Court Opinion

ID: 6915328
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:39:03.209403+00
Date Added: 2024-06-11T16:06:38.383472
License: Public Domain

MEDINA, Circuit Judge
(concurring and dissenting).
My only objection to my brothers’ disposition of this case concerns Liberty Mutual’s claim against Anheuser-Busch. I do not understand the theory on which Liberty is said to be subrogated to Borsari’s contract right against Anheuser. My brothers say simply that it is equitable that Anheuser should reimburse Liberty, since Liberty would have sustained no loss had Anheuser performed its contract. This is only another way of saying that my brothers consider, by and large and under all the circumstances of the case, that it is fair and reasonable to compel Anheuser to reimburse Liberty. But I have no confidence in this vague and slippery approach. Indeed, I do not believe that under our system of jurisprudence, judges have the right to decide cases purely on the basis of what may strike an individual judge as the right thing to do, independent of any rule of law. We are not mere philosophers, nor is it our function to dispense a priori justice between the parties, but rather to determine and apply the law as best we can.
As the District Court had jurisdiction of this case by virtue of the diversity of citizenship of the parties and we are to decide a substantive question of subrogation vel non, there necessarily arises in limine the conflict of laws problem of what law governs. What law are we talking about? Is it some general concept of justice residing in nubibusl Or is it a “federal general common law,” which we were told in Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 822, 82 L.Ed. 1188, no longer exists and never did exist, although even the Supreme Court at one time thought it did? My brothers give no answers to these questions. Nor do they say they are applying New York law or Missouri law.
We must first determine what rule of conflicts the New York courts would apply, as the case was tried in a United States District Court sitting in the State of New York, and we must find “what the state law is, not what it ought to be.” Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 1022, 85 L.Ed. 1477. But neither the parties nor the Court below has told us what that law is. We may assume that either New York law or Missouri law would be held to provide the controlling substantive rule.
Such research as I have been able to do in the limited time available, however, would tend to indicate that there is no principle or group of principles heretofore applied by the courts either in New York or Missouri which can fairly be said to provide a foundation for the conclusion that Liberty has a right of sub*291rogation to Borsari’s contractual rights against Anheuser.
Surely such general statements as are quoted in the majority opinion from certain New York cases are too frail a reed to lean upon. In their context they support the decisions arrived at, in vacuo and by themselves they are no more than pious thoughts, glittering generalities, which are all too often untrustworthy guides to the decision of particular cases.
Let us turn then to a consideration of certain fundamental principles of the law of subrogation, which may be thought to have general application in all American courts and to certain decisions by the New York and Missouri courts which seem, at least to me, to militate against the conclusion to which my brothers come and from which I dissent.
It is a fundamental principle of subrogation that “One who rests on subrogation stands in the place of one whose claim he has paid, as if the payment giving rise to the subrogation had not been made.” United States v. Munsey Trust Co., 332 U.S. 234, 242, 67 S.Ct. 1599, 1603, 91 L.Ed. 2022. In effect, the subrogee buys the claim from the subrogor. A person is not subrogated to another’s rights unless he has paid that person, or at least has satisfied an obligation owing by that person.
Liberty paid no money to Borsari. Did it satisfy an obligation owing by Borsari? In other words, was Borsari liable to the workmen’s estates under the Missouri Workmen’s Compensation Act? Under Missouri law, Borsari was liable to the estates only “on motion and proof of default by the insurer.” Mo.Rev.Stat. 1949, § 287.300, V.A.M.S. Hence Liberty’s payment was not made in Borsari’s behalf.
Even if we pass this hurdle and assume that Liberty did in effect satisfy an obligation of Borsari as its insurance carrier, we have merely satisfied one condition of subrogation. That is not the same as finding subrogation. An indemnity insurer by paying to or in behalf of his assured does not necessarily become subrogated to all of the assured’s claims relating to the subject matter.
