McBroome-Bennett Plumbing, Inc. v. Villa France, Inc.

• Citation: 515 S.W.2d 32
• Decision Date: 19 September 1974
• Docket Number: BROOME-BENNETT,No. 18350,18350
• Parties: McPLUMBING, INC., Appellant, v. VILLA FRANCE, INC., and Westchester Fire Insurance Company, Appellees.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 32

515 S.W.2d 32

McBROOME-BENNETT PLUMBING, INC., Appellant, v. VILLA FRANCE, INC., and Westchester Fire Insurance Company, Appellees.

No. 18350.

Court of Civil Appeals of Texas,

Dallas.

Sept. 19, 1974.

Rehearing Denied Oct. 17, 1974.

Larry L. Gollaher, Thompson, Coe, Cousins, Irons & Porter, Dallas, for appellant.

Rick W. Hightower, Dwight I. Porter, Johnson, Guthrie & Billings, Dallas, for appellees.

CLAUDE WILLIAMS, Chief Justice.

This is a case of first impression in Texas involving the subrogation rights of a builder's-risk insurer against a negligent subcontractor of the named insured.

On August 28, 1970 Westchester Fire Insurance Company issued its builder's risk insurance policy to Villa France, Inc., the owner-general contractor of an apartment house under construction. Nearly a month later Villa France entered into a subcontract with McBroome-Bennett Plumbing, Inc. for certain plumbing work to be done on the apartment project. On March 8, 1971 while McBroome-Bennett Plumbing, Inc. was performing its contract a fire occurred which damaged the building. It is stipulated that negligence of employees of McBroome-Bennett Plumbing, Inc. was the proximate cause of the fire and that damages amounted to $15,719.37. Westchester paid the loss to Villa France, Inc. and then brought this action in the name of Villa France against McBroome-Bennett to recover the amount paid. The subcontractor answered that it was not liable to Westchester on the subrogation claim because it was an unnamed coinsured party under the insurance contract, and it counter-claimed for the balance due on its subcontract and for loss of its tools destroyed in the fire. The case was submitted to the court without a jury, on stipulated facts and the court rendered judgment against the subcontractor and in favor of Westchester for the amount of the loss, denied the subcontractor's claim for its tools, but allowed the counterclaim against Villa France for the balance due for plumbing services. We hold that the subcontractor McBroome-Bennett was not an assured under the insurance policy issued to Villa France, and accordingly we affirm the judgment of the trial court.

The pertinent provisions of the policy are as follows:

1. Property covered: This policy covers property of the assured or property for which the assured is liable consisting of: Coverage hereunder is restricted to the Apartment house complex to be constructed on a 5 acre tract at Pioneer Dr. and Hwy. 356, Irving, Texas

(a) Actual values existing in any building(s) or structure(s) in the course of construction and insured hereunder;

(d) Builder's machinery, tools and equipment in insured building, or temporary structures or on premises of said building against loss or damage resulting from fire and lightning, windstorm, cyclone, tornado or hail.

2. Property Excluded: This policy does not cover:

(f) Contractors or sub-contractors tools and equipment, except as provided under Clause 1(d), above.

McBroome-Bennett contends that it is entitled to occupy the status of a coinsured party under this policy because it had several property interests within the coverage of the contract, including: (1) its tools in the building, which had a reasonable value of $25.00; (2) its own work destroyed in the first for which it had not been paid in the amount of $545.00; and (3) its security interest in the entire project for the balance due under the contract with Villa France, which was $9,417.00 at the time of the fire and $3,613.00 at the time of the trial.

Westchester contends that the policy's coverage extends only to the Liability of the named insured, Villa France, for the Property of subcontractors as 'property of the assured or property for which the assured is liable.'

To properly resolve the question presented, which has not been decided by Texas courts previously, we are required to examine and apply certain well-settled rules of subrogation and construction of insurance policies.

1. Subrogation is the substitution of one person in the place of another, whether as creditor or as the possessor of some lawful claim, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim. . . . By subrogation, a court of equity, for the purpose of doing exact justice between parties in a given transaction, places one of them, to whom a legal right does not belong, in the position of a party to whom the right does belong. 53 Tex.Jur.2d Subrogation § 1, at 429 (1964).

2. Subrogation has been characterized by Texas courts as a 'pure equity,' as a 'wholesome rule of equity,' and as 'a doctrine belonging to an age of enlightened policy and refined, although natural justice.' Chambers & Co. v. Little, 21 S.W.2d 17, 22 (Tex.Civ.App.--Eastland 1929, writ ref'd); O'Brien v. Perkins, 276 S.W. 308, 315 (Tex.Civ.App.--Amarillo 1925), aff'd sub nom., Shelton v. O'Brien, 285 S.W. 260 (Tex.1926).

