Waterway Terminals Co. v. P. S. Lord Mechanical Contractors

Decision Date13 October 1965
Citation13 A.L.R.2d 1,406 P.2d 556,242 Or. 1
Parties, 13 A.L.R.3d 1 WATERWAY TERMINALS COMPANY, a corporation, Appellant, v. P. S. LORD MECHANICAL CONTRACTORS, a corporation, Mechanical Handling Systems, Inc., a corporation, and Colby Steel & Manufacturing, Inc., a corporation, Respondents.
CourtOregon Supreme Court

R. R. Bullivant, Portland, argued the cause for appellant. With him on the briefs were Pendergrass, Spackman, Bullivant & Wright, Darrel L. Johnson, and Douglas G. Houser, Portland.

Howard K. Beebe, Portland, argued the cause for respondent P. S. Lord Mechanical Contractors; James Arthur Powers, Portland, argued the cause for respondent Mechanical Handling Systems, Inc.; James H. Bruce and Bruce Spaulding, Portland, argued the cause, for respondent Colby Steel & Manufacturing, Inc. On the respondents' briefs were the following attorneys: Maguire, Shields, Morrison, Bailey & Kester, William H. Morrison, Howard K. Beebe and David C. Landis, Koerner, Young, McColloch & Dezendorf and John Gordon Gearin, Portland, for P. S. Lord Mechanical Contractors; Tooze, Powers, Kerr, Tooze & Morrell, James Arthur Powers and Edwin J. Peterson, Portland, (who also filed a separate brief), for Mechanical Handling Systems, Inc.; Mautz, Souther, Spaulding, Kinsey & Williamson, Bruce Spaulding and James H. Bruce, Portland, for Colby Steel & Manufacturing, Inc.


LUSK, Justice.

This is an action to recover damages to plaintiff's property caused by a fire alleged to have commenced and spread as the result of the negligence of the defendants. A jury trial resulted in a verdict and judgment for the defendants and plaintiff appeals. There are attempted cross appeals

by the defendants from a judgment dismissing pleas in abatement filed by them. Such a judgment, being interlocutory, is not appealable, though it is reviewable on appeal from the final judgment: McKenney v. Oregon American Lumber Co., 209 Or. 140, 143, 304 P.2d 426; Hirschfeld v. McCullagh, 64 Or. 502, 509, 127 P. 541, 130 P. 1131; La Grande v. Portland Public Market, 58 Or. 126, 134, 113 P. 25. The issue arising out of the pleas in abatement will be considered first.


By their pleas in abatement the defendants assert that the plaintiff is not the real party in interest because the fire loss was covered by policies of fire insurance issued to the plaintiff by numerous insurance companies which paid the loss and became subrogated to the claim of the plaintiff. There was a trial of the pleas in abatement prior to the trial on the merits and, as stated, the court entered a judgment dismissing the pleas.

The evidence shows that payments of the loss by the insurance companies were made pursuant to 'loan receipts' similar to those considered in Furrer v. Yew Creek Logging Co., 206 Or. 382, 292 P.2d 499. In that case we held, over the objection that such loan receipts were a mere subterfuge devised to mask the fact of actual payment of the loss by an insurance company and so to enable the insured to prosecute in his own name an action against an alleged tort feasor, that the loan receipts were valid agreements under which the title to the action remained in the insured and that the defendant was protected against another action by the insurer. We said 'there is nothing inherently wrong with the use of a loan receipt in the manner and to the effect employed here.' We further said:

'Of course, defendant is entitled to assurance that it will be required to defendant against this claim only once, and that payment to plaintiff will, as to it, finally settle the matter. However, this is the extent of the interest which defendant may have in any agreement of this kind, made, as it is, between two other parties who are free to contract in any lawful manner concerning their business. If plaintiff chooses to take something less than the absolute payment to which he is entitled under this policy, that is his affair, and defendant's only proper concern is that payment to plaintiff is the only one which will be required of it.

'The reason why these parties chose to adopt this arrangement is immaterial so far as defendant is concerned, for he is properly concerned with only one effect of it--the location of the title to the cause of action.' 206 Or. at 389, 292 P.2d at 502.

The decision in the Furrer case was followed in Lamb-Weston et al. v. Oregon Auto. Ins. Co., 219 Or. 110, 116, 341 P.2d 110, 346 P.2d 643, 76 A.L.R.2d 485.

