Clougherty v. Royal Insurance Company ( 1967 )

Paolino, J.

These actions of case were brought to recover damages for personal injuries suffered by Sheila Clougherty, a minor, and consequential damages incurred by her father, Joseph, which resulted from a collision with a motor vehicle owned by defendant Royal Indemnity Company’s insured, Reuben and Edgar Billowitz. The cases are before us on the plaintiffs’ appeals from judgments entered pursuant to a decision rendered by a justice of the superior court in the sum of $200 for Joseph and $800 for his daughter against Royal Indemnity Co., a New York corporation licensed to do business in Rhode Island, and hereinafter sometimes referred to as defendant.

The plaintiffs brought these actions under G. L. 1956, §9-27l against Royal Insurance Co., Ltd. and Royal Indemnity Co. because they were in doubt as to which company insured the automobile which allegedly negligently collided with the automobile in which plaintiff Sheila was a passenger. The Royal Insurance Co., Ltd. denied it had issued any such policy and a judgment was entered in its favor. However, this doubt has been resolved since Royal Indemnity Co. admits that it issued a liability policy covering the motor vehicle in question. We shall treat the appeals accordingly.

This controversy results from an accident which occurred on April 27, 1963 in the city of East Providence. On that date Sheila was injured when the automobile in which she was a passenger collided with a motor vehicle operated by Edgar Billowitz and owned by Reuben Billowitz, both of Snyder, New York. The Billowitz car was insured by defendant, the policy coverage being limited to $20,000.

Sheila and her father commenced separate actions at law in the superior court in Providence against Reuben and Edgar Billowitz. These actions were tried before a jury and resulted in verdicts for the plaintiffs on June 30, 1965 in the following amounts: Sheila Clougherty, p.a. vs. Reuben Billowitz, C.A. No. 172423, $14,677.80; Joseph Clougherty vs. Reuben Billowitz, C.A. No. 172424, $3,318.60; Sheila Clougherty, p.a. vs. Edgar Billowitz, C.A. No. 173915 $14,417.80; and Joseph Clougherty vs. Edgar Billowitz, C.A. 173916, $3,260.01. On July 16, 1966, judgments were entered on the verdicts as of June 30, 1965.

On July 29, 1965 plaintiffs notified the insured’s attorney of record and defendant insurer of the entry of the judgments. The judgments having remained wholly unsatisfied although more than thirty days had expired from the time of the service of such notice, plaintiffs instituted the instant actions on September 20, 1965 to recover a sum not exceeding the amounts of said judgments or the amount of the applicable limit of coverage under the policy of insurance, whichever may be the lesser, pursuant to New York law.¹ The defendant Royal Indemnity Co., having paid $19,000 of the $20,000 coverage, made an offer of judgment to plaintiffs on March 4, 1966 in the amount of $1,000 in accordance with rule 68(a) of the rules of civil procedure of the superior court. This offer was refused. The parties agree that New York law governs.

The defendant filed a plea of the general issue together with notice that it intended to offer evidence of the applicable New York law. It appears from the sworn answers of defendants to plaintiffs’ interrogatories that the following claims and cases against the Billowitzs arose out of the same accident and resulted in the following dispositions and payments on the following dates:

1. Susan T. and Russell Gibaud $ 6,300

Judgment, February 9, 1965

2. Frank Petrone $ 2,700

Settlement, June 17, 1965

3. Judith and Nathan Reich $10,000

Judgment, June 16, 1965

Paid, November 11, 1965

In the Reich cases a jury in the Supreme Court of New York rendered a verdict on June 9, 1965 and a written judgment was filed on June 16, 1965. It is not disputed that under the New York statute there is an appeal period of thirty days from the entry of the judgment and that the appeal'period would have expired on July 16, 1965.

The instant cases were heard before a justice of the superior court on the pleadings, interrogatories, an agreed statement of facts, and a stipulation between the parties. The plaintiffs did not challenge the validity of the payment of $9,000 out of the coverage of $20,000 to the Gibauds and Petrone. The only question was whether defendant properly paid $10,000 to the Reichs on the basis of the judgments entered in New York. The plaintiffs contended in the superior court, as they do now, that they had a right to share pro rata with the Reichs in the balance of $11,000 of the policy proceeds. They base this contention on their argument that the judgments in their cases and those in the Reich cases ripened into final judgments on the same day, July 16, 1965. It appears that the Reich judgments² were entered in New York on June 16, 1965, but defendant paid the Reichs $10,000 on November 11, 1965.

