not find the reasoning in Davis to be persuasive. The plaintiffs in the instant case have received all that they were entitled to recover as third-party beneficiaries under the insurance policy, i. e., the full measure of protection afforded by the policy within designated limits.
At common law the assignability of a tort claim in Virginia was determined by its survivability. In re Funk, 2 F. Supp. 555, 559 (W.D. Va. 1932). In Winston v. Gordon, 115 Va. 899, 80 S.E. 756 (1914), it was held that a right of action, to be survivable, must be based upon a wrong to property, real or personal, whether the wrong was tortious or arose from breach of contract, and injury must have been the direct result of the wrong. Claims based upon other tortious wrongs done to one's person or reputation7 or which were purely personal and apart from injury to property resulting from tort or breach of contract or which were not the direct cause of the injury were not survivable. At page 763 the Court of Appeals quoted with approval from Graves on Pleading and stated:
"`* * * Then what tort actions are assignable? The answer is: Such only as survive to or against the personal representative, if one of the original parties dies. Then what tort actions survive? The answer is: Those for wrong to property, real or personal, or which grow out of breach of contract, but not for wrongs done to the person or reputation, or any purely personal wrong, apart from property or contract. * * *.'"
"The statement of Mr. Graves must always be borne in mind, that actions are assignable which survive, and those which do not survive are not assignable."
The court in Watson, supra, 165 Va. 564, 183 S.E. 183 (1936), carried the doctrine of survival beyond the holding in Winston v. Gordon, supra. In Watson it was held that a cause of action of a father for damages on account of the loss of services of a minor child and expenditures made to treat the child for injuries resulting from the negligence of the defendant, was one for pecuniary loss suffered by the father's estate and one that could be brought under Va. Code, sec. 5385 by a personal representative in the event of the father's death. As the court there stated, "The precise point here involved has never been passed upon by this court." 183 S.E. at page 184.
"The common law as to survival has been modified in Virginia by a statute, Code, sec. 5385, which provides: `An action of trespass, or trespass on the case, may be maintained by or against a personal representative for the taking or carrying away any goods, or for the waste or destruction of, or damage to, any estate of or by his decedent.'
"As said by this Court, speaking through Judge Northcott in Pathé Exchange v. Dalke, 4 Cir., 49 F.2d 161, 163, `There can be no doubt that the purpose of the Virginia statute was remedial, and enlarged rather than restricted the classes of action, that survive the common law.' * * *. And as a result of the statute and the decisions construing it, we think that the class of actions which survive in Virginia has been enlarged to include those which involve injury to a person in his property or business as distinguished from purely personal wrongs."9
The court below held that if the insurance carrier had within its grasp the opportunity to settle the claims of the injured plaintiffs with the property Carr had made available for that purpose through insurance, and the failure to settle was attributable to its negligence or bad faith, this is deemed to have been a "direct affectation" of Carr's property rights.
"It is now fully decided in Virginia that in some circumstances an insurance company may be sued when it refuses to settle a claim against its insured for an amount within the policy limits and a judgment in excess thereof is thereafter recovered against the insured. Basis for recovery against the insurer is bad faith in its negotiations with the claimant and therefore, by its nature, is an action which sounds in tort. The Aetna Casualty & Insurance Co. v. Price, 206 Va. 749, 146 S.E.2d 220 (1966)."
The district court, indicating principal reliance upon Berssenbrugge v. Luce Mfg. Co., 30 F. Supp. 101 (W.D. Mo. 1939); and Chicago Grain Door Co. v. Chicago, B. & Q. R. Co., 137 F. 101 (C.C.N.D. Ill. 1905), held:
"In the instant case to allow the plaintiffs to amend their complaint in September, 1967, under the guise of `amending' or `supplementing' would be of substantial prejudice to the defendant. The amended complaint is essentially another cause of action which may now be affected by other defenses."10
"It is quite clearly outlined by the authorities cited in Edmunds' Federal Rules of Civil Procedure, p. 725, note 433, that a plaintiff, who, at the time of filing original bill, had no cause of action, cannot by amended or supplemental bill introduce a cause of action thereafter accruing."
"Nor do we think that the proffered amended complaint can be accepted as a supplemental pleading under Rule 15 (d). As stated in Berssenbrugge v. Luce Manufacturing Co., supra, `an amended pleading is designed to include matters occurring before the filing of the bill but either overlooked or not known at the time. A supplemental pleading, however, is designed to cover matters subsequently occurring but pertaining to the original cause.' And in Chicago Grain Door Co. v. Chicago, B. & Q. R. Co., et al., 137 F. 101 (C.C.N.D. Ill., 1905), the Court said: `The limited purpose of a supplemental bill is to repair or add to a good original case, shown by an original bill, good or bad, either to supply defects sometimes existing when suit brought, but usually afterwards occurring, or to support, fortify or re-enforce.'"
