Condor Investment Co. v. Pacific Coca-Cola Bottling Co.

• Decision Date: 15 November 1962
• Docket Number: Civ. No. 62-8.
• Citation: 211 F. Supp. 671
• Parties: CONDOR INVESTMENT COMPANY, an Oregon corporation, Plaintiff, v. PACIFIC COCA-COLA BOTTLING CO., a Delaware corporation, Defendant.
• Court: U.S. District Court — District of Oregon

211 F. Supp. 671

CONDOR INVESTMENT COMPANY, an Oregon corporation, Plaintiff, v. PACIFIC COCA-COLA BOTTLING CO., a Delaware corporation, Defendant.

Civ. No. 62-8.

United States District Court D. Oregon.

November 15, 1962.

James B. O'Hanlon of Mautz, Souther, Spaulding, Kinsey & Williamson, Portland, Or., for defendant.

John Gordon Gearin of Koerner, Young, McColloch & Dezendorf, Portland, Or., for plaintiff.

KILKENNY, District Judge.

This matter is before the Court on the issues created by defendant's plea in abatement, in which it is charged that plaintiff is not the real party in interest and that the action should be abated in conformity with the provisions of Rule 17(a), F.R.Civ.P.

In May, 1960, plaintiff was the owner of a certain building which was damaged by fire. Plaintiff alleges that the loss was due to defendant's negligence. Plaintiff's loss was covered by insurance in three different companies. Each company paid its share of the loss totalling $11,710.66.

In due course, plaintiff filed proofs of loss and the agreed amount of the loss was paid by each insurance company in connection with a "loan receipt agreement" under which drafts payable to plaintiff were delivered by each of insurers. It is defendant's position that the drafts were given in payment of the respective losses, did not constitute loans and, as a consequence, the insurance companies are the real parties in interest.

The issues involved present the following questions:

(1) Are the loan receipts invalid when viewed in the light of the insurance policies, the proofs of loss and the applicable Oregon law; and

(2) Did the parties intend to negotiate loans or intend that the drafts were, in fact, payment in full for the fire loss.

The cause was submitted to the Court on the exhibits and the depositions of certain witnesses.

Since the Oregon statute¹ requires the issuance of a standard fire insurance policy in the state of Oregon, I must assume that the policies required the insurance companies to pay the amount of the loss, rather than loan the plaintiff the amount of the losses.

A typical statement in proof of loss used by plaintiff on its claims against the respective companies is set forth in the margin.² Also typical is the loan receipt set forth in the margin.³

I. Defendant contends that where the insurance policy makes no provision for a loan of the amount of the claim, in lieu of direct payment and subrogation, then any loan agreement which might be signed by the insurer and the insured would be of no consequence and that this would be particularly true where payment of the loss is required by statute. Defendant's theory finds adequate support in Rosenfeld v. Continental Building Operating Company, 135 F. Supp. 465 (D.C.W.D.Mo., 1955). In that case Mr. Justice Whittaker, then acting as a District Judge, applied the New York law and held that the payment of the loss, even though evidenced by a loan receipt, would not constitute payment unless the policy so provided. If the question was open in Oregon, I would be inclined to follow the Rosenfeld case and hold that these loan receipts negotiated and executed after the insured and insurers had agreed on settlements, constituted nothing more than shams and subterfuges which entirely misrepresented the real nature of the agreements. Be that as it may, I feel that the Supreme Court of Oregon has set at rest all doubt on the subject by its decisions upholding the validity of such loan agreements in Furrer v. Yew Creek Logging Co., 206 Or. 382, 292 P.2d 499, and Lamb-Weston, Inc. v. Oregon Automobile Insurance Co., 219 Or. 110, 341 P.2d 110, 346 P.2d 643, 76 A.L.R.2d 485. As a matter of interest, I was one of trial counsel for Oregon Automobile in the latter case. Defendant argues that the precise question was presented in neither Furrer nor Lamb-Weston. The Rosenfeld case was decided in December, 1955, and the Furrer case was decided in February, 1956. The Oregon Court in Furrer discusses and then discards the reasoning in Scarborough v. Bartholomew, City Ct., 22 N.Y.S.2d 635, aff'd 263 App.Div. 765, 30 N.Y.S.2d 971, the very case which is cited by Justice Whittaker in support of his finding that the New York law controlled his decision. Although the provisions of the standard fire insurance policy, required by the Oregon statute, are not discussed in those cases, this Court must presume that the Oregon Court was familiar with the statutes of its own state and that consideration was given to the provisions of those statutes in those decisions. In Oregon such agreements are valid even though the policy makes no provision for a loan.

