Case Title: STATE EX REL SLOVAK v DISTRICT CO

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1975-04-29T00:00:00Z

Document:
No. 12970 I N THE S U P R E M E COURT O F THE S T A T E O F MONTANA 1975 S T A T E ex rel., ROGER S L O V A K , Relator, THE DISTRICT COURT O F THE THIRTEENTH JUDICIAL DISTRICT O F THE S T A T E O F MONTANA, i n and for the COUNTY O F Y E L L O W S T O N E and the HONORABLE C H A R L E S B. S A M D E , Judge of the Thirteenth Judicial District, Judge Presiding, Respondents. ORIGINAL PROCEEDING: Counsel oft Record : For Relator: Cate, Lynaugh and Fitzgerald, Billings, Montana Jerome 3. Cate and Thomas Lynaugh argued, Billings, Montana For Respondents: Crowley, Kilbourne, Haughey, Hanson and Gallagher, Billings, Montana Jack Ramirez argued, Billings, Montana Submitted: April 7, 1975 Honorable E. Gardner Brownlee, D i s t r i c t Judge, s i t t i n g i n place of M r . Chief J u s t i c e James T. Harrison, delivered t h e opinion of t h e Court. Roger Slovak, r e l a t o r herein, f i l e d an a c t i o n i n Yellow- stone County d i s t r i c t c o u r t wherein he alleged t h e named defend- a n t w a s g u i l t y of negligent driving and caused damage t o r e l a t o r ' s automobile i n the sum of $2,000 a s well a s extensive i n j u r i e s t o h i s person. Subsequent t o f i l i n g t h e a c t i o n , r e l a t o r ' s insur- ance c a r r i e r reimbursed r e l a t o r f o r a l l but $100 of t h e property damage. Defendant i n t h e d i s t r i c t c o u r t a c t i o n moved t o dismiss t h a t portion of t h e property damage claim which had been paid by t h e insurance company f o r t h e reason t h a t a s t o t h a t amount plain- t i f f ( r e l a t o r ) was not t h e r e a l p a r t y i n i n t e r e s t and t h e r e f o r e was not e n t i t l e d t o prosecute the a c t i o n pursuant t o Rule 17 ( a ) , M.R.Civ.P. A hearing on t h e motion was held and the d i s t r i c t c o u r t then entered t h i s order: " I T IS, THEREFORE, ORDERED t h a t t h e p l a i n t i f f ' s insurance c a r r i e r must within twenty (20) days from t h e d a t e of t h i s order be joined a s a party p l a i n t i f f o r f i l e written r a t i f i c a t i o n i n t h i s a c t i o n ; and, upon its f a i l u r e t o do so i n t h e time s p e c i f i e d , t h e a c t i o n w i l l be dismissed, without prejudice, a s t o i t s subrogation i n t e r e s t . " Relator has applied t o t h i s Court f o r a w r i t of super- visory c o n t r o l because h i s insurance company does not d e s i r e t o be joined a s a p a r t y p l a i n t i f f i n t h e d i s t r i c t c o u r t a c t i o n . Neither does it d e s i r e t o r a t i f y r e l a t o r ' s a c t i o n nor execute an assignment of its possible claim a g a i n s t t h e d i s t r i c t c o u r t de- fendant. The reason i s t h e existence of a binding a r b i t r a t i o n agreement between it and t h e insurance company representing t h e d i s t r i c t c o u r t defendant. The basic question presented here is: Where an i n s u r e r has paid a l l o r a p a r t of a l o s s sustained by i t s insured and has thereby become subrogated t o t h a t e x t e n t t o any claim a g a i n s t a t h i r d p a r t y f o r t h e l o s s , what i s t h e e f f e c t of Rule 1 7 ( a ) , M.R.Civ.P. on an a c t i o n brought a g a i n s t t h e t h i r d party? Rule 17 (a) provides : "Every a c t i o n s h a l l be prosecuted i n t h e name of t h e r e a l p a r t y i n i n t e r e s t . A n executor, administrator, guardian, b a i l e e , t r u s t e e of an express t r u s t , a p a r t y with whom o r i n whose name a c o n t r a c t has been made, f o r t h e b e n e f i t of another, o r a p a r t y authorized by s t a t u t e may sue i n h i s own name without joining with him t h e p a r t y f o r whose b e n e f i t t h e a c t i o n i s brought; and when a s t a t u t e of t h e s t a t e of Montana so provides, an a c t i o n f o r t h e use o r b e n e f i t of another s h a l l be brought i n t h e name of t h e s t a t e of Montana. N o a c t i o n s h a l l be dismissed on t h e ground t h a t it i s not prosecuted i n t h e name of t h e r e a l p a r t y i n i n t e r e s t u n t i l a reasonable t i m e has been allowed a f t e r objection f o r r a t i f i - c a t i o n of commencement of