Cleveland Paint & Color Co. v. Bauer Mfg. Co.

• Decision Date: 07 March 1951
• Docket Number: No. 32053,32053
• Citation: 97 N.E.2d 545,155 Ohio St. 17
• Court: Ohio Supreme Court
• Parties: , 44 O.O. 59 CLEVELAND PAINT & COLOR CO. v. BAUER MFG. CO.

Page 17

155 Ohio St. 17

97 N.E.2d 545, 44 O.O. 59

CLEVELAND PAINT & COLOR CO. v. BAUER MFG. CO.

No. 32053.

Supreme Court of Ohio.

March 7, 1951.

Syllabus by the Court.

1. An action must be prosecuted in the name of the real party in interest.

2. Persons who are united in interest in the subject matter of an action must be joined as plaintiffs or defendants.

3. Where an insurer pays a claim under an indemnity policy indemnifying the insured against liability arising from his sale of a defective instrumentality, but instead of taking a receipt and release the insurer takes from the insured a so-called loan agreement which recites that insured has received a specific sum as a loan to be repaid only from such recovery as may be had from the manufacturer of the alleged defective instrumentality, the transaction is not a 'loan,' notwithstanding its designation as such, but is a 'payment' subrogating the insurer to that extent and affording to the manufacturer, who is 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.'

This is an appeal by the appellant, plaintiff in the Common Pleas Court and hereinafter referred to as plaintiff, to reverse a judgment of the Court of Appeals for Wayne county, which court affirmed two orders of the Common Pleas Court, one overruling plaintiff's demurrer to the second defense of defendant's answer and the other overruling plaintiff's motion to strike certain matter from the first defense of the defendant's answer.

The petition states the plaintiff's alleged cause of action in two forms, one based on warranty and the other on tort and both relating to the same transaction. The basic facts are alleged in the petition, in substance, as follows:

Plaintiff, The Cleveland Paint & Color Company, operates a store in Cleveland for the sale of painters supplies, including ladders for use by painters. The defendant, The Bauer Manufacturing Company, hereinafter designated as defendant, is engaged in the manufacture of ladders. For many years the plaintiff has purchased ladders from the defendant for resale to the former's customers. In May 1944, plaintiff purchased an extension ladder from defendant which plaintiff resold to one Hooker, a painting contractor. While Hooker was using the ladder in his housepainting business one of the rungs broke, as a result of which he was thrown to the ground and severely injured.

Hooker made claim against the plaintiff and the latter notified defendant of this claim and tendered the defense or settlement of it to defendant. The tender was declined. Subsequently, Hooker brought suit for his injuries against the plaintiff in the Common Pleas Court of Cuyahoga County. Again, the plaintiff tendered the defense to defendant, but the tender was again refused.

The case was tried and a judgment was entered in favor of Hooker and against the plaintiff, in the amount of $22,500. The judgment was paid and the present action was brought by the plaintiff against defendant, as the original delinquent, on the causes of action set out in the petition. Defendant filed its answer setting up two defenses. The first defense is in the nature of a general denial. The second defense alleges in substance that the plaintiff is not the real party in interest. The text of the pertinent parts of the second defense is as follows:

'For its second defense to the first and second causes of action in plaintiff's petition contained, defendant * * * says that the payment of the judgment obtained by Ernest J. Hooker against plaintiff herein in the Common Pleas Court of Cuyahoga County, Ohio, was not made with funds of the plaintiff herein and plaintiff herein did not sustain any damage or incur any loss thereby.

'Defendant is informed and therefore alleges that on or about June 30, 1945, * * * all * * * underwriters signatory to a certain certificate of insurance, issued to * * * The Cleveland Paint & Color Company * * * insured the plaintiff herein against loss or damage in excess of $50 for damages imposed by law and arising out of bodily injuries sustained by any person incurred by reason of the hazards enumerated in said policy of insurance.

'On the 17th day of July, 1947, following the rendition of the judgment against the plaintiff and in favor of Ernest J. Hooker in the sum of $22,500 and costs of $27.86, said underwriters paid to the plaintiff, as required by the terms and provisions of such insurance, the sum of $22,527.86, and the plaintiff paid to said underwriters the sum of $50, pursuant to the deductible provisions of such insurance.

