Court Opinion

ID: 9447065
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:24:21.955535+00
Date Added: 2024-06-11T17:30:53.109985
License: Public Domain

CAMERON, Circuit Judge
(dissenting).
I am unable to join my Brethren in deciding that, under the facts of this case, the court below correctly held that *534the Georgia Casualty & Surety Company was not an indispensable party when it owned ninety-five per cent of the claim sued on by Lawson. The action was begun and prosecuted by Lawson as sole plaintiff and he was permitted to recover the five per cent of the fund to which he was entitled, along with the ninety-five per cent to which the insurance company was entitled.
I am not unmindful of the tendency of statutes, as well as court decisions, to throw a mantle of anonymity around insurance companies which have become subrogated to the rights of their insureds by reason of having paid losses suffered by them. These decisions stem largely from the decision of the Supreme Court in Luckenbach v. W. J. McCahan Sugar Co., 1918, 248 U.S. 139, 39 S.Ct. 53, 63 L.Ed. 170. In that case the shipper of a consignment of sugar had been paid in full by the insurance company and the carrier by sea claimed that it was entitled to the full benefit of the insurance. When making the payment and in order to retain control of the litigation, the insurer took from the insured a “loan receipt” obligating the insured to pay back to the insurer any amount which might be recovered in the action against the shipper. The ship owners (along with the charterer) contended in the action brought in the name of the shipper “but for the sole benefit of the insurers” that the loan receipt was nothing but a sham and that the shipper had been paid in full and ought not to be permitted to maintain the action. The Supreme Court held otherwise, upholding the loan receipt device in these words (248 U.S. at pages 148-149, 39 S.Ct. at page 55):
“Agreements of this nature have been a common practice in business for many years. * * * It is clear that if valid and enforced according to their terms, they accomplish the desired purpose. They supply the shipper promptly with money to the full extent of the indemnity or compensation to which he is entitled on account of the loss; and they preserve to the insurers the claim against the carrier to which by the general law of insurance, independently of special agreement, they would become subrogated upon payment by them of the loss. The carrier insists that the transaction, while in terms a loan, is in substance a payment of insurance; that to treat it as if it were a loan, is to follow the letter of the agreement and to disregard the actual facts; and that to give it effect as a loan is to sanction fiction and subterfuge. But no good reason appears either for questioning its legality or for denying its effect. * * * Whether the transfer of money or other thing shall operate as a payment, is ordinarily a matter which is determined by the intention of the parties to the transaction. Compare The Kimball, 3 Wall. 37, 44, 18 L.Ed. 50. The insurer could not have been obligated to pay until the condition of their liability — i. e., non-liability of the carrier had been established. The shipper could not have been obliged to surrender to the insurers the conduct of the litigation against the carrier, until the insurers had paid. In consideration of securing them the right to conduct the litigation, the insurers made the advances. It is creditable to the ingenuity of business men that an arrangement should have been devised which is consonant both with the needs of commerce and the demands of justice.” [Italics added.]
The reasons behind that holding are not present here. Lawson made claim soon after August 1, 1957 against Georgia Casualty & Surety Company for losses sustained by him growing out of worthless checks given him. These losses were paid in eleven drafts dated August 13, all of which had been converted to cash by August 21. Ea.ch of the drafts contained in its face “in full settlement of all claims as result of accident on August 1 at Chattanooga — Policy CT 1008;” and each draft bore the in*535scription above Lawson’s endorsement of the name of Chattanooga Auction Company by Lawson, “The endorsement of this draft constitutes a release and receipt in full of the account as herein stated.” These payments were made pursuant to the policy provision quoted in the margin.1
It is plain, therefore, that the policy held by Lawson was an indemnity policy and required immediate payment, and the drafts he endorsed certified that the amount received was in full payment of the money due him under the policy. These writings fixed the nature and character of the policy obligation and of its performance. The facts, therefore, differentiate the case from Lucken-bach. In the quotation from that case supra the italicized words show that the insurer was under no obligation to pay the insured until the insured had litigated the question of the liability of the carrier; and the Insurance Company was liable only if the carrier was not. What the Supreme Court complimented was the ingenuity which led business men to make provision for a loan by the insurer to the insured during the period when the liability of the carrier was being litigated. The loan there had its genesis and its sole basis in the characer of the insurance contract. There is no such basis in the insurance contract before us, which by its terms required immediate payment to the insured upon the filing of a proper claim.
The policy before us makes no mention of any advances by the insurer or of any possible loan to the insured, and provides no subrogation of the insurer to the insured’s rights in event of any “advance.” These facts distinguish the present case from those cited in the majority opinion and others from this Court which have been rendered recently.2
This action was begun, moreover, in the name of Lawson by the attorneys for Georgia Casualty on August 23rd. It was filed, not against the person who had given the bad checks (such as was done in Luckenbach), but against third persons, appellants here, who had come into the possession of the cars which the bad checks covered. Whatever rights Georgia Casualty had against these third persons were not such as were dealt with or were within the contemplation of the Luckenbach case where the loan transaction was approved.
