Royal Indem. Co. v. Security Truck Lines

• Decision Date: 18 January 1963
• Citation: 27 Cal.Rptr. 858,212 Cal.App.2d 61
• Parties: ROYAL INDEMNITY COMPANY, a corporation, Plaintiff and Appellant, v. SECURITY TRUCK LINES, Defendant and Respondent. Civ. 20476.
• Court: California Court of Appeals Court of Appeals

Page 858

27 Cal.Rptr. 858

212 Cal.App.2d 61

ROYAL INDEMNITY COMPANY, a corporation, Plaintiff and Appellant, v. SECURITY TRUCK LINES, Defendant and Respondent.

Civ. 20476.

District Court of Appeal, First District, Division 2, California.

Jan. 18, 1963.

Robert M. Cole, Davis, for appellant.

Rankin, Oneal, Luckhardt & Center, by J. E. Longinotti, San Jose, for respondent.

KAUFMAN, Presiding Justice.

Appellant, Royal Indemnity Company, an insurance carrier, brought action against the respondent, Security Truck Lines (hereafter referred to as Security), to recover moneys paid by appellant to its insured, General Petroleum Corporation (hereafter referred to as General Petroleum), for the replacement of a sign at a gasoline service station located on U. S. Highway 101 in Laytonville, California. The complaint alleged that on May 4, 1957, the sign at General Petroleum's Laytonville station was irreparably damaged by a truck owned by the respondent and operated by its employee, George A. Clark. The replacement cost of $966.61 was paid by the appellant pursuant to its contract of insurance with General Petroleum.

Respondent's answer alleged a counterclaim of $3,000 owed by General Petroleum's wrongful removal of a sign at a service station at 1600 South First Street, San Jose, California, which General Petroleum had leased from the respondent. Appellant challenged the counterclaim by demurrer and by a motion to strike. The trial court sustained respondent's right to assert the counterclaim. Thereafter, the appellant entered into a written stipulation acknowledging the verity of the counterclaim and authorizing judgment to be entered accordingly and preserving its right to appeal. The trial court accordingly entered its judgment that appellant was entitled to its judgment against Security and that Security was entitled to a setoff against the judgment in its entirety.

The only question presented by this appeal is whether the trial court properly allowed the respondent's counterclaim. Appellant contends that the trial court erred because: (1) The insured, General Petroleum, was not a party to this action; (2) The counterclaim is entirely unrelated to the instant action; (3) The facts alleged do not sufficiently state a counterclaim; and (4) The counterclaim cannot be asserted against the appellant as the subrogee of General Petroleum.

Sections 437 and 438 of the Code of Civil Procedure, as amended in 1927, provide that the defendant may, in his answer, set up new matters as a counterclaim. The only requirements for a counterclaim are that it 'must tend to diminish or defeat the plaintiff's recovery and must exist in favor of a defendant and against a plaintiff between whom a several judgment must be had in the action * * *.' (Code Civ.Proc. § 438.) Since 1927, the scope of a counterclaim is broader than that of a cross-complaint. As long as the counterclaim fulfills the requisites of diminishing plaintiff's recovery and involves only the parties to the action, the cause of action set up in the counterclaim need have no relation to the plaintiff's cause of action. In the leading case (Terry Trading Corp. v. Barsky, 210 Cal. 428, 435-436, 292 P. 474, 477), the Supreme Court said: 'All of the other limitations were abolished by this amendment, and an intent on the part of the Legislature to avoid multiplicity of suits and to have all conflicting claims between the parties settled in a single action was most clearly manifested. * * * it is not necessary that there be any connection between the cause of action set up in the complaint and that which forms the basis of the counterclaim.' (See also Bond v. Farmers etc. Bank, 64 Cal.App.2d 842, 845, 149 P.2d 722; Buckman v. Tucker, 9 Cal.2d 403, 408, 71 P.2d 69; Casaretto v. DeLucchi, 76 Cal.App.2d 800, 807, 174 P.2d 328; 16 Cal.L.Rev. 365; 10 So.Cal.Rev. 420, 439; 18 Cal.L.Rev. 479.) Thus, there is no merit in appellant's contentions on this point.

We turn now to the contention that the respondent's counterclaim against General Petroleum cannot be asserted against the appellant. Appellant contends that it is not an assignee of the rights of General Petroleum, but that General Petroleum is a fiduciary and trustee of a constructive trust on its behalf. However, it has long been held that subrogation is the equivalent of an equitable assignment (Dibble v. San Joaquin Light & Power Corp., 47 Cal.App. 112, 190 P. 198).

In Offer v. Superior Court, 194 Cal. 114, at page 19, 228 P. 11, at page 13, our Supreme Court said: 'The development of subrogation is closely analogous to several other modes of remedy. The question often arises whether one who has suffered by being held liable for the tort or breach of contract of another should seek his remedy by an action founded on an express promise of indemnity, if such there was, or on the implied assumpsit raised by his payment of the obligation of the other, or upon the theory of subrogation. In some cases the claimant may have taken an assignment of the demand he has paid; he may have an express contract of indemnity, or an implied assumpsit to rest upon, and yet, perhaps, may have an election to proceed on the theory of subrogation, 'which is a sort of assignment by operation of equity.' This doctrine of subrogation having grown up out of the doctrine of assignment of causes of action, it may be well to trace the progress of the latter.'

Recently, in Fifield Manor v. Finston, 54 Cal.2d 632 at 640, 7 Cal.Rptr. 377 at 382, 354 P.2d 1073 at 1078, 78 A.L.R.2d 813, the court pointed out that: 'While subrogation and assignment have certain technical differences, each operates to transfer from one person to another a cause of action against a third, and the reasons of policy which make certain causes of action non-assignable would seem to operate as...