Although it appears to be law in every state that upon indemnifying the assured the insurer is subrogated to the assured’s tort claims against third party tortfeasors who caused the damage, 8 Couch, Cyclopedia of Insurance Law § 1997; Vance, Insurance § 134, there has been considerable disagreement among the states as to whether the insurer is similarly subrogated to contract claims of the assured against third parties also obligated to make good all or part of the loss. Note, Subrogation of the Insurer to Collateral Right of the Insured, 28 Colum.L.Rev. 202; Patterson, Cases and Materials on Insurance, 303; compare Couch, op. cit. supra, § 2017, with 2 Richards, Insurance § 188.
Neither my brothers nor I have been able to find a single case decided by any New York or Missouri court which holds an indemnity insurer subrogated to claims against third parties who had not caused the injuries. Nor am I prepared even to go so far as to say that such decisions are desirable and on the whole in the interest of justice. It is well to remember that Borsari, for reasons doubtless satisfactory to it, failed to avail itself of the cross-claim procedure provided in the Federal Rules of Civil Procedure, Rule 13(g), 28 U.S.C.A.; and there is still apparently the possibility of separate suit. Liberty doubtless should recover from Borsari; Borsari has a right to recover against Anheuser for breach of contract; but it does not shock my sense of justice to conclude that Liberty has no cause of action whatever against Anheuser.
But even if it were assumed that the judges of the highest or of other courts of New York or Missouri might be disposed to view such a holding as a forward step in the development of New York or Missouri law, the fact still remains that as yet there is no such law, the possibility of such a decision lies in gremio legis; it is a possibility but nothing more than that. There is a duty in *292a proper case to decide what the law of a particular state is, but not to anticipate or speculate on the subject of what that law shall some day be.
Moreover, such trend as I am able to detect in the Missouri and New York cases is in the opposite direction and indicates that subrogation to claims against third parties other than those who caused the injuries is viewed with disfavor.
In Plate Glass Underwriters’ Mut. Ins. Co. v. Ridgewood Realty Co., 219 Mo. App. 186, 269 S.W. 659, 662, the insurer paid its assured the cost of replacing a plate glass window that had been blown out by a windstorm. It then claimed to be subrogated to whatever rights its assured, the tenant of the premises, had against the landlord under the lease to compel the landlord to bear the cost of such repairs. The court rejected this claim, saying:
“Now, the insurance company in the case at bar did not agree to insure or guarantee to the insured the payment of any debt, or the performance of any obligation on the part of insured's landlord. It merely agreed to insure the plate glass, i. e., the property itself, for a cash consideration, to wit, the premiums paid by insured. The insurance contract was one solely between the two parties thereto, and the insurance company only paid what it contracted primarily to do; but now, notwithstanding it still retains the premiums or the benefit of its contract, it seeks reimbursement from the landlord on the basis that the latter, under a wholly separate and independent contract, should have done so. We see no basis of subrogation arising out of the circumstances herein, and are of the opinion that the subrogation clause in the insurance contract only applies to circumstances in which the law creates the right of subrogation. The plaintiff insured the property itself, not a debt due the tenant. Havens v. Germania Ins. Co., 135 Mo. 649, 658, 659, 37 S.W. 497. The mere fact that the tenant might thus have two sources to which he could look for repair or reimbursement does not give the plaintiff the right to be subrogated to that right as to one of such sources.”
In Alexandra Restaurant v. New Hampshire Ins. Co., 272 App.Div. 346, 71 N.Y.S.2d 515, a tenant had taken out fire insurance. A fire occurred, and the landlord restored the premises as required by the lease. The tenant-assured sued the insurer, which resisted payment on the ground that there had been no loss and also on the ground that it was subrogated to the tenant’s right against the landlord. The holding was that the insurer was not entitled to the benefit of its assured’s wholly independent contract with the landlord. The New York Court of Appeals affirmed without opinion. 297 N.Y. 858, 79 N.E.2d 268.
I would reject Liberty’s claim to subrogation against Anheuser, or, at most, leave this question open for full exploration on the remand.