Interstate Fire & Cas. Co. v. City of Milwaukee

• Decision Date: 09 January 1970
• Docket Number: No. 4,4
• Citation: 173 N.W.2d 187,45 Wis.2d 331
• Parties: INTERSTATE FIRE AND CASUALTY CO., a foreign corp., foreign corp., et al., Respondents, v. CITY OF MILWAUKEE, a municipal corporation, Appellant.
• Court: Wisconsin Supreme Court

Page 187

173 N.W.2d 187

45 Wis.2d 331

INTERSTATE FIRE AND CASUALTY CO., a foreign corp., foreign

corp., et al., Respondents, v. CITY OF MILWAUKEE, a municipal corporation, Appellant.

No. 4.

Supreme Court of Wisconsin.

Jan. 9, 1970.

Action commenced April 29, 1968, by Interstate Fire and Casualty Company and others, as subrogees of their insureds, against the city of Milwaukee. The city demurred to the complaint on the ground that it failed to allege facts sufficient to constitute a cause of action for subrogation. The city appeals from an order overruling its demurrer.

These actions arose out of the widespread disorders which occurred in the city of Milwaukee during the summer of 1967. The material allegations of the complaint are as follows:

(1) Beginning on the night of July 30, 1967, widespread rioting occurred in the city of Milwaukee on the rear north side thereof;

(2) As a direct result of such riot, property and contents of a tavern located at 1731 North Third street and owned by the insureds was damaged to the extent of $506.93;

(3) Prior to July 30, 1967, the insurers issued policies of indemnity insurance to their insureds, thereby insuring their property against loss and damage as a result of riot; and these policies were in full force and effect at the time the damage occurred; and

(4) The insurers were obliged to pay, and did pay, to their insureds the loss sustained by them as a result of the riot damage.

Relying upon sec. 66.091, Stats., the plaintiff insurers (hereinafter the 'respondents') contend that upon payment to their insureds they were subrogated to the rights granted by the statute. Sec. 66.091(1) states:

Mob damage. (1) The county shall be liable for injury to person or property by a mob or riot therein, except that within cities the city shall be liable.'

John J. Fleming, City Atty., Thomas E. Hayes and Wallace E. Zdun, Asst. City Attys., Milwaukee, for appellant.

Kenneth M. Kenney, Wolfe, O'Leary, Kenney & Wolfe, Milwaukee, for respondents.

HANLEY, Justice.

The principal issue raised on this appeal can be stated as follows: Does sec. 66.091, Stats., place the city within the position of a tort-feasor, thereby requiring the respondents upon payment to their insureds to be subrogated to their insureds' rights against the city?

By demurring to the respondents' complaint, the city of Milwaukee (hereinafter the 'appellant') has conceded the truth of all allegations of fact and has challenged only the conclusion of law resulting therefrom. D'Amato v. Freeman Printing Co. (1968), 38 Wis.2d 589, 157 N.W.2d 686; Jenkins v. State (1961), 13 Wis.2d 503, 108 N.W.2d 924. Assuming the veracity of the pleaded facts, we must determine whether there exists a rule of law which would allow recovery under the pleaded facts.

It is well established that subrogation is an equitable doctrine which is applicable where one other than a mere volunteer has been required to pay a debt or demand which in equity should have been satisfied by another. Lee v. Threshermen's Mut. Ins. Co. (1965), 26 Wis.2d 361, 132 N.W.2d 534; Perkins v. Worzala (1966), 31 Wis.2d 634, 143 N.W.2d 516.

In order to avoid unjust enrichment the doctrine has often been applied on behalf of one who has paid for damages caused by a tort-feasor. Patitucci v. Gerhardt (1932), 206 Wis. 358, 240 N.W. 385.