An explication of Rule 15(d), both prior to and subsequent to the 1963 amendment, is found in 3 Moore's Federal Practice (2d ed.), ¶ 15.16. We quote from pages 1085 and 1086 as follows:
"Prior to the 1963 amendment to Rule 15(d), some cases had held that where the original complaint failed to state a claim upon which relief could be granted, leave to serve a supplemental complaint must be denied, because there was no proper claim before the court to supplement. Other decisions had adopted a more liberal view, and did not require plaintiff to commence a new action when events subsequent to the original pleading made clear plaintiff's right to relief. The 1963 amendment adopted this latter view by adding to subdivision (d) what is now the sentence: `Permission may be granted even though the original pleading is defective in its statement of a claim for relief or defense.' Thus, the granting of leave is now clearly within the court's discretion regardless of the sufficiency of the original pleading, whether it is one setting forth a claim or a defense. Of course, one of the factors the court may take into consideration is whether the original pleading was defective, and in what manner."
"The decision to grant or deny leave to file a supplemental pleading is one for the discretion of the district court, and will not be disturbed on appeal except for abuse of discretion. The additional discretion confirmed to the district courts by the 1963 amendment should not be defeated by unnecessary restriction based on the view held by some state courts that a supplemental pleading cannot introduce a new `cause of action.'
"Some decisions under Rule 15(d), before the 1963 amendment, took a restrictive view. Thus, an early decision held that plaintiff in a patent infringement action could not introduce, in a supplemental complaint, a claim based on infringement of an entirely different patent, the court saying that Rule 15(d) was not intended to broaden the rule theretofore followed.12
Other decisions, however, have taken a contrary view, holding that a supplemental complaint should be allowed in aid of economy and the speedy disposition of the controversy, if defendant is not prejudiced, as where its rights are as well preserved by trial on a supplemental complaint as by trial in a new action. These decisions seem preferable. While the matters stated in a supplemental complaint should have some relation to the claim set forth in the original pleading, the fact that the supplemental pleading technically states a new cause of action should not be a bar to its allowance, but should only be a factor to be considered by the court in the exercise of its discretion, along with such factors as possible prejudice or laches; and, of course, a broad definition of `cause of action' should be applied here, as elsewhere."
In refusing to permit the filing of the tendered supplemental complaint the district court concluded that significant factors to be considered in the exercise of its discretion were "timeliness, excuse for delay, and prejudice to the opposite party." While the court made the conclusory finding of "substantial prejudice" to the defendant, the only reason assigned to support the finding was that "the amended complaint is essentially another cause of action which may now be affected by other defenses." The court did not offer any explanation as to what the "other defenses" might be or what complications reasonably could be anticipated. As to the timeliness factor, the court stated:
"The plaintiffs have waited more than three years since the date of the alleged oral assignment to offer an amendment or to bring a new suit in the proper status of the plaintiffs as they found themselves after August 11, 1964. While there was an interlocutory injunction forbidding further suits and pleadings in this matter, issued in August, 1964, that injunction was vacated in November, 1964, and nearly three years have elapsed since that time without any further action either proposed by the plaintiffs in this suit or in a new suit."
§ 38.1-380. Required provisions as to insolvency or bankruptcy, and as to when action maintained against insurer. — No policy * * * shall be issued * * * in this State unless it contains in substance the following provisions * * *:
Rowe v. United States Fidelity and Guaranty Company (E.D. Va. 1967)
On appeal the plaintiffs have apparently abandoned their contention below and as alleged in their complaint that their right to maintain the instant action derives from § 38.1-380, Va.Code 1950, as amended
See Seguros Tepeyac, S.A., Compania Mexicana, etc. v. Bostrom, 347 F.2d 168 (5 Cir. 1965); Tabben v. Ohio Casualty Ins. Co., 250 F. Supp. 853, and cases therein cited at 855-856 (E.D. Ky. 1966); Keeton, Liability Insurance and Responsibility for Settlement, 67 Harv. L. Rev. 1136, 1175-1177 (1954)
Moorman v. Nationwide Mutual Ins. Co., 207 Va. 244, 148 S.E.2d 874 (1966); Aetna Casualty & Surety Co. v. Price, 206 Va. 749, 146 S.E.2d 220 (1966); Storm v. Nationwide Mutual Ins. Co., 199 Va. 130, 97 S.E.2d 759, 69 A.L.R. 2d 849 (1957)
See, Note, Assignability of a Tort Cause of Action in Virginia, 41 Va. L. Rev. 687 (1955).
At the time of the institution of the instant action and the making of the oral assignment by Carr to plaintiffs of his claim against USF&G, Va.Code, sec. 5385 had been re-enacted in identical form as sec. 64-135 Code of Va. 1950, effective February 1, 1950. This section was later amended, effective October 1, 1968, and now appears as § 64.1-145, Va.Code 1950, as amended, and reads as follows:
Rowe v. United States Fidelity and Guaranty Co. (E.D. Va. 1967)
30 F. Supp. at 102
Here the author cites in a footnote the case of Berssenbrugge v. Luce Mfg. Co., 30 F. Supp. 101 (W.D. Mo. 1939), the "early decision" referred to in the text and upon which the district judge in the instant case relied so strongly in support of his conclusions