Kennedy-Ingalls Corp. v. Meissner

• Decision Date: 07 October 1958
• Docket Number: KENNEDY-INGALLS
• Citation: 5 Wis.2d 100,92 N.W.2d 247
• Parties: CORP., a corporation, Plaintiff-Respondent. v. Roland E. MEISSNER, an individual d/b/a Mid-West Textile Service, et al., Defendants-Respondents. A. O. Smith Corporation, Intervener-Appellant.
• Court: Wisconsin Supreme Court

Page 247

92 N.W.2d 247

5 Wis.2d 100

KENNEDY-INGALLS CORP., a corporation, Plaintiff-Respondent. v. Roland E. MEISSNER, an individual d/b/a Mid-West Textile Service, et al., Defendants-Respondents A. O. Smith Corporation, Intervener-Appellant.

Supreme Court of Wisconsin.

Oct. 7, 1958.

Rehearing Denied Dec. 2, 1958.

Motion by A. O. Smith Corporation (hereinafter referred to as 'Smith'), to intervene in an action for breach of warranty.

The action was originally begun by the two parties doing business as V. E. Kennedy-Ingalls Company, a partnership, against the defendants Meissner and Associated Sales & Bag Co. The plaintiff partners then incorporated under the name of Kennedy-Ingalls Corp. and such corporation was substituted as a party plaintiff. Both such partnership and corporation will hereinafter be referred to interchangeably as 'Kennedy-Ingalls.'

The defendant Associated Sales & Bag Co. is a manufacturer of certain textiles and related products and the defendant Meissner is its sales agent. Kennedy-Ingalls purchased a quantity of industrial protective aprons from the defendants and resold some of them to Smith. Smith furnished one of such aprons to one James, its employee, to be worn while James was engaged during the course of his employment in a welding operation. Such apron ignited and James was badly burned resulting in very severe personal injuries to him.

Smith, as required by the Wisconsin Workmen's Compensation Act, paid James' hospital and medical expenses in the sum of $7,421.94 and workmen's compensation in the sum of $10,105.55. James, as authorized by sec. 102.29, Stats., commenced a third party action in tort against Kennedy-Ingalls in which he sought $100,000 damages for his injuries, and Smith's claim for reimbursement in the sum of $17,527.49 to cover the medical and hospital expenses and workmen's compensation paid James, was included therein by operation of such section of the statutes. Thereafter, such action was compromised by Kennedy-Ingalls paying James $17,500, and Smith releasing its claim without payment to it.

Subsequent to such compromise settlement of the James action Kennedy-Ingalls instituted the present action for breach of warranty against the defendants. While the prayer of the complaint requests $25,000 damages, the allegations thereof make it clear that the damages sought to be recovered are those sustained by Kennedy-Ingalls in defending the suit instituted against it by James and the amount paid to James to settle his claim.

Smith moved to intervene as a party plaintiff in such action and in support of such motion filed a proposed complaint which alleged most of the material facts hereinbefore stated and asserted that by reason of such facts it had been subrogated to part of Kennedy-Ingalls' cause of action against the defendants. Such proposed complaint alleged that the reason Smith had previously released Kennedy-Ingalls from liability on Smith's claim for $17,527.49, in the compromise settlement of the James action, was because Kennedy-Ingalls had therein pleaded fault on the part of Smith and the right of Kennedy-Ingalls to reimbursement against Smith for any amount it was required to pay James.

By order dated March 5, 1958, the circuit court denied Smith's motion to intervene, and Smith has appealed therefrom.

Porter, Johnson, Quale & Porter, James N. Johnson and Irving W. Zirbel, Milwaukee, of counsel, for appellant.

Michael Klein, Rosenbaum & Rosenbaum, Milwaukee, Arnold, Philipp & Murray, Milwaukee, of counsel, for defendants-respondents.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, Victor M. Harding and Martin R. Browning, Milwaukee, of counsel, for plaintiff-respondent.

CURRIE, Justice.

The two questions presented on this appeal are:

(1) Do the facts as pleaded in Smith's proposed complaint and in Kennedy-Ingalls amended complaint establish that Smith has been subrogated to part of Kennedy-Ingalls' cause of action against the defendants?

(2) If the foregoing question be answered in the affirmative, is Smith entitled as a matter of right, and not discretion, to intervene in the action instituted by Kennedy-Ingalls against the defendants?

