State Farm Fire v. Pacific Rent-All, Inc.

• Decision Date: 16 June 1999
• Docket Number: No. 19854.,19854.
• Citation: 978 P.2d 753,90 Haw. 315
• Parties: STATE FARM FIRE AND CASUALTY COMPANY, a foreign corporation, State Farm Mutual Automobile Insurance Company, a foreign corporation, HBIF, Limited, a Hawai`i corporation, Gregory Hebert and Rudy Marn, Plaintiffs-Appellants, v. PACIFIC RENT-ALL, INC., a Hawai`i corporation, Grimmer-schmidt, a foreign corporation, John Does 1-20, Jane Does 1-20, Doe Partnerships 1-20, Doe Corporations 1-20, Doe Entities 1-20 and Doe Governmental Units 1-20, Defendants-Appellees.
• Court: Hawaii Supreme Court

978 P.2d 753

90 Haw. 315

90 Hawai`i 315

STATE FARM FIRE AND CASUALTY COMPANY, a foreign corporation, State Farm Mutual Automobile Insurance Company, a foreign corporation, HBIF, Limited, a Hawai`i corporation, Gregory Hebert and Rudy Marn, Plaintiffs-Appellants, v. PACIFIC RENT-ALL, INC., a Hawai`i corporation, Grimmer-schmidt, a foreign corporation, John Does 1-20, Jane Does 1-20, Doe Partnerships 1-20, Doe Corporations 1-20, Doe Entities 1-20 and Doe Governmental Units 1-20, Defendants-Appellees.

No. 19854.

Supreme Court of Hawai`i.

May 28, 1999.

Reconsideration Denied June 16, 1999.

John M. Kirimitsu (Stanford H. Nakamoto with him on the brief) of Kiuchi & Nakamoto, Honolulu, for plaintiffs-appellants.

James Shin (Roy F. Hughes with him on the brief) Honolulu, for defendant-appellee Pacific Rent-All, Inc.

James Kawashima (Ryan M. Akamine with him on the brief) Honolulu, for defendant-appellee Grimmer-Schmidt.

MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, JJ.

Opinion of the Court by RAMIL, J.

In this negligence and strict products liability action, plaintiffs-appellants State Farm Fire and Casualty Company (State Farm Fire), State Farm Mutual Automobile Insurance Company (State Farm Auto), HBIF, Limited (HBIF), Gregory Hebert, and Rudy Marn (collectively "Plaintiffs" or "Appellants") appeal from the circuit court's orders and first amended final judgment, granting in part and denying in part (1) defendant-appellee Pacific Rent-All, Inc. (Pacific)'s motion to dismiss and for attorneys' fees and costs and (2) defendant-appellee Grimmer-Schmidt's motion to dismiss.

Based upon the following, we affirm in part and vacate in part the circuit court's first amended final judgment, filed on April 30, 1996. We remand the remaining claims to the circuit court for proceedings consistent with this opinion.

I. BACKGROUND

A. The Accident and the Two Complaints

On January 18, 1992, Marn rented a Grimmer-Schmidt air compressor from Pacific and transported the compressor to the corporate headquarters of HBIF, located at Alaheiau Road in Kea`au, Hawai`i (the "HBIF building"). The HBIF building contained the corporate offices of HBIF, with Marn serving as its vice-president and manager. The HBIF building also contained residential apartments, in which Marn and Hebert lived.

Marn placed the compressor on the lanai of his HBIF apartment. When Marn used the compressor on January 19, 1992, the fuel hose apparently pulled away from the fuel tank, causing the compressor to ignite and explode. The explosion threw Marn to the ground, causing personal injury to Marn and substantial fire damage to the HBIF building and its contents, as well as to HBIF, Marn, and Hebert's property. Sometime thereafter, HBIF, Hebert, and Marn submitted claims to State Farm Fire and State Farm Auto subsequently paid.¹

On December 21, 1992, Marn filed a complaint against Pacific and Grimmer-Schmidt for personal injuries and property damage. Marn's complaint contained one count alleging negligence in the design, manufacture, renting, servicing, maintaining, and/or selling of compressors, and one count alleging strict products liability. Almost one year later, on December 7, 1993, Marn executed a "Settlement Agreement and Joint Tortfeasor Release" (hereinafter referred to as the "Agreement")² with Grimmer-Schmidt, which called for the settlement, in the amount of $20,000.00, and which released all of Marn's claims, against Pacific and Grimmer-Schmidt, arising out of personal injury and property damage occurring on January 19, 1992. Marn thereafter voluntarily dismissed his complaint on December 16, 1993.

On January 14, 1994, Plaintiffs State Farm Fire, State Farm Auto, HBIF, Hebert, and Marn filed a complaint, consisting of four counts, against Pacific and Grimmer-Schmidt for property damage and subrogation arising from the January 19, 1992 explosion and fire. Count One of Plaintiffs' complaint alleged strict products liability for improper and/or defective design, manufacture, assembly, and inspection of the Grimmer-Schmidt compressor. State Farm Fire and State Farm Auto asserted a right of subrogation as to the amounts paid to HBIF, Hebert, and Marn. Count Two set out a separate subrogation claim under Hebert's State Farm automobile insurance policy for $17,522.80, representing the cost of Hebert's 1991 Lincoln Continental, which was destroyed by the fire. Count Three alleged a breach of express and implied warranties. Count Four alleged negligence in the design, manufacture, assembly and/or inspection of the compressor.

