State ex rel. Duffy v. Western Auto Supply Co.

• Decision Date: 13 July 1938
• Docket Number: 26794.
• Citation: 134 Ohio St. 163,16 N.E.2d 256
• Parties: STATE ex rel. DUFFY, Atty. Gen., v. WESTERN AUTO SUPPLY CO.
• Court: Ohio Supreme Court

16 N.E.2d 256

134 Ohio St. 163

STATE ex rel. DUFFY, Atty. Gen., v. WESTERN AUTO SUPPLY CO.

No. 26794.

Supreme Court of Ohio

July 13, 1938

Syllabus by the Court.

1. The business of insurance is impressed with a public use, and its regulation, supervision and control are authorized and required to protect the general public and safeguard the interests of all concerned.

2. Insurance, as related to property and liability, is a contract by which one party promises, upon a consideration to compensate or reimburse the other if he shall suffer loss from a specified cause, or to guarantee or indemnify or secure him against loss from that cause.

3. A warranty promises indemnity against defects in an article sold, while insurance indemnifies against loss or damage resulting from perils outside of and unrelated to defects in the article itself.

4. A contract whereby the vendor of automobile tires undertakes to guarantee the tires sold against defects in material or workmanship without limit as to time, mileage or service, and further expressly guarantees them for a specified period against 'blowouts, cuts, bruises, rim-cuts under-inflation, wheels out of alignment, faulty brakes or other road hazards that may render the tire unfit for further service (except fire or theft),' or contracts to indemnify the purchaser 'should the tire fail within the replacement period' specified, without limitation as to cause of such 'failure,' is a contract 'substantially amounting to insurance' within the provisions of Section 665, General Code, which requires such guarantor or insurer to comply with the laws of the state authorizing and regulating the business of insurance.

This is an action in quo warranto brought in this court by the attorney general against Western Auto Supply Company, a corporation organized under the laws of the state of Missouri and duly licensed to transact business in this state pursuant to the provisions of Section 8625-1 et seq., General Code. The respondent is engaged in the sale of automobile parts, accessories and equipment, and pneumatic rubber tires for automobiles, in various locations in the state. It is charged that, in connection with such sales of pneumatic rubber tires, the respondent guarantees them against defects in material or workmanship without limit as to time, mileage or service and, in addition thereto, guarantees such tires for a stipulated period against any condition which shall render the tire sold by the respondent unfit for further service, whether such condition results from defective work or material, from ordinary wear and tear, or from injuries however caused, and that the respondent enters into other agreements in and about the sale of such tires in the form of a guarantee which constitutes the exercise of a franchise, privilege or right in contravention of the insurance laws of this state. The relator seeks a judgment of ouster of such company from 'enjoying the franchise and privilege of engaging in the business of insurance within this state and from doing each and all of the acts hereinabove complained of.' Issue was made by answer and the case was submitted to the court upon an agreed statement of facts, which, being quite voluminous, will not be set out in detail but only the portions thereof essential to present the legal question involved.

The respondent operates retail stores in several cities in this state where, along with certain other articles of merchandise, it sells pneumatic rubber tires for automobiles, which tires bear various trade names and are of standard quality of material and workmanship. Two printed forms of so-called 'guarantee' were employed by the company. Both of them served to guarantee the tire sold for a specified period which varied with the grade of tire which was indicated by the trade name, and also depended upon whether the tire was to be used on a passenger or commercial car. One form was a specific guarantee for the period stated therein 'against blowouts, cuts, bruises, rim-cuts, under-inflation, wheels out of alignment, faulty brakes or other road hazards that may render the tire unfit for further service (except fire and theft).' It then provided that 'In the event that the tire becomes unserviceable from the above conditions, we will (at our option) repair it free of charge, or replace it with a new tire of the same make at any of our stores, charging .....th of our current price for each month which has elapsed since the date of purchase. The new tire will be fully covered by our regular guarantee in effect at time of adjustment. Furthermore: every tire is guaranteed against defects in material or workmanship without limit as to time, mileage or service.' In the blank spaces were inserted the trade name of the tire, the period covered by the guarantee and the fractional part thereof represented by a single month's wear.

The other form constituted a guarantee 'to wear' for not less than the period therein specified, and then provided as follows: 'Should the tire fail within the replacement period, return it to the nearest Western Auto Store and we will either repair it free or replace it with a new tire, charging you a proportionate part of the current price for each month you have had the tire.'

In some instances these statements of guarantee were supplemented by written statements in catalogue or otherwise and by oral statements made to purchasers, but all in purpose and effect were substantially the same. It was further stipulated as follows: 'All pneumatic tires, regardless of the quality of material and workmanship, are subject to failure in varying degrees by cuts, bruises, breaks, blow-outs, rim-cuts, underinflation, wheels out of alignment, faulty brakes and collision, as well as other road hazards not herein specifically enumerated.'

Herbert S. Duffy, Atty. Gen., Herman G. Kreinberg, of Cleveland, and C. G. Roetzel, of Akron, for relator.

Tolles, Hogsett & Ginn and P. J. Mulligan, all of Cleveland, and James M. Butler and Sol Morton Isaac, both of Columbus, for respondent.

MATTHIAS Judge.

The sole question presented by the record is whether these oral or written agreements or statements or either of them as employed by the respondent in connection with its sale of automobile tires constitutes insurance.

It is contended by the relator that in the respect complained of the respondent is engaged in the business of insurance in violation of Section 665, General Code. Its provisions are as...