holding that, when proceeding upon the theory of conventional subrogation, it is essential that a plaintiff "allege facts showing the existence of a cause of action on the part of [the subrogor] against the defendant"Summary of this case from Financial Sec. v. Stephens, Inc.
ARGUED SEPTEMBER 6, 1966.
DECIDED OCTOBER 14, 1966. REHEARING DENIED NOVEMBER 9, 1966.
Action on contract. Chatham Superior Court. Before Judge Harrison.
Adams, Adams Brennan, Edward T. Brennan, J. Wiley Ellis, for appellant.
Connerat, Dunn, Hunter, Houlihan, Maclean Exley, E. Ormonde Hunter, for appellee.
1. In order to recover, a party seeking indemnity from another must allege and prove an actual legal liability to the injured party to whom payment was made.
2. In failing to present argument, appellant has abandoned its enumeration of error as to the sustaining of the general demurrer to Count 2 of the petition.
ARGUED SEPTEMBER 6, 1966 — DECIDED OCTOBER 14, 1966 — REHEARING DENIED NOVEMBER 9, 1966.
Southern Nitrogen Company filed suit in the Superior Court of Chatham County against Stevens Shipping Company. Its petition as amended was in two counts and alleged in substance that plaintiff executed a contract on March 1, 1962, with H. J. Baker Bro., a brokerage firm, for the purchase of 1,500 short tons in bulk of "Prilled, uncoated Urea, minimum 46% Nitrogen," at a price of $73.00 per short ton f.o.b. buyers cars, trucks with railroad switching charge allowed, to Port Wentworth, Georgia," shipment to be made "as nearly as possible ex vessel from our chartered boat, expected to sail from abroad end March," as shown by a copy of the contract attached as an exhibit to the petition. This contract contained the following provision: "Buyer accepts all risk and responsibility for, and agrees to hold seller harmless from any liability arising out of any use of the material by buyer or any subsequent purchaser. Buyer further agrees that no claim will be made for special consequential or coincidental damages of any kind, whether growing out of the non-delivery of, or use or inability to use said material, or any other cause. In no event shall any claim made by the buyer under this contract, whether for non-delivery of the material, deficiency in quality or otherwise, be greater than the purchase price of the particular quantity of the material in respect of which damages are claimed."
The petition further alleged that the defendant shipping company operated a shipping agency, stevedoring business and warehouse for hire at the Port of Savannah, Georgia, and was the local agent of the Baker Company; that the urea contracted for was shipped into the Port of Savannah on the S. S. Cydonia and the S. S. Alabama, for which ships the defendant acted as agent, and was unloaded and stored in bulk in the defendant's warehouse; that the defendant "negligently and carelessly allowed said urea to be stored adjacent to a bulk pile of ammonium sulphate and failed to provide an adequate partition between the two piles so that by their close proximity said urea was contaminated by said ammonium sulphate to such an extent that it was rendered unfit for industrial use as hereinafter stated"; and that on September 19, 1963, the plaintiff ordered delivery of 1,000 100-pound bags of the urea to be provided from the bulk pile maintained by the defendant in its warehouse, the same to be packed by the defendant in 100-pound bags provided by the plaintiff, according to instructions issued to the defendant by its principal, the Baker Company, on January 4, 1963, a copy of the letter containing such instructions being attached as an exhibit to the petition and providing as follows: "This is with reference to future shipments of urea for the account of Southern Nitrogen Company for `Industrial Use.' We have had some discussions with Mr. Paul Weller of Southern Nitrogen regarding their requirements for the above-noted material, and it is, of course, essential that such deliveries must be clean, sound material. When you receive instructions from Southern Nitrogen they will tell you that it will be for industrial use and you will arrange to bag the material in their bags of 100-lbs. net each from storage stocks ex the steamer Alabama. You will please advise all concerned to be particularly careful when filling these `industrial use' orders. Please acknowledge receipt of this letter and your understanding of the instructions." The petition further alleged that on or about September 19, 1963, the defendant packed the urea in the bags provided and shipped same to plaintiff's plant warehouse at Port Wentworth, Georgia; that plaintiff, unaware that such bags contained contaminated urea, stored same in its plant warehouse until October 8, 1963, when it shipped 400 bags (20 tons) of urea to the Borden Chemical Company at Fayetteville, North Carolina, pursuant to an order for said urea received by plaintiff in the normal course of business; that the Borden Chemical Company uses urea as one of the ingredients in producing manufactured resin and that on the day shipment was received, 214 bags (21,900 pounds) of the urea were added to Borden's reactor or kettle as a part of the normal resin manufacturing process; that within 15 minutes from the time the first bag of urea was dumped into the reactor, a violent chemical reaction occurred and the entire contents of the reactor gelled or solidified, requiring around-the-clock operations for 152 hours by all available personnel to get the reactor and its components operational again; that the damage to the reactor and its components and other special damages sustained by the Borden Chemical Company as a result of this solidification totaled $19,447.42 as enumerated in an attached list; and that this solidification and resulting damages were solely caused by the presence of quantities of ammonium sulphate in the urea resulting from the defendant's negligence in allowing it to become contaminated while stored in the defendant's warehouse.
The petition further alleged that the plaintiff insisted that the defendant make restitution to the Borden Chemical Company but that defendant refused, and that upon defendant's refusal to negotiate a settlement with the Borden Chemical Company, and in order to satisfy continuing demands upon it by Borden, the plaintiff negotiated and made a fair and reasonable settlement of Borden's claim by paying to Borden Chemical Company the sum of $18,343.82. The plaintiff alleged in Count 1 of the petition that by reason of the foregoing facts it was entitled to indemnity from defendant in the sum of $18,343.82, and prayed for judgment in that amount. In a second count of the petition, the plaintiff alleged that the Borden Chemical Company had assigned to the plaintiff its right of action against any party responsible for the contamination of the urea, a copy of such written assignment being attached as an exhibit to the petition; and in this count of the petition its right of recovery was predicated upon such assignment.
