Russom v. Insurance Company of North America

• Decision Date: 13 February 1970
• Docket Number: No. 18891.,18891.
• Citation: 421 F.2d 985
• Parties: F. M. RUSSOM, individually, and d/b/a Russom Transports, and Sidney Ray Aldy, individually and each for the use and benefit of Eugene Plunkett and in his own behalf, Plaintiffs-Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

421 F.2d 985 (1970)

F. M. RUSSOM, individually, and d/b/a Russom Transports, and Sidney Ray Aldy, individually and each for the use and benefit of Eugene Plunkett and in his own behalf, Plaintiffs-Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee.

No. 18891.

United States Court of Appeals, Sixth Circuit.

February 13, 1970.

Paul W. Denton, Memphis, Tenn., for plaintiffs-appellants; Walter Buford, Memphis, Tenn., on the brief.

Thomas F. Johnston, Memphis, Tenn., for defendant-appellee; Armstrong, Allen, Braden, Goodman, McBride & Prewitt, Memphis, Tenn., of counsel.

Before O'SULLIVAN, EDWARDS and CELEBREZZE, Circuit Judges.

O'SULLIVAN, Circuit Judge.

We here consider the appeal of plaintiffs, F. M. Russom, individually, and d/b/a Russom Transports, and Sidney Ray Aldy, individually and each for the use and benefit of Eugene Plunkett, and Eugene Plunkett in his own behalf, from a judgment dismissing the said plaintiffs' suit against defendant-appellant, Insurance Company of North America. It will aid clarity if we talk of Russom on one side and INA and its assured, Wesson Oil Division of Hunt Foods Industries, Inc., (Wesson Oil) on the other, as the adversaries in this lawsuit.

The basic question is whether INA had, by its policy issued to Wesson Oil, insured the liability of Russom arising from the death of a minor son of Eugene Plunkett, struck by a tractor and trailer then being operated by Russom's driver Ray Aldy, in the carriage of oil for Wesson Oil. Resolution of this question depends upon whether a lease agreement between Russom and Wesson Oil, made January 22, 1965, and identified at trial as Exhibit 1, was in force on June 21, 1966, the date of the fatal injury to Plunkett's son. Such agreement required Wesson Oil, as lessee, to carry "Cargo and Liability" insurance upon the leased vehicles. In turn, we construe INA's policy with Wesson Oil to mean that INA agreed to protect Wesson Oil against such contractual assumption of liability if the January 22, 1965, lease agreement was in force on June 21, 1966.

Following the June 21, 1966, accident, the father of the deceased Plunkett boy brought suit against Russom and Aldy in a state court of Tennessee. Defense of this suit was tendered to, and refused by, INA. Russom defended the suit through counsel employed by him. Trial resulted in a verdict and judgment for plaintiff Eugene Plunkett in the amount of $17,500. INA refused to satisfy the judgment and this lawsuit followed.

The District Judge, resolving mixed questions of law and fact, found that Exhibit 1, the January 22, 1965, agreement between Russom and Wesson Oil, was not in existence on the date of the accident. He arrived at this conclusion by construing a lease executed in February or March, 1965, and identified at trial as Exhibit 2, as a cancellation of the lease of January 22, 1965. We are of the opinion that the District Judge, to whom the case was tried, was wrong in the law applied and clearly erroneous in his factual findings.

We accordingly reverse.

In the year 1964, F. M. Russom was a smalltime trucker in Memphis, Tennessee, characterized, correctly we assume, by the District Judge as a "wildcatter". He apparently was not certificated by the Interstate Commerce Commission to carry on the business of hauling in interstate commerce. Beginning in July of 1964, he started hauling oil for Wessson Oil within the City of Memphis and environs. These hauls were generally what were known as short-hauls, picking up oil from suppliers of Wesson and delivering it to the latter's plant, also in the City of Memphis. The oil so delivered was carried in a 1955 model Trailmobile Tank Trailer owned by Russom and pulled, as a rule by a 1959 Mack Tractor also owned by Russom. However, there were times when, due to breakdowns of Russom's tractor, the Trailmobile Tanker was connected to a different tractor owned by Russom. Such haulage would be arranged by calls to Russom from Wesson Oil, notifying him where the desired load was to be picked up and delivered. Initially there was no written contract covering this relationship between Russom and Wesson Oil. Russom's charge for hauling in the City of Memphis, a short-haul, was five and one-half cents per hundred weight of oil. Occasionally he went out of Memphis — not farther than 150 miles — to pick up oil, and for these hauls Russom charged a higher rate, but also on a weight basis. All such carriage was considered shorthaul. On the other hand, the tariff generally charged in the industry for longhaul runs was computed on a per mile traveled basis. In January, 1965, it was decided that, in view of Russom's vehicles occasionally going beyond the limits of Memphis in hauling oil for Wesson, such equipment should be leased to Wesson; otherwise the hauls outside of Memphis would require an ICC certificate.