After the hearing the trial justice entered a written decision. After noting that the parties agreed that New York law applied, he held that the judgments in the plaintiffs' cases were entered in Rhode Island on July 16, 1965 and at that time, and not before, plaintiffs had a right to sue defendant and defendant had a duty to pay. He also held that the Reich judgments were final on June 16, 1965, with execution subject to a stay order if an appeal was taken before July 16, 1965; that since no appeal was taken so that no stay order was ever entered, the Reichs had a cause of action against defendant on June 16, 1965 upon which execution could issue; that defendant was required by the terms of its policy to pay when judgment was entered against the insured on June 16, 1965; and that the payment of $10,000 to the Reichs was a valid payment and a discharge pro tanto of its liability under the policy. Accordingly, he decided that plaintiffs could recover their proportionate share of $1,000 from defendant Royal Indemnity Co., plus costs; and he also entered a decision for Royal Insurance Co., Ltd. for its costs. Thereafter judgments based thereon were duly entered.

It is undisputed that under the Rhode Island statutes in force at that time, G. L. 1956, §9-21-1 the Clougherty judgments became final on July 16, 1965 because no appeal had been taken therefrom by defendant. Neither is there any dispute that under New York law, priority among automobile tort claimants is determined by the date of the judgment and that the “first in time, first in right” principle applies whether the priority is by way of judgment' or by way of settlement. See David v. Bauman, 24 Misc.2d 67, 68, 196 N.Y.S.2d 746, 748, where the court said:

“Case law going back to 1935 in New York and even earlier elsewhere makes clear that the right granted by subdivision 7 of section 167 of the Insurance Law does not alter the ‘first in time, first in right’ principle whether the priority is by way of judgment or by way of settlement.”

The narrow question raised by these appeals is whether the Reich judgments became final on June 16, 1965, the day they were filed, or on July 16, 1965, the date on which the time for appeal expired, no appeal having been taken nor stay of execution requested.

The plaintiffs contend that under the policy provisions³ defendant was under no duty to pay claimants until final judgment; that under the New York rule, priority by date of judgment means priority by date of final judgment; that under the New York statute⁴ judgments do not become final until the time to appeal therefrom has expired; and that on this record the Reich judgments did not become final until July 16, 1965, the date on which the time to appeal had expired.

The plaintiffs further argue that, applying this law, the New York courts, if confronted with the question, would hold that if two judgments are equal in time they are equal in right and would share pro rata. They argue that when defendant paid the sum of $10,000 to the Reichs on November 11, 1965, it unlawfully gave them priority over plaintiffs whose judgments had equal status.

The defendant argues that the Reich judgments were entered before the Clougherty judgments and therefore the Reichs were entitled to prior payment. In our opinion defendant’s contention has merit. We reach this conclusion based on the language of the policy and the law of New York.

The policy states that no action shall lie against the company “* * * until the amount of the insured’s obligation to pay shall have been finally determined * * by judgment against the insured after actual trial * * In order to determine the result in this case, it is necessary to ascertain when the amount of the insured’s obligation is “* * * finally determined * *' * by judgment

This phrase has been subject to many various constructions. In Tucker v. State Automobile Mut. Ins. Co., 280 Ky. 212, 132 S.W.2d 935, appellant Tucker successfully procured a judgment against Saxton in an action arising out of a collision. Saxton thereupon appealed to the Court of Appeals but did not supersede the entire amount of the judgment. Execution was returned with the notation “No property found,” and appellant filed a petition in equity in the nature of a bill of discovery. In this action it was discovered that Saxton carried an insurance policy with appellee. Thereupon, appellant amended his petition by setting up the policy and making appellee a party defendant and alleging his right to proceed against appellee. The appellee filed a plea in abatement alleging that the case was still pending in the Court of Appeals. From the decision sustaining the plea in abatement appellant appealed.

In affirming the lower court judgment the Supreme Court said, at 280 Ky. 212 at 215, 132 S.W.2d at 937:

* It is our view that the term 'final judgment’ or 'finally determined by judgment’ means a judgment which shall have become final by expiration of time for appeal or by affirmance on appeal. Such terms, in the sense used in the policy, do not come within the category of 'final orders’ or 'final judgments’ of a trial court, under the rules of practice and procedure, from which an appeal may be prosecuted to the appellate court.”

