Powell & Powell, Inc. v. Wake Water Co. , 171 N.C. 290 ( 1916 )

AlleN, J.

Tbe provisions in tbe contract between tbe city of Raleigh and Wake Water Company upon which tbe receiver relies to take this case out of tbe principle adopted in Gorrell v. Water Co., 124 N. C., 328, are in substance tbe same as those in tbe contracts considered in Jones v. Water Co., 135 N. C., 553, and Morton v. Water Co., 168 N. C., 582, and we therefore bold, following these authorities, tbat tbe News and Observer Publishing Company bad a right of action against tbe defendants as receivers of tbe Wake Water Company upon tbe allegations of negligence contained in tbe petition.

If so, Have tbe petitioners, the insurance companies, wbo have paid the loss in part, any interest in this right of action which can be maintained in their own name?

"When .property, upon which there is insurance, is destroyed or damaged by the wrongful act of another, the liability of the wrong-doer is primary and that of the insurer secondary, not in order of time, but in order of ultimate liability; the right of action is for one indivisible wrong, and this abides in the insured, through whom the insurer must work out his rights upon payment of the insurance, the insurer being subrogated to the rights of the insured upon payment being made. Hall v. R. R., 80 U. S., 367; R. R. v. Jurey, 111 U. S., 595; Phœnix Ins. Co., 117 U. S., 321; R. R. v. Ins. Co., 139 U. S., 235.

“The right (of subrogation) arises not out of the contract between the insured and the insurer, but has its origin in general principles of equity” (14 Mod. Am. L., 159), and in this respect the standard form of policy, which has been adopted by legislative enactment (Rev., sec. 4760), in making provision for subrogation, is but declaratory of principles already existing.

The great weight of authority is in favor of the position of the receiver, that when the loss exceeds the insurance, as the cause of action is indivisible and the right of the insurer is not because of any interest in the property destroyed or damaged, -and is enforced upon the equitable principle of subrogation, the action must be brought by and in the name of the owner of the property, and that he is entitled to recover the entire damages, without diminution on account of the insurance, and that he holds the recovery first to make good his own loss, and then in trust for the insurer; but if the insurance paid equals or exceeds the loss or damage, as the insured in that event has no further 'beneficial interest, the insurer is entitled to be subrogated to the entire cause of action of the insured, and the action may be maintained in the name of the insurer or of the insured to the use of the insurer. Ins. Co. v. Oil Co., 59 Fed., 987; R. R. v. Pullman Co., 139 U. S., 87; Ex Parte Ins. Co., 86 S. C., 54; Ins. Co. v. Frost, 37 Ill., 335; Ins. Co. v. R. R., 25 Conn., 277; Ins. Co. v. Lainsburg, 3 Doug., 245; Ins. Co. v. Mosher, 39 Me., 256; Ins. Co. v. R. R., 41 S. C., 412; Ins. Co. v. L. Co., 93 Mich., 139; Ætna Ins. Co. v. Hannibal, 3 Dill., 1; Hart v. R. R., 54 Mass., 108; Swarthout v. R. R., 49 Wis., 629; R. R. v. Loker, 68 Kan., 244; Ins. Co. v. R. R., 20 Ore., 269; Rankin Co. v. R. R., 82 Vt., 390; R. R. v. Shutt, 24 Okla., 102; R. R. v. Blount, 165 Fed., 261; Tel. Co. v. Watts, 66 Fed., 460; Hampton v. Power Co., 124 La. Ann., 570; 19 Cyc., 893 and notes.

The case from Kansas is also reported in 1 A. and E. Anno. Cases, 883, and the case from Vermont in 18 A. and E. Anno. Cases, 708, where there are full notes collecting the authorities.

Tbe controlling principles and tbe conclusions reached by tbe courts are stated accurately in tbe first case cited from tbe Circuit Court of Appeals as follows:

“When an insurance company pays to tbe insured tbe amount of a loss of tbe property insured, it is subrogated in a corresponding amount to tbe assured’s right of action against any other person responsible for tbe loss. This right of tbe insurer against such other person is derived from tbe assured alone, and can be enforced in bis right only. At common law it must be asserted in tbe name of tbe assured. In a court of equity or of admiralty, or under tbe modern codes of practice, it may be asserted by tbe insurance company in its own name, when it has paid tbe insured tbe full value of tbe property destroyed. St. Louis, I. M. and S. Ry. Co. v. Commercial Union Ins. Co., 139 U. S., 223, 235, 11 Sup. Ct., 554, and cases cited; Marine Ins. Co. v. St. Louis, I. M. and S. Ry. Co., 41 Fed., 643. But tbe rule seems to be well settled that when tbe value of tbe property exceeds tbe insurance money paid, tbe suit must be brought in tbe name of tbe assured. Ætna Ins. Co. v. Hannibal and St. J. R. Co., 3 Dill., 1, Fed. Cas., No. 96; Assur. Co. v. Sainsbury, 3 Doug., 245; Ins. Co. v. Bosher, 39 Me., 253; Hart v. R. R. Corp., 13 Metc. (Mass.), 99;. Connecticut, etc., Ins. Co. v. New York, etc., R. Co., 25 Conn., 2, 65, 278; Insurance Co. v. Frost, 37 Ill., 333; Fland Ins., pp. 360, 481, 591; Marine Ins. Co. v. St. Louis, I. M. and S. Ry. Co., supra. In such an action tbe assured may recover tbe full value of tbe property from tbe wrong-doer; but as to tbe amount paid him by tbe insurance company be becomes a trustee, and tbe defendant will not be permitted to plead a release of the cause of action from tbe assured or to set up as defense the insurance company’s payment of its part of tbe loss. Hart v. R. R. Corp., supra; Hall v. R. R. Co., 13 Wall., 367. In support of this rule it is commonly said that tbe wrongful act is single and indivisible and can give rise to but one liability. “If,” says Judge Dillon in Ætna Ins. Co. v. Hannibal and St. J. R. Co., supra, “one insurer may sue, then, if there are a dozen, each may sue; and if tbe aggregate amount of all tbe policies falls short of tbe actual loss, the owner could sue for tbe balance. This is not permitted, and so it was held nearly a hundred years ago, in a ease whose authority has been recognized ever since both in Great Britain and in this country.”

