General Ins. Co. of America v. Stoddard Wendle Ford Motors

• Decision Date: 10 February 1966
• Docket Number: No. 37909,37909
• Court: Washington Supreme Court
• Parties: GENERAL INSURANCE COMPANY OF AMERICA, a corporation, Appellant, v. STODDARD WENDLE FORD MOTORS, a corporation, Respondent.

Page 973

67 Wn.2d 973

410 P.2d 904

GENERAL INSURANCE COMPANY OF AMERICA, a corporation, Appellant, v. STODDARD WENDLE FORD MOTORS, a corporation, Respondent.

No. 37909.

Supreme Court of Washington, Department 1.

Feb. 10, 1966.

Rehearing Denied April 14, 1966.

Morrison & Huppin, Robert Ewing, Spokane, for appellant.

Quackenbush, Dean, Beschel & Smith, Jack R. Dean, Spokane, for respondent.

HILL, Judge.

Superficially, ¹ this would seem to be a subrogation case with the issue whether the insurance company, as subrogee, had waived its right to recover. The trial court held that there had been such a waiver and dismissed the action.

Stoddard Wendle Ford Motors, a corporation (hereinafter called Stoddard-Wendle), sold a truck to W. H. Findley (hereinafter called Findley) for use in his logging operations in Idaho. To meet the purchaseer's requirements of a 212-inch wheel base, the truck, which had a wheel base of 191 inches, was lengthened by cutting the body and welding in an additional section.

The vendor's interest in the conditional sales contract covering the truck (dated May 3, 1960) was assigned to Pacific Finance Corporation (hereinafter called Pacific) and, later, reassigned to Stoddard-Wendle. The insurance required by the contract was procured by Findley from the General Insurance Company of America (hereinafter called General) and named Pacific as the loss-payee. Findley never made any payment on the truck, other than the down payment, and his equity was never sufficient to entitle him to any part of the loss subsequently paid by General.

On August 1, 1960, while the truck carrying a tractor belonging to Findley was going up a grade, the weld separated and the truck, together with the tractor it was carrying, went over an embankment with resultant heavy damage. We assume, for the purposes of this opinion, that, as alleged by General, the welding by Stoddard-Wendle was 'negligently and ineffectually' done, otherwise General has no cause of action.

The truck was repossessed by Stoddard-Wendle by virtue of a repossession action which it started against Findley in Idaho in early June, 1961. By stipulation of the parties on June 15, 1961, the possession of the truck, then in the possession of the Sheriff of Nez Perce County, Idaho, was surrendered to Stoddard-Wendle. The stipulation provided that 'Such truck shall be and remain the property of the plaintiff to do with as it sees fit.' It was brought to Spokane and repaired at a cost of $7,124.

This amount, less the $250 deductible, i.e., $6,874, was paid by General October 20, 1961. The check was made payable to Pacific (the designated loss payee in the policy) and to Inland Truck & Diesel, which had made the repairs. The latter received the entire amount. Stoddard-Wendle, which then owned and had possession of the truck, paid the $250 deductible.

Stoddard-Wendle, in its repossession action against Findley, had also claimed damages; and Findley had, in his amended answer, made a claim for some $18,000 against Stoddard-Wendle for damages caused by the defective weld which had caused the truck to go off the road and down the embankment. The damages he claimed were to his tractor, which was being carried by the truck at the time of the accident, and for loss of use of the truck and tractor. (No damages were claimed for damage to the truck--General having paid for the necessary repairs, except the $250 deductible which Stoddard-Wendle had paid.) The stipulation, which restored ownership and possession of the truck to Stoddard-Wendle, provided that the taking of possession by Stoddard-Wendle 'shall not be construed as a waiver by either the plaintiff or the defendants of any right to damages accrued or accruing in this cause.'

The Idaho action was finally compromised June 29, 1962, by Stoddard-Wendle paying Findley $3,500. The action by Stoddard-Wendle, and Findley's action by cross-complaint for damages were both dismissed. Each party released all claims against the other for any damages arising out of the transaction between them.

The present action by General, as subrogee of Findley or Pacific, was commenced August 9, 1962, against Stoddard-Wendle as a third-party tortfeasor, to recover the $6,874 paid for repairs to the truck which had been damaged by reason of its defective weld.

The defense was that General has waived its right to claim subrogation by failing to intervene in the Idaho action, which had been commenced by Stoddard-Wendle but in which Findley, by cross-complaint, asked for damages caused by the defective weld. This action was terminated by a settlement in which Findley gave Stoddard-Wendle a release of all claims arising from any negligence.

It was established that General had notice of the Idaho action; and the trial court, in the present action, held that General had waived its right to sue Stoddard-Wendle when it failed to intervene in the Idaho action, even though Findley was not in that action asking for damages to the truck. The trial court found that General, by its failure to intervene in the Idaho action, had waived its right to subrogation and dismissed the action. General appeals.

The right of an insurer, which has paid a loss under its policy, to be subrogated to the rights of the insured (or the loss payee) against a wrongdoer responsible for the loss, is clear. However, subrogation is an equitable right and will be enforced or not according to the dictates of equity and good conscience. It arises independently of contract provision. Powers v. Calvert Fire Ins. Co., 216 S.C. 309, 57 S.E.2d 638, 16 A.L.R.2d 1261 (1950).

There is a substantial body of law developing which indicates that a settlement by a tortfeasor and the insured, with an accompanying release made with the knowledge of the tortfeasor that the insurer has paid that portion of the loss for which it was liable, does not defeat the insurer's claim to subrogation against the tortfeasor. See cases collected under Section 5(a), beginning at page 124 of 92 A.L.R.2d (part of an Annotation on 'Rights and remedies of property insurer as against third-person tortfeasor who has settled with insured' p. 97).

We are agreed that the trial court properly dismissed the action by General. However, we have serious doubts whether such a compromise settlement between Findley and Stoddard-Wendle, if the latter were a third-party tortfeasor, could enable it to avoid liability to General for the damage. Certainly Stoddard-Wendle knew that General had paid $6,874 for repairs on the truck.

Nor are we convinced that General lost or waived any rights by failing to intervene in the Idaho action between Findley and Stoddard-Wendle. That action was terminated by a settlement and a stipulated judgment. The Supreme Court of...