Fiat Motors of North America, Inc., v. Mayor and Council of City of Wilmington

• Citation: 498 A.2d 1062
• Parties: FIAT MOTORS OF NORTH AMERICA, INC., and Affiliated FM Insurance Company, Plaintiffs in Federal Court, v. MAYOR AND COUNCIL OF the CITY OF WILMINGTON, Department of Commerce of the City of Wilmington, Board of Harbor Commissioners of the Port of Wilmington, E. I. Du Pont de Nemours & Company, and American Auto, Inc., Defendants in Federal Court. . Submitted:
• Decision Date: 23 April 1985
• Court: United States State Supreme Court of Delaware

Page 1062

498 A.2d 1062

FIAT MOTORS OF NORTH AMERICA, INC., and Affiliated FM Insurance Company, Plaintiffs in Federal Court, v. MAYOR AND COUNCIL OF the CITY OF WILMINGTON, Department of Commerce of the City of Wilmington, Board of Harbor Commissioners of the Port of Wilmington, E. I. Du Pont de Nemours & Company, and American Auto, Inc., Defendants in Federal Court.

Supreme Court of Delaware.

Submitted: April 23, 1985.

Decided: Sept. 9, 1985.

As Corrected: Sept. 16, 1985.

On certification of questions of law from the United States District Court for the District of Delaware.

J.R. Julian, Wilmington, and Henry J. Catenacci (argued), of Podvey, Sachs & Catenacci, Newark, N.J., for plaintiffs in Federal Court.

David E. Brand (argued), of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, for defendants in Federal Court.

Before McNEILLY, HORSEY, and CHRISTIE, JJ.

CHRISTIE, Justice.

The Federal Court for the District of Delaware has certified three questions for review by this Court. The questions presented call for a determination of the impact which the Municipal Tort Claims Act, 10 Del.C. §§ 4010-4013, (hereinafter the Act) has had upon the law of municipal immunity in Delaware.

I.

Fiat Motors of North America, Inc. (hereinafter Fiat) imports and sells automobiles in the United States. In January of 1974, the City of Wilmington agreed to lease approximately 30 acres of property at the Wilmington Marine Terminal to Fiat for the processing, servicing and storage of its imported automobiles prior to their shipment to Fiat dealers in the United States. Pursuant to the lease executed between the parties, Fiat agreed to pay the City of On October 25, 1980, a severe rain storm caused flooding at the Marine Terminal. As a result of this storm, Fiat suffered a loss of over ten million dollars in damages to the vehicles parked there during the storm. The City had previously obtained one million dollars in insurance coverage for any tort liability on its part, and Fiat had obtained insurance coverage of ten million dollars. Apparently, Fiat's carrier, through Fiat, seeks to recover from the City's carrier and from the City the sums it has paid to Fiat as compensation for the loss. Fiat also seeks to recover for any part of its loss not covered by its own insurance.

Wilmington an annual rent of approximately $193,000, plus an annual adjustment to be based upon the wholesale price index.

Fiat and its insurer instituted a suit in Delaware Federal District Court against the City of Wilmington, alleging, inter alia, negligence on the part of the City. The City claimed that, even if it had been negligent, it was immune from liability under the provisions of the Act. The City moved for summary judgment on these grounds. Plaintiffs challenged the City's claim of immunity on two grounds. They initially contended that because the City acted in its proprietary capacity (as opposed to its governmental capacity) in leasing the parking facilities, any negligent conduct of the City was beyond the protection of municipal immunity. Plaintiffs also claimed that the City's purchase of liability insurance for activities, which might otherwise be subject to municipal immunity under the statute, constituted an implied waiver of municipal immunity.

The Federal District Court considered the briefs of the parties and heard oral argument on the City's motion for summary judgment. It was at the oral argument that Judge Wright suggested the certification of the issues of State law to this Court. See Del. Const. art. IV, § 11(9); ¹ Supreme Court Rule 41(a). ² In its unreported memorandum of decision dated February 27, 1985, the District Court, 619 F.Supp. 29, discussed the legal issues before it in detail. The court expressed views on some of the issues, and concluded that, in view of the unsettled state of Delaware decisional law as to municipal immunity and in view of the broad impact which a ruling defining the scope of municipal immunity would have in Delaware, certain questions should be certified to this Court.

The following are the three questions which were certified to this Court, and this Court's answers thereto:

Question 1: Does the County and Municipal Tort Claims Act, ³ 10 Del.C. §§ 4010-4013, render a municipality immune from liability for its negligent acts or omissions when the municipality is acting in a proprietary capacity?

Answer: Yes, except as otherwise provided in § 4012 or "otherwise expressly provided by statute" under § 4011(a).