On January 22, 1965, the critical agreement here involved — Exhibit 1 — was prepared for Russom by another "wildcatter". It was executed by Russom and, for Wesson Oil, by its then Traffic Manager, M. L. Butt. Russom was described as lessor and Wesson Oil was described as lessee. After reciting that the lessor was leasing to lessee two motor vehicles — a 1959 Mack Tractor (admittedly misdescribed in the case as a 1958 tractor) and a 1955 Trailmobile — the following provisions were set out:

"1. The rental period of this lease shall be for thirty (36) six months commencing on the 22 day of Jan. 1965 unless sooner terminated automatically by the giving of written notice by either of the parties to the other party of their desire to cancel this lease.

"2. The lessee shall carry Cargo and Liability Insurance and otherwise assumes all responsibility for the due care and safeguarding of the cargo being transported in the leased vehicle.

"3. The lessor shall pay all expenses for the equipment and provide fuel and oil used by the equipment under this lease, and assumes all road and fuel taxes.

"4. The lessor shall pay all tolls charged by toll bridges and turnpike officials."

The lease, Exhibit 1, was evidently prepared by filling in a mimeographed form entitled "Motor Equipment Lease Agreement"; the agreement that the lessee was to provide Cargo and Liability Insurance appears to be part of the mimeographed form. The rates or tariffs to be charged were not set out, but were agreed upon. It is undisputed that the rate or tariff charged by Russom at the time of execution of the lease, Exhibit 1, was at a short-haul, per hundred weight rate, and that such short-haul rate continued until the relationship between Russom and Wesson Oil was finally terminated near the end of 1966.

Some time in February or March of 1965 two further leases between Russom and Wesson Oil were prepared by an attorney employed for the purpose. One of these leases, Exhibit 2, was executed by Russom and by Butt for Wesson Oil. Another lease covering short-hauls was prepared at that time by this attorney, but it was never executed because Exhibit 1, the January 22, 1965, lease was already in existence to cover short hauls. While the long-haul lease, Exhibit 2, was executed in February or March of 1965, it was back dated to January 1, 1965. This lease covered two Mack Tractors, a 1959 and a 1960 model. One of these tractors, the 1959 model was the same tractor that was mentioned in the January 22, 1965, lease, but the Trailmobile covered by the earlier lease and which was used exclusively for short-hauling Wesson Oil cargoes, was not covered.

At the close of proofs, the District Judge announced his decision from the bench. The following are the critical findings thereof:

"The Court finds that Trial Exhibit 1, which is entitled a lease agreement and dated January 22, 1965, was executed before the instrument which is Trial Exhibit 2, dated January 1, 1965. The proof supports the fact that the prior dated agreement was, in fact, prepared and executed subsequent to January 22, 1965."

* * * * * *

"The Court further finds that the purpose of the lease of January 22, the short form lease, was to thwart and circumvent the Interstate Commerce Commission laws and regulations. The proof does not support that the motivating purpose for this agreement was liability insurance protection from Hunt Foods to Mr. Russom.

"Now, the Court is of the opinion that the proof supports that Trial Exhibit 2, the long form lease was, in fact, cancelled by mutual agreement as evidenced by Trial Exhibit 4. Thereby, no rights of the plaintiffs arise by virtue of the long form lease. Now, this addresses the Court to the importance of Trial Exhibit 1, or the short form lease. There are several reasons, the proof supports several factors, that kill the validity of this lease.

"In the first place the essential elements of a lease are; the thing, the price, and the consent.

"Trial Exhibit 1, or the short form lease, makes no reference to price. It does not even recite that the price will be the established price, or one-half cent off the established price in the area.

"The second point which the Court feels is a factor, is that the second lease in time cancelled the first lease because it was all inclusive, and it was at least partially for the same vehicle.

"Now, there is a big difference in the long form lease and the short form lease. The long form lease goes into great detail about possession, control services to be exchanged, and other phases of the lease. Mr. Russom testified that if it had been followed in practice it would have made a significant difference in determining where the vehicle would have been stored and the other factors which would have made the control and possession on the part of Hunt Foods very complete. When the parties executed the all inclusive lease for the same tractor whether you call it by operation of the law or otherwise, they cancelled the prior lease in time. Now, I am not unaware of the fact that the Trailmobile tank trailer was not mentioned by the second lease

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