II. The second point raised by defendant is that the evidence, consisting of the testimony in the depositions and the exhibits, definitely shows that the parties intended to make the payments in satisfaction of the claims under the insurance policies, rather than the making of loans as recited in the loan agreement. Obviously, some of the printed language used on some of the drafts, both on the face and on the reverse side, would indicate an intention other than a loan.

Since all of the statements in proof of loss and all of the loan receipts signed by plaintiff and issued to different companies were signed on the same day, it is quite clear that plaintiff and the insurance companies were engaged in the settlement of all claims as part and parcel of one transaction. All of the checks were dated either the 16th or 17th of August, 1960. Attention must be drawn to the fact that the original claim of plaintiff was in excess of the amounts agreed upon and which were set forth in the sworn proofs of loss. The total of the amounts set forth in those proofs is identical with the total of the checks which were issued by the respective insurance companies. Of course, this demonstrates that an agreement had been reached on the exact amount of the loss and the exact amount each insurance company was to pay, at the time the proofs were signed. There is no evidence of any negotiation as to the validity of the claims after the proofs of loss had been filed. The next thing that happened was the issuance of the checks. The printed language on the checks issued by one of the insurance companies, "Being in full settlement of" was obliterated and substituted therefor was the language, "Adv. as loan." The printed language on the checks⁴ of the other companies was unaltered and there is no doubt that these were given in full settlement of the fire claim, and not as a loan.

It is of interest and, in my opinion, of great importance, that all of these drafts were delivered to the plaintiff at the same time, endorsed and accepted by plaintiff and then deposited to its bank account. Likewise, of considerable importance is the fact that the drafts which were marked as "Adv. as loan" clearly show that the money paid was on the particular policy under a particular claim number. Turning to the claim, we find that the amount claimed in the proof of loss⁵ is exactly the same as the amount in the draft. The proof of loss is usual in form and contains no request for a loan. Although reciting that the money was paid as an advance on the loan, it is quite clear that the check was issued in connection with the proof of loss. Both the Furrer and the Lamb-Weston cases indicate that the intention of the parties controls the validity of the loan receipts. Defendant being a third party, the parol evidence rule has no application. Keadle v. Padden, 143 Or. 350, 20 P.2d 403, 22 P.2d 892; Commercial Securities v. Mast, 145 Or. 394, 28 P.2d 635, 92 A.L.R. 194. This is a case where the documents are highly ambiguous and contradictory. In such case, in order to determine the intention of the parties, I must look to the practical interpretation as placed on those instruments by the parties themselves. Pekovich v. Coughlin, 258 F.2d 191, 17 Alaska 691 (9 Cir., 1958); Pacific Portland Cement Co. v. Food Machinery & Chemical Corp., 178 F.2d 541 (9 Cir., 1949); Lease v. Corvallis Sand & Gravel Co., 185 F.2d 570 (9 Cir., 1950); Holbrook v. United States, 194 F.Supp. 252 (D.C.Or., 1961); Kinney v. Schlussel, 116 Or. 376, 239 P. 818.

Although the loan receipts recite the actual receipt of a specific sum of money, as a fact, the record discloses that no such sum of money was advanced at that time nor was the money paid until after the proofs of loss under the policies had been received by the respective companies some 10 or 12 days after the date of the loan receipts. The parties, with few exceptions, treated the transactions as the...