Opinion
No. 94-5455-G
November, 1995
MEMORANDUM OF DECISION AND ORDER ON THE PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiffs, the Trustees ("Trustees") of Security Mills Realty Trust ("Trust"), brought this action for contribution, as the assignees of a claim of Wasau Underwriters Insurance Company ("Wasau"), against Royal Insurance Company of America ("Royal"). The Trustees have moved for partial summary judgment in their favor on the issue of the liability of Royal. For the following reasons, the Trustees' motion is ALLOWED.
BACKGROUND
The Trust is a Massachusetts business trust established in 1922. The Trust owned real property in Newton, Massachusetts that had been the site of a textile mill from 1922 to 1985. In 1985, the Trust sold the property to Leo Kahn and Sandy Bloomberg, as General Partners of Security Mills Limited Partnership ("SMLP").
SMLP demolished the existing textile mill building on the property in order to redevelop the property as residential condominiums in 1988. While demolishing the buildings, SMLP discovered the existence of two underground oil storage tanks which had been installed during the 1930s, as well as the existence of asbestos on the site. At the same time, SMLP discovered that the soil of the property had been contaminated by fuel oil which had escaped from one of the underground tanks.
SMLP took various steps to determine the extent of and to remedy the contamination. As a result, SMLP brought a civil action against the Trustees in April, 1989 in Middlesex Superior Court. Kahn v. Rubenstein, Civ. No. 89-2514. In its complaint, SMLP alleged that it had incurred substantial expenses in assessing the nature and magnitude of the damage to the property, containing and removing the oil and asbestos, and by virtue of the decrease in value of the property resulting from the contamination. The claims were brought under G.L.c. 21E, §§ 4 and 5, and G.L.c. 93A, § 11.
The Trustees notified the various insurance companies which they believed had issued liability policies to the Trust that would apply to the SMLP claims. Each of the insurers, except Wasau, refused to defend the Trustees, either on the ground that it had not issued a policy to the Trustees or on the ground that any policy, if issued, did not provide coverage for the claims asserted by SMLP. Although denying that it had an obligation to defend the Trustees, Wasau agreed, under reservation of rights, to advance the Trustees their legal fees and expenses incurred defending the SMLP suit, up to a maximum of $150 per hour. The Trustees retained three attorneys at three different law firms to represent their respective interests.
The insurers involved in the underlying case, Kahn v. Rubenstein, aside from Wasau, were Commercial Union Insurance Company, Continental Casualty Company, Liberty Mutual Insurance Company and Lumbermens Mutual Casualty Company.
In June, 1991, the Trustees settled the underlying SMLP action for $425,000. Wasau had paid $261,902.84 in legal fees and expenses by the time of the settlement. The Trustees themselves paid an additional $17,866.70 in legal fees and expenses, representing the excess charged to the Trustees over the $150 per hour paid by Wasau.
The Trustees sought a declaratory judgment against the five insurance companies the Trustees thought were responsible to some extent to provide coverage for the SMLP litigation. That action, Rubenstein v. Liberty Mutual Ins. Co., Civ. No. 90-1687-B (Suffolk Supr. Ct.), resolved several issues during various phases of the civil action that ultimately affect the instant case. In May, 1994, the court concluded that Royal's predecessor companies had issued four different policies for the Trust covering the period from October 30, 1969 through October 4, 1977. The court also determined the content of the four policies as comprehensive general liability policies.
In August, 1994, the Trustees entered into an agreement with Wasau pursuant to which the Trustees agreed to release Wasau from any obligation to indemnify them for the $425,000 settlement with SMLP. Wasau agreed to release the Trustees from any obligation the Trustees might have had to reimburse it for the $261,902.84 of defense costs it had advanced and agreed to assign to the Trustees its contribution rights against the other insurers arising from its expenditure of those defense costs.
By the time of the court's decision on the declaratory judgment action, the four other insurers had settled with the Trustees. The settlements, which did not allocate the amounts between defense or indemnity claims or in any other manner, were in the following amounts:
Insurer Amount Paid Date Paid
Commercial Union $ 42,500 August 8, 1991
Liberty Mutual $ 65,000 January 12, 1994
Continental Casualty $ 85,000 October 24, 1994
Lumbermens Mutual $ 60,000 December 19, 1994
TOTAL $252,000
The court's Memorandum of Decision and Order for Judgment in the declaratory judgment action, dated August 23, 1995, indicated that the $425,000 paid by the Trustees came within the scope of one of the policies issued by Royal's predecessor, that the policy did not bar coverage through any of the policy's exclusions, and that Royal had a duty to defend. The order also mandated that sums of money received from the settling insurers who were parties to the declaratory judgment action should be offset against Royal's indemnity liability. Aside from holding Royal liable for indemnification, the court also awarded the Trustees a portion of the $17,886.70 in legal fees that they had personally assumed that were considered reasonable ($15,067.70), but indicated that there should be no recovery of defense costs already reimbursed by the other insurers.
On November 7, 1995, the court entered judgment against Royal in the amount of $359,802.14, plus costs. That amount represents the difference between the money for which the Trustees settled the underlying suit concerning the Newton property ($425,000) and the amount of settlement received from the other insurers, plus accrued interest.
The court takes judicial notice of the recent entry of judgment in Rubenstein v. Liberty Mutual Ins. Co., Civ. No. 90-1687 (Suffolk Super. Ct.). See Miller v. Norton, 353 Mass. 395 (1967).
