The Ocean Accident and Guarantee Corporation, Ltd. v. United States Fidelity and Guaranty Company

• Decision Date: 15 October 1945
• Docket Number: Civil 4652
• Citation: 162 P.2d 609,63 Ariz. 352
• Parties: THE OCEAN ACCIDENT AND GUARANTEE CORPORATION, LTD., a Corporation, Appellant and Cross-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a Corporation, Appellee and Cross-Appellant
• Court: Arizona Supreme Court

162 P.2d 609

63 Ariz. 352

THE OCEAN ACCIDENT AND GUARANTEE CORPORATION, LTD., a Corporation, Appellant and Cross-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a Corporation, Appellee and Cross-Appellant

Civil No. 4652

Supreme Court of Arizona

October 15, 1945

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge.

Judgment affirmed.

Messrs Fennemore, Craig, Allen & Bledsoe, and Mr. Floyd M. Stahl for Appellant and Cross-Appellee.

Messrs Moore, Romley & Roca, for Appellee and Cross-Appellant.

Morgan, J. Stanford, C. J., and LaPrade, J., concur.

OPINION

Morgan, J.

This action involves the respective liabilities of the parties as insurance carriers under an award made by the Industrial Commission of Arizona, which was reviewed and affirmed by this court in United States Fidelity & Guaranty Co. v. Industrial Commission et al., 42 Ariz. 422, 26 P.2d 1012. Appellee and cross-appellant instituted the action in the case below for subrogation and contribution against appellant and cross-appellee. The parties will be referred to as plaintiff and defendant. An appreciation of the issues involved requires a reference to the facts.

On May 5, 1931, The Texas Company, a California corporation, entered into a written commission agency agreement with one I. P. Frazier, constituting Frazier as its agent at Miami, Arizona, in charge of its service station and business there. This contract provided that the agent, "at his expense, furnish all assistants and employes he may require for the proper and diligent operation of said station, and assume full direction and control over and responsibility for all such assistants and employes, and indemnify and save the Company harmless from loss arising out of or by virtue of all damage to property and/or injury to persons (whether or not such injury result in death) occasioned by the acts of the Agent, his assistants and/or employes."

Prior to this date the plaintiff had issued to The Texas Company a workmen's compensation insurance policy. Pursuant to the provisions of the agency agreement, Frazier, on or about May 5, purchased from the defendant a workmen's compensation insurance policy in the usual form. The agreement and the policies mentioned, through extensions, were in effect on September 16, 1932, when one Ralph W. Hawes, an employee working at the service station, was killed in an accident, leaving surviving dependents. Frazier was also killed in the same accident. The widow of Hawes applied to the Industrial Commission of Arizona for compensation against the estate of Frazier and his insurance carrier, the defendant. The defendant, on November 28, 1932, paid back to the administratrix of the estate of Frazier the premiums which he had paid on the policies, with notice of rescission reciting that the policies were issued upon a mistake of fact and law, and under the belief that Frazier was an independent employer liable for the compensation of persons employed at the service station. These premiums were accepted by the administratrix. The plaintiff received no premiums on account of the employment of, or salary paid to, Hawes, as The Texas Company did not consider him as its employee.

The commission made an award against the Frazier estate and defendant as Frazier's insurance carrier. On motion for rehearing by defendant, alleging and setting forth that The Texas Company and not Frazier was the employer of the deceased, The Texas Company and its insurance carrier, the plaintiff, were made parties to the proceedings before the Industrial Commission. That body found both Frazier and The Texas Company to be employers of the deceased Hawes, and entered its award against plaintiff as insurance carrier for The Texas Company, and defendant as insurance carrier for Frazier. Plaintiff appealed the award to this court, no appeal being made by the defendant. In United States Fidelity & Guaranty Co. v. Industrial Commission, supra, the award against The Texas Company and plaintiff was affirmed upon the ground that Frazier was not an independent contractor. The defendant filed cross-assignments of error and briefs, claiming that the award was erroneous in holding it liable with the plaintiff, but we held that since no appeal had been taken by defendant, its contentions could not be considered, and the award as entered against it was also affirmed. Following the affirmance of the award, plaintiff paid the amounts as provided therein to the dependents of Hawes to the date of the trial of the present action.

