E. C. Long, Inc. v. Brennan's of Atlanta, Inc.

• Citation: 252 S.E.2d 642,148 Ga.App. 796
• Decision Date: 29 January 1979
• Docket Number: No. 56793,56793
• Court: United States Court of Appeals (Georgia)
• Parties: E. C. LONG, INC. v. BRENNAN'S OF ATLANTA, INC.

Page 642

252 S.E.2d 642

148 Ga.App. 796

E. C. LONG, INC. v. BRENNAN'S OF ATLANTA, INC.

No. 56793.

Court of Appeals of Georgia.

Submitted Nov. 6, 1978.

Decided Jan. 5, 1979.

Rehearing Denied Jan. 29, 1979.

Carter, Ansley, Smith & McLendon, Ben Kingree, A. Terry Sorrells, Atlanta, for appellant.

Long, Weinberg, Ansley & Wheeler, Rosa B. Lord, J. Kenneth Moorman, Hansell, Post, Brandon & Dorsey, Hugh E. Wright, Cotton, Katz & White, J. Timothy White, Atlanta, for appellee.

QUILLIAN, Presiding Judge.

Defendant, E. C. Long, Inc., appeals from the grant of a partial summary judgment, striking three of its defenses to an action by the plaintiff, Brennan's of Atlanta, Inc., for damages arising from an explosion and fire which destroyed the proposed Brennan's restaurant [148 Ga.App. 797] at 103 West Paces Ferry Road, Atlanta.

Brennan's of Atlanta, Inc., purchased a "James River Georgian Mansion" located on West Paces Ferry Road for the purpose of converting it into a restaurant. They contracted with E. C. Long, Inc., as general contractor, to renovate and convert the residence into a restaurant. Long contracted with B & W Service Company to perform certain grading work. On July 17, 1972, B & W bulldozed a tree and when the tree was uprooted, a gas line which had passed through the roots was broken. It is alleged that gas from the broken main seeped into the mansion. An explosion and fire followed and the mansion was destroyed.

Brennan's had purchased the mansion for $300,000. It carried the property on its books as the land having a value of $170,000 and the mansion having a value of $130,000. Brennan's had procured insurance on the mansion and was paid a total of $130,000 by the three insurers. Brennan then brought this action against Long, B & W Service Company, and the Atlanta Gas Light Company for damages totaling $450,000. Included within the complaint were damages to the residence; cost of preparing plans, drawings, and specifications for conversion of the residence to a restaurant; cost for removal of debris after the fire; cost of work performed prior to destruction of the mansion; lost profits; and other damages to be added by amendment.

Defendant Long included as his third defense: Brennan's was not the real party in interest; as his fourth defense: there had been an accord and satisfaction between Long and Brennan's; and as a fifth defense: that Long was an insured under the fire policies and to the extent that plaintiff's claims included claims of those insurers, it was barred by payment of benefits under those insurance policies. The court granted plaintiff's motion or partial summary judgment and struck defendant Long's third, fourth, and fifth defenses. Long brings this appeal. Held :

1. Brennan's and Long executed a "Standard Form of Agreement Between Owner and Contractor" of The American Institute of Architects. The contract provisions relevant to this action provide: "11.3 Property Insurance. 11.3.1 Unless otherwise provided, the Owner (Brennan's) Shall purchase and maintain property Insurance upon the entire Work at the site to the full insurable value thereof. This insurance shall include the interest of the Owner, the Contractor, Subcontractors and Sub-subcontractors In the Work and shall insure Against the perils of Fire, Extended Coverage, Vandalism and Malicious Mischief." (Emphasis supplied.)

Paragraph "1.1.3 The Work. The term Work includes all labor necessary to produce the construction required by the Contract Documents, and all materials and equipment incorporated or to be incorporated in such construction."

Apparently, pursuant to its obligation under Paragraph 11.3.1 the owner, Brennan's, procured insurance through an insurance agent, Bailey, Engelhardt & Vega, Inc. The Binder shows that three insurance companies, "Commercial Union, American, and Continental Casualty," each would issue policies for $105,000 to "Brennan's of Atlanta, Inc. Owner & E. C. Long, Contractor" in the amount of "$315,00" (sic) "(o)n the one story masonry building occupied as Restaurant and situated 103 W. Paces Ferry Road, N. W. Atlanta." The insurance policies themselves were not introduced in evidence and we have no other description of the property or the insureds intended to be covered. However, when the insurance companies forwarded their drafts to Brennan's to cover the claim for the explosion and fire, the drafts from American and Commercial Union were made out jointly to Brennan's and Long, and the draft from Continental Casualty was made only to Brennan's. But Brennan's forwarded all three drafts to Long for its indorsement with a cover letter explaining the drafts were for "the loss which they sustained to the West Paces Ferry Road property." After the drafts were indorsed by Long and returned to Brennan's, all insurance companies then took a "loan receipt" from Brennan's which stated, essentially: "Received from the (insurance company) $43,333.33 as a loan without interest repayable only in the event and to the extent of any net recovery the undersigned (Brennan's of Atlanta) may make from any person . . . or other parties causing or liable for the loss or damage . . . and as security for such a payment, the undersigned (Brennan's) pledges to the said (Insurance) Company all his, its, or their claim or claims against said person, persons . . . any recovery thereon."

