St. Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Corp.

• Citation: 65 Cal.App.3d 66,135 Cal.Rptr. 120
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. MURRAY PLUMBING AND HEATING CORPORATION, a corporation, et al., Defendants and Respondents. Civ. 48116.
• Decision Date: 20 December 1976
• Court: California Court of Appeals

Page 120

135 Cal.Rptr. 120

65 Cal.App.3d 66

ST. PAUL FIRE & MARINE INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. MURRAY PLUMBING AND HEATING CORPORATION, a corporation, et al., Defendants and Respondents.

Civ. 48116.

Court of Appeal, Second District, Division 3, California.

Dec. 20, 1976.

Cummins, White & Breidenbach, Bruce C. Gridley, W. F. Rylaarsdam, Los Angeles, for plaintiff and appellant.

Veatch, Snow, Carlson, Dorsey & Quimby, Raymond J. Mosher, Irvine, and Herbert F. Blanck, Encino, for Murray Plumbing.

Schell & Delamer, Mark B. Pepys, Los Angeles, for Rockwin.

Horgan & Robinson, Steven L. Anderson, Los Angeles, for Progressive.

Yusim, Cassidy, Stein & Hanger, Charles L. Fonarow, Beverly Hills, for Barnard.

Haight, Lyon, Smith & Dickson, Roy G. Weatherup, Los Angeles, for Russell Back-Hoe.

ALLPORT, Associate Justice.

In a first amended complaint for property damage plaintiff St. Paul Fire & Marine Insurance Company, a corporation, as insurer of C. H. Leavell & Company, a corporation, seeks reimbursement for sums paid by it for water damage to property located in or near the basement of the United States Post Office, Cafeteria and Federal Office Building at Wilshire and Sepulveda Boulevards in West Los Angeles, which damage occurred while the building was under construction. ¹ At the time of the loss Leavell was general contractor and Murray Plumbing and Heating Corporation, a corporation, Rockwin Prestressed Stone, a corporation, and Barnard Engineering Company, a corporation, were subcontractors engaged in the construction project. Progressive Transportation Company, a corporation, and Russell Back-Hoe Rental, Inc., a corporation, were subcontractors of Rockwin and Murray respectively on the same project.

It was alleged that, as a result of negligence, strict liability, breach of warranty and breach of contract by defendants, a four inch cast iron pipe broke causing extensive flooding and that:

'As a direct and proximate result of the carelessness, negligence and violation of law of defendants as aforesaid, and because of the failure and breakage of the cast iron pipe as aforesaid, LEAVELL sustained damage as follows:

Damages to the real property, damages to the building; wreckage, damage and depreciation of fixtures, equipment and furnishings, and additional construction costs for temporary power, hoisting, clean-up, job security and supervision and administration as a result thereof;

LEAVELL suffered damages in the sum of $283,294.50 by reason of its interest in said damaged objects and its contractual duty to restore the damaged objects and complete the construction project. According to the terms and conditions of the insurance policy, ST. PAUL was required to and did reimburse, indemnify and pay to LEAVELL said sum. By reason of said payment and by reason of the provisions of the policy of insurance, and by reason of the principle of equitable subrogation, ST. PAUL has become subrogated to all of the rights of LEAVELL up to the amount of said payment, against defendants, and each of them;'

Upon the case being called for jury trial the court preliminarily determined a special defense raised by amended answers and cross complaints, ruled as a matter of law that St. Paul could not maintain a subrogation action against defendants and rendered judgment as follows: 'All parties stipulated that the Court could try the special defense, of each of these Defendants, that the Plaintiff, St. Paul Fire and Marine Ins. Co., a corporation, was prohibited by law from suing and recovering from its insureds. ( ) The Court, having considered the stipulations of counsel, Plaintiff's Exhibit 1, and the oral stipulation of counsel, as to the facts, and the Insurance Contract, Plaintiff's Exhibit 2, and having heard argument of counsel: ( ) IT IS ORDERED ADJUDGED AND DECREED, that Judgment be for the Defendants, Rockwin Prestressed Stone, a corporation, aka Rockwin Corporation, a corporation for costs in the sum of $1403.54; Progressive Transportation Company, a corporation for costs in the sum of $715.08; Murray Plumbing and Heating Corporation, a corporation for costs in the sum of $1163.52; Barnard Engineering Company, a corporation for costs in the sum of $565.42; and Russell Back-Hoe Rentals, Inc., a corporation and against the Plaintiff, St. Paul Fire and Marine Ins. Co., a corporation.' ²

Contentions

St. Paul appeals contending that (1) the judgment is void because the trial court proceeded to try the special defense under the assumption such a procedure was stipulated to by counsel, and (2) the judgment itself is erroneous as a matter of law.