Unlike Marn's complaint and Agreement, Plaintiffs' complaint averred that HBIF rented the compressor in order to perform certain renovations to HBIF's real property. Plaintiffs averred that HBIF had a State Farm fire and casualty insurance policy in full force and effect, that Hebert had a State Farm automobile insurance policy in full force and effect, and that Hebert and Marn had a State Farm renter's insurance policy in full force and effect.³ Plaintiffs averred that, as a result of the fire, HBIF, Hebert, and Marn submitted insurance claims to State Farm Fire and State Farm Auto. Plaintiffs sought recovery of "an amount to cover the damages sustained in excess of the jurisdictional limits of the Circuit Courts of the State of Hawaii, which will be proven at trial."

B. The Dismissal

On April 14, 1994, Pacific moved to dismiss the January 14, 1994 complaint based upon the defenses of release and accord and satisfaction. In support, Pacific argued that Marn had already dismissed with prejudice all claims against defendants arising out of the January 19, 1992 fire, as evidenced by the application and indemnification provisions of the Agreement. Pacific asserted that, because Hebert and Marn were corporate officers of HBIF and, as such, were authorized to act on its behalf in all matters concerning the corporation, HBIF, Hebert, and Marn relinquished all rights arising from the fire and that, accordingly, the complaint must be dismissed. Pacific also argued that it was entitled to an award of attorneys' fees and costs for bringing the motion, because plaintiffs failed to respond to its informal requests to dismiss the case. Pacific attached an affidavit of counsel and three exhibits, including (1) Marn's December 21, 1992 complaint, (2) the December 7, 1993 Settlement Agreement, and (3) the December 16, 1993 stipulation to dismiss Marn's complaint with prejudice. On April 27, 1994, Defendant Grimmer-Schmidt similarly filed a motion to dismiss the complaint. For the same reasons as argued by Pacific, Grimmer-Schmidt argued that Plaintiffs' complaint was barred.

On May 3, 1994, Plaintiffs filed a memorandum in opposition to the motions to dismiss, arguing that State Farm Fire and State Farm Auto acquired rights of subrogation against defendants by virtue of benefits paid to HBIF, Hebert, and Marn as a result of the fire. Plaintiffs also argued that HBIF and Hebert were not parties to the Marn lawsuit, the negotiations, or the Agreement, and that Marn lacked the authority to bind HBIF or Hebert through the Agreement or dismissal of his complaint. With respect to the viability of Marn's claims, Marn argued that he did not intend to settle his property claims with defendants, implying that he was unaware of the contents of the Agreement.

Plaintiffs attached an affidavit of counsel, an affidavit of Marn, a copy of Marn's complaint, and a copy of the Agreement to their memorandum in opposition. In Marn's affidavit, he averred that, although he was the vice-president and manager of HBIF, he filed the December 21, 1992 lawsuit in his individual capacity and "at no time was he authorized to act on behalf of" HBIF or Hebert. Marn further stated that at no time did he represent to the defendants that he was acting on behalf of HBIF or Hebert. Marn also averred that he "was aware that under the terms of his insurance contract, Plaintiff State Farm Fire had obtained a subrogation interest in his claims for property damages" and that he did not intend to settle his property damage claims in the Agreement.

On June 7, 1994, the circuit court partially granted Pacific's motion to dismiss the complaint with prejudice, with respect to: (1) Marn, HBIF, and Hebert's claims against Defendants Pacific and Grimmer-Schmidt; (2) all claims brought through or on behalf of Marn (i.e., State Farm Fire's claimed subrogation rights); and (3) Pacific's request for attorneys' fees and costs.⁴ The circuit court, however, denied the motion with respect to Count Two, preserving Hebert and State Farm Auto's claims regarding the destroyed Lincoln automobile. On October 21, 1994, the circuit court similarly granted in part and denied in part Grimmer-Schmidt's motion to dismiss, denying its oral request for costs.

On May 9, 1995, Plaintiffs moved for reconsideration or, in the alternative, for an HRCP Rule 54(b) certification to appeal the circuit court's decisions. The circuit court denied Plaintiffs' motion for reconsideration on the basis that "no new issues were raised to warrant granting reconsideration of the Court's respective orders" and, in the alternative, denied the motion for certification because it "would result in piecemeal litigation." On December 14, 1995, the circuit court entered a final judgment. The parties voluntarily dismissed Count Two on February 5, 1996. An amended final judgment was entered on April 30, 1996, and Plaintiffs timely appealed.

II. STANDARD OF REVIEW

Although Defendants' motions, prompting the circuit court's orders partially dismissing Plaintiffs' January 14, 1994 complaint, were styled as motions to dismiss under Hawai`i Rules of Civil Procedure (HRCP) Rule 12(b)(6), the applicable rule of civil procedure was HRCP Rule 56, relating to summary judgment. See State ex rel. Bronster v. United States Steel Corp., 82 Hawai`i 32, 38-39, 919 P.2d 294, 300-01 (1996); Au v. Au, 63 Haw. 210, 212, 626 P.2d 173, 176, ...