Grace v. United States, Civil Action No. 3262.

• Decision Date: 05 March 1948
• Docket Number: Civil Action No. 3262.
• Parties: GRACE et al., to Use of GRANGERS MUT. INS. CO. v. UNITED STATES.
• Court: U.S. District Court — District of Maryland

76 F. Supp. 174

GRACE et al., to Use of GRANGERS MUT. INS. CO. v. UNITED STATES.

Civil Action No. 3262.

District Court, D. Maryland.

March 5, 1948.

Stanley R. Bossard, of Baltimore, Md., for plaintiffs.

Bernard J. Flynn, U. S. Atty., and James B. Murphy, Asst. U. S. Atty, both of Baltimore, Md., for defendant.

CHESNUT, District Judge.

In this case the plaintiffs sue the United States for damage to their automobile truck caused by the alleged negligence of an employee of the defendant. The suit is based on the recently enacted Federal Tort Claims Act, §§ 921-946.

The facts of the case are set out in a stipulation from which I find that the damage to the plaintiffs' truck occurred on July 24, 1946, and resulted from a collision on a Maryland highway with a motor vehicle (a Jeep) owned by the United States and operated by its employee acting within the scope of his employment. The collision was caused by the latter's negligent operation of the Jeep which was the proximate cause of the damage. The monetary damage was $780.00. The plaintiffs carried automobile collision insurance in the Grangers Mutual Insurance Company under which that Company has paid to the plaintiffs $680.00, that is the amount of the loss less $100.00 deductible. In accordance with the policy provisions this payment was made under a subrogation agreement. The suit is brought in the name of the plaintiffs, who are owners of the truck, "to their own use and to the use of the Grangers Mutual Insurance Company".

The Assistant United States Attorney representing the defendant has made no serious contest as to the liability of the United States to the plaintiffs to the extent of the $100.00; but does contest earnestly liability for the balance of the monetary damage to the plaintiffs' truck, on the ground that it has been paid by the insurer. The legal contention is that the Federal Tort Claims Act waives the sovereign immunity of the Government to suits only by persons who have been injured with respect to themselves or their property and does not authorize suits against the Government by plaintiffs based on derivative causes of action as for instance by assignment or subrogation; and therefore suits by or for the benefit of subrogees are not permissible. This is the substantial question involved in the particular case.

The Act contains a section with regard to procedure, Title 28, U.S.C.A. § 932. That section makes applicable the new Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c. Rule 17(a) provides — "Every action shall be prosecuted in the name of the real party in interest;" This suit is in accordance with that Rule. The parties in interest are obviously the plaintiffs to the extent of $100.00 for their own account and to the extent of $680.00 for the use or benefit of the insurer. The legal effect of the notation in the titling of the case "to the use of" is that any recovery of damages by the plaintiffs will be held in trust by them for the benefit of the insurer to the extent of its interest. United States v. American Tobacco Co., 166 U.S. 468, 474, 17 S.Ct. 619, 41 L.Ed. 1081. This is also in accordance with the long and well established practice in Maryland. Md. Code 1939, Art. 75, § 3; Poe's Pleading and Practice Vol. II, Ch. 13, pp. 150-155. See also McWhirter v. Otis Elevator Co., D.C. S.C., 40 F.Supp. 11.

In support of the contention that the Government is not liable to the plaintiffs for any amount that has been reimbursed to them by the insurer reference is made to the well-known "Assignment of Claims Statute," Section 203, Title 31, U.S. C.A. It is argued that the "subrogation agreement" mentioned in the stipulation constitutes such an assignment of claim as is prohibited by the Statute. But this Statute is in my opinion clearly inapplicable to the present situation. The purpose of the Statute is to protect the United States against defenses which it has to claims by an assignor by way of set-off, counter claim, etc., which might not be applicable to an assignee. Such defenses are expressly reserved under the Tort Claims Act, Title 28 U.S.C.A. § 932. It has often been held that the Assignment Statute applies only to voluntary assignments and not to those arising by operation of law as, for instance, by the equitable doctrine of subrogation. Nat. Bank of Comm. v. Downie, 218 U.S. 345, 356, 31 S.Ct. 89, 54 L.Ed. 1065, 20 Ann.Cas. 1116; Martin v. National Surety Co., 300 U.S. 588, 57 S.Ct. 531, 81 L.Ed. 822; McKenzie v. Irving Trust Co., 323 U.S., 365, 65 S.Ct. 405, 89 L.Ed. 305. The interest of the insurer comes from the equitable doctrine of subrogation which arises from the nature of the subject matter and the relationship of insured and insurer, quite apart from and independent of an express assignment from insured to insurer. This doctrine has been a well-known principle of insurance law from the time of Lord Mansfield. Mason v. Sainsbury, 3 Dougl. 61, 64; United States v. American Tobacco Co., supra, 166 U.S. page 478, 17 S.Ct. page 623; Chicago, St. L. & N. O. R. Co. v. Pullman Southern Car Co., 139 U.S. 79, 87, 11 S.Ct. 490, 35 L.Ed. 97; Phoenix Ins. Co. v. Erie & Western Transp. Co., 117 U.S. 312, 321, 6 S.Ct. 750, 29 L.Ed. 873.

It is apparently the principal contention of defendant's counsel that the wording of the affirmative liability set up by the Tort Claims Act is not broad enough to include the interest of a subrogee. Several recently decided District Court cases are cited in support of this contention — Rusconi v. United States, D.C.Cal., 74 F.Supp. 669; Old Colony Ins. Co. v. United States, D.C., Ohio, 74 F.Supp. 723; Nat. Am. Fire Ins. Co. v. United States, D.C.Cal.S.D., Civil No. 872;¹ Bewick v. United States, D.C.N.D.Tex., 74 F.Supp. 730; Mitchell v. United States, D.C.W.D.Wash., Civil No. 1809.¹

On examination I find that these cases were apparently all without opinions except for brief recitals in orders of dismissal to the effect that the claims of subrogees as such are not sustainable because only derivative. See also Aetna Casualty Co. v. United States, D.C.N.Y., 76 F.Supp. 333, to the same effect. In some of these cases the suits were brought in the name of the subrogated insurer, and in others petitions for intervention were filed on behalf of subrogees. In the intervention cases so far as I have noted, it does not affirmatively appear that the plaintiff in the case was joining in the request for intervention nor that the petition for intervention was only "for the use of" the proposed intervenor. These cases are therefore not clearly in point in the instant case. We may assume (without the necessity of deciding in this case) that derivative claims as such are not authorized by the Act; that is to say, the proper plaintiff in suits under the Act is the person who has been damaged by the alleged tort of the Government's agent, and therefore the suit can properly be filed only by that person. When the suit is so brought by the injured party there is, I find, nothing in the Act to preclude joining as an equitable plaintiff a party who as subrogee is entitled to some part or the whole of the proceeds of recovery. The Government is in no way prejudiced by a suit in that form because it has all of the defenses of set-off, counter claim and otherwise that are available to it as against the legal plaintiff and it is immaterial to the Government what the wrongfully injured plaintiff does with the money recovered by him in the suit. The effect of the entry of "to the use of" in the title of the case merely constituted notice that the plaintiff will hold the recovery in whole or in part in trust for the equitable plaintiff so named and possibly also subjects the equitable plaintiff to liability for costs of the case in the event of no recovery by the legal plaintiff.

The only reported opinion that I have found dealing with a case much...