t h e a c t i o n by, o r joinder o r s u b s t i t u t i o n o f , t h e r e a l p a r t y i n i n t e r e s t ; and such r a t i f i c a t i o n , joinder o r s u b s t i t u t i o n s h a l l have t h e same e f f e c t a s i f t h e a c t i o n has been commenced i n t h e name of t h e r e a l p a r t y i n i n t e r e s t . " R e l a t o r ' s position is well presented i n h i s b r i e f , wherein he s t a t e s : "In conclusion it i s submitted t h a t t h e adoption of t h e r u l e which permits t h e insured t o bring s u i t f o r t h e e n t i r e amount of h i s l o s s i n h i s own name, without requiring t h e joinder of h i s subro- gating insurance c a r r i e r , is t h e only view consis- t e n t with t h e policy of t h e Montana Supreme Court a g a i n s t d i s c l o s u r e of insurance and t h e only posi- t i o n c o n s i s t e n t with t h e law i n Montana t h a t t h e P l a i n t i f f has t h e r i g h t t o prove and recover f o r a l l of h i s a c t u a l damage under t h e c o l l a t e r a l source r u l e whether paid f o r by h i s insurance o r t h e insurance of t h e Defendants. Further, t h e adoption of t h e r u l e here proposed by P l a i n t i f f does not prejudice t h e Defendants i n any manner s i n c e t h e absence of t h e i n s u r e r a s a party does not deprive them of any defenses nor does it sub- j e c t them t o a m u l t i p l i c i t y of law s u i t s s i n c e t h e e n t i r e claim i s presented i n one s u i t , which is a f t e r a l l t h e purpose of Rule 17 requiring joinder of r e a l p a r t y i n i n t e r e s t . Further, it should be s t a t e d t h a t t h e only r e s u l t i n joining t h e Plain- t i f f 's i n s u r e r would be t o prejudice t h e jury by making an impression i n t h e i r minds t h a t t h e P l a i n t i f f has already been compensated f o r a l l h i s s p e c i a l damages, which i s not t r u e by any means . I' I n f e d e r a l c o u r t s , i n those instances where t h e insur- ance company has become p a r t i a l l y subrogated t o t h e claim of t h e insured, t h e majority r u l e i s t h a t t h e i n s u r e r i s t h e r e a l p a r t y i n i n t e r e s t under Rule 17 of the Federal Rules of C i v i l Procedure and t h a t t h e defendant i n an a c t i o n brought s o l e l y by t h e insured can compel t h e joinder of t h e insurance company i f j u r i s d i c t i o n can be obtained. 6 Wright & Miller Federal P r a c t i c e and Procedure; C i v i l S 1546; 6 Cyclopedia of Federal Procedure, § 21.25; and 3A Moore's Federal P r a c t i c e Sect. 17.09 With respect t o decisions of s t a t e c o u r t s pertaining t o s i t u a t i o n s i n which t h e insured i s only p a r t i a l l y compensated f o r t h e l o s s by insurance, apparently four d i f f e r e n t approaches have been taken. 4 4 Am J u r 2d § 1853, p. 782 contains t h i s analysis: "Under s t a t u t e s o r r u l e s providing t h a t every a c t i o n must be prosecuted i n t h e name of t h e r e a l p a r t y i n i n t e r e s t , it i s generally held t h a t where t h e l o s s exceeds t h e insurance and t h e insurance company therefore pays only a portion of t h e l o s s sustained by i t s insured, both t h e insured and t h e i n s u r e r o r d i n a r i l y q u a l i f y a s r e a l p a r t i e s i n i n t e r e s t i n an a c t i o n a g a i n s t an alleged t o r t f e a s o r respon- s i b l e f o r t h e l o s s , s i n c e each owns a p a r t of t h e claim a g a i n s t such t o r t f e a s o r . "There a r e , however, a number of d i f f e r e n t views a s t o t h e proper p a r t y t o prosecute t h e a c t i o n a g a i n s t t h e t o r t f e a s o r . A l l of t h e views a r e based upon t h e d o c t r i n e prohibiting t h e s p l i t t i n g of a cause of a c t i o n , but represent d i f f e r e n t l i n e s of reasoning. O n t h e b a s i s of t h e underlying reasoning, t h e cases a r e d i v i s i b l e i n t o t h r e e groups presenting four major views. One group comprises cases wherein t h e courts accord more weight t o t h e doctrine of i n d i v i s i b i l i t y of a cause of a c t i o n than t o t h e r e a l p a r t y i n i n t e r e s t s t a t u t e o r r u l e . This reasoning has produced two major views which, broadly s t a t e d a r e : (1) t h e