It is the contention of the respondents that by imposing absolute liability, sec. 66.091, Stats., renders the appellant the substantial equivalent of a tort-feasor. If respondents' contention is correct, the doctrine of subrogation is applicable and the demurrer to the complaint must be overruled. If, however, the city is not the equivalent of a tort-feasor, the doctrine is inapplicable. In such case the demurrer must be sustained since there is no alternative rule of law which under the facts pleaded would allow recovery.

As determinative of the statute's effect upon the doctrine of subrogation ¹ the respondents cite Frederick v. Great Northern Ry. Co. (1932), 207 Wis. 234, 240 N.W. 387, 241 N.W. 363, 80 A.L.R. 984; Northern Assurance Co. v. City of Milwaukee (1938), 277 Wis. 124, 277 N.W. 149; and A & B Auto Stores of Jones Street, Inc. v. City of Newark (1968), 103 N.J.Super. 559, 248 A.2d 258.

The Frederick Case, supra, revolved around a statute under which all that was necessary to create liability on the part of a railroad was proof that property had been injured or destroyed directly or indirectly by fire communicated by a locomotive. Proof of negligence was not required.

This court, relying upon the doctrine of subrogation, held that an insurance company, upon payments to its insured, became an indispensable party to an action by its insured against the railroad. The respondents contend that this holding supports the proposition that upon payment to its insured an insurer acquires a subrogative right of action against a third party whose legal responsibility exists by virtue of a statute.

The situation in which the appellant here finds itself, however, is somewhat different from that of the railroad. In the Frederick Case the statute merely eliminated the requirement of proving the negligence of the railroad; a causal connection between the railroad and the damage still had to be proven. Since the statute required a finding that the railroad 'caused' the resulting damage, it was in a sense deemed a wrongdoer, thereby necessitating application of the subrogation doctrine. The instant statute, however, imposes liability without regard to whether a city has caused the riot's commencement or continuation. We believe that liability which is imposed for that which one has not even caused is not imposed on the basis of fault or wrongdoing. On the contrary, it is imposed upon the basis of a public policy aimed at compensating unfortunate citizens.

The principal basis for the respondents' contention that subrogation is applicable to the instant case is found, however, in Northern Assurance Co. v. City of Milwaukee, supra, which was decided by this court in 1938. Since the facts then before this court were substantially identical to those of the instant case, the respondents contend that the court's decision therein is controlling.

There, as in the instant case, several indemnity insurers, relying upon the state riot statute (then sec. 66.07, Stats.), commenced an action against the city of Milwaukee for damages sustained by their insureds. This court, relying upon Patitucci v. Gerhardt, supra, held that, upon payment to their insureds, the insurers became subrogated to the rights of their insureds. In so holding, the court apparently assumed that, for purposes of the doctrine of subrogation, the city was the substantial equivalent of a tort-feasor.

This court's decision in Northern Assurance did not expressly define the statute's effect upon the status of the city. However, in a recent decision of the Superior Court of New Jersey, it was specifically held that, for purposes of the subrogation doctrine, the Newark riot statute rendered the city of Newark a tort-feasor.

The facts of the A & B Auto Stores, supra, were closely parallel to those of the instant case. There considerable property damage had occurred as a result of widespread rioting in the city of Newark and numerous insurance companies were claiming subrogative rights against the city.

The statute before the New Jersey court was similar to that of Wisconsin and provided:

"When, by reason of a mob or riot, any property, real or personal, is destroyed or injured, the municipality if it has a paid police force, in which the mob congregates or riot occurs, or, if not in such a municipality, the county in which such property is or was situate, shall be liable to the person whose property was so destroyed or injured for the damages sustained thereby, recoverable in an action by or in behalf of such person." ²

In refusing to dismiss the subrogation claims of the insurers, the court stated:

'Whether a cause of action exists by common law or statute is of no significance on the right of a subrogee to enforce its claim against the obligor or tortfeasor. * * *' ³

The court then stated:

'Under the riot statute * * * the city in effect is a wrongdoer. The Legislature has designated it as such for failure to enforce the laws and control its inhabitants. Even though its wrongdoing is passive and the damage is directly...