Hardware Mut. Ins. Co. v. Dunwoody

• Citation: 194 F.2d 666
• Decision Date: 13 February 1952
• Docket Number: No. 12960.,12960.
• Parties: HARDWARE MUT. INS. CO. v. DUNWOODY et al.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

194 F.2d 666 (1952)

HARDWARE MUT. INS. CO. v. DUNWOODY et al.

No. 12960.

United States Court of Appeals Ninth Circuit.

February 13, 1952.

Bert W. Levit, David C. Bogert and Long & Levit, San Francisco, Cal., for appellant.

Oscar Samuels and Tevis Jacobs, San Francisco, Cal., (Robert Sills, San Francisco, Cal., of counsel), Peters & Peters, Chico, Cal., for appellees.

Before DENMAN, Chief Judge, ORR, Circuit Judge, and LEMMON, District Judge.

LEMMON, District Judge.

In a complaint for declaratory relief, the appellant, a corporation formed under the laws of Minnesota, asked that it be adjudged not liable under a certain fire insurance policy. Each appellee is a citizen of California.

So far as they are pertinent to our view of the case, the facts have been stipulated as we here recite them.

On or about September 24, 1948, the appellant issued and delivered to the appellee Mildred A. Dunwoody a policy of fire insurance covering two buildings in Chico, California, in the amount of $10,000. The buildings were totally destroyed by fire on April 8, 1949. The fire was due to unknown causes.

The appellee Dunwoody was the owner of the buildings. She had leased them to the Grand Rapids Furniture Company for 50 years, commencing on January 1, 1944, by a written lease dated November 1, 1943. The interest of the lessee was transferred to the appellees Harold A. Goldman, Myrtle Goldman, Harold F. Baruh, and Doris G. Baruh, hereinafter referred to as the lessee-appellees, who have continued as lessees up to the present time. By certain supplemental agreements between the appellee Dunwoody as owner and lessor, and the lessee-appellees, the lessee-appellees Myrtle Goldman and Doris Baruh were purportedly released from some of the terms of the original lease, but the lessee-appellees Harold Goldman and Harold Baruh remained bound by all the terms of the original lease. The complaint, however, prays that if the appellant is adjudged liable to the appellee Dunwoody, the Court will determine the amount of that liability and enter judgment for that amount against all four of the lessee-appellees.

The lease provided that in the event that any of the buildings standing on the premises should be partly or totally destroyed by fire, "the same shall be restored by the Tenant at its own expense without unnecessary delay".

At the time of the trial, replacement of the buildings had not yet been undertaken, having been delayed by the lessee-appellees with the consent and approval of the appellee Dunwoody.

The appellee Dunwoody filed an amended answer and cross-complaint, in which latter she demanded payment of the face value of the policy. The lessee-appellees also filed an amended answer. In view of the limited ambit of the single specification of error, the various pleadings need not be further summarized here.

The judgment of the court below decreed that the appellee Dunwoody recover the sum of $10,000 from the appellant, with interest, and that upon payment by the appellant to the appellee Dunwoody of the said sum, the appellant would not be entitled to be subrogated to any of the rights of the appellee Dunwoody, or at all, against the lessee-appellees. It adjudged that the lessee-appellees Harold A. Goldman and Harold F. Baruh are legally bound to perform the obligations of the above lease of November 1, 1943, including paragraph 12, under which those two appellees "are obligated to restore the buildings destroyed".

The appellant has specified only one error; namely, that the trial court erred in holding that, "upon the payment of $10,000 by appellant to appellee Dunwoody pursuant to the judgment of the court, appellant is not entitled to be subrogated pro tanto to the rights of appellee Dunwoody against appellees Harold Goldman and Harold Baruh under the lease, whereby the lastnamed appellees are obligated to restore the premises".

On the other hand, the lessee-appellees do not question their obligation to rebuild the destroyed structures, but they "insist that no additional person be given the right to interfere in the performance, or nonperformance, or any negotiations in relation to, or any adjustment of, said obligation".

1. The Subrogation Paragraph

The policy contains a paragraph relating to the appellant's right of subrogation under certain conditions. That paragraph, the construction of which we believe is pivotal in the determination of this controversy, is as follows: "Subrogation. If this company shall claim that the fire was caused by the act or neglect of any person or corporation, this company shall, on payment of the loss be subrogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom, and such right shall be assigned to this company by the insured on receiving such payment."

The appellant concedes, as indeed it must, that it is "undisputed" that "The fire was due to causes unknown". In other words, the "company" does not "claim that the fire was caused by the act or neglect of any person or corporation".

2. The Subrogation Provision in the Policy Constitutes the Sole Measure of the Parties' Rights in That Regard.

The appellant, however, seeks to escape the effect of the foregoing subrogation paragraph in the policy, by a resort to the following argument: "Where, as here, the subrogation claimed by the insurer arises from contract rather than from tort liability, the most that can be said is that the policy is silent upon the subject and that subrogation should be granted or denied under the general equitable principles applicable under the facts of the case."

Such a contention, ingenious as it may seem at first blush, runs counter to that time-worn but sound principle of legal construction, be it statutory or contractual: Expressio unius est exclusio alterius.

Furthermore, it appears that the California legislature itself has adopted a construction of this subrogation provision contrary to that now urged by the appellant.

The paragraph in question is taken verbatim from the California Standard Form Fire Insurance Policy, adopted by the state legislature in 1935, and in force when the policy in question was executed, on August 31, 1948, and throughout the one-year period during which it remained in...