The defendant filed general and special demurrers to each count of the petition as amended and from the judgment of the trial court sustaining the general demurrers and dismissing the petition, the plaintiff has appealed to this court.
1. "Ordinarily, if one person is compelled to pay damages because of negligence imputed to him as the result of a tort committed by another, he may maintain an action over for indemnity against the person whose wrong has thus been imputed to him." Central of Ga. R. Co. v. Macon R. c. Co., 9 Ga. App. 628 (3a) ( 71 S.E. 1076). As stated by this court in that opinion (p. 631): "The right of one who has had a judgment rendered against him to maintain an action over against a third person may arise from relations contractual or non-contractual existing between the two. The duty to indemnify, may arise from some express or implied agreement to indemnify, or may arise by operation of law, independently of contract. The natural legal, and proximate result of a tort committed by A. may be to subject B. to legal liability and to a necessity to respond in damages to some third person, say C., and in some such cases B., when subjected to liability by C., may recover from A. the amount of the damage which has thus been caused to him. Familiar examples of contractual right of action over are to be found in cases where the loser in the first action holds the warranty of a third person or holds his agreement to indemnify. The present case proceeds ex delicto. The petition alleges no warranty or contract for indemnity, but bases the right of the railroad company to recover over against the light company exclusively upon acts of negligence — negligent installation of the wires, negligent failure to insulate them properly, negligent failure to make adequate inspections, the negligent allowing of the electric circuit to become grounded. Hence we must determine whether through one or more of these alleged torts there arose in favor of the railway company a right of action over against the light company on the theory that the loss, which the railway incurred through its employee's widow establishing liability against it on account of her husband's death, can be considered as damages naturally, legally, and proximately flowing to the railway company from the light company's wrongful acts. To state it somewhat differently, was the railway company in the first suit subjected to liability, not for its own immediate wrong, but solely because of the wrong of the light company?"
The plaintiff in this case does not allege the existence of a warranty or contract of indemnity on the part of the defendant, and is apparently proceeding ex delicto under the theory of the above cited decision. The plaintiff does not allege, however, that payment to Borden Chemical Company was made under the force of a legal judgment obtained against it by Borden, nor does the plaintiff allege that it was under any legal liability to Borden for the alleged damages sustained by the Borden Company resulting from the use of the contaminated urea. The petition simply alleges that the plaintiff negotiated a settlement with the Borden Company "in order to satisfy continuing demands made on it by Borden."
As stated by this court in Central of Ga. R. Co. v. Southern Clays, Inc., 94 Ga. App. 377, 380 ( 94 S.E.2d 625), an action to establish liability over by an indemnitee against a purported indemnitor cannot be maintained until the existence of the indemnitee's liability to the injured party is "determined by some procedure known to law and the amount thereof becomes ascertainable." Whether or not this court meant to imply that a judgment must first be obtained against the indemnitee before he can maintain an action over for indemnity is not made clear in the opinion, but such view was apparently entertained by the Supreme Court in the case of Terrell v. Stevenson, 97 Ga. 570 ( 25 S.E. 352). In any event, it is clear that in order for one seeking indemnity to recover, he must allege and prove that he has sustained an actual legal liability to the injured party (see 42 CJS, Indemnity, § 25); and the petition in this case is clearly lacking in such essential allegation.
The plaintiff in its brief argues that it was liable to the Borden Chemical Company for breach of implied warranty of merchantability under former Code § 96-301 (2) which was in effect when the sale was made by it to Borden, but the existence of such implied warranty is not alleged in the plaintiff's petition, and construing the petition most strongly against the plaintiff as must be done on general demurrer, we cannot infer its existence, for such warranty may well have been waived by the parties or superseded by an express warranty, and the contrary is not alleged. Fite v. McEntyre, 77 Ga. App. 585 ( 49 S.E.2d 159) at page 591, sets forth the essential elements of an action for breach of implied warranty and lists as one such element "the absence of a waiver of the warranty implied by the law." Since the provisions of Code § 96-301 apply only in the absence of an express warranty and since absence of a waiver must also be shown, the plaintiff could not show liability to the Borden Company (its vendee) without affirmatively alleging the applicability of this Code section and the absence of a waiver of its provisions.
Clearly, in the absence of allegations showing a legal necessity for payment by the plaintiff to the injured party, we must assume that such payment was made voluntarily and not under the compulsion of law; and such being true, the plaintiff had no standing to seek indemnity from the defendant. The trial court did not err therefore in sustaining the defendant's general demurrer to Count 1 of the petition.
2. The plaintiff in Count 2 predicates its right of action upon the written assignment to it by the Borden Company of any cause of action that the Borden Company might have against the defendant, and is thus proceeding upon the theory of conventional subrogation. Western Union Tel. Co. v. Smith, 50 Ga. App. 585 ( 178 S.E. 472). It is essential, therefore, in order for the plaintiff to state a cause of action based upon such assignment of any cause of action that the Borden Company might have against the defendant, to allege facts showing the existence of a cause of action on the part of Borden against the defendant. "Where the injured person does not have a cause of action against the wrongdoer, the person making compensation for the injury has nothing to which to be subrogated." 83 CJS 618, Subrogation, § 16.
The petition in this case does not disclose that the Borden Chemical Company had any direct right of action against the defendant; and the plaintiff in apparent recognition of this fact, has abandoned its enumeration of error on the sustaining of the general demurrer to this count of the petition by failing to present argument on this ground.
Judgment affirmed. Bell, P. J., and Eberhardt, J., concur.