See Joyce v. Central Surety & Ins. Corp., (Mo. App.) 321 S.W.2d 272, and General Acc. Fire & Life Assur. Corp. v. Clark, 34 F.2d 833.

Tucker, supra, cites “to the same effect,” Schroeder v. Columbia Casualty Co., 126 Misc. 205, 213 N.Y.S. 649, in which the court construed section 109 of the Insurance Law (added by Laws 1917, c. 524, as amended by Laws 1924, c. 639) which allows a direct action against the insurer in the event that execution against the insured is returned unsatisfied due to the insolvency of the insured. The court in Schroeder, supra, held that the liability “* * * imposed by law * * as stated in the policy, is not fixed until the termination of an appeal by the judgment debtor.

The Schroeder decision was soundly criticized in Materazzi v. Commercial Casualty Ins. Co., 157 Misc. 365, 283 N.Y.S. 942. However, Schroeder, Materazzi, both supra, and Weiss v. New Jersey Fidelity & Plate Glass Ins. Co., 131 Misc. 836, 228 N.Y.S. 314, are inapposite here because they deal with special statutes granting to an injured party the right to proceed directly against the insurer in the event that execution against the insured is returned unsatisfied due to the insolvency of the insured, and, the language of the policies involved substantially differs from that of the case at bar.

However, the courts of New York have construed policy provisions substantially similar to the one here involved. In Pape v. Red Cab Mut. Casualty Co., 128 Misc. 456, 219 N.Y.S. 135, plaintiff recovered a judgment for personal injuries against a taxicab operator who filed a notice of appeal but did not file a supersedeas bond. Pending the appeal, plaintiff brought an action against the insurer pursuant to a direct action statute, sec. 282-b of the Highway Law (added by Laws 1922, c. 612, amended by Laws 1924, c. 360, §12, chapter 413, §1 and Laws 1925, c. 315) which requires the filing of a bond by a carrier for hire of passengers to cover “any judgment” recovered against such carriers. The “no action” clause in the policy required the “* * * amount 0f l0gS shall have been fixed * * * by a final determination of the litigation after trial of the issue * * The insurer contended that due to the pendency of an appeal in the principal action, there is a lack of a “final determination.” In rejecting the insured’s contention the court said at 128 Misc. 457, 219 N.Y.S. 136:

“Considering the obligation under the policy, apart from the language of the statute, the insurer was liable upon a ‘final determination of the litigation after trial of the issue.’ The expression is synonymous with final judgment. * * *

“The express language of the clause in the policy would seem to indicate that it was not intended to fix the insurer’s liability upon the determination of the litigation beyond all possibilities of appeal. * * *”

Although this statement was not the holding of the case, it is dicta of the first water indicating the position of the courts of New York in construing the policy involved in the case at bar.

Weiss, supra, cited by plaintiff to support his contention that a judgment in New York is not final until the time for appeal has expired, is not determinative in the instant case due to another reason. The policy there contained a provision wherein the insurer agreed “* * * to indemnify * * * against loss from the liability imposed by law upon the assured for damages on account of bodily injuries.” The court in Weiss, supra, at 131 Misc. 841, 228 N.Y.S. 322, said:

“* * * A liability is imposed by law when by proper judicial process and procedure a judgment has been entered against the assured which has become a final judgment because the time to appeal therefrom has expired. (Schroeder v. Columbia Cas. Co. * * * Dean v. Marschall, 90 Hun, 335.) A judgment entered upon the verdict of a jury taken on an inquest is just as much a final judgment as one entered upon the verdict of a jury after a litigated trial. The judgment upon the inquest becomes final one year from the time it is docketed. (Civ. Prac. Act, §108.)”

The court based its holding on Schroeder, supra, which, as stated above, was strongly criticized in Materazzi, supra.

Neither is Judy Negligee, Inc. v. Portnoy, 194 Misc. 508, 89 N.Y.S.2d 656 (City Ct. of New York), dispositive in attempting to ascertain the proper construction of a “no action” clause. In this case plaintiff sued defendant bailee, the insured, for loss of merchandise. The insured moved to serve a third-party complaint on his insurer. The insurance policy provided that no action shall lie against the company “* * * unless it shall be brought to recover for loss and/or expense, the amount of which shall have been definitely determined (a) by final judgment after trial of the issue in an action against the Assured * In granting the defendant’s motion the court said that the purpose of the clause was to free the insurer from liability until a final judgment was procured against the insured. However the court did not discuss, in any way, when a judgment becomes final. The holding of the court that, in the facts of the case, the insurer may be joined in an action if it is “* * * safe against the possibility that there will be recovery against it in the absence of and before judgment is allowed against the assured,” 89 N.Y.S.2d at 658, in no way derogates from this opinion because the court did not discuss the time at which a judgment becomes final.

In more recent cases the term “finally determined” by judgment has been construed to mean that “* * * the insured's liability shall be considered to have been finally determined after trial by the entry of the judgment against him, regardless of whether an appeal is subsequently taken.” Travelers Ins. Co. v. Pinkerton-Hays Lumber Co. (Fla. App.), 120 So.2d 448. There, the injured party started garnishment proceedings against the insurer based on a judgment procured against the insured from which the insured appealed. The “no action” clause was identical to that of the case at bar. The court held that the garnishment proceedings were not premature despite the pendency of an appeal by the insured. See General Accident Fire & Life Assur. Corp. v. Harris (Fla. App.), 117 So.2d 44, and Larson v. Dauphin Realty Co., 228 F. Supp. 952. (Connecting case at 224 F. Supp. 989, modified on other grounds 340 F.2d 180.)

On the strength of Pape, supra, reinforced by the above three cases, we believe that the language of the policy does not require the termination of an appeal period in order for a judgment to gain finality.

We must next examine the law of New York to determine when a judgment becomes final. C.P.L.R., §5011, 7B McKinney states that “A judgment is the determination of the rights of the parties in an action or special proceeding and may be either interlocutory or final.” As to when a judgment is final in New York, the matter is settled in In the matter of Bailey, 265 App. Div. 758, 40 N.Y.S.2d 746, in which the court construed the term “final judgment” as it appears in section 2 of chapter 350 of Laws of 1941. The court said, 265 App. Div. 761, 40 N.Y.S.2d 749:

“The expression ‘final judgment’ has a well-defined meaning in the Civil Practice Act. It designates that judgment of the court of original jurisdiction by which the rights of the parties are adjudicated and determined. The finality of the judgment so entered is not affected by the pendency of an appeal. Section 472 of the Civil Practice Act defines a judgment as ‘the determination of the rights of the parties in an action, and may be either interlocutory or final.’ There are numerous other sections of the Civil Practice Act which imply the same interpretation of the words ‘final judgment.’ In this State in the absence of a stay a judgment entered in the Supreme Court has complete finality. Execution may be entered thereon even though an appeal is pending. The judgment may be satisfied while the appeal is pending. Though there may be a reversal and another final judgment, nevertheless, the first judgment was a final judgment in the action.” (italics ours)

See Concourse Super Service Station, Inc. v. Price, 33 Misc.2d 503, 226 N.Y.S.2d 651.

For the reasons stated it is our opinion that the decision of the trial justice is correct.

The judgment is affirmed.

1 insurance Law, 27 McKinney’s Consolidated Laws of New York, art. 7, §167. annotated, as amended.

2 Paragraph (6) in the Agreed Statement of Farts states that “The specific date or dates upon which judgments actually entered in the Reich cases and the Clougherty cases are not agreed to but are left up to the decision of the Court.”

3 “l Coverage A — Bodily Injury Liability

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person caused by accident and arising out of the ownership, maintenance or use of the automobile.

“9. Action Against Company. No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.

“Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. Nothing contained in this policy shall give any person or organization any right to join the company as a co-defendant in any action against the insured to determine the insured’s liability.”

4 7B McKinney’s Consolidated Laws of New York Annotated, R.5016, §§5230, 5513, 5519.

“Rule 5016. Entry of judgment

(a) What constitutes entry. A judgment is entered when, after it has been signed by the clerk, it is filed by him.”

Ҥ5230. Executions

(b) Issuance. At any time before a judgment is satisfied or vacated, an execution may be issued ***.”

Ҥ5513. Time to take appeal, cross-appeal or move for permission to appeal

(a) Time to take appeal as of right. An appeal as of right must be taken within thirty days after service upon the appellant of a copy of the judgment or order appealed from and written notice of its entry, except that when the appellant has entered the judgment or order or served notice of its entry his appeal must be taken within thirty days after he did either.”

Ҥ5519. Stay of enforcement

(a) Stay without court order. Service upon the adverse party of a notice of appeal or an affidavit of intention to move for permission to appeal stays all proceedings to enforce the judgment or order appealed from pending the appeal or determination on the motion for permission to appeal where ***.” !■