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Malone Freight Lines, Inc. v. Johnson Motor Lines, Inc.

Superior Court of Delaware, New Castle County

December 10, 1959

MALONE FREIGHT LINES, INC., a corporation, Plaintiff,
JOHNSON MOTOR LINES, INC., a corporation, and Joyce Edgar Bray, Defendants.

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On defendants' motion for summary judgment. Granted.

William H. Bennethum, Wilmington, for plaintiff.

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William Prickett (Prickett & Prickett) Wilmington, for defendants.


Plaintiff, Malone Freight Lines, Inc. (Malone), and defendant, Johnson Motor Lines, Inc. (Johnson), are carriers. The plaintiff's and the defendant's vehicles were involved in an accident on February 10, 1953, in Delaware, as a result of which both vehicles were damaged and the cargo being hauled by Malone was completely destroyed.

Malone's liability as a carrier was insured by St. Paul Fire and Marine Insurance Company (St. Paul) and Malone's property damage was insured by another company.

Johnson brought an action based on negligence for property damage to its vehicle, captioned Johnson v. Malone, 188 C.A.1953, in this Court (referred to herein as the first Delaware case). Malone answered denying negligence and alleging that Johnson was negligent and counterclaimed for the damage to its trailer. Johnson answered the counterclaim denying negligence and asserting that the collision was due to Malone's negligence.

This Court found that Malone was negligent and Johnson not negligent. Judgment was entered for the full amount of Johnson's claim. Malone's counterclaim was denied.

[52 Del. 289] Malone appealed to the Supreme Court. 1 Storey 504, 148 A.2d 770, 773 (1959). On appeal, Malone argued that there was no competent evidence to support the findings of the trial judge. The Supreme Court found that there was competent evidence to support the findings. Malone also argued that this Court had erred in a ruling denying an application by Malone to amend its answer so as to include a counterclaim for the loss of the cargo of the Malone vehicle. On this point the Supreme Court stated:

'(a) The complaint was filed February 25, 1953 and amended in March, 1954. Answer and counterclaims were filed in April 1954. In December, 1954, Malone moved to amend its counterclaim by adding an additional item of damage for loss of the cargo carried by its vehicle. The motion was denied. It is renewed in June, 1955, and again denied.

'The ground for denial appears to have been the failure of Malone to explain to the court's satisfaction the reason for the delay in asserting the claim. Much is said in the briefs about this ruling, but in the light of the verdict of the court on the issue of liability and our affirmance of it, the alleged error has become immaterial. Since Malone has been adjudged to have no claim against Johnson, the amount of damages claimed is now of no moment. Hence, if the court was in error (we do not for a moment imply that it was), the error was harmless.'

Meanwhile, this suit (sometimes referred to herein as the second Delaware suit) had been filed whereby Malone sues Johnson for the loss of Malone's cargo.

Johnson has moved for summary judgment based upon res judicata, collateral estoppel and upon the theory that Malone is attempting to split one cause of action by asserting its claim for damages to its vehicle by way of a counterclaim in the first suit and its damages for cargo loss in this a separate suit. This decision is confined to the issues raised by Johnson's motion.

[52 Del. 290] Malone insists that the defenses here asserted by Johnson are not applicable because Malone's name is merely being used by St. Paul to assert a claim of the United States for lost cargo. At the same time, Malone must also insist that it is a real party in interest in this suit.

St. Paul Fire and Marine Insurance Company paid Malone $39,534.43 on account of the loss of the cargo and took in exchange

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for such payment loan receipts. Under the terms of the loan receipts Malone in effect appointed St. Paul its manager and agent in respect to its claim for the lost cargo, with full authority to act in Malone's name in connection with any claim arising out of such loss. The loan receipts required that Malone repay the loan only in the event and to the extent of any net recovery Malone may receive from others on account of the loss.

It is apparent that all attempts to recover for the loss of Malone's cargo, both in the first Delaware suit and in this suit, have been made by St. Paul in Malone's name. Malone's real interest in the cargo loss, if it has a real interest, stems only from its bare legal title to the claim and its legal obligation under the loan receipt.

St. Paul, through the terms of loan receipts, acquired the right to assert, in Malone's name, any claim Malone had on account of the loss of cargo. United States was not a party to the loan receipts and St. Paul did not acquire any separate rights which the United States might have had. Thus, St. Paul, in acting through Malone, is subject to all of the defenses which could have been asserted against Malone in the absence of the loan receipts. A loan receipt does not insulate the insurer from defenses that may be asserted against the insured nor does it effectively assign to the insurer rights which the insured does not possess.

Malone cites many cases as to the validity and legal import of the terms of loan receipts, but such cases do not indicate that the insured acting for the insurer under the terms of a loan [52 Del. 291] receipt, is immune from defenses which could be asserted against the insured in the absence of a loan receipt.

