Transportation Equipment Rentals, Inc. v. Oregon Auto. Ins. Co.

• Decision Date: 31 December 1970
• Citation: 478 P.2d 620,257 Or. 288
• Parties: TRANSPORTATION EQUIPMENT RENTALS, INC., Respondent, v. OREGON AUTOMOBILE INSURANCE COMPANY, a corporation, Appellant, Leonard R. Toates, dba Van Doren Agency, Defendant.
• Court: Oregon Supreme Court

Page 620

478 P.2d 620

257 Or. 288

TRANSPORTATION EQUIPMENT RENTALS, INC., Respondent, v. OREGON AUTOMOBILE INSURANCE COMPANY, a corporation, Appellant, Leonard R. Toates, dba Van Doren Agency, Defendant.

Supreme Court of Oregon.

Argued and Submitted Sept. 10, 1970.

Decided Dec. 31, 1970.

James L. Sutherland Portland, argued the cause for appellant. With him on the briefs were Morrison & Bailey and Thomas S. Moore.

Frederic P. Roehr, Portland, argued the cause for respondent. On the brief were Vergeer, Samuels, Roehr & Sweek, Portland.

Before O'CONNELL, C.J., and McALLISTER, DENECKE, HOLMAN, HOWELL and MENGLER, JJ.

McALLISTER, Justice.

A log loader owned by plaintiff and insured by defendant was destroyed and plaintiff in this action recovered judgment on the policy for the value of the loader. Defendant appeals. ¹

Defendant contends that it was wrongfully denied a jury trial, that the court erred in finding for the plaintiff and also erred in awarding attorneys' fees to plaintiff.

The trial court made only general findings, but there was evidence from which it could, and evidently did, find the following facts, most of which were not in dispute. Plaintiff owned a Skagit Mobile Loader located at Medford, which it arranged to lease to Ross and Millsap Logging Company for use in the lessee's logging operations in Trinity County, California. On June 14, 1966, the Oregon Automobile Insurance Company, through its agent Leonard R. Toates, dba Van Doren Agency, issued a binder insuring the loader for a period of seven days against all physical loss. The binder was issued at plaintiff's request and named Ross and Millsap Logging Co. as the insured and plaintiff Transportation Equipment Rentals, Inc., as 'Mortgagee-Payee.' On June 17, 1966, while plaintiff was enroute with the loader to Ross and Millsap in California it overturned and was destroyed.

We will first consider defendant's claim that it was denied a jury trial. The case was tried by the court without a jury as a result of the following sequence of events. The original complaint clearly stated a cause of action on the insurance binder. Prior to trial plaintiff filed an amended complaint, alleging, inter alia, that through a mutual mistake plaintiff had been designated in the binder as a 'loss payee' instead of an 'additional insured,' praying that the binder be reformed by naming plaintiff as an additional insured and that it have judgment for the value of the loader.

The case came on for trial during the late afternoon of February 13, 1969. It was apparently assumed by both the parties and the court that the amended complaint stated a cause of suit in equity. The plaintiff offered in evidence the depositions of four witnesses, several exhibits, and rested its case. The judge then adjourned court until the following morning so that he could read the depositions and exhibits.

When court convened the next morning plaintiff was permitted to reopen its case to offer additional testimony from one of the witnesses whose deposition had been previously received in evidence. Plaintiff was also permitted to file a second amended complaint which alleged that 'through mistake' plaintiff was designated as a loss payee in the binder instead of as an additional assured and contained, instead of a prayer for reformation, only a simple demand for a money judgment.

During these proceedings defendant's attorney pointed out that the case had started as a suit in equity and stated that if the case was no longer an equity matter defendant was 'entitled to' and 'would want' a jury. This equivocal statement is the basis of defendant's claim that defendant was denied a jury trial.

We think that the defendant was obliged to decide for itself whether it was defending a law action and, if so, to insist on a jury trial rather than to depend on the court for guidance. But, in any event, defendant waived its right to a jury trial by failing later to renew its demand for a jury.

After plaintiff had reopened and then again rested its case defendant did not move to dismiss the erstwhile suit because of plaintiff's failure to establish a right to reformation, did not move to transfer the case to the law side of the court, and did not renew its demand for a jury. Defendant, whose answer contained six affirmative defenses, proceeded, without comment or remonstrance, to call its witnesses, introduce its evidence and submit its case to the court.

The completion of the plaintiff's case in chief has been firmly established as the critical point at which the defendant must finally protect his right to a jury trial or be deemed to have consented to submission of all issues to the court sitting without a jury. See Olson v. Roop, Or., 467 P.2d 437, 438 (1970), and cases there cited. ² This rule is usually applied when the plaintiff has pleaded but failed to prove a right to equitable relief. It is equally applicable here where the complaint was amended during plaintiff's case in chief resulting in the failure either to plead or prove a cause of suit in equity. We do not agree that because this case was tried 'in a somewhat casual manner' and because the trial judge may have still considered, even after the second amended complaint was filed, that there were both legal and equitable issues to try, that the defendant was excused from adequately protecting its right to a jury trial at every appropriate stage of the proceeding.

We turn next to defendant's claim that the court erred in finding for plaintiff. Since this is a law action we can reverse only if we find that the evidence required the trial court to find in favor of defendant as a matter of law. State ex rel. Salem Pac. Corp. v. Combo Constr., 254 Or. 89, 458 P.2d 410 (1969). We reverse under that rule because there is no evidence tending to prove one of the essential elements of plaintiff's case, i.e., that Ross and Millsap suffered any loss.

We have noted earlier that plaintiff abandoned its effort to reform the binder and elected in its second amended complaint to sue on the binder, which designated Ross and Millsap as the insured and plaintiff as the Mortgagee-Payee. As a consequence we must determine the rights of the parties under the binder as written and not on some hypothetical contract that might have been issued under other circumstances. We have scrutinized the testimony of Paul Martin, who represented plaintiff, Earl Millsap, who represented Ross and Millsap, and the insurance agent, Leonard Toates, who represented the defendant. It would serve no purpose to quote that testimony. It is sufficient to say that there was a failure to prove a meeting of minds on the issuance of any different contract than the binder sued on.

As a general rule a loss payee is not a party to the insurance contract and cannot recover in his own right. According to Appleman:

'It is generally stated that under such a clause the person so designated is a mere appointee to receive the proceeds to the extent of his interest, and the validity of the contract is not, or that reason, dependent upon the existence of an insurable interest in such appointee. Under an open loss payable clause, it makes the policy subject to any act or omission of the insured which might void, terminate, or adversely affect the coverage; and if the policy is not collectible by the insured, the appointee, likewise, cannot recover thereunder.' 5A Appleman, Insurance Law and Practice (1970), 143--146, § 3335.

And in Charles R. Allen, Inc. v. Rhode Island Ins. Co., 217 S.C. 296, 60 S.E.2d 609, 613 (1950), the court said:

'* * * Such a clause does not create a new and independent contract between the insurance company and the third party. The party named does not recover in the event of loss as the party insured, but as the beneficiary under the policy in the right of the insured. Such a clause does not operate as an assignment of the policy. The party to whom the loss is payable is a mere nominee of the ownerinsured to receive the insurance money. Hence it is the damage sustained by the party insured and not by the party appointed to receive payment that is recoverable from the insurer. * * *' (Emphasis supplied.)

Oregon has adopted this approach to the rights of a loss payee. In Armbrust v. Travelers Ins. Co., 232 Or. 617, 376 P.2d 669 (1962) a party named as loss payee under a fire insurance policy brought the action against the insurer; the insurer claimed that the named insured had not had an insurable interest in the property which was lost to fire. The court said:

'Moreover, when an insurance policy contains a loss-payable clause, the 'loss payee' does not claim as an assignee of the policy, but merely as an appointee to collect the insurance; consequently, he must claim in the right of the insured, and not in his own right. 5 Couch, Insurance (2d ed 1960), 350, § 29:65. 'A fortiori, if insurance is payable to a mortgagee as his interest may appear, he is not entitled to recover, if the insured is not * * *.' 5 Couch, Insurance (1929), 4432, § 1215a.' 232 Or. at 621, 376 P.2d at 671.

See also, Haskin et al. v. Greene, 205 Or. 140, 149, 286 P.2d 128 (1955).

Although the evidence is conflicting in some details, it is clear that prior to the loss plaintiff had agreed to deliver the loader to Ross and Millsap, who had agreed to use the loader on a trial basis and to pay rental for the loader while it was being used. Ross and Millsap had leased other equipment from plaintiff and could have retained the Skagit loader on a similar lease if it had proved satisfactory. It is conceded that the loader was destroyed while it was being driven by plaintiff to Trinity County for delivery to Ross and Millsap.

We assume that as a lessee or a prospective lessee, Ross and Millsap had an insurable interest in the loader, but we find no evidence whatever that Ross and Millsap sustained any loss. If Ross and Millsap sustained no loss, defendant owed nothing to Ross and...