Court Opinion

ID: 5786529
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:59:57.914277+00
Date Added: 2024-06-11T08:42:07.155864
License: Public Domain

Kupferman, J.
(dissenting in part). While I concur on the basic question of liability, I would modify the award to reduce it to $60,000 plus interest.
It is clear that the defendant was less than faithful in his service to the telephone company as the District Manager of its Broad Street office, allowing nonpayment of telephone bills for one customer for the years 1962-1967 to reach a total of over $148,000, somewhat facetiously referred to as “ the biggest unpaid telephone bill in the world ”.
Certainly, more than negligence was involved in the deliberate way in which the defendant prevented opportunity for attempts at collection. However, what we have here is a suit against the employee by a subrogated fidelity insurer which paid to the telephone company the sum of $60,000 in full settlement of the telephone claim. Yet, the judgment is for *164$148,803.40 (plus .interest, which brings it to over $200,000), which is the full amount of the unpaid telephone bills involved.
While nobody has raised the question, it seems to me that the insurer should not (despite doubt as to collectibility of any judgment) be making a profit on this transaction. An assignment of the. claim was taken by the insurer and a complete release and discharge obtained by it from the New York Telephone Company. “ The amount of subrogation to which a person may be entitled cannot exceed the amount actually paid by him, even if the amount of the obligation discharged was greater than the amount paid by him.” (57 N. Y. Jur., Subrogation, § 27, p. 76).
The fact that an assignment was taken does not change the basic subrogation situation. (See Rosenthal Jewelry Corp. v. St. Paul Fire & Mar. Ins. Co., 21 A D 2d 160 [1st Dept., 1964], affd. without opn. 17 N Y 2d 857; Salon Serv. v. Pacific & Atlantic Shippers, 30 A D 2d 190 [1st Dept., 1968].)
The right of the surety to pursue the claim depends on subrogation rather than assignment. (83 C. J. S., Subrogation, § 50, p. 678.) “ It is necessary here to distinguish between the discharge by the surety of its obligation to the principal and complete satisfaction of the cause of action in favor of the principal against third parties.” (American Sur. Co. of N. Y. v. Gerold, 255 App. Div. 285, 287 [1st Dept, 1938].)
The assignment was, doubtless, to permit the equity of subrogation to arise without payment in full to the insured. (See McGrath v. Carnegie Trust Co., 221 N. Y. 92, 95 [1917].)
The Restatement of Restitution (1937) best sums up the situation in the following language (§ 162): “ i. Discharge at a discount. Where the obligation is discharged by the payment of a sum less than the amount of the obligation, or by the ■transfer of property the value of which is less than the amount of the obligation, the person discharging the obligation is ordinarily not entitled by subrogation to recover the full amount of the obligation, but can recover only the amount he paid or the value of the property used in discharging the obligation. Thus, a surety is entitled by subrogation to recover only the amount which he paid to discharge the obligation. He is entitled to be made whole, but he is not entitled to make a profit.”
Markewich, Murphy and Capozjzoli, JJ., concur with Stevens, P. J.; Kupferman, J., dissents in part in opinion.
Judgment, Supreme Court, New York County, entered on April 18, 1972, affirmed. Respondent shall recover of appellant $60 costs and disbursements of this appeal.