Prior to the above resolution of the declaratory judgment action, the Trustees attempted to amend the claims to include the contribution claim that Wasau had assigned to them. By order dated September 22, 1994, the court denied the Trustees' motion to add the Wasau contribution claim to the declaratory judgment action. The Trustees commenced the instant action on October 7, 1994 to determine whether and to what extent it may recover under the Wasau assignment. The Trustees seek partial summary judgment on the issue of whether Royal is liable in contribution to the Trustees, under the assignment, for some portion of the defense costs paid by Wasau.
DISCUSSION
This court grants summary judgment where there are no genuine issues of material facts and where the summary judgment record entitles the moving party to judgment as a matter of law. Cassesso v. Comm'r of Correction, 390 Mass. 419, 422 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976); Mass.R.Civ.P. 56(c). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). A party moving for summary judgment who does not bear the burden of proof at trial demonstrates the absence of a triable issue either by submitting affirmative evidence negating an essential element of the nonmoving party's case or by showing the nonmoving party is unlikely to submit proof of that element at trial. Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991).
The nonmoving party cannot defeat the motion for summary judgment by resting on its pleadings and mere assertions of disputed facts." LaLonde v. Eissner, 405 Mass. 207, 209 (1989). A court will grant summary judgment to the party entitled to judgment as a matter of law if all parties have moved for summary judgment and "there is no real dispute [concerning] salient facts" or if a case only involves a question of law. Cassesso v. Comm'r of Correction, supra.
When one debtor pays a common debt, a right of contribution arises. Seronick v. Levy, 26 Mass. App. Ct. 367, 372 (1988). Although an obligation to contribute may be modified by contract, contribution is based "on the general principle of justice that persons assuming a common burden shall bear it equally." Quintin v. Magnant, 285 Mass. 450, 451-452 (1934). The validity of a duty to contribute rests on equitable grounds. Seronick v. Levy, 26 Mass. App. Ct. at 373.
In the instant case, Royal and the assignor Wasau shared an underlying obligation to defend the Trustees which was "equal in kind and degree." Id. at 372. As one of the five insurers of the Trust property, Royal had a duty to defend the Trustees from claims made by those who purchased the property from the insured and which were covered under the predecessor-issued policies. See Ratner v. Canadian Universal Ins. Co. Ltd., 359 Mass. 375 (1971). Wasau was the only insurer to undertake the defense of the Trustees, as all others, including Royal, failed to observe their duty. Thus, by assuming the cost of defending the Trustees in the underlying action by the purchasers of the Trustee's Newton property, Wasau was entitled to seek contribution from the other insurers. See Quintin v. Magnant, 285 Mass. at 451.
Wasau and the Trustees have executed a valid assignment of Wasau's right the contribution in exchange for the Trustee's release of the insurer from any further obligation concerning the underlying action. See Larabee v. Potvin Lumber Co., Inc., 390 Mass. 636 (1983); In re Gulf Air, Inc., 90 B.R. 10 (Bankr. D. Mass. 1988). As a result, Royal is liable in contribution to the Trustees to the same extent as Royal would have been liable to Wasau. Therefore, under the undisputed facts in the record before the court, summary judgment is properly allowed in favor of the Trustees on the issue of liability.
Nevertheless, both parties should note that the court will carefully approach the assessment of any award. The Trustees cannot be allowed to recover any monies over and above their total harm. As indicated in the declaratory judgment action concerning Royal's liability to the Trustees, "[a] party may not receive cumulative damages for the same wrong." Rubenstein v. Liberty Mutual Ins. Co., Civ. No. 901687-B, at 27, citing McGrath v. Mishara, 386 Mass. 74, 83-85 (1982).
The total of all the settlements and awards appear to completely satisfy the Trustees' damages. According to the record before the court, it appears as though the Trustees have received reimbursement for the full $425,000 which can be applied to their settlement obligation. In addition, Wasau assumed responsibility for the bulk of the legal expenses for prosecuting the underlying action. Royal was held responsible for the remainder of the reasonable legal expenses.
Equity regards substance rather than form. Although the assignment is valid on its face, the result of allowing the Trustees to recover under such a transaction would result in the Trustee's obtaining a windfall and the decimation of the rule against receiving remuneration in excess of actual damages. Stuart v. Town of Brookline, 412 Mass. 251, 258 (1992); Tritsch v. Boston Edison Co., 363 Mass. 179, 182 (1973). Therefore, although Royal is technically liable to the Trustees for contribution, the court will scrutinize carefully any effort in the next stage of this action by the Trustees to recover any sums over and above actual damages.
The argument that any award under this action is not double recovery appears tenuous. The characterization of the awards by the parties need not be determinative. While the assignment and settlements certainly appear to be valid, the court will seek to allocate and classify properly the money received from the various interested parties to preserve the ends of justice.
Although there is no formal agreement to do so that is known to the court, the settlements received from the other insurers can be considered implicitly allocable in some proportion between indemnity and contribution costs. The money forwarded by Wasau for legal fees was ultimately provided — through the release — in a manner which precluded any liability for indemnification. Thus, any money that would otherwise be considered to be allocable to attorneys' fees from the other insurers would, for all practical purposes, allow for the reallocation of funds forwarded by Wasau from legal expenses into compensation for the indemnifiable damages, for which Wasau has not explicitly been held otherwise liable. The court must take reasonable steps to ensure that the parties before it are not permitted to circumvent the standard limits on tort recovery through this type of assignment as it would lead to cumulative recovery on a single harm.
Peter M. Lauriat Justice of the Superior Court
Dated: November, 1995