Lake Erie & W.R. Co. v. Hobbs

• Decision Date: 24 April 1907
• Docket Number: No. 5,498.,5,498.
• Court: Indiana Appellate Court
• Parties: LAKE ERIE & W. R. CO. v. HOBBS et al.

40 Ind.App. 511

81 N.E. 90

LAKE ERIE & W. R. CO.

v.HOBBS et al.

No. 5,498.^*

Appellate Court of Indiana, Division No. 1.

April 24, 1907.

Appeal from Circuit Court, Hamilton County; Ira W. Christian, Judge.

Action by William S. Hobbs and another against the Lake Erie & Western Railroad Company. From a judgment for plaintiffs, defendant appeals. Affirmed.Jno. B. Cockrum, Shirts & Fertig, and Hawkins, Smith & Hawkins, for appellant. Nash & Teter, Kane & Kane, Dan Waugh, and Elliott & Elliott, for appellees.

HADLEY, J.

This was an action by the appellee Hobbs to recover damages for loss of property by fire by reason of the alleged negligence of appellant, and cross-complaint by appellee insurance company to recover on account of the same alleged negligence for the amount of insurance paid to said Hobbs. The amended complaint was in two paragraphs, and made appellant and appellee insurance company defendants. The appellee insurance company filed cross-complaint in two paragraphs. Demurrers were filed by appellant to the first and second paragraphs of the complaint and to the first and second paragraphs of cross-complaint, each of which demurrers was overruled. Appellant then moved to strike out the cross-complaint, which was also overruled. Issue was properly joined by all the parties to the different pleadings; appellee Hobbs filing general denial to cross-complaint of appellee insurance company and to affirmative answers of appellant. Trial by jury and verdict for appellee Hobbs for $460 on his complaint, and for appellee insurance company for $990 on the cross-complaint. Interrogatories numbered from 1 to 112 were also answered by the jury. Appellant moved for judgment in its favor on the answers to interrogatories upon the whole case, and also as to each paragraph of the complaint and cross-complaint separately, all of which were overruled. Motion was also filed by appellant for new trial as to the whole case, and separate motions for new trial upon the issues on the complaint and cross-complaint, each of which was overruled.

The overruling of the demurrers to the first and second paragraphs of complaint are first presented. These paragraphs are substantially the same as the first and second paragraphs of complaint in the cases of Lake Erie & W. Ry. Co. v. McFall, 165 Ind. 574, 76 N. E. 400, and Lake Erie & W. Ry. Co. v. Ford (Ind. Sup.) 78 N. E. 969, actions growing out of the same fire, and under authority of those cases the demurrers thereto were properly overruled. The first and second paragraphs of the cross-complaint of appellee insurance company, after reciting that it was engaged in the fire insurance business, avers the facts in the same words as contained in the first and second paragraphs of the amended complaint. Each then alleges that prior to the fire said insurance company insured the buildings of said Hobbs, which were worth $1,500, and that “by reason of and on account of the destruction of said property by fire by and through the negligence and carelessness and wrongfulness of the said Lake Erie & Western Railroad Company, as herein stated and not otherwise, it was compelled to and did, on the 29th day of April, 1902, pay under such policy by its terms the full amount of said insurance, to wit, $1,000.” “*** By reason of the facts aforesaid cross-complainant says it has been subrogated to all the rights of said William S. Hobbs,” closing with the averment “that by reason of the facts aforesaid it has sustained damages in the sum of $1,000.” Appellant's motion to strike out the cross-complaint is on two grounds: First, “that the cross-complaint was irrelevant and surplusage; and, second, that, the orignal action being one to recover for an alleged tort, a cross-complaint cannot be filed for the purpose of procuring a separate recovery for parts of the same tort.” The overruling of the demurrer and motion will be considered together.