Plaintiff commenced this action on April 4, 1934, on two counts, the first cause being for subrogation for the full amount paid on the award, and requiring defendant to make all future accruing payments. In its second cause of action, it sued for contribution for one-half of what had been paid, and that defendant be required to contribute equally towards all future accruing payments to be made under the award.

On April 24, 1942, a similar amended complaint was filed in two counts for subrogation and for contribution covering all amounts paid or to be paid. The trial court entered judgment in favor of defendant on plaintiff's subrogation cause and in favor of plaintiff on the contribution cause. The judgment covered one-half of all amounts paid by plaintiff to date of trial, with interest on payments to date of judgment. It also provided that plaintiff recover of defendant one-half of all payments made or to be made by it on the award subsequent to the date of trial. Defendant's motion for new trial was denied. It appealed from the judgment for contribution and from the order denying motion for new trial. Plaintiff appealed from that portion of the judgment denying subrogation.

Two principal questions are raised by the appeal, which may be paraphrased as follows:

1. Defendant seeks to reverse the judgment on the ground that since contribution is an equitable remedy and available only when the parties are in equal right and rest under a common burden which in equity and good conscience should be shared between them, it is not available to plaintiff because the equities of defendant are superior to those of plaintiff. The award which operated equally against plaintiff and defendant will not justify a judgment for contribution in favor of plaintiff as the defendant's equities are superior;

2. Plaintiff, in support of its cross-appeal, takes the position that The Texas Company, Frazier and the defendant interpreted the commission agency agreement and the relation between The Texas Company and Frazier to require the latter to hold The Texas Company harmless against the payment of loss arising out of the injury or death of his immediate employee Hawes, and that defendant, Hawes' insurance carrier, is primarily liable and should be required to pay the total cost of compensation.

Other claims of error advanced by defendant will be adverted to later.

That contribution is an equitable remedy and is available only when the parties are in aequali jure is unquestioned. It seems to be the settled doctrine that where two or more persons are obliged to bear a common burden which should be borne with equality, one should not be required to bear a greater burden than the other. In such cases, the law requires equality, and the rule is that equality is equity. 18 C. J. S. 3, Contribution, § 2; 13 Am. Jur. 6, sec. 3, Contribution. Nor does the right to sue for contribution depend upon a prior determination that the defendant is liable. Liability is a matter to be decided in a suit for contribution. The plaintiff, however, must prove that there was a common burden or debt, and that as between himself and the defendant he has paid more than his share of the obligation common to both. The defendant may, in such action, set up such defenses as are available to him to show that under the rule of equality he is not liable. Phillips-Jones Corp. v. Parmley, 302 U.S. 233, 58 S.Ct. 197, 82 L.Ed. 221; Consolidated Coach Corp. v. Burge, 245 Ky. 631, 54 S.W.2d 16, 85 A. L. R. 1086.

Even though there is a joint judgment against several persons, which has been paid by one, the payor may not recover against another with whom he was not in equal right. King v. Price, 212 Ala. 344, 102 So. 702; Note, 101 A. L. R. 116. But this general rule is subject to an exception. The rule does not apply if, in the action in which judgment entered against codefendants, they occupy the position of adversaries and the issue of their respective liabilities has been determined. In such case, the judgment becomes res judicata as between the parties. The rule pertaining to this exception is stated in 30 Am. Jur. 968, sec. 234, Judgments:

". . . It is clear that the general rule does not apply where, in the course of the litigation, coplaintiffs or codefendants do in fact, although not in form, occupy the attitude of adversaries, and contest an issue with each other, either upon the pleadings between themselves and the other party, or upon cross pleadings between themselves, so that a judgment conclusively determines, as between coparties, issues which are raised and determined between them in the original action. In this connection, it has been declared that the character of a party, as adverse or otherwise as regards the doctrine of res judicata, is to be determined not by his position upon the docket, or in the title of the cause, but by reference to his relations to the other parties, as shown by his interests involved in the case."

The text is supported by numerous decisions, to some of which we now refer. In Wright v. Schick, 134 Ohio St. 193, 16 N.E.2d 321, 121 A. L. R. 882, it appeared that Schick and his insurance carrier had been sued in an independent action to...