National Fire Ins. Co. v. Mogan et al.

• Decision Date: 01 June 1949
• Parties: NATIONAL FIRE INS. CO. <I>v.</I> MOGAN ET AL.
• Court: Oregon Supreme Court

186 Or. 285

206 P.2d 963

NATIONAL FIRE INS. CO.v.

MOGAN ET AL.

Supreme Court of Oregon.

Argued March 16, 1949.

Reversed and remanded June 1, 1949.

Bailment — Exclusive custody — Destruction by fire — Bailee for hire

1. A complaint which alleged that plaintiff's insured had rented air compressor to defendants who assumed exclusive custody thereof, and that defendants had refused to return it to plaintiff's insured but had informed insured that the air compressor had been destroyed by fire, sufficiently showed that the defendants were bailees for hire and that they had breached the contract by failure to return compressor.

Bailment — Bailee for hire — Failure to return compressor — Fault — Want of care

2. Bailee for hire of an air compressor were obliged to return compressor in good condition, and for their failure to do so would be liable to respond in damages to the bailor unless such failure was excused as not being due to the fault or want of care of the bailees.

Bailment — Bailment for hire — Breach of contract — Assumpsit — Tort

3. On breach of contract of bailment for hire by bailees, the bailors may maintain an action of assumpsit for breach of contract or sue in tort charging negligence.

Bailment — Breach of contract — Allegations — Failure to return property — Presumption of negligence

4. When the action by bailor is for breach of contract, it is sufficient to allege the bailment and failure of the bailee to return the property and upon proof of such facts a presumption of negligence on the part of the bailee arises.

Action — Complaint — Allegations in assumpsit

5. Where complaint alleged that plaintiff's insured had rented an air compressor to defendants who had assumed exclusive custody thereof, that defendants had failed and refused to return compressor to insured and had informed insured that the air compressor had been destroyed by fire, complaint was in assumpsit for breach of contract of bailment and not in tort.

Pleading — Motion — Judgment on pleadings — Construction — Pleader

6. On defendants' motion for judgment on the pleadings the complaint will not be given a construction unfavorable to the pleader.

Bailment — Bailee — Duty to explain origin of fire

7. The bailee should be charged with the duty in the first instance of explaining the origin of a fire which consumed property in his exclusive possession.

Warehousemen — Courts — Avoid incongruity of different rules for bailees

8. In the absence of some compelling reason for taking a different course, the courts should avoid the incongruity of one rule for bailees subject to the Warehouse Receipts Act and a different rule for other bailees. O.C.L.A. § 60-208.

Bailment — Bailee for hire — Burden to show fire not due to bailees' negligence

9. Where air compressor in the exclusive custody of bailees for hire was destroyed by fire, and the bailees were sued for breach of contract the burden was on bailees to show that fire was not due to bailees' negligence.

Insurance — Subrogation — Rights and remedies of the insured

10. An insurance company paying a fire loss is subrogated to all the rights and remedies of the insured against the parties whose wrongful act was responsible for the loss.

Subrogation — Rights — Priorities — Remedies — Liens — Securities

11. Subrogation gives to the substitute all the rights, priorities, remedies, liens, and securities of the party for whom he is substituted.

Insurance — Subrogation — Right of action for breach of contract

12. Insurer which had paid fire loss of insured was subrogated to insured's right of action for breach of contract against bailees for hire who had exclusive control of the property destroyed by fire.

                  See 8 C.J.S., Bailments, § 37
                  6 Am. Jur., 437, 452
                  151 A.L.R., 716
                  48 A.L.R., 387
                  71 A.L.R., 773.
                

Appeal from Circuit Court, Lane County.

G.F. SKIPWORTH, Judge.

John L. Luvaas, of Eugene, and Robert Clapperton, of Portland, argued the cause for the appellant. With them on the brief were Clapperton & Schallhorn, of Portland.

David B. Evans and Sidney A. Milligan, of Eugene, argued the cause for respondents. With them on the brief was E.O. Immel, of Eugene.

Before LUSK, Chief Justice, and BRAND, ROSSMAN, KELLY and BAILEY, JJ.

Action by National Fire Insurance Company against S.A. Mogan and B.L. Mogan doing business as Mogan Lumber Company for breach of contract of bailment with plaintiff's insured. From a judgment on the pleadings for the defendants the plaintiff appeals.

REVERSED AND REMANDED.

LUSK, C.J.