Question 2: Does the County and Municipal Tort Claims Act, 10 Del.C. §§ 4010-4013, prohibit a municipality from waiving its statutory immunity?

Answer: Yes.

Question 3: Does a municipality's purchase of insurance that provides the municipality with protection against liability for activities beyond the scope of the exceptions enumerated in 10 Del.C. § 4012 constitute an implied waiver of the municipality's statutory immunity under 10 Del.C. § 4011 of the County and Municipal Tort Claims Act?

Answer: No.

We shall now briefly discuss these questions and explain our answers.

II.

In Delaware, the general rule has always been that a municipality is immune from suit for its negligent acts or omissions unless such immunity has been modified or waived by statute. Varity Builders, Inc. v. Polikoff, Del.Supr., 305 A.2d 618 (1973); Shellhorn & Hill, Inc. v. State, Del.Supr., 187 A.2d 71 (1962); Flait v. Mayor & Council of Wilmington, Del.Supr., 97 A.2d 545 (1953), overruled in, City of Wilmington v. Spencer, Del.Supr., 391 A.2d 199 (1978). Prior to the passage of the Act, the legislature had never specifically modified this rule or provided for a waiver of municipal immunity. However, there was an exception to the general rule of municipal immunity which had already been engrafted as part of our common law when we adopted the rule from England. See Flait, 97 A.2d at 545-6. This exception provided that when a municipality was operating in a proprietary capacity, its activities were not immune from liability because the municipality was functioning outside its traditional role. Only when the municipality was performing a governmental service were its activities immune. Spencer, 391 A.2d 199; Wilmington Housing Authority v. Williamson, Del.Supr., 228 A.2d 782 (1967).

This distinction has been consistently applied in Delaware courts up until the passage of the Act in 1979. The rule, which depends for its proper application upon the distinction between proprietary and governmental acts, is difficult to apply. In fact, the rule has been criticized as "illogical" and "unsatisfactory" by Delaware courts and recognized as "inherently unsound" by the United States Supreme Court. See Williamson, 228 A.2d at 786; Flait, 97 A.2d at 546; Indian Towing Company v. United States, 350 U.S. 61, 65, 76 S.Ct. 122, 124, 100 L.Ed. 48 (1955).

The question which has been framed by the District Court is "whether the Act 'eliminated the exception to sovereign immunity for the proprietary activities of a municipality.' "

Plaintiffs assert that any interpretation of the Act which would do away with the distinction between governmental and proprietary functions, would in turn lead to an improper extension of the doctrine of municipal immunity to include activities which were not immune even at common law. Plaintiffs contend that any legislative extension of the doctrine in derogation of the common law, must be strictly (i.e., narrowly) construed by our courts. Pajewski v. Perry, Del.Supr., 363 A.2d 429 (1976); Spencer, 391 A.2d 199.

This Court must endeavor to discern the legislative intent as expressed in the words of the Act, in light of the circumstances under which the Act was adopted. In reaching our conclusion, we are cognizant of the common law, as it existed before the Act was passed. However, our reading of the entire statute and our attempt to make a harmonious whole of the various sections thereof, leads us to conclude that the Act completely redefined municipal immunity. See Nationwide Insurance Co. v. Graham, Del.Supr., 451 A.2d 832, 834 (1982); State v. Nicholson, Del.Super., 334 A.2d 230, 233 (1975).

The Act was not a mere alteration of the doctrine of municipal immunity. In the process of recodification of the doctrine, the General Assembly extended municipal immunity to areas where it did not formerly apply. In so doing, the General Assembly sought to simplify and clarify the law to overcome recent decisions limiting municipal immunity and to extend such immunity.

Id. We base this conclusion on several factors.

The first indication that the legislature intended to terminate the traditional governmental/proprietary distinction is contained in the clear and unambiguous language of § 4011(a), which reads as follows:

Except as otherwise explicitly provided by statute, all governmental entities and their employees shall be immune from suit on any and all tort claims seeking recovery of damages. That a governmental entity has the power to sue or be sued, whether appearing in its charter or statutory enablement, shall not create or be interpreted as a waiver of the immunity granted in this subchapter.

The first sentence clearly states that municipalities and their employees will be immune from liability for any torts committed, unless "... otherwise expressly provided by statute ...." It is clear that the distinction between governmental and proprietary functions was ancient judge-made law. This distinction not only finds no legislative support in Delaware, but it has now been abolished by statute insofar as it applies to municipalities.

However, plaintiffs contend (and the District Court seems to suggest) that the very broad scope of immunity established in the first sentence of § 4011(a) is narrowed by the more specific statements in the second sentence of the statute (quoted above). There is no doubt that this second sentence was intended to make it clear that the statute changed the law...