Even if the loan receipts were regarded as instruments of subrogation, St. Paul would be subrogated to Malone's position and not to the position of the United States. In that case St. Paul would have no rights not possessed by Malone. Phoenix Insurance Co. v. Erie & Western Transportation Co., 1886,117 U.S. 312, 6 S.Ct. 750, 29 L.Ed. 873.

In any event, Malone (then, as now, acting for St. Paul under the terms of loan receipts) attempted to assert the very claim it here asserts in the prior suit in this Court. Malone's attempt in the first Delaware case to amend its answer to assert a counterclaim for loss of cargo was before the Supreme Court and the record revealed that this Court had refused to permit the amendment. The Supreme Court stated that even if the refusal to allow the amendment were error, such error was harmless and immaterial, and that since Malone has been adjudged to have no claim against Johnson, the amount of damages claimed is of no moment.

The language of the Supreme Court shows that it regarded the decision of this Court to have disposed of the claim here asserted. The only important additional factors before the Court which were not before the Supreme Court are the details of the relationship between Malone and one of its insurance carriers. There reveal that St. Paul rather than Malone would receive the ultimate benefit from any recovery by Malone and that St. Paul has been in complete charge of Malone's attempt to recover for the loss of the cargo. This additional information reveals a very common situation but it is without pertinent legal significance as between the parties to this action.

Malone has had its day in Court against Johnson in respect to any and all claims for damages which Malone has against Johnson on account of the collision which occurred February 10, 1953. The decision of this Court in the first Delaware[52 Del. 292] case as interpreted by the Supreme Court is res judicata as to the claim here asserted. Williams v. Daisey, 7 W.W.Harr. 161,180 A. 908 (Superior Court 1935).

If, on the other hand, the plain language of the Supreme Court in the first

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Delaware case is ignored and that case is not deemed to have disposed of the claim now before this Court, a separate adjudication of such claim as between the parties before the Court would involve an improper splitting of a single cause of action and collateral estoppel. See Levitt v. Simco Sales Service of Penn., 11 Terry 557,135 A.2d 910 (Superior Court 1957) where a similar result was reached although it was a subrogation case involving property damages and personal injuries.

Malone attaches importance to a suit in New York State arising out of the same accident. Sassi v. Malone (unreported in the Supreme Ct. for N. Y. County; affirmed without opinion by Appellate Div., 149 N.Y.S.2d 208 (1956)). In that suit Sassi, assignee of the owner of the cargo in the Johnson vehicle, sued Malone for damages to the Johnson cargo, and the Court found that the negligence of Johnson's driver was the sole cause of the accident. Thus, no recovery was allowed for damages to the Johnson cargo.

When Johnson sued Malone in the first Delaware suit for damages to Johnson's vehicle, Malone attempted to assert the New York decision as res judicata as to the issues before this Court.

This Court refused to recognize the New York decision as res judicata. Such refusal was upheld by the Supreme Court upon the ground that there was no such privity between the owner of the Johnson cargo (as bailor) and Johnson (as bailee) to warrant the application of the doctrine of res judicata. The decision of this Court in the first Delaware case as to which driver was negligent is directly opposed to the prior decision of the New York Court.

[52 Del. 293] How, then, argues Malone, can the first Delaware suit dealing with the damages to Malone's vehicle be res judicata as to this, the second Delaware suit, which deals with the Malone cargo. If two elements of damages on Johnson's side of the dispute can be litigated separately, why not separate trials as to the same two elements on Malone's side of the dispute?

The short answer to this argument is that in the first Delaware suit there was what amounts to an adjudication of the claim now before this Court; whereas in the New York suit no mention was made of the damages which later formed the basis of the claim asserted by Johnson in the first Delaware case and furthermore Sassi could not have claimed any damages other than cargo damages. Thus, res judicata finds literal application here.

A more complete answer is found in the collateral estoppel and in the elementary complexities of the law as to suits by bailors and bailees.

The bailor of the Johnson cargo was Fuller, who assigned his claim to Sassi. The bailor of the Malone cargo was the United States. These bailors entrusted their cargoes to the carriers Johnson and Malone as bailees under circumstances which made the carriers insurers of the cargoes. When damage or loss occurred in respect to the cargoes both the bailors and the bailees had rights of action against those whose negligence caused the loss. Terry v. Pennsylvania R. Co., 5 W.W.Harr. 1,156 A. 787 (Superior Court 1931). If the bailor sued, it had to assert all its claims, but its claim would necessarily be limited to the damages connected with the goods subject to the bailment. If the bailee sued, it also must assert all its claims and its possible claims include both the damages connected with the goods subject to bailment and any other damages it might have as owner of one of the vehicles involved in the accident.

A bailor, as owner of the cargo, could assert only a claim for cargo since it had no financial or legal interest in the damage[52 Del. 294] to the vehicles. If the bailor brought a suit against the third party, the result of such suit would bind the bailee as to the claim ...

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