It is further clear that the entire transaction between Georgia Casualty and Lawson was the payment of the amount due under its policy with Lawson of its entire liability of ninety-five per cent of his loss. The idea of the loan receipt seems not to have originated until December 9, when the defendant (appellant) began taking of the deposition of the Assistant General Claims Manager of Georgia Casualty, the responsible officer handling this transaction. At that time, the attorney for Georgia Casualty Company produced the loan receipt, and this was the first time the man who approved the drafts and authorized and supervised the payment of the policy liability had ever seen it or been advised that such a document was in existence. He even admitted that the loan receipt played no part in the Company’s paying what it owed under its policy.3
*536All of these facts were established without contradiction. Under the test set forth in the italicized language from Luckenbach supra it is clear that the “transfer” of the money in August to Lawson was intended by the parties to be payment of its unconditional obligation to him and not as a loan.
The question of parties is, in my opinion, under the facts of this case to be determined by the federal law as established by Rule 17, F.R.Civ.P., 28 U.S.C.A. An en banc decision of this Court construing that Rule has bearing on the question here presented. The District Court for the Northern District of Texas had denied a motion of the United States to dismiss from a personal injury suit the claim of the insurance company which had paid the injured parties and become subrogated to their claims.4 This Court first reversed, with one Judge dissenting.5 Upon rehearing by the Court en banc,6 the Court permitted each of the three injured parties and also the insurance company to recover the respective amounts due them. In the course of the opinion it said that before F.R. C.P., an insurance company settling with an injured party in full could not maintain suit against the wrongdoer in its own name; but that under Rule 17, “ * * * usees are no longer to be resorted to, but persons interested may ordinarily sue in their own names, and all parties in interest may be joined under Rule 19.” The result was that all three injured parties and the insurance company, which had paid a part of their respective losses, could proceed in one suit.
This, it seems to me, is the genius of the law, as amplified by the Supreme Court in United States v. Aetna Casualty Insurance Co., 1949, 338 U.S. 366, 70 S.Ct. 207, 94 L.Ed. 171. The question there was whether an insurance company could bring suit in its own name against the United States upon a claim to which it had become subrogated by payment to an insured who would have been able to bring the action. The court answered the question in the affirmative and discussed the evolution of the Rule, which was formerly Equity Rule 37 and now Rule 17(a). This is some of its language (338 U.S. at page 380, 70 S.Ct. at page 215):
“If the subrogee has paid an entire loss suffered by the insured, it is the only real party in interest and must sue in its own name. * * * If it has paid only part of the loss, both the insured and the insurer * * * have substantive rights against the tortfeasor which qualify them as real parties in interest.
*537“In cases of partial subrogation the question arises whether suit may be brought by the insurer alone, whether suit must be brought in the name of the insured for his own use and for the use of the insurance company, or whether all parties in interest must join in the action. Under the common-law practice rights acquired by subrogation could be enforced in an action at law- only in the name of the insured to the insurer’s use, * * * Mr. Justice Stone characterized this rule as ‘a vestige of the common law’s reluctance to admit that a chose in action may be assigned, [which] is today but a formality which has been widely abolished by legislation.’ * * * Under the Federal Rules, the ‘use’ practice is obviously unnecessary, as has long been true in equity * * * Rule 17(a) was taken almost verbatim from Equity Rule 37. No reason appears why such a practice should now be required in cases of partial subrogation, since both insured and insurer ‘own’ portions of the substantive right and should appear in the litigation in their own names.
“Although either party may sue, the United States, upon timely motion, may compel their joinder. * * * The pleadings should be made to reveal and assert the actual interest of the plaintiff, and to indicate the interests of any others in the claim.” 7 [Italics supplied.]
I think that, even under the Shields v. Barrow test, the joinder of the insurance company here should have been compelled. Lawson, owning, as pro tanto self insurer, only five per cent, permitted the insurance company owning ninety-five per cent to take hold of the litigation and conduct it in his name. That did not present a true situation, but was a sham. The pleadings did not “reveal and assert the actual interest of the plaintiff.”
Granted that Lawson could have sued appellant for his five per cent and Georgia Casualty could have joined him or sued independently for its ninety-five per cent, we do not have such a situation as that here. This action, from the filing of the complaint to the rendition of the final judgment, was handled as a unitary claim owned in part by Lawson and in part by Georgia Casualty, each being the asserted owner of an undivided interest. This Court held as long ago as Seeley v. Cornell, 5 Cir., 1934, 74 F.2d 353, that an owner of an undivided interest in a chose in action could sue separately to recover his own interest without including the other joint owners. But it has held steadfastly that an action which involves the interest of a party not present cannot be prosecuted by or in the name of a party owning only a partial interest. See Hudson v. Newell, 5 Cir., 1949, 172 F.2d 848, where the general question of indispensable parties is discussed. These facts being undisputed and the interest of a party not before the Court being admittedly dealt with by the judgment and all of the proceedings leading to it, I think it was error for the court below to deny the motion to bring in Georgia Casualty as an indispensable party. I, therefore, respectfully dissent.
Rehearing denied; CAMERON, Circuit Judge, dissenting.