i n s u r e r ' s subrogation r i g h t s should be enforced through t h e insured, so t h a t t h e insured i s t h e only proper p a r t y t o prosecute an a c t i o n f o r t h e f u l l amount of t h e l o s s ; and ( 2 ) an a c t i o n a g a i n s t t h e t o r t f e a s o r should be prosecuted by t h e insured a.nd insurer j o i n t l y . The second group of cases c o n s i s t s of those wherein t h e c o u r t s accord more weiqht t o t h e r e a l party i n i n t e r e s t s t a t u t e o r r u l e than t o t h e doctrine of i n d i v i s i b i l i t y of a cause of a c t i o n . This reasonins has produced t h e major view, broadly s t a t e d , t h a t t h e insured may prosecute an action for the full amount of the loss, or either the insured or the insurer may separately sue for his portion of the loss, and if the action is instituted by either one alone, the defendant can compel joinder of the other or may waive joinder. The third group of cases embraces those wherein the real party in - interest is deemed to be the person owning the entire cause of action, and wherein the view is taken that the name in which the action must be prosecuted depends upon the extent of the assign- ment or subrogation. But despite the great vari- ation in the language enunciating the first three major views and their numerous variants, in the final analysis there is, from the practical viewpoint, very little difference between them, because under any of them (I) the insured may sue for the full amount of the loss in the absence of objection by the defendant, and except in those jurisdictions wherein the insurer is deemed a proper but not necessary party, the defendant may, on proper and timely objection, compel joinder of the insurer; (2) where either the insured or the insurer institutes a separate action to re- cover only its portion of the loss, the defendant can, on timely and proper objection, compel joinder of the other; (3) the insured and insurer may jointly prosecute an action for the full amount of the loss; and (4) joinder of the insured and insurer where either proper or necessary may be waived by the defendant.." (Emphasis supplied.) See also: Anno. 13 ALR3d 140. The underlined portion of the above analysis represents the Montana law. Section 67-1103, R.C.M. 1947, specifically allows the assignment of "A thing in action, arising out of the violation of a right of property * * *." In Caledonia Ins. Co. v. N.P. Ry. Co., 32 Mont. 46, 79 P. 544, the Court stated: " * * * subrogation is merely an equitable assignment, or an assignment by operation of law." In the instant case an action has been filed to recover for the property damage. Upon defendant's proper objection that all the real parties in interest had not been joined the court ordered such joinder or dismissal. Relator argues that the collateral source rule precludes the insurance company from being joined as the real party in inter- est. The purpose of the collateral source rule is to prevent the reduction of the defendant's liability by the amount of collateral benefits received by the plaintiff. There is no effort here to reduce t h e amount of damages which might be ultimately recover- able. Here t h e maximum amount of recovery f o r t h e property damage i s t h e sum of $2,000, and t h e only question is -- who g e t s the money? Relator is not e n t i t l e d t o more than $100 and, t h e r e f o r e , would not be allowed t o prove a l o s s i n any g r e a t e r amount without some r a t i f i c a t i o n by t h e insurance company of a claim f o r a g r e a t e r amount. Relator f u r t h e r argues t h e d i s t r i c t court r u l i n g improperly i n j e c t s insurance i n t o t h e case. I f such i s t h e case, it i s because r e l a t o r seeks t o recover on behalf of h i s insurance com- pany o r has taken such s t e p s a s would r e q u i r e t h e joinder of t h e insurance company and t h e r e f o r e i f he i s prejudiced i n any manner it i s e n t i r e l y because of h i s own a c t i o n s . Relator can avoid t h e i n j e c t i o n of insurance i n t o t h i s a c t i o n , t h e choice i s h i s . The application f o r a w r i t of supervisory c o n t r o l i s denied. Hon. E. Gardner Brownlee, d i s t r i c t judge, s i t t i n g i n place of M r . Chief J u s t i c e James T. Harrison. W e concur: