Travelers Ins. Co. v. Graye

• Decision Date: 02 November 1970
• Parties: , 1971 A.M.C. 409 The TRAVELERS INSURANCE COMPANY v. William J. GRAYE et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 442

263 N.E.2d 442

358 Mass. 238, 1971 A.M.C. 409

The TRAVELERS INSURANCE COMPANY v. William J. GRAYE et al. ¹

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Oct. 9, 1970.

Decided Nov. 2, 1970.

Terence F. Riley, Belmont, for Graye.

William R. Hall, Cambridge, for plaintiff.

Before SPALDING, CUTTER, KIRK, SPIEGEL, REARDON, and QUIRICO, JJ.

SPALDING, Justice.

This bill for declaratory and other relief was heard on stipulated facts and documentary evidence which the judge treated as a statement of agreed facts. The plaintiff seeks to have the defendant Graye ordered to execute an assignment to it of his rights and causes of action to the extent of $12,000 against any third party responsible for the sinking of his yacht.

On August 28, 1966, Graye's yacht, the 'Nepenthe,' was sunk off Tinker's Ledge, Marblehead, and has never been recovered. The yacht was insured by Graye with the plaintiff under a policy with a limit of $12,000. The full amount of the policy was paid by the plaintiff to Graye on October 25, 1966. Thereafter, Graye brought an action of tort in the Superior Court against the defendant Williams who is the owner of the boat that collided with the 'Nepenthe.' In the present proceeding, the plaintiff seeks to be subrogated to the rights of Graye in his action against Williams to the extent of the $12,000 payment it has made to Graye.

The policy contained no express provision with respect to subrogation. The plaintiff made an attempt to salvage the yacht, but without success. Thereafter, on November 25, 1966, the plaintiff presented Graye with a subrogation agreement which Graye refused to execute. The plaintiff took the position that subrogation is not dependent on its being expressly provided for in the policy but rather is based on principles of equity and the nature of the contract of insurance. Graye contended that no right of subrogation exists because it is not expressly provided for in the policy; he further contended that when the plaintiff exercised its salvage rights it made an election and is now estopped to claim subrogation.

The judge ordered a decree to be entered adjudging that the plaintiff was entitled to be subrogated to the rights of Graye against Williams to the extent of $12,000, and ordering Graye to execute and deliver to the plaintiff an assignment of his rights and causes of action against Williams to the extent of $12,000. From a decree in accordance with this order, Graye appealed. Graye demurred to the bill, and from an interlocutory decree overruling the demurrer he also appealed.

1. The bill was not demurrable; it presents a justiciable issue and an actual controversy. This remains true even though the respective rights and responsibilities of the parties are contingent upon the outcome of the tort action against the defendant Williams by Graye. General Laws c. 231A is 'to be liberally construed and administered,' and where, as here, an actual controversy has arisen, a bill for declaratory relief will lie though the liability of the defendant Williams has not been established. See Improved Mach. Inc. v. Merchants Mut. Ins. Co., 349 Mass. 461, 463, 208 N.E.2d 796. '(U)nless the matter is adjusted such antagonistic claims will almost immediately and inevitably lead to litigation.' School Comm. of Cambridge v. Superintendent of Schs. of Cambridge, 320 Mass. 516, 518, 70 N.E.2d 298, 300. See also Crompton v. Lumbermens Mut. Cas. Co., 334 Mass. 207, 211, 135 N.E.2d 14.

2. The right of subrogation is not dependent on contract but 'rest(s) upon natural justice and equity.' Amory v. Lowell, 1 Allen, 504, 507. See Massachusetts Hosp. Life Ins. Co. v. Shulman, 299 Mass. 312, 316, 12 N.E.2d 856. The doctrine is expounded in Arnould on Marine Insurance (14th ed.) § 1225: 'Subrogation is an equitable arrangement incident to all contracts of indemnity and to all payments on account thereof. 'The general rule of law (and it is obvious justice),' said Lord Blackburn, 'is that (where) there is a contract of indemnity (it matters not whether it is a marine policy or a policy against fire on land, or any other contract of indemnity) and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid it, then if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back. '' ²

Arnould continues: "As between the underwriter and the assured, the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on...