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Fireman's Fund Insurance v. Cozad Construction Co.
Citations: 88 Or. App. 321; 745 P.2d 432; 1987 Ore. App. LEXIS 5100Docket: CC-83-499; CA A39528
Court: Court of Appeals of Oregon; November 17, 1987; Oregon; State Appellate Court
The United States Forest Service contracted Vinson-Kirby to construct roads in the Willamette National Forest, with Fireman’s Fund issuing performance bonds for Vinson-Kirby, which included indemnification for subcontractor payments. In late 1978, work commenced, and on December 31, 1980, the partners reorganized, incorporating as Vinson-Kirby Enterprises, Inc. (V.K.). In an agreement dated April 20, 1982, V.K. and the defendant entered a contract for the project, agreeing to share profits and losses equally, although the defendant refused to become a principal on the bonds. Following the project’s completion, subcontractors made claims resulting in Fireman’s Fund either paying or depositing a $200,000 obligation into court. Fireman’s Fund subsequently sued the former partnership for indemnity, obtaining a judgment, and V.K. assigned its rights against the defendant to Fireman’s Fund. The complaint, based on subrogation, sought $100,000 from the defendant, reflecting an equal share of losses, plus costs and attorney fees. During the trial, the court ruled against Fireman’s Fund, finding no liability on the defendant's part under the subrogation theory. The court noted that the Equipment Rental agreement primarily obligated the defendant to provide equipment, funding, and bookkeeping, with no intention of assuming liability for past losses. The arrangement between V.K. and the defendant was classified as a joint venture, but the court found no express intention in the agreements that would make the defendant liable for the losses incurred by V.K. Plaintiff fulfilled its $200,000 obligation on the performance bond, which constitutes a 'loss' according to insurance terms. Vinson-Kirby (V.K.) was obligated to indemnify the plaintiff for this loss, an obligation V.K. assumed from a former partnership. However, the plaintiff's actions appear inconsistent with a traditional subrogation claim, as it does not assert the rights of the subcontractors it paid nor does it seek to recover the full $200,000. Instead, it seems to claim that V.K. should share this loss equally with the defendant, an interpretation not aligned with the partnership's equipment rental agreement. Furthermore, a partner cannot sue another for partnership-related damages without a prior accounting, which was not pleaded in this case. The alleged total losses of $200,000 claimed by the plaintiff are deemed legally impossible, leading to the conclusion that the lawsuit is based on flawed legal grounds. The trial court's rejection of both the subrogation theory and the breach of contract claim, which sought $100,000 as an equal share of losses, is upheld. The plaintiff’s request for reconsideration of a third-party beneficiary claim was abandoned during oral arguments. The court affirms the decision without further deliberation on the unfounded claims.