The ultimate question on this appeal is whether an insurance company, which issued a policy of fire insurance covering a certain chattel which was destroyed by fire while in the exclusive possession of a bailee of the insured and paid the loss, is subrogated to the rights of the insured as bailor against the bailee. A preliminary question is whether the record before us discloses a right in the bailor to recover from the bailee on account of the destruction of the property.

The case comes here as an appeal by the plaintiff from a judgment on the pleadings granted by the Circuit Court in favor of the defendants, on motion of the latter.

The complaint alleges the following: On March 18, 1946, the plaintiff, National Fire Insurance Company, issued a policy of insurance in the sum of $310,000.00 to McNutt Bros. insuring them against loss or damage by fire to various articles of equipment including a certain air compressor. On May 23, 1946, McNutt Bros. rented the air compressor to the defendants Mogan, a partnership engaged in the sawmill business at Eugene, Oregon, under the name of Mogan Lumber Company, "and Defendants then and there assumed exclusive care, custody, control and possession thereof." "Said defendants have failed and refused to return said property to McNutt Bros. the owners thereof, but have informed McNutt Bros. that the property was destroyed by fire." The reasonable value of the property at the time of its delivery by McNutt Bros. to the defendants was $3,000.00. "That Plaintiff's insured, McNutt Bros., upon being informed of the loss of said property while in the custody of said Defendants and within the time provided in the policy hereinbefore referred to, furnished to the Plaintiff due proof of loss so caused to said insured by said fire; that thereafter and prior to the commencement of this action Plaintiff caused investigation to be made for the purpose of determining the amount of its liability to said insured by reason of said fire, and determined that the total of such liability was the value of said property, to-wit: $3,000.00." Thereafter the plaintiff paid McNutt Bros. $3,000.00 in full satisfaction of its liability under said policy of insurance and "by the terms of said policy, became and was subrogated to all the rights and claims of said insured against said Defendants to the extent of said payment so made by Plaintiff, and Plaintiff alleges that ever since such payment it has been and now is the holder and owner of the rights and claims to which it was so subrogated as aforesaid." "That prior to the commencement of this action, Plaintiff and its insured, McNutt Bros., demanded from the Defendants that said Defendants re-deliver to McNutt Bros. said property in the same condition in which it was delivered by McNutt Bros. to said Defendants, or the reasonable value thereof, to-wit: the sum of $3,000.00; but Defendants have failed and refused and still fail and refuse to re-deliver said property or any part thereof, or to pay said sum of money or any part thereof."

The prayer is for judgment against the defendants in the sum of $3,000.00.

The defendants by their answer admit that "the property described in Plaintiff's Complaint was destroyed by fire"; but otherwise they deny all the allegations of the complaint except the formal allegations as to the incorporation of the plaintiff and the partnership status of the defendants.

The defendants' motion for judgment on the pleadings was submitted after a jury had been selected and sworn, and was based on the ground that "the plaintiff has not stated a cause of action against the defendants or either of them".

1. First. The complaint sufficiently shows that the defendants were bailees for hire of the air compressor. Willamette Tug & Barge Co. v. Commercial Dispatching Corp., 180 Or. 657, 178 P. (2d) 698; Western Transportation Co. v. Commercial Dispatching Corp., 180 Or. 665, 178 P. (2d) 702. The terms of the contract of bailment are not stated, other than that McNutt Bros. rented the property to the defendants, who were in the exclusive possession and control of it at the time of its destruction by fire. It is fairly inferable, nevertheless, from the allegations of the pleading that the contract was breached by the defendants' failure and refusal to return the property.

2. As bailee it was the duty of the defendants to return the compressor to the bailors in good condition, and for their failure to do so they would be liable to respond in damages to the bailor unless such failure was excused as not being due to the fault or want of care of the bailees. Commercial Dispatching Corp. cases, supra; Hansen v. Oregon-Wash. R. & N. Co., 97 Or. 190, 188 P. 963, 191 P. 655.

3-6. The bailors had a choice of remedies. They might either have maintained an action of assumpsit for breach of the contract or sued in tort charging negligence. When the action is for breach of the contract it is sufficient to allege the bailment and failure of the bailee to return the property. And upon proof of these facts a presumption of negligence on the part of the bailee arises. See the cases above cited. We construe the complaint here to be in assumpsit for breach of the contract of bailment. That is what plaintiff's counsel claim for it, it is susceptible to that construction, and as it is to be considered in the face of a motion for a judgment on the pleadings we are not to give it a...