Defendant Long acknowledges that Georgia law recognizes a loan receipt instrument by an insurer to his insured permits an action against an alleged wrongdoer to be brought in the name of the insured. McCann v. Dixie Lake &c. Co., 44 Ga.App. 700(1), 162 S.E. 869; Green v. Johns, 86 Ga.App. 646(2), 72 S.E.2d 78. The wording of the loan receipts in the instant case is similar to those of the cited cases and would appear to be dispositive of this issue except this case has one fact not included within those cases. The present defendant is a named insured in the policy of insurance.

( a) The first enumerated error addresses the defendant's "Third Defense" which was: "The plaintiff, Brennan's of Atlanta, Inc., is not the real party in interest . . ." We will note in passing that this was not a motion " to require (plaintiff) to (add the insurer) as an additional party plaintiff because it was 'a party at interest.' " See Southeast Transport Corp. v. Hogan Livestock Co., 133 Ga.App. 825, 826, 212 S.E.2d 638.

Professor Moore advises that "(c)ases construing the real party in interest provision can be more easily understood if it is borne in mind that the true meaning of real party in interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced." 3A Moore's Federal Practice 17-65, § 17.07.

The court correctly granted summary judgment for plaintiff as to this defense, for regardless of the merit of plaintiff's claim for damages to the mansion it is only one of thirteen enumerated items of alleged damages sought to be enforced against the defendant by the plaintiff. Brennan's is a proper party plaintiff to the remaining categories of damages alleged to have been caused by the negligence of the defendant and his sub-contractor, which items were not covered by Brennan's insurance on behalf of the plaintiff and the defendants. This enumeration is without merit.

(b) We turn to the third enumerated error which deals with the grant of the motion for summary judgment for plaintiff, striking defendant's fifth defense in which he alleged he was "an insured under certain fire policies issued by insurers who are real parties in interest in a portion or all of plaintiff's claim for damages. To the extent that plaintiff's claim for damages involve claims of these insurers, the claims are barred by virtue of the existence of these policies of insurance and the payment of benefits thereunder." We agree.

The contract between Brennan's and Long provided: "11.3.6 The Owner and Contractor waive all rights against each other for damages caused by fire or other peril To the extent covered by insurance provided under this Paragraph 11.3 . . ." (Emphasis supplied.) As stated earlier, apparently the owner Brennan's, procured this insurance under its obligation of paragraph 11.3 as this was the only insurance noted which covered the owner And the contractor on this construction project. Brennan's contends "the Contract between Brennan's and Long provided that the insurance policies procured by Brennan's for Long would cover damage only to Long's 'Work' . . . Long was an insured only to the extent of its limited interest in the 'Work,' . . . Long sustained no damage to its 'Work' and, therefore, was afforded no coverage under these policies . . . for purposes of this incident, Long, in effect, was not an insured under the policies." We can not agree. Long was a named insured in the binder and had an insurable interest in the project. Under Georgia law, a person has an "insurable interest" in property when he has "any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment." Code Ann. 56-2405(2) (Ga.L.1960, pp. 289, 658); Pike v. American Alliance Ins. Co., 160 Ga. 755, 761, 129 S.E. 53. Where the subject matter of insurance is a builder's risk policy, whether for construction, alteration, or repair, the building contractor who has entered into such a contract has an insurable interest in the building. See generally 3 Couch on Insurance 2d p. 112, § 24.29; 1 Richards on Insurance 347-348, § 80; Annot. 94 ALR2d 226, § 2; 43 AmJur2d 511, Insurance, § 470; 44 C.J.S. Insurance § 186, p. 882. When such risk is deemed to have commenced is decided by the wording of the policy, otherwise, normally while "under construction." 94 ALR2d 226. The building here was "under construction" at the time of the fire as the defendant Long had been paid...