May Trucking Co. v. International Harvester Co., 11753

• Decision Date: 22 December 1975
• Docket Number: No. 11753,11753
• Citation: 543 P.2d 1159,97 Idaho 319
• Parties: MAY TRUCKING CO., an Idaho Corporation, and Transport Indemnity Company, a California Corporation, Plaintiffs-Appellants, v. INTERNATIONAL HARVESTER COMPANY, a Delaware Corporation, and Boise . international, Inc., a Delaware Corporation, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 1159

543 P.2d 1159

97 Idaho 319

MAY TRUCKING CO., an Idaho Corporation, and Transport Indemnity Company, a California Corporation, Plaintiffs-Appellants, v. INTERNATIONAL HARVESTER COMPANY, a Delaware Corporation, and Boise . international, Inc., a Delaware Corporation, Defendants-Respondents.

No. 11753.

Supreme Court of Idaho.

Dec. 22, 1975.

Glenn A. Coughlan of Coughlan, Imhoff, Christensen & Lynch, Boise, for plaintiffs-appellants.

Eberle, Berlin, Kading, Turnbow & Gillespie, Michael G. Brady of Moffatt, Thomas, Barrett & Blanton, Boise, for defendants-respondents.

DONALDSON, Justice.

Appellant, Transport Indemnity Company, brought this action against respondents, International Harvester Company and Boise International Inc., seeking indemnity for moneys paid by Transport Indemnity, the insurer, to co-appellant May Trucking Company pursuant to a contract for insurance. The trial court found the insurer Transport Indemnity's action not to be based on indemnity but rather one based on the right of subrogation and granted respondents' motion for summary judgment on the ground that the applicable statutes of limitation ¹ had run prior to the filing. Transport Indemnity appeals that ruling.

In 1969, Ronald K. Farmer bought a truck from the respondent Boise International, Inc. By agreement, Farmer leased the truck to May Trucking Company and drove it for them, hauling May's trailers. On March 16, 1971, the truck, and a trailer owned by May Trucking Company, ran off the road and were damaged to the sum of $16,387.75. May Trucking had a policy of insurance with appellant Transport Indemnity for damage to property owned by May and also property under 'bailment' to May. Pursuant to the contract, Transport Indemnity made payments on April 12, May 7, and May 12, 1971 to May Trucking covering the loss of both the truck and trailer. On May 5, 1974, over three years after the accident, the present action for indemnity was filed by appellants against International Harvester Company, manufacturer of the truck, and Boise International, Inc., the seller.

The single issue facing this Court is whether the district court was correct in finding the action not to be one of indemnity but rather one based on the right of subrogation.

Both indemnity and subrogation are equitable principles based on the general theory that one compelled to pay damages caused by another should be able to seek recovery from that party. The doctrines overlap in some cases and certainly the possessor of the right of indemnity may also possess the right of subrogation.

In Williams v. Johnston, 92 Idaho 292, 442 P.2d 178 (1968), this Court, in defining subrogation, stated:

"'Subrogation, in its broadest sense, is the substitution of one person for another, so that he may succeed to the rights of the creditor in relation to the debt or claim and its rights, remedies and securities. The doctrine is derived from the civil law from which it has been adopted by the courts of equity. * * * Its principle is often extended to those who, because of their interest in the property on which debts of others are a charge, are entitled to pay such debts and be substituted to the place of the original creditor. Generally speaking it is only in cases where one advances money to pay the debt of another to protect his own rights that a court of equity substitutes him in place of the creditor as a matter of course, without any express agreement to that effect. The doctrine of subrogation is not administered as a legal right but the principle is applied to subserve the ends of justice and to do equity."' (emphasis added) 92 Idaho at 298, 442 P.2d at 184.

The common law right of indemnity, on the other hand, refers to those situations where a person who without fault on his part is compelled to pay damages occasioned by the negligence of another. Industrial Indemnity Co. v. Columbia Basin Steel & Iron, Inc., 93 Idaho 719, 471 P.2d 574 (1970); Williams v. johnston, supra; Prickett v. Hawkeye-Security Insurance Co., 282 F.2d 294 (10th Cir. 1960); Allied Mutual Cas. Corp. v. General Motors, 279 F.2d 455 (10th Cir. ,1960); Dobbs, Handbook on the Law of Remedies § 43, pp. 250-252 (1973); Popkin Bros. v. Volk's Tire Co. 23 A.2d 162, 20 N.J.Misc. 1 (1941); Restatement of Law on Restitution No. 76. The party seeking indemnity may base his claim on a number of theories, including the following examples:

(1) The indemnitee may claim that his liability was based on passive neglect, while the indemnitor was guilty of recklessness.

(2) The indemnitee owed only a secondary duty to the injured party while the indemnitor was primarily responsible, as in cases where a municipal corporation has the primary duty to keep the streets in safe condition and the landowner has a secondary duty.

(3) The indemnitee may be only vicariously liable for the actual negligence of his employee and seek indemnity. These are the agency cases.

The final distinction between subrogation and indemnity which is the key to this appeal, is the effect each has on the statute of limitation. An insurer's claim by subrogation is derivative from that of the insured, and it is subject to the same statute of limitation as though the action were sued upon by the insured. Sunset-Sternau Food Co. v. Bonzi, 60 Cal.2d 834, 36 Cal.Rptr. 741, 389 P.2d 133 (1964); Earley v. Rooney,49 Wash.2d 222, 299 P.2d 209 (1956); Restatement on the Law on Restitution § 77, p. 341. In the present case, the statutes of limitation for the various tort actions began running at the time of the accident, March 16, 1971.

The cause of action for indemnity, however, arises at and the statutes of limitation begin to run from the time of payment or settlement by the indemnitee. Liberty Mutual Insurance Company v. Fales, 8 Cal.3d 712, 106 Cal.Rptr. 21, 505 P.2d 213 (1973); Couch on Insurance 2d § 61:230. In this case the record is unclear as to when, if ever, May Trucking Company paid Farmer for the damage to his truck and this would be the definitive date.

It is clear that the insurer, after paying May Trucking for the damages resulting from collision, is entitled to subrogation against the tortfeasor who is legally responsible for the harm caused the insurer. ² The net effect of such a finding is that Transport Indemnity Company as the insurer is substituted to any cause of action which May Trucking would be entitled to bring. It is therefore essential to determine what, if any, rights May Trucking Company had as a result of the collision.

The original complaint founded the present action on the theories of strict liability in tort, negligence and breach of implied warranty. Under the statutes of limitation applicable to these causes of action ³ May Trucking was barred from such actions by the date of filing the complaint. Since the truck had been bought in 1969, the breach of warranty action was extinguished in 1973, as nothing occurred to stay the running of the four year statute of limitation. Similarly, since the accident occurred on March 16,...