Aetna Freight Lines, Inc. v. R. C. Tway Co.

• Decision Date: 18 May 1956
• Parties: AETNA FREIGHT LINES, Inc., et al., Appellants, v. R. C. TWAY COMPANY, Inc., d/b/a Kentucky Manufacturing Company, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 293

298 S.W.2d 293

62 A.L.R.2d 480

AETNA FREIGHT LINES, Inc., et al., Appellants, v. R. C. TWAY COMPANY, Inc., d/b/a Kentucky Manufacturing

Company, Appellee.

Court of Appeals of Kentucky.

May 18, 1956.

As Modified on Denial of Rehearing Oct. 26, 1956.

Rehearing Denied March 1, 1957.

Stanley B. Mayer, Mayer, Cooper & Keil, Louisville, for appellants.

Charles I. Dawson, Rucker Todd, Bullitt, Dawson & Tarrant, Thomas S. Dawson, Louisville, for appellee.

SIMS, Judge.

Appellants, Paul Fellabaum and Aetna Freight Lines, Inc. (hereinafter referred to as Aetna), seek to set aside a summary judgment entered in favor of appellee, R. C. Tway Company, Inc. (hereinafter referred to as Tway).

Fellabaum purchased a tractor trailer (a 'train' consisting of two trailers connected by a drawbar) from an Ohio dealer who had bought the trailer from Tway, the manufacturer. Fellabaum leased the 'train' to Aetna, a contract carrier operating in Ohio and adjoining states. On June 11, 1949, after it had been used approximately four months and had run some 17,000 miles, the 'train' was involved in an accident in Ohio which resulted when the drawbar broke, permitting the 'train' to cross the road and collide with an approaching car.

Three passengers in the car were killed and two were serously injured. Shortly after the accident, five suits were filed in Ohio against Fellabaum, Aetna, and Harr, the driver of the trailer,--three by the administrators of the estates of the deceased, and two by the injured persons.

At the time of the accident, the 'train' was insured by the Continental Casualty Company. When it appeared desirable settlements of the Ohio suits were possible, Continental entered into two 'loan agreements' with Fellabaum and Aetna, whereby they borrowed from it the money required to settle the actions. One agreement was for the sum of $27,000, the amount of settlement in the suits by the two injured passengers. The second loan was for $19,500, the sum agreed upon by the administrators of the deceased passengers in settlement of their suits. Thereafter, the five Ohio suits were settled by appellants with the funds 'borrowed' from Continental.

In January, 1951, appellants filed an action against Tway in the Jefferson Circuit Court to recover in $27,000 which they had paid to the parties injured in the Ohio accident. In August, 1952, a second action was filed to recover the $19,500 which had been paid to the estates of the deceased passengers. By agreement of parties, the two actions were tried together.

In an amended answer filed in April, 1953, Tway raised the defense that Fellabaum and Aetna were not the real parties in interest, since Continental had become subrogated to their rights against Tway. The defense was based on the premise that the 'loan agreements' were actually payments of Continental's liability under its insurance policy.

After a pre-trial conference, the judge delivered a written opinion stating the actions had been brought by the real parties in interest. The cases proceeded to trial, but after five days of testimony, the judge announced he was reversing his decision on the question of the real parties in interest. The jury was dismissed and the case continued. Then Tway entered a motion for summary judgment, which was sustained on the ground that Fellabaum and Aetna were not the real parties in interest. The appeal is from that judgment.

Appellants urge that under the terms of the loan agreements Continental did not make absolute payments, and thereby avoided subrogation to the rights of appellants, hence they are the real parties in interest. Appellee insists the trial court's action was proper, on the ground announced; but, in any event, the summary judgment should be sustained on three other grounds which will be hereinafter discussed.

The loan agreements executed between Continental and appellants stated the parties thereto believed Tway to be primarily liable for the damages resulting from the Ohio accident; that Tway had refused to accept responsibility therefor and had refused to join in defending the suits. The agreements stated a settlement of those actions was desired, and the necessary sum to accomplish that end was being loaned to Fellabaum and Aetna. In consideration of the loan, the latter agreed to institute an action against Tway for indemnification of the sums paid in settlements of the Ohio suits. Continental agreed to bear the expense of the suit against Tway and to direct that litigation through counsel of its own choice. It was agreed any sums recovered in the suits against Tway would be paid to Continental in full discharge of the loan; but if the actions against Tway were unsuccessful, the loans would become null and void and regarded as fully satisfied. The agreements did not provide for interest on the loans.

The loan agreements were executed in Ohio. The parties agree that under Ohio law such contracts are treated as payments rather than loans, so as to afford a party sued by the insured alone a defense under the statute requiring that every action be prosecuted in the name of the real party in interest. See Cleveland Paint & Color Co. v. Bauer Manufacturing Co., 155 Ohio St. 17, 97 N.E.2d 545: also annotations 157 A.L.R. 1261. Nevertheless, appellants insist the question of who is the real party in interest, is a matter of procedure; hence it is controlled by the law of the forum--which in this case is Kentucky.

With this contention we agree. Matters of procedure are determined by the law of the forum, and the question of who must sue or be sued is a procedural question. See 11 Am.Jur., 'Conflict of Laws,' Sec. 187, p. 500; Restatement, Conflict of Laws, Sec. 588. Although the validity of a contract, or the extent or nature of a cause of action based thereon, may be controlled by the Conflict Rule...