'Upon the making of said payment by said underwriters, the plaintiff signed a receipt in which it was recited that said sum of $22,527.86 was received by the plaintiff as a loan and repayable only to the extent of any net recovery which the plaintiff might make against the defendant on account of loss incurred by reason of said judgment. Said receipt further recited that the plaintiff thereby pledged any such net recovery to the said underwriters, and agreed to enter and prosecute suit against the defendant to recover on account of said claim for said loss incurred by plaintiff in consequence of the entry of the above judgment with all due diligence, such suit to be at the expense and under the exclusive direction and control of said underwriters.

'In fact, said sum of $22,527.86 was paid by said underwriters and received by the plaintiff not as a loan but in payment and discharge of said underwriters' absolute liability as provided in the certificates and policies of said insurance; and the language used in said receipt was a mere device employed by said underwriters and the plaintiff to conceal a payment and discharge under the guise of a loan so as to conceal the real party in interest.

'The plaintiff is not the real party in interest in this case except to the extent of the $50 paid by the plaintiff pursuant to the deductible provisions of said insurance.'

Defendant's first defense, in substance a general denial, contains the following matter:

'* * * but defendant alleges that said judgment was satisfied with funds provided by the plaintiff's insurers, as more fully hereinafter set forth in defendant's second defense.'

Plaintiff's demurrer to the second defense of the answer and plaintiff's motion to strike the above-quoted matter from the first defense, necessary to make its denial effective, were overruled.

The plaintiff elected not to plead further, and the court dismissed the petition.

On plaintiff's appeal to the Court of Appeals, the judgment of the Common Pleas Court was affirmed.

The case is now in this court for review by reason of the allowance of a motion to certify the record.

Critchfield, Critchfield & Critchfield, Wooster, and Hauxhurst, Inglis, Sharp & Cull, Cleveland, for appellant.

Weygandt & Ross, Wooster, Garfield, Baldwin, Jamison, Hope & Ulrich, Cleveland, Karl E. Hoover, Wooster William F. Aigler and Robert F. Lee, Cleveland, for appellee.

HART, Judge.

The question raised or sought to be raised by the plaintiff's demurrer to the second defense of the answer and by its motion to strike certain allegations from the first defense of the answer is whether, under these pleadings, the plaintiff, which brings this action pursuant to the terms of an alleged 'loan agreement' with its insurer, is the real party in interest within the meaning of Section 11241, General Code.

The demurrer admits the truth of the facts well pleaded in the second defense of the answer. The demurrer necessarily admits for its purpose that 'the payment of the judgment obtained by Ernest J. Hooker against the plaintiff herein * * * was not made with funds of the plaintiff herein and plaintiff herein did not sustain any damage or incur any loss thereby;' and that 'said sum of $22,527.86 was paid by said underwriters and received by the plaintiff not as a loan but in payment and discharge of said underwriters' absolute liability as provided in the certificates and policies of said insurance.'

It is the plaintiff's claim that its insurer has no interest in or lien upon any recovery which plaintiff might obtain against the defendant. In effect, it is plaintiff's claim that its insurer has not paid the loss but has merely made a loan to plaintiff and consequently is not subrogated to its right of action, if any, against the defendant.

The case of Purdy v. McGarity, 262 App.Div. 623, 30 N.Y.S.2d 966, 969, is a case similar in facts to the one at bar. It was an appeal from an order of the Supreme Court of New York which struck out a separate defense set up in the answer of the defendant who prosecuted that appeal. The automobiles of the respective parties collided on a public highway, as a result of which plaintiff instituted an action against the defendant to recover for damage to his car on the theory that defendant's negligence was the cause of the collision.

The defendant's answer contained a general denial and in addition the following defense which the court below struck out:

'That prior to the commencement of this action plaintiff * * * duly assigned and transferred the alleged cause of action set forth in the complaint herein, and all his right, title and interest therein to an insurance corporation, whose name is unknown...