The present case is ruled by these decisions and the judgment on the pleas in abatement is, therefore, affirmed.

An able opinion by United States District Judge John F. Kilkenny in Condor Investment Co. v. Pacific Coca-Cola Bottling Co., 211 F.Supp. 671 (D.Or.1962) has been pressed upon us. The court there held that our decisions on the question were not applicable to the case before it for the reason, among others, that the drafts issued by the insurance company purported on their face to be in full payment of the loss. That is true here, but we think that the language of the loan receipts clearly expressing the intention of the plaintiff and the insurance companies to treat the payments as loans is controlling. Recitals in the documents show that the parties relied on the Furrer case in entering into the agreements. The rule of stare decisis requires that there should be no departure from our former decisions.

Contrary to the contention of the defendants, we think the evidence presented no jury question and the court rightly determined the question as a matter of law.


Plaintiff, Waterway Terminals Company, an Oregon corporation, is the owner of a large dock and warehouse on the west bank of the Willamette River in Portland, which was in course of construction in 1958. The fire--a costly one causing damage fixed at $352,540.87--occurred on the afternoon of September 11, 1958, while the defendants were engaged in performing a contract with the plaintiff for the construction of a conveyor system for the mechanical handling of cargo from dockside to warehouse. An integral part of the system were six cargo lifts designed to bring cargo from barges up to the floor of the dock. Just prior to the breaking out of the fire employees of the defendant P. S. Lord Mechanical Contractors were engaged in welding and cutting operations at one of the cargo lift installations. It is the plaintiff's basic contention that the heat generated by these operations and sparks thrown out and molten metal falling and coming into contact with the wooden structural members of the dock, some of them creosoted and highly inflammable, caused the fire to start, and that the defendants were negligent in failing to take proper precautions against this hazard. None of the defendants now claims that the evidence of negligence and causation was not sufficient to take the case to the jury, though the defendant Mechanical Handling Systems, Inc., contends, for reasons to be stated later, that it is not legally responsible for the acts of the other defendants.

As the larger part of some 650 printed pages of abstract of record and briefs is devoted to matters not directly related to the issues of negligence and contributory negligence, but to questions growing out of contracts entered into by the parties, the admission of evidence of the payment of insurance to the plaintiff, and a pleading question, it is necessary first to dispose of the assignments of error to which these matters give rise.

The defendants will hereinafter be referred to as follows: P. S. Lord Mechanical Contractors, an Oregon corporation, as Lord; Mechanical Handling Systems, Inc., a Michigan corporations, as MHS; and Colby Steel & Manufacturing, Inc., a Washington corporation, as Colby. MHS was the prime contractor for the conveyor system. It subcontracted to Colby the furnishing and installation of the cargo lifts and Colby in turn subcontracted to Lord the job of installing the cargo lifts. The prime contract called for the payment by plaintiff to MHS of $1,070,463.

The furnishing of the conveyor system, it should be noted, was but a part of an entire project, which included construction of the dock and warehouse and a marine elevator--in all requiring the services of some 20 prime contractors and subcontractors.


Difficult questions are raised on the record as to the construction of provisions of the contract between the plaintiff and MHS claimed to affect the liability of the parties for loss caused by fire.

To put these questions in perspective we relate briefly the events leading up to the formation of the contract and its execution. Crown Zellerbach Corporation, of which the plaintiff is a wholly owned corporation, was providing the plaintiff with engineering advice and assistance through its Central Engineering Office and acted as agent of the plaintiff in the negotiations and in the execution of the contract.

What is described in the briefs as a 'unique idea for the automated handling of barge cargos from dock side to warehouse' appears to have been conceived by plaintiff in the latter part of 1956. The system to be developed would consist of two principal parts: Cargo lifts to bring cargo from barges in the river to wharf level and a mechanical handling system, also referred to as the 'towveyor' system, to transport the cargo in carts into the warehouse. Generally, the system was automatic. Plaintiff at first invited proposals from suppliers of automated cargo handling equipment. Among the manufacturers of cargo lifts approached Eventually, plaintiff decided to deal directly with MHS on the entire project, that is, the 'towveyor system' and the cargo lifts, and entered into a contract with MHS to supply it. The course of dealing was as follows: Under date of October 9, 1957, Colby submitted its proposal, No....

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