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Royal Indemnity Co. v. Petrozzino

decided as amended may 14 1979.: May 2, 1979.



Before Seitz, Chief Judge, and Aldisert and Rosenn, Circuit Judges.

Author: Aldisert


In this diversity action we are to determine whether the insurer of a bank is barred by the New Jersey statute of limitations from proceeding against a bank robber. The district court held that the insurer failed to commence its action within the applicable six-year period and dismissed the claim. Although there is no New Jersey decision precisely on point, we believe the New Jersey Supreme Court would hold that the action was timely. We therefore reverse the judgment of the district court.


On September 4, 1964, the Citizens National Bank in Inglewood, New Jersey was robbed. Within hours of the robbery, Michael Petrozzino, Jr. was arrested for the crime, and his arrest was reported in the press. Four days later the Royal Indemnity Company paid Citizens National Bank the sum of $28,433.84, representing the net loss of the bank. A criminal information was filed against Petrozzino and two others on March 29, 1966, charging them with conspiracy to rob the bank, and on May 18, 1966, Petrozzino pleaded guilty. On December 22, 1970, more than six years after the robbery, appellant commenced this civil action under its right of subrogation to the bank. A default judgment was entered against Petrozzino on November 8, 1971. In 1978 the judgment was vacated solely to permit Petrozzino to interpose the defense of the statute of limitations; he has admitted all of the substantive allegations in the complaint.

The district court found that the bank employees who witnessed the robbery were, and are to this day, unable to identify Petrozzino as one of the robbers, that the bank knew of Petrozzino's arrest within a few days after the robbery, and that the insurance company made no effort to discover whether Petrozzino was in fact one of the robbers. In addition, the court found that the bank failed to verify the accuracy of various newspaper reports relating to Petrozzino and imputed knowledge of the reports to the appellant.*fn1

In support of his limitations defense, Petrozzino relied on New Jersey's fictitious name practice. When a plaintiff is aware of an actionable claim but does not know the identity of a defendant, an action may be commenced against John Doe. When the plaintiff, acting with reasonable diligence, later ascertains the identity of the defendant, he may amend the complaint to specify the defendant's name. The amended complaint then relates back to the date of the filing of the original complaint so that the action is not barred by the statute of limitations. Farrell v. Votator Division of Chemetron Corp., 62 N.J. 111, 299 A.2d 394 (1973); Rules of Court R. 4:26-4. Petrozzino argued that appellant could have filed a John Doe complaint immediately after the robbery, before it knew who had robbed the bank.

Appellant relied on New Jersey's "discovery principle" under which the statute of limitations does not begin to run until a plaintiff discovers, or in the exercise of reasonable diligence, should discover, that he has an actionable claim. Fernandi v. Strully, 35 N.J. 434, 173 A.2d 277 (1961). The insurer argued that until Petrozzino pleaded guilty in 1966, it could not reasonably have known against whom to bring an action, so that the limitations period should have been tolled. Its position was that the complaint filed in 1970 was timely because it was within six years of the discovery that Petrozzino robbed the bank.

The district court held that appellant should have commenced its action within six years of the robbery. If Petrozzino's identity was uncertain, a John Doe complaint would have permitted the bringing of a timely action. The court believed that the discovery principle was not applicable when the existence of the claim was known and the insurer merely lacked the name of the proper defendant. In the alternative, the district court held that if the discovery principle applied, appellant did not meet its burden of showing that the exercise of reasonable diligence would have failed to disclose the identity of the bank robber until six years prior to the filing of the complaint. Concluding that the action was barred by the statute of limitations, the court dismissed the complaint and entered judgment for the appellee. We disagree with both determinations of the district court.


Whether the New Jersey fictitious name practice precludes application of the discovery principle in this case is a difficult question. The district court dismissed the complaint on the basis of this reasoning: "Neither party has pointed to any New Jersey case which holds that the discovery rule of Strully and its progeny is applicable where the plaintiff knows he has a cause of action but does not know the identity of the person against whom the cause of action exists. As I perceive the law of New Jersey, the discovery rule has no such application." Appendix at 13a-14a. We cannot accept the court's rationale for two reasons: (1) we do not think the New Jersey Supreme Court would hold that the discovery principle does not apply when the John Doe practice is available, and (2) even if that were the law of New Jersey, the John Doe practice was not available to the appellant in this federal diversity action.


In Farrell, supra, the leading case on the John Doe practice, the Supreme Court of New Jersey addressed the situation in which a John Doe complaint had been filed within the limitations period and amended after its expiration to name the actual defendant. Citing New Jersey Rule of Court 4:9-3,*fn2 the court held that "(t)he amendment related back to commencement of the action." 62 N.J. at 120, 299 A.2d at 399. In the case before us, however, the district court did not apply the narrow rule announced in Farrell, but relied on the holding of the state's intermediate appellate court in Lawrence v. Bauer Publishing & Printing Ltd., 154 N.J.Super. 271, 381 A.2d 358 ...

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