It is well settled by the authorities that where insured property is destroyed by the negligent act of another, and the insurer pays the insured for said loss according to the contract, such payment to the owner does not bar the right of recovery against the party originally liable for the loss; but such payment creates an equitable assignment of so much of the right of recovery in such claim to the insurer. This equitable assignment does not create a new right of action in the insurer, but subrogates the insurer to the existing right of action of the insured, and can only be enforced in the right of the latter. Phenix Ins. Co. v. Penn. R. R. Co., 134 Ind. 215, 33 N. E. 970, 20 L. R. A. 405, and cases cited; Gracie v. New York Ins. Co., 8 Johns. (N. Y.) 245; B. & O. R. Co. v. Countryman Assignees, 16 Ind. App. 139, 44 N. E. 265; Mason v. Sainsbury, 3 Doug. Rep. 61; Yates v. Whyte, 4 Bing. N. C. 272; Rockingham, etc., Ins. Co. v. Bosher, 39 Me. 253, 63 Am. Dec. 618; Newcomb et al. v. Cincinnati Ins. Co., 22 Ohio St. 382, 10 Am. Rep. 746; Joyce on Ins. § 3574. It is equally well settled that, where the assured sustains a loss in excess of the insurance received, he has an undoubted right to have the excess satisfied by action against the wrongdoer. Newcomb et al. v. Cincinnati Ins. Co., supra; Joyce on Insurance, supra; Phœnix Ins. Co. v. Erie, etc., Co., supra; Nevil v. Clifford, 55 Wis. 161, 12 N. W. 419. The right of the owner of property to recover damages for its destruction is not incident to property in the thing destroyed, but is only a personal right, and the insurer acquires a beneficial interest in that right of action in proportion to the sum paid by him to the owner on account of such destruction. Phœnix Ins. Co. v. Erie, etc., Co., 117 U. S. 312, 6 Sup. Ct. 750, 29 L. Ed. 873. Any other rule would be unjust; since, if the owner were permitted to recover from the insurer and also from the tort-feasor, he would be receiving more than the destroyed property was worth, and thus profit by disaster. On the other hand, if payment by the insurer was an acquittance of the wrongdoer, it would enable him to escape the penalties of his own wrong and receive the benefits of an insurance for which he never paid; and while it is clear, in both reason and authority, that the insurer shall be thus subrogated and his rights protected, there is some apparent conflict in the authorities as to how his rights shall be enforced. An examination of the authorities, however, discloses the rock upon which they split and renders their reconciliation easy. In those forums where the common-law procedure prevails, it is uniformly held that either the assured must maintain the action as trustee for the insurer, or, upon his refusal, the insurer must maintain it in the name of the insured. In the latter case, if the insurance covers the whole loss, the insured is only a nominal party, and has no control over the action; or, in a proper case, the insurer might file his bill in equity, making all parties defendants and thus have his rights adjudged and determined. Bliss on Code Pleading, § 65; Rockingham Fire Ins. Co. v. Bosher, supra; Hart et al. v. Western, etc., Co., 13 Metc. (Mass.) 99, 46 Am. Dec. 719; Phœnix Ins. Co. v. Erie, etc., Co., supra. But in those courts where the Code procedure prevails the rule of practice is different. There the rule “that actions shall be maintained by the real party in interest” eliminates the fictitious or nominal party, and it is therefore held with practical unaminity in such jurisdictions that, where the insurance covers the whole loss and the insured is satisfied, the insurer may sue independently in his own name, but in assured's right, for the amount of insurance paid. And in case the insurance only partially covers the loss, and the insured is unsatisfied, the insurer and insured may join in an action as plaintiffs against the tort-feasors. Newcomb et al. v. Cincinnati Ins. Co., supra; Bliss on Code Pleading, § 65; Grain v. Aldrich, 38 Cal. 514, 99 Am. Dec. 423; Phenix Ins. Co. v. Penn. R. R. Co., supra; Wiggins v. McDonald, 18 Cal. 126;Singleton v. O'Blenis, 125 Ind. 151, 25 N. E. 154;Lapping v. Duffy, 47 Ind. 51.

So far the way is clear. But in the case at bar neither of the above forms was pursued. Here the pleadings show that the loss was greater than the insurance. The insured brought the action for the whole amount of the loss, making the insurer a party defendant to answer to its interest, without averring what that interest was or that it had refused to join as plaintiff. The insurer returns with the cross-complaint, setting up the wrong, the loss, the payment of the amount of insurance, and asking a subrogation, and thereby a judgment pro tanto. Appellant insists that this procedure cannot be maintained, that it is a splitting of the cause of action-a tort. This procedure appears to be new. Counsel have not cited us, and, after careful investigation, we have been unable to find, an authority in exact terms approving or disapproving it. But this does not necessarily mean it may not be maintained. Modern thought and development are averse to the subtilties and technicalities of the ancient forms of procedure, whereby in courts of justice the ends of justice were ofttimes defeated. The adoption of our Code was in the line of this legal progression. By it the distinctions between common-law and equity practice were abolished, ancient forms effaced, and the intent clearly expressed that an ultimate determination of all questions legal or equitable, or both, between the parties to the transaction should be had in one judgment. By section 263, Burns' Rev. St. 1901, it is provided: “All persons having an interest in the subject of the action, and in obtaining the relief demanded, shall be joined as plaintiffs, except as otherwise provided in this act.” (Our italics.) Section 269 provides: “Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary ...