Stillwell Enterprises, Inc. v. Interstate Equipment Co.

• Decision Date: 15 May 1979
• Docket Number: No. 7830SC603,7830SC603
• Citation: 254 S.E.2d 770,41 N.C.App. 204
• Court: North Carolina Court of Appeals
• Parties: STILLWELL ENTERPRISES, INC., Plaintiff, v. INTERSTATE EQUIPMENT COMPANY, Original Defendant and Third-Party Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, and Robert D. Kelly, Third-Party Defendants.

Page 770

254 S.E.2d 770

41 N.C.App. 204

STILLWELL ENTERPRISES, INC., Plaintiff, v. INTERSTATE EQUIPMENT COMPANY, Original Defendant and Third-Party Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, and Robert D. Kelly,

Third-Party Defendants.

No. 7830SC603.

Court of Appeals of North Carolina.

May 15, 1979.

Smith, Currie & Hancock, by Joseph A. McManus, Jr., Atlanta, Ga., for plaintiff appellant and Robert D. Kelly, third-party defendant appellant.

Raymer, Lewis, Eisele & Patterson, by Douglas G. Eisele, Statesville, for defendant appellee and third-party plaintiff appellee.

ERWIN, Judge.

Plaintiff assigns as error the court's enforcement of the contractual limitations provided in the lease agreement. We find no error. The lease agreement entered into between plaintiff and defendant constituted a bailment contract. Parties to a bailment contract may limit the rights of the bailee in case of a breach of an express warranty. Annot., 68 A.L.R.2d 850 (1959). The measure of the rights, duties, and obligations of bailor and bailee can be ascertained by looking at the terms of the contract itself. 8 Am.Jur.2d, Bailments, § 120, pp. 1014-15. Paragraph 6 of the lease in question provides:

"The receipt and acceptance by the lessee of said equipment shall constitute acknowledgment that said property has been accepted and found in good, safe and serviceable condition and fit for use, unless the lessee makes claim to the contrary to the lessor by registered mail with return receipt demanded, addressed to the lessor's home office within three days after receipt of said equipment. The complaint as made shall set forth in detail its complete nature and the condition of the property received."

Under Paragraph 11 of the lease, plaintiff's sole remedy if the equipment proved to be defective or unfit for use after the three-day period was to return the machinery to lessor and terminate the contract. In that event, plaintiff would have only been liable for the minimum rental charges supposedly embodied in the agreement. Paragraph 9 of the agreement provided that:

"The lessor shall not be liable in any event to the lessee for any loss, delay or damage of any kind or character resulting from defects in, or inefficiency of equipment hereby leased or accidental breakage thereof."

We need not consider what the consequence would have been if plaintiff had sought to terminate the contract under Paragraph 11.

In Falco Corp. v. Hood, 7 N.C.App. 717, 173 S.E.2d 578 (1970), we upheld a lease agreement which precluded the recovery of damages because of any defect in the equipment leased at the time of delivery where no notice was given in the five-day period provided therein. Quoting from 5 Strong, N.C. Index 2d, Landlord and Tenant, § 5, p. 156, we said:

" 'Where a lease of business equipment makes no provision that the lessee might recover damages because of any defect in the equipment at the time of delivery and that the lessee should give the lessor written notice of any defect within 5 days or it would be conclusively presumed that the equipment was delivered in good repair, the lessee is not entitled to damages or replacement as against the lessor for an asserted defect or misrepresentation as to the condition of the machinery at the time of delivery, no notice of any defect having been given the lessor as required by the instrument.' " (Citation omitted.)

Id. at 720, 173 S.E.2d at 581; See also Leasing Corp. v. Hall, 264 N.C. 110, 141 S.E.2d 30 (1965). We believe that our holding in Falco Corp. v. Hood, supra, is dispositive of the validity of the contractual limitation presented here. We affirm the entry of summary judgment as to the contractual limitation of damages.

Plaintiff next assigns as error the trial court's dismissal of the counts of its complaint insomuch as they allege a claim for relief based on negligence.

It is the duty of a bailor for hire to see that equipment leased is in good condition, and while he is not an insurer, he is liable for injury to the bailee or a third person for injuries proximately caused by a defect in the equipment of which he had knowledge or which he could have discovered by reasonable care and inspection. See Roberts v. Memorial Park, 281 N.C. 48, 187 S.E.2d 721 (1972); Hudson v. Drive It Yourself, Inc., 236 N.C. 503, 73 S.E.2d 4 (1952); Products Liability Liability of the Bailor for Hire for Personal Injury Caused by Defective Goods, 51 N.C.L.Rev. 786-87 (1973). See also 8 Am.Jur.2d, Bailments, § 143, p. 1039. The bailor's breach of this duty of reasonable care may give rise to an action in tort, as well as in contract. 8 Am.Jur.2d, Bailments, § 150, p. 1045. This possibility was recognized by our Supreme Court in Ports Authority v. Roofing Co., 294 N.C. 73, 240 S.E.2d 345 (1978). In setting forth the instances in which a breach of contract action may give rise to a tort, the Supreme Court stated:

"It may well be that this enumeration of categories in which a promisor has been held liable in a tort action by reason of his negligent, or wilful, act or omission in the performance of his contract is not all inclusive. However, our research has brought to our attention no case in which this Court has held a tort action lies against a promisor for his simple failure to perform his contract, even though such failure was due to negligence or lack of skill."

Id. at 82-83, 240 S.E.2d at 351. The fact that the breach of duty under bailment contract gives rise to an action in tort for negligence was recognized in Insurance Asso. v. Parker, 234 N.C. 20, 65 S.E.2d 341 (1951); See also 8 Am.Jur.2d, Bailments, § 285, p. 1173. Our Supreme Court stated in Insurance Asso. v. Parker, supra :

"At first blush it would seem that the duty of a bailee to exercise due care to protect the thing bailed against loss, damage, or destruction is an obligation imposed by the contract, and that a breach thereof gives rise to an action on the contract rather than in tort for negligence. Council v. Dickerson's, Inc., 233 N.C. 472, 64 S.E.2d 551. But the courts uniformly hold that it is a legal duty arising out of the relationship created by the contract. If a person accepts and receives the property of another for safe keeping or other purpose under a contract of bailment, the law requires of him due care by reason of the semitrust relation he thus assumes. Hanes v. Shapiro & Smith, supra (, 168 N.C. 24, 84 S.E. 33); Trustees of Elon College v. Elon Banking & Trust Co., 182 N.C. 298, 109 S.E. 6, 17 A.L.R. 1205. The obligation to use due care in contracts of this type arises from the relation created by the contract and is independent, rather than a part of it. 6 A.J. (Rev.) 343. That the obligation arises from the relation and not as an implied term of the contract is shown by the refusal of the law under certain circumstances to give effect to provisions in the contract undertaking to nullify the effect of the obligation. Kenney v. Wong Len, 81 N.H. 427, 128 A. 343.

It is a well-recognized rule of law that in an ordinary mutual benefit bailment, where there is no great disparity of bargaining power, the bailee may relieve himself from the liability imposed on him by the common law so long as the provisions of such contract do not run counter to the public interest. " (Citations omitted.)

Id. at 23, 65 S.E.2d at 343.

If the scraper contained a preexisting defect which could or should have been discovered by a proper inspection, and if the defect was the proximate cause of plaintiff's damages, defendant would be liable to plaintiff. Mann v. Transportation Co. and Tillett v. Transportation Co., 283 N.C. 734, 198 S.E.2d 558 (1973).

Here, however, plaintiff has offered no evidence to show that the defect alleged existed at the time of leasing. On the contrary, plaintiff's evidence merely states "When I examined the scraper at Stillwell's request, I noticed that there was no lock wire to these bolts or screws.

Normal driving time from Statesville to Sylva is 23/4 hours. If two service personnel spent 223/4 hours in travel time and on the job setting up the machines for operations, such inspection should encompass the inspection of the front hitch ball joint.

From my experience of 25 years, If such front hitch ball joint were inspected and If lock wires were absent from the screws, this would signal some problems and further investigation of the matter would be in order. " (Emphasis added.)

Plaintiff's hypothetical assumption of a prior defect is not sufficient to impose liability on a bailor for hire. The defect must be shown to have existed at the time of delivery. See Hudson v. Drive It Yourself, Inc., supra. We hold the court's entry of summary judgment as to plaintiff's claim of negligence was proper.

Plaintiff's final assignment of error is that the trial court erred in its entry of summary judgment as to defendant's damages. We agree.

Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on...