The bases of the second contention appear to be that, even though the subcontractors were listed as additional insureds under the policy for property damage only, the policy did not extend coverage to them for the loss so as to prevent subrogation against them and they were contractually obligated to indemnify the general contractor therefor under the provisions of the subcontracts.

Discussion

We need not linger over the contention that the trial court committed 'judicial' error in reciting in the judgment that 'all parties stipulated that the court could try the special defense. . . .' We have considered the reporter's transcript of proceedings commencing June 24 and concluding June 26, 1975. It appears therefrom that it was not unreasonable for the court to conclude as it did with respect to trial of the issue raised by the special defenses.

Preliminarily the procedural aspects of the trial were discussed. At the beginning the court and counsel for St. Paul expressed doubt the special defenses raised only questions of law and suggested that it was highly probable factual matters might first have to be resolved by the jury before the legal issue could be resolved. However, under pressure from defense counsel, acquiesced in by counsel for St. Paul, the court agreed to attempt to resolve the special defenses first pursuant to oral and written stipulations of fact. The record reveals that counsel for St. Paul was agreeable to this procedure and actively participated in the factual and legal presentation of this issue to the court. While it is true that no formal motion or stipulation was made or advanced, the procedure finally adopted by the court was agreed to by all concerned without reservation or objection. We have no hesitancy in holding that the trial court's conclusion that the parties 'stipulated' to the procedure was fully supported by the record. If not, and it was in fact an erroneous assumption on its part, the error was invited. Furthermore, no showing has been made that the procedure adopted by the court was prejudicial to the plaintiff. It should be borne in mind that the gravamen of St. Paul's action is equitable subrogation. Being a proceeding in equity the matter would ordinarily be determined by the court. (Raedeke v. Gibraltar Sav. & Loan Assn., 10 Cal.3d 665, 671, 111 Cal.Rptr. 693, 517 P.2d 1157; Meyer Koulish Co. v. Cannon, 213 Cal.App.2d 419, 430--431, 28 Cal.Rptr. 757.) For reasons to be stated, the special defense was susceptible of determination under the procedure agreed upon by the parties.

We turn next to the substantive issue of whether, under the facts of the case, St. Paul could subrogate against the Leavell subcontractors. Generally the right of subrogation applies in all cases in which a person, not a volunteer, pays a debt for which another is primarily answerable, and which, in equity and good conscience, should have been discharged by the latter. This equitable doctrine of subrogation is to be liberally applied to promote justice and does not necessarily rest upon contract or privity, but arises out of the nature of the contract of insurance as a contract of indemnity. (Meyer Koulish Co. v. Cannon, supra, 213 Cal.App.2d 419, 423--424, 28 Cal.Rptr. 757.) It is clear that where, by the terms of the policy under which the loss is paid there is no coverage extended to others, subrogation is permitted as against those others responsible for the loss. (Pacific Indem. Co. v. Truck Ins. Exch., 269 Cal.App.2d 420, 426, 74 Cal.Rptr. 793.)

In the instant case the stipulated facts disclose St. Paul issued a builder's risk insurance policy which listed the insured as 'C. H. Leavell & Company . . . for its account and/or the account of its subcontractors.' The policy insured against 'all risks of direct physical loss, damage or destruction . . . of property of the assured or of others in custody or control of the assured' excluding loss caused directly or indirectly by defective materials or faulty workmanship or error in design. . . .' St. Paul advances the unique argument that this particular exclusion applies only to the subcontractors and not to Leavell because the loss was not caused directly or indirectly by Leavell's defective materials, faulty workmanship or errors in design, but was caused directly or indirectly by that of the Subcontractors. As noted above the policy makes no such distinction as to the source of the defect, fault or error and the exclusion must be uniformly applied as to all insureds. Either all insureds were covered or none was covered.

The policy also excluded loss 'if at the time of loss, there is other valid and collectible insurance which would attach if this insurance had not been effected.' It was stipulated that no other builder's risk coverage was available although each subcontractor had a policy of liability insurance with an insurance carrier other than St. Paul. It was also stipulated that:

'ST. PAUL FIRE & MARINE INSURANCE CO. paid under its builders' risk policy approximately $283,000.00 to the general contractor, C. H. LEAVELL & CO., who thereafter disbursed a part of the proceeds of the funds paid by ST. PAUL FIRE & MARINE INSURANCE CO. to various subcontractors. The disbursements of the proceeds of the monies received by C. H. LEAVELL & CO. from ST. PAUL...