Smith v. Mitsubishi Motors Credit of America, Inc.

• Citation: 247 Conn. 342,721 A.2d 1187
• Decision Date: 29 December 1998
• Docket Number: No. 15950,15950
• Court: Supreme Court of Connecticut
• Parties: Robert SMITH et al. v. MITSUBISHI MOTORS CREDIT OF AMERICA, INC., et al. Michael PALMER v. MITSUBISHI MOTORS CREDIT OF AMERICA, INC., et al.

Page 1187

721 A.2d 1187

247 Conn. 342

Robert SMITH et al. v. MITSUBISHI MOTORS CREDIT OF AMERICA, INC., et al.

Michael PALMER v. MITSUBISHI MOTORS CREDIT OF AMERICA, INC., et al.

No. 15950.

Supreme Court of Connecticut.

Argued Nov. 4, 1998.

Decided Dec. 29, 1998.

Frederick L. Murolo, with whom was Jeffrey L. Fisher, Cheshire, for the appellant (named defendant).

Geoffrey Naab, Manchester, for the appellee (defendant Christopher J. Moore).

Before BORDEN, NORCOTT, KATZ, PALMER and PETERS, JJ.

PETERS, J.

The principal issue in this case is the validity, as a matter of public policy, of an indemnity clause in a multiyear automobile lease. General Statutes § 14-154a ¹ imposes on the owner of a leased automobile liability for injuries to third parties caused by the tortious conduct of the automobile's lessee. The specific issue before us is whether that statute bars the enforcement of a clause in an automobile lease that requires the lessee to "indemnify and hold harmless" the owner that has fulfilled its statutory obligation to pay damages to injured third parties. We conclude that the statute does not invalidate the indemnity clause.

The named plaintiffs, Robert Smith and Michael Palmer, brought actions against the defendant Christopher J. Moore alleging that Moore's negligence and recklessness in driving his leased automobile had caused them to suffer personal injuries. Relying on § 14-154a, they also sought damages from the named defendant, Mitsubishi Motors Credit of America, Inc. (Mitsubishi), as the owner of the automobile leased to Moore. ² Palmer settled his claim against Mitsubishi for $287,500, and Smith, after a jury trial, obtained a judgment against Mitsubishi for $265,000. The merits of those underlying proceedings are not at issue in the present appeal.

In response to the named plaintiffs' complaints, Mitsubishi filed answers and cross claims against Moore for indemnity. In its cross claims, Mitsubishi alleged that Moore was liable both because of an indemnity clause in the automobile lease and because of common-law principles of indemnity. Moore moved for summary judgment on both claims, and Mitsubishi moved for summary judgment on the claim regarding the indemnity clause in the lease. The trial court granted Moore's motions and denied Mitsubishi's motions and rendered judgments accordingly. Mitsubishi appealed from the judgments. ³

Mitsubishi, the appellant, has raised three issues challenging the rulings of the trial court. It claims that the court improperly held that: (1) the contractual indemnity clause was unenforceable as inconsistent with the policy of § 14-154a; (2) the contractual indemnity clause was unenforceable on the ground of unconscionability; and (3) common-law indemnity has no applicability in this case. Because we agree with Mitsubishi's first two contentions, we need not decide its common-law claim.

I PUBLIC POLICY

The automobile lease that Mitsubishi drafted and Moore signed was a two page document that contained numerous provisions for the protection of Mitsubishi. ⁴ The clause that the trial court found to be unenforceable provides in relevant part: "13. INDEMNITY, LIENS AND FINES.... I agree to indemnify you (that is, I will pay you) and hold you harmless for losses, damages, claims, injuries and expenses (including attorneys' fees) that result from this Lease, or from the manufacture, selection, delivery or possession of the Vehicle, or which relate to the condition, maintenance, use or operation The trial court concluded that the indemnity clause violated the statutory policy of § 14-154a and thus was unenforceable on public policy grounds. In the court's view, such a clause was an impermissible attempt to override the obligations that the statute imposed on Mitsubishi. We disagree.

                of the Vehicle.  My agreement to indemnify you and hold you harmless will survive termination of this Lease and repossession of the Vehicle."   The clause appears on the first page of the lease, where it is set off in a separate paragraph from clauses that, in similar type, disclaim warranties, impose liability for damage to the vehicle and specify default.  Moore has not claimed ambiguity in the language of paragraph thirteen or any other clause in the lease.  Compare Burkle v. Car & Truck Leasing Co., 1 Conn.App. 54, 57, 467 A.2d 1255 (1983) (evaluating clarity of indemnity clause where plaintiff had alleged ambiguity)
                

For more than 100 years, § 14-154a and its statutory antecedents have imposed on owners of leased vehicles obligations that significantly supplement common-law principles of vicarious liability. We have construed the statute as having created a "statutory suretyship," pursuant to which the owner of a leased automobile, driven by an authorized driver, is directly liable for injuries caused by the operation of the vehicle. See Gionfriddo v. Avis Rent A Car System, Inc., 192 Conn. 280, 284, 287-88, 472 A.2d 306 (1984); Levick v. Norton, 51 Conn. 461, 469 (1884).

