Powell & Powell v. Wake Water Co.

• Decision Date: 05 April 1916
• Docket Number: 251.
• Parties: POWELL & POWELL v. WAKE WATER CO.
• Court: North Carolina Supreme Court

88 S.E. 426

171 N.C. 290

POWELL & POWELL v. WAKE WATER CO.

No. 251.

Supreme Court of North Carolina

April 5, 1916

Walker J., dissenting.

Appeal from Superior Court, Wake County; Peebles, Judge.

Action by Powell & Powell against the Wake Water Company and William B. Grimes, receiver. From an order allowing suit against the receiver, he appeals. Affirmed.

Where a waterworks company contracts with a city to furnish it and its inhabitants water, citizens whose property is destroyed through fire owing to the company's negligent failure to furnish water may recover against it.

This is an appeal from an order allowing certain insurance companies to institute an action against the receiver of the waterworks company that was under contract, at the time of the injuries complained of, to furnish the city of Raleigh and its inhabitants with water and to perform other obligations. It is alleged in the petition that the property of the News & Observer Publishing Company was destroyed by fire on account of the negligence of the water company; that at the time of the loss the property was insured in the companies of the petitioners; that the amount of the insurance has been paid to the publishing company; and that the receiver has settled the claim of the publishing company in excess of the insurance. The receiver denies negligence, but contends that if this is established there is no right of action in the insurance companies for the following reasons:

(1) That under the contract between said Wake Water Company and the city of Raleigh, a copy of which is attached to said order, it is provided as follows: The said water company "shall hold the said city harmless from any and all damages arising from negligence or mismanagement of said water company or its employés in constructing, extending or operating said works." That this contract in effect provides that the water company will indemnify and hold harmless the city, and that by its terms the water company was dealing exclusively with the city and was accountable only to it, and that the city only must sue for its breach. Therefore there was no cause of action in the News & Observer Publishing Company, and consequently none in the petitioning insurance companies who claim under the News & Observer Publishing Company.

(2) That if there was any cause of action in the News & Observer Publishing Company for the alleged breach of said contract the entire and sole cause of action was in said publishing company, and the right of recovery for the entire damage caused by the water company was in the News & Observer Publishing Company, and the fact that the News & Observer Publishing Company had insurance covering a part of its alleged loss and had collected said insurance was not a defense available to the water company when sued by the publishing company, but the News & Observer Publishing Company held any amount collected from the Wake Water Company as trustee for the insurance companies after it was fully compensated. Therefore the compromise approved by court of the suit brought by the News & Observer Publishing Company "the dominus litis," and the release executed by the publishing company, in the absence of any allegation or suggestion of fraud, was a bar to the prosecution of any suit by the insurance companies, the said release by the News & Observer Publishing Company being as follows:

"$12,500. Raleigh, N. C., December, 15, 1914.

Received of William B. Grimes, receiver of Wake Water Company the sum of twelve thousand five hundred dollars ($12,500), in full settlement, satisfaction and discharge of all claims and demands of the News & Observer Publishing Company against W. B. Grimes, John A. Mills and Fred G. Boyce, Jr., receivers of Wake Water Company, and the Wake Water Company or any of them and of the order of Wake superior court, directing the payment of said sum to said publishing company and of all things required of W. B. Grimes, John A. Mills and Fred G. Boyce, Jr., receivers of Wake Water Company, and the Wake Water Company or any of them pursuant to the paper writing of compromise, release and indemnity dated December 9, 1914, and signed by said News & Observer Publishing Company.

The News & Observer Publishing Co.,

By W. H. Bagley, Business Manager.

Jones & Bailey,

Attorneys for the News & Observer Publishing Company."