Tbe cases of Ins. Co. v. R. R., 132 N. C., 75, and Cunningham v. R. R., 139 N. C., 427, belong to -this latter class, as in each tbe insurance was equal to or exceeded tbe loss.

It is also generally held that there is no right to subrogation until tbe insurance is paid, and that when tbe right once attaches it cannot be destroyed or extinguished by a release or discharge executed by tbe . insured. Ins. Co. v. Oil Co., 59 Fed., 987; Hart v. R. R., 54 Mass., 100; Ins. Co. v. R. R., 73 N. Y., 405; Swarthout v. R. R., 49 Wis., 628; Ins. Co. v. Hutchinson, 21 N. J. Eq., 117; R. R. v. Ins. Co., 59 Kan., 435.

“After the loss has been j>aid by the company, the wrong-doer, haying knowledge of the fact, cannot make settlement with the insured for the loss, his liability being to the company to the extent of the insurance paid.” 19 Cyc., 895, and cases in note.

“In regard to the right of the insurance company to sue in the name of the assured, we think the cases fully affirm the iiosition that by accepting payment of the insurers the assured do impliedly assign their right of indemnity from a party liable to the assured. It is in the nature o'f an equitable assignment, which authorizes the assignee to sue in the name of the assignor for his own benefit; and this-is a right which a court of law will support, and will restrain and prohibit the assignor from defeating it by a release. The formal discharge, therefore, given by the nominal plaintiffs, is not a bar to the action.” Hart v. R. R., 54 Mass., 100.

“The courts have likewise been very firm in supporting the right of the insurance company to bring an action in the name of the assured, and will not allow the latter to defeat such action, even by a release or discharge of the person by whose' act the damage was occasioned.” Swarthout v. R. R., Wis., 628.

“It is also settled that if the railroad company had not paid Hutchinson his damages, or had paid them to him, knowing that he had received the amount insured from the complainants, that they are liable to the complainants in a suit at law, which they have the right to bring in the name of Hutchinson, without his consent, to repay them the damages to the amount of the sum paid by them, and that a release by Hutchinson would be no defense to such suit.” Ins. Co. v. Hutchinson, 21 N. J. E.

The case from New-York is in many respects like the one before us. There the loss was greater than the insurance, and the owner settled with the wrong-doer for the difference between the value of the property and the insurance, reserving the right to the insurance, and executed a release, and it was held that the insurer could maintain his action; and the reasoning in the case from Kansas on a similar state of facts leads to the same result.

It would seem, therefore, that the following principles are established :

1. That the right of action to recover damages from the wrong-doer is in the insured, and that this right of action is one and indivisible.

2. That upon payment .of the insurance the insurer is subrogated to the rights of the insured as against the wrong-doer.

3. That if the insurance is equal to or exceeds the loss, this right of subrogation extends to the whole right of action in the insured, and operates as an equitable assignment, and the action may thereafter be prosecuted in the name of the insurer.

4. That if the insurance is less than the total loss, the right of sub-rogation still exists; but as the right of action is indivisible, and as the insurer has only paid a part of the loss and is not entitled to an assignment of the whole cause of action, the action must be prosecuted in the name of the insured.

5. That a release by the insured does not extinguish the right of subrogation.

They also seem to establish the proposition that if the insurance is less than the loss, and the insured has settled the difference between the insurance and the total loss with the wrong-doer, leaving unsettled only the amount of damages, measured by the insurance, that the cause of action for this damage would be in the insurer, for the reason that the insured has parted with all beneficial interest in the right of action, and, while the cause of action was indivisible, it has been divided by the act of the parties.

Applying these principles, we are of the opinion that there is no error in granting the prayer of the petitioners, as it appears that the News and Observer Publishing ’Company alleged in its complaint against the receiver of the Wake Water Company that the value of the property destroyed was $110,951.48, that the insurance on the same amounted to $26,901.24, and that it asked for judgment for the difference between the two amounts; and it further appears that the claim of the publishing company has been settled with knowledge of the payment of the insurance.

The receiver has the right to be relieved from a multiplicity of suits, and the petitioners or the receiver may require all insurance companies that have participated in the payment of the loss to the publishing company to be made parties to the action.

This opinion is based on the facts alleged in the petition, as the petitioners are not now required to do more than make out a prima facie right to sue.

We make no intimation on the issue of negligence, which the petitioners must establish, as none of the evidence bearing upon negligence is before us.

We further reserve the question of laches, and whether the right to subrogation may prevail as against the owner of bonds secured by mortgage or trust deed, until the facts are fully developed.

Affirmed.