3. Texas courts have always been particularly hospitable to the right of subrogation and have been in the forefront of upholding it. As Judge Brown declared in Faires v. Cockerell, 88 Tex. 428, 437, 31 S.W. 190, 194, 28 L.R.A. 528 (1895):

Perhaps the courts of no state have gone further in applying the doctrine of subrogation than has the court of this state . . ..

4. The doctrine of subrogation is always given a liberal interpretation and is broad enough to include every instance in which one person, not acting voluntarily has paid a debt for which another was primarily liable and which in equity and good conscience should have been discharged by the latter. Galbraith-Foxworth Lumber Co. v. Long, 5 S.W.2d 162, 167 (Tex.Civ.App.--Dallas 1928, writ ref'd); Constitution Indemnity Co. v. Armbrust, 25 S.W.2d 176, 180 (Tex.Civ.App.--San Antonio 1930, writ ref'd); Independence Indemnity Co. v. Republic Nat'l Bank & Trust Co., 114 S.W.2d 1223 (Tex.Civ.App.--Dallas 1938, writ dism'd w.o.j.).

5. An insurance company, having paid a loss to its named insured, may not proceed against its own insured in a subrogation action.

6. The term 'insurance' is defined as an undertaking by one party, usually called the 'insurer,' to protect the other party, generally designated as the 'insured' or 'assured,' from loss arising from named risk, for the consideration and on the terms and under the conditions recited. An insurance policy is a contract entered into between the insurer and the insured, by which each party becomes bound to perform the obligations assumed in the policy of insurance. 32 Tex.Jur.2d Insurance § 1, at 23 (1962).

In a fire policy the term 'insured' usually refers to the owner of the property insured, to whom the policy is issued and by whom the premium is paid, and does not include a person appointed to receive a portion of the proceeds in case of loss. 32 Tex.Jur.2d Insurance § 1, at 24 (1962).

7. Courts should always endeavour to ascertain and give effect to the intention of the parties to the contract. The strict rule of construction of an insurance contract is not to be applied so as to destroy the plain meaning of the contract or to make a new one for the parties. United States Casualty Co. v. Medcalf & Thomas, 272 S.W. 539, 541 (Tex.Civ.App.--San Antonio 1925, no writ).

8. Where the court can give a policy a construction which, while preserving the protection given the insured under its terms, would also relieve the insurer from the increased hazard against which it undertook to provide, then such construction must be adopted, 'for such was the evident intent of the parties.' Royal Ins Co. v. Texas & G. Ry., 53 Tex.Civ.App. 154, 159, 115 S.W. 117, 120 (1909, writ ref'd).

9. The general rule that doubtful language contained in an insurance policy is to be construed in favor of insured and against insurer, operates only after insured has been determined and not in deciding whether a certain individual belongs to the insured class described in the policy, and a third person who is not a party to a contract of insurance usually is not entitled to a strict construction in his favor in determining whether the contract was made for his benefit. 44 C.J.S. Insurance § 308, at 1226 (1945).

While applying these principles of law in resolving the question here presented, we are impressed with the statement made by The Honorable Gerald Ford, President of the United States, who, in a speech delivered September 8, 1974, said, 'The law, both human and divine, is no respecter of persons, but the law is a respecter of realities.' ¹

What are the realities of the case before us? They seem simple enough. If there had been no insurance, Villa France, Inc. would undoubtedly have had a cause of action against the plumbing subcontractor, McBroome-Bennett, for the damage proximately caused by the negligence of the latter. The mere fact that the subcontractor also had some property on the premises which was also damaged would not affect the right of Villa France, Inc. to recover for Its damage. That is the cause of action to which the insurer Westchester was subrogated, and its subrogation rights should not be destroyed on the tenuous ground that it was the insurer of a party who could have been liable to the negligent subcontractor for the fire damage to its tools and other property, and that to allow such recovery would be to permit reimbursement of an insurer for losses paid to its assured. To deny the insurer its right of subrogation here and under the circumstances presented would be contrary to basis principles of equity and justice.

The true relationship of the parties should be carefully examined in the light of the foregoing rules of law. Westchester entered into an insurance contract with one named insured, Villa France, Inc . Only the named insured paid the insurer a premium for protection set forth in the insurance policy, protecting it against its liability for losses enumerated in the policy. Thus there was created a corresponding obligation on the part of both...