In passing on the issue of subrogation, which Smith contends arose out of the compromise settlement of the prior James action, it is necessary to analyze the rights and liabilities of the various parties as they existed immediately prior to such settlement. In so doing we will assume as verities the material facts pleaded in Smith's proposed complaint and Kennedy-Ingalls' amended complaint. The defendants have placed in issue certain of those facts, but the resolving of such disputed issues is a matter to be disposed of by trial on the merits, and not on the motion now before the court.

As of the time such compromise settlement was made, Kennedy-Ingalls had a cause of action for breach of warranty against the defendants for any damages that Kennedy-Ingalls was liable to pay to both James and Smith arising out of the purchase of the aprons by Kennedy-Ingalls from the defenants and their resale to Smith and use by the latter and its employee James. Kennedy-Ingalls' liability to Smith was already definitely established at $17,527.49 but the amount of Kennedy-Ingalls' liability to James had not been liquidated by trial. However, the fact that at this particular time it may have been difficult to establish in dollars and cents the amount of such liability is immaterial. Cohan v. Associated Fur Farms, Inc., 1952, 261 Wis. 584, 597, 53 N.W.2d 788.

Therefore, when Smith released its claim of $17,527.49 against Kennedy-Ingalls, Smith was discharging a portion of the defendants' liability. In considering the question of whether Smith thereby became subrogated to a portion of Kennedy-Ingalls' cause of action against the defendants, we can perceive no distinction in principle between the case of where a third party discharges the liability of another by payment and one where such liability is discharged through a release of a valid claim. In both situations the party ultimately liable is relieved of a liability which such party in good conscience ought to pay unless subrogation be invoked.

The restatement makes no distinction in such a situation between discharge through payment and discharge through release of a legitimate claim. We quote from Restatement, Restitution, sec. 1, page 12, Comment b, as follows:

'A person confers a benefit upon another if he gives to the other possession of or some other interest in money, land, chattels, or choses in action, performs services beneficial to or at the request of the other, satisfies a debt or a duty of the other, or in any way adds to the other's security or advantage. He confers a benefit not only where he adds to the property of another, but also where he saves the other from expense or loss.' (Emphasis supplied.)

Subrogation is a principle invoked by the law to avoid unjust enrichment. This is borne out by Restatement, Restitution, sec. 162, page 653, where it is stated:

'Where property of one person is used in discharging an obligation owed by another or a lien upon the property of another, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee or lien-holder.'

Under the principles enunciated in the Restatement it is apparent that the defendants would be unjustly enriched to the extent of $17,527.49 by reason of Smith releasing Kennedy-Ingalls from Smith's claim for reimbursement in such amount if Smith be held not to be subrogated to part of Kennedy-Ingalls' cause of action. To grant such right of subrogation would in no way injure Kennedy-Ingalls, while to deny the same would unjustly benefit the defendants.

The Michigan court in Stroh v. O'Hearn, 1913, 176 Mich. 164, 142 N.W. 865, 869, declared:

'Subrogation is an equitable doctrine depending upon no contract or privity, and proper to apply whenever persons other than mere volunteers pay a debt or demand which in equity and good conscience should have been satisfied by another. It is proper in all cases to allow it where injustice would follow its denial, and in allowing it all injustice should be guarded against so far as possible.'

Under the allegations of Smith's proposed complaint Smith was not a mere volunteer when it released its claim against Kennedy-Ingalls. This is because of the allegation that it did so as a direct result of Kennedy-Ingalls' attempt to hold Smith liable for any damages James might recover against Kennedy-Ingalls. As to this we deem the holding of this court in the recent case of Rusch v. Korth, 1957, 2 Wis.2d 321, 86 N.W.2d 464, to be in point. In that case this court held that, where one of two drivers participating in an automobile collision was sued by a passenger in one of such vehicles and made payment to the plaintiff in settlement of the latter's claim, the party making the payment was not a volunteer, even though a jury later found such party was entirely free from negligence. In that case the recovery of the driver making the settlement from the other driver, who was found negligent, was limited to one-half the amount paid on the theory of contribution because that was the extent of the relief sought. However, the opinion expressly stated that, because only contribution and not full indemnity was prayed for, the court was not passing on the issue of whether the settling party might not have been entitled to complete indemnity from the wrongdoer if such relief had been requested.

Restatement, Restitution, sec. 71(2), p. 290, lays down the principle that one who pays the liability of another in response to the threat of civil suit is not a volunteer if the payor acted to avoid trouble and...