(3) That the said insurance companies knew, at the time they made payment of the loss under their policies, to wit, on September 12, 1913, that said water company was in the hands of a receiver, and that the News & Observer Publishing Company had brought suit against the receiver of the Wake Water Company for the damages by reason of the alleged negligent failure to furnish water and pressure, and none of said petitioning insurance companies applied to be made parties and said suit was not compromised until December, 1914, and none of said insurance companies asked leave to sue until January, 1915, or filed with said receiver any claim until November 23, 1915, after said compromise and settlement had been carried out and the $12,500 paid under the order of the court by its receiver, though said insurance companies knew on May 27, 1913, that the water company was in the hands of a receiver, and the time for filing claims expired July 15, 1913, and under the facts as found by the court the said insurance companies have no right of action against the water company or its receiver, and said insurance companies have been negligent in asserting their pretended claims.

(4) That the loss by said fire to the property covered by all insurance policies was appraised and adjusted by said insurance companies in May, 1913, at $41,265.50, and the total insurance in force and paid was $26,901.24, which, added to the $12,500 collected from the water company by the compromise approved by the court, amounts to $39,401.24, which is about $2,000 less than the loss to the property covered by all insurance, and the News & Observer Publishing Company alleged its total damage was $110,951.48. The insurer has no right of subrogation until the insured is fully indemnified. The News & Observer Publishing Company was asserting a $100,000 claim against the water company; the water company and its receivers were denying any liability. The News & Observer Publishing Company was afraid it would get nothing; the water company was afraid it would have to pay the full $75,000 for which the News & Observer was authorized to bring suit. The suit was pending a year and a half, and each side, acting for what it considered its best interest, compromised for $12,500 which was approved by the court. The water company insists that it compromised with "the lord of the litigation," and it compromised all matters growing out of the fire, and that under the facts it should not be subject to the cost and expense of another suit. If this course is permitted, the other companies who paid the additional $12,000 of insurance not embraced by this order may later separately and jointly apply for leave to sue, and the water company will be subjected to the cost and expense of three or more suits for one alleged tort--which is against the settled principle of the law "that a defendant shall not be subjected to two actions by different parties for the same wrong."

(5) That the insurance companies ought not to sue, for that it was found as a fact that they had not paid the full value of the loss to the property insured, and, until the total loss is paid, the right of action is in the insured, and the right of the insurer must be worked out through the insured, and the insurer can and must take timely action to protect its rights.

(6) That neither said publishing company nor any of said insurance companies were parties or privies to said contract between said water company and said city of Raleigh, and hence none of them have any right to sue said water company or its receiver.

The following order was made upon the petition to sue in which appears the findings of fact of his honor:

Upon consideration of the petition of the Orient Fire Insurance Company of Hartford, Conn., the Virginia Fire & Marine Insurance Company, Springfield Fire & Marine Insurance Company, the Hartford Insurance Company, New York Underwriters Agency, British-American Assurance Company, the Dixie Fire Insurance Company, the Sun Insurance Company, Niagara Insurance Company, Fire Association of Philadelphia, Pennsylvania Fire Insurance Company, for leave to sue the receiver of the Wake Water Company heretofore appointed by order of this court, it is considered and ordered, after considering the petition, the answer filed, and the argument of counsel, that the said petitioners have leave of the court to sue the receiver of the Wake Water Company and to bring one independent action against said receiver, joining in one action their demands and causes of action against the said receiver.

It is further ordered that the said petitioners give bond in the sum of $1,000 to secure the costs to be incurred by the receiver in the defense of said action, with surety approved by the clerk of this court, if it shall be finally adjudged that the said petitioners are required to pay said costs.

The said court, being requested by attorneys for receiver of Wake Water Company to find the facts, does find the following facts:

That W. B. Grimes was appointed receiver of the defendant Wake Water Company on the 29th day of August, 1912, and at once qualified and entered upon the discharge of his duties as such receiver.

That pursuant to order of court in said action a notice was published in the Baltimore Sun and in the Raleigh Evening Times for 20 days, commencing May 30, 1913, notifying all parties having claims against the said water...