Case Name: EAGLE INDEMNITY CO. v. DIEHL
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1928-06-11
Citations: 27 F.2d 76
Docket Number: No. 5435
Parties: EAGLE INDEMNITY CO. v. DIEHL.
Judges: Before GILBERT; RUDKIN, and DIETRICH, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 27
Pages: 76–77

Head Matter:
EAGLE INDEMNITY CO. v. DIEHL.
Circuit Court of Appeals, Ninth Circuit.
June 11, 1928.
No. 5435.
E. L. McDougal, of Portland, Or., for appellant.
Lord & Moulton and Floyd D. Moore, all of Portland, Or., for appellee.
Before GILBERT; RUDKIN, and DIETRICH, Circuit Judges.

Opinion:
GILBERT, Circuit Judge
(after stating the facts as above). The only assignment of error is that the court below denied the appellant's motion for an instructed verdict in its favor, which motion, it is contended, should have been granted for want of proof of the insolvency or bankruptcy of the insured. Upon that issue there was the proof of the return of the sheriff that he had been unable to find any property, personal or real, belonging to the insured within the county of Multnomah, state of Oregon, where the insured had resided, and evidence that the county assessor • had searched the tax records of the county and discovered no property assessed to the insured during the years 1926 and 1927, and it was shown that at the time of the trial in the court below the insured had removed from the state of Oregon to California. There was also evidence of a statement made by him that he had nothing but his salary as an automobile salesman., his household effects, and his automobile, which was agreed to be of comparatively small value.
The appellant upon its part made no effort to show that the insured had assets out of which the judgment could have been satisfied. The above-quoted clause in the insurance contract was inserted in obedience to a statute of New York, which provided that the insolvency or bankruptcy of the insured should not relieve the company from payment. In Miller v. Union Indemnity Co., 209 App. Div. 455, 204 N. Y. S. 730, it was held that the bankruptcy or insolvency of the insured; which shoifld not release the company, meant only the inability of the insured to meet his financial obligations, and did not mean that he must have been adjudicated insolvent or bankrupt, and that the word "insolvency" must be given its usual broad meaning of general financial irresponsibility. Both the appellant and the appellee cite United States Fidelity & Guaranty Co. v. Williams, 148 Md. 289, 129 A, 660, in which the Court of Appeals of Maryland held that, where it is a controverted question, the sheriff's return of nulla bona to a writ of execution on a judgment against the insured is insufficient alone to establish the latter's insolvency or bankruptcy within the provision of a policy authorizing recovery by an injured party.
But in the case at bar, as we bave shown, the sheriff's return was not the only evidence of the insolvency of the insured. And although the evidence does not absolutely demonstrate the inability of the insured to pay the judgment, it is sufficient, we think, to comply with the letter and spirit of the contract, based, as it was, upon a statute of New York, under the laws of which state the appellant is incorporated. In Merchants' Liability Co. v. Smart, 267 U. S. 126, 131, 45 S. Ct. 320, 321, 69 L. Ed. 538, it was said of the New York statute: "It secures to the injured person the indemnity Which his injurer has provided for himself in advance to avoid payment for the injury. But the clause becomes operative only in the event of the insolvency or bankruptcy of the assured, when he can no longer use the indemnity to pay the injured person as he should. The title to the indemnity passes out of the bankrupt or insolvent person, and vests in him in whom the contract and the state law declares it should vest."'
Although it is based on no ruling of the court below, and upon no assignment of error, the appellant advances the contention that the appellee's remedy was by garnishment proceedings. Conceding it to be true that, in view of the admitted fact that the appellant took charge of the defense in the action against the insured, it was bound by the judgment in that action, and might have been proceeded against by garnishment (Patterson v. Adan, 119 Minn. 308, 138 N. W. 281, 48 L. R. A. [N. S.] 184), it is nevertheless true that the insurance contract created a direct obligation in favor of the appellee, upon which she might bring an action directly against the appellant (Finkelberg v. Continental Casualty Co., 126 Wash. 543, 219 P. 12; Malachowski v. Varro, 76 Cal. App. 207, 244 P. 936; Miano v. Empire Surety Co., 153 App. Div. 423, 138 N. Y. S. 475). It is also true that, if the appellant had the right to insist upon garnishment proceedings, it waived the right by its failure to assert it in the court below.
The judgment.is affirmed.