The purpose of the statutory suretyship imposed by § 14-154a is to protect members of the public from injuries caused by the improper use of a leased automobile. Each of our decided cases concerning § 14-154a and its predecessors illustrates and enforces that statutory purpose, because each involved litigation between injured parties and the owner of the automobile. Pedevillano v. Bryon, 231 Conn. 265, 268-69, 648 A.2d 873 (1994); Gionfriddo v. Avis Rent A Car System, Inc., supra, 192 Conn. at 282-83, 472 A.2d 306; Fisher v. Hodge, 162 Conn. 363, 369, 294 A.2d 577 (1972); Graham v. Wilkins, 145 Conn. 34, 37, 138 A.2d 705 (1958); Farm Bureau Mutual Automobile Ins. Co. v. Kohn Bros. Tobacco Co., 141 Conn. 539, 542-43, 107 A.2d 406 (1954); Connelly v. Deconinck, 113 Conn. 237, 240, 155 A. 231 (1931); Levy v. Daniels' U-Drive Auto Renting Co., 108 Conn. 333, 336, 143 A. 163 (1928); Marshall v. Fenton, 107 Conn. 728, 731, 142 A. 403 (1928); Levick v. Norton, supra, 51 Conn. at 468-69. ⁵

In the trial court, and in this appeal, Moore urges that § 14-154a serves a second purpose as well. That purpose, he argues, is to shield a negligent operator of a leased automobile from contractual liability to the automobile's owner. For three reasons, we are not persuaded.

First, and most important, the text of the statute provides no support for Moore's position. It addresses liability "for any damage to any person or property caused by the operation of such motor vehicle while so rented or leased, to the same extent as the operator would have been liable if he had also been the owner." (Emphasis added.) General Statutes § 14-154a. Moore is not a person who has been "damaged" by his own negligent operation of the leased automobile. The persons who have been "damaged" are the named plaintiffs. Without exception, all our cases have construed the statutory language of "damage" as referring to the claims of the parties injured by the tortious operation of the automobile. In Farm Bureau Mutual Automobile Ins. Co. v. Kohn Bros. Tobacco Co., supra, 141 Conn. at 543-44, 107 A.2d 406, we held, furthermore, that an owner of an automobile who must pay damages under the statute may recover from a driver who negligently caused the injury. Moore has cited no appellate case to the contrary, and we have found none. In our view, it would turn the statute on its head to construe the intended protection of injured members of the public to include protection of the tortfeasor who himself caused the injuries to occur.

Second, Moore's position would make Mitsubishi an insurer of Moore's tort liability. Moore does not, and cannot, point to any clause in the automobile lease that would bear such a construction. The unambiguous indemnity clause expressly states the opposite, making Moore liable to Mitsubishi for payments made by Mitsubishi as a result of Moore's tortious conduct. Moore has articulated no reason why, as a matter of public policy, a tortfeasor should not be held accountable for the damages that he himself has caused.

Third, Mitsubishi's duty as a statutory surety does not conflict, in any way, with its right to enforce the indemnity clause in its automobile lease. It has long been the law that, after payment, a surety is entitled to reimbursement from an underlying obligor who has notice of the suretyship. "From time immemorial courts of equity have recognized the surety's right to reimbursement upon payment of his principal's debt.... For a long time ... it has been generally recognized that the surety, upon payment, may recover of his principal in an action at law for money paid to the principal's use.... [C]ourts of law today treat the right of reimbursement as founded upon a contract implied in fact...." L. Simpson, Handbook on the Law of Suretyship (1950) § 48, pp. 225-26. For an updated statement of the same principle, see Restatement (Third), Suretyship and Guaranty § 22, pp. 93-94 (1996); see generally Johnson v. Mortenson, 110 Conn. 221, 229, 147 A. 705 (1929). Moore has cited no contrary precedent in Connecticut law, and we have been unable to find any. The indemnity clause in the lease in this case, therefore, makes express what the common law has held to be implicit in the concept of suretyship.

For these reasons, we conclude, contrary to the trial court, that § 14-154a does not preclude, as a matter of public policy, the enforcement of an indemnity clause in an automobile lease in cases in which the lessee, as tortfeasor, has caused injuries for which the owner has paid damages. An automobile owner's statutory liability to injured third persons does not shield such a lessee from liability.

II UNCONSCIONABILITY

The contractual indemnity clause was contained in an automobile lease that was a form contract. ⁶ Moore claims, and the trial court held, that the clause was unenforceable because it was unconscionable. The classic definition of an unconscionable contract is one "which no man in his senses, not...