. “The Company agrees to indemnify Raymond Lawson d/b/a Chattanooga Auction of Chattanooga, Tenn., against pecuniary loss owing to checks given by purchasing dealer endorsed or guaranteed by the assured.”
And the further policy provision: “Any losses for which the Company may be liable sil all he payable immediately upon receipt by the Company of proof of claim provided above.”

. E. g., Celanese Corp. of America v. John Clark Industries, Inc., 5 Cir., 1954, 214 F.2d 551; and United Services Automobile Ass’n v. Russom, 5 Cir., 1957, 241 F.2d 296, 301.

. When the officer of Georgia Casualty was giving his deposition he made the following answers:
“Q. When and from whom did Georgia Casualty and Surety Company obtain that loan receipt?
“A. Georgia Casualty and Surety Company received it today from Mr. Smith [its attorney] — where he got it, I don’t know.”
*536“Q. Now, Mr. McKay, in ascertaining whether- these drafts shall be honored, the loan receipt plays no part in that, does it?
“A. It hasn’t * * * ”
Prom all of this it is clear that the loan receipt did not constitute a part of the file in the hands of the responsible officer of Georgia Casualty. It was produced at the deposition hearing by the attorney. It did not form a part of the transaction by which the company paid what it owed the insured, and it was not on a company form, but is a typewritten document, not mentioned in or contemplated by the policy. The only conclusion which can be drawn from these facts is that the loan receipt was a mere device utilized in connection with the exigencies of the litigation.
. In denying the motion of appellant to bring the insurance company into the ease as an indispensable party, the court stated: “ * * * I must say, as always happens in these cases, counsel very understandably make a very desperate effort to get before the jury that the man has an insurance policy which is the ultimate aim of all this business. I don’t think under the facts shown here that there is grounds for me to make Georgia Casualty a party plaintiff. Since they have elected not to be, I don’t see why Mr. Lawson doesn’t have the right to be the party plaintiff, and I so rule.”

. Hill v. United States, D.C., 74 F.Supp. 129.

. United States v. Hill, 5 Cir., 171 F.2d 404.

. 5 Cir., 174 F.2d 61, 62.

. It is true that, in a note, the Supreme Court said that clearly such parties were not indispensable under Shields v. Barrow, 17 How. 129, 130, 139, 15 L.Ed. 158, which laid down the test that indispensable parties must have “an interest of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience.”